CROP GROWERS CORP, SC 13E3/A, 1997-07-23

CROP GROWERS CORP
SC 13E3/A, 1997-07-23
INSURANCE AGENTS, BROKERS & SERVICE

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As filed with the Securities and Exchange Commission on July 15, 1997

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 13E-3

AMENDMENT NO. 3

RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)

CROP GROWERS CORPORATION
(Name of Issuer)

CROP GROWERS CORPORATION
FIREMAN'S FUND INSURANCE COMPANY
CG ACQUISITIONS CORP.
(Name of Person(s) Filing Statement)

COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)

227297 10 8
(CUSIP Number of Class of Securities)

THOMAS A. SWANSON LAWRENCE T. MARTINEZ
SENIOR VICE PRESIDENT AND GENERAL COUNSEL CHIEF EXECUTIVE OFFICER
FIREMAN'S FUND INSURANCE COMPANY CROP GROWERS CORPORATION
777 SAN MARIN DRIVE 10895 LOWELL, SUITE 300
NOVATO, CALIFORNIA 94998 OVERLAND PARK, KANSAS 66201
(415) 899-2000 (913) 338-7800

(Name, Address and Telephone Number of Person Authorized to Receive
Notice and Communications on Behalf of Person(s) Filing Statement)

COPIES TO:

BARTLEY C. DEAMER JOHN W. MANNING
MCCUTCHEN, DOYLE, BROWN & ENERSEN, LLP DORSEY & WHITNEY LLP
THREE EMBARCADERO CENTER 507 DAVIDSON BUILDING
SAN FRANCISCO, CALIFORNIA 94111-4067 8 THIRD STREET NORTH
(415) 393-2000 GREAT FALLS, MONTANA 59401
(406) 727-3632

This statement is filed in connection with:

/X/ a. The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C or Rule 13d-3(c) under the
Securities Exchange Act of 1934.
/ / b. The filing of a registration statement under the Securities Act of
1933.
/ / c. A Tender Offer.
/ / d. None of the above.

Check the following box if the soliciting materials or information statement
referred to in check box (a) are preliminary copies: /X/

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CALCULATION OF FILING FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Transaction Valuation Amount of Filing Fee
- --------------------------------------------------------------------------------
$63,860,801 $12,772
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* For purposes of calculating fee only. This amount assumes the purchase
at a price of $10.25 per share of 6,145,104 outstanding shares of
Company Common Stock and the settlement of 461,369 shares subject to
stock options at an average spread of $1.89 per share. The amount of
the filing fee, calculated in accordance with Regulation 240.0-11 of
the Securities Exchange Act of 1934, equals 1/50th of one percent of
the value of the shares purchased, plus 1/50th of one percent of the
average spread of the options settled.

/ / CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED IN RULE 0-11 (a) (2)
AND IDENTIFY THE FILING WITH WHICH THE OFFSETTING FEE WAS PREVIOUSLY
PAID. IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER, OR
SCHEDULE AND THE DATE OF ITS FILING.

Amount Previously Paid: $12,772 Filing Parties: Same

Form or Registration No.: Schedule 13E3-3 Date Filed: May 8, 1997

2
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CROSS REFERENCE SHEET
(PURSUANT TO GENERAL INSTRUCTION F TO SCHEDULE 13E-3)

INTRODUCTION

This Rule 13E-3 Transaction Statement is being filed in connection with
the proposed merger (the "Merger") of CG Acquisition Corp., a Delaware
corporation (the "Merger Subsidiary") and wholly owned subsidiary of
Fireman's Fund Insurance Company, a California corporation ("Fireman's
Fund"), with and into Crop Growers Corporation, a Delaware corporation (the
"Company"), pursuant to the terms and conditions of an Agreement and Plan of
Merger dated May 1, 1997 (the "Merger Agreement") among the Company,
Fireman's Fund and the Merger Subsidiary, a copy of which is attached hereto
as Exhibit (c)(4). Upon consummation of the Merger, (i) the separate
corporate existence of the Merger Subsidiary will cease and the Company will
continue as the surviving corporation and a wholly owned subsidiary of
Fireman's Fund, (ii) each outstanding share of Common Stock, par value $.01
per share, of the Company (the "Common Stock") will be converted into the
right to receive $10.25 in cash, and (iii) holders of options to acquire
shares of the Common Stock of the Company will receive a cash settlement, net
of withholding taxes, equal to the excess, if any, of $10.25 over the
exercise price of such options.

The Cross Reference Sheet is being supplied pursuant to General
Instruction F to Schedule 13E-3 and shows the location in the Company's
preliminary proxy statement (the "Proxy Statement"), concurrently being filed
with the Securities and Exchange Commission (the "SEC") in connection with
the proposed Merger of information required to be included in response to
items of this Statement. A copy of the Proxy Statement is attached hereto as
Exhibit (d)(1). The information in the Proxy Statement, including all
exhibits thereto, is hereby expressly incorporated herein by reference and
the responses to each item are qualified in their entirety by the provisions
of the Proxy Statement. All information in, or incorporated by reference in,
the Proxy Statement or this Statement concerning the Company or its advisors,
or actions or events with respect to any of them, was provided by the
Company, and all information in, or incorporated by reference in, the Proxy
Statement or this Statement concerning Fireman's Fund, the Merger Subsidiary
or their affiliates, or actions or events with respect to them, was provided
by Fireman's Fund. The Proxy Statement incorporated by reference in this
filing is in preliminary form and is subject to completion or amendment.
Capitalized terms used but not defined in this Statement shall have the
respective meanings given them in the Proxy Statement.

As of March 5, 1997, the date upon which the Company and Fireman's Fund
entered into an Acquisition Agreement setting forth the principal terms of
the Merger (the "March 5 Agreement"), Fireman's Fund owned 10,000 shares of
the Series A Convertible Preferred Stock of the Company (the "Preferred
Stock"), which are convertible into 754,717 shares of Common Stock of the
Company and vote with the Common Stock on an as-converted basis, and which
represented approximately 8.6% of the voting power of the total outstanding
capital stock of the Company. On that date, Fireman's Fund had the right to
acquire from certain stockholders of the Company 1,827,447 shares of Common
Stock which, together with the 754,717 votes attributable to the Preferred
Stock, represented approximately 29.6% of such voting power, but the exercise
of such right was subject to the Company's consent. Neither the Company nor
Fireman's Fund believes that Fireman's Fund or the Merger Subsidiary was then
an affiliate of the Company, and the filing of this Schedule 13E-3 does not
constitute an admission by Fireman's Fund or the Merger Subsidiary that
either entity is an affiliate of the Company.

3
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SCHEDULE 13E-3 ITEM NUMBER AND RESPONSE AND/OR LOCATION IN PROXY STATEMENT
CAPTION

ITEM 1. ISSUER AND CLASS OF SECURITY
SUBJECT TO THE TRANSACTION

(a) Front Cover Page and "SUMMARY--The Company,"
which information is incorporated herein by
this reference.

(b) "SUMMARY--Record Date; Stockholders Entitled
to Vote; Quorum" and "THE SPECIAL MEETING--
Record Date; Stockholder Approval," which
information is incorporated herein by this
reference.

(d) "SUMMARY--Market Price and Dividend Data,"
which information is incorporated herein by
this reference.

(e)-(f) "SPECIAL FACTORS--Public Offerings and
Repurchases of Common Stock," which
information is incorporated herein by this
reference.

ITEM 2. IDENTITY AND BACKGROUND This Statement is being jointly filed by
the Company (the issuer of the equity
securities that are the subject of the
Merger), Fireman's Fund and the Merger
Subsidiary.

(a)-(d) "SUMMARY--The Company" and "--Fireman's
Fund" and "MANAGEMENT OF THE COMPANY,
FIREMAN'S FUND AND THE MERGER SUBSIDIARY,"
which information is incorporated herein by
this reference.

(e), (f) To the best of the undersigned's knowledge,
except as described under "MANAGEMENT OF THE
COMPANY, FIREMAN'S FUND AND THE MERGER
SUBSIDIARY--Certain Proceedings" in the
Proxy Statement, which information is
incorporated herein by this reference, none
of the persons will respect to whom
information is provided in response to this
Item was during the last five years
(i) convicted in a criminal proceeding
(excluding traffic violations or similar
misdemeanors) or (ii) party to a civil
proceeding of a judicial or administrative
body of competent jurisdiction and as a
result of such proceeding was or is subject
to a judgment, decree or final order
enjoining further violations of, or
prohibiting activities subject to, federal
or state securities laws or finding any
violations of such laws.

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ITEM 3. PAST CONTACTS,
TRANSACTIONS OR NEGOTIATIONS

(a)(1) "SPECIAL FACTORS--Background of the
Merger--History of Relationship Between the
Company and Fireman's Fund" and
"--Relationship Between the Company and
Fireman's Fund--Intercompany Business
Relationship," which information is
incorporated herein by this reference.

(a)(2), (b) "SPECIAL FACTORS--Background of the
Merger--Contacts and Negotiations with
Fireman's Fund" and "--Relationship Between
the Company and Fireman's Fund--Transactions
and Agreements," which information is
incorporated herein by this reference.

ITEM 4. TERMS OF THE TRANSACTION

(a) Front Cover Page, "SUMMARY--The Merger,"
"THE MERGER AGREEMENT" and "EXHIBIT
A--Agreement and Plan of Merger," which
information is incorporated herein by this
reference.

(b) "SPECIAL FACTORS--Purpose and Structure of
the Merger," "--Relationship Between the
Company and Fireman's Fund--Transactions
and Agreements" and "--Interests of Certain
Persons in the Merger," which information
is incorporated herein by this reference.

ITEM 5. PLANS OR PROPOSALS OF
THE ISSUER OR AFFILIATE

(a)-(e) "SPECIAL FACTORS--Plans for the Company After
the Merger" and "MANAGEMENT OF THE COMPANY,
FIREMAN'S FUND AND THE MERGER SUBSIDIARY,"
which information is incorporated herein by
this reference.

(f), (g) "SPECIAL FACTORS--Certain Effects of the
Merger," which information is incorporated
herein by this reference.

ITEM 6. SOURCE AND AMOUNT OF
FUNDS OR OTHER CONSIDERATION

(a), (b) "SPECIAL FACTORS--Sources and Uses of Funds,"
which information is incorporated herein by
this reference.

(c) "SPECIAL FACTORS--Relationship Between the
Company and Fireman's Fund" and "--Sources
and Uses of Funds," which information is
incorporated herein by this reference.

(d) Not applicable.

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ITEM 7. PURPOSE(S), ALTERNATIVES,
REASONS AND EFFECTS

(a)-(c) "SPECIAL FACTORS--Background of the Merger,"
"--Purpose and Structure of the Merger,"
"--Recommendation of the Company's Board of
Directors," "--Perspective of Firemen's
Fund on the Merger" and "--Certain Effects
of the Merger," which information is
incorporated herein by this reference.

(d) "SUMMARY--The Merger," "--Interests of
Certain Persons in the Merger" and
"--Federal Income Tax Consequences,"
"SPECIAL FACTORS--Background of the Merger,"
"--Plans for the Company After the Merger,"
"--Certain Effects of the Merger,"
"--Interests of Certain Persons in the
Merger" and "--Certain Federal Income Tax
Consequences" and "MANAGEMENT OF THE
COMPANY, FIREMAN'S FUND AND THE MERGER
SUBSIDIARY," which information is
incorporated herein by this reference.

ITEM 8. FAIRNESS OF THE
TRANSACTION

(a) "SUMMARY--Special Factors--Recommendation of
Board of Directors" and "THE MERGER--FACTORS
TO BE CONSIDERED--Recommendation of the
Company's Board of Directors," which
information is incorporated herein by this
reference.

(b) "SUMMARY--Special Factors--Recommendation of
Board of Directors" and "Opinion of Financial
Advisor" and "SPECIAL FACTORS--Background of
the Merger," "--Purpose and Structure of the
Merger," "--Recommendation of the Company's
Board of Directors" and "--Relationship
Between the Company and Fireman's Fund,"
which information is incorporated herein by
this reference.

(c) "THE SPECIAL MEETING--Record Date;
Stockholder Approval," which information is
incorporated herein by this reference.

(d)-(e) "SPECIAL FACTORS--Background of the Merger"
and "--Opinion of Financial Advisor," which
information is incorporated herein by this
reference.

(f) "SPECIAL FACTORS--Background of the Merger,"
which information is incorporated herein by
this reference.

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ITEM 9. REPORTS, OPINIONS,
APPRAISALS AND CERTAIN
NEGOTIATIONS

(a)-(c) "SUMMARY--Special Factors--Opinion of
Financial Advisor," "SPECIAL FACTORS--
Background of the Merger" and "--Opinion of
Financial Advisor" and "EXHIBIT B--Opinion of
Dean Witter Reynolds Inc.," which information
is incorporated herein by this reference.

ITEM 10. INTEREST IN SECURITIES
OF THE ISSUER

(a) "SUMMARY--Voting of Shares Owned by
Fireman's Fund," "THE SPECIAL MEETING--
Record Date Stockholder Approval," "SPECIAL
FACTORS --Background of the Merger" and
"--Interests of Certain Persons in the
Merger" and "STOCK OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS," which
information is incorporated herein by this
reference.

(b) "STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN
BENEFICIAL OWNERS--Transactions by Certain
Persons in Common Stock," which information
is incorporated herein by this reference.

ITEM 11. CONTRACTS, ARRANGEMENTS "SPECIAL FACTORS--Background of the Merger,
TO THE ISSUER'S SECURITIES Interests of Certain Persons in the Merger,"
"--Recommendation of the Company's Board of
Directors" "--Opinion of Financial Advisor"
and "--Relationship Between the Company and
Fireman's Fund," which information is
incorporated herein by this reference.

ITEM 12. PRESENT INTENTION AND
RECOMMENDATION OF CERTAIN
PERSONS WITH REGARD TO THE
TRANSACTION

(a), (b) "THE SPECIAL MEETING--Record Date;
Stockholder Approval," "SPECIAL FACTORS--
Background of the Merger," "--Recommendation
of the Company's Board of Directors" and
"--Interests of Certain Persons in the
Merger" and "STOCK OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS," which
information is incorporated herein by this
reference.

ITEM 13. OTHER PROVISIONS OF
THE TRANSACTION

(a) "SUMMARY--Dissenters' Rights," "RIGHTS OF
DISSENTING STOCKHOLDERS" and "EXHIBIT C--
Provisions of Deleware General Corporation
Law Relating to Appraisal Rights," which
information is incorporated herein by this
reference.

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(b), (c) Not applicable.

ITEM 14. FINANCIAL INFORMATION The Company's Annual Report on Form 10-K/A-2
for the year ended December 31, 1996 (filed
herewith) and its Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997
are incorporated by reference in the Proxy
Statement and will be delivered to
stockholders of the Company with the Proxy
Statement. The Company's audited financial
statements for the periods covered by the
Form 10-K/A-2 and unaudited financial
statements for the periods covered by the
Form 10-Q are incorporated herein by this
reference.

ITEM 15. PERSON AND ASSETS
EMPLOYED, RETAINED OR UTILIZED

(a), (b) "SUMMARY--Special Factors--Opinion of
Financial Advisor," "THE SPECIAL MEETING--
Proxies" and "SPECIAL FACTORS--Sources and
Uses of Funds" and "THE MERGER AGREEMENT--
Payment for Shares and Options," which
information is incorporated herein by this
reference.

ITEM 16. ADDITIONAL INFORMATION See the text of the Proxy Statement.

ITEM 17. MATERIALS TO BE FILED EXHIBIT NUMBER AND DESCRIPTION (EXHIBITS
AS EXHIBITS MARKED WITH AN ASTERISK (*) ARE FILED
HEREWITH)

(a) (a)(1) Business Loan Agreement effective
March 31, 1997 between the Company and
Fireman's Fund (previously filed).

(b) (b)(1) Opinion of Dean Witter Reynolds Inc.
dated March 5, 1997 (as amended), which is
Exhibit B to the Proxy Statement and is
incorporated herein by this reference.

(b)(2) Presentation of Dean Witter Reynolds
Inc. to the Board of Directors of the Company
dated March 5, 1997.

(c) (c)(1) Preferred Stock Purchase Agreement
dated July 10, 1996 between the Company and
Fireman's Fund, which is incorporated
herein by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996.

(c)(2) Acquisition Agreement dated March 5,
1997 between the Company and Fireman's
Fund, which is incorporated herein by
reference to Exhibit 2.1 to the Company's
Current Report on Form 8-K dated February
28, 1997.

(c)(3) Consent Agreement dated March 5,
1997 between the Company and Fireman's Fund,
which is incorporated herein by reference
to Exhibit 2.2 to the Company's Current
Report on Form 8-K dated February 28, 1997.

(c)(4) Agreement and Plan of Merger dated
May 1, 1997 among the Company, Fireman's
Fund and the Merger Subsidiary, which is
Exhibit A to the Proxy Statement and is
incorporated herein by this reference.*

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(c) (c)(5) Letter of Intent re Revolving
Credit Working Capital Facility dated
March 5, 1997 between the Company and
Fireman's Fund, which is incorporated
herein by reference to Exhibit 2.3 to the
Company's Current Report on Form 8-K dated
February 28, 1997.

(c)(6) Business Loan Agreement dated
effective March 31, 1997 between the
Company and Fireman's Fund. See Exhibit
(a)(1).

(c)(7) Right of First Offer and First
Refusal Agreement dated September 23, 1996
among the Company, Fireman's Fund and John
J. Hemmingson, which is incorporated
herein by reference to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996.

(c)(8) Right of First Offer and First
Refusal Agreement dated September 23, 1996
among the Company, Fireman's Fund and Gary
A. Black, which is incorporated herein by
reference to Exhibit 10.4 to the Company's
Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996.

(c)(9) Non-Employee Director Stock Option
Plan, which is incorporated by reference
to Exhibit 10.11 to the Company's
Registration Statement on Form S-1 (File
No. 33-85808).

(c)(10) Employment Agreement dated May 31,
1996 between the Company and Lawrence T.
Martinez, which is incorporated herein by
reference to Exhibit 10.28 to the
Company's Annual Report on Form 10-K for
the year ended December 31, 1996.

(c)(11) Agreement Granting Irrevocable
Proxy among John J. Hemmingson, Firstar
Bank of Minnesota, N.A. and the Company,
which is incorporated by reference to
Exhibit 10.26 to the Company's Annual
Report on Form 10-K for the year ended
December 31, 1996.

(d) (d)(1) Definitive copy of Letter to
Stockholders, Notice of Special Meeting,
Proxy Statement and form of Proxy for the
Special Meeting of Stockholders of the
Company to be held on August 13, 1997.*

(e) (e)(1) Section 262 of the Delaware General
Corporation Law, which is Exhibit C to the
Proxy Statement and is incorporated herein
by this reference.

(f) Not applicable.

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After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and
correct.

July 21, 1997 FIREMAN'S FUND INSURANCE COMPANY

By: /s/ Harold N. Marsh, III
-------------------------------------
Name: Harold N. Marsh, III
Title: Senior Vice President and Treasurer

July 21, 1997 CG ACQUISITIONS CORP.

By: /s/ Harold N. Marsh, III
-------------------------------------
Name: Harold N. Marsh, III
Title: Senior Vice President and Treasurer

July 21, 1997 CROP GROWERS CORPORATION

By: /s/ Lawrence T. Martinez
-------------------------------------
Name: Lawrence T. Martinez
Title: Chief Executive Officer

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EXHIBIT INDEX

Exhibit
Number Description
------- -----------

(a) (a)(1) Business Loan Agreement effective
March 31, 1997 between the Company and
Fireman's Fund (previously filed).

(b) (b)(1) Opinion of Dean Witter Reynolds Inc.
dated March 5, 1997, which is Exhibit B to
the Proxy Statement and is incorporated
herein by this reference.

(b)(2) Presentation of Dean Witter Reynolds
Inc. to the Board of Directors of the Company
dated March 5, 1997.

<PAGE>

(c) (c)(5) Letter of Intent re Revolving
Credit Working Capital Facility dated
March 5, 1997 between the Company and
Fireman's Fund, which is incorporated
herein by reference to Exhibit 2.3 to the
Company's Current Report on Form 8-K dated
February 28, 1997.

(c)(6) Business Loan Agreement dated
effective March 31, 1997 between the
Company and Fireman's Fund. See Exhibit
(a)(1).

(c)(9) Non-Employee Director Stock Option
Plan, which is incorporated by reference
to Exhibit 10.11 to the Company's
Registration Statement on Form S-1 (File
No. 33-85808).

(e) (e)(1) Section 262 of the Delaware General
Corporation Law, which is Exhibit C to the
Proxy Statement and is incorporated herein
by this reference.

(f) Not applicable.

<PAGE>
CROP GROWERS CORPORATION
10895 LOWELL AVENUE
SUITE 300
OVERLAND PARK, KANSAS 66210

July 21, 1997

Dear Stockholder:

You are cordially invited to attend a special meeting of stockholders of
Crop Growers Corporation (the "Company") to be held at the offices of the
Company, 10895 Lowell Avenue, Suite 300, Overland Park, Kansas, on Wednesday,
August 13, 1997 at 9:00 a.m. local time (the "Special Meeting"). A Notice of the
Special Meeting, a Proxy Statement, related information about the Company and a
proxy card are enclosed. All holders of the Company's outstanding shares of
Common Stock (the "Common Stock") and Series A Convertible Preferred Stock (the
"Preferred Stock") as of July 15, 1997 are entitled to notice of and to vote at
the Special Meeting.

At the Special Meeting, you will be asked to consider and to vote upon a
proposal to approve and adopt an Agreement and Plan of Merger, dated May 1, 1997
(the "Merger Agreement"), by and among the Company, Fireman's Fund Insurance
Company, a California corporation ("Fireman's Fund"), and a wholly owned merger
subsidiary of Fireman's Fund, pursuant to which the merger subsidiary will be
merged with and into the Company (the "Merger"). If the Merger Agreement is
approved and the Merger becomes effective, each outstanding share of the Common
Stock will be converted into the right to receive $10.25 in cash, and holders of
options to acquire shares of the Common Stock will each be paid, in cash, net of
withholding taxes, an amount per option share equal to the excess, if any, of
$10.25 over the exercise price of such options. Approval of the Merger requires
the affirmative vote of the holders of a majority of the voting power of all
outstanding shares of the Common Stock and the Preferred Stock, voting together
as one class. Details of the proposed Merger and other important information are
set forth in the accompanying Proxy Statement, which you are urged to read
carefully.

YOUR BOARD OF DIRECTORS HAS APPROVED THE MERGER AND RECOMMENDS THAT YOU VOTE
FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. Whether or not you plan to
attend the Special Meeting, please complete, sign and date the accompanying
proxy card and return it in the enclosed postage prepaid envelope. If you attend
the Special Meeting, you may revoke such proxy and vote in person if you wish,
even if you have previously returned your proxy card.

Thank you for your interest and participation.

Sincerely,
Lawrence T. Martinez
CHIEF EXECUTIVE OFFICER

THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR
MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<PAGE>
CROP GROWERS CORPORATION
10895 LOWELL AVENUE
SUITE 300
OVERLAND PARK, KANSAS 66210

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

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, AUGUST 13, 1997

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

To Stockholders of Crop Growers Corporation:

A special meeting of the stockholders of Crop Growers Corporation, a
Delaware corporation (the "Company"), will be held at the offices of the
Company, 10895 Lowell Avenue, Suite 300, Overland Park, Kansas, on Wednesday,
August 13, 1997 at 9:00 a.m. local time (the "Special Meeting"), to consider and
act upon the following matters:

1. To consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Merger, dated May 1, 1997 (the "Merger Agreement"), among the
Company, Fireman's Fund Insurance Company, a California corporation
("Fireman's Fund"), and CG Acquisitions Corp., a Delaware corporation and
wholly owned subsidiary of Fireman's Fund (the "Merger Subsidiary"),
pursuant to which, among other things, (i) the Merger Subsidiary will be
merged with and into the Company (the "Merger"), (ii) each outstanding
share of Common Stock, par value $.01 per share, of the Company (the
"Common Stock") will be converted into the right to receive $10.25 in
cash, and (iii) holders of options to acquire shares of the Common Stock
will each be paid, in cash, net of withholding taxes, an amount per
option share equal to the excess, if any, of $10.25 over the exercise
price of such options. A copy of the Merger Agreement is attached as
Exhibit A to the accompanying Proxy Statement.

2. To transact such other business as may properly come before the Special
Meeting or any adjournment thereof.

Only holders of record of the Common Stock and the Series A Convertible
Preferred Stock, par value $.01 per share, of the Company (the "Preferred
Stock") at the close of business on July 15, 1997 are entitled to notice of and
to vote at the Special Meeting. Fireman's Fund, which owns approximately 22.9%
of the outstanding shares of Common Stock and all of the outstanding shares of
the Preferred Stock (together representing approximately 29.6% of the combined
voting power of the Common Stock and the Preferred Stock) has notified the
Company that, to the extent it is permitted to do so under its prior agreement
with the Company, it intends to vote its shares of the Common Stock and the
Preferred Stock in favor of the Merger. See the discussion in the accompanying
Proxy Statement with respect to the "Consent Agreement" under the caption
"SPECIAL FACTORS--Relationship Between the Company and Fireman's
Fund--Transactions and Agreements."

Holders of the Common Stock who do not vote their shares in favor of the
Merger Agreement and who strictly comply with Section 262 of the Delaware
General Corporation Law (the "DGCL") have the right to object to the Merger
Agreement and make written demand for payment of the "fair value" of their
shares ("Dissenting Shares"). For a description of the rights of holders of
Dissenting Shares, see Section 262 of the DGCL, a copy of which is attached as
Exhibit C to the accompanying Proxy Statement. In addition, a description of the
procedures to be followed in order to obtain payment for Dissenting Shares is
set forth under the caption "RIGHTS OF DISSENTING STOCKHOLDERS" in the Proxy
Statement.
<PAGE>
Your attention is directed to the Proxy Statement, the Exhibits thereto and
the other materials relating to the Company that have been mailed to you
herewith for more complete information regarding the Merger Agreement and the
Company. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT.

By Order of the Board of Directors
David E. Hill
SECRETARY

Overland Park, Kansas
July 21, 1997

YOUR VOTE IS IMPORTANT. ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE
SPECIAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE MARK, SIGN AND DATE
THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. YOU MAY
NEVERTHELESS VOTE IN PERSON IF YOU ATTEND THE SPECIAL MEETING.
<PAGE>
CROP GROWERS CORPORATION

PROXY STATEMENT

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

SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, AUGUST 13, 1997

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

This Proxy Statement is being furnished to the stockholders of Crop Growers
Corporation, a Delaware corporation (the "Company"), in connection with the
solicitation by the Board of Directors of the Company of proxies to be voted at
a special meeting of stockholders of the Company to be held at the offices of
the Company, 10895 Lowell Avenue, Suite 300, Overland Park, Kansas, on
Wednesday, August 13, 1997 at 9:00 a.m. local time, and any adjournments or
postponements thereof (the "Special Meeting"). At the Special Meeting, the
stockholders of the Company will consider and vote upon a proposal to approve
and adopt an Agreement and Plan of Merger, dated May 1, 1997 (the "Merger
Agreement"), by and among the Company, Fireman's Fund Insurance Company, a
California corporation ("Fireman's Fund"), and CG Acquisitions Corp., a Delaware
corporation and wholly owned subsidiary of Fireman's Fund (the "Merger
Subsidiary"), pursuant to which, among other things (i) the Merger Subsidiary
will be merged with and into the Company (the "Merger"), with the result that
the Company will become a wholly owned subsidiary of Fireman's Fund, (ii) each
outstanding share of Common Stock, par value $.01 per share, of the Company (the
"Common Stock"), except those shares as to which dissenters' rights have been
perfected ("Dissenting Shares"), will be converted into the right to receive
$10.25 in cash, and (iii) holders of options to acquire shares of the Common
Stock of the Company will each receive a cash payment, net of withholding taxes,
in an amount per share equal to the excess, if any, of $10.25 over the exercise
price of such options. See "THE MERGER AGREEMENT--Consideration To Be Received
by Stockholders."

The Company's Annual Report on Form 10-K, as amended, for the year ended
December 31, 1996 and its Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997 are attached as Exhibits D and E, respectively, to this Proxy
Statement. These materials are specifically incorporated by reference in this
Proxy Statement and are included to aid stockholders in their consideration of
the Merger.

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

SUMMARY.................................................................................................... 1
Date, Time and Place of Special Meeting.................................................................. 1
Record Date; Stockholders Entitled to Vote; Quorum....................................................... 1
Purpose of the Meeting................................................................................... 1
The Merger............................................................................................... 2
Termination by Company................................................................................... 2
Termination Fee.......................................................................................... 2
Effective Time of the Merger............................................................................. 2
Voting of Shares Owned by Fireman's Fund................................................................. 2
Special Factors.......................................................................................... 3
Payment for Shares and Options........................................................................... 4
Dissenters' Rights....................................................................................... 4
Regulatory Approvals..................................................................................... 4
The Company.............................................................................................. 4
Fireman's Fund........................................................................................... 4
Market Price and Dividend Data........................................................................... 5
Selected Consolidated Financial Data..................................................................... 6

THE SPECIAL MEETING........................................................................................ 7
General.................................................................................................. 7
Proposal to be Considered at the Special Meeting......................................................... 7
Record Date; Stockholder Approval........................................................................ 7
Proxies.................................................................................................. 8

SPECIAL FACTORS............................................................................................ 8
Background of the Merger................................................................................. 8
Purpose and Structure of the Merger...................................................................... 17
Recommendation of the Company's Board of Directors....................................................... 18
Opinion of Financial Advisor............................................................................. 20
Perspective of Fireman's Fund on the Merger.............................................................. 25
Plans for the Company After the Merger................................................................... 26
Certain Effects of the Merger............................................................................ 26
Relationship Between the Company and Fireman's Fund...................................................... 27
Interests of Certain Persons in the Merger............................................................... 30
Sources and Uses of Funds................................................................................ 31
Certain Federal Income Tax Consequences.................................................................. 32
Public Offerings and Repurchases of Common Stock......................................................... 33
Regulatory Approvals..................................................................................... 33

THE MERGER AGREEMENT....................................................................................... 34
General.................................................................................................. 34
Effective Time........................................................................................... 34
Consideration To Be Received by Stockholders............................................................. 34
Payment for Shares and Options........................................................................... 34
Operations of the Company Prior to the Merger............................................................ 35
Conditions to Consummation of the Merger................................................................. 36
Termination.............................................................................................. 37
Termination Fee.......................................................................................... 37
Accounting Treatment..................................................................................... 37
</TABLE>

i
<PAGE>

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
RIGHTS OF DISSENTING STOCKHOLDERS.......................................................................... 38

STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS................................................ 41
Stock Ownership.......................................................................................... 41
Transactions by Certain Persons in Common Stock.......................................................... 42

MANAGEMENT OF THE COMPANY, FIREMAN'S FUND AND THE MERGER SUBSIDIARY........................................ 43
The Company.............................................................................................. 43
Fireman's Fund and Affiliates............................................................................ 44
The Merger Subsidiary.................................................................................... 45
Certain Proceedings...................................................................................... 45

STOCKHOLDER PROPOSALS...................................................................................... 46

INDEPENDENT PUBLIC ACCOUNTANTS............................................................................. 46

INFORMATION INCORPORATED BY REFERENCE...................................................................... 46

AVAILABLE INFORMATION...................................................................................... 47

ADDITIONAL INFORMATION..................................................................................... 47

EXHIBIT A--Agreement and Plan of Merger.................................................................... A-1

EXHIBIT B--Opinion of Dean Witter Reynolds Inc............................................................. B-1

EXHIBIT C--Provisions of Delaware General Corporation Law Relating to Appraisal Rights..................... C-1

EXHIBIT D--Crop Growers Corporation Annual Report on Form 10-K for the year ended December 31, 1996, as
amended.................................................................................................. D-1

EXHIBIT E--Crop Growers Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 1997..... E-1
</TABLE>

ii
<PAGE>
SUMMARY

THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROXY STATEMENT. THE FOLLOWING SUMMARY IS NOT INTENDED TO BE COMPLETE AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION
CONTAINED IN THIS PROXY STATEMENT, IN THE MATERIALS ACCOMPANYING THIS PROXY
STATEMENT, IN THE EXHIBITS HERETO AND IN THE DOCUMENTS INCORPORATED HEREIN BY
REFERENCE. STOCKHOLDERS ARE URGED TO REVIEW THE ENTIRE PROXY STATEMENT AND
ACCOMPANYING MATERIALS CAREFULLY.

DATE, TIME AND PLACE OF SPECIAL MEETING

A Special Meeting of Stockholders of Crop Growers Corporation will be held
on Wednesday, August 13, 1997 at 9:00 a.m. local time at the offices of the
Company, 10895 Lowell Avenue, Suite 300, Overland Park, Kansas.

RECORD DATE; STOCKHOLDERS ENTITLED TO VOTE; QUORUM

Only holders of record of shares of the Common Stock and the Preferred Stock
at the close of business on July 15, (the "Record Date") are entitled to notice
of and to vote at the Special Meeting. On that date, there were 7,957,780 shares
of Common Stock outstanding, held of record by approximately 110 stockholders,
and 10,000 shares of Preferred Stock outstanding, all of which are owned by
Fireman's Fund. The holders of Common Stock and the holder of the Preferred
Stock will vote together as one class with respect to the matters to be voted
upon at the Special Meeting, with each share of Common Stock entitled to one
vote and the 10,000 shares of Preferred Stock entitled to a total of 754,717
votes. See "THE SPECIAL MEETING--Record Date; Stockholder Approval." The
presence, in person or by proxy, at the Special Meeting of the holders of a
majority of the combined voting power of the outstanding shares of the Common
Stock and the Preferred Stock is necessary to constitute a quorum at the Special
Meeting.

PURPOSE OF THE MEETING

At the Special Meeting, stockholders will consider and vote upon a proposal
to approve and adopt the Merger Agreement, a copy of which is attached as
Exhibit A to this Proxy Statement. See "THE SPECIAL MEETING--Proposal to be
Considered at the Special Meeting." The Merger Agreement provides for the merger
of the Merger Subsidiary with and into the Company, with the result that the
Company, as the surviving corporation (the "Surviving Corporation"), will become
a wholly owned subsidiary of Fireman's Fund. See "THE MERGER
AGREEMENT--General."

THE MERGER

Pursuant to the Merger Agreement, the Merger Subsidiary will merge with and
into the Company, with the Company being the Surviving Corporation. Each
outstanding share of Common Stock (except Dissenting Shares and shares held by
Fireman's Fund or its designee) will be converted into the right to receive
$10.25 in cash, without interest, from the Paying Agent (as defined herein) for
Fireman's Fund and holders of options to acquire shares of the Common Stock of
the Company will each receive from the Surviving Corporation a cash payment, net
of withholding taxes, in an amount per share equal to the excess, if any, of
$10.25 over the exercise price of such options. See "THE MERGER
AGREEMENT--Consideration To Be Received by Stockholders" and "--Payment for
Shares and Options." After the Merger, Fireman's Fund will own all of the
outstanding shares of capital stock of the Surviving Corporation. The shares of
the Common Stock will no longer be traded on the Nasdaq National Market and the
registration of the Common Stock under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), will be terminated. See "SPECIAL FACTORS--Certain
Effects of the Merger."

Approval of the Merger requires the affirmative vote of the holders of a
majority of the voting power of all outstanding shares of the Common Stock and
the Preferred Stock, voting together as one class. See "THE SPECIAL
MEETING--Record Date; Stockholder Approval."

1
<PAGE>
The Merger is subject to various closing conditions, including state
insurance regulatory approvals (which have been granted) and the absence of any
event that would have a material adverse effect on the assets, properties,
liabilities, obligations, financial condition, results of operations or business
of the Company. See "THE MERGER AGREEMENT--Conditions to Consummation of the
Merger."

TERMINATION BY COMPANY

The Board of Directors of the Company may, if it determines in good faith,
after hearing advice of outside counsel, that such action is necessary in order
for the Board of Directors to comply with its fiduciary duties to the Company's
stockholders under applicable law, modify or withdraw its approval or
recommendation of the Merger, approve or recommend a Superior Proposal (as
defined below) or terminate the Merger Agreement, and such action will not
constitute a breach of the Merger Agreement. A "Superior Proposal" is a bona
fide Acquisition Proposal (as defined herein) the terms of which the Board of
Directors of the Company determines, after hearing the advice of a financial
advisor of nationally recognized reputation, to be more favorable to the
Company's stockholders than the terms of the Merger. See "THE MERGER
AGREEMENT--Termination."

TERMINATION FEE

The Merger Agreement may, under specified circumstances, be terminated and
the Merger abandoned at any time prior to the filing of a Certificate of Merger
with the Delaware Secretary of State, notwithstanding approval of the Merger
Agreement by the stockholders of the Company. The Merger Agreement requires the
Company to pay Fireman's Fund a termination fee of $2.4 million plus a sum equal
to the amount of certain transaction costs incurred by Fireman's Fund if the
Merger is not consummated and (a) the Merger Agreement is terminated by the
Company as stated under "--Termination by Company" above, or (b) the Merger
Agreement is terminated by Fireman's Fund following any withdrawal or
modification of the approval or recommendation of the Merger Agreement by the
Company's Board of Directors or any failure by the Board to recommend that the
stockholders of the Company vote in favor of the Merger or any approval or
recommendation by the Board of any Acquisition Proposal other than the Merger,
or (c) Fireman's Fund has complied with all its obligations under the Merger
Agreement, and (d) if the termination is the result of failure of the
stockholders of the Company to approve the Merger, the Company within 18 months
thereafter enters into a binding agreement with a third party regarding a
merger, consolidation, recapitalization, sale of assets, sale of its securities
or a similar transaction. See "THE MERGER AGREEMENT--Termination" and
"--Termination Fee."

EFFECTIVE TIME OF THE MERGER

Unless otherwise agreed by the parties to the Merger Agreement or otherwise
provided by law, the Merger will become effective upon the acceptance for
recording of the Certificate of Merger by the Delaware Secretary of State (the
"Effective Time"). Subject to approval of the Merger at the Special Meeting and
the satisfaction or waiver of the terms and conditions in the Merger Agreement,
the Effective Time is expected to occur on the date of and as soon as
practicable after the Special Meeting. See "THE MERGER AGREEMENT--Effective
Time."

VOTING OF SHARES OWNED BY FIREMAN'S FUND

The Board of Directors of Fireman's Fund, which owns approximately 22.9% of
the issued and outstanding shares of the Common Stock and all of the issued and
outstanding shares of the Preferred Stock (together representing 29.6% of the
combined voting power of the Common Stock and the Preferred Stock), has approved
the Merger and has notified the Company that, to the extent it is permitted to
do so under its prior agreement with the Company, it intends to vote its shares
of the Common Stock and the Preferred Stock in favor of the Merger. The
agreement requires Fireman's Fund to vote its shares which exceed 20% of the
Company's outstanding voting securities in accordance with the pro rata vote of
the

2
<PAGE>
Company stockholders who are not "interested parties" as defined in Section 203
of the Delaware General Corporate Law ("DGCL"). For such purposes, Fireman's
Fund is an "interested party" as so defined. See the discussion with respect to
the "Consent Agreement" under the caption "SPECIAL FACTORS-- Relationship
Between the Company and Fireman's Fund--Transactions and Agreements." Because
Fireman's Fund is entitled to vote substantially less than 50.0% of the combined
voting power of the outstanding shares of the Common Stock and the Preferred
Stock, approval of the Merger is not assured as a result of the voting power
held by Fireman's Fund. See "THE SPECIAL MEETING--Record Date; Stockholder
Approval."

SPECIAL FACTORS

In determining whether to vote in favor of the Merger, stockholders of the
Company should consider the following special factors, as well as the other
factors discussed elsewhere in this Proxy Statement under the caption "SPECIAL
FACTORS":

PURPOSE AND STRUCTURE OF THE MERGER. The purpose of the Merger is to effect
the sale of the Company to Fireman's Fund in a transaction that will provide the
Company stockholders cash for their shares at a price that the Board of
Directors of the Company believes to be fair. The primary reason for the Company
entering into the Merger Agreement is the Board of Directors' belief that it
would be difficult for the Company to enhance operating performance and enhance
shareholder value on a stand-alone basis in the immediate future. See "SPECIAL
FACTORS--Purpose and Structure of the Merger."

RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS. The Board of Directors
of the Company has determined that the Merger is fair from a financial point of
view to and in the best interests of the Company's stockholders (other than
affiliates of the Company and Fireman's Fund and its affiliates). The Board of
Directors has approved the Merger Agreement and recommends that stockholders
vote in favor of the proposal to approve and adopt the Merger Agreement. See
"SPECIAL FACTORS--Recommendation of the Company's Board of Directors."

OPINION OF FINANCIAL ADVISOR. On March 5, 1997, Dean Witter Reynolds Inc.
("Dean Witter") delivered a written opinion to the Board of Directors of the
Company to the effect that the cash consideration to be received by the holders
of the Common Stock (other than Fireman's Fund and its affiliates) in connection
with the Merger is fair to such stockholders from a financial point of view. A
copy of the written opinion of Dean Witter dated March 5, 1997 is attached as
Exhibit B to this Proxy Statement. Stockholders of the Company are urged to read
the opinion of Dean Witter in its entirety. For discussion of the factors
considered and assumptions made by Dean Witter in reaching its opinion, see
"SPECIAL FACTORS--Opinion of Financial Advisor."

INTERESTS OF CERTAIN PERSONS IN THE MERGER. In considering the
recommendation of the Board of Directors of the Company with respect to the
Merger Agreement and the transactions contemplated thereby, stockholders should
be aware that certain officers and directors of the Company have interests in
connection with the consummation of the Merger that may conflict with the
interests of the Company's stockholders. For example current officers and
directors of the Company will receive payments in connection with the settlement
of stock options totalling $72,725 (not taking into account any tax witholding).
See "SPECIAL FACTORS--Interests of Certain Persons in the Merger."

FEDERAL INCOME TAX CONSEQUENCES. For federal income tax purposes, the
Merger will be treated as a taxable sale or exchange of shares of the Common
Stock for cash by each holder of the Common Stock (including any holder of
Dissenting Shares). The amount of gain or loss to be recognized by each
stockholder will be measured by the difference between the amount of cash
received by such stockholder in connection with the Merger for his or her shares
of Common Stock (including Dissenting Shares) and such stockholder's tax basis
in such shares of Common Stock at the Effective Time. See "SPECIAL
FACTORS--Certain Federal Income Tax Consequences."

3
<PAGE>
PAYMENT FOR SHARES AND OPTIONS

As promptly as possible after the Effective Time, instructions will be
furnished to holders of shares of the Common Stock regarding procedures to be
followed to surrender their certificates and receive payment from the Paying
Agent for their shares. Instructions will also be furnished by the Surviving
Corporation to holders of options to purchase the Common Stock concerning their
rights, if any, to receive payments from the Surviving Corporation in settlement
of the options and procedures to be followed to exercise those rights. See "THE
MERGER AGREEMENT--Payment for Shares and Options."

DISSENTERS' RIGHTS

Under the DGCL, any holder of the Common Stock who does not vote in favor of
the Merger and who strictly complies with the procedural requirements of Section
262 of the DGCL, the full text of which is attached as Exhibit C to this Proxy
Statement, will have the right to object to the Merger Agreement and make
written demand for the payment of the "fair value" of such holder's shares of
the Common Stock. See "RIGHTS OF DISSENTING STOCKHOLDERS."

REGULATORY APPROVALS

All approvals of state insurance regulatory authorities required in
connection with the Merger have been obtained. In addition, under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Merger may not be consummated unless notice has been given and
certain information has been furnished to the Antitrust Division of the United
States Department of Justice and the Federal Trade Commission. Such notice and
information has been given and furnished, and the Company and Fireman's Fund
have been notified that neither the Department of Justice nor the Federal Trade
Commission will object to the Merger. See "SPECIAL FACTORS--Regulatory
Approvals."

THE COMPANY

The Company is a leading marketer and servicer of crop insurance. It markets
and services federal multi-peril crop insurance ("MPCI"), private crop hail
insurance and other insurance products underwritten primarily by Fireman's Fund,
as well as its own property and casualty insurance company subsidiaries. The
Company also markets a variety of farm-related software products. The Company's
principal source of revenues is fees for servicing policies and premiums that
are generated for Fireman's Fund through the Company's agency network. In
addition, the Company has underwriting gains and losses generated through its
insurance company subsidiaries.

The principal executive office of the Company is located at 10895 Lowell
Avenue, Suite 300, Overland Park, Kansas 66210, and the Company's telephone
number is (913) 338-7800.

FIREMAN'S FUND

Fireman's Fund is one of the top 20 property and casualty insurance
companies in the United States, with total assets of $16.6 billion and gross
premiums written of $4 billion. The 134-year old Fireman's Fund is assigned an
"A" rating from A.M. Best Company and an "Aa1" rating from Moody's. Fireman's
Fund has 8,157 employees who operate out of 40 major offices, distributing
business and personal lines insurance through approximately 6,000 independent
agents.

The principal executive office of Fireman's Fund is located at 777 San Marin
Drive, Novato, California 94998, and its telephone number is (415) 899-2000.

Fireman's Fund is a wholly owned subsidiary of Allianz of America, Inc.
("AZOA"). Allianz Aktiengesellschaft Holding ("AZ AG") holds 90% of the voting
securities of AZOA. AZ AG's business address is Koniginstrasse 28, 80802 Munich,
Federal Republic of Germany. AZOA's business address is 55 Green Farms Road,
Westport, Connecticut 06881.

4
<PAGE>
MARKET PRICE AND DIVIDEND DATA

The Common Stock is traded on the Nasdaq National Market under the symbol
"CGRO." The following table sets forth the high and low trading prices per share
of the Common Stock on the Nasdaq National Market for the periods indicated.

<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1995
First Quarter............................................................ $ 28.00 $ 14.00
Second Quarter........................................................... 33.00 11.25
Third Quarter............................................................ 16.75 13.19
Fourth Quarter........................................................... 15.00 11.50

1996
First Quarter............................................................ $ 16.25 $ 6.00
Second Quarter........................................................... 11.75 7.00
Third Quarter............................................................ 10.50 6.88
Fourth Quarter........................................................... 7.88 5.88

1997
First Quarter............................................................ $ 10.00 $ 6.13
Second Quarter........................................................... 10.13 9.50
Third Quarter (through July 18).......................................... 10.13 10.06
</TABLE>

On February 14, 1997, the last full day of trading prior to the announcement
by the Company that certain stockholders of the Company intended to sell their
shares of Common Stock for $10 per share, which were approximately 23% of the
shares of the Common Stock then outstanding (see "SPECIAL FACTORS--Relationship
Between the Company and Fireman's Fund"), the reported high and low trading
prices per share of the Common Stock were $8.00 and $7.00, respectively. On
March 5, 1997, the last full day of trading prior to the announcement by the
Company that it had entered into an agreement with Fireman's Fund relating to
the Merger, such reported high and low trading prices per share of the Common
Stock were $8.88 and $8.50, respectively. On July 18, 1997, the last full day of
trading prior to the printing of this Proxy Statement, the reported high and low
trading prices per share of the Common Stock were $10.13 and $10.06,
respectively. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR
THEIR SHARES.

The Company has never paid a cash dividend on the Common Stock and does not
anticipate paying any such dividend in the foreseeable future.

5
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

Set forth below is a summary of selected consolidated financial data with
respect to the Company excerpted or derived from the information contained in
the Company's Annual Reports on Form 10-K for the years ended December 31, 1996,
1995 and 1994, and its Quarterly Report on Form 10-Q for the quarterly periods
ended March 31, 1997 and March 31, 1996. More comprehensive financial
information is included in such reports and other documents filed by the Company
with the Securities and Exchange Commission (the "Commission"), and the
following summary is qualified in its entirety by reference to such reports and
other documents and all of the financial information (including any related
notes) contained therein. Such reports and other documents may be inspected and
copies may be obtained from the offices of the Commission. See "AVAILABLE
INFORMATION." In addition, copies of the Company's Annual Report on Form 10-K
for the year ended December 31, 1996, as amended, and its Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 1997 are attached as Exhibits
D and E to this Proxy Statement being provided to stockholders and are
incorporated herein by reference. See "INFORMATION INCORPORATED BY REFERENCE."
<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- ------------------------------------------
1997 1996 1996 1995 1994 1993
--------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER COMMON SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Revenues:
Service fees.................................................. $ 49,737 $ 66,272 $ 104,602 $ 85,025 $ 48,100 $ 26,733
Premiums earned and other income.............................. 522 780 4,309 701 2,203 524
Investment income............................................. 206 562 2,255 2,163 1,397 587
--------- --------- --------- --------- --------- ---------
Total Revenues.............................................. 50,465 67,614 111,166 87,889 51,700 27,844

Expenses:
Agent commissions and other direct costs...................... 36,010 46,280 71,082 52,612 30,475 20,203
Losses incurred and other expenses............................ 142 445 2,420 (2,013) 1,428 --
General and administrative expenses........................... 7,481 8,029 33,699 28,886 11,526 5,765
Restructuring and non-core expenses........................... 1,375 -- 6,510 -- -- --
Legal matters................................................. 1,135 551 7,458 -- -- --
Interest expense.............................................. 93 834 1,478 859 394 431
--------- --------- --------- --------- --------- ---------
Total Expenses.............................................. 46,236 56,139 122,647 80,344 43,823 26,399
Income (loss) before income taxes and minority interest......... 4,229 11,475 (11,481) 7,545 7,877 1,445
Income taxes.................................................. (1,683) (4,503) 3,345 (2,943) (2,274) --
Minority interest............................................. -- -- (67) (307) (279) --
--------- --------- --------- --------- --------- ---------
Net income (loss)........................................... 2,546 6,972 (8,203) 4,295 5,324 1,445
Redeemable preferred stock dividend............................. (125) -- (239) -- -- --
--------- --------- --------- --------- --------- ---------
Net income (loss) attributable to common stock.............. $ 2,421 $ 6,972 $ (8,442) $ 4,295 $ 5,324 $ 1,445
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Pro Forma Data (1):
Historic net income (loss).................................... $ -- $ -- $ -- $ -- $ 5,324 $ 1,445
Pro forma provision for income taxes.......................... -- -- -- -- (281) (542)
--------- --------- --------- --------- --------- ---------
Pro forma net income (loss)................................... $ -- $ -- $ -- $ -- $ 5,043 $ 903
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Pro forma net income per common share......................... $ -- $ -- $ -- $ -- $ .91 $ .22
Net income (loss) per common share.............................. $ .30 $ .84 $ (1.04) $ .51 $ -- $ --
Ratio of earnings to fixed charges.............................. 19.8 14.76 -- (2) 9.79 -- --
Weighted average common shares outstanding...................... 7,985 8,348 8,109 8,353 5,562 4,074

1992
---------

<S> <C>

STATEMENT OF OPERATIONS DATA:
Revenues:
Service fees.................................................. $ 19,122
Premiums earned and other income.............................. --
Investment income............................................. 323
---------
Total Revenues.............................................. 19,445
Expenses:
Agent commissions and other direct costs...................... 14,065
Losses incurred and other expenses............................ --
General and administrative expenses........................... 4,882
Restructuring and non-core expenses........................... --
Legal matters................................................. --
Interest expense.............................................. 505
---------
Total Expenses.............................................. 19,452
Income (loss) before income taxes and minority interest.........
Income taxes.................................................. --
Minority interest............................................. --
---------
Net income (loss)...........................................
Redeemable preferred stock dividend............................. --
---------
Net income (loss) attributable to common stock.............. $
---------
---------
Pro Forma Data (1):
Historic net income (loss).................................... $
Pro forma provision for income taxes.......................... 3
---------
Pro forma net income (loss)................................... $
---------
---------
Pro forma net income per common share......................... $ --
Net income (loss) per common share.............................. $ --
Ratio of earnings to fixed charges.............................. --
Weighted average common shares outstanding...................... --
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
----------------------- ---------------------------------------------
1997 1996 1996 1995 1994 1993
------------ --------- ------------ --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER COMMON SHARE DATA)
BALANCE SHEET DATA:
Total assets........................................... $ 325,983 $ 319,299 $ 158,929 $ 153,465 $ 88,175 $ 35,230
Long-term debt, excluding current installments......... 2,328 3,838 2,654 3,374 1,978 1,621
Redeemable preferred stock............................. 10,000(3) -- 10,000(3) -- -- 3,250
Stockholders' equity................................... 36,194 50,935 33,752 44,342 38,669 1,960
Book value per common share............................ $ 4.54 $ 6.25 $ 4.23 $ 5.43 $ 4.78 $ .55

1992
---------

<S> <C>

BALANCE SHEET DATA:
Total assets........................................... $ 20,337
Long-term debt, excluding current installments......... 618
Redeemable preferred stock............................. --
Stockholders' equity................................... 1,176
Book value per common share............................ $ .33
</TABLE>

- ----------------------------------
(1) Reflects federal and state income taxes as if the Company's subsidiaries had
not been treated as S Corporations during periods prior to the Company's
initial public offering in June 1994.
(2) In 1996, earnings were inadequate to cover fixed charges by $11,818,303.
(3) Represents issuance of the Preferred Stock to Fireman's Fund in July 1996.

6
<PAGE>
THE SPECIAL MEETING

GENERAL

This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of the Company for a Special Meeting of
Stockholders to be held on August 13, 1997 at 9:00 a.m. local time at the
offices of the Company, 10895 Lowell Avenue, Suite 300, Overland Park, Kansas,
and at any adjournments thereof. Shares represented by properly executed proxies
received by the Company will be voted at the Special Meeting or any adjournment
thereof in accordance with the terms of such proxies, unless such proxies are
revoked. See "--Proxies" below.

PROPOSAL TO BE CONSIDERED AT THE SPECIAL MEETING

At the Special Meeting, the stockholders of the Company will consider and
vote upon a proposal to approve and adopt the Merger Agreement. Pursuant to the
Merger Agreement, the Merger Subsidiary will merge with and into the Company,
the separate corporate existence of the Merger Subsidiary will cease, and the
Company will be the Surviving Corporation. At the Effective Time, each
outstanding share of the Common Stock (except Dissenting Shares and shares owned
by Fireman's Fund or its designee) will be converted into the right to receive
$10.25 in cash, and holders of options to acquire shares of the Common Stock of
the Company will each be paid, in cash, net of withholding taxes, an amount per
share equal to the excess, if any, of $10.25 over the exercise price of such
options. Holders of Dissenting Shares will be entitled to receive from the
Surviving Corporation a cash payment in the amount of the "fair value" of such
shares, determined in the manner provided in Section 262 of the DGCL, but after
the Effective Time such shares will not represent any interest in the Surviving
Corporation other than the right to receive such cash payment. See "RIGHTS OF
DISSENTING STOCKHOLDERS." A copy of the Merger Agreement is attached as Exhibit
A to this Proxy Statement.

In addition to approval and adoption of the Merger Agreement and the
transactions contemplated thereby, stockholders of the Company may be asked to
approve a proposal to adjourn the Special Meeting to permit further solicitation
of proxies in the event there are not sufficient votes at the time of the
Special Meeting to approve and adopt the Merger Agreement. It is not anticipated
that any other matters will be brought before the Special Meeting. However, if
other matters should come before the Special Meeting, it is intended that the
holders of proxies solicited hereby will vote thereon in their discretion,
unless such authority is withheld.

RECORD DATE; STOCKHOLDER' APPROVAL

Only holders of record of the Common Stock and the Preferred Stock at the
close of business on July 15, 1997 are entitled to notice of and to vote at the
Special Meeting. On that date, there were 7,957,780 shares of Common Stock
outstanding, which were held of record by approximately 110 stockholders, and
10,000 shares of Preferred Stock outstanding, all of which are held of record by
Fireman's Fund. Each share of Common Stock entitles its holder to one vote, and
the holder of the Preferred Stock is entitled to a total of 754,717 votes,
concerning all matters properly coming before the Special Meeting. A majority of
the combined voting power of the shares of the Common Stock and the Preferred
Stock entitled to vote, represented in person or by proxy, will constitute a
quorum. Abstentions and broker non-votes (I.E. shares held by brokers in street
name, voting on certain matters due to discretionary authority or instructions
from the beneficial owner but not voting on other matters due to lack of
authority to vote on such matters without instructions from the beneficial
owner) are counted for the purpose of establishing a quorum and will have the
same effect as a vote against the approval of the Merger.

The Merger must be approved by the holders of at least a majority of the
combined voting power of all outstanding shares of the Common Stock and the
Preferred Stock. Approval by holders of a majority of such combined voting power
that are not affiliates of the Company is not required.

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Fireman's Fund, which owns approximately 22.9% of the issued and outstanding
shares of the Common Stock and all of the issued and outstanding shares of the
Preferred Stock (together representing approximately 29.6% of the combined
voting power of the Common Stock and the Preferred Stock), has notified the
Company that, to the extent it is permitted to do so under its prior agreement
with the Company, it intends to vote its shares of Common Stock and Preferred
Stock in favor of the Merger. See the discussion with respect to the "Consent
Agreement" under the caption "SPECIAL FACTORS-- Relationship Between the Company
and Fireman's Fund--Transactions and Agreements." Because Fireman's Fund is
entitled to vote substantially less than 50.0% of the combined voting power of
all outstanding shares of Common Stock and Preferred Stock, approval of the
Merger is not assured as a result of the voting power held by Fireman's Fund.

Although they have not specifically agreed to do so, the Company believes
that each of the directors and executive officers of the Company will vote the
shares of Common Stock with respect to which he has voting power in favor of the
Merger. Such shares represent less than 1% of the shares entitled to vote at the
Special Meeting. See "STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL
OWNERS."

PROXIES

Any Company stockholder entitled to vote at the Special Meeting may vote
either in person or by duly authorized proxy. All shares of the Common Stock and
the Preferred Stock represented by properly executed proxies received prior to
or at the Special Meeting and not revoked will be voted in accordance with the
instructions indicated in such proxies. IF NO INSTRUCTIONS ARE INDICATED, SUCH
PROXIES WILL BE VOTED FOR THE PROPOSAL TO APPROVE AND ADOPT THE MERGER AGREEMENT
AND, IN THE DISCRETION OF THE PERSONS NAMED IN THE PROXY, ON SUCH OTHER MATTERS
AS MAY PROPERLY BE PRESENTED AT THE SPECIAL MEETING.

A stockholder may revoke his or her proxy at any time prior to its use by
delivering to the Secretary of the Company a signed notice of revocation or a
later dated and signed proxy or by attending the Special Meeting and voting in
person. Attendance at the Special Meeting will not in itself constitute the
revocation of a proxy.

Expenses in connection with the solicitation of proxies will be paid by the
Company. Upon request, the Company will reimburse brokers, dealers and banks, or
their nominees, for reasonable expenses incurred in forwarding copies of the
proxy material to the beneficial owners of the Common Stock which such persons
hold of record. Solicitation of proxies will be made principally by mail and by
the Company's agent for such purposes, W.F. Doring & Company (the "Proxy
Solicitation Agent"). The Proxy Solicitation Agent will be paid a fee of $5,000
plus expenses for such services, which principally will involve contacting
individual stockholders of the Company and delivery of proxy materials and
solicitation of proxies from brokers, nominees, fiduciaries and other custodians
for stockholders. Proxies may also be solicited in person, or by telephone or
telegraph, by officers and regular employees of the Company.

SPECIAL FACTORS

BACKGROUND OF THE MERGER

HISTORY OF RELATIONSHIP BETWEEN THE COMPANY AND FIREMAN'S FUND. The Company
and Fireman's Fund first entered into a business and contractual relationship in
1995. Effective for the 1995 crop year (beginning July 1, 1994), the Company and
Fireman's Fund entered into agreements pursuant to which Fireman's Fund agreed
to write a portion of the federal multi-peril crop insurance ("MPCI") policies
serviced by the Company, and the Company agreed to provide the services and
administration relating to such policies. For a description of those agreements,
see "--Relationship Between the Company and Fireman's Fund--Intercompany
Business Relationship" below.

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In April 1996, representatives of the Company and Fireman's Fund began
discussing the possibility of expanding their business relationship in a manner
such that Fireman's Fund would become the primary writer of the Company's crop
insurance business and would also make an investment in the Company. On July 10,
1996, the Company and Fireman's Fund entered into a stock purchase agreement
(the "Preferred Stock Purchase Agreement") pursuant to which Fireman's Fund
purchased, for $10 million in cash, 10,000 shares of the Company's Preferred
Stock. The Preferred Stock is convertible into 754,717 shares of the Company's
Common Stock (at the time of purchase and assuming conversion, approximately
8.6%). Under the terms of the Preferred Stock Purchase Agreement, Fireman's Fund
has the right to select one nominee for election to the Company's Board of
Directors. Fireman's Fund selected John M. Meuschke, Fireman's Fund's Senior
Vice President in charge of its Central States Region, as its representative on
the Board of Directors.

At the same time, the Company and Fireman's Fund entered or agreed to enter
into new agreements relating to MPCI, crop hail insurance and farm and ranch
insurance under which Fireman's Fund obtained the right to underwrite
substantially all of such insurance originated by the Company other than the
portion underwritten by the Company's subsidiaries. Also as a part of this
transaction, and in connection with discussions among the Company, Fireman's
Fund and the Federal Crop Insurance Corporation (the federal agency that
administers the MPCI program, the "FCIC") related to the Company's indictment on
May 30, 1996 in an action brought by the Independent Counsel investigating the
affairs of former Secretary of Agriculture, Mike Espy (see "MANAGEMENT OF THE
COMPANY, FIREMAN'S FUND AND THE MERGER SUBSIDIARY--Certain Proceedings"),
Fireman's Fund assumed the Company's standard reinsurance agreement with the
FCIC that had previously been held by one of the Company's insurance company
subsidiaries, and agreed to service the Company's MPCI business in the event the
Company was unable to participate in the MPCI program. The Company believes
Fireman's Fund's agreement to assume the Company's standard reinsurance
agreement was an important aspect of the FCIC's decision to permit the Company
to continue to participate in the MPCI program following its indictment. Absent
such an assignment, the Company believes it may have been suspended from
participating in the MPCI pending disposition of the charges contained in the
indictment. In light of the fact that, prior to the Company's indictment,
Fireman's Fund and the Company had agreed in principle to expand their business
relationship, the assignment of the standard reinsurance agreement was made a
part of the overall business transaction.

For a description of the agreements discussed above, see "--Relationship
Between the Company and Fireman's Fund--Intercompany Business Relationship" and
"--Transactions and Agreements" below.

FINANCIAL ADVISOR. In late 1995, the Company began considering expanding
its business relationships and potential strategic transactions. Accordingly, in
January 1996, the Company engaged Dean Witter to act as its exclusive financial
advisor in connection with the Company's review of strategic and financial
planning matters, including a possible merger or sale of the Company. Dean
Witter was the Company's financial advisor in connection with the expansion of
its business relationship with Fireman's Fund in July 1996 and the related
investment in the Company by Fireman's Fund. From time to time, representatives
of Dean Witter had discussions with senior management of the Company and the
Company's Board of Directors concerning the Company's potential strategic
alternatives. Such discussions were general in nature and did not result in any
formal actions by the Company's Board of Directors, except as described below.

DISCUSSIONS WITH THIRD PARTY. In October 1996, the Company was approached
by Acceptance Insurance Companies ("Acceptance"), which indicated a desire to
hold discussions with Company management relating to possible strategic
transactions involving the Company and Acceptance. Acceptance was involved in
the crop insurance business through a subsidiary which serviced approximately
$250 million of MPCI premiums in the 1996 crop year. On or about October 21,
1996, Richard Gibson, Chief Executive Officer of Acceptance's crop insurance
subsidiary, telephoned Lawrence T. Martinez, the Chief Executive Officer

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of the Company, to determine if the Company would be interested in meeting to
discuss what opportunities might exist for a relationship between their
respective companies. Mr. Martinez indicated he would be available to meet and
asked Mr. Gibson to telephone him to arrange a meeting. On October 24, 1996, Mr.
Gibson telephoned Mr. Martinez regarding meeting logistics.

On October 25, 1996, Messrs. Martinez and David E. Hill, the Chief Financial
Officer of the Company, met with Mr. Gibson, Kenneth Coon, Chief Executive
Officer of Acceptance, and Michael McCarthy, a director of and financial advisor
to Acceptance. The parties discussed general crop insurance industry conditions,
the possibility of government action that would significantly reduce the amount
paid to private companies to service MPCI premiums and the likelihood that such
a reduction would result in increased consolidation within the industry. The
parties also briefly discussed the possible merits of a strategic transaction
between the two companies, including the creation of a leading market position
and the economies of scale created by combining the two crop insurance
businesses. They also discussed Fireman's Fund's MPCI agreements with the
Company. There was no discussion of any form or structure that any possible
relationship between the companies might take. At the conclusion of the meeting,
the parties agreed that it would be appropriate to continue the discussions.

On November 7, 1996, at a meeting of the Board of Directors of the Company
(with all directors in attendance), the Board directed Mr. Martinez to continue
discussions with Acceptance.

On November 21, 1996, at the initiative of Mr. Coon, Messrs. Martinez and
Hill, a representative of Dean Witter and Messrs. Coon and McCarthy met to
continue their prior discussion. In addition to again reviewing general crop
insurance industry conditions, Mr. McCarthy outlined a possible transaction
between the companies whereby the Company and Acceptance would each contribute
its crop insurance book of businesses into a to-be-formed company in exchange
for stock in the new company. Mr. McCarthy indicated that because of the
uncertainty surrounding the possible impact of the Independent Counsel matter
and the Company's existing securities class action, Acceptance did not believe
it was desirable to structure a transaction pursuant to which the Company was
the surviving corporation.

On November 26, 1996, Dean Witter, at the Company's request, sent Acceptance
an alternative transaction structure which contemplated a merger of the
Company's and Acceptance's crop insurance companies, with the Company surviving
as a public company. No price or other financial terms were included. On the
same date, a representative of Dean Witter and Messrs. Hill and Martinez were
telephoned by Messrs. Coon and McCarthy to discuss the alternative transaction
structure proposed by the Company. Dean Witter indicated that the structure
previously proposed by Acceptance was unacceptable to the Company because it
left any and all contingent liabilities of the Company with the Company
stockholders, did not adequately address how the new company would be
capitalized, had adverse tax consequences for the Company and its stockholders,
and might have required the new company to go through the time and expense of an
initial public offering. Messrs. Coon and McCarthy indicated that they were
still concerned with doing a transaction pursuant to which the Company was the
surviving corporate entity, but that they would consider the structure proposed
by the Company.

On December 11, 1996, at a meeting initiated by Acceptance, Mr. Martinez, a
representative of Dean Witter and Messrs. Coon and McCarthy met to continue
their prior discussions. Mr. McCarthy indicated that the Company's proposed
transaction structure was not acceptable for the reasons stated above and he
suggested that Acceptance believed the preferred transaction structure would be
an acquisition of the Company by Acceptance in a merger pursuant to which the
Company's stockholders would receive stock of Acceptance. No financial terms
were discussed at the meeting, however the parties did discuss certain issues
facing the Company, such as the Independent Counsel matter and the ongoing
related expenses, the existing securities class action lawsuit against the
Company, competitive issues facing the Company in the marketplace (principally
as a result of the negative impact of the Independent Counsel matter), the
restructuring charges the Company had taken in 1996 and the terms of the
Company's MPCI agreements with Fireman's Fund, which are described below under
the caption "Relationship Between the Company

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<PAGE>
and Fireman's Fund--Intercompany Business Relationship." Mr. Martinez in
response to a question indicated that he believed Fireman's Fund wanted to be a
long-term player in the crop insurance industry. He also indicated that he
believed that Fireman's Fund's ongoing role would be an important element for
the Company to consider. The parties talked generally about these issues,
without quantifying the effects, and agreed that for a transaction to go
forward, Acceptance would have to become comfortable with these issues as the
Company was not willing to enter into an acquisition agreement that included
termination rights for Acceptance relating to these issues.

On December 27, 1996, Acceptance sent a draft summary of proposed terms to
Dean Witter, and Dean Witter provided a copy to the Company. The proposal
provided that the Company would be merged into a subsidiary of Acceptance, and
that each issued and outstanding share of the Company's Common Stock would be
converted into stock of Acceptance having an equivalent value of approximately
$6.80 per share (based on the then-current price of Acceptance's stock), on the
condition that the Company had a tangible book value on the closing date of the
transaction of at least $35 million. The proposal was further conditioned upon
completion of due diligence by Acceptance, settlement of the Company's
outstanding securities class action lawsuit and disposition of the Independent
Counsel matter. Acceptance proposed a break-up fee of $1 million and an option
to purchase a portion of the Company's crop insurance business at a specified
price in the event the break-up fee became payable. On or about January 6, 1997,
a representative of Dean Witter telephoned Mr. McCarthy to convey to Acceptance
the Company's position that the proposed terms were unacceptable to the Company
based on the proposed price and the conditions attached to the payment of that
price and to a closing of the proposed transaction.

On February 10 and 11, 1997, Messrs. Martinez and Hill, Paul T. Horn, the
Company's Chairman, Thomas M. Vertin, the Company's Vice Chairman, Mr. Meuschke,
and representatives of Dean Witter met with Messrs. Coon, Gibson and McCarthy,
John Nelson, President of Acceptance, and William Gerber, Vice President of
Investor Relations of Acceptance. The meeting resulted from Acceptance's offer
to meet with members of the Company's Board of Directors to discuss Acceptance's
business and the benefits of a possible merger transaction with Acceptance. At
the meeting, the representatives of Acceptance provided an overview of
Acceptance's business and management team. They also discussed certain benefits
Acceptance perceived of combining the Company's and Acceptance's crop insurance
businesses. These benefits included a leading market position in the MPCI
industry, an improved spread of risk across the United States and economies of
scale which might be realized through a combination of the businesses. None of
the benefits discussed were quantified. In response to a question, one of the
Acceptance representatives indicated that Fireman's Fund's role in such a
transaction would be as a potential reinsurer once the Company's MPCI
reinsurance agreement with Fireman's Fund terminated after the 1999 crop year.
Mr. Horn indicated that the Company believed that Fireman's Fund's participation
in any possible transaction between the Company and Acceptance was desirable in
view of Fireman's Fund's capital resources and its investor and reinsurance
relationships with the Company. The representatives of Acceptance indicated that
it was unlikely that Fireman's Fund could continue to have its same reinsurance
arrangement (after the 1999 crop year) in the event of a transaction. The
parties discussed Acceptance's desire to be assured that a certain minimum MPCI
premiums level for the 1997 Spring business would be achieved and a minimum
tangible net worth be maintained as conditions to a possible merger agreement
and/or adjustments to the purchase price. The Company indicated that it was not
acceptable for it to enter into a definitive merger agreement where the price
payable to shareholders might fluctuate and/or Acceptance, a competitor, could
engage in significant due diligence and then terminate the agreement for the
Company's failure to satisfy a certain covenant. In view of this discussion,
Acceptance suggested that it might be preferable to wait until the Company's
first quarter financial results were known before entering into any agreement or
discussing the consideration Acceptance might be willing to pay for the
Company's Common Stock. The parties also discussed the timing and possible
disruption to the Company's business (for example, distractions to management
and possible leaks of information which might negatively affect the Company's
agency network) of engaging in any formal due diligence process prior to the
1997 Spring MPCI sales closing date (March 15, 1997) which would mean that
discussions and further negotiations

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<PAGE>
would likely have to wait until after that date. The parties agreed to discuss
further a possible transaction schedule based on the timing of the availability
of the Company's first quarter financial results.

Except as described below under the caption "--Contacts and Negotiations
with Fireman's Fund," the Company and Acceptance did not engage in any
significant discussions following the February 10 and 11, 1997 meetings.

CONTACTS AND NEGOTIATIONS WITH FIREMAN'S FUND. On January 20, 1997, at the
request of Mr. Martinez and with the knowledge of the Board of Directors of the
Company, a representative of Dean Witter contacted Mr. Meuschke, Fireman's
Fund's representative on the Company's Board of Directors, to determine whether
Fireman's Fund had an interest in expanding its relationship with the Company,
particularly in light of the Company's recent discussions with Acceptance. Mr.
Meuschke indicated that Fireman's Fund's principal interest was to protect its
investment in and contracts with the Company. Mr. Martinez and Mr. Meuschke had
a telephone conference the same day, in which Mr. Meuschke gave Mr. Martinez
similar information.

On January 21, 1997, the Company settled the charges brought against it by
the Independent Counsel investigating the affairs of former Secretary of
Agriculture, Mike Espy. See "MANAGEMENT OF THE COMPANY, FIREMAN'S FUND AND THE
MERGER SUBSIDIARY--Certain Proceedings." The existence of the Independent
Counsel matter had been a factor in certain discussions with Acceptance, as
discussed above. It was not, however, a significant factor in the Board's
decision to hold discussions with Acceptance, or subsequently with Fireman's
Fund concerning a possible strategic transaction.

On January 27, 1997, Mr. Horn, the Chairman of the Board of the Company,
spoke to Carl Lindner, the Chairman of the Board of American Financial Group,
who had called Mr. Horn to inquire whether Mr. Horn knew whether John Hemmingson
or Gary Black, former executives of the Company, or Kramer Spellman LP, an
institutional stockholder, might be interested in selling their Company stock.
American Financial Group's subsidiary, Great American Insurance Company ("Great
American"), serviced approximately $75 million of MPCI premiums in the 1996 crop
year. At that time, Mr. Hemmingson, Mr. Black and Kramer Spellman LP owned
approximately 15%, 9% and 10%, respectively, of the outstanding Common Stock of
the Company.

On January 29, 1997, at a meeting of the Company's Board of Directors that
included Messrs. Horn, Meuschke, Vertin and Martinez in attendance and from
which Mr. Sanchez was absent, and was also attended by Mr. Hill and a
representative of Dean Witter, the parties discussed recent events, including
those described above. In response to a question, Mr. Meuschke informed the
Board that Fireman's Fund would be interested in exploring its options regarding
an expanded relationship with the Company if the Board decided to explore more
aggressively the possibility of entering into a strategic transaction. The Board
also discussed the Company's current operations, including the projected decline
in premiums serviced in the first quarter of 1997 versus the first quarter of
1996, general conditions affecting the crop insurance industry (including the
possibility that the government would significantly reduce the amounts paid to
private companies for servicing MPCI business) and the Company's difficulty in
securing adequate working capital financing. The Board also discussed the
possible impact on the Company's Spring MPCI business of any announcement of a
significant transaction prior to March 15, 1997, the date on which the majority
of the MPCI premiums serviced by the Company in 1997 were to become bound.

On January 30, 1997, during a telephonic meeting of the Company's Board
(with Messrs. Horn, Meuschke, Vertin and Martinez present and Mr. Sanchez
absent) held to continue the discussion which occurred during the January 29,
1997 meeting, the Board determined, based upon the factors discussed during the
January 29, 1997 board meeting, to explore more aggressively the possibility of
pursuing a strategic transaction. In that regard, the Board asked Dean Witter to
contact Acceptance and inform its representatives that members of the Board
would be willing to meet with Acceptance's representatives to discuss the
possibility of a strategic transaction.

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On February 4 and 5, 1997, Mr. Martinez and Mr. Meuschke discussed,
generally, the possibility of a transaction involving the Company, Fireman's
Fund's and Acceptance, including whether Fireman's Fund would have any ongoing
role after expiration of its agreements with the Company. They also discussed,
generally, the possibility of Fireman's Fund deciding to expand its relationship
with the Company through increased ownership in the Company.

On February 15, 1997, Mr. Meuschke telephoned Mr. Martinez to inform him
that Fireman's Fund had received notice from Mr. Hemmingson, pursuant to
Fireman's Fund's right of first refusal agreement with him, offering his
1,145,703 shares of stock to Fireman's Fund and informing Fireman's Fund that he
had an agreement to sell his stock to Great American for $10 per share. The
notice indicated that Mr. Black also had an agreement to sell his 681,774 shares
of stock to Great American for $10 per share. Mr. Meuschke stated that Fireman's
Fund was analyzing the issues presented by the proposed sales. Right of first
refusal agreements between Fireman's Fund and Hemmingson and Black provided that
Fireman's Fund had 20 days to respond if it wished to exercise its rights to
purchase the offered stock. For a description of the right of refusal
agreements, see "--Relationship between the Company and Fireman's
Fund--Transactions and Agreements" below. Mr. Lindner telephoned Mr. Horn the
same day to inform him of Great American's agreements to purchase all of the
stock of the Company owned by Messrs. Hemmingson and Black (the "Hemmingson and
Black Stock").

On February 17, 1997, Mr. Martinez telephoned Mr. Meuschke to inform him
that the Company would be issuing a press release the next day regarding
Hemmingson's and Black's agreements to sell their stock to Great American and
Fireman's Fund's right of first refusal with respect to the Hemmingson and Black
Stock.

On February 19 and 20, 1997, Mr. Martinez and Mr. Hill were telephoned by
Jeff Post, the Chief Financial Officer of Fireman's Fund, Harold Marsh, the
Treasurer of Fireman's Fund, and Bruce Friedberg, the Chief Financial Officer of
Fireman's Fund's Commercial Insurance Division, to discuss Hemmingson's and
Black's agreements with Great American and the impact of the standstill
provision in the Preferred Stock Purchase Agreement on Fireman's Fund's ability
to exercise its rights to purchase such shares. Fireman's Fund indicated that it
was interested in purchasing Hemmingson's and, perhaps, Black's stock. Fireman's
Fund asked if the Company would waive the 20% standstill provision in the
Preferred Stock Purchase Agreement, if necessary, so that Fireman's Fund would
be in a position to purchase the Hemmingson and Black Stock. Mr. Martinez
indicated that the Company was evaluating the standstill issue. For a
description of the standstill provision, see "--Relationship Between the Company
and Fireman's Fund--Transactions and Agreements" below.

On February 22, 1997, the Company's Board of Directors held a meeting (with
Messrs. Horn, Meuschke, Vertin and Martinez in attendance and Mr. Sanchez
absent) to discuss these recent developments. Mr. Meuschke participated in the
first portion of the meeting, in which there were discussions of Fireman's
Fund's rights of first refusal, the proposed standstill waiver and Fireman's
Fund's intentions with respect to exercising its rights of refusal. Mr. Meuschke
said Fireman's Fund was inclined to purchase all of the Hemmingson and Black
Stock. Mr. Meuschke then withdrew from the meeting, and the members of the Board
held lengthy discussions, with representatives of Dean Witter, the Board's
financial advisor, and Dorsey & Whitney LLP ("Dorsey & Whitney"), the Company's
legal counsel, and Henke, Heaton & Bufkin ("Henke, Heaton") the Company's
special crop insurance counsel, present.

At the time of the February 22 meeting, the Board believed that it was
important to know Fireman's Fund's longer term intentions before it made a
decision to waive the standstill provision, and the Board did not want to
preclude Fireman's Fund, its primary business partner, from considering a
transaction with the Company. The Board also considered the impact on the
Company of another party, particularly a competitor, obtaining an approximately
23% interest in the Company, as well as the facts that (a) the Company did not
know Great American's intentions toward the Company, (b) refusal to accommodate
Fireman's Fund's purchase of the Hemmingson and Black Stock could harm its
relationship with Fireman's

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Fund, and (c) Great American's purchase of the Hemmingson and Black Stock would
likely result in uncertainty in the crop insurance marketplace and could be
harmful to the Company's business. Based on reports from its regional office
personnel, the Company believed Great American's purchase of approximately 23%
of the Common Stock would create uncertainty over who controlled the Company and
the impact of a competitor potentially influencing the management of the Company
in a manner designed to benefit that competitor.

At the February 22 meeting, the Board took action authorizing Mr. Martinez
to inform Fireman's Fund that the Company would waive the standstill agreement
(subject to certain restrictions regarding Fireman's Fund's voting of its
Company stock) to accommodate Fireman's Fund's purchase of the Hemmingson and
Black Stock, if Fireman's Fund would agree: (a) to consider making a proposal
for the acquisition of the Company within one week (i) at a price above the $10
per share price offered by Great American for the Hemmingson and Black Stock,
and (ii) with the understanding that management of the Company would have the
right to seek out other parties who might be interested in a similar transaction
involving the Company and to terminate the acquisition agreement with Fireman's
Fund if a superior offer was obtained and a break-up fee was paid to Fireman's
Fund; and (b) to provide an interim working capital facility to the Company, if
needed. The Board's proposal was immediately communicated by Mr. Martinez and a
representative of Dean Witter to Mr. Meuschke. Members of the Board, with Mr.
Meuschke, representatives of Dean Witter, Dorsey & Whitney and Henke, Heaton
present, had a telephone conference with Messrs. Post, Marsh and Friedberg and
with Paul Saffert, the Chief Financial Officer of Allianz of America Corporation
("Allianz"), a wholly-owned subsidiary of AZOA, the parent company of Fireman's
Fund, to discuss the Board's proposal. Mr. Post indicated that Fireman's Fund's
preference was to continue its strategic relationship with the Company, not to
purchase the Company. Mr. Post acknowledged the Company's concern about having
Great American or Fireman's Fund own a significant percentage of the Company
Common Stock and possibly precluding the Company from entering into strategic
transactions with other parties as a result of such ownership. Mr. Post
indicated that Fireman's Fund would consider the Company's proposal.

On February 23, 1997, Mr. Meuschke initiated a telephone conference with a
representative of Dean Witter Mr. McCarthy to discuss whether it made sense for
Fireman's Fund and Acceptance to meet to discuss whether a possible transaction
among the three companies was feasible.

On February 24, 1997, Mr. Martinez spoke with Mr. Meuschke to determine
whether a meeting among Fireman's Fund, the Company and Acceptance was to take
place to discuss the possibility of a transaction which could result in a
combination of the Company's and Acceptance crop insurance books of business.

On February 25, 1997, Mr. Martinez met with Mr. Meuschke and Keith F. Curry,
the underwriting executive in charge of Fireman's Fund's Agricultural Unit, and
discussed recent events, including the Great American agreements with Hemmingson
and Black and Fireman's Fund's intention with respect to the exercise of its
rights of first refusal. Messrs. Meuschke and Curry indicated that Fireman's
Fund was still evaluating whether to exercise its rights of first refusal. Mr.
Martinez indicated the Company was still considering whether to waive the
standstill provision. They also discussed, in general terms, what the meeting
with Acceptance the following day might accomplish.

On February 26, 1997, Mr. Martinez attended a meeting involving Messrs.
Post, Marsh, Friedberg, Meuschke, Curry, Greg Wacker, the Vice President and
Actuary of Fireman's Fund, Mr. Saffert, Manfred Hoffman of Allianz, and Messrs.
Coon, Gibson, McCarthy and Nelson of Acceptance. The representatives of
Acceptance provided an overview of Acceptance's business and management team.
Acceptance also discussed certain benefits perceived of combining the Company's
and Acceptance's crop insurance businesses through the merger of the Company
into Acceptance. These benefits included a leading market position in the MPCI
industry, and improved spread of risk across the United States and economies of

14
<PAGE>
scale which might be realized through the combination of the businesses. None of
the benefits discussed were quantified.

Messrs. Post, Marsh, Friedberg and Hoffman and the representatives of
Acceptance also met separately the same day to discuss various scenarios under
which Fireman's Fund and Acceptance would enter into a strategic relationship in
conjunction with Acceptance's proposal to merge the Company into Acceptance. The
primary proposal set forth by Acceptance was to form a joint venture between
Fireman's Fund and Acceptance in which Fireman's Fund would exercise its first
rights of refusal on the Hemmingson and Black Stock and agree to vote in favor
of Acceptance's bid to acquire the Company for Acceptance's stock. Acceptance
would then acquire the Company, and together with its crop insurance business,
contribute both operations to the joint venture. Fireman's Fund would eventually
receive Acceptance's stock in return for its shares of the Company so that after
the transaction was completed, Fireman's Fund would be a significant shareholder
of Acceptance and would then agree to be a long-term reinsurer to the joint
venture, assuming 100% of the underwriting risk for a 20% profit stake.
Throughout the discussions, it was Fireman's Fund's perception that Acceptance
viewed Fireman's Fund's role primarily as a reinsurer, and secondarily as a
potential capital provider to Acceptance. Fireman's Fund, however, viewed its
role as participating in the underwriting activities of the Company's MPCI
business, thus creating a business conflict between Fireman's Fund and
Acceptance.

On February 26, 1997, Mr. Martinez talked to Mr. Post about Fireman's Fund's
request that the Company waive the standstill provision and a possible meeting
on March 3, 1997 between the Company and Fireman's Fund to discuss a proposed
transaction. Mr. Post indicated that Fireman's Fund would be prepared on March 3
to address the Company's concerns that any Fireman's Fund proposal provide all
Company stockholders with an opportunity to sell their shares. Mr. Post
indicated that Fireman's Fund's willingness to consider an acquisition of the
entire Company was influenced, in part, by its concern that the Board of
Directors of the Company would not give its consent under the standstill
provision in the Preferred Stock Purchase Agreement to its purchase of the
Hemmingson and Black Stock in the absence of an opportunity for all stockholders
of the Company to sell their shares. On February 27, 1997, Mr. Martinez had
additional discussions with Mr. Post regarding the same matters and to confirm
the March 3 meeting date.

On February 28, 1997, Mr. Marsh and Mr. McCarthy reviewed by telephone the
proposal set forth in the meeting of February 26. Mr. Marsh and Mr. McCarthy
could not agree upon a proposal satisfactory to Fireman's Fund because both
parties wanted to participate in the same aspect of the Company's MPCI business,
specifically the underwriting activities, and Fireman's Fund did not wish to
become a significant shareholder of Acceptance. No agreement was ever reached
between Fireman's Fund and Acceptance.

On March 1, a representative of Dean Witter telephoned Mr. McCarthy to
determine if Acceptance was willing to make a proposal for consideration by the
Board of Directors. Mr. McCarthy indicated that Acceptance was still considering
the possibility of making a proposal to the Company whereby the Company would be
merged into Acceptance and the Company's stockholders would receive Acceptance's
common stock (which, based on the then current trading price of Acceptance's
stock, represented approximately $8.85 per share of Company Common Stock) in
exchange for their shares of the Company's Common Stock. No formal proposal was
made. Dean Witter discussed the possible structure on the telephone with Messrs.
Martinez and Vertin on March 1 and with the Board as a group at a meeting on
March 3.

On March 1, 1997, Mr. Martinez talked with Mr. Marsh to confirm the Board's
planned March 3 meeting. Mr. Marsh indicated that Fireman's Fund's had had
discussions with Mr. McCarthy on February 28 regarding a possible Fireman's Fund
role in the context of a transaction between the Company and Acceptance, and
that Fireman's Fund did not view reaching an agreement with Acceptance as likely
due to the fact that both parties sought the same aspect of the Company's MPCI
business and because Fireman's Fund was not interested in becoming a significant
shareholder of Acceptance.

15
<PAGE>
On March 2, 1997, at Mr. Post's invitation Mr. Martinez met with Mr. Post,
who indicated that Fireman's Fund was preparing to exercise its rights of first
refusal with respect to the Hemmingson and Black Stock, to make an offer to
acquire all remaining shares of the Company for $10 per share, and to agree to
provide a working capital line of credit (as necessary) for the Company. Mr.
Post indicated that Fireman's Fund would request that the Company waive the
standstill provision to permit Fireman's Fund to exercise its rights of first
refusal. Mr. Martinez and Mr. Post also discussed in general terms certain
business and operational issues involving the companies.

On March 3, 1997, the Company's Board of Directors held a meeting (with
Messrs. Horn, Meuschke, Vertin and Martinez in attendance and Mr. Sanchez
absent) in preparation for the scheduled meeting with representatives of
Fireman's Fund. During the day, representatives of Dorsey & Whitney and Henke,
Heaton, Messrs. Horn, Vertin, Martinez, Hill and representatives of Dean Witter
had numerous discussions and negotiations with Messrs. Post, Marsh, Friedberg
and Meuschke and a representative of McCutchen, Doyle, Brown & Enersen, LLP
("McCutchen"), Fireman's Fund's legal counsel, regarding Fireman's Fund's
proposal as presented the previous day to Mr. Martinez. The proposal also
included (a) a no-solicitation provision, (b) a break-up fee of 3% of the
transaction value, plus an overbid option to acquire 19.9% of the Company's
Common Stock, and (c) a waiver of the standstill provision and a related voting
restriction with respect to equity securities of the Company owned by Fireman's
Fund that represented more than 25% of the combined voting power of all equity
securities of the Company. Fireman's Fund provided drafts of acquisition
documents to the Company at that time. The Board, Dean Witter and Dorsey &
Whitney reviewed the documents. The Company negotiated throughout the day for a
price higher than $10. The negotiations concerning price were tied to the
Company's ability to continue to solicit alternative proposals after a
definitive agreement with Fireman's Fund was reached. The Company indicated that
were Fireman's Fund willing to offer $12 per share, the Company would be willing
to limit its ability to solicit alternative offers and agree to a waiver of the
standstill provision. In the alternative, the Company suggested that if
Fireman's Fund would be willing to offer $10.50 per share, the Company would not
be willing to limit its ability to solicit other offers. Fireman's Fund
initially indicated that it was not willing to offer more than $10 per share.
The Company also negotiated to eliminate or change various provisions of the
draft acquisition documents.

By the end of the day on March 3, the Company and Fireman's Fund had reached
agreement in principle on the acquisition of the Company by Fireman's Fund in
the form of a cash merger at $10.25 per share. The Company negotiated for and
obtained the opportunity to affirmatively solicit alternative proposals until
March 28, 1997 from a group of seven companies (some of the larger crop
companies in the United States and several companies with which the Company had
had contacts over the previous few years) whom the Company and Dean Witter
believed were possible purchasers of or partners for the Company, and to have
the right to terminate any agreement in the event the Company obtained a
superior offer. The Board wanted the ability to contact those companies to
ensure that the offer by Fireman's Fund was the best opportunity available to
the Company at that time. In addition, the Company obtained a provision allowing
the Company to terminate any such agreement under certain conditions in the
event the Board received an unsolicited offer that it believed it had to
consider. Upon termination of the agreement, the Company was obligated to pay a
breakup fee of $2.4 million plus Fireman's Fund's out-of-pocket costs (including
outside legal fees) and internal legal costs. The Company also consented to
Fireman's Fund's purchase of the Hemmingson and Black Stock, waiving the 20%
standstill provision with respect to those purchases set forth in its prior
agreement with the Company and consenting to such purchases under Section 203 of
the DGCL. See the discussions with respect to the "Consent Agreement" and the
"Preferred Stock Purchase Agreement" under the caption "SPECIAL
FACTORS--Relationship between the Company and Fireman's Fund--Transactions and
Agreements." Relative to the proposal discussed with Fireman's Fund on March 3,
the members of the Board concluded that Fireman's Fund's proposal offered
significantly more value than the structure being discussed by Acceptance and
consequently did not pursue discussions with Acceptance at that time.

16
<PAGE>
On March 4, 1997, Messrs. Martinez, Hill and Marsh, together with
representatives of Dorsey & Whitney and McCutchen, legal counsel for the
parties, negotiated the remainder of the terms of the definitive acquisition
documents. The negotiations primarily involved wording of the provisions
relating to the circumstances under which any agreement could be terminated and
other provisions negotiated in principle on the previous day.

On March 5, 1997, the Board of Directors held a meeting, with all members
participating, to consider and approve the Merger and the definitive acquisition
documents (together, the "Acquisition Agreements"). Dean Witter delivered its
written opinion to the Board that the cash consideration to be paid in
connection with the Merger was fair, from a financial point of view, to the
stockholders of the Company (excluding Fireman's Fund and its affiliates). Dean
Witter also distributed materials it prepared containing the analysis underlying
its fairness opinion. The Board (unanimously with the exception of Mr. Meuschke,
who abstained) approved the Merger and the Acquisition Agreements. The
Acquisition Agreements were executed and delivered by the Company and Fireman's
Fund at the end of the day.

Following the March 5 meeting, at the request of the Board, Dean Witter
began to contact the limited group of potential purchasers or partners that
Fireman's Fund and the Company agreed the Company could affirmatively solicit to
ascertain their interest in a strategic transaction with the Company. None of
the contacts or discussions during the ensuing several weeks between Dean Witter
and the identified group (including Acceptance), or with two other parties who
initiated contact with Dean Witter and the Company, indicated any serious
interest by any such parties in pursuing a transaction with the Company or an
acquisition proposal.

During the course of its negotiations with the Company and following
execution of the Acquisition Agreements, Fireman's Fund has had preliminary
contacts with other parties concerning a potential investment in the business of
the Company following the Merger. Such preliminary contacts did not result in
any agreement to pursue any such investment.

PURPOSE AND STRUCTURE OF THE MERGER

The primary benefit of the Merger to the Company's stockholders is the
opportunity to sell all of their Common Stock at a price which represents a
substantial premium over trading prices in effect immediately prior to the
announcement of Messrs. Hemmingson's and Black's agreements to sell their stock
to Great American for $10 per share and the announcement of the Merger. The
structure of the transaction as a cash merger provides a cash payment at a
premium price to all holders of outstanding Common Stock (except for Messrs.
Hemmingson and Black, who had separate agreements to sell their stock to
Fireman's Fund) and ensures the acquisition by Fireman's Fund of all the
outstanding shares of the Company.

The primary reason for the Company entering into the Merger Agreement is the
Board of Directors' belief that it would be difficult for the Company to
significantly enhance operating performance and maximize stockholder value on a
stand-alone basis in the immediate future. The Company's projections for
revenues, expenses, earnings and cash flows for calendar years 1997 through
2006, which it provided to both Dean Witter and Fireman's Fund, assumed revenues
from MPCI premiums serviced would decrease 20% for 1997, be relatively flat for
1998 and grow 10% per year thereafter. For crop hail, the Company assumed
revenues would decrease 30% for 1997 (due to a one-time non-compete obligation),
grow 25% during 1998 (due to the elimination of the non-compete) and 10%
thereafter. The Company assumed expenses would decrease during 1997 based on the
anticipated sale of its insurance company subsidiaries and realization of
certain efficiencies as a result of the restructuring by the Company undertaken
during 1996. Expenses were projected to remain flat for 1998 and increase by 5%
thereafter. The differential in the rates of increase of expenses versus
revenues was based on anticipated system and other efficiencies in processing
the business. The Company's earnings and cash flow projections flow directly
from the projected revenues and expenses.

17
<PAGE>

The Company's projections of revenues, expenses, earnings and cash position
for each of the years 1997 through 2006 are set forth below. More detailed
projections are included as pages 32 through 46 of Dean Witter's March 5, 1997
presentation to the Company's Board of Directors filed as Exhibit (b)(2) to the
Schedule 13E-3 filed by the Company and Fireman's Fund. See "ADDITIONAL
INFORMATION."

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002 2003 2004 2005
--------- --------- --------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues........................ $ 91,285 $ 92,384 $ 96,667 $ 104,065 $ 112,423 $ 123,601 $ 135,858 $ 149,334 $ 164,152
Expenses........................ 88,826 86,526 90,972 97,778 103,387 112,037 121,471 131,764 143,872
Net Earnings.................... 1,500 3,573 3,474 3,835 5,512 7,054 8,776 10,718 12,371
Cash, End of Year............... 16,005 18,482 20,628 23,487 28,634 35,045 42,311 51,318 61,717

2006
---------

<S> <C>
Revenues........................ $ 180,444
Expenses........................ 155,262
Net Earnings.................... 15,361
Cash, End of Year............... 74,985
</TABLE>

The Board of Directors believes, based principally upon factors (i), (ii)
and (vii) discussed below under "--Recommendation of the Company's Board of
Directors" that an internal restructuring of the Company's operations in order
to enhance its growth and profitability would not yield as favorable a result to
the Company's stockholders in the foreseeable future as the Merger with
Fireman's Fund. Consequently, the Board of Directors believes that the Merger is
the best available opportunity to maximize stockholder value at the present
time. The $10.25 per share price to be received by the stockholders represents a
premium of approximately 29% over the reported average closing price of the
Common Stock during the 30-day period prior to the announcement of the Merger,
and 41%, over the reported average closing price of the Common Stock during the
30-day period prior to announcement that Messrs. Hemmingson and Black had
entered into agreements to sell their stock to Great American for $10 per share.

Fireman's Fund's principal purposes for entering into the Merger Agreement
are to preserve a significant underwriting book of business developed by the
Company and Fireman's Fund and to protect its prior $10 million cash investment
in the Company. It gave consideration to simply purchasing the Hemmingson and
Black Stock, but could not do so without the consent of the Company under the
standstill agreement between Fireman's Fund and the Company. It also considered
entering into a transaction involving the Company and Acceptance, but decided
that such a transaction would not be commercially feasible due to the fact that
both parties sought the same aspect of the Company's MPCI business and because
Fireman's Fund was not interested in becoming a significant shareholder of
Acceptance.

RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS

On March 5, 1997, the Company's Board of Directors, by unanimous vote (with
the exception of Mr. Meuschke, Fireman's Fund's designee, who did not
participate in the deliberations or the vote) at a special board meeting held on
that date, determined that the transactions contemplated by the Merger are fair
from a financial point of view to and in the best interests of the stockholders
of the Company other than (i) affiliates of the Company and (ii) Fireman's Fund
and its affiliates (the "Unaffiliated Stockholders"), approved the Acquisition
Agreements and resolved to recommend that the Company's stockholders approve the
Acquisition Agreements and all related implementing agreements, including the
Merger Agreement.

In determining to approve and adopt the Acquisition Agreements and related
implementing agreements, and in determining the fairness of the terms of the
Merger to the Unaffiliated Stockholders, the Board of Directors considered the
following factors, each of which, in the Board of Directors' view, supported the
determination to recommend the Merger:

(i) information with regard to the financial condition, results of
operation, liquidity, business and prospects of the Company, as well as
the risks involved in achieving those prospects, including the expected
decline in the Company's premium base in 1997 without a commensurate
reduction in

18
<PAGE>
the Company's general and administrative expenses, continuing reductions
in the amount the Company expected to receive from the government for
servicing MPCI business (particularly in light of recently proposed
changes to the MPCI program which, if enacted as proposed, would reduce
the Company's service fee revenues in the 1998 crop year by
approximately 20%, assuming the company were to service the same amount
of premiums in the 1998 crop year as the 1997 crop year), the Company's
ability to effectively manage its operating expenses to offset the
reduced MPCI revenues, particularly in view of the Company's inability
to retain a significant amount of underwriting risk due to the small
amount of capital in its insurance company subsidiaries, the ability of
the Company to secure adequate working capital or other financing in
light of these factors and the lingering impact of the Independent
Counsel matter;

(ii) the going concern value of the Company (as reflected in part by its
historical and projected operating results) and the net book value and
liquidation value of the Company, each as discussed with Dean Witter as
summarized below under the caption "--Opinion of Financial Advisor,"
and each of which, on a per share basis, was projected to be less than
the $10.25 per share being offered by Fireman's Fund;

(iii) the historical market prices of and recent trading activity in the
Company's Common Stock, particularly the fact that the Merger will
enable the stockholders of the Company to realize a significant premium
over the prices at which the Common Stock traded prior to the Company's
public announcement that Messrs. Hemmingson and Black had entered into
agreements to sell their stock to Great American for $10 per share and
prior to the announcement of the Merger;

(iv) the written opinion of Dean Witter that the cash consideration to be
paid in the Merger is fair, from a financial point of view, to the
stockholders of the Company (excluding Fireman's Fund and its
affiliates);

(v) the terms and conditions of the Acquisition Agreements, including the
special, limited shop provision and the fiduciary out provision
negotiated by the Company, which allowed the Company to seek additional
offers by contacting certain parties until March 28, 1997, and to
consider unsolicited offers thereafter; the fact that the Company may
terminate the Acquisition Agreements in certain circumstances; the
circumstances under which the breakup fee is payable; the restriction of
Fireman's Fund's voting or tendering of certain Company stock in certain
circumstances; and the relatively few substantive closing conditions;

(vi) the Company's positive working relationship with Fireman's Fund, and
Fireman's Fund's reputation in the insurance industry;

(vii) the likely positive effect of the Merger on stabilizing the Company's
premium base, agent network, key employees important to the premium
base and agent network and the relatively low level of expected
disruption to the Company's business prior to closing the Merger; and

(viii) the likely decrease in the market price of the Company's Common Stock
if the Company was not sold, taking into account the likelihood of
downward pressure on the market price as a result of factors discussed
in subparagraph (i) above and the announcement, the day after the
announcement of the proposed Merger, of a significant reduction of the
Company's earnings estimates by an analyst, and advice from Dean Witter
that, based on financial projections furnished to Dean Witter by the
Company, it was unlikely that the price of the Common Stock would reach
$10.25 per share in the near future.

In considering the fairness of the Merger to Unaffiliated Stockholders, the
Board gave primary consideration to factors (ii) through (v) above. It also gave
consideration to factors (i) and (vi) through (viii) in determining whether to
approve the Merger. The Company's Board of Directors did not find it practicable
to, and did not, quantify or otherwise attempt to assign relative weights to the
specific factors considered in reaching its conclusions.

19
<PAGE>
The executive officers of the Company, other than Mr. Martinez in his
capacity as a director, have made no recommendation with respect to the Merger.

If the Merger is not approved by the Company's stockholders and the Merger
does not occur, the Company will continue its current operations as an
independent company. However, for the reasons discussed above, it is possible
that the Company would seek a business combination with another company.

OPINION OF FINANCIAL ADVISOR

As described under "SPECIAL FACTORS--Background of the Merger--Financial
Advisor" above, the Company engaged Dean Witter to act as its exclusive
financial advisor in connection with the Company's review of strategic and
financial planning matters including the possible merger or sale of the Company.
In connection with the transaction discussed herein and pursuant to the terms of
the engagement, the Company requested that Dean Witter evaluate the fairness to
the holders of the Company's Common Stock other than Fireman's Fund and its
affiliates (the "Public Stockholders") from a financial point of view, of the
consideration to be received by the Public Stockholders in connection with the
Merger. It was contemplated that prior to the consummation of the Merger, a
subsidiary of Fireman's Fund would purchase all of the Common Stock then owned
by Messrs. Hemmingson and Black, so that Messrs. Hemmingson and Black would not
be Public Stockholders. On March 5, 1997, Dean Witter delivered to the Board of
Directors its opinion to the effect that, as of such date and based upon and
subject to certain matters described to the Board of Directors, the
consideration to be received by the Public Stockholders is fair from a financial
point of view (the "Dean Witter Opinion"). The Dean Witter Opinion is directed
to the Board of Directors of the Company and does not constitute a
recommendation to any stockholder of the Company as to how such stockholder
should vote with respect to the Merger at the Special Meeting. Dean Witter did
not establish or recommend the amount of the Merger Consideration, but only
passed upon the fairness from a financial point of view of the amount agreed
upon by the Company and Fireman's Fund.

A copy of the Dean Witter Opinion, which sets forth the assumptions made and
matters considered in, and limits on the review undertaken, is attached to this
Proxy Statement as Exhibit B and should be read by stockholders carefully in its
entirety.

In connection with its opinion, Dean Witter, among other things, (i)
reviewed the Acquisition Agreement dated March 5, 1997 between the Company and
Fireman's Fund (the "March 5 Agreement"); (ii) reviewed the Annual Reports on
Form 10-K and related publicly available financial information of the Company
for the two most recent fiscal years ended December 31, 1994 and 1995, the
Quarterly Reports on Form 10-Q of the Company for the periods ended March 31,
1996, June 30, 1996 and September 30, 1996, and the Company's definitive Proxy
Statement dated May 8, 1996; (iii) reviewed the Right of First Refusal
Agreements between Fireman's Fund and Messrs. Hemmingson and Black (the
"Hemmingson and Black Transactions"); (iv) reviewed the Chief Financial
Officer's financial model of the income statement, balance sheet and cash flow
statement of the Company for the quarter ended December 31, 1996 and for
calendar years 1997 through 2006 created for the purpose of evaluating various
financial alternatives (the "Model"); (v) conducted discussions with members of
senior management of the Company concerning the past and current business,
operations, assets, present financial condition and future prospects of the
Company; (vi) reviewed the historical reported market prices and trading
activity for the Company's Common Stock; (vii) compared certain financial
information and operating statistics relating to the Company with published
financial information and operating statistics relating to selected public
companies that Dean Witter deemed to be most comparable to the Company; (viii)
compared the amount per share of the cash consideration proposed to be paid to
the holders of the Company's Common Stock upon approval of the Merger with the
financial terms, to the extent publicly available, of selected other recent
acquisitions that Dean Witter deemed to be relevant; (ix) reviewed certain other
information, including publicly available information relating to the business,
earnings, cash flow, assets and prospects

20
<PAGE>
of the Company; and (x) reviewed such other financial studies and analyses and
performed such other investigations and took into account such other matters as
Dean Witter deemed necessary.

Dean Witter relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by it for
purposes of rendering its opinion. Dean Witter also relied upon the management
of the Company as to the reasonableness and achievability of the Model (and the
assumptions and bases therefor) provided to Dean Witter and assumed for purposes
of such opinion that the Model was reasonably prepared on bases reflecting the
performance of the Company. Dean Witter was not requested to make, and did not
make, an independent appraisal or evaluation of the assets, properties,
facilities or liabilities of the Company and Dean Witter was not furnished with
any such appraisal or evaluation. Dean Witter was not directed to, and did not,
solicit any third party indications of interest in acquiring all or any part of
the Company before delivering its opinion, however, Dean Witter noted the
provision of the March 5 Agreement which gave the Company the ability to solicit
indications of interest from a limited group of other participants in the crop
insurance and related industries from the date of the signing of the March 5
Agreement until March 28, 1997 to determine what, if any, interest certain
parties would have in an acquisition of the Company. Dean Witter also noted the
"window shop" provision of the March 5 Agreement also gives the Company the
right to consider certain unsolicited offers before or after March 28, 1997.
Dean Witter's opinion to the Company's Board of Directors was based upon
prevailing market conditions (including, then current market prices for the
Company's Common Stock) and other circumstances and conditions existing on the
date of such opinion and does not represent Dean Witter's opinion as to what the
actual value of the Company's Common Stock will be after the date of such
opinion. It is not contemplated that Dean Witter will give any subsequent
opinion with respect to the Merger.

The following is a brief summary of certain financial analyses performed by
Dean Witter in connection with its opinion dated March 5, 1997, which it
presented to the Company's Board of Directors at the Board meeting held on that
date or at previous meetings.

STOCK TRADING HISTORY. Dean Witter examined the history of the trading
prices and volume for the Company's Common Stock and the relationship between
movements in the prices of the Common Stock and certain events surrounding the
Company. For the 52-week period ending March 3, 1997, the Company's highest
trading price was $11.75 and its lowest trading price was $5.875. The Company's
average closing bid and asked prices for the 30 days ending February 14, 1997,
the trading date immediately prior to the public announcement of the Hemmingson
and Black Transactions (the "Hemmingson/Black Announcement"), was $7.24. The
last sale price on March 3, 1997 was $8.25.

ANALYST REPORTS. Dean Witter reviewed publicly available research reports
from ABN Amro Chicago Corporation ("ABN") relating to the Company's Common Stock
and noted that the earnings projections were lowered from $0.70 and $1.10 to
$0.39 and $0.14, respectively, for 1996 and 1997, on February 19, 1997, one day
after the Hemmingson/Black Announcement.

ANALYSIS OF CERTAIN OTHER PUBLICLY TRADED COMPANIES. Using publicly
available information, Dean Witter compared selected historical share prices,
earnings and operating and financial ratios for the Company to the corresponding
data and ratios of selected crop insurance participants, insurance brokers and
excess and surplus lines insurance companies. Such data and ratios included
equity market value on March 3, 1997 to announced and projected operating
earnings (based upon First Call earnings estimates for 1996, 1997 and 1998) and
to book value (adjusted to eliminate the effects of FASB 115 adjustments, which
require insurance companies to mark-to-market the bonds that are held as
available-for-sale in their portfolios, thus impacting stockholders' equity), as
well as dividend yield, price performance over the 30 and 60 days immediately
prior to March 3, 1997, the 52 week high and low trading prices, and the March 3
closing price relative to the 52 week trading range. For the Company, Dean
Witter compared both First Call earnings estimates and the projected operating
earnings data from the Model.

21
<PAGE>
In performing its analyses, Dean Witter concluded that there were no
publicly traded companies which it considered directly comparable to the
Company. Dean Witter did, however, select two other crop insurance participants
(Acceptance Insurance Companies and Symons International, collectively the "Crop
Insurance Companies"), six insurance brokers (Acordia, Inc., E.W. Blanch
Holdings, A.J. Gallagher, Hilb, Rogal & Hamilton, Marsh & McLennan and Poe &
Brown, collectively the "Insurance Brokers") and nine excess and surplus lines
insurance companies (Acceptance Insurance Companies, W.R. Berkley Corp., Capsure
Holdings, Exel Ltd., Gainsco, Inc., HCC Insurance Holdings, Markel Corp.,
NYMAGIC, Inc., and RLI Corp., collectively the "E&S Companies") as to which Dean
Witter analyzed certain data. Although Dean Witter analyzed this data, due to
the differences between these companies and the Company, Dean Witter concluded
that the comparisons were of limited relevance.

Dean Witter again noted that ABN adjusted its 1996 and 1997 earnings
forecast for the Company from $0.70 and $1.10 per share of Common Stock to $0.39
and $0.14, respectively, on February 19, 1997, one day after the
Hemmingson/Black Announcement. Dean Witter noted that the earnings multiples at
which the Crop Insurance Companies, the Insurance Brokers and the E&S Companies
traded were much lower than the Company's, and that Dean Witter believed this
difference was due in large part to the Hemmingson/Black Announcement. When Dean
Witter compared the Company to the other Crop Insurance Companies, the Insurance
Brokers and the E&S Companies, an analysis of market value to 1996 projected or
announced operating earnings yielded a range of 8.7x to 11.1x, 11.7x to 18.6x
and 9.9x to 19.4x and an adjusted average (excluding the high and the low of
each range, except for the Crop Insurance Companies) of 9.9x, 15.2x and 13.5x,
respectively, as compared to 21.7x ABN estimates for the Company and 68.8x
estimate of the Model (based on a share price of $8.25); market value to 1997
projected operating earnings yielded a range of 8.0x to 9.4x, 11.3x to 16.6x and
9.4x to 17.0x and an adjusted average (except for the Crop Insurance Companies)
of 8.7x, 13.4x and 12.3x, respectively, as compared to 58.9x ABN estimates for
the Company and 16.8x estimate of the Model (based on a share price of $8.25);
market value to 1998 projected operating earnings yielded a range of 10.1x to
14.7x and 8.6x to 13.3x and an adjusted average of 12.4x and 11.3x for the
Insurance Brokers and the E&S Companies (1998 earnings estimates were not
available for the Crop Insurance Companies), respectively, as compared to 21.2x
estimate of the Model (based on a share price of $8.25, no 1998 analyst earnings
projections were available). An analysis of market value to book value adjusted
to eliminate the effects of FASB 115 adjustments yielded a range of 1.6x to
2.8x, 2.0x to 5.4x and 1.2x to 3.6x and an adjusted average (except for the Crop
Insurance Companies) of 2.2x, 3.8x and 1.7x, respectively, as compared to 1.5x
for the Company (based on a share price of $8.25). An analysis of dividend yield
produced a range of 0.0% to 0.0%, 1.7% to 4.7% and 0.0% to 2.2% and an adjusted
average (except for the Crop Insurance Companies) of 0.0%, 2.9% and 0.8%,
respectively, as compared to 0.0% for the Company (based on a share price of
$8.25). An analysis of price performance over the 30 days immediately prior to
March 3, 1997 yielded a range of -3.7% to 9.7%, -0.9% to 15.0% and -17.2% to
15.0% and an adjusted average (except for the Crop Insurance Companies) of 3.0%,
7.0% and 8.4%, respectively, as compared to 24.5% for the Company (based on a
share price of $8.25). An analysis of price performance over the past 60 days
immediately prior to March 3, 1997 yielded a range of 0.0% to 3.7%, -0.9% to
21.1% and -10.5% to 27.8% and an adjusted average (except for the Crop Insurance
Companies) of 1.8%, 4.6% and 6.7%, respectively, as compared to 32.0% for the
Company (based on a share price of $8.25). An analysis of the March 3 closing
price relative to the 52 week trading range yielded a range of 59.5% to 85.1%,
17.3% to 94.7% and 16.7% to 100.0% and an adjusted average (except for the Crop
Insurance Companies) of 72.3%, 73.0% and 73.4%, respectively, as compared to
40.4% for the Company (based on a share price of $8.25).

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TRANSACTION ANALYSIS. Dean Witter reviewed publicly available information
on certain acquisitions of crop insurers, as well as certain pending or
withdrawn acquisition transactions and completed acquisition transactions
involving companies in the property and casualty and brokerage markets. In
performing its analysis, Dean Witter concluded that there were no transactions
for which financial information was available which are directly comparable to
the Merger and that, given the differences between the Company and the companies
pending to be acquired and acquired in other transactions, these comparisons
were of limited relevance.

The completed acquisitions of crop insurers which Dean Witter reviewed were
the acquisitions of Dawson Hail Insurance Co. by the Company and Redland Group
Inc. by Acceptance Insurance Companies (collectively the "Crop Insurance
Transactions"). Dean Witter calculated multiples for each of the Crop Insurance
Transactions based on the ratio of the offer price to such acquired company's
respective statutory net income in the year prior to and the year of the
transaction, direct premiums written, and policyholders' surplus for the year
ending before the transaction. With respect to the multiple of the offer price
to statutory net income in the year prior to the transaction, the multiple was
8.9x compared to 27.0x for the Company (based upon a $10.25 value per share).
The multiple of the offer price to statutory net income in the year of the
transaction was 4.1x compared to 73.2x for the Company (based upon a $10.25
value per share). The average multiple of the offer price to direct written
premiums in the year prior to the transaction was 0.3x and ranged from 0.2x to
0.3x compared to 0.3x for the Company (based upon a $10.25 value per share). The
average multiple of the offer price to policyholders' surplus at year-end prior
to the transaction was 1.4x and ranged from 1.4x to 1.4x compared to 2.4x for
the Company (based upon a $10.25 value per share and the Model's estimated book
value per share). The multiple of the consideration offered for Redland Group
Inc.'s common stock to Redland Group Inc.'s statutory net income in both the
year prior to and the year of its acquisition is not meaningful as Redland Group
Inc. incurred losses in both years.

The pending and withdrawn transactions which Dean Witter reviewed were the
acquisitions of Avemco Corp. by HCC Insurance Holdings Inc.; Alexander &
Alexander Services by Aon Corp.; Pac Rim Holding Corp. by Superior National
Insurance Group; Financial Institutions Insurance Group by John Dore (company
president) and Castle Harlan; and Midland Financial Group, Inc. by Danielson
Holding Corp. (collectively the "Pending or Withdrawn Transactions"). Dean
Witter calculated multiples for each of the Pending or Withdrawn Transactions
based on the ratio of the offer price to such acquired company's respective
consensus earnings estimates for the current year and the following year, as
well as to the market value of such acquired company one day, one week, four
weeks, six months and one year prior to the transaction's announcement date.
With respect to the multiple of the offer price to consensus earnings estimates
for the current year, the adjusted mean was 17.1x and ranged from 9.0x to 23.3x
compared to 27.0x for the Company (based upon a $10.25 value per share). The
average multiple of the offer price to consensus earnings estimates for the
following year was 18.1x and ranged from 18.0x to 18.2x compared to an estimated
73.2x for the Company (based upon a $10.25 value per share). The adjusted
average premium to the market value of the companies one day prior to the
transaction's announcement was 18.8% and ranged from 0.0% to 46.7% compared to
19.7% for the Company (based upon a $10.25 value per share). The adjusted
average premium the market value of the companies one week prior to the
transaction's announcement was 20.9% and ranged from 6.7% to 49.7% compared to
17.1% for the Company (based upon a $10.25 value per share). The adjusted
average premium to the market value of the companies four weeks prior to the
transaction's announcement was 19.3% and ranged from 14.3% to 81.8% compared to
39.0% for the Company (based upon a $10.25 value per share). The adjusted
average premium to the market value of the companies six months prior to the
transaction's announcement was 9.4% and ranged from -22.7% to 83.3.% compared to
43.9% for the Company (based upon a $10.25 value per share). The adjusted
average premium to the market value of the companies one year prior to the
transaction's announcement was 21.6% and ranged from -19.4% to 80.3% compared to
2.5% for the Company (based upon a $10.25 value per share).

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The other completed transactions which Dean Witter reviewed were the
acquisitions of American Re Corp. by Munich Re; National Re Corp. by General Re
Corp.; Capital Guaranty Corp. by Financial Security Assurance; Milwaukee
Insurance Group by Unitrin Inc.; CII Financial Inc. by Sierra Heath Services
Inc.; Employee Benefits Plans Inc. by First Financial Management; Kemper Corp.
by an investor group; Re Capital Corp. by Zurich Reinsurance Centre; Victoria
Financial Corp. by USF&G Corp.; and UniCare Financial Corp. by Wellpoint Health
Networks Inc. (collectively the "Completed P&C Transactions"). Dean Witter
calculated multiples for each of the Completed P&C Transactions based on the
ratio of the offer price to such acquired company's respective consensus
earnings estimates for the current year and the following year, as well as to
the market value of such acquired company one day, one week, four weeks, six
months and one year prior to the transaction's announcement date. With respect
to the multiple of the offer price to consensus earnings estimates for the
current year, the adjusted mean was 16.1x and ranged from 12.7x to 21.9x
compared to 27.0x for the Company (based upon a $10.25 value per share). The
adjusted average multiple of the offer price to consensus earnings estimates for
the following year was 13.0x and ranged from 10.8x to 15.1x compared to 73.2x
for the Company (based upon a $10.25 value per share). The adjusted average
premium to the market value of the companies one day prior to the transaction's
announcement was 43.0% and ranged from 13.0% to 63.0% compared to 19.7% for the
Company (based upon a $10.25 value per share). The adjusted average premium to
the market value of the companies one week prior to the transaction's
announcement was 49.2% and ranged from 18.0% to 63.8% compared to 17.1% for the
Company (based upon a $10.25 value per share). The adjusted average premium to
the market value of the companies four weeks prior to the transaction's
announcement was 55.1% and ranged from 20.7% to 91.3% compared to 39.0% for the
Company (based upon a $10.25 value per share). The adjusted average premium to
the market value of the companies six months prior to the transaction's
announcement was 54.7% and ranged from -14.1% to 131.6% compared to 43.9% for
the Company (based upon a $10.25 value per share). The adjusted average premium
to the market value of the companies one year prior to the transaction's
announcement was 33.8% and ranged from -14.7% to 72.8% compared to 2.5% for the
Company (based upon a $10.25 value per share).

No company or transaction used in the above analyses is believed by Dean
Witter to be directly comparable to the Company or the Merger. Accordingly, an
analysis of the results of the foregoing is not mathematical; rather, it
involves complex considerations and judgments concerning differences in the
financial and operating characteristics of the companies and other factors that
could affect the public trading values of the companies to which they are being
compared.

DISCOUNTED CASH FLOW ANALYSIS. Using discounted cash flow analysis, Dean
Witter estimated the present value of the future streams of after-tax cash flows
that the Company would produce through 2006, assuming the Company performed in
accordance with the Model provided by the Company's Chief Financial Officer.
After-tax cash flows were calculated as the total cash generated by the Model
for each of the ten years 1997 through 2006. Dean Witter estimated the terminal
value of the Company by applying a range of multiples (from 8.0 to 10.0) to net
income and (from 1.0x to 2.0x) to book value projected for the Company in 2006.
The cash flow streams and terminal values were then discounted to present values
using different discount rates (ranging from 13% to 17%) chosen to reflect
different assumptions regarding the required rates of return of holders or
prospective buyers of the Company's Common Stock. This discounted cash flow
analysis indicated a reference range for the Company's Common Stock of between
$5.81 and $8.86 per share and $3.84 and $6.55 per share, respectively.

LIQUIDATION VALUE. After consulting with management of the Company, Dean
Witter determined that the liquidation value of the Company would be an amount
substantially less than the consideration that would be paid to the Public
Stockholders (assuming $10.25 per share total consideration). The Model projects
the Company's book value to be approximately $4.30 per share and tangible book
value (book value less intangibles) to be approximately $3.27 per share at year
end 1996.

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GENERAL. The summary set forth above does not purport to be a complete
description of the analyses performed by Dean Witter. The preparation of a
fairness opinion involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of these methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Accordingly, notwithstanding the separate
factors summarized above, Dean Witter believes that its analyses must be
considered as a whole and that selected portions of its analyses and the factors
considered by it, without considering all analyses and factors, could create an
incomplete view of the evaluation process underlying its opinion. In performing
its analyses, Dean Witter made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the control of the Company. The analyses performed by Dean
Witter are not necessarily indicative of actual values or future results, which
may be significantly more or less favorable than suggested by such analyses.
Additionally, analyses relating to the values of businesses do not purport to be
appraisals or to reflect the prices at which businesses actually may be sold.

Dean Witter is an investment banking firm engaged, among other things, in
the valuation of businesses and securities in connection with mergers,
acquisitions, underwritings, sales and distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes. Dean Witter is a nationally recognized investment banking firm which
has substantial experience in merger and acquisition transactions and was
familiar with the Company. In the ordinary course of business, Dean Witter may
actively trade in the securities of the Company for its own account and the
accounts of its customers, and accordingly, may at any time hold a long or short
position in such securities.

Pursuant to the terms of an engagement letter dated January 5, 1996 (the
"Engagement Letter") and its amendment dated May 28, 1996, Dean Witter acted as
financial advisor to the Company in July 1996 in the formation of a strategic
alliance with Fireman's Fund which included a $10,000,000 investment by
Fireman's Fund in the Preferred Stock. Dean Witter received a fee of $500,000
plus reimbursement of out-of-pocket expenses, as the exclusive financial advisor
in this transaction.

The Company has paid Dean Witter $400,000 for acting as financial advisor in
connection with rendering the Dean Witter Opinion, and will pay Dean Witter an
additional $515,000 upon consummation of the Merger. The Company also has agreed
to reimburse Dean Witter for its out-of-pocket expenses, including the
reasonable fees and expenses of its legal counsel, and to indemnify Dean Witter
and certain related parties against certain liabilities, including liabilities
under the federal securities laws, arising out of or in connection with the
services rendered by Dean Witter under the engagement letter. The Company's
Board of Directors was aware of the fact that a significant portion of the
aggregate fee payable to Dean Witter is contingent upon consummation of the
Merger or another Transaction (as defined hereafter). Such additional fee (the
amount of which would depend upon the value of the underlying transaction) also
would be payable upon consummation of a transaction or series of transactions
(including, without limitation, a sale or exchange of capital stock or assets, a
lease of assets with or without a purchase option, a merger (other than the
Merger) or consolidation, a leveraged buy-out or recapitalization, the formation
of a joint venture, a minority investment or partnership, or any similar
transaction) whereby, directly or indirectly, control of or a material interest
in the securities, assets or business of the Company or any of its affiliates is
transferred (collectively, a "Transaction") if such Transaction were to occur
within six months from the termination of the engagement letter (which
termination date is upon 15 days' prior written notice).

PERSPECTIVE OF FIREMAN'S FUND ON THE MERGER

The determination of the Merger Consideration resulted from extensive
arm's-length negotiation between the Company and Fireman's Fund and their
respective representatives. See "--Background of the Merger." At the conclusion
of the negotiation process, Fireman's Fund offered to acquire the Company for a
price of $10.25 per share. In determining such price, Fireman's Fund analyzed
its projections of the underwriting results for the policies marketed by the
Company and of the Company's results of operations,

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including the effects of projected growth in the Company's revenue and possible
reductions in the Company's expenses following the Merger.

Fireman's Fund did not undertake any formal or informal evaluation of its
own as to the fairness of the Merger Consideration to the Company stockholders.
Based upon the determination by the Company's Board of Directors that the Merger
is fair to, and in the best interests of, the Unaffiliated Stockholders of the
Company, and based upon the fact that Dean Witter rendered the Dean Witter
Opinion to the Company's Board of Directors, Fireman's Fund believes that the
Merger Consideration is fair to such Unaffiliated Stockholders from a financial
point of view and hereby adopts the Company's Board of Directors' analysis as to
fairness. Fireman's Fund did not attach specific weights to any factors in
reaching its belief as to fairness and did not perform any independent analysis
with respect thereto. In considering the determination made by the Company's
Board of Directors, Firemen's Fund did not necessarily adopt any intermediate
conclusions reached by the Board.

Fireman's Fund's principal purposes for entering into the Merger Agreement
are to preserve a significant underwriting book of business developed by the
Company and Fireman's Fund and to protect its prior $10 million cash investment
in the Company. It gave consideration to simply purchasing the Hemmingson and
Black Stock, but could not do so without the consent of the Company under the
standstill agreement between Fireman's Fund and the Company. It also considered
entering into a transaction involving the Company and Party X, but decided that
such a transaction would not be commercially feasible.

PLANS FOR THE COMPANY AFTER THE MERGER

After the Merger, Fireman's Fund anticipates that it will continue its
review of the Company and its assets, businesses, operations, properties,
policies, corporate structure, dividend policy, capitalization and management
and consider whether any changes would be desirable in light of the
circumstances then existing. At this time Fireman's Fund does not intend to
close the Company's corporate headquarters located in Overland Park, Kansas.
Effective upon consummation of the Merger, current management of the Company
will be the initial management of the Surviving Corporation and the directors of
the Merger Subsidiary will be the initial directors of the Surviving
Corporation.

Except for the foregoing, and as otherwise indicated in this Proxy
Statement, Fireman's Fund does not have any other present plans or proposals
which relate to or would result in an extraordinary corporate transaction, such
as a merger, reorganization or liquidation, involving the Company or any of its
subsidiaries, a sale or transfer of a material amount of assets of the Company
or any of its subsidiaries or any material change in the Company's
capitalization or any other material changes in the Company's corporate
structure or business or the composition of the Company's Board of Directors or
management.

CERTAIN EFFECTS OF THE MERGER

As a result of the Merger, the entire equity interest of the Company will be
owned by Fireman's Fund, and the current stockholders will have no continuing
interest in the Company. Therefore, following the Merger, the stockholders of
the Company other than Fireman's Fund will no longer benefit from any increases
in the value of the Company and will no longer bear the risk of any decreases in
the value of the Company. Following the Merger, Fireman's Fund and its
affiliates will own 100% of the Company and will have complete control over the
management and conduct of the Company's business, all income generated by the
Company and any future increase in the Company's value. Similarly, Fireman's
Fund will also bear the risk of any losses incurred in the operation of the
Company and any decrease in the value of the Company.

Following the Merger, the Common Stock will no longer meet the requirements
of the Nasdaq National Market for continued listing and will, therefore, be
delisted from the Nasdaq National Market.

The Common Stock is currently registered as a class of securities under the
Exchange Act. Registration of the Common Stock under the Exchange Act may be
terminated upon application of the Company to the Commission if the Common Stock
is not listed on a national securities exchange or quoted on the

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Nasdaq National Market and there are fewer than 300 record holders of the Common
Stock. Termination of registration of the Common Stock under the Exchange Act
would substantially reduce the information required to be furnished by the
Company to its stockholders and to the Commission and would make certain
provisions of the Exchange Act, such as the short-swing trading provisions of
Section 16(b), the requirement of furnishing a proxy statement in connection
with stockholders' meetings pursuant to Section 14(a), and the requirements of
Rule 13e-3 under the Exchange Act with respect to "going private" transactions,
no longer applicable to the Company. It is the present intention of Fireman's
Fund to cause the Company to make an application for the termination of the
registration of the Common Stock under the Exchange Act as soon as practicable
after the Effective Time of the Merger.

RELATIONSHIP BETWEEN THE COMPANY AND FIREMAN'S FUND

INTERCOMPANY BUSINESS RELATIONSHIP. In 1996 and 1995, 21% and 9.8%,
respectively, of the Company's service fees were derived from premiums
underwritten by Fireman's Fund, pursuant to a MPCI general agency agreement. The
Company's business relationship with Fireman's Fund with respect to MPCI, crop
hail/named peril insurance and farm and ranch insurance is governed by the terms
of certain agency agreements and reinsurance arrangements, the principal terms
of which are summarized below.

MPCI AGREEMENTS. Effective with the 1995 crop year, the Company and
Fireman's Fund entered into a general agency agreement to market and service
MPCI policies underwritten by Fireman's Fund. The Company's responsibilities
under the agreement included production, processing, claims administration,
accounting and statistical reporting and risk management strategy. Under the
agreement, the Company was responsible for all expenses allocable to the
business generated under the agreement, including marketing and claims
administration and adjusting services. The Company received as its compensation,
(i) the expense reimbursement allowance and excess loss adjustment expenses
(both of which amounts are established by the federal government under the MPCI
program) payable by the federal government for premiums serviced under the MPCI
program, and (ii) a portion of certain of the underwriting gains on MPCI
premiums for policies written under Fireman's Fund's standard reinsurance
agreement. In addition, Fireman's Fund received fronting fees under the parties'
MPCI agreement. In the Company's fiscal years ended December 31, 1995 and 1996,
the amounts of such compensation were $9.9 million and $22.0 million,
respectively. In addition, for the 1995, 1996 and 1997 crop years, Fireman's
Fund insured or reinsured 17%, 45% and 100%, respectively, of the MPCI premium
serviced by the Company.

Concurrent with Fireman's Fund's purchase of the Preferred Stock in July
1996, the Company and Fireman's Fund entered into a new general agency agreement
effective for the 1997 crop year (the "New Agreement"). The Company's
responsibilities for servicing the business remained the same as in the prior
agreement. The fronting fees payable to Fireman's Fund were eliminated and the
profit sharing formula was changed to provide the Company with a greater
percentage of underwriting gain once the underwriting gain exceeds a certain
minimum level. The New Agreement also provides for an additional profit and
growth bonus based on certain profit levels for combined MPCI and Crop Hail
business. See "--Crop Hail/Named Peril Agency Agreement" below.

On November 27, 1996, the Company and Fireman's Fund entered into an
amendment to the original MPCI agency agreement, pursuant to which Fireman's
Fund agreed, for the 1996 crop year only, to finance up to $50 million of MPCI
premium payments on behalf of insureds who did not pay their premiums by the
applicable due date. In 1996 and 1997, Fireman's Fund paid the Company $76,000
and $175,000, respectively, as an administrative fee under the agreement.

The Company has granted Fireman's Fund a security interest in the Company's
expiration rights and records as security for the Company's obligations under
the MPCI Agreements. The Company has the right to effect a bulk transfer to
another insurance company(ies) of the MPCI business upon termination of the
Agreements. The New Agreement can terminate as of June 30, 1999, if 12 months
advance notice is given by either party. Thereafter, the Company may terminate
the agreement upon 12 months advance notice and Fireman's Fund may terminate the
agreement upon 24 months advance notice. Fireman's Fund also has the right to
terminate the agreement immediately in the event of certain specified breaches
of the agreement.

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CROP HAIL/NAMED PERIL AGENCY AGREEMENT. In July 1996, the parties also
agreed that Fireman's Fund would underwrite crop hail and other named peril
(collectively referred to as "Crop Hail") policies serviced by the Company
beginning in 1997. The Company's responsibilities under this agreement are
similar to its responsibilities under the MPCI agency agreements described
above. Under the agreement, Fireman's Fund will insure or reinsure 100% of the
premiums serviced by the Company, and the Company will receive commissions as
its compensation for marketing and servicing Crop Hail premiums. As of April 30,
1997, approximately $900,000 of payments had been made under this agreement.

Fireman's Fund has been granted a security interest in the Crop Hail
expiration rights and records. The term of the agreement coincides with the term
of the MPCI agency agreement. The agreement may be terminated by Fireman's Fund
for cause upon the occurrence of certain enumerated events.

FARM AND RANCH AGENCY AGREEMENT. The Company and Fireman's Fund also
entered into a farm and ranch general agency agreement effective November 1,
1996. The Company is responsible for marketing and servicing farm and ranch
insurance in certain agreed upon states and will receive income under a
specified commission structure. As of March 31, 1997, the Company had not
written any premiums under this agreement. The Company does not expect this
agreement to have a material impact on its revenues in the near future. The
agreement may be terminated by either party without cause, as of October 31,
1999 or any October 31 thereafter, upon three months prior notice.

TRANSACTIONS AND AGREEMENTS. The Company and certain of its principal
stockholders have entered into certain transactions and agreements on and after
July 10, 1996 that are related directly and indirectly to the Merger. Such
transactions and agreements are described below:

PREFERRED STOCK PURCHASE AGREEMENT. On July 10, 1996, Fireman's Fund and
the Company entered into a stock purchase agreement (the "Preferred Stock
Purchase Agreement") pursuant to which Fireman's Fund purchased 10,000 shares of
the Company's Series A Convertible Preferred Stock, par value $.01 per share,
for an aggregate purchase price of $10 million. The Preferred Stock is
convertible into 754,717 shares of the Company's Common Stock, or approximately
9% of the outstanding Company Common Stock, assuming conversion of the Preferred
Stock and assuming that any other outstanding rights to purchase, convert into
or exchange for the Company's Common Stock are not exercised. Such conversion is
at an initial price per share of Common Stock of $13.25, which represents a
premium of $2.25 per share over the last traded price of the Common Stock on May
29, 1996, the day prior to the public announcement that the Company and
Fireman's Fund had entered into discussions concerning the Preferred Stock
transaction. The Preferred Stock has a liquidation value of $1,000 per share and
holders of the Preferred Stock are entitled to dividends thereon at the rate of
$50.00 per share per annum, payable quarterly. The Company has paid Fireman's
Fund $239,000 in 1996 and $250,000 in 1997 in dividends on the Preferred Stock.
The Preferred Stock Purchase Agreement contains a "standstill" provision which,
in general terms, requires the Company to consent to any Fireman's Fund
acquisition of Common Stock which results in Fireman's Fund beneficially owning
greater than 20% of the outstanding Common Stock of the Company. The provision
expires on the earlier of the tenth anniversary of the agreement or the date
upon which Fireman's Fund beneficially owns less than 150,000 shares of the
Company's Common Stock or equivalents, but in no event prior to the second
anniversary of the agreement. The agreement also gives Fireman's Fund the right
to select one nominee for election to the Company's Board of Directors.

RIGHT OF FIRST REFUSAL AGREEMENTS. On September 23, 1996, Fireman's Fund
and each of John J. Hemmingson and Gary A. Black entered into separate Right of
First Offer and First Refusal Agreements (together, the "Right of First Refusal
Agreements"). The Company was a party to the agreements for the limited purpose
of agreeing to facilitate transfers of the subject shares.

Under the Right of First Refusal Agreements, Fireman's Fund was granted
certain first offer and first refusal rights with respect to the shares of the
Company's Common Stock owned by each of Messrs. Hemmingson and Black. Such first
offer and first refusal rights became operative at such time as either Mr.
Hemmingson or Mr. Black notified Fireman's Fund of their intent to sell shares
of the Company's Common Stock.

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On February 14, 1997, Mr. Hemmingson, and on February 17, 1997, Mr. Black
notified Fireman's Fund that they each had received an offer for the Hemmingson
and Black Stock and were offering to sell such shares to Fireman's Fund on the
same terms as those contained in the offer they had received. On March 5, 1997,
Fireman's Fund notified each of Messrs. Hemmingson and Black that Fireman's Fund
would exercise its rights under the Right of First Refusal Agreements and
purchase the Hemmingson and Black Stock. According to their written notices to
Fireman's Fund, Messrs. Hemmingson and Black then owned 1,145,703 and 681,774
shares, respectively, of the Company's Common Stock.

Fireman's Fund purchased the Hemmingson and Black Stock on May 30, 1997, for
$10 per share, plus interest thereon from the date of exercise of the rights of
first refusal. The aggregate amounts paid to Messrs. Hemmingson and Black,
including interest, were $11,645,993 and $6,930,186, respectively.

As result of the purchase of the shares of the Hemmingson and Black Stock,
Fireman's Fund beneficially owns 2,582,194 shares of the Company's Common Stock,
or approximately 29.6% of the Company's Common Stock, assuming conversion of the
Preferred Stock and assuming that any other outstanding rights to purchase,
convert into or exchange for the Company's Common Stock are not exercised. Upon
consummation of the Merger, Fireman's Fund will own, directly or through an
affiliate, 100% of the outstanding shares of the Company's Common Stock.

ACQUISITION AGREEMENT. On March 5, 1997, the Company and Fireman's Fund
entered into an Acquisition Agreement pursuant to which they agreed to the
principal terms of the Merger. Subsequently, the Company, Fireman's Fund and the
Merger Subsidiary entered into the Merger Agreement dated May 1, 1997, which
includes the essential terms of and supercedes the Acquisition Agreement. See
"THE MERGER AGREEMENT."

LOAN AGREEMENT. On March 5, 1997, the Company and Fireman's Fund also
entered into a Letter of Intent re Revolving Credit Working Capital Facility,
pursuant to which, as an express condition of the Acquisition Agreement,
Fireman's Fund agreed to extend a $15,000,000 revolving credit working capital
facility to the Company in the event that the Company, after using its
reasonable best efforts, was unable by March 31, 1997 to obtain a working
capital facility from a commercial bank on reasonable terms not involving any
guarantee or similar support from Fireman's Fund. Effective March 31, 1997, the
Company entered into a Business Loan Agreement with Fireman's Fund to borrow up
to $15,000,000 on a revolving basis and thereby provide the Company with working
capital. The loan bears interest at Bank of America's Base Rate (currently 8.5%)
and will mature in one year. The loan is secured with the inventory, accounts
receivable, equipment and general intangibles of the Company and certain of its
subsidiaries and affiliates.

CONSENT AGREEMENT. On March 5, 1997, the Company and Fireman's Fund also
entered into a Consent Agreement (the "Consent Agreement"). As discussed above,
the Preferred Stock Purchase Agreement contains a "standstill" provision which,
in general, requires the Company to consent to any Fireman's Fund acquisition of
Common Stock which results in Fireman's Fund beneficially holding more than 20%
of the voting power of the Company's outstanding securities, assuming the
exercise of in-the-money stock options and stock rights. Under the terms of the
Consent Agreement, the Company gave its consent under the standstill provision
and for purposes of Section 203 of the DGCL to the extent required to permit
Fireman's Fund's acquisition of the Hemmingson and Black Stock, which would
result in Fireman's Fund owning more than 20% of such outstanding shares. Under
the Consent Agreement, and in return for the Company's consent thereunder and
waiver of the applicable provisions of Section 203 with respect to Fireman's
Fund's purchase of the Hemmingson and Black Stock, Fireman's Fund agreed, with
respect to any stockholder vote on an acquisition or other specified
transactions, to vote its shares which exceed 20% of the voting power of the
Company's outstanding securities in accordance with the pro rata voting of other
Company stockholders who are not "interested stockholders" of the Company under
Section 203 of the DGCL (generally, persons owning more than 15% of the
Company's voting stock, or affiliates or associates of the Company who owned 15%
of such stock within the three-year period prior to the determination, and the
affiliates and associates of such persons). Under the applicable provisions of
Section 203 of the DGCL, Fireman's Fund, would become an "interested party" with
respect to the

29
<PAGE>
Company by virtue of its acquisition of the Hemmingson and Black Stock and,
unless the Board had consented in advance to that purchase, would have been
prohibited from completing the Merger or any similar transaction with the
Company for a period of three years following the acquisition of such stock.

In addition, the Consent Agreement contains a provision which amends the
standstill provision of the Preferred Stock Purchase Agreement. Under this
provision, the restrictions of the standstill provision will immediately
terminate at the time when any person or group (as defined in Commission
regulations) publicly announces an intention to make or makes or commences a
tender or exchange offer, other than a tender or exchange offer which has been
approved by the Board of Directors of the Company before the earliest to occur
of such announcement, making or commencement, for more than 15% of the
outstanding Common Stock.

INTERESTS OF CERTAIN PERSONS IN THE MERGER

In considering the recommendation of the Board of Directors of the Company
with respect to the Merger Agreement and the transactions contemplated thereby,
stockholders should be aware that certain members of the management and the
Board of Directors of the Company have certain interests in the Merger in
addition to the interests of stockholders of the Company generally. In
connection with the Board of Directors' determination that the Merger is fair to
the Company's stockholders (excluding Fireman's Fund and its affiliates), the
Board carefully considered conflict of interest issues relating to the matters
described below.

EMPLOYMENT AGREEMENT. Mr. Martinez, Chief Executive Officer of the Company,
has a three-year employment agreement ending in May 1999, under which he is
currently paid an annual base salary of $275,000. Under the terms of the
agreement, upon consummation of the Merger, Mr. Martinez may resign and continue
to receive his then current base salary and continuation of health and life
insurance benefits for the remainder of the contract term.

STOCK OPTIONS. Under the terms of the Company's stock option plans and the
agreements relating to certain outstanding stock options, the Merger will cause
the acceleration of vesting of all outstanding stock options of the Company. The
following table sets forth, with respect to each of the individuals who are, or
since January 1, 1996 have been (as indicated with an asterisk), executive
officers and directors of the Company, information concerning cash settlements
of "in-the-money" stock options that will be paid in connection with the
consummation of the Merger, including options that are currently exercisable and
those that will become exercisable as a result of the Merger. See "THE MERGER
AGREEMENT-- Payment for Shares and Options" and "MANAGEMENT OF THE COMPANY,
FIREMAN'S FUND AND THE MERGER SUBSIDIARY--The Company." The cash settlement
amounts are based upon the spread between $10.25 and the exercise price of such
options and do not take into account any income taxes that may be required to be
withheld.

<TABLE>
<CAPTION>
AMOUNT PAYABLE WITH
RESPECT TO OPTIONS
------------------------ TOTAL
CURRENTLY BECOMING CASH SETTLEMENT
EXERCISABLE EXERCISABLE AMOUNT
----------- ----------- ---------------
<S> <C> <C> <C>
Tony Cid........................................... $ 4,309 $ 8,621 $ 12,930
Rafe Hargrove...................................... 16,580 19,411 35,991
Paul Horn.......................................... 4,125 -- 4,125
John Meuschke...................................... 2,625 -- 2,625
Manuel Sanchez..................................... 4,125 -- 4,125
David Hill......................................... 4,309 8,621 12,930
Richard Bartlett*.................................. 15,311 -- 15,311
Gary Black*........................................ 59,979 63,710 123,689
Tony Coelho*....................................... 3,750 1,875 5,625
John Hemmingson*................................... 85,939 96,881 182,820
----------- ----------- ---------------
Total.......................................... $ 201,052 $ 199,119 $ 400,171
----------- ----------- ---------------
----------- ----------- ---------------
</TABLE>

30
<PAGE>
INDEMNIFICATION OF OFFICERS AND DIRECTORS. The Merger Agreement provides
that, for a period of not less than four years following the Effective Time, the
Surviving Corporation will maintain in effect all rights of indemnification of
the officers, directors, employees or agents of the Company and its subsidiaries
of the Company provided in its certificate of incorporation, bylaws or in
indemnification agreements with the Company or any of its subsidiaries, and will
indemnify and hold harmless such persons to the full extent permitted by law
against losses, claims, damages, liabilities, costs, expenses, judgments, fines
and amounts paid in settlement in connection with any threatened or actual
claim, action, suit, proceeding or investigation, asserted or arising before or
after the Effective Time. Fireman's Fund has also agreed to cause the Surviving
Corporation to maintain, or for Fireman's Fund itself to provide, for the
benefit of such persons, for a period of not less than four years after the
Effective Time, any current officer's and director's liability insurance
policies maintained by the Surviving Corporation, or policies with at least the
same coverage, provided that if the cost of such continuing coverage exceeds
200% of the last annual premium paid by the Surviving Corporation prior to March
5, 1997, Fireman's Fund will purchase as much comparable insurance as possible
for an annual premium equal to such maximum amount.

SOURCES AND USES OF FUNDS

MERGER CONSIDERATION, FEES AND EXPENSES. Fireman's Fund estimates that the
total consideration payable to stockholders other than Fireman's Fund upon
consummation of the Merger, including amounts needed to settle outstanding
Company stock options, will be approximately $64,250,000. It paid an aggregate
purchase price of $18,576,179, including interest, to Messrs. Hemmingson and
Black for their shares. The estimated fees and expenses incurred or to be
incurred by Fireman's Fund in connection with the Merger are legal fees and
expenses of $200,000 and miscellaneous fees of $50,000. Fireman's Fund currently
has working capital funds available to make such payments and pay such fees and
expenses.

The estimated fees and expenses incurred or to be incurred by the Company in
connection with the Merger, which will be paid using working capital funds, are
approximately as follows. Certain of those funds may be borrowed by the Company
from Fireman's Fund under the Business Loan Agreement referred to above under
"SPECIAL FACTORS--Relationships Between the Company and Fireman's
Fund--Transactions and Agreements--Loan Agreement."

<TABLE>
<S> <C>
Investment banking fees and expenses............................ $ 935,000
Legal fees and expenses......................................... 200,000
Printing and mailing fees....................................... 70,000
Accounting fees and expenses.................................... 10,000
Commission filing fee........................................... 12,772
Paying Agent fees............................................... 10,000
Proxy Solicitation Agent fees................................... 5,000
Miscellaneous expenses.......................................... 15,000
---------
Total Fees and Expenses......................................... 1,187,772
</TABLE>

For information regarding Dean Witter's engagement by the Board of
Directors, see "--Opinion of Financial Advisor." Certain of the Company's
officers will receive certain payments if the Merger is consummated. See
"--Interests of Certain Persons in the Merger."

SOLICITATION FEES AND EXPENSES. Neither Fireman's Fund nor the Company will
pay any fees or commissions to any broker or dealer or any other person (other
than the Proxy Solicitation Agent) for soliciting Company stockholders with
respect to the Merger. Brokers, dealers, commercial banks and trust companies
will, upon request, be reimbursed by the Company for reasonable and necessary
costs and expenses incurred by them in forwarding materials to their customers.

31
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES

Under currently existing provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), the Treasury Regulations promulgated thereunder,
applicable judicial decisions and administrative rulings, all of which are
subject to change, the federal income tax consequences described below will
arise in connection with the Merger. Due to the complexity of the Code, the
following discussion is limited to the material federal income tax aspects of
the Merger for a Company stockholder who is a citizen or resident of the United
States. The general tax principles discussed below are subject to retroactive
changes that may result from subsequent amendments to the Code. The following
discussion does not address potential foreign, state, local and other tax
consequences, nor does it address taxpayers subject to special treatment under
the federal income tax laws, such as insurance companies, Fireman's Fund as the
holder of all of the outstanding shares of Preferred Stock, tax-exempt
organizations, S corporations and taxpayers subject to the alternative minimum
tax. In addition, the following discussion may not apply to Company stockholders
who acquired their shares upon the exercise of employee stock options or
otherwise as compensation. Neither the Company nor Fireman's Fund has requested
either the Internal Revenue Service or counsel to rule or issue an opinion on
the federal income tax consequences of the Merger. ALL STOCKHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, FOREIGN, STATE AND LOCAL
TAX CONSEQUENCES OF THE DISPOSITION OF THEIR SHARES IN THE MERGER.

For federal income tax purposes, the Merger will be treated as a taxable
sale or exchange of shares of Common Stock for cash by each holder of such
shares (including any holder of Dissenting Shares). Accordingly, the federal
income tax consequences to the holders of Common Stock will generally be as
follows:

(a) Assuming that the shares of Common Stock exchanged by a Company
stockholder for cash in connection with the Merger are capital assets in
the hands of the stockholder at the Effective Time, such stockholder will
recognize capital gain or loss by reason of the consummation of the
Merger.

(b) The capital gain or loss, if any, will be long-term with respect to
shares of Common Stock held for more than 12 months as of the Effective
Time and short-term with respect to such shares held for 12 months or
less as of the Effective Time.

(c) The amount of capital gain or loss to be recognized by each holder of
Common Stock will be measured by the difference between the amount of
cash payable for the account of such stockholder in connection with the
Merger (including cash received for Dissenting Shares) and such
stockholder's tax basis in the Common Stock at the Effective Time.

Cash payments made pursuant to the Merger (including any cash paid to
holders of Dissenting Shares) will be reported to the extent required by the
Code to stockholders of the Company and the Internal Revenue Service. Such
amounts will ordinarily not be subject to withholding of federal income tax.
However, backup withholding of such tax at a rate of 31% may apply to certain
stockholders by reason of the events specified in Section 3406 of the Code and
the Treasury Regulations promulgated thereunder, which include failure of a
stockholder to supply the Company or its agent with such stockholder's taxpayer
identification number. Accordingly, each Company stockholder will be asked to
provide the stockholder's correct taxpayer identification number on a Substitute
Form W-9 which is to be included in the letter of transmittal to be sent to
stockholders relating to their shares of Common Stock. Withholding may also
apply to Company stockholders who are otherwise exempt from such withholding,
such as a foreign person, if such person fails to properly document its status
as an exempt recipient.

The cash settlement amounts distributed in connection with the Merger to
holders of in-the-money options to acquire shares of the Common Stock will
constitute "wages," and will be subject to income tax

32
<PAGE>
withholding. The gross amount due, the withheld amount and the net payment will
be included in each optionholder's W-2 form for 1997.

PUBLIC OFFERINGS AND REPURCHASES OF COMMON STOCK

PUBLIC OFFERINGS. On June 30, 1994, the Company completed an underwritten
initial public offering of 2,780,748 newly issued shares of its Common Stock, at
an initial public offering price to the public of $7.50, which was registered on
a Registration Statement on Form S-1 under the Securities Act of 1933, as
amended. The Company retained net proceeds of the offering in the amount of
$18,096,107, after deducting underwriting commissions and discounts of
$1,459,893 and other costs of $1,299,610.

On December 6, 1994, the Company completed an underwritten public offering
of 1,400,000 newly issued shares of its Common Stock, at a public offering price
to the public of $14.00, which was registered on a Registration Statement on
Form S-1 under the Securities Act of 1933, as amended. The Company retained net
proceeds of the offering of $17,774,886, after deducting underwriting
commissions and discounts of $1,274,000 and other costs of $551,114.

REPURCHASES. Pursuant to an agreement relating to the acquisition of their
agency business, in 1996 the Company purchased 14,250 and 10,000 shares of its
Common Stock from John Chapman, Sr. and Jack Chapman, respectively, for $16.25
per share. Also, pursuant to separation agreements with Messrs. Hemmingson and
Black, in 1996 and 1997 the Company purchased 108,000 and 84,000 shares of its
Common Stock from Hemmingson and Black, respectively, at prices ranging from
$10.00 to $6.65 per share. The average repurchase price paid for each applicable
quarterly period was as follows:

<TABLE>
<CAPTION>
AVERAGE
REPURCHASE
PRICE PAID
-----------
<S> <C>
1996
First Quarter.................................................................. $ 16.25
Third Quarter.................................................................. $ 9.78
Fourth Quarter................................................................. $ 7.14

1997
First Quarter.................................................................. $ 6.50
</TABLE>

REGULATORY APPROVALS

STATE REGULATORY AUTHORITIES. Certain filings have been made with, and all
necessary approvals obtained from, insurance regulatory authorities in certain
states in connection with the Merger.

HSR ACT FILINGS. Under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 and the rules promulgated thereunder by the Federal Trade Commission (the
"FTC"), certain acquisition transactions may not be consummated unless notice
has been given and certain information has been furnished to the Antitrust
Division of the United States Department of Justice (the "Antitrust Division")
and the FTC and certain waiting period requirements have been satisfied. The
Merger is subject to these requirements.

The Company and Fireman's Fund each filed with the Antitrust Division and
the FTC a Notification and Report Form with respect to the Merger on May 2 and
May 1, 1997, respectively. On May 16, 1997, the Company and Fireman's Fund were
notified by the FTC that the waiting period had been terminated.

State Attorneys General and private parties may also bring legal actions
under the federal or state antitrust laws under certain circumstances. There can
be no assurance that a challenge to the proposed Merger on antitrust grounds
will not be made or of the result if such a challenge is made.

33
<PAGE>
THE MERGER AGREEMENT

The information under this caption is qualified in its entirety by reference
to the full text of the Merger Agreement, a copy of which is attached as Exhibit
A to this Proxy Statement.

GENERAL

The Company and Fireman's Fund entered into the Merger Agreement effective
May 1, 1997. If the stockholders of the Company approve the Merger Agreement,
the Merger Subsidiary will be merged with and into the Company, with the result
that the separate corporate existence of the Merger Subsidiary will then cease.
The Company will be the Surviving Corporation and will be an wholly owned
subsidiary of Fireman's Fund. At the Effective Time, the Common Stock will be
converted automatically into the right to receive cash, as described below. See
"--Consideration to be Received by Stockholders." The shares of the Common Stock
will no longer be listed or traded on the Nasdaq National Market, and the
registration of the Common Stock under the Exchange Act will be terminated.

EFFECTIVE TIME

If the Merger Agreement is adopted by the requisite vote of the Company's
stockholders, the Merger will be consummated and become effective upon the
acceptance for record of the Certificate of Merger by the Delaware Secretary of
State on a date as soon as practicable after conditions to the Merger are
satisfied (or waived to the extent permitted), or such other date agreed on by
the parties. It is currently contemplated that the Effective Time will occur on
the date of, and as soon as practicable after, the Special Meeting. There can be
no assurance that all conditions to the Merger will be satisfied. See
"--Conditions to Consummation of the Merger."

CONSIDERATION TO BE RECEIVED BY STOCKHOLDERS

In connection with the Merger, each share of Common Stock outstanding
immediately prior to the Effective Time (other than Dissenting Shares and shares
held by Fireman's Fund or its designee) will be converted into the right to
receive $10.25 in cash, without interest (the cash consideration per share to be
paid to the Company's stockholders in the Merger being sometimes referred to
herein as the "Merger Consideration"), and each holder of an option to acquire
shares of the Common Stock of the Company will receive a cash settlement, net of
withholding taxes, equal to the excess, if any, of $10.25 over the exercise
price of such options. Dissenting Shares will be converted to cash in the manner
described under the caption "RIGHTS OF DISSENTING STOCKHOLDERS."

PAYMENT FOR SHARES AND OPTIONS

PAYMENT FOR SHARES. On the Effective Date Fireman's Fund will deliver the
Merger Consideration to ChaseMellon Shareholder Services, L.L.C. (the "Paying
Agent"), who will act as the paying agent for payment of the Merger
Consideration to the holders of the Common Stock. Instructions with regard to
the surrender of certificates formerly representing shares of Common Stock,
together with the letter of transmittal to be used for that purpose, will be
mailed to stockholders of record on the Effective Date as soon as practicable
after the Effective Time. As soon as practicable following receipt from the
stockholder of a duly executed letter of transmittal, together with certificates
formerly representing Common Stock and any other items specified by the letter
of transmittal, the Paying Agent will pay the Merger Consideration to such
stockholder, by check or draft.

After the Effective Time, the holder of a certificate formerly representing
Common Stock will cease to have any rights as a stockholder of the Company, and
such holder's sole right will be to receive the Merger Consideration with
respect to such shares (or, in the case of Dissenting Shares, the statutorily
determined "fair value"). If payment is to be made to a person other than the
person in whose name the surrendered certificate is registered, it will be a
condition of payment that the certificates so surrendered be properly

34
<PAGE>
endorsed or otherwise in proper form for transfer and that the person requesting
such payment shall pay any transfer or other taxes required by reason of such
payment or establish to the satisfaction of the Surviving Corporation that such
taxes have been paid or are not applicable. No transfer of shares outstanding
immediately prior to the Effective Time will be made on the stock transfer books
of the Surviving Corporation after the Effective Time.

To the extent permitted by law, the appointment of the Paying Agent may be
terminated at any time by Fireman's Fund upon notice to the Paying Agent, or by
the Paying Agent upon 30 days notice to Fireman's Fund. Any portion of the
Merger Consideration remaining undistributed upon termination of the Paying
Agent's appointment will be returned to the Surviving Corporation, and any
holders of theretofore unsurrendered Common Stock certificates may thereafter
surrender to the Surviving Corporation such stock certificates and (subject to
abandoned property, escheat or similar laws) receive in exchange therefor the
Merger Consideration to which they are entitled.

STOCKHOLDERS OF THE COMPANY SHOULD NOT FORWARD THEIR STOCK CERTIFICATES TO
THE PAYING AGENT WITHOUT A LETTER OF TRANSMITTAL, AND SHOULD NOT RETURN THEIR
STOCK CERTIFICATES WITH THE ENCLOSED PROXY.

OPTION SETTLEMENT PAYMENTS. As of the Effective Time, the outstanding
options to purchase shares of the Company's Common Stock will become, by their
terms, fully exercisable and vested. At such time, all such options will be
canceled, and in consideration of such cancellation, the Surviving Corporation
will pay to the holder of each such option an amount (the "Option Settlement
Amount"), net of withholding taxes, equal to the excess, if any, of $10.25 over
the exercise price of such options. Such payments will be made by check, mailed
to optionholders with a letter explaining in detail the calculation of the
amount paid. No action on the part of optionholders will be required to initiate
such payments. After the Effective Time, no holder of an option will have any
rights other than to receive payment for such holder's options equal to the
Option Settlement Amount.

NO INTEREST ON PAYMENT AMOUNTS. In no event will holders of shares of
Common Stock or options to purchase Common Stock be entitled to receive payment
of any interest on the Merger Consideration or the Option Settlement Amounts.

OPERATIONS OF THE COMPANY PRIOR TO THE MERGER

The Company has agreed that, prior to the Effective Time, the business of
the Company will be conducted in accordance with certain restrictions set forth
in the Merger Agreement. Among other things, the Company has agreed that, except
as the Company and Fireman's Fund may otherwise agree, the Company will, and
will cause its subsidiaries to, operate only in the ordinary course of business,
and neither the Company nor any of its subsidiaries will do any of the
following: (a) take any action which would or could reasonably be expected to
jeopardize any of its material contracts or its good standing with any
applicable state department of insurance or similar regulatory agency with
jurisdiction over the Company, (b) take any extraordinary action or fail to take
any action, the failure of which to be taken would be an extraordinary action,
or (c) declare, set aside or pay any dividend (other than stated dividends on
the Preferred Stock) or other distribution in respect of its capital stock,
whether in stock, cash, indebtedness or other property, redeem, repurchase or
otherwise acquire any of its outstanding capital stock, whether for cash,
indebtedness or property, or issue any capital stock or any right to acquire,
convert into or exchange for capital stock except pursuant to stock options
outstanding on March 5, 1997. The Company has also agreed that, in the event it
adopts a "rights plan," "poison pill," or similar plan or arrangement, it will
include a provision expressly exempting Fireman's Fund from the operation
thereof.

In addition, the Company has agreed that until the earlier of the
termination of the Merger Agreement or the Effective Time, neither the Company
nor any of its subsidiaries or representatives will, directly or indirectly,
take any action to encourage, solicit or initiate the submission of any
Acquisition Proposal (as defined below), enter into any agreement for or
relating to any Acquisition Proposal, or

35
<PAGE>
participate in any way in any discussions or negotiations with, or furnish any
nonpublic information to, any party in connection with any Acquisition Proposal.
Notwithstanding the foregoing, the Company may, in response to an unsolicited
bona fide offer or proposal made by a third party to the Company and upon
written notice to Fireman's Fund, provide information to or have discussions or
negotiations with such third party if the Board of Directors of the Company,
after having considered the advice of outside counsel, has determined in good
faith that it is the fiduciary duty under applicable law of such directors to do
so.

An Acquisition Proposal is defined in the Merger Agreement as a proposal for
any (i) merger, consolidation or similar transaction involving the Company, (ii)
sale, lease or other disposition directly or indirectly by merger,
consolidation, share exchange or otherwise of any assets of the Company and its
subsidiaries representing 15% or more of the consolidated assets of the Company
and its subsidiaries, (iii) issuance, sale or other disposition of (including by
way of merger, consolidation, share exchange or any similar transaction)
securities (or options, rights or warrants to purchase, or securities
convertible into, such securities) representing 15% or more of the votes
attached to the outstanding securities of the Company, (iv) transaction in which
any person or group of persons will acquire beneficial ownership or the right to
acquire beneficial ownership of 15% or more of the outstanding shares of
Company's Common Stock, (v) recapitalization, restructuring, liquidation,
dissolution or similar type of transaction with respect to the Company or any of
its subsidiaries, or (vi) transaction which is similar in form, substance or
purpose to any of the foregoing transactions.

CONDITIONS TO CONSUMMATION OF THE MERGER

The Merger will occur only if the Merger Agreement is approved and adopted
by the requisite votes of the holders of the Common Stock and Preferred Stock
voting as a single class. Consummation of the Merger also is subject to the
satisfaction of certain other conditions specified in the Merger Agreement,
unless such conditions are waived (to the extent such waiver is permitted by
law). The failure of any such condition to be satisfied, if not waived, would
prevent consummation of the Merger.

The obligations of Fireman's Fund to consummate the Merger are subject to
satisfaction of the following conditions: (i) all waivers, consents,
authorizations, orders, approvals and expirations of waiting periods required
under any applicable law, rule, regulation, judgment or decree ("Law"), or any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which any party to the Merger
Agreement or any of its subsidiaries is bound or by which the property or assets
of any such party or subsidiary is bound or affected ("Contract"), required to
be obtained by any such party in order to consummate the Merger shall have been
obtained, except where the failure to do so would not have a material adverse
effect on the assets, properties, liabilities, obligations, business, financial
condition or results of operations ("Material Adverse Effect") of the Company
and its subsidiaries taken as a whole; (ii) each of the representations and
warranties of the Company contained in the Merger Agreement shall have been true
and correct as of the date of execution of the Merger Agreement and as of the
Effective Time (except for any inaccuracies which in the aggregate would not be
expected to have a Material Adverse Effect on the Company and its subsidiaries
taken as a whole); (iii) the Company shall have complied in all material
respects with all covenants and agreements required under the terms of the
Merger Agreement to be performed by it; (iv) no injunction, restraining order or
other order of any federal or state court which prevents the Merger shall be in
effect; (v) no statute, rule or regulation shall have been enacted by any state
or governmental agency that would prevent consummation of the Merger; (vi)
between March 5, 1997 and the Effective Time no Material Adverse Effect shall
have occurred with respect to the Company other than any developments that
generally affect the industry in which the Company operates; and (vii) the
Merger shall have been approved by the stockholders of the Company.

The obligations of the Company to consummate the Merger are subject to
satisfaction of the following conditions: (i) all waivers, consents,
authorizations, orders, approvals and expirations of waiting periods

36
<PAGE>
required under any applicable Law or Contract to be obtained by any party to the
Merger Agreement in order to consummate the Merger shall have been obtained,
except where the failure to do so would not have a Material Adverse Effect on
the Company and its subsidiaries taken as a whole ; (ii) each of the
representations and warranties of Fireman's Fund contained in the Merger
Agreement shall have been true and correct as of the date of execution of the
Merger Agreement and as of the Effective Time (except for any inaccuracies which
in the aggregate would not be expected to have a Material Adverse Effect on
Fireman's Fund and its subsidiaries taken as a whole); (iii) Fireman's Fund
shall have complied in all material respects with all covenants and agreements
required under the terms of the Merger Agreement to be performed by it; (iv) no
injunction, restraining order or other order of any federal or state court which
prevents the Merger shall be in effect; (v) no statute, rule or regulation shall
have been enacted by any state or governmental agency that would prevent
consummation of the Merger; and (vi) the Merger shall have been approved by the
stockholders of the Company.

TERMINATION

The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the filing of Certificate of Merger with the Delaware Secretary of
State whether before or after action by the Company's stockholders and without
further approval by the Company's stockholders under any of the following
circumstances: (i) by mutual written consent of the Company and Fireman's Fund;
(ii) by either the Company or Fireman's Fund on or after December 31, 1997 if
the conditions of such party's obligation to consummate the Merger have not been
satisfied or waived; and (iii) by the Company and Fireman's Fund if the Company
stockholders do not approve the Merger. In addition, (a) the Board of Directors
of the Company may, if it determines in good faith, after hearing advice of
outside counsel, that such action is necessary in order for the Board of
Directors to comply with its fiduciary duties to the Company's stockholders
under applicable law, modify or withdraw its approval or recommendation of the
Merger, approve or recommend a Superior Proposal (as defined below) or terminate
the Merger Agreement without such action constituting a breach of the Merger
Agreement, and (b) Fireman's Fund may terminate the Merger Agreement if the
Board of Directors of the Company or any committee of the Board withdraws or
modifies its approval or recommendation of the Merger Agreement or the Merger,
fails to recommend that the stockholders of the Company vote in favor of the
Merger, approves or recommends any Acquisition Proposal other than the Merger,
or resolves to do any of the foregoing. A "Superior Proposal" is a bona fide
Acquisition Proposal the terms of which the Board of Directors of the Company
determines, after hearing the advice of a financial advisor of nationally
recognized reputation, to be more favorable to the Company's stockholders than
the terms of the Merger.

TERMINATION FEE

The Merger Agreement requires the Company to pay Fireman's Fund a
termination fee of $2.4 million plus costs and expenses incurred by Fireman's
Fund in connection with the Merger (the "Termination Fee Amount") if the Board
of Directors of the Company takes any of the actions described in clause (a)
above under the caption "--Termination," or the Merger Agreement is terminated
by Fireman's Fund for any of the reasons set forth in clause (b) above under
such caption. In the event that the Merger Agreement is terminated because the
stockholders of the Company do not approve the Merger, and if within the 18
months following such termination the Company enters into a binding agreement
for an Acquisition Transaction with a party not affiliated with Fireman's Fund,
the Company must pay Fireman's Fund the Termination Fee Amount upon entering
into such binding agreement.

ACCOUNTING TREATMENT

The Merger will be accounted for under the purchase method of accounting
under which the total consideration paid in the Merger will be allocated among
the Surviving Corporation's consolidated assets and liabilities based on the
fair values of the assets acquired and liabilities assumed.

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<PAGE>
RIGHTS OF DISSENTING STOCKHOLDERS

When the Merger is effected, stockholders of the Company who comply with the
procedures prescribed in Section 262 of the DGCL ("Section 262") will be
entitled to a judicial determination of the "fair value" of their shares
(exclusive of any element of value arising from the accomplishment or
expectation of the Merger) and to receive from the Company payment of such fair
value in cash. Shares of Common Stock which are outstanding immediately prior to
the Effective Time and with respect to which appraisal shall have been properly
demanded in accordance with Section 262 shall not be converted into the right to
receive the Merger Consideration at or after the Effective Time unless and until
the holder of such shares withdraws his or her demand for such appraisal or
becomes ineligible for such appraisal.

The following is a brief summary of the statutory procedures to be followed
by a stockholder of the Company in order to dissent from the Merger and perfect
appraisal rights under the DGCL. This summary is not intended to be complete and
is qualified in its entirety by reference to Section 262, the text of which is
included as Appendix C of this Proxy Statement. Any stockholder considering
demanding appraisal is advised to consult legal counsel.

A written demand for appraisal of shares of Common Stock must be delivered
to the Company by a stockholder seeking appraisal before the taking of the vote
on the Merger. This written demand must be separate from any proxy or vote
abstaining from or voting against approval of the Merger. Voting against
approval of the Merger, abstaining from voting or failing to vote with respect
to approval of the Merger will not constitute a demand for appraisal within the
meaning of Section 262.

Stockholders electing to exercise their appraisal rights under Section 262
must not vote for approval of the Merger. A vote by a stockholder against
approval of the Merger is not required in order for that stockholder to exercise
appraisal rights. However, if a stockholder returns a signed proxy but does not
specify a vote against approval of the Merger or a direction to abstain, the
proxy, if not revoked, will be voted for approval of the Merger, which will have
the effect of waiving that stockholder's appraisal rights.

A written demand for appraisal must reasonably inform the Company of the
identity of the stockholder of record and that such stockholder intends thereby
to demand appraisal. Accordingly, a demand for appraisal should be executed by
or for the stockholder of record, fully and correctly, as such stockholder's
name appears on the stock certificates. If Common Stock is owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian, such demand
must be executed by the fiduciary. If, for example, a stockholder holds shares
of Common Stock through a broker, who in turn holds shares through a central
securities depository nominee, such as Cede & Co., a demand for appraisal of
such shares must be made by or on behalf of such depository nominee. If Common
Stock is owned of record by more than one person, as in a joint tenancy or
tenancy in common, such demand must be executed by or for all joint owners. An
authorized agent, including an agent for two or more joint owners, may execute
the demand for appraisal for a stockholder of record; however, the agent must
identify the record owner and expressly disclose the fact that, in exercising
the demand, he is acting as agent for the record owner.

A record owner, such as a broker, who holds Common Stock as a nominee for
others, may exercise appraisal rights with respect to the Common Stock held for
all or less than all beneficial owners of Common Stock as to which the holder is
the record owner. In such case, the written demand must set forth the number of
shares of Common Stock covered by such demand. Where the number of shares of
Common Stock is not expressly stated, the demand will be presumed to cover all
shares of Common Stock outstanding in the name of such record owner. Beneficial
owners who are not record owners and who intend to exercise appraisal rights
should instruct the record owner to comply strictly with the statutory
requirements with respect to the delivery of written demand prior to the taking
of the vote on the Merger.

A Company stockholder who elects to exercise appraisal rights must mail or
deliver the written demands for appraisal to: Secretary, Crop Growers
Corporation, 10895 Lowell, Suite 300, Overland Park, Kansas, 66210, or deliver
such demand to the Company in person at the Special Meeting. The written

38
<PAGE>
demand for appraisal should specify the stockholder's name and mailing address
and the number of shares of Common Stock covered by the demand, and should state
that the stockholder is thereby demanding appraisal in accordance with Section
262.

Within ten days after the Effective Time, the Company must provide notice as
to the date of effectiveness of the Merger to all stockholders who have duly and
timely delivered demands for appraisal and who have not voted for approval of
the Merger Agreement.

Within 120 days after the Effective Time, any dissenting stockholder is
entitled, upon written request, to receive from the Company a statement setting
forth the aggregate number of shares not voted in favor of approval of the
Merger Agreement and with respect to which demands for appraisal have been
received by the Company and the number of holders of such shares. Such statement
must be mailed within 10 days after the written request therefor has been
received by the Company.

Within 120 days after the Effective Time, either the Company or any
dissenting stockholder may file a petition in the Delaware Court of Chancery
demanding a determination of the fair value of shares of Common Stock of all
dissenting stockholders. If a petition for an appraisal is timely filed, after a
hearing on such petition, the Delaware Court of Chancery will determine which of
the Company stockholders are entitled to appraisal rights and thereafter will
appraise the shares of Common Stock owned by such stockholders, determining the
fair value of such shares, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with the fair rate of
interest to be paid, if any, upon the amount determined to be fair value. In
determining fair value, the Delaware Court of Chancery is to take into account
all relevant factors. In WEINBERGER V. UOP, INC, ET AL., the Delaware Supreme
Court discussed the factors that could be considered in determining fair value
in an appraisal proceeding, stating that "proof of value by any techniques or
methods which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered and the "fair price
obviously requires consideration of all relevant factors involving the value of
a company." The Delaware Supreme Court stated that in making this determination
of fair value the court and the appraiser may consider "all factors and elements
which reasonably might enter into the fixing of value," including "market value,
asset value, dividends, earnings prospects, the nature of the enterprise and any
other facts which were known or which could be ascertained as of the date of the
merger and which throw any light on future prospects of the merged
corporation...." The Delaware Supreme Court has construed Section 262 to mean
that "elements of future value, including the nature of the enterprise, which
are known or susceptible of proof as of the date of the merger and not the
product of speculation, may be considered." However, such court noted that
Section 262 provides that fair value is to be determined "exclusive of any
element of value arising from the accomplishment or expectation of the merger."

Stockholders considering whether to seek appraisal should bear in mind that
the fair value of their Common Stock determined under Section 262 could be more
than, the same as, or less than the value of the Merger Consideration to be
exchanged in the Merger, and that opinions of investment banking firms as to
fairness from a financial point of view are not necessarily opinions as to fair
value under Section 262. Moreover, the Company reserves the right to assert in
any appraisal proceeding that, for purposes thereof, the "fair value" of the
Common Stock is less than the value of the Merger Consideration.

The cost of the appraisal proceeding may be determined by the Delaware Court
of Chancery and taxed upon the parties as the court deems equitable in the
circumstances. Upon application of a dissenting stockholder, the court may order
that all or a portion of the expenses incurred by any dissenting stockholder in
connection with the appraisal proceeding, including, without limitation,
reasonable attorneys' fees, and the fees and expenses of experts, be charged pro
rata against the value of all shares entitled to appraisal. In the absence of
such a determination or assessment, each party bears its own expenses.

A dissenting stockholder who has duly demanded appraisal in compliance with
Section 262 will not, after the Effective Time, be entitled to vote for any
purpose the Common Stock subject to such demand or

39
<PAGE>
to receive payment of dividends or other distributions on such Common Stock,
except for dividends or other distributions payable to stockholders of record at
a date prior to the Effective Time.

At any time within 60 days after the Effective Time, any dissenting
stockholder will have the right to withdraw his or her demand for appraisal and
to accept the Merger Consideration. After this period, a dissenting stockholder
may withdraw his or her demand for appraisal only with the consent of the
Company. If no petition for appraisal is filed with the Delaware Court of
Chancery within 120 days after the Effective Time, dissenting stockholders'
rights to appraisal shall cease and they shall be entitled only to receive the
Merger Consideration. Inasmuch as the Company has no obligation to file such a
petition, any stockholder who desires such a petition to be filed is advised to
file it on a timely basis. However, no petition timely filed in the Delaware
Court of Chancery demanding appraisal shall be dismissed as to any stockholder
without the approval of the Delaware Court of Chancery, and such approval may be
conditioned upon such terms as the Delaware Court of Chancery deems just.

A vote for the Merger will constitute a waiver of appraisal rights. A
failure to vote against the Merger will not, under Delaware law, constitute a
waiver of appraisal rights. If a stockholder returns a proxy which does not
contain instructions as to how it should be voted, such proxy will be voted in
favor of the Merger and, accordingly, appraisal rights will be waived. As
described above, a vote against the Merger is not sufficient to perfect
appraisal rights. A stockholder's failure to make the written demand prior to
the Special Meeting (under Delaware law) as described above will constitute a
waiver of appraisal rights.

Cash received pursuant to the exercise of dissenters' rights may be subject
to federal or state income tax. See "SPECIAL FACTORS--Certain Federal Income Tax
Consequences."

ANY HOLDER WHO FAILS TO COMPLY FULLY WITH THE STATUTORY PROCEDURE SUMMARIZED
ABOVE WILL FORFEIT HIS OR HER RIGHTS OF DISSENT AND WILL RECEIVE THE MERGER
CONSIDERATION FOR HIS OR HER SHARES. SEE EXHIBIT C.

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<PAGE>
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

STOCK OWNERSHIP

The following table sets forth, as of June 30, 1997, certain information
with respect to beneficial ownership of the Common Stock by (i) each person or
entity known by the Company to own beneficially more than 5% of the Company's
Common Stock; (ii) each director of the Company; (iii) each executive officer of
the Company; and (iv) all executive officers and directors as a group. For
purposes of this table, beneficial ownership of securities is defined in
accordance with the rules of the Commission and means generally the power to
vote or dispose of securities, regardless of any economic interest therein.
Except as otherwise indicated, the stockholders listed in the table have sole
voting and investment power with respect to the shares indicated. For the
purpose of determining "Percent of Outstanding Shares," (i) the number of shares
of Common Stock outstanding at June 30, 1997 was 8,712,497, including 754,717
shares of Common Stock issuable upon conversion of 10,000 shares of the
Preferred Stock (which will vote with the Common Stock with respect to the
Merger on an as converted basis), and (ii) stock options exercisable within 60
days from June 30, 1997 are assumed to be exercised by the individual or entity
with respect to whom the percentage is calculated.

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF BENEFICIALLY PERCENT OF
BENEFICIAL OWNER OWNED OUTSTANDING SHARES
- -------------------------------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
Fireman's Fund Insurance Company (1) ..................................... 2,582,164 29.6%
777 San Marin Drive
Novato, California 94998

Thomas Vetter (2) ........................................................ 457,735 5.2%
955 West Chandler Blvd., Suite 15
Chandler, Arizona 84244

Michael A. Roth and Brian J. Stark ....................................... 788,200 9.0%
1500 West Market Street
Mequon, Wisconsin 53092 (3)

Tony Cid (2).............................................................. 16,963 *

David E. Hill (2)......................................................... 9,029 *

Raford S. Hargrove, Jr. (2)............................................... 15,483 *

Paul T. Horn (2)(4)....................................................... 83,500 *

Lawrence T. Martinez (2).................................................. 47,635 *

John M. Meuschke (2)...................................................... 2,500 *

Manuel Sanchez (2)........................................................ 4,500 *

Thomas M. Vertin (2)(5)................................................... 129,779 1.5%

All executive officers and directors as a group (8 individuals)
(2)(4)(5)............................................................... 309,389 3.4%
</TABLE>

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

* Less than 1%.

(1) Includes 754,717 shares of Common Stock issuable upon conversion of 10,000
shares of the Preferred Stock, which currently votes with the Common Stock
on an as converted basis.

(2) Includes the following number of shares of Common Stock which could be
acquired within 60 days of June 30, 1997 through the exercise of stock
options: Mr. Vetter, 837 shares; Mr. Cid, 3,629 shares; Mr. Hill, 8,629
shares; Mr. Hargrove, 11,883 shares; Mr. Martinez, 47,000 shares; Mr. Horn,
79,500 shares; Mr. Meuschke, 1,500 shares; Mr. Sanchez, 4,500 shares; Mr.
Vertin, 69,500 shares; and all directors and executive officers as a group,
226,141 shares.

(3) On the basis of information contained in a Schedule 13D filed by Messrs.
Roth and Stark with the Commission on April 3, 1997, includes 394,100 shares
owned by Reliant Trading and 394,100 shares

41
<PAGE>

owned by Shepard Trading Limited, investment entities. Messrs. Roth and
Stark have shared voting and investment power with respect to such shares by
virtue of their positions as members of Stark Asset Management L.L.C., the
managing partner of Reliant Trading, and as investment managers of Shepard
Trading Limited.

(4) Includes 2,000 shares of Common Stock beneficially owned by Mr. Horn's
spouse.

(5) Includes 5,000 shares of Common Stock held jointly with another individual
(2,500 shares of which Mr. Vertin disclaims beneficial ownership of), 3,750
shares of which are held by a corporation owned by Mr. Vertin, and 1,125
shares are held by Mr. Vertin's wife and daughters, all of which Mr. Vertin
is deemed to beneficially own. With respect to 6,225 shares of Common Stock,
Mr. Vertin shares investment power with another individual or individuals.

TRANSACTIONS BY CERTAIN PERSONS IN COMMON STOCK

No transactions in the Company's Common Stock were effected by any person
named in the table above during the 60 day period preceding the date of this
Proxy Statement, other than Fireman's Fund's purchase of the Hemmingson and
Black Stock as described under the caption "SPECIAL FACTORS-- Relationship
Between the Company and Fireman's Fund--Transactions and Agreements--Right of
First Refusal Agreements."

42
<PAGE>
MANAGEMENT OF THE COMPANY, FIREMAN'S FUND
AND THE MERGER SUBSIDIARY

Certain information concerning the directors and executive officers of the
Company, Fireman's Fund and the Merger Subsidiary is set forth below. Unless
otherwise indicated, each such person is a citizen of the United States and the
address of each such person is that of the Company, Fireman's Fund or the Merger
Subsidiary, as the case may be. Such addresses are set forth under the caption
"SUMMARY--The Company" and "--Fireman's Fund."

THE COMPANY

The names, ages, principal occupations and employment history for the past
five years of the members of the directors and executive officers of the Company
are set forth below.

PAUL T. HORN, 54, has been Chairman of the Board of Directors since March
1996, and a Director since June 1994. He has been the Chief Operating Officer of
R.D. Offutt Company, which provides a variety of agribusiness services and
products to rural communities, since 1985. He has been President, Chief
Operating Officer and a Director of RDO Equipment Corp., which owns and operates
John Deere industrial and agricultural stores in the United States, since August
1996. He also serves as a Director of Northern Grain Company, a regional grain
elevator.

LAWRENCE T. MARTINEZ, 35, has been the Chief Executive Officer and a
Director of the Company since August 1996. He was Acting Chief Executive Officer
from June 1996 to August 1996, and was with the law firm of Dorsey & Whitney LLP
from November 1990 to June 1996.

JOHN M. MEUSCHKE, 51, has held various positions at Fireman's Fund since
1968, and is currently Senior Vice President of Fireman's Fund Insurance
Company. He has been a Director of the Company since July 1996.

MANUEL SANCHEZ, 53, has been a Director of the Company since June 1994. He
has been the Chief Executive Officer of Tower Health, a health maintenance
organization, since February 1997. He had a private law practice from May 1996
to February 1997, and served as President and Chief Executive Officer of Gulf
Atlantic Life Insurance Company from 1991 to May 1996.

THOMAS M. VERTIN, 50, has been Vice Chairman of the Board of Directors since
March 1996, and has been a Director since October 1994. He has been the owner
and operator of Vertin Company, a business management firm with a variety of
commercial business and real estate interests, primarily involving multi-state
funeral homes, since its inception in 1981. He is also a partner in The Coveda
Company, a management firm that operates Hardee's restaurants in Minnesota,
North Dakota and South Dakota.

TONY CID, 35, has been the Senior Vice President of the Company since April
1994. He held various positions with Continental Insurance Companies from March
1989 to February 1994.

RAFORD S. HARGROVE, JR., 28, has been President of Crop Growers Software,
Inc. since October 1994. He was General Manager of Crop Growers Software, Inc.
from January 1991 to October 1994, and was a Director of the Company from
October 1994 to July 1996.

DAVID E. HILL, 34, has been Chief Financial Officer of the Company since
December 1995, and Secretary and Treasurer since May 1996. He served as Chief
Accounting Officer from March 1995 to December 1995, and Vice President and
Controller of Insurance Company Operations from September 1994 to March 1995. He
was with the accounting firm of KPMG Peat Marwick LLP from January 1985 to
September 1994.

43
<PAGE>
FIREMAN'S FUND AND AFFILIATES

Fireman's Fund is a wholly owned subsidiary of AZOA, and AZ AG holds 90% of
the voting securities of AZOA. See "SUMMARY--Fireman's Fund.

FIREMAN'S FUND. The names, principal occupations and employment history for
the past five years of the directors and executive officers of Fireman's Fund
are set forth below. Mr. Hansmeyer and Dr. Schulte-Noelle are German citizens.
Dr. Schulte-Noelle's address is Koniginstrasse 28, 80802 Munich, Federal
Republic of Germany, and Mr. Marks' address is 55 Green Farms Road, Westport,
Connecticut 06881.

GARY E. BLACK, Director; President, Claims Division, since 1997; Executive
Vice President of Fireman's Fund since 1987.

HERBERT HANSMEYER, Director and Chairman of the Board since 1991; Member of
the Board of Management of AZ AG since 1994.

DAVID R. POLLARD, Director; Executive Vice President of Fireman's Fund.

JEFFREY H. POST, Director; Executive Vice President, Chief Financial Officer
and Actuary of Fireman's Fund since 1994; Senior Actuary with St. Paul Companies
Inc. from 1985 to 1994.

THOMAS E. ROWE, Director; Executive Vice President of Fireman's Fund since
1993; Senior Vice President from 1987 to 1993.

DR. HENNING SCHULTE-NOELLE, Director; Chairman of the Board of Management of
AZ AG and Director, President and Chief Executive Officer of AZOA since 1991.

JOE L. STINNETTE, JR., Director; President and Chief Executive Officer of
Fireman's Fund since 1994; Chief Administrative Officer from 1991 to 1994;
Director of AZOA since 1994.

DAVID P. MARKS, Executive Vice President of Fireman's Fund; Director,
Secretary and Assistant Treasurer of AZOA since 1991.

HAROLD N. MARSH, III, Senior Vice President and Treasurer of Fireman's Fund
since 1991.

THOMAS A. SWANSON, Senior Vice President and General Counsel of Fireman's
Fund since 1988; Corporate Secretary since 1993.

AZOA. The names and, unless already set forth under "--Fireman's Fund"
above, the principal occupations and employment history for the past five years
of the directors and executive officers of AZOA are set forth below. Mr.
Hansmeyer and Drs. Schulte-Noelle, Breipohl and Schinzler are German citizens.
The address of Mr. Hansmeyer and Drs. Schulte-Noelle and Breipohl is
Koniginstrasse 28, 80802 Munich, Federal Republic of Germany; the address of
Messrs. Clark and Marks is 55 Green Farms Road, Westport, Connecticut 06881; the
address of Mr. Stinnette is 777 San Marin Drive, Novato, California 94998; the
address of Mr Anderson is 1750 Hennepin Avenue, Minneapolis, Minnesota 55403;
and the address of Dr. Schinzler is 500 Lexington Avenue, New York, New York
10022.

DR. HENNING SCHULTE-NOELLE, Director, President and Chief Executive Officer.

LOWELL C. ANDERSON, Director.

DR. DIETHART BREIPOHL, Director; Member of the Board of Management of AZ AG.

HERBERT HANSMEYER, Director.

DAVID P. MARKS, Director, Secretary and Assistant Treasurer.

44
<PAGE>
DR. HANS JURGEN SCHINZLER, Director.

JOE L. STINNETTE, JR., Director.

RONALD M. CLARK, Treasurer and Assistant Secretary.

AZ AG. The names and, unless already set forth under "--Fireman's Fund" or
"--AZOA" above, the principal occupations and employment history for the past
five years of the members of the Board of Management of AZ AG are set forth
below. All of the named individuals are German citizens. The address of each of
the named individuals is Koniginstrasse 28, 80802 Munich Federal Republic of
Germany.

DR. HENNING SCHULTE-NOELLE, Chairman of the Board of Management.

DETLEV BREMKAMP, Member.

DR. REINER HAGEMANN, Member.

DR. GERHARD RUPPRECHT, Member.

DR. DIETHART BREIPOHL, Member.

DR. HELMUT PERLET, Member.

HERBERT HANSMEYER, Member.

THE MERGER SUBSIDIARY

The names and, unless already set forth under "--Fireman's Fund" above,
principal occupations and employment history for the past five years of the
directors and executive officers of the Merger Subsidiary are set forth below.

HAROLD N. MARSH, III, Director and Senior Vice President and Treasurer.

JEFFREY H. POST, Director and Executive Vice President, Chief Financial
Officer and Actuary.

JOE L. STINNETTE, JR., Director and Chairman of the Board, President and
Chief Executive Officer.

THOMAS A. SWANSON, Senior Vice President, General Counsel and Corporate
Secretary.

RICHARD G. WARREN, Senior Vice President and Controller.

CERTAIN PROCEEDINGS

On January 21, 1997, the Company entered a NOLO CONTENDERE plea to two
charges in the matter of UNITED STATES OF AMERICA V. CROP GROWERS CORPORATION,
JOHN J. HEMMINGSON AND GARY A. BLACK (Crim. No. 96-0181 (GK)), filed in the
United States Federal District Court in Washington, D.C., and paid a fine in the
amount of $2 million. The case was brought against the Company by the
Independent Counsel appointed to investigate former United States Secretary of
Agriculture Mike Espy, and the indictment as initially filed against the Company
alleged conspiracy to violate federal election laws, false statements to a
government agency, falsification of books and records, false statements to
auditors, various securities law violations and other matters. The allegations
were made in connection with alleged corporate reimbursement of individual
campaign contributions to the 1993 Congressional primary campaign of Henry Espy,
brother of Mike Espy, and an amount paid as a retainer to an attorney who used
the funds, allegedly with the knowledge of an officer of the Company, to retire
certain Congressional primary campaign debts of Henry Espy. The counts with
respect to which the Company entered its plea alleged conspiracy to make and
conceal illegal campaign contributions and the making and keeping of false
records and accounts

45
<PAGE>
under provisions of the Securities and Exchange Act of 1934. A nolo contendere
plea is neither an admission nor a denial of guilt.

On February 28, 1997, the Company agreed to settlement of the matter
entitled IN RE CROP GROWERS SECURITIES LITIGATION (Civ. No. 95-58-GF-PGH) with
members of a class of plaintiffs consisting of purchasers of the Company's
common stock during the period from February 15, 1995 to May 16, 1995. The
complaint alleged, among other things, that the Company made false and
misleading statements in publicly filed or disseminated documents to inflate
artificially the price of its stock. Specifically, plaintiffs' primary
allegation was that the Company's statements regarding the potential impact on
the Company's premiums and earnings for 1995 due to the passage of legislation
in the Fall of 1994 amending the MPCI program were false and misleading. Under
the settlement, the Company has paid $2.5 million, $1.22 million of was paid by
the Company, with the remainder paid out under the terms of a directors' and
officers' insurance policy.

Except as described in the preceding paragraph, during the past five years,
neither the Company, Fireman's Fund, AZOA, AZ AG, the Merger Subsidiary, nor any
of the individuals named above with respect to those entities has been convicted
in a criminal proceeding (excluding traffic violations and similar
misdemeanors), or been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
been or become subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws of finding any violation with respect to such laws.

STOCKHOLDER PROPOSALS

In the event the Merger is not consummated for any reason, proposals of
stockholders intended to be presented at the 1997 annual meeting of stockholders
must be received by the Company at its principal executive offices not later
than June 20, 1997 for inclusion in the Company's proxy statement and form of
proxy relating to that meeting. Stockholders should mail any proposals by
certified mail return receipt requested.

INDEPENDENT PUBLIC ACCOUNTANTS

The consolidated financial statements of the Company as of December 31,
1996, December 31, 1995, and December 31, 1994, and for each of the years in the
three-year period ended December 31, 1996, incorporated by reference in this
Proxy Statement, have been audited by KPMG Peat Marwick LLP, independent public
accountants.

A representative of KPMG Peat Marwick LLP will be at the Special Meeting to
answer questions by stockholders and will have the opportunity to make a
statement if so desired.

INFORMATION INCORPORATED BY REFERENCE

The Company's Annual Report on Form 10-K for the year ended December 31,
1996, as amended, its Quarterly Report on Form 10-Q for the quarter ended March
31, 1997, and its Current Reports on Form 8-K dated January 3, 1997, January 21,
1997, February 28, 1997 and May 30, 1997 as filed by the Company with the
Commission (Commission File No. 0-23830), are incorporated by reference into
this Proxy Statement.

All documents filed by the Company pursuant to sections 13(a), 13(c), 14 or
15(d) or the Exchange Act after the date of this Proxy Statement and prior to
the date of the Special Meeting shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Copies
of the documents (without exhibits) incorporated by reference in this Proxy
Statement are available without charge upon written or oral request from David
E. Hill, Chief Financial Officer, Crop Growers Corporation, 10895 Lowell Avenue,
Suite 300, Overland Park, Kansas 66210 (telephone (913) 338-7800).

46
<PAGE>
AVAILABLE INFORMATION

The Company is subject to the informational reporting requirements of the
Exchange Act and, in accordance therewith, files reports, proxy statements and
other information with the Commission. Such reports, proxy statements and other
information can be inspected and copies made at the public reference facilities
of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549
and the Commission's regional offices at Seven World Trade Center, Suite 1300,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such material can also be obtained from
the Public Reference Section of Commission at its Washington, D.C. address at
prescribed rates. The Commission also maintains a Web site address,
http://www.sec.gov., which contains reports, proxy statements and other
information regarding registrants that file electronically with the Commission.
The Company's Common Stock is listed and traded on the Nasdaq National Market,
and such reports, proxy statements and other information may be inspected at the
offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.

ADDITIONAL INFORMATION

This Proxy Statement contains information disclosed pursuant to Rule 13e-3
under the Exchange Act, which governs so-called "going private" transactions by
certain issuers and their affiliates. At the time the Company and Fireman's Fund
entered into the March 5 Agreement, Fireman's Fund owned 10,000 shares of the
Company's Preferred Stock, which, on an as converted basis, represented 8.6% of
the combined voting power of the Company's Common Stock and Preferred Stock. At
such time, Fireman's Fund had the right to acquire from Messrs. Hemmingson and
Black 1,827,477 shares of Common Stock, which, together with the Preferred
Stock, represented 29.6% of such combined voting power, but the exercise of such
right was subject to the Company's consent. Although neither the Company nor
Fireman's Fund believes that Fireman's Fund or the Merger Subsidiary was then an
"affiliate" of the Company within the meaning of Rule 13e-3(a)(1) of the
Exchange Act, Fireman's Fund, the Merger Subsidiary and the Company are filing a
Rule 13e-3 Transaction Statement ("Schedule 13E-3") with the Commission to
furnish information with respect to the transactions described herein. This
Proxy Statement does not contain all of the information set forth in the
Schedule 13E-3, parts of which are omitted in accordance with the regulations of
the Commission. The Schedule 13E-3, and any amendments thereto, including
exhibits filed as part thereof, will be available for inspection and copying at
the offices of the Commission as set forth above.

By Order of the Board of Directors

David E. Hill

SECRETARY

Overland Park, Kansas

July 21, 1997

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<PAGE>
EXHIBIT A

AGREEMENT AND PLAN OF MERGER

This Agreement and Plan of Merger (this "AGREEMENT") dated May 1, 1997 is
entered into among CROP GROWERS CORPORATION, a Delaware corporation (the
"COMPANY"), FIREMAN'S FUND INSURANCE COMPANY, a California corporation (the
"BUYER"), and CG ACQUISITIONS CORP., a Delaware corporation and direct
subsidiary of the Buyer (the "BUYER SUBSIDIARY").

The Company and the Buyer entered into a binding acquisition agreement dated
March 5, 1997 (the "ACQUISITION AGREEMENT") pursuant to which the parties agreed
that an affiliate of the Buyer would merge into the Company, with the Company
being the surviving corporation, in which (i) the common stockholders of the
Company will be entitled to receive cash in the amount of $10.25 per share upon
surrender of the relevant stock certificate following the closing, (ii) the
holders of options to acquire common stock of the Company will receive a cash
settlement equal to the spread (if any) represented by each option, based on
such price per share, and (iii) the Buyer or an affiliate of the Buyer will
become the holder of all the outstanding common stock and rights to acquire
common stock of the Company.

The Acquisition Agreement contemplates that Implementation Agreements (as
defined therein) will be entered into to carry out the acquisition contemplated
thereby. This Agreement is such an Implementation Agreement.

The Company's outstanding capital stock consists of two classes: (i) common
stock, par value $0.01 per share (the "COMMON STOCK"), and (ii) Series A
Convertible Preferred Stock, par value $0.01 per share (the "PREFERRED STOCK").

The Buyer Subsidiary's outstanding capital stock consists of common stock,
$1.00 per share (the "BUYER SUBSIDIARY COMMON STOCK").

NOW, THEREFORE, the parties hereby agree as follows:

SECTION 1. THE MERGER

1.1 THE MERGER. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 1.3 hereof), the Buyer Subsidiary
shall be merged with and into the Company in accordance with this Agreement and
the separate corporate existence of the Buyer Subsidiary shall thereupon cease
(the "MERGER"). The Company shall be the surviving corporation in the Merger
(sometimes hereinafter referred to as the "SURVIVING CORPORATION"). The Merger
shall have the effects specified in Section 259 of the Delaware General
Corporation Law (the "DGCL").

1.2 THE CLOSING. Subject to the terms and conditions of this Agreement,
the consummation of the Merger (the "CLOSING") shall take place within 5
business days after the satisfaction or waiver (the party or parities entitled
to waive) all conditions to Closing set forth in this Agreement. The date on
which the Closing occurs is herein called the "CLOSING DATE."

1.3 EFFECTIVE TIME. If all the conditions to the Merger set forth in
Sections 12 and 13 shall have been fulfilled or waived in accordance herewith
and this Agreement shall not have been terminated as provided in Section 14, the
parties hereto shall cause a Certificate of Merger satisfying the requirements
of the DGCL to be properly executed, verified and delivered for filing in
accordance with the DGCL on the Closing Date. The Merger shall become effective
upon the acceptance for record of the Certificates of Merger by the Secretary of
State of Delaware in accordance with the DGCL (the "EFFECTIVE TIME").

SECTION 2. THE SURVIVING CORPORATION

2.1 ARTICLES OF INCORPORATION. The Certificate of Incorporation of the
Company shall be the Certificate of Incorporation of the Surviving Corporation.

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2.2 BYLAWS. The Bylaws of the Company shall be the Bylaws of the Surviving
Corporation.

2.3 BOARD OF DIRECTORS. The Board of Directors of the Surviving Company
will consist of individuals designated by the Buyer on or before the Effective
Time.

2.4 OFFICERS. The officers of the Surviving Company will consist of
individuals designated by the Buyer on or before the Effective Time.

SECTION 3. CONVERSION OF SECURITIES

3.1 CAPITAL STOCK. As of the Effective Time, by virtue of the Merger and
without any action on the part of the holders of any shares of capital stock of
the Company:

(a) BUYER SUBSIDIARY CAPITAL STOCK. Each issued and outstanding share
of Buyer Subsidiary Common Stock shall be converted into and become one fully
paid and nonassessable share of common stock, $0.01 par value per share of the
Surviving Corporation.

(b) COMPANY CAPITAL STOCK.

(i) COMMON STOCK. Each issued and outstanding Share (a "SHARE") of
the Common Stock (other than any Shares which are held by stockholders
exercising appraisal rights pursuant to Section 262 of the DGCL (the "DISSENTING
STOCKHOLDERS") and other than any Shares held by the Buyer or the Buyer's
designee) shall be converted into the right to receive $10.25 in cash, payable
to the holder thereof, without interest (the "MERGER CONSIDERATION"), upon
surrender of the certificate formerly representing such Share in the manner
provided in Section 3.2. All such Shares, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such Shares shall cease
to have any rights with respect thereto, except the right to receive the Merger
Consideration therefor upon surrender of such certificate in accordance with
Section 3.2, without interest, or, in the case of Dissenting Stockholders, the
right, if any, to receive payment from the Surviving Corporation of the "fair
value" of such Shares as determined in accordance with Section 262 of the DGCL.

(ii) COMMON STOCK HELD BY THE BUYER. All Shares of Common Stock
held by the Buyer or the Buyer's designee shall be canceled.

(iii) PREFERRED STOCK. Each issued and outstanding share of the
Preferred Stock shall continue as an identical share of preferred stock of the
Surviving Corporation.

(c) CANCELLATION OF TREASURY STOCK. All Shares that are owned by the
Company shall be canceled and retired and shall cease to exist and no
consideration shall be delivered in exchange therefor.

3.2 SURRENDER OF CERTIFICATES.

(a) PAYING AGENT. Prior to the Effective Time, the Buyer shall
designate a bank or trust company to act as agent for the holders of the Shares
in connection with the Merger (the "PAYING AGENT") to receive the funds to which
the holders of the Shares shall become entitled pursuant to Section 3.1(b)(i).
The Buyer shall pay the Merger Consideration under Section 3.1(b)(i) to the
Paying Agent on or before the date on which the Effective Time occurs. All
interest earned on such funds shall be paid the Surviving Corporation.

(b) SURRENDER PROCEDURES. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail each holder of record of a
certificate or certificates, which immediately prior to the Effective Time
represented outstanding Shares (the "CERTIFICATES"), whose shares were converted
pursuant to Section 3.1(b)(i) into the right to receive the Merger Consideration
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Paying Agent and shall be in such form and
have such other provisions as

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the Buyer and the Company may reasonably specify) and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for payment of the
Merger Consideration. Upon surrender of a Certificate for cancellation to the
Paying Agent or to such other agent or agents as may by appointed by the Buyer,
together with such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor the Merger
Consideration for each Share formerly represented by such Certificate and the
Certificate so surrendered shall forthwith be canceled. If payment of the Merger
Consideration is to be made to a person other than the person in whose name the
surrendered Certificate is registered, it shall be a condition of payment that
the Certificate so surrendered shall be properly endorsed or shall be otherwise
in proper form for transfer and that the person requested in such payment shall
have paid any transfer and other taxes required by reason of the payment of the
Merger Consideration to a person other than the registered holder of the
Certificate surrendered or shall have established to the satisfaction of the
Surviving Corporation that such tax either has been paid or is not applicable.
Until surrendered as contemplated by this Section 3.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration as contemplated by this Section 3.2. The right
of any holder of Shares to receive the Merger Consideration shall be subject to
and reduced by any applicable withholding obligation.

(c) TRANSFER BOOKS; NO FURTHER OWNERSHIP RIGHTS IN THE SHARES. At the
Effective Time, the stock transfer books of the Company shall be closed and
thereafter there shall be no further registration of transfers of the Shares on
the records of the Company. From and after the Effective Time, the holders of
Certificates evidencing ownership of the Shares outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such Shares,
except as otherwise provided for herein or by applicable law.

(d) TERMINATION OF FUND; NO LIABILITY. At any time following six
months after the Effective Time, the Surviving Corporation shall be entitled to
require the Paying Agent to deliver to it any funds (including any interest
received with respect thereto) which had been made available to the Paying Agent
and which have not been disbursed to holders of Certificates, and thereafter
such holders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general creditors
thereof with respect to the Merger Consideration payable upon due surrender of
their Certificates, without any interest thereon. In no event shall the Buyer,
the Surviving Corporation or the Paying Agent shall be liable to any holder of a
Certificate for Merger Consideration delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.

(e) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the registered holder thereof or such holder's duly
authorized attorney-in-fact, the Surviving Company may pay, or authorize the
Paying Agent to pay, the Merger Consideration with respect thereto, subject to
Section 3.2(d) if applicable, PROVIDED, HOWEVER, that the Board of Directors of
the Surviving Company may, it its discretion and as a condition precedent to the
payment thereof, require the registered holder(s) and/or beneficial owner(s) of
such Certificate to give the Surviving Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Surviving
Corporation, the Company, the Buyer or the Buyer Subsidiary with respect to the
Certificate alleged to have been lost, stolen or destroyed.

3.3 DISSENTER'S RIGHTS. If any Dissenting Stockholder shall be entitled to
be paid the "fair value" of such holder's Shares, as provided in Section 262 of
the DGCL, the Company shall give the Buyer and Buyer Subsidiary notice thereof
and the Buyer and Buyer Subsidiary shall have the right to participate in all
negotiations and proceedings with respect to any such demands. The Surviving
Corporation shall not, except with the prior written consent of the Buyer or the
Buyer Subsidiary, voluntarily make any payment with respect to, or settle or
offer to settle, any such demand for payment. If any Dissenting Stockholder
shall fail to perfect or shall have effectively withdrawn or lost the right to
dissent, the Shares held by such Dissenting Stockholder shall thereupon be
treated as though such Shares had been converted into the right to receive the
Merger Consideration pursuant to Section 3.1(b)(i).

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3.4 COMPANY STOCK PLANS. On the Effective Time, (i) cause each outstanding
stock option (the "OPTIONS") to purchase Shares granted under the Company's
option arrangements set forth in Section 8(b) of the Company's disclosure
schedule delivered concurrently with the Acquisition Agreement (the "DISCLOSURE
SCHEDULE"), whether or not then exercisable or vested, will become fully
exercisable and vested. The Company will cause each Option that is then
outstanding to be canceled as of the Effective Time. In consideration of such
cancellation, and except that the Buyer or the Buyer Subsidiary and the holder
of any such Option otherwise agree, the Buyer will cause the Company (or, at the
Buyer's option, the Buyer Subsidiary) to pay such holders of Options an amount
in respect thereof equal to the product of (A) the excess, if any, of the Merger
Consideration over the exercise price of each such Option and (B) the number of
Shares previously subject to the Option immediately prior to its cancellation
(such payment to be net of withholding taxes).

SECTION 4. NO SOLICITATION, ETC.

(a) Until the earlier of the termination of this Agreement pursuant to its
terms or the Effective Time, neither the Company nor any of its subsidiaries nor
any representative of the Company or any of its subsidiaries shall, directly or
indirectly, take any action to (i) encourage, solicit or initiate the submission
of any Acquisition Proposal, (ii) enter into any agreement for or relating to a
Third Party Transaction, or (iii) participate in any way in discussions or
negotiations with, or furnish any non-public information to, any Person in
connection with any Acquisition Proposal. Notwithstanding any other provision of
this Section 4(a), the Company may, in response to an unsolicited BONA FIDE
offer or proposal made by a third party to it, provide information to or have
discussions or negotiations with such third party; PROVIDED, HOWEVER, that if
such offer or proposal is received after March 28, 1997, the Board of Directors
must first make a determination in good faith, after hearing advice of its
outside counsel, that such action is necessary in order for the Board of
Directors to comply with its fiduciary duties under applicable law. The Company
will immediately communicate to the Buyer the receipt of any third party
solicitation, proposal or BONA FIDE inquiry that the Company, any of its
subsidiaries or any representative of the Company or any of its subsidiaries may
receive in respect of any such transaction, or of any request for such
information, including in each case a copy thereof and all other particulars
thereof.

(b) "ACQUISITION PROPOSAL" means any proposed Acquisition Transaction.
"ACQUISITION TRANSACTION" means any (i) merger, consolidation or similar
transaction involving the Company, (ii) sale, lease or other disposition
directly or indirectly by merger, consolidation, share exchange or otherwise of
any assets of the Company or its subsidiaries representing 15% or more of the
consolidated assets of the Company and its subsidiaries, (iii) issue, sale or
other disposition of (including by way of merger, consolidation, share exchange
or any similar transaction) securities (or options, rights or warrants to
purchase, or securities convertible into, such securities) representing 15% or
more of the votes attached to the outstanding securities of the Company, (iv)
transaction in which any person shall acquire Beneficial Ownership or the right
to acquire Beneficial Ownership, or any Group shall have been formed which has
Beneficial Ownership or has the right to acquire Beneficial Ownership, of 15% or
more of the outstanding shares of common stock of the Company, (v)
recapitalization, restructuring, liquidation, dissolution or other similar type
of transaction with respect to the Company or any of its subsidiaries, or (vi)
transaction which is similar in form, substance or purpose to any of the
foregoing transactions. "THIRD PARTY TRANSACTION" shall mean an Acquisition
Transaction with a party unrelated to the Buyer. "BENEFICIAL OWNERSHIP" and
"GROUP" shall have the meanings stated in Regulation 13D-G under the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT").

(c) The Company will use its best efforts to take all action necessary in
accordance with applicable law and its certificate of incorporation and bylaws
to convene a meeting of its stockholders as promptly as practicable to consider
and vote upon the approval of the Merger. The Board of Directors of the Company
shall recommend and declare advisable to its stockholders such approval and the
Company shall take all lawful action to solicit, and use all best efforts to
obtain, approval of its stockholders, and neither the

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Board of Directors of the Company nor any committee of such Board of Directors
shall (i) withdraw or modify the approval or recommendation by such Board of
Directors or such committee of the Merger, (ii) approve or recommend any
Acquisition Proposal other than the Merger, or (iii) cause the Company to enter
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement with respect to any Acquisition Proposal other than the
Merger. Notwithstanding the foregoing, the Board of Directors of the Company may
withdraw or modify its approval or recommendation of the Merger, approve or
recommend a Superior Proposal or terminate this Agreement, but in each case only
concurrently with the payment of the amount required by Section 14(d) or 14(e),
as applicable, and after a determination in good faith, after hearing advice of
its outside counsel, that such action is necessary in order for the Board of
Directors to comply with its fiduciary duties to stockholders under applicable
law. A "SUPERIOR PROPOSAL" means any bona fide Acquisition Proposal, the terms
of which the Board of Directors of the Company determines in its good faith
judgment (after hearing the advice of a financial advisor of nationally
recognized reputation) to be more favorable to the Company's stockholders than
the Merger.

SECTION 5. ACCESS

The Company shall (and shall cause each of its subsidiaries to) afford to
the Buyer and its agents and representatives full access during normal business
hours throughout the period prior to the Effective Time to all of its
properties, books, contracts, commitments and records and during such period
shall (and shall cause each of its subsidiaries to) furnish promptly to such
parties (i) a copy of each report, schedule and other document filed or received
by it pursuant to the requirements of federal or state securities or insurance
laws and (ii) all other information concerning its business, properties and
personnel as such party may reasonably request, including any financial and
operating data. Any such access shall commence forthwith, and shall be conducted
in such a manner so as not to interfere unreasonably with the business or
operations of the Company. The Buyer shall maintain the confidentiality of any
nonpublic information received by it or its representatives pursuant to this
Section 5.

SECTION 6. CONSENTS

The parties hereto will use their respective reasonable best efforts to (i)
obtain all material consents, authorizations, orders and approvals of or from
private parties or Government Entities, required, proper or advisable in
connection with this Agreement and the Merger and (ii) resolve any action, suit,
proceeding or investigation which shall have been instituted or which a
Government Entity shall have indicated its intention to institute which
jeopardizes the Merger; PROVIDED, HOWEVER, that no party hereto shall be
obligated to take any such action which, in the reasonable opinion of such party
(following consultation with its counsel), would (x) have a material adverse
effect on the assets, properties, liabilities, obligations, financial
conditions, results of operations or business (a "MATERIAL ADVERSE EFFECT") of
such party and its subsidiaries taken as a whole or (y) have a Material Adverse
Effect or materially restrict or impair the effective ownership, operation or
control of the Company by the Buyer following the consummation of the Merger.
"GOVERNMENTAL ENTITY" means any federal, state or local governmental or
regulatory agency, authority or instrumentality, whether domestic or foreign.

SECTION 7. ANNOUNCEMENTS

The parties hereto will consult and cooperate with each other and agree upon
the terms and substance of all press releases, announcements and public
statements with respect to this Agreement and the Merger, PROVIDED, HOWEVER,
that such consultation and cooperation shall not interfere with any obligation
of either party hereto to disclose any information as required by applicable
law. Any press release or other announcement by any party with respect to the
Merger will be subject to the consent and approval of the other party, which
consent or approval will not be unreasonably withheld.

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SECTION 8. INTERIM OPERATIONS

Except as set forth on the Disclosure Schedule, or expressly required or
permitted by this Agreement, from and after the date hereof until the earlier of
(i) the Effective Time or (ii) the termination of this Agreement pursuant to its
terms, the Company will and will cause its subsidiaries to (w), except as
otherwise agreed to by the Buyer orally or in writing, operate its businesses in
the ordinary course of business, (x) not take any action or fail to take any
action which would or could reasonably be expected to jeopardize any of its
material contracts or its good standing with all applicable Departments of
Insurance and similar regulatory agencies with jurisdiction over the Company,
(y) not take any extraordinary action or fail to take any action, the failure of
which to be taken would be an extraordinary action, and (z) not declare, set
aside or pay any dividend (other than stated dividends on the Preferred Stock)
or other distribution in respect of its capital stock, whether in stock, cash,
indebtedness or other Property, redeem, repurchase or otherwise acquire any of
its outstanding capital stock, whether for stock, cash, indebtedness or
Property, or issue any capital stock or any right to acquire, convert into or
exchange for capital stock except pursuant to stock options outstanding on March
5, 1997. The Company agrees that, in the event it adopts a "rights plan,"
"poison pill" or similar plan or arrangement, it will include a provision
expressly exempting the Buyer from the operation thereof.

SECTION 9. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to the Buyer and the Buyer
Subsidiary that, as of the date of this Agreement:

(a) ORGANIZATION AND QUALIFICATIONS. The Company and each subsidiary
of the Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority, and all governmental permits, approvals
and other authorizations, necessary to own, lease and operate its Properties and
to carry on its business as it is now being conducted, except for such
exceptions as would not, individually or in the aggregate, have a Material
Adverse Effect on the Company and its subsidiaries taken as a whole (a "COMPANY
MATERIAL ADVERSE EFFECT").

(b) CAPITALIZATION. The authorized capital stock of the Company is as
set forth on the Disclosure Schedule. Except as set forth thereon, no shares of
capital stock or other voting securities of the Company are issued, reserved for
issuance or outstanding. Except as set forth above and except as contemplated
herein, there are no options or agreements relating to the issued or unissued
capital stock of the Company or any subsidiary of the Company, or obligating the
Company or any subsidiary to issue, transfer, grant or sell any shares of
capital stock of, or other equity interests in, or securities convertible into
or exchangeable for any capital stock or other equity interests in, the Company
or any subsidiary. There are no outstanding contractual obligations of the
Company or any subsidiary to repurchase, redeem or otherwise acquire any shares
of capital stock of the Company or any subsidiary. Attached hereto as Exhibit 1
is a complete and accurate list of each holder of an option to acquire Shares,
showing the number of shares and exercise price under each option.

(c) AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and, subject to adoption of this Agreement
by the stockholders of the Company as contemplated hereby (the "STOCKHOLDER
APPROVAL"), to consummate the Merger. The execution and delivery of this
Agreement by the Company and the consummation by it of the Merger have been duly
and validly authorized by all necessary corporate action and no other corporate
proceedings on the part of the Company is necessary to authorize this Agreement
or to consummate the Merger (other than the Stockholder Approval). This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery hereof by each other
party hereto, constitutes the legal, valid and binding obligation of the
Company, enforceable against it in accordance with its terms, except as
enforcement may be limited

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by bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights generally and by equitable principles.

(d) NO CONFLICT; REQUIRED FILINGS AND CONSENTS.

(i) The execution and delivery of this Agreement by the Company does
not, and the performance of its obligations hereunder and the
consummation of the Merger by it will not, (A) conflict with or violate
the certificate of incorporation or bylaws of the Company or any of its
subsidiaries, (B) subject to the making of the filings and obtaining the
approvals identified in Section 9(d)(ii), conflict with or violate any
law, rule, regulation, order, judgment or decree (collectively, "LAWS")
applicable to the Company or any of its subsidiaries or by which any
Property or asset of the Company or any of its subsidiaries is bound or
affected, or (C) except as disclosed in the Disclosure Schedule, conflict
with, result in any breach of, constitute a default (or an event which
with notice or lapse of time or both would become a default) under,
result in a loss or modification adverse to the Company or its
subsidiaries of any right or benefit under, give to others any right of
termination, amendment, acceleration, repurchase, repayment, increased
payments or cancellation of, or result in the creation of a lien or other
encumbrance on any Property or asset of the Company or any subsidiary
pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation,
whether written or oral (collectively, a "CONTRACT"), to which the
Company or any subsidiary is a party or by which the Company or any
subsidiary or any Property or asset of the Company or any subsidiary is
bound or affected, except, in the case of clauses (B) and (C), for any
such conflicts, violations or other consequences which would not,
individually or in the aggregate, prevent or delay in any material
respect the consummation of the Merger or prevent the Company from
performing its obligations under this Agreement in any material respect
and which, in any case, would not, individually or in the aggregate, have
a Company Material Adverse Effect.

(ii) The execution and delivery of this Agreement by the Company does
not, and the performance of its obligations hereunder and the
consummation of the Merger by it will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any
Government Entity for or by any party, except (A) for applicable
requirements of (l) the Exchange Act (in the case of the Company only)
and the filing, of a certificate of merger under the DGCL, (2), to the
knowledge of the Company on the date hereof, the state insurance holding
company laws of the states previously agreed by the parties (in the case
of the Buyer only) and (3) the Hart-Scott-Rodino Antitrust Improvement
Act (the "HSR ACT") and (B) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or
notifications, would not, individually or in the aggregate, prevent or
delay in any material respect consummation of the Merger, or otherwise
prevent the Company from performing its obligations hereunder in any
material respect, and would not, individually or in the aggregate, have a
Company Material Adverse Effect.

(e) SECURITIES REPORTS AND FINANCIAL STATEMENTS. Except as set forth
on the Disclosure Schedule, each form, report, schedule, registration statement
and definitive proxy statement filed by the Company with the Securities and
Exchange Commission ("SEC") since December 31, 1995 and prior to the date hereof
(as such documents have been amended prior to the date hereof, collectively the
"COMPANY SEC REPORTS"), as of their respective dates, complied in all material
respects with the applicable requirements of the Securities Act and the Exchange
Act and the rules and regulations thereunder. Except as set forth in the
Disclosure Schedule, none of the Company SEC Reports, as of their respective
dates, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except for such statements, if any, as have been modified or
superseded by subsequent Company SEC Reports filed prior to the date hereof. The
consolidated financial statements of the Company and its subsidiaries included
in such reports comply in all material respects with applicable

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accounting requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of the
unaided interim financial statements, as permitted by Form 10-Q of the SEC) and
fairly present (subject, in the case of the unaudited interim financial
statements, to normal year-end audit adjustments) the consolidated financial
position of the Company and its subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended. Except as set forth in the Disclosure Schedule, since December 31, 1996,
neither the Company nor any of its subsidiaries has incurred any liabilities or
obligations (whether absolute, accrued, fixed, contingent, liquidated,
unliquidated or otherwise and whether due or to become due) of any nature,
except liabilities, obligations or contingencies which (i) were incurred in the
ordinary course of business after such interim date and are consistent with past
practices, (ii) are disclosed in the Company SEC Reports filed after such date,
or (iii) would not, individually or in the aggregate, have a Company Material
Adverse Effect. Since December 31, 1996, there has been no change in any of the
significant accounting (including tax accounting) policies, practices or
procedures of the Company or any material subsidiary.

(f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as contemplated by
this Agreement, as disclosed in any Company SEC Report or as set forth in the
Disclosure Schedule, since December 31, 1996, (i) the Company and its
subsidiaries have conducted their respective businesses only in the ordinary
course, consistent with past practice, and have not taken any action that would
be inconsistent with the covenants set forth in Section 8 if they had applied
during such period, and (ii) there has not occurred or arisen any event that,
individually or in the aggregate, has had or, insofar as reasonably can be
foreseen, is likely in the future to have, a Company Material Adverse Effect
other than any developments that generally affect the industry in which the
Company operates.

SECTION 10. REPRESENTATIONS AND WARRANTIES OF THE BUYER

The Buyer hereby represents and warrants to the Company that, as of the date
of this Agreement:

(a) ORGANIZATION AND QUALIFICATIONS. The Buyer is a corporation duly
incorporated or organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has the requisite power and
authority and all governmental permits, approvals and other authorizations
necessary to own, lease and operate its Properties and to carry on its business
as it is now being conducted, except for such exceptions as would not,
individually or in the aggregate, have a Material Adverse Effect on the Buyer
and its subsidiaries, taken as a whole (a "BUYER MATERIAL ADVERSE EFFECT").

(b) AUTHORITY RELATIVE TO THIS AGREEMENT. The Buyer has all necessary
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the Merger. The execution and
delivery of this Agreement by the Buyer and the consummation by it of the Merger
have been duly and validly authorized by all necessary corporate action and no
other corporate proceedings on the part of the Buyer is necessary to authorize
this Agreement or to consummate the Merger. This Agreement has been duly and
validly executed and delivered by the Buyer and, assuming the due authorization,
execution and delivery thereof by the Company, constitutes the legal, valid and
binding obligation of the Buyer, except as enforcement may be limited by
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights generally and by equitable principles.

(i) The execution and delivery of this Agreement by the Buyer does
not, and the performance of its obligations hereunder and the
consummation of the Merger by it will not (A) conflict with or violate
the certificate of incorporation or bylaws of the Buyer, (B) subject to
the making of the filings and obtaining the approvals identified in
Section 10(c)(ii), conflict with or violate any Laws applicable to the
Buyer or by which any Property or asset of the Buyer is bound or
affected, or (C) conflict with or result in any breach of or constitute a
default (or an event which

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with notice or lapse of time or both would become a default) under,
result in the loss or modification in a manner materially adverse to the
Buyer of any material right or benefit under, or give to others any right
of termination, amendment, acceleration, repurchase or repayment,
increased payments or cancellation of, or result in the creation of a
lien or other encumbrance on any Property or asset of the Buyer pursuant
to, any Contract to which the Buyer is a party or by which the Buyer or
any Property or asset of the Buyer is bound or affected, except, in the
case of clauses (B) and (C), for any such conflicts or violations which
would not prevent or delay in any material respect the consummation of
the Merger, or otherwise, individually or in the aggregate, prevent the
Buyer from performing its obligations under this Agreement in any
material respect.

(ii) The execution and delivery of this Agreement by the Buyer does
not, and the performance of its obligations hereunder and the
consummation of the Merger by it will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any
Governmental Entity for or by the Buyer, except (A) for applicable
requirements of (1) the insurance company holding laws of certain states
and (2) the HSR Act, and (B) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or
notifications, would not, individually or in the aggregate, prevent or
delay in any material respect consummation of the Merger, or otherwise
prevent the Buyer from performing its obligations hereunder in any
material respect.

SECTION 11. REPRESENTATIONS AND WARRANTIES OF THE BUYER SUBSIDIARY

The Buyer Subsidiary hereby represents and warrants to the Company that, as
of the date of this Agreement:

(a) ORGANIZATION AND QUALIFICATIONS. The Buyer Subsidiary is a
corporation duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite power and authority and all governmental permits, approvals and other
authorizations necessary to own, lease and operate its Properties and to carry
on its business as it is now being conducted, except for such exceptions as
would not, individually or in the aggregate, have a Buyer Material Adverse
Effect.

(b) AUTHORITY RELATIVE TO THIS AGREEMENT. The Buyer Subsidiary has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the Merger. The execution
and delivery of this Agreement by the Buyer Subsidiary and the consummation by
it of the Merger have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of the Buyer
Subsidiary is necessary to authorize this Agreement or to consummate the Merger.
This Agreement has been duly and validly executed and delivered by the Buyer
Subsidiary and, assuming the due authorization, execution and delivery thereof
by the Company, constitutes the legal, valid and binding obligation of the Buyer
Subsidiary, except as enforcement may be limited by bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights generally and by
equitable principles.

(i) The execution and delivery of this Agreement by the Buyer
Subsidiary does not, and the performance of its obligations hereunder and
the consummation of the Merger by it will not (A) conflict with or
violate the certificate of incorporation or bylaws of the Buyer
Subsidiary, (B) subject to the making of the filings and obtaining the
approvals identified in Section 11(c)(ii), conflict with or violate any
Laws applicable to the Buyer Subsidiary or by which any Property or asset
of the Buyer Subsidiary is bound or affected, or (C) conflict with or
result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, result in
the loss or modification in a manner materially adverse to the Buyer
Subsidiary of any material right or benefit under, or give to others any
right of termination,

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amendment, acceleration, repurchase or repayment, increased payments or
cancellation of, or result in the creation of a lien or other encumbrance
on any Property or asset of the Buyer Subsidiary pursuant to, any
Contract to which the Buyer Subsidiary is a party or by which the Buyer
Subsidiary or any Property or asset of the Buyer Subsidiary is bound or
affected, except, in the case of clauses (B) and (C), for any such
conflicts or violations which would not prevent or delay in any material
respect the consummation of the Merger, or otherwise, individually or in
the aggregate, prevent the Buyer Subsidiary from performing its
obligations under this Agreement in any material respect.

(ii) The execution and delivery of this Agreement by the Buyer
Subsidiary does not, and the performance of its obligations hereunder and
the consummation of the Merger by it will not, require any consent,
approval, authorization or permit of, or filing with or notification to,
any Governmental Entity for or by the Buyer Subsidiary, except (A) for
applicable requirements of (1) the insurance company holding laws of
certain states and (2) the HSR Act, and (B) where the failure to obtain
such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not, individually or in the aggregate,
prevent or delay in any material respect consummation of the Merger, or
otherwise prevent the Buyer Subsidiary from performing its obligations
hereunder in any material respect.

SECTION 12. CONDITIONS TO THE COMPANY'S OBLIGATIONS

The obligation of the Company to consummate the Merger is subject to the
satisfaction of each of the following conditions:

(a) All waivers, consents, authorizations, orders, approvals or
expiration of waiting periods required under any Law or Contract to be
obtained by the Company in order to consummate the Merger shall have been
obtained, except where the failure to have obtained any such waiver,
consent, authorization, order or approval would not have a Company Material
Adverse Effect.

(b) The representations and warranties of the Buyer and the Buyer
Subsidiary set forth herein shall be true and correct in all respects as of
the date hereof, and as of the time the Merger is consummated, other than,
in all such cases, such failures to be true and/or correct as would not in
the aggregate reasonably be expected to have a Buyer Material Adverse
Effect; PROVIDED, HOWEVER, that if any of the representations and warranties
are already qualified in any respect by materiality or as to a Buyer
Material Adverse Effect, for purposes of this Section 12(b) such materiality
or Buyer Material Adverse Effect qualification will be in all respects
ignored (but subject to the overall standard as to Buyer Material Adverse
Effect set forth immediately prior to this proviso); and the Buyer and the
Buyer Subsidiary shall have complied in all material respects with all
covenants and agreements set forth herein to be performed by it.

(c) No injunction, restraining order or other order of any federal or
state court which prevents the consummation of the Merger shall be in
effect.

(d) No statute, rule or regulation shall have been enacted by any state
or governmental agency that would prevent the consummation of the Merger.

(e) The Stockholder Approval shall have been obtained.

SECTION 13. CONDITIONS TO THE BUYER'S AND THE BUYER SUBSIDIARY'S OBLIGATIONS

The respective obligations of the Buyer and the Buyer Subsidiary to
consummate the Merger are subject to the satisfaction of each of the following
conditions:

(a) All waivers, consents, authorizations, orders, approvals or
expiration of waiting periods required under any Law or Contract to be
obtained by any of the parties hereto in order to

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consummate the Merger shall have been obtained, except where the failure to
have obtained any waiver, consent, authorization, order or approval would
not have a Company Material Adverse Effect or a Buyer Material Adverse
Effect.

(b) The representations and warranties of the Company set forth herein
shall be true and correct in all respects as of the date hereof, and as of
the time the Merger is consummated, other than, in all such cases, such
failures to be true and/or correct as would not in the aggregate reasonably
be expected to have a Company Material Adverse Effect; PROVIDED, HOWEVER,
that if any of the representations and warranties is already qualified in
any respect by materiality or as to a Company Material Adverse Effect, for
purposes of this Section 13(b) such materiality or Company Material Adverse
Effect qualification will be in all respects ignored (but subject to the
overall standard as to Material Adverse Effect set forth immediately prior
to this proviso); and the Company shall have complied in all material
respects with all covenants and agreements set forth herein to be performed
by it.

(c) No injunction, restraining order or other order of any federal or
state court which prevents the consummation of the Merger shall be in
effect.

(d) No statute, rule or regulation shall have been enacted by any state
or governmental agency that would prevent the consummation of the Merger.

(e) Except as set forth in the Disclosure Schedule, no Company Material
Adverse Effect shall have occurred between March 5, 1997 and the Effective
Time other than any developments that generally affect the industry in which
the Company operates.

(f) The Stockholder Approval shall have been obtained.

SECTION 14. TERMINATION

This Agreement shall terminate at the earlier of:

(a) Such time as the parties shall mutually agree.

(b) At the option of the Company, on or after December 31, 1997, if by
that date all of the conditions set forth in Section 12 shall not have been
satisfied or waived.

(c) At the option of the Buyer or the Buyer Subsidiary, on or after
December 31, 1997, if by that date all of the conditions set forth in
Section 13 shall not have been satisfied or waived.

(d) At the option of the Company in accordance with Section 4(c),
provided the Company has complied with all provisions thereof, and provided
further that the Company simultaneously pays to the Buyer the sum of $2.4
million plus the Buyer's out-of-pocket costs (including, without limitation,
outside legal fees and expenses) and internal legal costs as the Buyer shall
reasonably determine (collectively, the "TERMINATION FEE AMOUNT") in
immediately available funds.

(e) At the option of the Buyer, if (i) the Board of Directors of the
Company or any committee of such Board of Directors shall have (A) withdrawn
or modified its approval or recommendation of this Agreement (or the
Acquisition Agreement) or the Merger, or (B) failed to recommend that the
stockholders of the Company vote in favor of the Merger, or (C) approved or
recommended any Acquisition Proposal other than the Merger, or (ii) the
Board of Directors of the Company or any committee of such Board of
Directors shall have resolved to do any of the foregoing. The Company shall
promptly following termination for any of the reasons set forth in this
clause (e) pay to the Buyer the Termination Fee Amount in immediately
available funds.

(f) At the option of any of the parties hereto if the stockholders of
the Company do not approve the Merger.

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In the event this Agreement is terminated pursuant to Section 14(f) because the
Company stockholders did not approve the Merger and prior to 18 months following
such termination the Company enters into a binding agreement for a Third Party
Transaction, the Company shall pay to the Buyer the Termination Fee Amount in
immediately available funds simultaneously with its entry into such binding
agreement.

SECTION 15. RECORD DATE

The Company agrees that the record date for determining stockholders
entitled to vote on (or give consents or exercise appraisal rights with respect
to) the Merger or any Third Party Transaction will be no earlier than 10
business days after the Buyer's receipt of all required approvals under the
insurance holding company laws of states with applicable jurisdiction, and the
expiration of the applicable waiting period under the HSR Act, with respect to
the Buyer's purchase of 1,145,703 shares of Company common stock from John J.
Hemmingson and 681,774 shares of Company common stock from Gary A. Black,
provided that, in the case of a Third Party Transaction, this Section 15 shall
not require the Company to set a record date later than December 31, 1997. This
Section 15 shall continue in effect (with respect to any Third Party
Transaction) notwithstanding any termination of this Agreement in accordance
with its terms or otherwise

SECTION 16. MISCELLANEOUS

(a) AMENDMENTS AND WAIVERS. This Agreement may not be modified or
amended except by an instrument or instruments in writing signed by the party
against whom enforcement of any such modification or amendment is sought. Any
party hereto may, in its sole election, solely as to itself and not as to any
other party hereto, only by an instrument in writing, waive compliance by
another party hereto with any term or provision hereof on the part of such other
party hereto to be performed or complied with. The waiver by any party hereto of
a breach of any term or provision hereof shall not be construed as a waiver of
any subsequent breach.

(b) ENTIRE AGREEMENT. This Agreement, the Consent Agreement dated
March 5, 1997 and the Business Loan Agreement dated as of March 31, 1997 each
between the Company and the Buyer, contain the entire agreement between the
parties hereto with respect to the transactions contemplated hereby and thereby.
This Agreement supersedes the Acquisition Agreement, except for the Disclosure
Schedule, which is incorporated into this Agreement. This Agreement is not
intended to confer upon any other person any rights or remedies hereunder.

(c) APPLICABLE LAW. This Agreement shall be exclusively governed by
and construed in accordance with the internal laws of the State of Delaware
without regard to its rules of conflicts of laws.

(d) EXPENSES. Except as otherwise included herein, in the event the
Merger contemplated hereby is not consummated for any reason, then all expenses
incurred by each party will be borne by the party incurring such expenses.

(e) DESCRIPTIVE HEADINGS, SECTION REFERENCES, DATE. The descriptive
headings contained herein are for convenient reference only and shall not affect
in any way the meaning or interpretation of this Agreement. Reference herein to
Sections refer, unless otherwise specified, to the designated Section of this
Agreement. The date of this Agreement is for identification only and is not
necessarily the date on which it was entered into.

(f) COUNTERPARTS. This Agreement and any amendments hereto may be
executed in any number of counterparts, each of which shall be deemed to be an
original but all of which together shall constitute but one agreement.

(g) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors. This
Agreement may not be assigned by any party without prior consent of all parties
hereto, provided that any party hereto may assign its rights and

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obligations hereunder to any affiliate to implement the Merger, provided that
such affiliate agrees to be bound hereby, provided that such party remains
liable hereunder, and that such assignment does not adversely effect the Merger
from the perspective of the other parties.

(h) BINDING EFFECT. This Agreement shall, subject to the terms and
conditions hereof, be in all respects binding upon each of the Company and the
Buyer from and after the date hereof.

(i) SURVIVAL. None of the representations or warranties set forth in
Sections 9, 10 or 11 shall survive the consummation of the Merger.

(j) INDEMNIFICATION; INSURANCE. Following the Effective Time, the
Surviving Corporation will maintain in effect all rights to indemnification
existing in favor of any director, officer, employee or agent of the Company and
its subsidiaries (the "INDEMNIFIED PARTIES") as provided in its certificate of
incorporation, by-laws or in indemnification agreements with the Company or any
of its subsidiaries, all of which shall survive the consummation of the Merger
and shall continue in full force and effect for a period of not less than four
years from the Effective Time; PROVIDED, HOWEVER, that in the event any claim or
claims are asserted or made within such four-year period, all rights to
indemnification in respect of any such claim or claims shall continue until
final disposition of any and all such claims. It is understood and agreed that
the Surviving Corporation shall advance, indemnify, and hold harmless, as and to
the full extent permitted by applicable law, each Indemnified Party against any
losses, claims, damages liabilities, costs, expenses (including attorneys' fees
and expenses), judgments, fines and amounts paid in settlement in connection
with any threatened or actual claim, action, suit, proceeding or investigation
(whether asserted or arising before or after the Effective Time). In addition,
the Surviving Corporation shall cause to be maintained in effect for not less
than four years from the Effective Time any current policies of the directors'
and officers' liability insurance maintained by the Surviving Corporation;
PROVIDED, HOWEVER, that the Surviving Corporation will be permitted to
substitute therefor policies, issued by the Buyer or other insurers, of at least
the same coverage containing terms and conditions which are no less advantageous
and provided that such substitution shall not result in any gaps or lapses in
coverage with respect to matters occurring prior to the Effective Time;
PROVIDED, FURTHER, that the Surviving Corporation shall not be required to pay
an annual premium in excess of 200% of the last annual premium paid by the
Surviving Corporation prior to March 5, 1997 and if it is unable to obtain the
insurance required, it shall obtain as much comparable insurance as possible for
an annual premium equal to such maximum amount

SECTION 17. GLOSSARY

As used in this Agreement, the following terms have the meaning indicated:

ACQUISITION AGREEMENT--introductory paragraphs.

ACQUISITION PROPOSAL--Section 4(b).

ACQUISITION TRANSACTION--Section 4(b).

AGREEMENT--introductory paragraphs.

BENEFICIAL OWNERSHIP--Section 4(b).

BUYER--introductory paragraphs.

BUYER MATERIAL ADVERSE EFFECT--Section 10(a).

BUYER SUBSIDIARY--introductory paragraphs.

BUYER SUBSIDIARY COMMON STOCK--introductory paragraphs.

CERTIFICATES--Section 3.2(b).

CLOSING--Section 1.2.

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CLOSING DATE--Section 1.2.

COMMON STOCK--introductory paragraphs.

COMPANY--introductory paragraphs.

COMPANY SEC REPORTS--Section 9(e).

COMPANY MATERIAL ADVERSE EFFECT--Section 9(a).

CONTRACT-- ection 9(d)(i)(C).

DGCL--Section 1.1.

DISCLOSURE SCHEDULE--Section 3.4.

DISSENTING STOCKHOLDERS--Section 3.1(b)(i).

EFFECTIVE TIME--Section 1.3.

EXCHANGE ACT--Section 4(b).

GOVERNMENTAL ENTITY--Section 6.

GROUP--Section 4(b).

HSR ACT--Section 9(d)(ii)(A)(3).

INDEMNIFIED PARTIES--Section 16(j).

LAWS--Section 9(d)(i)(B).

MATERIAL ADVERSE EFFECT--Section 6.

MERGER--Section 1.1.

MERGER CONSIDERATION--Section 3.1(b)(i).

PAYING AGENT--Section 3.2(a).

PERSON--a natural individual, corporation, partnership, limited liability
company, trust, business trust, association or entity of any kind, including
without limitation a Governmental Entity.

PREFERRED STOCK--introductory paragraphs.

PROPERTY--any interest in real, personal or mixed property, whether tangible
or intangible, including without limitation cash.

OPTIONS--Section 3.4.

SEC--Section 9(e).

SHARE--Section 3.1(b)(i).

STOCKHOLDER APPROVAL--Section 9(c).

SUPERIOR PROPOSAL--Section 4(c).

SURVIVING CORPORATION--Section 1.1.

TERMINATION FEE AMOUNT--Section 14(d).

THIRD PARTY TRANSACTION--Section 4(b).

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement and Plan
of Merger.

CROP GROWERS CORPORATION

By: /s/ Lawrence T. Martinez
----------------------------------

Name: Lawrence T. Martinez
Title: Chief Executive Officer

FIREMAN'S FUND INSURANCE COMPANY

By: /s/ Harold N. Marsh, III
----------------------------------

Name: Harold N. Marsh, III
Title: Senior Vice President and
Treasurer

CG ACQUISITIONS CORP.

By: /s/ Harold N. Marsh, III
----------------------------------

Name: Harold N. Marsh, III
Title: Senior Vice President and
Treasurer

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EXHIBIT B

March 5, 1997
Board of Directors
Crop Growers Corporation
10895 Lowell, Suite 300
Overland Park, Kansas 66210

Gentlemen:

Crop Growers Corporation, a Delaware Corporation ("Crop Growers"), and
Fireman's Fund Insurance Company, a California corporation ("Fireman's Fund"),
contemplate entering into an acquisition agreement (the "Acquisition
Agreement"), dated as of the date hereof, providing for the acquisition by
Fireman's Fund through merger of all of the issued and outstanding shares of
common stock (the "Common Shares") of Crop Growers from all holders of Common
Shares other than Fireman's Fund and its affiliates (the "Public Shareholders").
It is contemplated that prior to the consummation of the merger, a subsidiary of
Fireman's Fund ("Acquisition Sub") will purchase all of the Common Shares now
owned by John Hemmingson and Gary Black, former Chief Executive Officer and
Executive Vice President of Crop Growers, respectively, for a purchase price of
$10.00 per share in cash, so that Messrs. Hemmingson and Black will not be
Public Shareholders. The Acquisition Agreement provides, among other things,
that at the Effective Time (as defined in the Acquisition Agreement).
Acquisition Sub will be merged into Crop Growers with the Common Shares held by
Public Shareholders being converted into the right to receive $10.25 per share
in cash (the "Cash Consideration"). The Acquisition Agreement provides that Crop
Growers will waive the standstill agreement to which Fireman's Fund is subject
in order for Fireman's Fund to exercise its right of first refusal under
existing agreements to purchase from Messrs. Hemmingson and Black 1,145,703 and
681,744 Common Shares, respectively, which shares represent approximately 23% of
Crop Grower's outstanding Common Shares.

You have requested Dean Witter Reynolds Inc.'s opinion ("Dean Witter"), as
investment bankers, as to the fairness, from a financial point of view, of the
Cash Consideration, taken as a whole, to the Public Shareholders.

In arriving at the opinion set forth below, we have, among other things:

(1) reviewed the Acquisition Agreement;

(2) reviewed the Annual Report on Form 10-K and related publicly
available financial information of Crop Growers for the two most recent
fiscal years ended December 31, 1994 and 1995, the Quarterly Reports on Form
10-Q of Crop Growers for the periods ended March 31, 1996, June 30, 1996 and
September 30, 1996, and the definitive Proxy Statement on Form 14A, dated
May 8, 1996;

(3) received the Right of First Refusal agreements between Fireman's
Fund and Messrs. Hemmingson and Black;

(4) reviewed the Chief Financial Officer's financial model of the income
statement, balance sheet and cash flow statement of Crop Growers for the
quarter ended December 31, 1996 and for the calendar years 1997 through 2006
created for the purpose of evaluation various financial alternatives (the
"Model");

(5) conducted discussions with members of senior management of Crop
Growers concerning the past and current business, operations, assets,
present financial condition and future prospects of Crop Growers;

(6) reviewed the historical reported market prices and trading activity
for Crop Growers' Common Shares;

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(7) compared certain financial information and operating statistics
relating to Crop Growers with published financial information and operating
statistics relating to selected public companies that we deemed to be most
comparable to Crop Growers;

(8) compared the proposed Cash Consideration with the financial terms,
to the extent publicly available, of selected other recent acquisitions that
we deemed to be relevant;

(9) reviewed certain other information, including publicly available
information relating to the business, earnings, cash flow, assets and
prospects of Crop Growers; and

(10) reviewed such other financial studies and analyses and performed
such other investigations and took into account such other matters as we
deemed necessary.

In preparing our opinion, we have assumed and relied upon the accuracy and
completeness of all financial and other information supplied to us by Crop
Growers, or that is publicly available, and we have not independently verified
such information. We also have relied upon the management of Crop Growers, as to
the reasonableness and achievability of the financial results of Crop Growers as
set forth in the Model (and the assumptions and bases thereof) provided to us or
prepared on the basis of information and assumptions furnished to us, and with
your consent we have assumed that the Model has been reasonably prepared on the
basis reflecting the best currently available estimates and judgments of
management as to the future operating performance of Crop Growers. We have not
been requested to make, and we have not made, an independent appraisal or
evaluation of the assets, properties, facilities or liabilities of Crop Growers,
and we have not been furnished with any such appraisal or evaluation.

It should be noted that this opinion necessarily is based upon prevailing
market conditions and other circumstances and conditions as they exist and can
be evaluated at this time, and does not represent our opinion as to what the
actual value of the Common Shares will be after the date hereof.

In the past, we have acted as financial advisor to Crop Growers concerning a
strategic alliance with Fireman's Fund, which included an investment by
Fireman's Fund in Crop Growers, and we received a fee for our services.

We have acted as financial advisor to the Board of Directors of Crop Growers
in connection with this transaction and will receive a fee for our services, a
portion of which is contingent upon the consummation of the transaction.

On the basis of, and subject to the foregoing and other matters that we
consider pertinent, we are of the opinion that as of the date hereof the
proposed Cash Consideration to be paid for the Common Shares of the Public
Shareholders, taken as a whole, is fair, from a financial point of view, to such
Public Shareholders.

Very truly yours,

DEAN WITTER REYNOLDS INC.

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EXHIBIT C

SECTION 262 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE

Section 262 APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to Section 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.

(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section Section 251, 252, 254, 257, 258, 263 or 264 of this
title:

(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the holders of the surviving corporation as provided in
subsection (f) of Section 251 of this title.

(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to Section
Section 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:

a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;

b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000 holders;

c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or

d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.

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(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.

(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.

(d) Appraisal rights shall be perfected as follows:

(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsections (b) or (c) hereof that appraisal rights are
available for any or all of the shares of the constituent corporations, and
shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation, a
written demand for appraisal of his shares. Such demand will be sufficient
if it reasonably informs the corporation of the identity of the stockholder
and that the stockholder intends thereby to demand the appraisal of his
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must do
so by a separate written demand as herein provided. Within 10 days after the
effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation
who has complied with this subsection and has not voted in favor of or
consented to the merger or consolidation of the date that the merger or
consolidation has become effective; or

(2) If the merger or consolidation was approved pursuant to Section228
or Section253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval
of the merger or consolidation and that appraisal rights are available for
any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section;
provided that, if the notice is given on or after the effective date of the
merger or consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of stock of
a constituent corporation that are entitled to appraisal rights. Such notice
may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective date of
the merger or consolidation. Any stockholder entitled to appraisal rights
may, within twenty days after the date of mailing of such notice, demand in
writing from the surviving or resulting corporation the appraisal of such
holder's shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such
notice did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a
second notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of such
constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such holders on
or within 10 days after such effective date; provided, however, that if such
second notice is sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder who is
entitled to appraisal rights and who has demanded appraisal of such holder's
shares in accordance with this subsection. An affidavit of the

C-2
<PAGE>
secretary or assistant secretary or of the transfer agent of the corporation
that is required to give either notice that such notice has been given
shall, in the absence of fraud, be prima facie evidence of the facts stated
therein. For purposes of determining the stockholders entitled to receive
either notice, each constituent corporation may fix, in advance, a record
date that shall be not more than 10 days prior to the date the notice is
given; provided, however, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior to
the effective date, the record date shall be the close of business on the
day next preceding the day on which the notice is given.

(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw his demand for
appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and (d)
hereof, upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement setting
forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written statement shall
be mailed to the stockholder within 10 days after his written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.

(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by one or more publications at least one week before the day
of the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.

(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.

(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion,

C-3
<PAGE>
permit discovery or other pretrial proceedings and may proceed to trial upon the
appraisal prior to the final determination of the stockholder entitled to an
appraisal. Any stockholder whose name appears on the list filed by the surviving
or resulting corporation pursuant to subsection (f) of this section and who has
submitted his certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that he is not entitled to appraisal rights under this section.

(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.

(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged PRO RATA against the value of all
the shares entitled to an appraisal.

(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.

(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.

C-4
<PAGE>
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- --------------------------------------------------------------------------------

EXHIBIT D

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
------------------------

FORM 10-K

(AS AMENDED)

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 1996

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 0-23830
------------------------

CROP GROWERS CORPORATION

(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 81-0491497
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

10895 LOWELL, SUITE 300
OVERLAND PARK, KANSAS 66210
(Address of principal executive (zip code)
offices)
</TABLE>

Registrant's telephone number, including area code: (913) 338-7800
------------------------

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value
(Title of Class)
------------------------

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

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

The aggregate market value of the registrant's Common Stock held by
non-affiliates as of March 21, 1997, was approximately $65,334,951

As of March 21, 1997, the shares outstanding of the registrant's common
stock was 7,972,251.

DOCUMENTS INCORPORATED BY REFERENCE

None

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

D-1
<PAGE>
PART I

ITEM 1. BUSINESS

RECENT DEVELOPMENT

On March 5, 1997, Crop Growers Corporation ("Crop Growers" or the "Company")
and Fireman's Fund Insurance Company ("Fireman's Fund") entered into a
definitive agreement by which Fireman's Fund would acquire the Company in a cash
merger at $10.25 per share. Fireman's Fund presently owns convertible preferred
stock of the Company and has exercised its right to purchase an additional
1,827,477 shares of common stock from former Company executives for $10.00 per
share. The Company consented to such purchases, subject to certain restrictions.
The transaction is subject to, among other things, Company stockholder approval,
regulatory approvals and other customary conditions. Because of regulatory
approvals and clearances, the transaction is not expected to close until
mid-1997.

Through March 28, 1997, the Company had the right to seek alternative
acquisition proposals from certain companies and to receive unsolicited
proposals. After March 28, 1997, the Company may receive unsolicited proposals.
The Company may terminate the Fireman's Fund agreement under certain, limited,
circumstances upon payment of a break-up fee of $2.4 million.

See the Company's Current Report on Form 8-K dated February 28, 1997, for
more information concerning this transaction. See also "Relationships with Third
Party Insurance Companies--Fireman's Fund" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations-- Liquidity and
Capital Resources."

FORWARD-LOOKING INFORMATION

Except for the historical information contained in this Annual Report on
Form 10-K, matters discussed herein may constitute forward-looking information.
Such forward-looking information reflects the Company's current best estimates
regarding future operations, but, since they are only estimates, actual results
may differ materially from such estimates.

A variety of events, most of which are outside the Company's control, cannot
be accurately predicted and may materially impact estimates of future
operations. Important among such factors are weather conditions, natural
disasters, changes in federal or state laws or regulations including, without
limitation, changes to the multi-peril crop insurance ("MPCI") program currently
being considered and future changes by the Federal Crop Insurance Corporation
("FCIC") (the federal agency which administers the MPCI program), funding for
the MPCI program, price competition impacting premium levels and agent
commissions, and general economic conditions. Federal regulations governing
aspects of crop insurance are frequently modified, and any such changes may
impact the Company's results of operations. See "The MPCI Program--Recent
Developments" for a discussion of certain changes being proposed to the MPCI
program.

GENERAL

Crop Growers is one of the nation's leading marketers and servicers of crop
insurance. The Company markets and services federal MPCI, private crop hail
insurance and other insurance products underwritten by third party insurance
companies, as well as its own property and casualty insurance company
subsidiaries. MPCI is a federally regulated and subsidized insurance program
which is available to farmers to reduce the risk of crop loss from adverse
weather, natural disasters and other uncontrollable events. The Company's other
major insurance product marketed and serviced, crop hail insurance, supplements
MPCI or can be written on a stand alone basis.

The Company's revenues consist primarily of fees for servicing policies for
third party insurers relating to the premiums generated through its agency
network. To date, the majority of the Company's service fee

D-2
<PAGE>
revenues have been derived from the servicing of MPCI policies. The Company's
services include enforcing underwriting guidelines, providing software systems
to agents, policy processing, accounting and statistical reporting, claims
administration and adjusting services and, in the case of crop hail insurance
and other insurance products, rate analysis and filings. In addition, the
Company participates in the formulation of the risk management strategy related
to the premiums it services. Crop Growers' arrangements with third party
insurers allow it to share in underwriting gains, if any, without assuming any
underwriting loss related to the premiums it services. In addition, the Company
may have underwriting gains or losses attributable to underwritten premiums
retained by its insurance company subsidiaries.

Since its inception in 1989, the Company has expanded its rural distribution
network to include over 3,000 agencies in over 40 states. The Company competes
for agents by emphasizing its range of services and support and a competitive
level of commissions. The Company has developed proprietary software systems
that it believes allow it to attract and retain agents for its distribution
network, and to provide such agents with a competitive advantage in selling crop
insurance to customers in the rural marketplace. The Company's systems assist
agents in quoting crop insurance premiums, managing and processing policies and
enforcing underwriting guidelines. Effective computer systems are particularly
important in the crop insurance industry due to the complexity of and continued
revisions to the regulations governing the MPCI program, the wide variety of
crops, coverages and rates, and commodity price fluctuations. Additionally,
because there is essentially no price competition in MPCI, commissions and
services offered to agents are the primary competitive factors in that business.

The Company also markets and services a farm and ranch product in selected
markets in order to provide its agency network with an additional product for
its customer base. In addition, the Company
markets computer generated geo-referenced color maps which are designed to allow
agents and farmers to reference and update digitized maps to record and report
crop and other agricultural related information. These products are marketed to
agents and farmers to assist them in monitoring and analyzing farm assets, soil
types, weather conditions, chemical applications, yields and other variables.
The Company also markets VisAg-TM- farm management software ("VisAg-TM-"), a map
driven system designed to allow farmers to analyze and record the same
information on a computer.

BUSINESS STRATEGY

The Company focuses primarily on earning recurring service fee revenues from
the distribution of crop insurance underwritten primarily by third party
insurers. Crop Growers also focuses on developing risk management strategies
designed to maximize its share of underwriting gains related to the premiums it
services while retaining a relatively small amount of risk on premiums
underwritten by its own insurance company subsidiaries. The Company's strategy
is to provide innovative systems and high quality service to its agency network
to maintain and expand its share of the crop insurance market. Crop Growers also
intends to continue to further develop and enhance its proprietary software
systems, as well as to market complementary software and farm mapping products
to its agents and rural customer base. The Company also seeks to market
additional insurance products through its rural distribution network and will
continue to evaluate strategic acquisitions and alliances to further expand its
distribution network and broaden the range of products it markets and services.

PRODUCTS AND SERVICES

CROP INSURANCE

In the 1996, 1995, 1994 and 1993 MPCI crop years (July 1 through June 30),
the Company serviced approximately 15.9%, 17.7%, 12.5% and 9.4%, respectively,
of MPCI premiums that exceeded the basic catastrophic level of MPCI coverage
("Buy-Up Coverage") in the United States. In the 1995 crop year, the first year
in which a basic level of catastrophic coverage ("Basic Coverage") was offered
under the MPCI program, and the 1996 crop year, the Company serviced
approximately 22.9% and 22.6%, respectively, of

D-3
<PAGE>
the Basic Coverage premiums written by private insurers. See "Multi-Peril Crop
Insurance" below. For the years ended December 31, 1996, 1995, 1994 and 1993 the
Company serviced approximately 13.2%, 13.3%, 5.0% and 2.0%, respectively, of the
total crop hail premiums written in the United States. The following table
presents certain statistical information relating to the Company's crop
insurance business from 1992 through 1996. Statistical data related to MPCI is
presented on a July 1 to June 30 crop year basis (e.g., information for 1996
relates to the July 1, 1995 to June 30, 1996 crop year).

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- --------- ---------
(IN THOUSANDS, EXCEPT NUMBER OF POLICIES)
<S> <C> <C> <C> <C> <C>
MPCI Buy-Up Coverage(1):
Premiums serviced.................................. $ 222,422 $ 191,421 $ 114,576 $ 70,709 $ 45,752
Number of policies................................. 99,389 97,991 53,267 36,050 24,167
MPCI Basic Coverage(1):
Premiums serviced.................................. $ 48,525 $ 39,546 -- -- --
Number of policies................................. 49,494 55,375 -- -- --
Crop Hail:
Premiums serviced.................................. $ 82,991 $ 69,625 $ 26,164 $ 9,951 $ 9,564
Number of policies................................. 35,479 32,720 12,940 4,942 4,168
</TABLE>

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

(1) MPCI premiums serviced in the 1995 crop year include $36.2 million of Buy-Up
Coverage and $4.6 million of Basic Coverage serviced by Dawson Hail
Insurance Co. ("Dawson"), which was acquired by the Company in 1995. See
"Insurance Company Operations."

MULTI-PERIL CROP INSURANCE

To date, the majority of the Company's service fee revenues have been
derived from the servicing of MPCI policies generated through its agency
network. In general, the Company's responsibilities for servicing MPCI policies
include enforcing the FCIC's underwriting guidelines, policy processing,
accounting and statistical reporting, claims administration and adjusting
services. The Company also develops risk management strategy on the premiums it
services for third party insurers as well as its insurance company subsidiaries,
Plains Insurance Company ("Plains") and Dawson.

Under the MPCI program, an insurance company receives an expense
reimbursement allowance for processing and administering MPCI policies, and
shares in any underwriting gains or losses attributable to premiums retained by
the insurer. Under its contracts with Fireman's Fund and Continental Insurance
Company, a subsidiary of CNA Insurance Company ("CNA") (for information
concerning the Company's dissolution of its relationship with CNA, see
"Relationships with Third Party Insurance Companies-- CNA"), and on behalf of
Plains and Dawson, the Company receives the expense reimbursement payable by the
FCIC, which for Buy-Up Coverage was 31% of MPCI premiums for both the 1996 and
1995 crop years and which is 29% for the 1997 crop year. For Basic Coverage, the
Company receives up to the first $100 of the administrative fee paid by the
farmer and a loss adjusting expense reimbursement amount regardless of loss
experience. From these amounts, the Company pays a commission to the agent that
produces the premium. In addition, the Company receives any excess loss
adjustment expense reimbursement (up to 4% of premium) for excess loss adjusting
expenses if loss ratios on the Company's total book of MPCI business, by state
and by risk retention fund, are in excess of ratios established by the FCIC. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Under its agreements with Fireman's Fund and CNA, the Company is also
entitled to receive a percentage of MPCI underwriting gains, if any, on premiums
underwritten by Fireman's Fund and CNA. For a crop year in which an underwriting
loss occurs, the Company does not assume any of the loss. The Company may also
have underwriting gains and losses attributable to underwritten premiums
retained by

D-4
<PAGE>
Plains and Dawson, however, the Company does not expect Plains or Dawson to
retain any significant risk on business they underwrite.

THE MPCI PROGRAM

RECENT DEVELOPMENTS. Effective December 31, 1996, the FCIC provided notice
that it intended to revise the Standard Reinsurance Agreement ("SRA") that
governs the relationship between the FCIC and private companies that participate
in the MPCI program. On March 20, 1997, a draft of the SRA (effective for the
1998 crop year) was released by the FCIC. The draft SRA proposes to revise the
expense reimbursement for Buy-Up Coverage to an amount equal to a flat $100 per
policy plus 18% of the premium related to that policy (17% in the case of Crop
Revenue Coverage policies, a revenue protection coverage introduced by the FCIC
in the 1997 crop year). For Basic Coverage, private companies would receive a
flat $50 per policy plus 4.8% of the premium related to that policy (based on a
50% production guarantee at a 60% price election). The draft SRA also proposes
certain changes to the risk sharing arrangement (calculation of underwriting
gain or loss on premiums retained by private companies) between private
companies and the FCIC. Under the proposed draft, private companies would
receive the expense reimbursement in one installment at the time acreage reports
are reported to and validated by the FCIC. The draft SRA also proposes certain
other changes to the administration of the MPCI program, including certain
compliance and program integrity issues. Earlier in 1997 and as a part of the
Clinton Administration's budget proposal for the government's 1998 fiscal year,
funding for the expense reimbursement was proposed at 24.5% for the 1998 crop
year.

GENERAL. MPCI is provided by the federal government to help farmers insure
against damage to their crops due to a number of natural causes and other
uncontrollable events. MPCI is administered by the FCIC, a federal agency under
the United States Department of Agriculture ("USDA"). MPCI policies
automatically renew on the same terms and conditions on the applicable sales
closing date unless the farmer has failed to pay the prior year's premium or has
elected to cancel the coverage.

In October 1994, Congress enacted the Federal Crop Insurance Reform Act of
1994 (the "Reform Act"). Under the Reform Act, the MPCI program was changed
(effective for the 1995 crop year) to provide for, among other things, a new
catastrophic level of mandatory insurance, referred to herein as Basic Coverage.
Under the Reform Act, farmers were required to obtain at least Basic Coverage on
eligible crops in order to participate in many federal farm subsidy programs.
Basic Coverage is available to farmers if they pay an administrative fee of $50
per crop per county, not to exceed $200 per farmer per county up to a maximum of
$600 for all counties in which a farmer has insured crops. In the 1995 crop
year, Basic Coverage was offered by private insurance companies and their agents
and all USDA field service offices.

In 1996, Congress enacted the Federal Agriculture Improvement and Reform Act
of 1996 (the "FAIR Act"). The Fair Act eliminated the mandatory linkage that
required farmers to obtain some form of MPCI insurance in order to participate
in other federal farm subsidy programs. Under the FAIR Act, farmers may forego
MPCI insurance for any given crop without losing eligibility for such programs,
provided they waive all rights to any possible crop disaster assistance in
connection with the particular crop. In addition, the FAIR Act amended the
Reform Act's provisions relating to the USDA's role in selling and servicing
Basic Coverage, by providing that, effective with the 1997 crop year, the USDA
will offer Basic Coverage

D-5
<PAGE>
only if the Secretary of Agriculture determines there is an insufficient number
of approved insurance providers operating in the particular state or region to
adequately provide Basic Coverage to farmers. Under the FAIR Act, the Secretary
of Agriculture is required to make a determination no later than April 30 of the
year preceding the year in which the crop will be planted, of whether Basic
Coverage in a state or portion of a state is sufficiently available through
private insurance providers. If sufficient, the Secretary may direct the USDA to
discontinue selling Basic Coverage in the state or region. For the 1997 crop
year, the USDA determined not to sell Basic Coverage at USDA field service
offices in 14 states. No determination has been announced for the 1998 crop year
regarding whether the USDA will discontinue selling Basic Coverage in states in
addition to the 14 states in which the USDA no longer sells Basic Coverage.

Buy-Up Coverage provides a yield guarantee to the farmer by insuring against
production below a specified yield. The lost production is insured at a price
elected by the farmer, subject to strict guidelines imposed by the FCIC. Basic
Coverage provides protection at a 50% yield guarantee and a 60% price election.
In addition, in the 1997 crop year, several MPCI products providing
price/revenue as well as production protections were introduced, including Crop
Revenue Coverage.

Except for Basic Coverage offered by the USDA, MPCI is written by private
insurance companies under a SRA with the FCIC. A SRA continues in effect from
year to year with an annual renewal date of July 1 of each succeeding year
unless the FCIC or insurance company gives 20 days advance notice that the SRA
will not be renewed. The terms and conditions of the SRA, including the amount
of expense reimbursement and level of reinsurance the FCIC will assume, may vary
from year to year. In connection with entering into and renewing a SRA, an
insurance company submits a Plan of Operation that sets forth the insurance
company's qualifications and business plan relating to the MPCI business it
proposes to write. The Plan of Operation must generally be submitted to the FCIC
by April 1 preceding each crop year. The Plan of Operation sets forth such
things as the net written premium and associated liability that the insurer will
retain and the identities of organizations other than the insurer that will
write MPCI and provide services for the MPCI policies written pursuant to the
SRA.

In accordance with the terms of the SRA and Plan of Operation, an insurance
company generally provides, among other services, marketing, enforcement of MPCI
underwriting guidelines and claims adjusting. As consideration for these
services, the insurance company receives an expense reimbursement allowance from
the FCIC equal to a percentage of premiums written. The FCIC generally pays a
significant portion of the expense reimbursement (currently 22%) related to each
policy, after the policy acreage report is submitted to, and the related premium
is cleared by, the FCIC. The remaining installment relating to each policy is
received by the private insurer, or its designee, when the premium is paid to
the FCIC. On Basic Coverage policies, the private insurer receives the $50
administrative fee paid by the farmer for Basic Coverage up to a maximum of $100
of the administrative fee payable for farmers obtaining Basic Coverage on
multiple crops and/or in multiple counties as consideration for its servicing of
the policy. In addition, the insurance company receives a loss adjustment
expense amount on all Basic Coverage regardless of actual loss experience. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

In addition to receiving the expense reimbursement allowance for processing
and administering MPCI policies, an insurer shares, with the FCIC, in any
underwriting gains and losses attributable to premiums written by the insurer.
An insurance company's share of profit or loss on the MPCI business it writes is
determined under a formula established by the FCIC. Under this formula, the
primary factors that determine the MPCI profit or loss share are (i) the gross
premiums the insurer is credited with having written; (ii) the amount of such
credited premiums retained by the insurer after ceding premiums to certain
federal reinsurance funds; and (iii) the loss experience of the insurer's
insureds.

D-6
<PAGE>
An insurer's share of profit or loss calculated under its SRA depends in
part on the aggregate amount of MPCI premium on which it retains risk after
allocating premiums to the federal reinsurance funds (the "MPCI Retention"). The
percentage split between private insurers and the federal government of any
profit or loss which emerges from a MPCI Retention is set by the FCIC and
generally is adjusted from year to year.

FUNDING FOR THE MPCI PROGRAM. Prior to adoption of the Reform Act in
October 1994, the MPCI program was funded through annual Congressional
appropriations. Under the Reform Act, the FCIC is authorized to pay from a FCIC
fund the administrative and operating expenses of private insurance providers
approved for participation in the MPCI program, including sales commissions of
agents.

If there are insufficient amounts in the FCIC fund, the Reform Act makes it
possible for the Secretary of Agriculture to use the funds of the Commodity
Credit Corporation ("CCC") for payment of administrative and operating expenses
of approved insurance providers and, within the limitations indicated above, for
payment of sales commissions to agents. The partial availability of CCC funds
for the expenses of private insurance providers was a change intended to make
the program less dependent than it had been in the past on annual appropriations
by Congress.

The authorization of appropriations to fund the MPCI program contained in
the Reform Act extends from fiscal years 1995 through 2001. Congress would have
to extend the authorization of the appropriations beyond that date for the MPCI
program to continue. There can be no assurance that Congress will not decide in
the future to reduce or eliminate funding of, or discontinue or otherwise
significantly change, the MPCI program.

An additional factor which may adversely impact participation by farmers in
the MPCI program is a potential decrease in agricultural spending by the federal
government. If Congress cuts spending for farm-related programs in general, the
MPCI program might also be adversely affected.

CROP HAIL INSURANCE

The other principal area of the Company's insurance business involves
providing a wide range of services to insurance companies in the crop hail
business. Crop hail is available to farmers as stand-alone coverage or as a
supplement to MPCI coverage and may be purchased to cover the actual cash value
of a crop on a per-acre basis which allows the farmers to recover a loss on a
small percentage of the farmer's total acres when such a loss may not be
recoverable through MPCI.

The Company's services to companies in the crop hail business include rate
analysis, software support, regulatory assistance, assisting in reinsurance
placement, loss adjustment services, marketing and processing. In 1996, the
Company's crop hail business was conducted under agreements with CNA, five farm
mutual insurance companies and other insurance companies. Plains and Dawson also
underwrite crop hail insurance. Of the $82.9 million of crop hail premiums
serviced in 1996, approximately $35.1 million were written by CNA and $30.0
million were written by Plains and Dawson. In 1996, 75.6% of all crop hail
premiums serviced by the Company were either written or reinsured with CNA. In
1997, the Company will continue to conduct its hail business through its
agreement with the farm mutuals, Plains, Dawson and Fireman's Fund. The Company
will not conduct hail business with CNA in 1997. As a result of a one-year
noncompetition provision in its crop hail agreement with CNA, the Company
expects an approximately 25-30% decline in the volume of crop hail premiums it
services in 1997 as compared to 1996. Given that the principal competitive
factor that affects the crop hail business is the rate filed in each state
(which varies from year to year), the Company cannot predict whether this
one-year noncompetition agreement will impact the Company's crop hail business
in 1998 or beyond.

The Company currently has crop hail management contracts with five farm
mutual insurance companies. Under these contracts, which renew annually unless
otherwise terminated, the Company receives a fee based upon costs incurred in
managing premiums written by the mutual companies. The

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Company believes these management contacts provide certain marketing and expense
advantages in some instances. In addition, because these farm mutual insurance
companies have been in business for a long time in their respective states, the
Company believes they have a relatively stable client base.

In addition to earning service fees, the Company also participates in the
underwriting gains and losses on its crop hail book of business. Under its
agreement with Fireman's Fund, the Company is eligible to receive amounts based
on minimum loss ratios incurred related to the premiums it services without
sharing in any of the losses. To the extent that any premiums are retained by
its insurance company subsidiaries, the Company may also experience an
underwriting loss.

FARM AND RANCH

The Company markets and services a farm and ranch product in order to
provide its agency network with an additional product for its client base. In
1996, the Company wrote approximately $1.3 million of farm and ranch premiums
through its insurance company subsidiaries. The Company has quota share
reinsurance on 80% of this business. In 1996, the Company entered into an
agreement with Fireman's Fund, pursuant to which the Company will, in certain
states, market and service farm and ranch premiums underwritten by Fireman's
Fund. As a part of this agreement, the Company will earn service fees and
participate in underwriting gains, if any, based upon agreed upon loss ratios
incurred on the total farm and ranch book of business placed through Fireman's
Fund.

AG MANAGEMENT SYSTEMS AND PRODUCTS

Crop Growers believes that the business of managing agriculture and, in
particular, crop insurance, is increasingly dependent on effective information
management. Accordingly, the Company has developed or is developing products
which it believes will improve its ability to increase market share by enhancing
the sales effectiveness of its agent network in the marketing of crop insurance.
The Company continues to work on developing and marketing a comprehensive farm
management system.

MAPPING PRODUCTS

In order to expand its product offerings and rural customer base, in 1995,
the Company began producing and marketing computer generated geo-referenced
color maps which allow agents and farmers to view an entire agricultural
operation on a single map. These computer generated maps may be referenced and
updated by agents and farmers to more easily record and report crop and other
agricultural related information. These maps are currently being marketed to
assist agents and farmers in monitoring and analyzing farm assets, crop yields,
soil types, weather conditions, chemical and fertilizer applications and other
variables.

To date, most of these maps have been sold to agents, however, the Company
intends to expand its efforts in this area to directly market to farmers.
Individual maps are prepared and sold on an as ordered basis. Based on
information received from agents and farmers, Crop Growers believes the ability
to provide these maps will offer its distribution network an important marketing
tool.

VISAG-TM- SOFTWARE

In December 1995, the Company released the initial version of its VisAg-TM-
farm management software. Designed for use by small family farms to large
corporate operations, the PC-based, map-driven system allows users to manage
planting records, fertilizer and chemical applications, tillage and harvest data
visually by pointing and clicking on the appropriate field. Extensive tracking
and reporting, labor information, equipment costs and other pertinent data are
linked to geo-referenced maps which are the key to the system's functionality.
Crop Growers is currently evaluating marketing options including price,
packaging and distribution for the VisAg-TM- product line.

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For the crop insurance industry, VisAg-TM- can provide benefits in several
areas. To date, it has been primarily used as a value-added component to agents'
marketing efforts. In this manner, the Company hopes to increase agent loyalty.
A newly developing opportunity is in the area of acreage certification and
verification required under the MPCI program. As the USDA decreases its services
in this area, more responsibility will fall to individual insurance providers.
Crop Growers believes this creates an opportunity to apply this technology to
serve not only Company purposes, but perhaps those of the industry as well.

Direct retail sales of VisAg-TM- continue to be pursued as a separate
contribution to overhead. The Company has used its first year's experience in
software development and marketing to establish pricing points within the
product line and to better ascertain the perceived benefits of the product as
determined by the end user.

AG MANAGEMENT MAPPING SOFTWARE

The Company intends to use its technological resources to include with its
agency management system a feature which will allow an agent to identify a
client's entire farming operation on a computer screen. This will provide the
agent with the information needed to quickly and accurately custom design a risk
management program by selecting coverage options for each specific field and
crop. The system will also be integrated with information from the Company's
rating and underwriting databases. See "Software Systems" below for a discussion
of the Company's software systems used in agency operations.

SOFTWARE SYSTEMS

Crop Growers relies extensively on its proprietary software systems in its
marketing efforts with agents, and to enforce underwriting guidelines, evaluate
risks and ensure proper payment of claims. Over 1,400 agencies currently use the
Company's Agency Management System ("AMS"). In addition to AMS, Crop Growers has
developed a Company Management System ("CMS") for use by the Company in
validating and verifying data previously recorded by agents. AMS and CMS are
personal computer based systems.

AGENCY MANAGEMENT SYSTEM

AMS provides the Company's personnel responsible for enforcing underwriting
guidelines and agents in its network with desktop access to MPCI and crop hail
insurance rates as well as the special underwriting guidelines applicable to
each specific county and crop. AMS allows the Company's agency service personnel
and agents in its network to eliminate the need to search for rate information
using actuarial books. In view of the large number of variables that must be
considered, the Company believes the number of errors is reduced by quoting and
preparing policies with the assistance of AMS. The Company believes that the
ability of AMS to quickly and accurately quote rates and coverages is an
important tool in maintaining existing and attracting new agents.

With respect to MPCI policies, one of the principal features of AMS is its
ability to enforce the FCIC's underwriting guidelines. AMS verifies the
insurability of the applicant's land and crops and is designed to ensure that
FCIC rules governing the calculation of each farm unit's insurable yield (actual
production history or "APH") are followed. APH rules vary depending on crop,
location and farming practice and are modified periodically by the FCIC.
Accordingly, the Company continually updates AMS to incorporate the most current
FCIC rules and procedures, including those regarding APH calculations. The
Company receives MPCI rates from the FCIC in electronic form, formats such rates
into files usable by its software systems, and then distributes such rates to
its automated agents. The Company believes that the ability to promptly
implement and distribute software containing FCIC rule changes offers agents in
its network a competitive advantage in the MPCI market.

With respect to crop hail policies, AMS provides its agency service
personnel and agents an efficient means to quote and write policies based on
MPCI policy data already in the system. AMS also provides

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desktop access to endorsements and policy forms available in each state,
coverage limits applicable to each crop and farming practice and graphical
representations depicting the coverage, cost and loss coverage of comparable
policy forms. As with MPCI, the applicable crop hail premium rate is
automatically applied by accessing AMS's electronic actuarial files.

COMPANY MANAGEMENT SYSTEM

CMS assists Crop Growers in verifying an agent's electronic policy data
submission and reporting to its agency service personnel all significant changes
from previously reported data. In addition, CMS assists the Company in tracking
and properly paying losses. For example, CMS automatically accesses the original
policy data to help ensure that a claim is paid only according to the provisions
of the policy as originally written. Crop Growers believes that CMS's tracking
and claims-prioritizing features assist in providing a high-level of service to
agencies in its network.

With respect to crop hail insurance, the Company maintains various databases
of historical loss costs. These databases allow the Company to develop various
rating strategies based on historical results. In many instances the Company
believes it is able to determine which of the various crops may be more
profitable than others, or which specific townships are more likely to show
underwriting profits or losses. The Company believes these features enable it to
perform rate comparisons more efficiently.

SUPPORT AND MAINTENANCE

The Company has a software development and services staff which provides
software development, installation, training and ongoing support services to
agents in addition to providing network administration and support for the
Company's information networks and all software and actuarial distribution and
support for the Company's agency service personnel.

Crop Growers attempts to protect its proprietary rights to its software
programs with a combination of patent, copyright and trade secret laws, employee
and third-party nondisclosure and employee non-compete agreements. The Company
filed a patent application for its Ag Management Mapping Software in 1994. While
the Company's competitive position could be threatened by its inability to
protect its proprietary information, the Company believes patent, copyright and
trade secret protection are less important to the value of its software products
than other factors, such as knowledge of the crop insurance industry, ability
and experience of the Company's personnel and ongoing product development and
support, particularly relating to updates of the programs necessary to keep pace
with changes made in the MPCI program.

MARKETING AND DISTRIBUTION NETWORK

Crop Growers believes that the unique needs of rural America require special
products and marketing efforts. Accordingly, the Company's strategy continues to
be to develop a strong distribution network capable of delivering products and
services to rural customers. The Company's goal is to increase its service fee
revenues by distributing and servicing additional products for companies who
wish to serve the rural market.

Products serviced by Crop Growers are marketed in over 40 states. The
Company's agency network has been developed from several sources, including
through its relationships with Fireman's Fund, CNA, Cimarron Insurance Company
and certain farm mutual insurance companies, and from marketing efforts by the
Company. In addition, selected acquisitions of agency operations, including
Dawson, have also played an important part of the Company's continued
development of its distribution network.

The Company has production supervisors who are principally responsible for
identifying and recruiting new agencies and agents and servicing existing
relationships. Because the crop insurance industry is a relatively small segment
of the insurance industry, the Company believes its production supervisors, who

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are often former farmers or agents themselves, are able to identify and market
to substantially all existing crop insurance agents within a particular region.
Because there is essentially no price competition in MPCI, the Company competes
for agents by emphasizing the range of services and support it offers to agents
and the level of commissions. With respect to crop hail, competition is based
primarily on policy rates.

Due to the highly regionalized nature of the crop insurance industry, the
Company believes it is better able to serve its agency network by organizing its
agency service personnel and underwriting enforcement functions on a regional
basis. The Company has accomplished this by assigning its agency service
personnel to designated regional areas and establishing a regional presence
either through acquisition of existing agency operations or affiliating with
local general agencies. The Company believes that its strategy to allow regional
operations to preserve their local identities has been an effective way to
establish a regional presence while maintaining existing relationships with
farmers.

For the most part, general agencies and independent agents are appointed by
the contracting insurance companies, and have binding authority within the
limits prescribed by the contracting insurance companies. Although agents are
licensed by the policy issuing company, in most aspects of the Company's
business, the principal elements of the agency relationship, commissions and
level of services provided by the Company, are negotiated between Crop Growers
and the individual agencies or agents and the Company has the primary ongoing
contact with agents. As a part of its role as servicer of premiums underwritten
by third party insurance companies, the Company has the authority to negotiate
with agencies and agents regarding, among other things, agent commissions and
the extent of services and support the Company will provide. These agreements
are negotiated on a case-by-case basis with general agencies and independent
agents that produce a large volume of premiums. Agreements with agents that
produce a smaller volume of premiums are relatively standardized. Many agencies
seek to perform themselves some of the services related to the policies in
return for a higher commission.

Crop Growers has developed a program that targets agricultural cooperatives
and food processors and their members. The program offers a risk management
package customized to the needs of each organization and member. In 1995, the
first full year of marketing this program, the Company entered into agreements
with several cooperatives, including Sunkist Growers, Inc., the largest citrus
cooperative in Southern California. In 1996, the Company continued to expand
this program principally in California and the Pacific Northwest.

At December 31, 1996, the Company had established 13 offices, including
regional operation and processing centers. The Company evaluates local offices,
from time to time, in order to establish and maintain the Company's competitive
position in certain regional areas.

UNDERWRITING MANAGEMENT

Because of the highly regulated nature of the MPCI program and the fact that
rates are established by the FCIC, the underwriting functions performed by the
Company's agency service personnel consist primarily of ensuring policies are
underwritten in accordance with FCIC rules. With respect to crop hail insurance
products, the Company's underwriting functions are essentially similar to those
applicable under MPCI policies, except that the underwriting guidelines are
those established by the policy issuing company.

Since many of the factors analyzed in underwriting crop insurance products
are region-specific, the Company's regional offices generally handle the crops
within their regions. Crop Growers believes that its agency service personnel
are thus able to develop a more comprehensive understanding of the regional
variances in the crop insurance business and provide more efficient compliance
with applicable underwriting guidelines than they could if agency service
personnel were centralized. The Company's agency service personnel rely on the
Company's software systems to verify that underwriting guidelines are followed.

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The Company's agency service personnel are required to attend training
programs relating to the MPCI program and other aspects of the crop insurance
business. The agency service group's performance is audited internally and by
the Company's contracting insurance companies with respect to MPCI and crop hail
insurance and by the FCIC with respect to MPCI.

CLAIMS ADMINISTRATION

The services provided by the Company in claims administration and adjusting
are to investigate the cause of loss, to examine and approve or deny payments in
accordance with the guidelines established by the FCIC or the underwriting
insurance company, to furnish forms required for reporting and administering
claims, to establish claims files and to issue drafts or checks in payment of
MPCI claims and expenses. Because the administration of MPCI claims is highly
regulated by the FCIC, the primary function of the Company's claims personnel is
to ensure that all such regulations have been complied with in administering
MPCI claims.

Because crop insurance varies based on the type and location of the crop
insured, the Company has assigned loss supervisors to different regions within
the United States to handle claims administration functions. Within each
designated region, the Company has established, on a contract basis, a network
of independent loss adjusters. With respect to claims administration, the
Company has authority to settle claims up to specified dollar limits as set
forth in its respective contracts with third-party insurance companies.

RELATIONSHIPS WITH THIRD PARTY INSURANCE COMPANIES

FIREMAN'S FUND

On March 5, 1997, Fireman's Fund and the Company entered into a definitive
merger agreement by which Fireman's Fund would acquire the Company in a cash
merger at $10.25 per share. See "Recent Development."

On July 10, 1996, as a part of the expansion of the Company's business
relationship with Fireman's Fund, Fireman's Fund purchased 10,000 shares of the
Company's preferred stock for $10 million. See Note 5 of Notes to the Company's
Consolidated Financial Statements.

Effective for the 1995 crop year, the Company and Fireman's Fund entered
into an agreement pursuant to which the Company marketed and serviced MPCI
premiums underwritten by Fireman's Fund. In 1996 and 1995, 21.0% and 9.8%,
respectively, of the Company's service fees were derived from premiums
underwritten by Fireman's Fund. The Company's responsibilities under the
agreement include production, processing, claims administration, accounting and
statistical reporting and risk management strategy. The Company is responsible
for all expenses allocable to the business generated under such agreement,
including claims administration and adjusting services.

Under its agreement with Fireman's Fund, the Company receives as its
compensation the expense reimbursement allowance (including all administrative
fees related to Basic Coverage) and any excess loss adjustment expenses payable
by the FCIC related to premiums serviced. Effective for the 1997 crop year, the
Company does not pay any overwrite fee to Fireman's Fund. In addition, the
Company is entitled to receive a percentage of Fireman's Fund's underwriting
gains on MPCI marketed and serviced by the Company after such gains exceed a
minimum level. For a crop year in which Fireman's Fund has an underwriting loss,
the Company does not assume any of the loss. There is no underwriting loss
carryforward under the agreement and, accordingly, losses do not reduce the
Company's future underwriting gains, if any.

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The agreement may be terminated by either party without cause, as of June 30
of 1999 or any June 30 thereafter, upon 12 months prior notice with respect to
new policyholders. With respect to renewal policyholders, the Company may
terminate the agreement without cause as of June 30 of 1999 or any June 30
thereafter, upon 12 months prior notice and Fireman's Fund may terminate the
agreement upon 24 months prior notice. The agreement may be terminated by
Fireman's Fund for cause upon the occurrence of certain enumerated events.

The Company and Fireman's Fund have entered a crop hail agreement effective
for the 1997 crop hail year. Under the terms of the crop hail agreement, the
Company performs all of the marketing and servicing of crop hail premiums
written by Fireman's Fund. The Company receives a commission, including a
percentage for loss adjusting expenses, for premiums serviced. The Company also
participates in underwriting gains, if any, on the crop hail premiums written
under the agreement if loss ratios on the entire book of premiums serviced is
less than an agreed upon loss ratio. The term of the agreement coincides with
the term of the MPCI agreement with Fireman's Fund. The agreement may be
terminated by Fireman's Fund for cause upon the occurrence of certain enumerated
events.

Under the terms of its MPCI and crop hail agreements with Fireman's Fund,
the Company also may receive a profit and growth bonus if the overall
underwriting performance of its MPCI and crop hail businesses and volume of
premiums written meet certain agreed upon targets. Fireman's Fund is currently
assigned an "A" (Excellent) rating by A.M. Best.

CNA

In 1996, 1995 and 1994, 40.2%, 59.9% and 84.5%, respectively, of the
Company's service fees were derived from MPCI and crop hail premiums
underwritten by CNA. As part of the Company's decision to expand its strategic
alliance with Fireman's Fund during 1996, the Company and CNA agreed to
terminate their existing agreements effective for the 1997 crop year in the case
of MPCI, and the 1997 year for crop hail. The Company and CNA have not yet
finalized all of the terms relating to the dissolution of their relationship,
including the terms of certain financial settlements. For further discussion of
dissolution of MPCI agreement with CNA see "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Restructuring and Non-Core
Expenses."

INSURANCE COMPANY OPERATIONS

Crop Growers acquired Plains in October 1994 and Dawson in July 1995. In
1997, the Company currently intends to reinsure virtually all of the risk
underwritten by its insurance company subsidiaries. The Company is continuing to
evaluate how best to utilize its insurance company subsidiaries to maximize the
profitability of its business.

At December 31, 1996, Dawson had $8.2 million of statutory capital and
surplus. Dawson is currently licensed as a property and casualty insurer in
Iowa, Kansas, Minnesota, North Dakota and South Dakota. Dawson is not currently
rated by A.M. Best.

At December 31, 1996, Plains had $7.1 million of statutory capital and
surplus. Plains is currently licensed as a property and casualty insurer in
Arizona, Colorado, Kansas, Missouri, Nebraska, Nevada, New Mexico, North Dakota,
Oklahoma, South Dakota, Texas, Utah and Wyoming. Plains is not currently rated
by A. M. Best.

COMPETITION

The crop insurance industry is highly competitive. The Company competes
against other private companies and, with respect to Basic Coverage in certain
states, USDA field service offices. Some of the Company's competitors have
greater financial and other resources than the Company, and there can be no
assurance that the Company will be able to compete effectively against such
competitors in the future. The

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Company competes on the basis of the commissions paid to agents, the speed with
which claims are paid, the quality and extent of services offered, the
reputation and experience of its agency network and, in the case of private
insurance, policy rates. Because the FCIC establishes the rates that may be
offered for MPCI policies, the Company believes that quality of service and
level of commissions offered to agents are the principal factors on which it
competes in the area of MPCI. The Company believes the crop hail insurance
industry is extremely rate-sensitive, and the ability to offer competitive rate
structures to agents is a critical factor in the agents' ability to write crop
hail. Because of the varying state laws regarding the ability of agents to write
crop hail premiums prior to completion of rate and form filings (and, in some
cases, state approval of such filings), a company may not be able to write its
expected premium volume if its rates are not competitive.

In terms of premium dollars written, the MPCI market is dominated by a few
companies: Rain & Hail Management, Inc. (an affiliate of Cigna Corporation),
Crop Growers, Rural Community Insurance Services, Inc. (which is owned by
Norwest Corporation) and The Redland Group, Inc. (a subsidiary of Acceptance
Insurance Companies, Inc.) serviced approximately 23.5%, 16.6%, 16.4%, and
15.1%, respectively, of the MPCI crop insurance premiums written by private
insurance companies in the United States in the 1996 crop year. As a
consequence, the Company believes that in order to compete successfully in the
crop insurance business it will have to service a volume of premiums
sufficiently large to enable the Company to realize operating efficiencies in
conducting its business.

SEASONALITY

The Company's operating results vary substantially from quarter to quarter
as a result of various factors, including MPCI sales closing dates and crop
insurance cycles. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Seasonality."

REGULATION

LICENSING

The activities of the Company and its subsidiaries are subject to licensing
and regulation by the jurisdictions in which they conduct such activities. The
Company's operations depend on the validity of and its continued good standing
under the licenses and approvals pursuant to which it operates. Failure by the
Company or its subsidiaries to obtain or maintain such licenses could have an
adverse effect on the Company's results of operations. Licensing laws and
regulations vary from jurisdiction to jurisdiction. In all jurisdictions, the
applicable licensing laws and regulations are subject to amendment or
interpretation by regulatory authorities, and, generally, such authorities are
vested with relatively broad discretion as to the granting, reviewing and
revoking of licenses and approvals.

Insurance companies that are involved in the MPCI program, including
Fireman's Fund, Plains and Dawson are subject to at least an annual review by
the FCIC for, among other things, the availability of adequate capital and
surplus and compliance with underwriting, loss adjustment and other requirements
of the MPCI program. In addition, as a part of the FCIC's review process, the
Company, as a servicer on behalf of Fireman's Fund, Plains and Dawson, is
periodically reviewed for its compliance with FCIC rules and regulations. A
failure to comply with such rules or regulations could result in the FCIC
choosing not to allow the Company, Plains, Dawson, or Fireman's Fund to
participate in the MPCI program. Based on the results of reviews conducted by
the FCIC, Fireman's Fund and its own internal reviews, the Company believes that
it and Plains and Dawson have complied in all material respects with FCIC rules
and regulations relating to the marketing, servicing and underwriting of MPCI
premiums. No assurance can be given that the FCIC would continue to allow the
Company to service MPCI policies if it were to fail to comply with FCIC rules
and regulations.

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INSURANCE INDUSTRY

The Company's insurance operations are subject to a significant degree of
regulatory oversight. This oversight generally is designed to protect the
interests of policyholders, as opposed to shareholders. Such regulation relates
to authorized lines of business, capital and surplus requirements, investment
parameters, underwriting limitations, transactions with affiliates, dividend
limitations, changes in control, and a variety of other financial and
nonfinancial components of an insurance company's business. The Company believes
that more, rather than less, regulation is likely in the future. In particular,
the National Association of Insurance Commissioners has adopted a system of
assessing the adequacy of statutory capital which is applicable to Plains and
Dawson. This system, known as risk-based capital, establishes statutory capital
requirements based on levels of risk assumed by an insurance company rather than
on levels of premiums written. At December 31, 1996, Plains and Dawson exceed
the minimum risk-based capital requirements. The Company cannot predict with
certainty the effect any other proposed or future legislation may have on the
results of operations or financial condition of the Company.

Most states have insurance laws requiring that property-liability rate
schedules, policy or coverage forms, and other information be filed with the
state's regulatory authority. In many cases, such rates and/or policy forms must
be approved prior to use. Rate and form regulation and supervision were
originally designed primarily to ensure the financial stability of insurance
companies and to protect policyholders and were not designed to protect
shareholders or creditors. A few states have recently considered or enacted
limitations on the ability of insurers to share data. Such restrictions have no
significant impact on the Company's insurance operations. There can be no
assurance that state or federal regulatory requirements will not become more
stringent in the future which may have an adverse effect on the future
operations of Plains or Dawson.

Insurance companies are required to file detailed statutory annual reports
with the state insurance regulators in each of the states in which they do
business, and their business and accounts are subject to examination by such
agencies at any time. In addition, these insurance regulators periodically
examine the insurer's financial condition, adherence to statutory accounting
principles, and compliance with insurance department rules and regulations.
Applicable state insurance laws, rather than federal bankruptcy laws, apply to
the liquidation or reorganization of insurance companies.

HOLDING COMPANY STRUCTURE; DIVIDEND RESTRICTIONS

The Company is subject to insurance holding company laws and regulations.
Under Kansas, North Dakota and Texas (Plains, given the volume of business it
writes in the State of Texas in relation to its overall business, may be
considered to be "commercially domiciled" in Texas) law (and, in some cases, the
laws of the states in which the farm mutuals managed by the Company are
located), acquisition of control of the Company, and thereby indirect control of
Plains or Dawson, requires the prior approval of the state insurance
commissioner. "Control," as the term relates to insurance holding companies, is
defined as the direct or indirect power to cause the direction of the management
and policies of a person. Any purchaser of 10% or more of the outstanding voting
stock of a corporation is presumed to have acquired control of the corporation
and its subsidiaries unless the Kansas, North Dakota or Texas Insurance
Commissioner (and, in some cases, the commissioners in states in which the farm
mutuals managed by the Company are located), upon application, determines
otherwise.

The payment of dividends by Plains and Dawson are subject to restrictions
set forth in the Kansas, North Dakota and Texas insurance laws, respectively.
See "Market for the Registrant's Common Equity and Related Stockholder Matters."

GUARANTY FUNDS

All 50 states have separate insurance guaranty fund laws requiring
property-liability insurance companies doing business within their respective
jurisdictions to participate in their guaranty associations,

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which are organized to pay covered claims (as defined and limited by the various
guaranty association statutes) under insurance policies issued by insolvent
insurance companies. Generally, such guaranty association laws create
post-assessment associations which make assessments against member insurers to
obtain funds to pay association covered claims after an insurer insolvency
occurs. These associations generally levy assessments (up to prescribed limits)
on all member insurers in a particular state on the basis of the proportionate
share of the premiums written by member insurers in the covered lines of
business in that state.

EMPLOYEES

At March 14, 1997, the Company, including its subsidiaries, employed 408
people. Management believes that its relations with its employees are
satisfactory.

ITEM 2. PROPERTIES

Currently, the Company's accounting, agency service personnel, and
administrative personnel are primarily located in its corporate headquarters in
Overland Park, Kansas, its insurance company relations functions in Fargo, North
Dakota and Overland Park, Kansas and a significant number of its software
development personnel are located in Austin, Texas. In addition to these
offices, the Company also leases or owns space for its local and regional
offices and independent agent operations. At December 31, 1996, the Company had
13 offices. The Company also conducts independent agent operations through its
offices in Prosser, Washington; Modesto, California; and Manlius, New York.

ITEM 3. LEGAL PROCEEDINGS

From time to time the Company is involved in litigation relating to claims
arising from its operations in the normal course of business. Neither the
Company nor any of its subsidiaries is a party to any legal proceedings other
than as described below, the adverse outcome of which individually or in the
aggregate, in the Company's opinion, would have a material adverse effect on the
Company's results of operations, financial position or liquidity.

INDEPENDENT COUNSEL INVESTIGATION. On January 21, 1997, the court in the
matter of UNITED STATES OF AMERICA V. CROP GROWERS CORPORATION, JOHN J.
HEMMINGSON AND GARY A. BLACK (Crim. No. 96-0181(GK)) accepted Crop Growers
Corporation's (the "Company") plea of NOLO CONTENDERE to two charges brought
against it by the Independent Counsel ("IC") appointed to investigate former
Secretary of Agriculture Mike Espy. Pursuant to an agreement with the IC, the
Company also agreed to pay a fine of $2.0 million. The settlement concludes
matters between the Company and the IC. The entire amount of the settlement has
been accrued for at December 31, 1996.

The indictment as initially filed against the Company alleged conspiracy to
violate federal election laws, false statements to a government agency,
falsification of books and records, false statements to auditors, various
securities law violations and other matters. The allegations were made in
connection with alleged corporate reimbursement of individual campaign
contributions to the 1993 Congressional primary campaign of Henry Espy, brother
of Mike Espy and an amount paid as a retainer to an attorney who used the funds,
allegedly with the knowledge of an officer of the Company, to retire certain
Congressional primary campaign debts of Henry Espy. In January 1997, the court
dismissed (i) 10 of the counts against the Company based on its ruling that the
Company had no duty to disclose uncharged criminal conduct under the concealment
prong of 18 U.S.C. ("Section 1001") and because the indictment did not
adequately allege the use of an affirmatively false writing under the false
statement prong of Section 1001 on various grounds, (ii) one count against the
Company based on its ruling that the Company had no duty to disclose the alleged
omissions to the investing public and (iii) one count based on its ruling that
venue did not lie in the District of Columbia for the charge of making and
keeping false records and accounts, but rather venue is determined by the laws
of the offense (the making and keeping of books, records and accounts).

D-16
<PAGE>
By its terms, the Company's agreement with the IC does not compromise or
preclude civil actions by other governmental regulatory authorities, such as the
Federal Election Commission, Securities and Exchange Commission, the USDA, or
state or federal insurance regulatory authorities, or shareholders as a result
of the allegations made by the IC and the Company's NOLO CONTENDERE plea. No
assurance can be given as to what action a regulatory authority might take in
response to the Company's plea and its agreement with the IC.

SECURITIES CLASS ACTION. On February 28, 1997, the Company agreed to a
settlement of the matter entitled IN RE CROP GROWERS SECURITIES LITIGATION (Civ.
No. 95-58-GF-PGH) with members of the class consisting of purchasers of the
Company's common stock during the period from February 15, 1995 to May 16, 1995.
The complaint alleged, among other things, that the Company made false and
misleading statements in publicly filed or disseminated documents to inflate
artificially the price of its stock. Specifically, plaintiffs' primary
allegation was that the Company's statements regarding the potential impact on
the Company's premiums and earnings for 1995 due to the passage of legislation
in the Fall of 1994 amending the MPCI program were false and misleading. Under
the settlement, the Company has agreed to pay $2.5 million, $1.22 million of
which is payable by the Company, with the remainder to be paid out under the
terms of a directors' and officers' insurance policy. The $1.22 million has been
accrued for at December 31, 1996. The settlement is subject to court approval.

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

Not applicable.

D-17
<PAGE>
PART II

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

The Company's common stock trades on the NASDAQ Stock Market under the
symbol "CGRO." The following table sets forth the high and low sales price of
the Common Stock as quoted by the NASDAQ Stock Market during the periods set
forth below.

<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1995 1st Quarter.......................................................... $ 28.00 $ 14.00
2nd Quarter.......................................................... 33.00 11.25
3rd Quarter.......................................................... 16.75 13.38
4th Quarter.......................................................... 15.00 11.50

1996 1st Quarter.......................................................... $ 16.25 $ 6.00
2nd Quarter.......................................................... 11.75 7.00
3rd Quarter.......................................................... 10.50 6.88
4th Quarter.......................................................... 7.50 5.88
</TABLE>

The Company, which was formed in April 1994, has not paid any dividends on
its common stock. The Company currently intends to retain earnings to finance
the growth and development of its business and does not currently anticipate
paying cash dividends on its common stock in the foreseeable future. Any
determination to pay cash dividends on the common stock will depend on, among
other things, future earnings, capital requirements and the financial condition
and liquidity of the Company, legal restrictions on the payment of dividends,
and on such other factors as the Company's Board of Directors may consider
relevant. As a holding company, the Company depends on dividends from its
subsidiaries to meet its expenses and other corporate obligations and to pay
dividends to stockholders. In the case of Plains and Dawson, such payments are
restricted by the laws of the States of Kansas and Texas and the State of North
Dakota, respectively, which provide that dividends must be paid out of earned
surplus (earned surplus is calculated after reserving a sum equal to all
liabilities of Plains and Dawson and may include all or part of surplus arising
from unrealized capital gains or revaluation of assets). In addition, Kansas,
North Dakota and Texas law limits an insurance company's ability to pay
extraordinary dividends. In general, the Kansas, North Dakota and Texas laws
relating to such extraordinary dividends limits the aggregate amount of
dividends or other distributions that Plains or Dawson may declare or pay to the
Company within any 12 month period without the permission of the Kansas, North
Dakota or Texas Commissioner of Insurance, and requires that Plains' and
Dawson's statutory surplus following any such dividend or distribution be
reasonable in relation to its outstanding liabilities and adequate to meet its
financial needs. During 1996, Plains and Dawson paid dividends to the Company of
$500,000 and $2.5 million, respectively, from earned surplus. These payments
were not considered extraordinary dividends. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."

In 1996, the Company paid $239,000 in dividends on its Series A Convertible
Preferred Stock held by Fireman's Fund. See Note 5 of Notes to Consolidated
Financial Statements.

The approximate number of holders of record of the Company's common stock as
of March 18, 1997 was 107 according to Chase Mellon, the Company's transfer
agent.

D-18
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------
1996 1995 1994 1993 1992
---------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:

Revenues:
Service fees............................................ $ 104,602 $ 85,025 $ 48,100 $ 26,733 $ 19,122
Premiums earned and other income........................ 4,309 701 2,203 524 --
Investment income....................................... 2,255 2,163 1,397 587 323
---------- --------- --------- --------- ---------
Total revenues........................................ 111,166 87,889 51,700 27,844 19,445

Expenses:
Agent commissions and other direct costs................ 71,082 52,612 30,475 20,203 14,065
Losses incurred and other expenses...................... 2,420 (2,013) 1,428 -- --
General and administrative expenses..................... 33,699 28,886 11,526 5,765 4,882
Restructuring and non-core expenses..................... 6,510 -- -- -- --
Legal matters........................................... 7,458 -- -- -- --
Interest expense........................................ 1,478 859 394 431 505
---------- --------- --------- --------- ---------
Total expenses........................................ 122,647 80,344 43,823 26,399 19,452

(Loss) income before income taxes
and minority interest................................... (11,481) 7,545 7,877 1,445 (7)
Income taxes............................................ 3,345 (2,943) (2,274) -- --
Minority interest....................................... (67) (307) (279) -- --
---------- --------- --------- --------- ---------
Net (loss) income..................................... (8,203) 4,295 5,324 1,445 (7)

Redeemable preferred stock dividend..................... (239) -- -- -- --
---------- --------- --------- --------- ---------
Net (loss) income attributable to common stock........ $ (8,442) $ 4,295 $ 5,324 $ 1,445 $ (7)
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------

Pro Forma Data(1):
Historic net (loss) income.............................. $ -- $ -- $ 5,324 $ 1,445 $ (7)
Pro forma provision for income taxes.................... -- -- (281) (542) 3
---------- --------- --------- --------- ---------
Pro forma net (loss) income............................. $ -- $ -- $ 5,043 $ 903 $ (4)
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------

Pro forma net income per common share................... $ -- $ -- $ .91 $ .22 $ --

Net (loss) income per common share...................... $ (1.04) $ .51 $ -- $ -- $ --

Weighted average common shares
outstanding........................................... 8,109 8,353 5,562 4,074 --
</TABLE>

D-19
<PAGE>

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- --------- --------- ---------
(IN THOUSANDS, EXCEPT NUMBER OF POLICIES)
<S> <C> <C> <C> <C> <C>
STATISTICAL DATA(2):

MPCI:
Buy-Up Coverage premiums............................
serviced(3)(4)...................................... $ 222,422 $ 155,249 $ 114,576 $ 70,709 $ 45,752
Market share........................................ 15.9% 14.4% 12.5% 9.4% 6.0%
Number of policies.................................. 99,389 71,114 53,267 36,050 24,167

Basic Coverage premiums serviced(4)................. $ 48,525 $ 34,954 $ -- $ -- $ --
Market share........................................ 22.6% 20.2% -- -- --
Number of policies.................................. 49,494 42,642 -- -- --

Crop Hail:
Premiums serviced................................... $ 82,991 $ 69,625 $ 26,164 $ 9,951 $ 9,564
Market share........................................ 13.2% 13.3% 5.0% 2.0% 2.3%
Number of policies.................................. 35,479 32,720 12,940 4,942 4,168

BALANCE SHEET DATA:

Total assets............................................ $ 158,929 $ 153,465 $ 88,175 $ 35,230 $ 20,337
Long-term debt, excluding current installments.......... 2,654 3,374 1,978 1,621 618
Redeemable preferred stock.............................. 10,000(5) -- -- 3,250 --
Stockholders' equity.................................... 33,752 44,342 38,669 1,960 1,176
</TABLE>

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

(1) Reflects federal and state income taxes as if the Company's subsidiaries had
not been treated as S Corporations during periods prior to the Company's
initial public offering in June 1994.

(2) Statistical data related to MPCI are presented on a July 1 to June 30 crop
year basis (e.g., information for 1996 relates to July 1, 1995 to June 30,
1996 crop year). All crop hail statistics are presented on a calendar year
basis. Market share information for MPCI and crop hail is derived from
industry statistics published by the FCIC and National Crop Insurance
Services, a statistical and rate filing organization ("NCIS"), respectively.
Market share information for Basic Coverage is only based on the total Basic
Coverage premiums written by private insurers.

(3) MPCI premiums represent premiums actually paid by the policyholder plus the
portion of the premium subsidized and actuarially assumed by the FCIC.

(4) MPCI premiums serviced in the 1995 crop year represent actual premiums
serviced by the Company and exclude the effect of the Dawson acquisition.

(5) Represents issuance of redeemable preferred stock to Fireman's Fund in July
1996. See Note 5 to Notes to Consolidated Financial Statements.

D-20
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

The following should be read in conjunction with the Company's Consolidated
Financial Statements and notes thereto included elsewhere in the Company's
Annual Report on Form 10-K.

AGENCY OPERATIONS

SERVICE FEES

The Company's agency operations revenues include service fees related to the
servicing of MPCI and crop hail insurance, excess loss adjusting expense
reimbursement related to MPCI premiums serviced and profit sharing amounts, if
any, resulting from underwriting gains, if any, on the premiums it services.

For Buy-Up Coverage, the Company is entitled to the expense reimbursement
payable by the FCIC. This expense reimbursement is passed through to the Company
under its MPCI contracts with third party insurance companies and is paid
directly to the Company for MPCI premiums underwritten by its property and
casualty insurance subsidiaries. For the 1997 crop year, beginning July 1, 1996,
the expense reimbursement for Buy-Up Coverage was established by the FCIC at
29%. For the 1996 and 1995 crop years, the expense reimbursement for Buy-Up
Coverage was established by the FCIC at 31%.

For Basic Coverage, the Company retains a portion of the administrative fee
paid by the insured and receives an amount for loss adjusting expenses
(regardless of the loss experience of the insureds), which amounts are passed
through or paid directly to the Company under its MPCI contracts. For Basic
Coverage, the Company's portion of the administrative fee is up to the first
$100 of the fee paid by the insured and the loss adjusting expense reimbursement
which is equal to 4.7% of an imputed premium (based upon a 65% production
guarantee at a 100% price election).

The expense reimbursement level for the 1998 and 1999 crop years for Buy-Up
coverage is limited under the Reform Act to levels not to exceed 28% and 27.5%,
respectively. See the following paragraph for a discussion of proposed changes
to the expense reimbursement level for the 1998 crop year. Because the Company's
MPCI service fees are directly related to the expense reimbursement established
by the FCIC, the Company's future MPCI service fees will be affected by
reductions in the level of expense reimbursement. Prior to the 1996 crop year,
the impact of FCIC expense reimbursement level reductions on the Company's net
earnings had been minimized because the Company had reduced its agents'
commissions in order to minimize the impact on its margin on MPCI business. MPCI
agent commissions vary by agent depending on such factors as the volume of
premium produced by the agent, whether or not the agent is responsible for any
direct costs and other competitive factors. The Company believes, based on
competitive factors within the industry, that it will have to absorb a
significant portion of the expense reimbursement reduction in the 1997 crop
year.

On March 20, 1997, a draft of the SRA (effective for the 1998 crop year) was
released by the FCIC. The draft SRA proposes to revise the expense reimbursement
for Buy-Up Coverage to an amount equal to a flat $100 per policy plus 18% of the
premium related to that policy (17% in the case of Crop Revenue Coverage
policies, a revenue protection coverage introduced by the FCIC in the 1997 crop
year). For Basic Coverage, private companies would receive a flat $50 per policy
plus 4.8% of the premium related to that policy (based on a 50% production
guarantee at a 60% price election). The draft SRA also proposes certain changes
to the risk sharing arrangement (calculation of underwriting gain or loss on
premiums retained by private companies) between private companies and the FCIC.
Under the proposed draft, private companies would receive the expense
reimbursement in one installment at the time acreage reports are reported to and
validated by the FCIC. The draft SRA also proposes certain other changes to the
administration of the MPCI program, including certain compliance and program
integrity issues. Earlier in 1997 and as a part of the Clinton Administration's
budget proposal for the government's 1998 fiscal year, funding for the expense
reimbursement was proposed at 24.5% for the 1998 crop year.

D-21
<PAGE>
reimbursement), if implemented as proposed, would have an adverse impact on the
Company's results of operations in the 1998 crop year. The FCIC has requested
written comments on the proposed SRA draft by April 11, 1997. The Company cannot
predict what the final terms of the SRA will ultimately be or what other
legislative or administrative actions may occur as a part of the SRA revision
process or the federal budget process. For the 1998 crop year the Company
expects to negotiate with agents regarding reduced commissions on Buy-Up
coverage to offset expense reimbursement reductions, however, there is no
assurance that any reduction will be able to be passed through to agents as a
result of competitive or other factors.

Under its MPCI contracts, the Company is also entitled to receive any excess
loss adjustment expense reimbursement from the FCIC. The FCIC pays contracting
insurance companies an amount up to 4% of premium on Buy-Up coverage for excess
loss adjusting expenses on such coverage if loss ratios on the Company's total
book of MPCI business, by state and by risk retention fund, are in excess of the
ratios established by the FCIC. Generally, the excess loss adjustment expense
reimbursement increases as the loss ratio increases. Under Basic Coverage
policies, the FCIC pays contracting insurance companies an amount up to 1.7% of
the imputed premium for excess loss adjusting expenses in the event loss ratios
on the overall book of Basic Coverage are in excess of loss ratios established
by the FCIC.

Additionally, the Company has arrangements with its third party insurance
companies pursuant to which it is entitled to receive a percentage of the
underwriting gains, if any, on MPCI premiums it services. These gains, or profit
sharing, are reflected as additional service fees.

The Company's operating results may vary significantly depending on the
underwriting results of the premiums serviced and underwritten by it. The
Company does not assume any of the underwriting loss under its MPCI agreements
with third party insurers; and under the Company's MPCI agreement with Fireman's
Fund, there is no loss carryforward to reduce future underwriting gains.
Underwriting gains or losses on crop insurance are generally not determinable
until sometime after the second quarter of any year and, accordingly, the
Company expects that revenues, if any, from these arrangements will typically be
recognized in the third and fourth quarters. Underwriting gains on premiums
serviced by the Company are recognized by the Company as additional service fees
and, because they generally have very low related expenses, can have a material
impact on the Company's operating results. Accordingly, although the Company's
risk management strategy is to minimize its exposure to underwriting risk, the
Company's earnings can be materially affected by factors which impact
underwriting results and, accordingly, its portion of any underwriting gains,
including the timing and severity of losses from storms and other natural
perils.

The Company's service fees related to crop hail insurance are a percentage
of the premiums serviced for third party insurance companies.

AGENT COMMISSIONS AND OTHER DIRECT COSTS

Agent commissions and other direct costs related to marketing and servicing
MPCI are obligations of the Company under its MPCI agreements and, accordingly,
are reflected as expenses of the Company. Additionally, agent commissions and
other direct costs on crop hail insurance are generally direct obligations of
the Company and, therefore, are reflected as expenses of the Company. Under the
Company's crop hail contract with CNA, agent commissions and other direct costs,
except loss adjusting expense, are the direct obligations of CNA and therefore
are not reflected as an expense of the Company.

Other direct costs include overwrite fees payable to third party insurance
companies, loss adjusting expenses, premium taxes on crop hail insurance, bureau
fees and other costs. These costs, except for loss adjusting expense, vary
proportionally with the amount of premiums serviced. Beginning in the 1997 crop
year and as a result of the restructuring of its MPCI agreement with Fireman's
Fund, the Company will no longer pay any overwrite fees on MPCI premiums it
places with Fireman's Fund.

D-22
<PAGE>
reviewed periodically and variances, if any, in estimated versus actual amounts
are reflected in current operations. In some instances, agents are responsible
for loss adjusting expenses or other direct costs associated with policies sold
by them, and those agents generally receive higher commissions in return for the
assumption of those direct costs. Bureau fees are fees charged by NCIS for
providing rates and procedures required to be used by the FCIC.

RECOGNITION OF SERVICE FEES AND DIRECT COSTS

Crop Growers recognizes service fees from MPCI policies and the related
direct costs as of the sales closing date for the particular policy. The sales
closing date, which is established by the FCIC, is the date on which coverage
for a crop must be bound or renewed by the policyholder and when substantially
all required services relating to placing the insurance have been rendered by
the Company. Unless canceled by the farmer, policies in place from the prior
year automatically renew on the same terms on the sales closing date.

Since sales closing dates precede the date on which farmers plant their
insured crop, MPCI coverage and related premiums are estimated by the Company
until the farmer subsequently submits his or her report on actual acreage
planted. The effect of changes in such estimated premiums are included in the
results of operations in the period in which the estimates are changed.

For crop hail insurance, service fees are recognized when the insurance
coverage is accepted by the insurance company, which is concurrent with the
completion of substantially all services required to be performed by the
Company. Direct costs such as agent commissions, loss adjusting and premium
taxes are recognized at the time service fees are recognized.

The Company recognizes service fees under the profit sharing provisions of
its agreements with third party insurance companies when a reasonable estimate
can be made. The Company generally recognizes profit sharing, if any, in the
third and fourth quarters.

SOFTWARE OPERATIONS

The Company's software operations revenues include sales of VisAg-TM-
software, mapping products, and hardware products. Costs include commissions on
software and mapping sales, mapping product development costs, hardware costs,
and other direct costs such as shipping, postage, and packaging. The VisAg-TM-
product is a PC-based map driven farm management system designed for use by
small family farms to large corporate operations. Mapping products are computer
generated geo-referenced maps which allow an agent or farmer to view an entire
agricultural operation on a single map. Hardware products represent various
hardware products manufactured by third parties sold to agents and other outside
customers. Revenues from the sale of VisAg-TM-, mapping products and hardware
are recognized upon shipment to the customer.

Sales of VisAg-TM- and other mapping products have not made a significant
contribution to revenues or earnings since their introduction. Management
continues to assess the VisAg-TM- product marketing and distribution strategy,
does not expect to achieve significant profitability in its software operations
in 1997 and will seek to manage these operations to a break even level. The
Company does, however, continue to believe map based technology is important in
supporting its crop insurance operations and will continue to develop products
or applications for use by its agency distribution network.

INSURANCE OPERATIONS

The Company's insurance operations include premiums earned and losses
incurred on Buy-Up and Basic Coverages, crop hail, and farm and ranch insurance
coverages underwritten and retained by the Company's property and casualty
insurance company subsidiaries.

For the 1996 and 1997 crop years, the Company did not and will not retain
any MPCI premiums underwritten by its insurance company subsidiaries. For the
1996 crop hail season, the Company retained 15% of crop hail premiums
underwritten by Dawson. In 1995, Dawson retained a certain amount of risk on

D-23
<PAGE>
premiums underwritten and reinsured prior to its acquisition by the Company in
excess of the Company's risk retention strategy.

INVESTMENT INCOME

Historically, the Company has derived investment income from interest
charged to policyholders who elect not to pay their MPCI premiums on the FCIC
established due date and from investments. Under the MPCI program, the FCIC
charges interest at a rate of 1.25% per month on overdue premiums and the
insurance company, which is responsible for payment of the policyholder's
premiums to the FCIC, passes such interest cost on to the policyholder.

The Company has agreed with its contracting insurance companies to assume
the responsibility for such payments to the FCIC and, therefore, receives
interest payments made by policyholders on deferred premiums. In the event of an
insured loss, the Company deducts premium payments and interest, if any, from
the claim payment to the farmer.

The Company also earns investment income on interest and dividends on
investment securities and excess cash invested at certain times of the year,
which typically occurs after MPCI and crop hail premiums are collected. Realized
gains and losses on the sale of investments are included in investment income.
Also included in investment income are income and losses on investments in
companies which are 50% or less owned by the Company, which are accounted for
under the equity method.

SEASONALITY

The Company's quarterly operating results vary substantially from quarter to
quarter as a result of various factors, including MPCI sales closing dates, crop
production cycles and recognition of underwriting gains, if any. The Company
recognizes the highest amount of service fees and related direct costs in the
first quarter because the sales closing date for the majority of spring crops is
March 15. The majority of these amounts are attributed to service fees related
to MPCI. Virtually all of the Company's service fees and direct costs related to
crop hail insurance are recognized in the second quarter. The Company generally
recognizes its second highest amount of revenues and related direct costs in the
third quarter because the MPCI sales closing date for the majority of fall crops
is September 30. In addition, the Company may recognize a portion of
underwriting gains or losses, if any, on the premiums it services or underwrites
in the third quarter. In the fourth quarter, the Company also recognizes
underwriting gains or losses, if any, on the premiums it services or
underwrites, most of the interest income on MPCI deferred premium financing and
service fees on MPCI premiums with sales closing dates occurring in the fourth
quarter. Crop Growers cannot predict whether MPCI sales closing dates will be
changed in the future, but any such change could have a material effect on the
Company's quarterly results of operations. Because the Company's business is
directly tied to the production cycle of crops, the Company expects that
seasonal patterns in its operating results will continue.

RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1995

AGENCY OPERATIONS. Service fees in the year ended December 31, 1996
increased $19.6 million to $104.6 million from $85.0 million in the year ended
December 31, 1995. Although overall MPCI premiums serviced increased during
1996, the increase was primarily the result of the acquisition of Dawson and
FCIC established rate increases on MPCI premiums in the 1996 crop year. The
increase was partially offset by a loss of premiums written by certain agencies
who elected to have their premiums serviced by other insurance companies, a
reduction in the expense reimbursement paid by the FCIC from 31% in the 1996
crop year to 29% in the 1997 crop year and the impact of the dissolution of its
MPCI agreement with CNA. See "--Restructuring and Non-Core Expenses." Management
believes the Company's premiums in the first quarter of 1997 will continue to be
adversely impacted by certain factors including competitive pressures,
principally relating to commissions, and the dissolution of its MPCI agreement
with CNA.

D-24
<PAGE>
Also included in service fees is $10.9 million in profit sharing revenue in
the year ended December 31, 1996 as compared to $9.1 million in the year ended
December 31, 1995. The increase in profit sharing was primarily the result of
the increase in premiums serviced in 1996 compared to 1995. Profit sharing
revenue as a percentage of premiums serviced decreased to 4.9% in 1996 from 5.8%
in 1995. The decrease was primarily attributed to less favorable underwriting
results on the premiums serviced in 1996 as compared with 1995.

In addition to profit sharing, the Company also recorded excess loss
adjusting expense reimbursement of $2.0 million in the year ended December 31,
1996 as compared to $3.3 million in the year ended December 31, 1995. Included
in the $3.3 million of excess loss adjusting expense reimbursement in 1995 was
$1.7 million of excess loss adjusting expense reimbursement associated with hold
harmless provisions on certain prevented planting claims specific to the 1995
crop year.

Agent commissions and other direct costs in the year ended December 31, 1996
increased by $18.5 million to $71.1 million from $52.6 million in the year ended
December 31, 1995. The increase in agent commissions and other direct costs was
primarily a result of the increased MPCI and crop hail premiums serviced. Agent
commissions increased as a percentage of premiums serviced in 1996 as compared
to 1995 due to competitive pressures which forced the Company to, in several
areas of the country, increase commissions offered to agents.

Also included in agent commissions and other direct costs in the year ended
December 31, 1996, were $3.2 million in charges related to the Company's
assessment of the adequacy of the allowance for uncollectible receivables.
Approximately $2.0 million of this charge was recognized in the fourth quarter
of 1996. These charges, resulted from management's ongoing review and analysis
of the collectibility of outstanding receivables which were recorded primarily
during 1994, 1995 and 1996. The Company, through review of historical trends and
analysis, evaluates the adequacy of its allowance each quarter and charges to
the allowance are made at such date, if necessary, based on management's best
estimate of collectibility of the then outstanding receivables. In determining
the necessary allowance for uncollectible receivables at December 31, 1996, the
Company considered (i) the historical collection experience of receivables, (ii)
the collectibility of certain balances, and (iii) the growth in the volume of
premiums serviced. The Company also considered that collection efforts during a
portion of 1996 were not performed efficiently which increased the aging of the
receivables. The Company believes that collection efforts have been refocused,
but the increased agings have increased the Company's credit exposure on
historical balances thus resulting in the need for a larger allowance.
Additionally, the Company considered its decision to enforce the MPCI policy
cancellation provisions for non-payment of premiums by the insured. During 1996,
the Company implemented a policy whereby, virtually all uncollected policies
were canceled. This policy change should allow the Company to more quickly
determine potential uncollectible accounts. The short-term effect was additional
collection efforts and an increase in the amount of uncollectible accounts. The
long-term benefit is expected to be fewer bad debts related to ongoing policies
serviced. The Company does not believe that the decision to enforce the policy
cancellation provision will have a significant impact on its service fee
revenues.

INSURANCE OPERATIONS. Premiums earned increased to $2.5 million in 1996
from $(182,000) in 1995. Losses incurred increased in 1996 to $1.3 million from
$(2.3) million. The increases were primarily due to crop hail premiums
underwritten and retained by Dawson in 1996. Dawson was not acquired until July
1995 which was after most crop hail premiums had been written for 1995.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 16.6% in the year ended December 31, 1996 to $33.7 million from $28.9
million in the year ended December 31, 1995. The increase was due primarily to
the increase in the number of employees hired to service increased MPCI premium
and crop hail premium volume and additional general and administrative costs
incurred as a result of the acquisitions made by the Company in 1995 as the
operations have now been included for a full year.

D-25
<PAGE>
Depreciation and amortization expenses increased to $3.3 million in the year
ended December 31, 1996 from $2.4 million in the year ended December 31, 1995.
The increase was primarily a result of increased property and equipment
purchased in late 1995 and 1996 and an increase in the amortization of
intangible assets as a result of the acquisitions during 1995.

RESTRUCTURING AND NON-CORE EXPENSES. In 1996, as a result of management's
assessment of the Company's core operation and focus on improving the
consistency of its financial performance and improving shareholder returns, the
Company recorded costs related to the relocation of the Company's corporate
headquarters and main office to Overland Park, Kansas, of $2.0 million, write
downs and losses on assets to be disposed of consisting of real estate and
software mapping of $1.3 million, losses on the discontinuation of certain
non-core business operations of $2.0 million, and costs accrued as a result of
the cancellation of certain agreements and contracts with third parties of $1.1
million.

Additionally, as a result of the dissolution of its MPCI agreement with CNA,
the Company was required to request agents to cancel and rewrite MPCI policies
previously written on CNA paper to Fireman's Fund, or one of its insurance
subsidiaries paper. For other competitive factors, including significant
incentive fees being offered to agents by competitors to induce agents to
transfer their books of business, the Company offered incentive fees to agents
to compensate them for obtaining the necessary cancellation and rewrite forms
from policyholders. In the year ended December 31, 1996, the Company agreed to
pay approximately $300,000 relating to transferred business. The Company expects
to pay approximately $1.5 million to $1.8 million of additional incentive fees
in the first quarter of 1997 as part of the cancellation and rewrite process.
The Company anticipates accruing these amounts consistent with the Company's
revenue recognition method. The Company believes these costs are a one-time
expenditure.

LEGAL MATTERS. In the year ended December 31, 1996, the Company incurred
approximately $4.0 million in expenses, primarily legal fees, in connection with
indictments of the Company and certain of its former officers by the Independent
Counsel appointed to investigate matters relating to former Secretary of
Agriculture, Mike Espy. Included in this amount, are amounts advanced by the
Company pursuant to indemnification agreements between the former officers and
the Company for the defense of the case. In January 1997, the Company settled
this matter and agreed to pay $2.0 million. This amount, which is not tax
deductible, was accrued as an expense in 1996.

The Company also incurred approximately $200,000 in the year ended December
31, 1996 in connection with defending a shareholder class action lawsuit filed
in May 1995. In February 1997, the Company settled this matter and agreed to pay
$2.5 million, $1.22 million of which is payable by the Company and the remainder
of which is payable under the terms of a directors' and officers' insurance
policy. The $1.22 million was accrued as an expense in 1996.

INTEREST EXPENSE. Interest expense increased to $1.5 million in the year
ended December 31, 1996 from $859,000 in the year ended December 31, 1995. The
increase in interest expense was a result of additional borrowings necessary to
finance operating expenses attributed to the increase in premium volumes as well
as MPCI deferred premiums in the 1996 crop year.

YEARS ENDED DECEMBER 31, 1995 AND 1994

AGENCY OPERATIONS. Service fees in the year ended December 31, 1995
increased $36.9 million to $85.0 million from $48.1 million in the year ended
December 31, 1994. The increase in service fees was primarily the result of an
increase in MPCI and crop hail premiums serviced, underwriting gains and
revenues from excess loss adjustment expense reimbursement. The increase in MPCI
premiums serviced was due, in part, to the overall increase in the Buy-Up
Coverage market as a result of the Reform Act, and the addition of Basic
Coverage beginning with the 1995 crop year. Actual premiums serviced by the
Company (including Dawson) during the 1995 crop year were $191.4 million and
$39.5 million for Buy-Up and Basic Coverage, respectively. During the 1995 crop
year, the FCIC made a one time change (in large

D-26
<PAGE>
part due to excess moisture which delayed planting in certain states) to excess
loss adjustment expense reimbursement to allow companies to recover additional
loss adjusting expenses associated with adjusting prevented planting claims. The
Company recognized $3.3 million in excess loss adjustment expense reimbursement
from the FCIC attributable to the 1995 crop year. A significant portion of this
was related to preventive planting claims. Crop hail premiums serviced increased
as a result of growth in the Company's business and as a result of the Dawson
acquisition.

Service fees also increased as the Company recognized $9.1 million of
underwriting gains in the year ended December 31, 1995 compared to $3.1 million
in the year ended December 31, 1994. The increase in the Company's share of
underwriting gains was primarily a result of increased premiums serviced, the
fact that there was no loss carryforward remaining under its MPCI contract with
CNA and favorable underwriting results on premiums retained by Dawson.

Agent commissions and other direct costs increased by $22.1 million to $52.6
million for the year ended December 31, 1995 compared to $30.5 million for the
year ended December 31, 1994. The increase in agent commissions and other direct
costs was a result of the increased MPCI premiums serviced by the Company during
the year ended December 31, 1995 compared to the same period in 1994 and as a
result of the loss adjusting costs associated with adjusting of claims incurred
in prevented planting. These increases were partially offset by the agency
acquisitions completed during the year which had the effect of moving direct
costs to general and administrative expenses as these agents became employees.
In addition, overwrite fees payable to third party insurance companies decreased
slightly as Plains and Dawson underwrote a larger percentage of the premiums
serviced by the Company in the year ended December 31, 1995 compared to 1994. As
a percentage of service fees, related agent commissions and other direct costs
decreased to 62.5% in 1995 from 63.5% in 1994.

INSURANCE OPERATIONS. Premiums earned decreased in 1995 to $(182,000) from
$1.3 million in 1994. Losses incurred decreased in 1995 to $(2.3) million from
$1.3 million in 1994. The decreases were due primarily to the acquisition of
Dawson. In connection with the purchase of Dawson, at July 14, 1995, initial
estimates were made of premiums and losses related to the MPCI and crop hail
business underwritten by Dawson prior to the acquisition. The Company's practice
is to estimate a breakeven underwriting result until late in the third quarter,
when more information is available on the underwriting results of its premiums
serviced. Subsequent to the acquisition, the FCIC changed the MPCI program to
provide insurance companies relief for most of the prevented planting losses,
and as a result the level of loss reserves estimated at the acquisition date was
higher than the amount ultimately necessary. This reduction of loss reserves
along with other changes in estimates made as of the acquisition date, resulted
in the business acquired having an underwriting gain of approximately $2.3
million.

INVESTMENT INCOME. Investment income increased $766,000 in the year ended
December 31, 1995 to $2.2 million from $1.4 million in the year ended December
31, 1994. The increase in investment income was due primarily to realized gains
on investment securities sold during 1995 to fund the Dawson acquisition.

INTEREST EXPENSE. The increase in interest expense was primarily due to
additional borrowings necessary to finance MPCI deferred premiums and operating
expenses attributed to the increase in premium volume as a result of the
extension by the FCIC of reporting deadlines for the 1995 crop year (which
delayed the Company's receipt of a portion of the expense reimbursement payable
to the Company on MPCI premiums) as well as additional long-term debt incurred
on the permanent financing of the Company's former headquarters in Great Falls,
Montana.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 150.6% to $28.9 million in the year ended December 31, 1995 from $11.5
million in the year ended December 31, 1994. The increase was due primarily to
the increase in the number of employees hired to service the increased MPCI
premium volume and additional general and administrative costs incurred as a
result of

D-27
<PAGE>
the acquisitions made by the Company in 1995. At December 31, 1995 the Company
had 524 employees, 142 of which were hired in 1995 as a result of acquisitions,
compared to 228 at December 31, 1994. The Company also incurred significant
start-up costs including development and marketing costs associated with the
initial release of VisAg-TM- in December 1995.

Depreciation and amortization expenses increased to $2.4 million in the year
ended December 31, 1995 from $1.0 million for the year ended December 31, 1994.
The increase was primarily a result of increased property and equipment
purchased to support the growth of the Company and an increase in the
amortization of intangible assets as a result of acquisitions.

INCOME TAXES. For the year ended December 31, 1994, the Company recognized
approximately $264,000 of a rehabilitation tax credit related to the renovation
of the Company's new office building which qualified as a historic structure.
This had the effect of reducing the Company's effective tax rate as compared to
the year ended December 31, 1995.

MINORITY INTEREST. Minority interest represents dividends accrued and the
accretion of discount on preferred stock issued in March of 1995, to fund the
Dawson acquisition. Also included in minority interest are earnings attributed
to minority shareholders.

LIQUIDITY AND CAPITAL RESOURCES

OPERATING ACTIVITIES

Net cash provided by operating activities was $5.4 million and $2.9 million
during 1996 and 1994, respectively, compared with cash used by operating
activities of $16.0 million in 1995. The increase in cash provided by operating
activities in 1996 was primarily the result of the receipt of income tax refunds
in 1996 and the delay in payment of operating expenses until January 1997. In
1995, the FCIC extended the payment due dates for the 1995 crop year by one
month for policyholders which delayed policyholders payments to the Company for
MPCI premiums due. This had the effect of delaying the Company's receipt of a
portion of the expense reimbursement payable to the Company on MPCI premiums
serviced. This delay, which did not happen in 1994, nor reoccur in 1996,
substantially increased cash used for operations during 1995.

INVESTING ACTIVITIES

Cash provided by investing activities was $22.4 million and $699,000 for
1996 and 1995, respectively, compared with cash used by investing activities of
$37.3 million in 1994. Historically, most of the Company's cash flow has been
used to pay premiums due to the FCIC in the last quarter of the year on behalf
of policyholders in order to earn the spread between the interest charged to the
policyholders, which is equal to the rate established by the FCIC, and the
Company's cost of funds. The increase in cash provided by investing activities
in 1996 was primarily a result of the Company not financing the premiums payable
to the FCIC on the 1996 crop year. In November 1996, Crop Growers and Fireman's
Fund amended their MPCI agreement pursuant to which Fireman's Fund financed the
premiums on behalf of the policyholders in exchange for the interest charged on
the deferred premiums. The Company continues to administer the collection of the
receivables and is ultimately responsible for the collection of the balances.
The Company receives a fee for administrative costs related to the premiums
financed. Deferred premiums financed at December 31, 1995, were $22.1 million
compared to $27.6 million at December 31, 1994. The portion of deferred premiums
financed at December 31, 1995, was less than 1994, due to less available funds
to finance premiums, primarily as a result of the Company's use of funds to
finance the acquisition of Dawson and the delay in receiving the excess loss
adjusting expense reimbursement from the FCIC for prevented planting until
January, 1996.

The remaining investing activities of the Company have been primarily
purchases and sales of investment securities, acquisitions and purchases of
property and equipment needed as a result of the

D-28
<PAGE>
growth of the Company. During 1996, a portion of the proceeds from the $6.1
million sale of investment securities were used by the Company to assist in
funding operations during 1996 and early 1997. Additionally, during 1995, the
Company used $9.1 million in proceeds from the sale of investment securities to
fund the acquisition of Dawson. During 1994, the Company invested $13.5 million
in investment securities. This amount represented proceeds from the Company's
two public offerings pending the need for corporate use.

FINANCING ACTIVITIES

Cash used by financing activities was $25.4 million in 1996, compared with
cash provided by financing activities of $18.6 million and $34.1 million for
1995 and 1994, respectively. The primary source of cash during 1996 was $10
million from the issuance of redeemable preferred stock to Fireman's Fund. The
primary use of cash during 1996 was to repay amounts outstanding under the
Company's line of credit of $32.2 million. The primary sources of cash during
1995 and 1994 were from draws on the Company's line of credit to pay the
deferred premiums due to the FCIC on behalf of policyholders and $35.9 million
in 1994 of net proceeds received in the Company's two public offerings. The
Company also redeemed $3.5 million of subsidiary preferred stock during 1994.

In addition, during 1996, the Company repurchased $2.1 million of common
stock from employees and certain former executive officers under separation
agreements with the officers and employees. The Company purchased an additional
$85,000 of stock in January 1997 as the last required purchases under the
agreements. See Note 8 of Notes to Consolidated Financial Statements.

The Company paid $239,000 in dividends during 1996 relating to its preferred
stock issued to Fireman's Fund in July 1996. The Company has not paid dividends
on its common stock. The Company currently intends to retain earnings to finance
the growth and development of its business and does not currently anticipate
paying cash dividends on its common stock in the foreseeable future.

CAPITAL RESOURCES

Historically, the Company has maintained lines of credit to finance working
capital needs and premiums on behalf of policyholders who elect not to pay their
MPCI premiums on the FCIC established due date and to fund crop hail losses in
advance of reimbursement from the contracting insurance companies. These lines
of credit expired in October and November 1996 and were not renewed.

In connection with the March 1997 acquisition agreement between the Company
and Fireman's Fund, Fireman's Fund has agreed to provide the Company with a
working capital line of credit of up to $15 million subject to certain borrowing
base limitations in the event that the Company is not able to secure third party
financing. The credit agreement includes restrictive covenants and the
requirement to maintain certain financial ratios and minimum net worth. The
commitment which will expire in March 1998, does not contain any loan or
commitment fees and borrowings bear interest at national bank's base rate. If
the Company were to terminate the acquisition agreement with Fireman's Fund, any
amounts then outstanding under the line of credit would become immediately due
and payable.

In addition, under the crop hail general agency agreement between the
Company and Fireman's Fund, Fireman's Fund will fund crop hail losses.
Accordingly, the Company will not need to finance crop hail losses in 1997.

The Company believes that the cash generated from operations and the
availability of borrowings under the Fireman's Fund commitment to provide
working capital will provide sufficient resources to finance the Company's
current operations and projected working capital needs for the next 12 months.

D-29
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Independent Auditors' Report.............................................................................. D-31

Consolidated Financial Statements:

Statements of Operations for the years ended December 31, 1996, 1995 and 1994........................... D-32

Balance Sheets as of December 31, 1996 and 1995......................................................... D-33

Statements of Stockholders' Equity for the years ended December 31, 1996, 1995 and 1994................. D-34

Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994........................... D-35

Notes to Consolidated Financial Statements................................................................ D-36
</TABLE>

D-30
<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders

Crop Growers Corporation:

We have audited the accompanying consolidated balance sheets of Crop Growers
Corporation and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1996. These
consolidated 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 Crop Growers
Corporation and subsidiaries as of December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP

Kansas City, Missouri
March 28, 1997

D-31
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994

<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Revenues:
Service fees................................................... $104,602,376 $85,025,204 $48,100,395
Premiums earned and other income............................... 4,308,467 700,910 2,202,499
Investment income.............................................. 2,255,324 2,162,613 1,396,713
------------ ----------- -----------
Total revenues............................................... 111,166,167 87,888,727 51,699,607
Expenses:
Agent commissions and other direct costs....................... 71,082,490 52,611,960 30,475,468
Losses incurred and other expenses............................. 2,420,666 (2,012,311) 1,427,218
General and administrative expenses............................ 33,698,919 28,885,688 11,525,930
Restructuring and non-core expenses............................ 6,509,628 -- --
Legal matters.................................................. 7,458,044 -- --
Interest expense............................................... 1,477,595 858,640 394,167
------------ ----------- -----------
Total expenses............................................... 122,647,342 80,343,977 43,822,783
------------ ----------- -----------
(Loss) income before income taxes and minority interest........ (11,481,175) 7,544,750 7,876,824
Income tax benefit (expense)................................. 3,345,732 (2,942,452) (2,273,435)
Minority interest............................................ (67,227) (306,987) (279,819)
------------ ----------- -----------
Net (loss) income.............................................. (8,202,670) 4,295,311 5,323,570
Redeemable preferred stock dividend.......................... (238,889) -- --
------------ ----------- -----------
Net (loss) income attributable to common stock................. $ (8,441,559) $ 4,295,311 $ 5,323,570
------------ ----------- -----------
------------ ----------- -----------
Pro forma data (see Note 7):
Historic net income............................................ $ -- $ -- $ 5,323,570
Pro forma provision for income taxes........................... -- -- (280,975)
------------ ----------- -----------
Pro forma net income........................................... $ -- $ -- $ 5,042,595
------------ ----------- -----------
------------ ----------- -----------
Pro forma net income per common share............................ $ -- $ -- $ 0.91
------------ ----------- -----------
------------ ----------- -----------
Net (loss) income per common share............................... $ (1.04) $ .51 $ --
------------ ----------- -----------
------------ ----------- -----------
Weighted average common shares outstanding....................... 8,108,600 8,352,837 5,562,374
------------ ----------- -----------
------------ ----------- -----------
</TABLE>

See accompanying notes to consolidated financial statements.

D-32
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities, held to maturity............................. $ 1,308,439 $ 2,311,177
Fixed maturities, available for sale........................... 5,199,708 5,838,391
Equity securities, available for sale.......................... -- 1,757,540
------------ ------------
Total investments............................................ 6,508,147 9,907,108

Cash and cash equivalents--corporate funds....................... 8,635,308 6,315,417
Cash and cash equivalents--restricted funds...................... 7,496,818 665,153
Premiums receivable, net......................................... 57,536,838 60,944,012
Underwriting gain receivable..................................... 14,317,285 12,926,642
Reinsurance balances recoverable................................. 32,625,869 31,779,006
Property and equipment, net...................................... 5,242,447 11,687,066
Intangible assets, net........................................... 9,857,238 10,528,630
Income tax recoverable........................................... 4,949,064 5,434,737
Deferred tax asset............................................... 1,861,640 --
Other assets..................................................... 9,898,474 3,277,131
------------ ------------
$158,929,128 $153,464,902
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Premiums payable................................................. $ 29,504,825 $ 6,336,084
Commissions payable.............................................. 16,239,692 14,142,811
Underwriting gain payable........................................ 1,216,780 4,512,961
Deferred tax liability........................................... -- 1,244,852
Accounts payable and accrued liabilities......................... 12,253,886 4,259,312
Reinsurance balances payable..................................... 17,010,461 17,787,551
Loss reserves.................................................... 32,147,342 21,726,157
Deferred service fees............................................ 3,513,445 2,678,871
Notes payable to bank............................................ -- 32,245,539
Long-term debt................................................... 3,290,672 4,188,540
------------ ------------
115,177,103 109,122,678
Redeemable preferred stock....................................... 10,000,000 --

Stockholders' equity
Common stock (par value $.01): 40,000,000 shares authorized;
7,970,251 and 8,172,581 shares issued and outstanding at
December 31, 1996 and December 31, 1995, respectively........ 79,702 81,726
Paid-in capital................................................ 36,729,115 38,244,567
Accumulated (deficit)/retained earnings........................ (3,086,499) 5,881,973
Unrealized appreciation of fixed maturity and equity
investments, net of taxes.................................... 54,707 208,958
Unearned compensation.......................................... (25,000) (75,000)
------------ ------------
Total stockholders' equity................................... 33,752,025 44,342,224

Commitments and contingencies (Notes 11, 13 and 16)..............
------------ ------------
$158,929,128 $153,464,902
------------ ------------
------------ ------------
</TABLE>

See accompanying notes to consolidated financial statements.

D-33
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
ACCUMULATED UNREALIZED
COMMON STOCK (DEFICIT) APPRECIATION
-------------------- PAID-IN INVESTED RETAINED (DEPRECIATION)
SHARES PAR VALUE CAPITAL CAPITAL EARNINGS OF INVESTMENTS
--------- --------- ----------- --------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1993............. -- $ -- $ -- $ 643,191 $ 1,316,812 $ --
Net income............................ -- -- -- -- 5,323,570 --
Net contributions..................... -- -- -- 29,130 -- --
Reorganization........................ 3,570,000 35,700 5,338,099 (672,321) (4,701,478) --
Change in unrealized appreciation
(depreciation) of fixed maturity
investments, net of taxes........... -- -- -- -- -- (71,734)
Dividends and distributions........... -- -- (4,140,000) -- -- --
Issuance of common stock, net of
offering costs of $4,584,618........ 4,180,748 41,807 35,829,186 -- -- --
Issuance of restricted stock.......... 20,000 200 149,800 -- -- --
Restricted stock compensation
earned.............................. -- -- -- -- -- --
--------- --------- ----------- --------- ------------- --------------
Balances, December 31, 1994............. 7,770,748 77,707 37,177,085 -- 1,938,904 (71,734)
Restatement for immaterial pooling of
interests........................... 316,500 3,166 20,835 -- (352,242) --
--------- --------- ----------- --------- ------------- --------------
Balances, December 31, 1994, as
restated.............................. 8,087,248 80,873 37,197,920 -- 1,586,662 (71,734)
Net income............................ -- -- -- -- 4,295,311 --
Issuance of common stock in
conjunction with acquisition........ 46,933 469 759,031 -- -- --
Exercise of stock options............. 38,400 384 287,616 -- -- --
Restricted stock compensation
earned.............................. -- -- -- -- -- --
Change in unrealized appreciation
(depreciation) of fixed maturity and
equity investments, net of taxes.... -- -- -- -- -- 280,692
--------- --------- ----------- --------- ------------- --------------
Balances, December 31, 1995............. 8,172,581 81,726 38,244,567 -- 5,881,973 208,958
Net loss.............................. -- -- -- -- (8,202,670) --
Exercise of stock options............. 1,920 19 14,381 -- -- --
Repurchase of common stock............ (204,250) (2,043) (1,529,833) -- (526,913) --
Dividends paid on preferred stock..... -- -- -- -- (238,889) --
Restricted stock compensation
earned.............................. -- -- -- -- -- --
Change in unrealized appreciation
(depreciation) of fixed maturity and
equity investments, net of taxes.... -- -- -- -- -- (154,251)
--------- --------- ----------- --------- ------------- --------------
Balances, December 31, 1996............. 7,970,251 $79,702 $36,729,115 $ -- $(3,086,499) $ 54,707
--------- --------- ----------- --------- ------------- --------------
--------- --------- ----------- --------- ------------- --------------

TOTAL
UNEARNED STOCKHOLDERS'
COMPENSATION EQUITY
------------ -------------
<S> <C> <C>
Balances, December 31, 1993............. $ -- $ 1,960,003
Net income............................ -- 5,323,570
Net contributions..................... -- 29,130
Reorganization........................ -- --
Change in unrealized appreciation
(depreciation) of fixed maturity
investments, net of taxes........... -- (71,734)
Dividends and distributions........... -- (4,140,000)
Issuance of common stock, net of
offering costs of $4,584,618........ -- 35,870,993
Issuance of restricted stock.......... (150,000) --
Restricted stock compensation
earned.............................. 25,000 25,000
------------ -------------
Balances, December 31, 1994............. (125,000) 38,996,962
Restatement for immaterial pooling of
interests........................... -- (328,241)
------------ -------------
Balances, December 31, 1994, as
restated.............................. (125,000) 38,668,721
Net income............................ -- 4,295,311
Issuance of common stock in
conjunction with acquisition........ -- 759,500
Exercise of stock options............. -- 288,000
Restricted stock compensation
earned.............................. 50,000 50,000
Change in unrealized appreciation
(depreciation) of fixed maturity and
equity investments, net of taxes.... -- 280,692
------------ -------------
Balances, December 31, 1995............. (75,000) 44,342,224
Net loss.............................. -- (8,202,670)
Exercise of stock options............. -- 14,400
Repurchase of common stock............ -- (2,058,789)
Dividends paid on preferred stock..... -- (238,889)
Restricted stock compensation
earned.............................. 50,000 50,000
Change in unrealized appreciation
(depreciation) of fixed maturity and
equity investments, net of taxes.... -- (154,251)
------------ -------------
Balances, December 31, 1996............. $ (25,000) $33,752,025
------------ -------------
------------ -------------
</TABLE>

See accompanying notes to consolidated financial statements.

D-34
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994

<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income.............................................. $ (8,202,670) $ 4,295,311 $ 5,323,570
Adjustments to reconcile net (loss) income to net cash provided
(used) by operating activities:
Depreciation................................................... 1,758,218 1,249,632 485,046
Amortization................................................... 1,583,216 1,165,840 550,385
Deferred taxes................................................. (3,006,769) 835,679 275,534
Gain on sale of securities available for sale.................. (435,557) (371,237) --
Loss on restructuring charges.................................. 3,292,217 -- --
Other changes, net of effect from acquisitions:
Cash and cash equivalents, restricted funds.................. (6,831,665) (665,153) --
Premiums receivable, net..................................... 3,407,174 59,074,738 (25,564,731)
Premiums payable............................................. 2,369,733 (57,518,081) 14,010,143
Underwriting gain receivable/payable......................... (4,686,823) (5,413,681) (3,000,000)
Commissions payable.......................................... 2,096,881 (5,748,128) 4,261,797
Loss reserves................................................ 10,421,185 (35,548,868) 5,609,411
Reinsurance balances recoverable............................. (846,863) 14,485,003 (4,279,105)
Reinsurance balances payable................................. (777,090) 13,508,446 4,279,105
Accounts payable and accrued liabilities..................... 7,994,577 1,194,787 659,361
Income taxes................................................. 485,613 (6,643,277) 287,605
Other........................................................ (3,230,408) 114,835 (2,010)
------------ ------------ ------------
Net cash provided (used) by operating activities................. 5,390,969 (15,984,154) 2,896,111
INVESTING ACTIVITIES:
Change in company financed premiums............................ 20,799,008 5,504,598 (15,233,082)
Purchase of securities--available for sale..................... (3,653,116) (11,865,698) (11,203,397)
Purchase of securities--held to maturity....................... -- -- (2,313,240)
Proceeds from sales and maturities of securities--available for
sale......................................................... 6,271,260 19,397,918 35,000
Proceeds from maturities of securities--held to maturity....... 1,000,000 -- --
Sale of assets held for sale................................... 1,430,000 -- --
Purchases of intangible assets, including sales of assets,
acquisitions of businesses, net of cash received............. (1,124,331) (6,215,541) (2,140,338)
Purchases of property and equipment............................ (2,367,215) (6,122,241) (6,413,749)
------------ ------------ ------------
Net cash provided (used) by investing activities................. 22,355,606 699,036 (37,268,806)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock......................... 14,400 288,000 35,870,993
Repurchase of common stock..................................... (2,058,788) -- --
Preferred stock transactions................................... 10,000,000 -- (3,529,819)
Change in notes payable to bank................................ (32,245,539) 18,193,539 5,052,000
Proceeds from issuance of long-term debt....................... 30,264 2,350,864 1,731,511
Repayment of long-term debt.................................... (928,132) (2,207,231) (1,053,568)
Dividends and other distributions.............................. (238,889) -- (3,957,072)
------------ ------------ ------------
Net cash (used) provided by financing activities................. (25,426,684) 18,625,172 34,114,045
Net change in cash and cash equivalents--corporate funds....... 2,319,891 3,340,054 (258,650)
Cash and cash equivalents--corporate funds beginning in year..... 6,315,417 2,975,363 3,234,013
------------ ------------ ------------
Cash and cash equivalents--corporate funds end of year........... $ 8,635,308 $ 6,315,417 $ 2,975,363
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

See accompanying notes to consolidated financial statements.

D-35
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1996, 1995, AND 1994

(1) ORGANIZATION

Crop Growers Corporation and subsidiaries (the Company) markets and services
federal multi-peril crop insurance, crop hail and other insurance products on
behalf of insurance companies, including its wholly-owned subsidiaries, Plains
Insurance Company (Plains) and Dawson Hail Insurance Co. (Dawson). The Company
is also involved in development and marketing of proprietary software
applications for use in the agriculture industry by insurance agents and
farmers.

On March 5, 1997, Fireman's Fund and the Company entered into a definitive
agreement by which Fireman's Fund would acquire the Company in a cash merger at
$10.25 per share. The transaction is subject to, among other things, Company
stockholder approval, regulatory approval and other customary conditions.
Because of regulatory approvals and clearances, the transaction is not expected
to close until mid-1997.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.

BASIS OF ACCOUNTING

The accompanying consolidated financial statements have been prepared on the
basis of generally accepted accounting principles ("GAAP") which, as to the
insurance company subsidiaries, vary from statutory accounting practices
prescribed or permitted by insurance regulatory authorities. The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those estimates.

REVENUE RECOGNITION

For multi-peril crop insurance, service fees are recognized based on
estimates of premium as of the sales closing date which is when coverage for a
crop must be applied for or renewed by the policyholder and when substantially
all required services, except for loss adjusting relating to placing the
insurance have been rendered. Actual premiums billed, which are based on actual
planted acreage, may vary from the original estimates made at the sales closing
date. The resulting adjustments are reflected in operations in the periods in
which they are determined. For crop hail insurance, service fees are recognized
when the insurance coverage is accepted by the insurance company, which is
concurrent with the completion of substantially all services required by the
Company. Direct costs such as agent commissions are recognized at the time
service fees are recognized.

Premiums associated with the underlying coverage are recognized as due from
the insured or agent and payable to the United States Department of
Agriculture's Federal Crop Insurance Corporation (FCIC), insurance company or
reinsurance company concurrent with the recognition of service fees. Premiums on
multi-peril and crop hail insurance written by Plains and Dawson are considered
earned when written. For multi-peril crop insurance, premiums are written based
on estimates of premium as of the sales closing date.

D-36
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995, AND 1994

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company is entitled to additional income on certain business written for
or reinsured with third-party insurance companies based on specified loss
experience. This additional income is recognized as income when a reasonable
estimate can be made. The Company recognized $10.9 million, $9.1 million and
$3.1 million for the years ended 1996, 1995 and 1994, respectively, under
certain of these profit sharing provisions.

LOSS RESERVES

Loss reserves are based upon estimates for losses reported and estimates for
losses incurred but not yet reported. The estimate of losses incurred but not
yet reported, includes a provision for losses on multi-peril and crop hail
insurance based on the ultimate anticipated underwriting gain or loss by crop
year. Reinsurance recoverable is recorded at the same time for the portion of
losses not retained by the Company.

The liability for losses and the related estimation methods are continually
reviewed and revised to reflect current conditions and trends. The resulting
adjustments are reflected in operations in the periods in which they are
determined. While management believes the reserves for losses are adequate to
cover the ultimate liability, the actual ultimate loss costs may vary from
amounts provided.

REINSURANCE

Reinsurance recoverable on paid and unpaid losses are reported as assets,
instead of being netted with the related liabilities, since the Company is not
relieved of its legal liability to its policyholders.

DEFERRED SERVICE FEES

Deferred service fees which are initially established at sales closing date
represent management's estimate of such amounts needed for all Company loss
adjusting costs to settle claims incurred or to be incurred on policies for
which revenue has been recognized plus a provision for related gross profit. The
estimated deferred service fees are continuously reviewed and variances, if any,
in estimated versus actual amounts are reflected in current operations.

ALLOWANCE FOR UNCOLLECTIBLE RECEIVABLES

Under its agreements with third-party insurance companies, the Company is
generally responsible for billing and collecting premiums due from the insureds.
To the extent that premiums are not collected, the Company is responsible for
the uncollected balance. An allowance for uncollectible receivables has been
provided based on historical experience and management's best estimate. The
allowance was $3.1 million and $1.3 million at December 31, 1996 and 1995,
respectively. See note 19.

INVESTMENTS

The Company has classified its investments in fixed maturities as "held to
maturity" and "available for sale," and its marketable equity securities as
"available for sale." Investments classified as "held to maturity" are reported
at amortized cost. Investments classified as "available for sale" are reported
at estimated market value. Unrealized appreciation and depreciation on the
investments classified as "available for sale" are recorded in stockholders'
equity, net of deferred income taxes.

D-37
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995, AND 1994

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Realized gains or losses on sales of investments are determined on the
specific-identification method and are included in investment income. Investment
income is recognized as earned and includes the accretion of bond discount and
amortization of bond premium.

PROPERTY AND EQUIPMENT

Property and equipment is carried at cost less accumulated depreciation.
Depreciation is computed primarily on a straight-line basis over the estimated
useful lives of the underlying assets from 3 to 10 years.

INTANGIBLE ASSETS

Intangible assets include contract rights, which represent costs assigned to
agency contracts and policyholder lists obtained in the acquisitions of "books
of business," non-compete agreements, software development costs, management and
services agreements, and insurance licenses. These assets are being amortized on
a straight-line basis over the following periods:

<TABLE>
<S> <C>
Software development costs............................ 3 years
Contract rights....................................... 3 to 15 years
Non-compete agreements................................ 3 to 5 years
Management and services agreements.................... 15 to 20 years
Insurance licenses.................................... 20 years
Other................................................. 5 to 15 years
</TABLE>

The Company assesses the recoverability of its intangible assets whenever
adverse events or changes in circumstances or business climate indicate that
expected future cash flows may not be sufficient to support the recorded
intangible assets. To the extent the carrying value is in excess of the
recoverable value, the assets are written down to their estimated net realizable
value. There have been no significant write-downs of intangible assets during
1996, 1995 or 1994.

LONG-LIVED ASSETS

The Company adopted the Statement of Financial Accounting Standards (SFAS)
No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF, in the first quarter of 1996. SFAS No. 121 requires
that certain long-lived assets be reviewed for impairment when events or
circumstances indicate that the carrying amounts of the assets may not be
recoverable. If such review indicates that the carrying amount of an asset
exceeds the sum of its expected future cash flows, the asset's carrying value is
written down to fair value. Long-lived assets to be disposed of are reported at
the lower of carrying amount or fair value less cost to sell.

INCOME TAXES

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in

D-38
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995, AND 1994

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the period that includes the enactment date. Amounts attributable to the
Company's current year tax return are reflected as current income taxes.

At December 31, 1993, all members of the consolidated group had elected S
Corporation status under Section 1362 of the Internal Revenue Code. Some members
joined the consolidated group as part of the Reorganization (see Note 8). At
that date their S Corporation status terminated. Additionally, prior to that
time certain of these members reported taxable income on the cash basis of
accounting. Upon joining the consolidated group, these members had to change
their method of reporting income to the accrual basis and incurred a tax expense
on the outstanding difference in income between the two methods of accounting.
Accordingly, there is no provision for income taxes in the consolidated
financial statements for all income in periods in which certain members of the
group were S Corporations since the income tax liability or benefit accrued to
the stockholders and not to the Company.

As discussed in Note 7, a pro forma provision for income taxes has been
reflected in the accompanying consolidated statement of operations in 1994.

SOFTWARE DEVELOPMENT COSTS

Certain software development costs are capitalized when incurred.
Capitalization of software development costs begins upon the establishment of
technological feasibility. The establishment of technological feasibility and
the ongoing assessment of recoverability of capitalized software development
costs requires considerable judgment by management with respect to certain
external factors, including, but not limited to, anticipated future revenues,
estimated economic life and changes in software technologies.

All software development costs are amortized on a straight-line basis over
the remaining estimated economic life. To date such costs have resulted from
engineering and development of new and existing products. All other research and
development costs are charged to expense in the period incurred.

STATEMENTS OF CASH FLOWS

Cash and cash equivalents include corporate funds and include highly liquid
debt instruments with original maturities of three months or less.

The Company may pay premiums which are due in advance of receipt of premium
payments from the policyholder. Such amounts are considered an investing
activity in the statements of cash flows.

The Company paid interest of $1.5 million, $852,000, and $398,000 in 1996,
1995, and 1994, respectively. The Company received income tax refunds of $4.3
million and paid income taxes of $3.5 million during 1996, and paid taxes of
$8.8 million and $1.8 million in 1995 and 1994, respectively.

PREMIUM TRUST FUNDS

Premiums collected from insureds but not yet remitted to insurance carriers
are restricted as to use by laws in certain states in which the Company
operates. These amounts are reported in the accompanying consolidated balance
sheets as "Cash and cash equivalents--restricted funds."

D-39
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995, AND 1994

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
MINORITY INTEREST

Minority interest includes dividends accrued on the preferred stock of
subsidiaries and earnings attributed to minority shareholders on the
consolidated statements of operations.

PER SHARE INFORMATION

Net (loss) earnings per common share is computed based on the weighted
average number of common shares outstanding, including the effects of the
Reorganization (see Note 8).

When dilutive, stock options are included as stock equivalents using the
treasury stock method. There is not a material difference between primary and
fully diluted earnings per share.

RECLASSIFICATIONS

Certain reclassifications have been made to the 1994 and 1995 consolidated
financial statements to conform with the 1996 presentation.

D-40
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995, AND 1994

(3) INVESTMENTS

The amortized cost, gross unrealized appreciation and depreciation, and
estimated market value of investments in fixed maturity and equity investments
are as follows:

DECEMBER 31, 1996

DECEMBER 31, 1995

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST APPRECIATION DEPRECIATION MARKET VALUE
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Held to maturity:
U.S. Treasury securities............................... $ 2,311,177 $ 106,395 $ -- $ 2,417,572
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Available for sale:
Obligations of states and
political subdivisions............................... $ 5,630,639 $ 184,060 $ (887) $ 5,813,812
Corporate securities................................... 24,901 -- (322) 24,579
------------ ------------ ------------ -------------
Total.............................................. $ 5,655,540 $ 184,060 $ (1,209) $ 5,838,391
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Equity securities...................................... $ 1,597,865 $ 159,675 $ -- $ 1,757,540
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
</TABLE>

D-41
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995, AND 1994

(3) INVESTMENTS (CONTINUED)
The amortized cost and estimated market value of investments in fixed
maturities are shown below by contractual maturity. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without prepayment penalties.

<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------
ESTIMATED AMORTIZED
COST MARKET VALUE
------------ ------------
<S> <C> <C>
Held to maturity:
Due in 1 year or less........................................... $ -- $ --
Due after 1 year through 5 years................................ 400,209 403,876
Due after 5 years through 10 years.............................. -- --
Due after 10 years.............................................. 908,230 944,721
------------ ------------
$ 1,308,439 $ 1,348,597
------------ ------------
------------ ------------
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------
AMORTIZED ESTIMATED
COST MARKET VALUE
------------ ------------
<S> <C> <C>
Available for sale:
Due in 1 year or less........................................... $ 50,284 $ 50,686
Due after 1 year through 5 years................................ 1,997,337 2,027,157
Due after 5 years through 10 years.............................. 1,495,515 1,535,449
Due after 10 years.............................................. 1,567,562 1,586,416
------------ ------------
$ 5,110,698 $ 5,199,708
------------ ------------
------------ ------------
</TABLE>

At December 31, 1996, Plains and Dawson had fixed maturities with a carrying
value of $3.5 million on deposit with various regulatory agencies, as required
by law.

The following is a summary of investment income for the years ended December
31, 1996, 1995 and 1994:

<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Fixed maturity investments...................... $ 492,654 $ 709,922 $ 151,870
Equity investments.............................. 32,298 27,681 --
Premium finance................................. 1,134,603 899,347 945,923
Loss on 50% or less owned
companies..................................... (257,938) (114,245) --
Other, including realized gains................. 853,707 639,908 298,920
------------ ------------ ------------
$ 2,255,324 $ 2,162,613 $ 1,396,713
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

D-42
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995, AND 1994

(3) INVESTMENTS (CONTINUED)
Proceeds from the sale of available-for-sale securities and gross realized
gains and losses were as follows for the years ended December 31, 1996, 1995,
and 1994:

<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Proceeds.................................................. $ 6,136,261 $ 9,227,684 $ --
Gross realized gains...................................... 582,925 412,467 --
Gross realized losses..................................... (101,111) (41,230) --
</TABLE>

(4) INTANGIBLE ASSETS

Intangible assets are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1995
------------- -------------
<S> <C> <C>
Contract rights...................................................... $ 7,430,952 $ 7,430,952
Software development costs........................................... 1,293,363 943,319
Non-compete agreements............................................... 590,000 590,000
Management and services agreements................................... 883,982 972,492
Insurance licenses................................................... 1,275,000 1,388,529
Other................................................................ 2,046,755 1,396,880
------------- -------------
13,520,052 12,722,172
Less accumulated amortization...................................... 3,662,814 2,193,542
------------- -------------
$ 9,857,238 $ 10,528,630
------------- -------------
------------- -------------
</TABLE>

(5) REDEEMABLE PREFERRED STOCK

On July 10, 1996, Fireman's Fund Insurance Company purchased 10,000 shares
of a new series of preferred stock of the Company for $10 million. The preferred
stock is convertible into common stock at a price of $13.25 per share
(equivalent to 754,717 shares), subject to certain adjustments. The preferred
stock pays a quarterly dividend (on each January 1, April 1, July 1 and October
1 commencing October 1, 1996) of 5% per annum and is entitled to vote on all
matters brought before the common shareholders on an as-converted basis. The
preferred stock is redeemable at the option of the Company after July 8, 1997,
at $1,000 per share plus all dividends accumulated and unpaid on the date fixed
for redemption; however, the Company may not redeem the shares prior to July 9,
2001 unless the price of common stock exceeds a redemption threshold set forth
in the certificate of designation creating the preferred stock. The preferred
stock is subject to mandatory redemption on July 9, 2006.

D-43
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995, AND 1994

(6) LONG-TERM DEBT

Long-term debt is summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
6.9% notes, payable in aggregate monthly installments of $14,443, including interest,
through January 2015, secured by building and office equipment...................... $ 1,734,155 $ 1,780,488
9% note, payable in aggregate monthly installments of $24,910 through November 15,
1999, secured by equipment.......................................................... 754,370 973,497
Bank base rate plus 1% notes, payable in aggregate annual installments of $223,796,
plus interest, through 1999; secured by crop insurance agency operations............ 671,389 895,186
Various notes with interest rates ranging from 2.9% to 9.5%, payable on demand or in
aggregate monthly installments of $13,161 including interest, maturing at various
dates through December 15, 1998; secured by vehicles and office equipment........... 130,758 539,369
------------ ------------
$ 3,290,672 $ 4,188,540
------------ ------------
------------ ------------
</TABLE>

The aggregate maturities of long-term debt for the next five years are as
follows:

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
- ----------------------------------------------------------------------------------
<S> <C>
1997.............................................................................. $ 636,955
1998.............................................................................. 546,063
1999.............................................................................. 533,195
2000.............................................................................. 60,932
2001.............................................................................. 65,296
</TABLE>

At December 31, 1995, the Company had two revolving line of credit
agreements for $35,000,000 and $15,000,000, respectively. The $15,000,000 line
of credit was available solely to pay hail losses with respect to policies
issued by or through the Company or its subsidiaries. This line, which was not
utilized during 1996, matured on October 31, 1996 and was not renewed.
Historically, the Company has utilized the $35,000,000 line of credit to finance
working capital needs as well as MPCI premiums due to the FCIC which have not
yet been paid to the Company by the policyholder. This line matured on November
30, 1996 and was not renewed by the Company. See Note 14 for the financing of
MPCI premiums for 1996.

Fireman's Fund has agreed to provide the Company with a working capital line
of credit of up to $15,000,000 subject to certain borrowing base limitations.
The credit agreement includes restrictive covenants and the requirement to
maintain certain financial ratios and minimum net worth. The commitment, which
will expire in March 1998, does not contain any loan or commitment fees and
borrowings bear interest at a national bank's base rate. If the Company were to
terminate the acquisition agreement with Fireman's Fund, any amounts then
outstanding under the line of credit would become immediately due and payable.

D-44
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995, AND 1994

(7) INCOME TAXES

Income tax (benefit) expense consists of the following:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1996 1995 1994
------------- ------------- ------------
<S> <C> <C> <C>
Current:
Federal......................................... $ (260,261) $ 1,650,050 $ 1,617,185
State........................................... (78,702) 456,723 380,716
Deferred:
Federal......................................... (2,325,694) 652,744 224,343
State........................................... (681,075) 182,935 51,191
------------- ------------- ------------
$ (3,345,732) $ 2,942,452 $ 2,273,435
------------- ------------- ------------
------------- ------------- ------------
</TABLE>

The following is a reconciliation between federal income tax (benefit)
expense applicable to (loss) income before income taxes and minority interest
and the amount computed at the statutory federal income tax rate of 34%.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994
------------- ------------ ------------
<S> <C> <C> <C>
Federal income tax (benefit) expense at statutory
rate............................................. $ (3,903,600) $ 2,565,215 $ 2,678,120
S Corporation earnings prior to reorganization..... -- -- (424,319)
Change in tax status............................... -- 21,165 172,787
Rehabilitation tax credit.......................... -- (52,217) (264,000)
State taxes, net of federal benefit................ (501,453) 426,779 288,036
Tax exempt interest and dividends received......... (88,010) (170,502) --
Non-deductible payments............................ 760,747 -- --
Other, net......................................... 386,584 152,012 (177,189)
------------- ------------ ------------
$ (3,345,732) $ 2,942,452 $ 2,273,435
------------- ------------ ------------
------------- ------------ ------------
</TABLE>

D-45
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995, AND 1994

(7) INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to deferred tax
assets and liabilities are presented below:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1995
------------- -------------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts............................... $ 1,215,049 $ 434,392
Asset write downs............................................. 717,430 --
Nondeductible reserves........................................ 973,683 120,677
Other......................................................... 172,850 107,230
------------- -------------
3,079,012 662,299
------------- -------------
Deferred tax liabilities:
Differences in depreciation and amortization.................. (1,137,323) (1,294,877)
Unrealized appreciation of investments........................ (33,847) (133,566)
Difference in revenue recognition............................. -- (363,441)
Change in tax status (46,202) (115,267)
------------- -------------
(1,217,372) (1,907,151)
------------- -------------
Net deferred tax asset (liability).......................... $ 1,861,640 $ (1,244,852)
------------- -------------
------------- -------------
</TABLE>

Based upon all available evidence including taxes paid during the carryback
period, the Company believes that no valuation allowance is necessary for its
deferred tax assets.

The following unaudited pro forma information provides a summary of income
taxes as if the Company had been subject to federal and state income taxes for
the year ended December 31, 1994 prior to the termination of the S Corporation
status:

<TABLE>
<S> <C>
Federal tax expense............................................... $ 251,532
State taxes, net of federal benefit............................... 29,443
---------
$ 280,975
---------
---------
</TABLE>

D-46
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995, AND 1994

(8) STOCKHOLDERS' EQUITY

During 1996, the Company entered into separation agreements with its former
President and Chief Executive Officer John Hemmingson and its former Executive
Vice President and Chief Financial Officer Gary Black. Under the agreements, the
Company purchased 100,000 and 80,000 shares of its common stock from Hemmingson
and Black, respectively, at prices ranging from $10.00 to $6.65 during 1996. The
Company also purchased 8,000 and 4,000 shares at $6.50 per share from Hemmingson
and Black, respectively, in January 1997.

On June 30, 1994, the Company completed an initial public offering of
2,780,748 shares of common stock at $7.50 per share. The net proceeds from the
offering totaled $18,096,107 and were used to purchase and capitalize Plains,
redeem preferred stock of certain subsidiaries, pay certain stockholders the
remaining contingent purchase price related to the acquisition of the Company's
software development subsidiary, make certain distributions to former S
Corporation stockholders, prepay the remaining amount owed under the noncompete
agreement with a former stockholder, reduce outstanding short-term borrowings
and for general corporate purposes, including working capital.

Prior to the Reorganization described below, the accompanying consolidated
financial statements represent the historical combined operations of Crop
Growers Insurance, Inc., Prairie Mountain Insurance, Inc., Cimarron Crop
Insurance Services, Inc., Wheat Growers General Agency, Inc., Crop Growers
Software, Inc. (formerly AgriPeril Software, Inc.) and Insurance Acquisition
Corporation, collectively referred to as the Entities.

In anticipation of the Company's initial public offering:

The board of directors of a newly formed Delaware corporation, and the
stockholders of the Entities entered into a Reorganization Agreement with
the Company. Pursuant to the Reorganization Agreement, the outstanding
common stock of the Entities were exchanged for 3,570,000 shares of the
Company's common stock and $3,010,000 of promissory notes with certain
stockholders. The transaction was accounted for as an exchange of interest
under common control, similar to a pooling of interest. All name references
in the consolidated financial statements and the notes thereto, have been
changed to reflect this Reorganization.

The Entities distributed to their stockholders $830,000 as a partial
distribution of accumulated S Corporation earnings. The status of any of the
Entities as S Corporations was terminated upon consummation of the
Reorganization. At the date of Reorganization, any remaining undistributed
earnings were transferred to paid-in capital as though the Company had
distributed such earnings to the stockholders and they had contributed the
amounts back to the Company. During the fourth quarter of 1994, the Company
distributed an additional $300,000 of dividends to cover tax liabilities of
certain former S Corporation stockholders relating to earnings of certain of
the S Corporations prior to the Reorganization. This amount has been
included in dividends and distributions in the accompanying consolidated
financial statements.

On December 6, 1994, the Company completed a second public offering of
1,400,000 shares of its common stock at $14.00 per share. The net proceeds
from this offering totaled $17,774,886 and were used to provide additional
capital to Plains, support additional product development efforts relating
to software systems and for general corporate purposes.

D-47
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995, AND 1994

(9) STOCK OPTION AND OTHER INCENTIVE PLANS

The Company has a Stock Incentive Plan (Incentive Plan) which permits the
issuance of options, stock appreciation rights, restricted stock, restricted
stock units, performance awards, dividend equivalents and other stock based
awards to employees, officers, consultants or independent contractors providing
service to the Company.

A total of 1,500,000 shares of common stock have been reserved for the
granting of awards under the Incentive Plan. The Incentive Plan is administered
by a Committee of the Board of Directors.

Under the terms of the Incentive Plan, the exercise price determined by the
Committee, of any stock option may not be less than 100% of the fair market
value on the date of grant. The options vest in periods of three to five years.
Following is a summary of the stock option activity:

<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
OPTION SHARES PER SHARE
------------- --------------
<S> <C> <C>
Outstanding, January 1, 1994.................................. -- $ --
Granted..................................................... 743,900 7.50 - 25.00
Forfeited................................................... (10,000) 7.50
Exercised................................................... -- --
------------- --------------
Outstanding, December 31, 1994................................ 733,900 7.50 - 25.00
Granted..................................................... 181,750 12.63 - 26.75
Forfeited................................................... (5,060) 7.50
Exercised................................................... (38,400) 7.50
------------- --------------
Outstanding, December 31, 1995................................ 872,190 7.50 - 26.75
Granted..................................................... 299,710 8.50 - 11.00
Forfeited................................................... (97,899) 7.50 - 19.50
Exercised................................................... (1,920) 7.50
------------- --------------
Outstanding, December 31, 1996................................ 1,072,081 7.50 - 19.50
------------- --------------
------------- --------------
Exercisable, December 31, 1996................................ 578,801 7.50 - 26.75
------------- --------------
------------- --------------
</TABLE>

In 1994, 20,000 shares of restricted stock were granted under the Incentive
Plan which vest over three years. The shares are considered issued when awarded,
but the recipient does not own and cannot sell the shares while they are
restricted.

At December 31, 1996, 254,640 shares remain eligible for future grant under
the Incentive Plan.

The Company accounts for stock options in accordance with the provisions of
Accounting Principles Board (APB) Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES, and related interpretations. As such, compensation expense would be
recorded on the date of grant only if the current market price of the underlying
stock exceeded the exercise price. On January 1, 1996, the Company adopted SFAS
No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, which permits entities to
recognize as expense over the vesting period the fair value of all stock-based
awards on the date of grant. Alternatively SFAS No. 123 also allows entities to
continue to apply the provisions of APB Opinion No. 25 and provide pro forma net
income and pro forma earnings per share disclosures for employee stock option
grants made in 1995 and future years as if the fair-value-based method defined
in SFAS No. 123 had been applied. The Company has elected to

D-48
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995, AND 1994

(9) STOCK OPTION AND OTHER INCENTIVE PLANS (CONTINUED)
continue to apply the provisions of APB Opinion No. 25 and provide the pro forma
disclosure provisions of SFAS No. 123.

The per share weighted-average fair value of stock options granted during
1996 and 1995 was $4.23 and $8.43 on the date of grant using the Black Scholes
option-pricing model with the following weighted-average assumptions:
1996--expected dividend yield 0%, risk-free interest rate of 8.0%, expected
volatility factor of 30%, and an expected life of 6 years; 1995--expected
dividend yield 0%, risk-free interest rate of 8.0%, expected volatility factor
of 30%, and an expected life of 6 years.

Since the Company applies APB Opinion No. 25 in accounting for its plan, no
compensation cost has been recognized for its stock options in the financial
statements. Had the Company recorded compensation cost based on the fair value
at the grant date for its stock options under SFAS No. 123, the Company's net
(loss) income per share for 1996 and 1995 would have been ($1.11) and $.48 per
share, respectively. Pro forma net income reflects only options granted in 1996
and 1995. Compensation cost for options granted prior to January 1, 1995 is not
considered.

The Company has a Non-Employee Director Stock Option Plan (Director Plan),
which provides for automatic grants of options, which do not qualify as
incentive stock options, to non-employee directors of the Board of Directors. A
total of 50,000 shares of Common Stock have been reserved for the granting of
awards under the Director Plan at 100% of the fair market value at the grant
date. Under the terms of the Director Plan, options granted are exercisable in
full six months from the date of grant and expire ten years from such date. At
December 31, 1996, 18,000 options had been granted under the Director Plan at
prices ranging from $7.50 to $27.13 and 32,000 shares remain eligible for future
grants.

In May, 1996, the Board of Directors awarded 75,000 and 65,000 options to
the Chairman and Vice Chairman of the Board, respectively. The options, with
exercise prices of $11.00 per share, vested 30 days after issuance.

In March 1996, a Management Compensation Plan ("Plan") was authorized by the
Board of Directors. The Plan provides annual and long-term incentives for
officers and certain key employees of the Company. Under the annual plan, for
the year ended December 31, 1996, certain required performance goals under the
Plan were achieved and accordingly, the Company recorded approximately $100,000
in compensation expense. Under the long-term portion of the plan, performance
units for potential cash incentives and 10 year stock options may be awarded.
Performance units are earned over a three-year performance period between 1996
to 1998, based on the degree of attainment of performance objectives. The cash
target value of the performance units at December 31, 1996 was approximately
$151,000. Options are awarded at the discretion of the board during the
three-year performance period and vest in thirds over the three year period
following the option grant date. As of December 31, 1996, 188,710 options had
been granted; none were exercisable.

The Company has a 401(k) plan covering substantially all of its employees
who have met specific age and service requirements. Benefits under the plan vest
after varying periods of plan participation. Contributions to the plan are at
the sole discretion of the Board of Directors. Contributions to the plan for
1996, 1995 and 1994 were $381,001, $208,182, and $134,610, respectively.

D-49
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995, AND 1994

(10) STATUTORY ACCOUNTING PRACTICES

Plains and Dawson are domiciled in Kansas and North Dakota, respectively,
and prepare their statutory-basis financial statements in accordance with
accounting practices prescribed or permitted by the Kansas and North Dakota
Insurance Departments, respectively. "Prescribed" statutory accounting practices
include state laws, regulations and general administrative rules, as well as a
variety of publications of the National Association of Insurance Commissioners
("NAIC"). Permitted statutory accounting practices encompass all accounting
practices that are not prescribed; such practices may differ from state to
state, may differ from company to company within a state, and may change in the
future. Plains and Dawson have no significant permitted accounting practices
that vary from prescribed accounting practices, except as noted below.

Stockholder's equity and net income, as reported to the domiciled state
insurance departments in accordance with its prescribed or permitted statutory
accounting practices, for the Company's insurance subsidiaries, are summarized
as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Stockholder's equity:
Plains.......................................................... $ 7,134,453 $ 7,447,433
Dawson.......................................................... 8,806,867 8,204,035
</TABLE>

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1996 1995 1994
------------ ------------ ----------
<S> <C> <C> <C>
Net income:
Plains.............................................. $ 187,020 $ 375,152 $ 262,131
Dawson.............................................. 1,053,259 2,793,067 --
</TABLE>

On a statutory accounting basis, Dawson recognizes premiums earned,
commission income and the related direct costs such as agent commissions,
premium taxes and other underwriting expenses based on the FCIC crop year. This
accounting practice was approved by the North Dakota Insurance Department as a
permitted accounting practice.

The payment of stockholder dividends by insurance companies without the
prior approval of regulators is limited to surplus determined in accordance with
statutory accounting practices, and requires that the capital and surplus
following such dividends be reasonable in relation to its outstanding
liabilities, and adequate to meet its financing needs. The maximum amount
available for the payment of dividends by Plains and Dawson to the Company
during 1997 without prior approval with the regulatory authorities is $213,000.
During 1996, Plains and Dawson paid dividends, to the Company, of $500,000 and
$2.5 million, respectively, from earned surplus.

The NAIC has adopted minimum risk based capital requirements to evaluate the
adequacy of statutory capital and surplus in relation to an insurance company's
risks. Regulatory compliance of risk based capital requirement is defined by a
ratio of a company's regulatory total adjusted capital to its to its authorized
control level risk based capital, as defined by the NAIC. At December 31, 1996,
Plains and Dawson exceed the minimum risk based capital requirements.

D-50
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995, AND 1994

(11) REINSURANCE

Plains and Dawson are each a party to a Quota Share Standard Reinsurance
Agreement with Fireman's Fund pursuant to which they cede all multi-peril crop
insurance premiums they underwrite to Fireman's Fund. In 1996, Plains and Dawson
entered into reinsurance agreements with non-affiliated insurance companies
under which Plains ceded 100% and Dawson ceded 85% of the crop hail premiums.

Dawson has entered into a reinsurance agreement with a non-affiliated
insurance company under which Dawson assumed 100% of the multi-peril crop
insurance and losses written by the non-affiliated insurance company in the
State of Kansas. Dawson has currently ceded all of this business to Fireman's
Fund. This agreement was not renewed for the 1997 crop year.

During 1995, Plains entered into a reinsurance agreement with non-affiliated
insurance companies. With respect to this agreement, additional commissions
predicated on loss experience with respect to MPCI business were $1,249,200 at
December 31, 1995. This agreement was terminated in 1996.

The effect of these reinsurance transactions on premiums earned and losses
incurred are as follows:

YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
LINE OF BUSINESS
------------------------------------------------------------
MULTI-PERIL CROP HAIL OTHER TOTAL
-------------- -------------- ----------- ---------------
<S> <C> <C> <C> <C>
Premiums earned:
Direct........................................... $ 79,090,253 $ 29,909,731 $ 793,820 $ 109,793,804
Assumed.......................................... 8,624,632 -- -- 8,624,632
Ceded............................................ (87,714,885) (27,554,476) (642,377) (115,911,738)
-------------- -------------- ----------- ---------------
Net............................................ $ -- $ 2,355,255 $ 151,443 $ 2,506,698
-------------- -------------- ----------- ---------------
-------------- -------------- ----------- ---------------
</TABLE>

<TABLE>
<CAPTION>
LINE OF BUSINESS
------------------------------------------------------------
MULTI-PERIL CROP HAIL OTHER TOTAL
-------------- -------------- ----------- ---------------
<S> <C> <C> <C> <C>
Losses incurred:
Direct........................................... $ 73,829,342 $ 18,325,770 $ 585,158 $ 92,740,270
Assumed.......................................... 15,157,666 -- -- 15,157,666
Ceded............................................ (88,987,008) (17,137,583) (469,401) (106,593,992)
-------------- -------------- ----------- ---------------
Net............................................ $ -- $ 1,188,187 $ 115,757 $ 1,303,944
-------------- -------------- ----------- ---------------
-------------- -------------- ----------- ---------------
</TABLE>

D-51
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995, AND 1994

(11) REINSURANCE (CONTINUED)
YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
LINE OF BUSINESS
------------------------------------------------------------
MULTI-PERIL CROP HAIL OTHER TOTAL
-------------- -------------- ----------- ---------------
<S> <C> <C> <C> <C>
Premiums earned:
Direct........................................... $ 20,754,807 $ 7,704,421 $ 204,320 $ 28,663,548
Decrease in estimate made subsequent to Dawson
acquisition.................................... (754,519) -- -- (754,519)
Assumed.......................................... 6,730,063 6,311,616 -- 13,041,679
Ceded............................................ (27,211,238) (13,748,473) (172,837) (41,132,548)
-------------- -------------- ----------- ---------------
Net............................................ $ (480,887) $ 267,564 $ 31,483 $ (181,840)
-------------- -------------- ----------- ---------------
-------------- -------------- ----------- ---------------
</TABLE>

<TABLE>
<CAPTION>
LINE OF BUSINESS
------------------------------------------------------------
MULTI-PERIL CROP HAIL OTHER TOTAL
-------------- -------------- ----------- ---------------
<S> <C> <C> <C> <C>
Losses incurred:
Direct........................................... $ 16,818,192 $ 3,333,423 $ 78,752 $ 20,230,367
Decrease in estimate made subsequent to Dawson
acquisition.................................... (3,829,691) -- -- (3,829,691)
Assumed.......................................... 6,730,063 3,996,560 -- 10,726,623
Ceded............................................ (21,990,215) (7,395,354) (63,171) (29,448,740)
-------------- -------------- ----------- ---------------
Net............................................ $ (2,271,651) $ (65,371) $ 15,581 $ (2,321,441)
-------------- -------------- ----------- ---------------
-------------- -------------- ----------- ---------------
</TABLE>

YEAR ENDED DECEMBER 31, 1994

<TABLE>
<CAPTION>
LINE OF BUSINESS
------------------------------------------------------------
MULTI-PERIL CROP HAIL OTHER TOTAL
-------------- -------------- ----------- ---------------
<S> <C> <C> <C> <C>
Premiums earned:
Direct........................................... $ 4,529,509 $ 5,905,422 $ 438 $ 10,435,369
Ceded............................................ 3,199,208 5,905,422 350 9,104,980
-------------- -------------- ----------- ---------------
Net............................................ $ 1,330,301 $ -- $ 88 $ 1,330,389
-------------- -------------- ----------- ---------------
-------------- -------------- ----------- ---------------
</TABLE>

<TABLE>
<CAPTION>
LINE OF BUSINESS
------------------------------------------------------------
MULTI-PERIL CROP HAIL OTHER TOTAL
-------------- -------------- ----------- ---------------
<S> <C> <C> <C> <C>
Losses incurred:
Direct........................................... $ 4,529,509 $ 3,206,714 $ -- $ 7,736,223
Ceded............................................ 3,199,208 3,206,714 -- 6,405,922
-------------- -------------- ----------- ---------------
Net............................................ $ 1,330,301 $ -- $ -- $ 1,330,301
-------------- -------------- ----------- ---------------
-------------- -------------- ----------- ---------------
</TABLE>

D-52
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995, AND 1994

(11) REINSURANCE (CONTINUED)
During 1996, 1995 and 1994, Plains and Dawson underwrote approximately $40.4
million, $12.4 million and $3.3 million, respectively, of imputed premium for
basic catastrophic and buy up coverage which is included in direct and ceded
multi-peril premiums earned. These premiums are fully subsidized by the FCIC and
any related losses are fully recoverable from the FCIC, except to the extent
Plains and Dawson elect to participate in the overall underwriting gain or loss
relating to such business.

The Company continuously reviews and monitors the financial condition of its
reinsurers. To the extent that a reinsurer does not meet the obligations under
its reinsurance agreement, Plains and Dawson remain liable.

In connection with the purchase of Dawson at July 14, 1995, initial
estimates were made of premiums and losses related to the MPCI and crop hail
business underwritten by Dawson prior to the acquisition. Subsequent to the
acquisition, the FCIC changed the MPCI program to provide insurance companies
relief for most of the prevented planting losses, and as a result the level of
loss reserves estimated at the acquisition date was higher than the amount
ultimately necessary.

(12) FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair values of financial instruments presented in the applicable notes
to the Company's consolidated financial statements are estimates of the fair
values at a specific point in time using available market information and
appropriation valuation methodologies. These estimates are subjective in nature
and involve uncertainties and significant judgment in the interpretation of
current market data. Therefore, the fair values presented are not necessarily
indicative of amounts the Company could realize or settle currently. The Company
does not necessarily intend to dispose of or liquidate such instruments prior to
maturity. Fair values of these financial instruments have been determined as
follows:

Cash, short--term investments and accrued investment income and notes
payable to bank--these financial instruments are short-term in nature;
therefore, the carrying value and fair value are approximately the same.

Fixed maturity and equity securities--fair value for fixed maturity and
equity securities are based on quoted market prices from major pricing
services, where available; for securities that are not actively traded,
estimated fair values are based on values of issues of comparable yield and
quality.

Debt - the fair values are based on the interest rates that are currently
available to the Company for issuance of debt with similar terms and
remaining maturities.

D-53
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995, AND 1994

(12) FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The following are the estimated fair values of the Company's financial
instruments:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------
1996 1995
---------------------------- ----------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Financial assets:
Fixed maturity securities......................... $ 6,508,147 $ 6,548,305 $ 8,149,568 $ 8,255,963
Equity securities................................. -- -- 1,757,540 1,757,540
Cash and cash equivalents......................... 16,132,126 16,132,126 6,980,570 6,980,570

Financial liabilities:
Notes payable to bank............................. -- -- 32,245,539 32,245,539
Debt.............................................. 3,290,672 3,187,694 4,188,540 4,019,315
</TABLE>

The Company does not have derivative financial instruments.

(13) COMMITMENTS

The Company has several operating leases for office space that expire at
various dates over the next five years. Total rental expense was $1,079,042,
$767,253, and $391,818 for the years ended December 31, 1996, 1995, and 1994,
respectively.

Future minimum lease payments under noncancelable operating leases for the
next five years are as follows:

<TABLE>
<CAPTION>
AGGREGATE
MINIMUM LEASE SUBLEASE NET MINIMUM
YEARS ENDING DECEMBER 31, PAYMENTS PAYMENTS LEASE PAYMENTS
- ------------------------------------------------- -------------- ---------- --------------
<S> <C> <C> <C>
1997............................................. $ 1,280,555 $ (92,145) $ 1,118,410
1998............................................. 1,163,476 (83,520) 1,079,956
1999............................................. 985,608 (20,880) 964,728
2000............................................. 911,370 -- 911,370
2001............................................. 721,591 -- 721,591
</TABLE>

(14) SIGNIFICANT RELATIONSHIPS

FEDERAL MPCI PROGRAM

The majority of the Company's revenues since inception have been derived
from servicing multi-peril crop insurance. The Company expects that at least a
majority of its revenue will continue to be derived from its multi-peril crop
insurance business for the foreseeable future. Therefore, the Company's results
of operations and financial condition are substantially dependent upon the
multi-peril crop insurance program.

Insurance companies that are involved in the multi-peril crop insurance
program, including Fireman's Fund, Plains, and Dawson, are subject to periodic
review by the FCIC for, among other things, the availability of adequate capital
and surplus and compliance with underwriting, loss adjustment, and other

D-54
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995, AND 1994

(14) SIGNIFICANT RELATIONSHIPS (CONTINUED)
requirements of the multi-peril crop insurance program. In addition, as a part
of the FCIC's review process, the Company, as a servicer on behalf of Fireman's
Fund, Plains and Dawson, is periodically reviewed for its compliance with FCIC
rules and regulations. A failure to comply with such rules could result in the
FCIC choosing not to allow the Company, Fireman's Fund, Plains or Dawson to
participate in the MPCI program.

INSURANCE COMPANIES

In connection with the marketing and servicing of multi-peril crop
insurance, crop hail and other named peril insurance, a significant amount of
the premiums serviced are underwritten by CNA and Fireman's Fund. During 1996,
1995 and 1994, 40.2%, 59.9%, and 84.5% respectively, of the Company's service
fee revenues were derived from premiums underwritten by CNA and 21.0% and 11.6%
of the Company's service fee revenues were derived from premiums underwritten by
Fireman's Fund. No premiums were serviced by the Company for Fireman's Fund in
1994.

The Company and CNA terminated their existing agreements effective for the
1997 crop year in the case of multi-peril crop insurance and the 1997 year for
crop hail insurance.

The Company and Fireman's Fund entered into an agreement in November 1996,
whereby Fireman's Fund agreed to finance the premiums due to the FCIC in
exchange for the interest charged on the deferred premiums. The Company
continues to administer the collection of the receivables and is ultimately
responsible for the collection of the balances. The Company receives an
administrative fee from Fireman's Fund for administrative costs related to the
premiums financed. This financing arrangement has been reflected as premiums
payable in the accompanying consolidated balance sheet.

(15) ACQUISITIONS

On March 14, 1995, the Company acquired the agency operations of Dawson and
on July 14, 1995, the Company acquired all of the outstanding common stock of
Dawson. The purchase price for Dawson was approximately $7,900,000 in cash and a
contingent payment of up to $3,400,000, payable over up to 12 years (subject to
an annual cap of $700,000), based on a percentage of the Company's future net
profit sharing, if any, on its crop insurance book of business. In connection
with the recognition of underwriting gains in 1996 and 1995, the Company
recognized contingent consideration of $700,000 in both of those years (which is
reflected as an additional acquisition cost of Dawson). The Company also
contributed $1,500,000 to the capital of Dawson to repay a surplus note.

The Dawson transactions have been accounted for as purchases and,
accordingly, the purchase prices have been allocated to the assets and
liabilities of the agency operations and Dawson based on their relative fair
values at the dates of acquisition. The Company's results of operations include
the results of the agency operations and Dawson from the respective dates of
acquisition.

D-55
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995, AND 1994

(15) ACQUISITIONS (CONTINUED)
In conjunction with the Dawson acquisitions, the allocation of the purchase
price consisted of the following:

<TABLE>
<S> <C>
Fair value of assets acquired, excluding intangible assets.... $118,968,335
Intangible assets............................................. 4,431,940
Liabilities assumed........................................... 115,549,195
-----------
Total purchase price........................................ $ 7,851,080
-----------
-----------
</TABLE>

The following unaudited pro forma information represents the consolidated
results of operations as if the acquisitions had occurred at the beginning of
the periods presented below after giving effect to certain adjustments,
including amortization of intangible assets acquired and related income tax
effects.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994
------------- -------------
<S> <C> <C>
Total revenues................................................. $ 97,932,000 $ 68,255,000
Net income..................................................... 6,124,000 5,417,000
Net income per common share.................................... .73 .97
Weighted average common shares outstanding..................... 8,352,837 5,562,374
</TABLE>

The pro forma information above does not purport to be indicative of the
results of operations that would have occurred had the transactions taken place
at the beginning of 1994 or of future results of operations.

During 1995, the Company also acquired several additional crop insurance
agency operations. Certain acquisitions were accounted for on the
pooling-of-interests method of accounting. The consolidated financial statements
were not restated, as the acquisitions were not material. The remaining
acquisitions were accounted for on the purchase method of accounting. The
consolidated results of operations would not have been materially different had
these acquisitions been completed on January 1, 1995.

On October 14, 1994, the Company acquired Plains. The purchase price was
approximately $3,800,000 of which $975,000 represented the value of Plains'
licenses and $2,800,000 represented Plains' statutory capital and surplus at the
date of closing. The acquisition was accounted for as a purchase and,
accordingly, the consolidated statements of operations include Plains' results
of operations since the date of acquisition. The consolidated results of
operations would not have been materially different had this acquisition been
completed on January 1, 1994.

D-56
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995, AND 1994

(16) LEGAL MATTERS

For the year ended December 31, 1996, the Company incurred approximately
$4.0 million in expenses, primarily legal fees, in connection with indictments
of the Company and certain of its former officers by the Independent Counsel
appointed to investigate matters relating to former Secretary of Agriculture,
Mike Espy. On January 21, 1997, the court accepted the Company's plea of NOLO
CONTENDERE to two charges. Pursuant to an agreement with the Independent
Counsel, the Company also agreed to pay a fine of $2.0 million. The settlement
concludes matters between the Company and the I.C. The entire amount of the
settlement which is not deductible for tax purposes has been accrued at December
31, 1996.

By its terms, the Company's agreement with the IC does not compromise or
preclude civil actions by other governmental regulatory authorities, such as the
Federal Election Commission, Securities and Exchange Commission, the USDA, or
state or federal regulatory authorities, or shareholders as a result of the
allegations made by the IC and the Company's NOLO CONTENDERE plea. No assurance
can be given as to what action a regulatory authority might take in response to
the Company's plea and its agreement with the IC.

The Company also incurred approximately $200,000 in the year ended December
31, 1996 in connection with defending a shareholder class action lawsuit filed
in May 1995. In February 1997, the Company settled this matter and agreed to pay
$2.5 million, $1.22 million of which is payable by the Company and the remainder
is to be paid out under the terms of a directors' and officers' insurance
policy. The $1.22 million was accrued as an expense in 1996. The terms of the
settlement are subject to court approval.

(17) RESTRUCTURING AND NON-CORE EXPENSES

On March 28, 1996, the Company announced it would take steps to relocate its
corporate headquarters and main office to Overland Park, Kansas. The relocation
efforts began in April 1996 and were substantially completed by December 1996.
In addition, as part of the Company's consolidation efforts and focus on
improving the consistency of its financial performance and improving shareholder
returns, management reviewed the Company's core operations which were the
servicing of the multi-peril crop insurance and crop hail insurance business,
and recorded restructuring charges related to write downs and losses on assets
to be disposed of, loss on discontinuation of non-core operations, and contract
termination costs. These restructuring and non-core charges began in April 1996
and are expected to be completed by September 1997, which is when the Company
expects it will complete its evaluation of each regional office location and
complete implementation of its long-term business strategy.

D-57
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995, AND 1994

(17) RESTRUCTURING AND NON-CORE EXPENSES (CONTINUED)
The following table provides a summary of these costs for the year ended
December 31, 1996.

<TABLE>
<S> <C>
Relocation Costs................................................ $1,994,853
Write down on assets to be disposed of.......................... 1,306,517
Loss on discontinuation of non-core operations.................. 2,037,830
Contract termination costs...................................... 1,076,427
Other........................................................... 94,001
---------
$6,509,628
---------
---------
</TABLE>

Relocation costs consist of charges related specifically to the relocation
of the Company's corporate headquarters and main office to Overland Park,
Kansas. These costs include severance paid to employees not relocating and
moving costs incurred by employees relocating, including closing and maintenance
costs of employee homes and house hunting trips.

Included in the write down on assets to be disposed of are charges related
specifically to management's review and analysis of the anticipated net
realizable value on certain assets which are currently held for sale. Management
utilized appraisals or current market data, where available, to assist in the
evaluation process. The planned disposals relate to management's assessment and
realignment of the Company's focus on core operations and consist primarily of
buildings, land, and retail software inventory.

At December 31, 1996, the Company had $6.4 million recorded as assets to be
disposed of which are included in other assets. The Company had recorded a
valuation allowance of $1.8 million on the assets to be disposed of. The Company
anticipates selling these assets over the next twelve months.

Included in the loss on discontinuation of non-core operations are charges
for severance costs and write downs of assets related to the elimination of
certain non-core business operations which included a travel agency, graphic
design division, employee leasing company, and an investment advisory firm.
Approximately $1.0 million of these charges are related to the Company's
investment in and advances to Coelho Associates LLC, a joint venture between the
Company, a former director of the Company, and other parties. These changes
represent the write off of the entire amount outstanding as of December 31,
1996.

Contract termination costs include charges related to the termination of
certain consulting contracts, costs associated with the cancellation of certain
leased facilities contracts and cancel rewrite fees associated with the
dissolution of its MPCI agreement with CNA. Management reviewed certain
consulting and employment contracts and as a result terminated certain
agreements which were not part of the Company's continued core operations. As
part of the relocation of the Company's corporate headquarters and main office,
certain facilities were abandoned and the related costs associated with
terminating or subleasing these facilities were accrued.

At December 31, 1996, the Company had paid substantially all of the costs
relating to the relocation and contract termination costs.

Management believes that cash generated from the sale of assets to be
disposed of and continuing core operations will be adequate to cover the
estimated cash requirements related to the relocation, restructuring and
non-core expenses.

D-58
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995, AND 1994

(18) QUARTERLY RESULTS

In the fourth quarter of 1996, the Company revised certain amounts and
recorded certain adjustments as a result of its review of estimates made on MPCI
premiums and the related revenues and direct costs and its assessment of the
adequacy of certain reserves and allowances. These amounts are summarized in the
table below and are included in service fees or agent commissions and other
direct costs for the year ended December 31, 1996.

<TABLE>
<S> <C>
Service fees:
Profit sharing revenue.......................................... $4,214,000
Excess loss adjusting reimbursement............................. 1,283,000
Reductions for late acreage reporting........................... (753,000)
Change in MPCI revenue estimate................................. (427,000)
---------
Total increase to service fees................................ $4,317,000
---------
---------
Agent commissions and other direct costs:
Change in MPCI commission estimate.............................. $1,916,000
Roll bonuses on MPCI premiums................................... 1,040,000
Additional allowance for uncollectible receivables.............. 2,025,000
Additional deferred service fees................................ 1,222,000
---------
Total increase to agent commissions and other direct costs.... $6,203,000
---------
---------
</TABLE>

Profit sharing revenue and excess loss adjusting reimbursement are generally
recorded in the third and fourth quarter of the fiscal year, which is when the
amounts can be reasonably estimated. In the third quarter, the Company estimated
the ultimate underwriting gain and excess loss adjusting reimbursement based on
actual losses incurred and estimated losses remaining to be incurred. In the
fourth quarter, management reviewed this estimate and revised the estimate based
on the development of the estimated losses.

Certain commission amounts previously estimated were revised in the fourth
quarter to reflect the Company's estimated and recorded commission obligation to
its agents. Commissions are originally estimated in connection with the revenue
and premium estimate. As the original estimate on premiums, revenues and direct
costs developed, the amounts reflect the actual commission obligation. The
increase in actual expenses as compared to estimated was primarily due to
competitive pressures which forced the Company to pay higher than expected
commissions and incentive (roll) fees to agents to retain and attract premiums.

The charge to the allowance for doubtful accounts of $2.0 million was made
in the fourth quarter as a result of management's ongoing review and analysis of
the collectibility of outstanding receivables. The charge resulted from an
increase in the volume of premium and policies serviced by the Company which
increased the outstanding receivable and related allowance.

In the fourth quarter the Company recorded $4.6 million of costs associated
with settling legal matters as discussed in Note 16. In the fourth quarter the
Company recorded $2.0 million of restructuring and non-core expenses, $1.5
million of which was related to the loss on discontinuation of non-core
operations as discussed in Note 17.

D-59
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995, AND 1994

(19) VALUATION AND QUALIFYING ACCOUNTS

The Company's allowance for doubtful accounts is summarized as follows:

<TABLE>
<CAPTION>
BALANCE ADDITIONS/ DEDUCTIONS/ BALANCE
JANUARY 1, PROVISION WRITE-OFFS DECEMBER 31,
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
1996.................................... 1,320,000 3,700,000 (1,919,000) 3,101,000
1995.................................... 614,000 1,330,000 (624,000) 1,320,000
1994.................................... 205,000 412,000 (3,000) 614,000
</TABLE>

The Company's reserve for assets to be disposed of is summarized as follows:

<TABLE>
<CAPTION>
BALANCE ADDITIONS/ DEDUCTIONS/ BALANCE
JANUARY 1, PROVISION WRITE-OFFS DECEMBER 31,
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
1996.................................... -- 1,780,000 -- 1,780,000
1995.................................... -- -- -- --
1994.................................... -- -- -- --
</TABLE>

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

None.

D-60
<PAGE>
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information concerning the directors
and executive officers of the Company.

<TABLE>
<CAPTION>
NAME AGE BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
- ------------------------------------ --- ---------------------------------------------------------------------
<S> <C> <C>
Lawrence T. Martinez................ 34 Chief Executive Officer and Director of the Company since August 1996
(term expires in 1997); Acting Chief Executive Officer from June
1996 to August 1996; with the law firm of Dorsey & Whitney LLP from
November 1990 to June 1996.

Tony Cid............................ 35 Senior Vice President of the Company since April 1994; held various
positions with Continental from March 1989 to February 1994.

Raford S. Hargrove, Jr.............. 28 President of Crop Growers Software since October 1994; General
Manager of Crop Growers Software from January 1991 to October 1994.
Director of the Company from October 1994 to July 1996.

David E. Hill....................... 34 Chief Financial Officer since December 1995; Secretary and Treasurer
since May 1996; Chief Accounting Officer from March 1995 to
December 1995; Vice President and Controller of Insurance Company
Operations of the Company from September 1994 to March 1995; with
the accounting firm of KPMG Peat Marwick LLP from 1985 to September
1994.

Robert N. Rousey.................... 42 Chief Administrative Officer of the Company since August 1996;
Director of Investor Relations of the Company from October 1995 to
August 1996; Vice President of Marketing and Investor Relations
with First Federal Savings Bank from November 1989 to October 1995.

Paul T. Horn........................ 53 Chairman of the Board of Directors since the end of March 1996.Chief
Operating Officer of R.D. Offutt Company, which provides a variety
of agribusiness services and products to rural communities, since
1985; President, Chief Operating Officer and a Director of RDO
Equipment Corp., which owns and operates John Deere industrial and
agricultural stores in the U.S. since August 1996; Director of
Northern Grain Company, a regional grain elevator; Director since
June 1994 (term expires 1999). (1)

John M. Meuschke.................... 51 Senior Vice President of Fireman's Fund Insurance Company; has held
various positions at Fireman's Fund since 1968. Director since July
1996 (term expires 1999). (2)
</TABLE>

D-61
<PAGE>
<TABLE>
<CAPTION>
NAME AGE BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
- ------------------------------------ --- ---------------------------------------------------------------------
<S> <C> <C>
Manuel Sanchez...................... 52 Chief Executive Officer of Tower Health, a health maintenance
organization, since February 1997; private law practice from May
1996 to February 1997; President and Chief Executive Officer of
Gulf Atlantic Life Insurance Company from 1991 to May 1996;
Director since June 1994 (term expires 1998). (3)

Thomas M. Vertin.................... 50 Vice Chairman of the Board of Directors since the end of March 1996.
Owner and operator of Vertin Company, a business management firm
with a variety of commercial business and real estate interests,
primarily involving multi-state funeral homes, since its inception
in 1981; Partner in The Coveda Company, a management firm that
operates Hardee's restaurants in Minnesota, North Dakota and South
Dakota. Director since October 1994 (term expires 1997). (1)
</TABLE>

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

(1) Member of the Audit and Compensation Committee.

(2) Mr. Meuschke is a member of the Audit Committee. Mr. Meuschke was appointed
to the board under the terms of an agreement between Fireman's Fund and the
Company relating to Fireman's Fund purchase of $10 million of preferred
stock in July 1996. See "Certain Relationships and Related Transactions."

(3) Member of the Stock Option Committee.

Directors who are not officers of the Company receive $10,000 annually for
serving on the Board of Directors, plus $500 for each Board meeting attended and
$250 for each committee meeting attended in person. Directors are reimbursed for
out-of-pocket expenses incurred in attending Board of Directors' and committee
meetings. Non-employee directors are also compensated with annual stock option
grants of 1,500 shares, execisable at fair market value on the date of grant and
expiring five years after issuance. These options are granted at the time of
election or reelection at the Company's annual meeting of shareholders.

On May 29, 1996, Messrs. Horn and Vertin were each awarded one-time stock
option grants of 75,000 and 65,000 shares, respectively, exercisable at $11 per
share. The options were awarded in consideration of Messrs. Horn's and Vertin's
duties as Chairman and Vice-Chairman of the Board, respectively.

See "Certain Relationships and Related Transactions--Transactions with Tony
Coelho" for description of certain relationships between the Company and Tony
Coelho, a former director of the Company.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Company's directors and executive officers and all persons who
beneficially own more than 10 percent of the outstanding shares of the Company's
Common Stock to file with the Securities and Exchange Commission initial reports
of ownership and reports of changes in ownership of such Common Stock. Officers,
directors and greater than 10 percent beneficial owners are also required to
furnish the Company with copies of all Section 16(a) forms they file. To the
Company's knowledge, based upon a review of the copies of such reports furnished
to the Company and written representations that no other reports were required,
during the fiscal year ended December 31, 1996 all Section 16(a) filing
requirements applicable to the Company's directors, executive officers and
greater than 10 percent beneficial owners were satisfied.

D-62
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.

SUMMARY COMPENSATION TABLE

The following table sets forth the cash and noncash compensation for each of
the last three fiscal years awarded to or earned by the Chief Executive Officer
of the Company, the four other highest paid executive officers of the Company in
1996, and the Company's former chief executive officer and executive vice
president.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION --------------------------------
--------------------------------- RESTRICTED SECURITIES (1)ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS STOCK AWARDS UNDERLYING OPTIONS CONTRIBUTIONS
- ----------------------------------------- --------- ---------- ---------- ------------ ------------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence T. Martinez(2) ................. 1996 $ 139,411 $ -- -- 100,000 --
Chief Executive Officer

David E. Hill ........................... 1996 119,724 -- -- 10,888 $ 4,750
Chief Financial Officer, Secretary and 1995 96,531 -- -- -- 2,154
Treasurer 1994 20,458 30,000 -- 10,000 --

Tony Cid ................................ 1996 116,923 -- -- 10,888 4,240
Senior Vice President 1995 97,370 -- -- -- 2,000
1994 68,358 55,000 150,000(3) -- --

Richard A. Bartlett(4) .................. 1996 125,586 -- -- 10,888 4,750
President of Crop Growers Insurance, 1995 87,564 -- -- -- 2,184
Inc. 1994 65,000 30,000 -- 10,000 --

Raford S. Hargrove, Jr. ................. 1996 119,615 -- -- 7,150 4,750
President of Crop Growers Software, 1995 103,675 -- -- 10,000 3,962
Inc. 1994 83,681 45,000 -- 10,000 3,096

John J. Hemmingson(5) ................... 1996 156,923 -- -- 27,638 4,750
Former Chief Executive Officer 1995 298,919 -- -- -- 4,620
1994 219,379 145,000 -- 375,000 4,620

Gary A. Black(5) ........................ 1996 108,461 -- -- 9,422 26,385
Former Executive Vice President 1995 210,008 -- -- -- 4,620
1994 202,359 95,000 -- 56,250 4,620
</TABLE>

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

(1) These amounts represent the Company's contributions to its 401(k) plan.

(2) Mr. Martinez was hired on May 31, 1996. See "Employment Agreements."

(3) Market value of shares of restricted stock as of the date of grant. The
shares vest in equal annual installments of 33 1/3% commencing on June 23,
1995. At December 31, 1996, Mr. Cid had 6,666 shares of restricted stock
that had not yet vested. At December 31, 1996, the market value of these
shares was $46,662. No dividends have been paid by the Company with respect
to these shares.

(4) Effective in March 1997, Mr. Bartlett's employment relationship with the
Company ended.

(5) Messrs. Hemmingson and Black, resigned from the Company effective May 9 and
May 30, 1996, respectively. Messrs. Hemmingson and Black were paid salaries
through June 30, 1996 under the terms of their respective employment
agreements, as amended. In connection with the Company's initial public
offering in June 1994, the Company entered into employment agreements with
Messrs. Hemmingson and Black each for a three year period ending June 22,
1997. Under the terms of the agreements, base salaries were adjusted
annually based on the consumer price index and were

D-63
<PAGE>
subject to review for possible further increase by the Compensation
Committee of the Board of Directors on an annual basis. The agreements also
provided that Messrs. Hemmingson and Black would have the opportunity to
earn incentive compensation under plans established by the Compensation
Committee or the Board of Directors. The employment agreements also provided
severance benefits in the event of termination of employment under certain
circumstances. In the event of termination of employment other than for
"cause" (as such term is defined in the agreements) or by voluntary
resignation of the individual other than for "good reason" (as such term is
defined in the agreements), in addition to compensation and benefits already
earned, Messrs. Hemmingson and Black would be entitled to receive: (i) a
cash payment equal to their then current base salary for the remainder of
the contract term, or if greater, 12 months, (ii) immediate vesting of all
outstanding options and (iii) continuation of health and life insurance
benefits for the remainder of the contract terms or if greater, 12 months.
In March 1996, the Company announced that Messrs. Hemmingson and Black would
be granted leaves of absence effective no later than upon the hiring of a
new Chief Executive Officer of the Company. Under the terms of the leave of
absence agreements, Messrs. Hemmingson and Black would continue to receive
their salaries and benefits in accordance with the terms of their employment
agreements through the expiration of their agreements on June 22, 1997.
Messrs. Hemmingson's and Black's leaves of absence commenced on May 30 and
May 9, 1996, respectively. On September 23, 1996, the Company entered into
separation agreements with each of Messrs. Hemmingson and Black. These
agreements terminated the existing leave of absence agreements between the
Company and each of Hemmingson and Black. Under these agreements, the
Company did not pay Hemmingson or Black any severance amounts in addition to
their base salaries, except that, in the case of Black, the Company paid
Black an amount equal to $21,635 for his unused vacation and personal time
as of June 30, 1996. See "Certain Relationships and Related
Transactions--Stock Repurchases from Hemmingson and Black."

EMPLOYMENT AGREEMENTS

In connection with the hiring of Mr. Martinez as Chief Executive Officer on
May 31, 1996, the Company entered into a three-year employment agreement with
Mr. Martinez ending in May 1999. Mr. Martinez was paid an annual base salary of
$225,000 for the period from May 31, 1996 to August 7, 1996 (during which time
he served as Acting Chief Executive Officer) and an annual base salary of
$275,000 thereafter (when he was named Chief Executive Officer). Under the terms
of his agreement, Mr. Martinez's base salary is subject to annual increases at
the discretion of the compensation committee or board of directors. Under the
agreement, Mr. Martinez also participates in executive incentive plans
established by the board of directors or the compensation committee.

In connection with the Company's initial public offering in June 1994, the
Company entered into an employment agreement with Tony Cid, for a three-year
period ending in June 1997. Under the terms of the agreement, Mr. Cid's base
salary was contractually established at $100,000 and $120,000 for 1995 and 1996,
respectively. The agreement also provides that Mr. Cid will have the opportunity
to earn incentive compensation under plans established by the compensation
committee or board of directors.

Messrs. Martinez's and Cid's employment agreements also provide severance
benefits in the event of termination of employment under certain circumstances.
In the event of termination of employment other than for "cause" (as such term
is defined in the agreements), by the voluntary resignation of the individual
other than for "good reason" (as such term is defined in the agreements) or upon
certain "change in controls" (as defined) of the Company, in addition to
compensation and benefits already earned, Mr. Martinez or Mr. Cid would be
entitled to receive: (i) a cash payment equal to his then current base salary
for the remainder of the contract term, or if greater, 12 months, (ii) immediate
vesting of all outstanding options and (iii) continuation of health and life
insurance benefits for the remainder of the contract term or, if greater, 12
months. On March 5, 1997, Fireman's Fund and the Company entered into

D-64
<PAGE>
a definitive agreement by which Fireman's Fund would acquire the Company in a
cash merger at $10.25 per share (the "Fireman's Fund Transaction").

STOCK OPTION GRANTS

The following table sets forth stock option information for named executives
in 1996.

OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO EXERCISE STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES IN OR BASE FOR OPTION TERM(2)
OPTIONS FISCAL YEAR PRICE EXPIRATION --------------------------
NAME GRANTED(1) 1996 ($/SHARE) DATE 5% 10%
- ------------------------------------- ----------- ------------- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence T. Martinez................. 100,000 33.4% $ 10.375 5/31/06 $ 1,689,978 $ 2,691,008

David E. Hill........................ 10,888 3.6% 9.0625 3/26/06 160,727 255,931

Tony Cid............................. 10,888 3.6% 9.0625 3/26/06 160,727 255,931

Richard A. Bartlett.................. 10,888 3.6% 9.0625 3/26/06 160,727 255,931

Raford S. Hargrove, Jr............... 7,150 2.4% 9.0625 3/26/06 105,547 168,066

John J. Hemmingson................... 27,638 9.2% 9.0625 3/26/06 407,987 649,651

Gary A. Black........................ 9,422 3.2% 9.0625 3/26/06 139,086 221,471
</TABLE>

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

(1) Upon the occurrence of certain defined acceleration events, including the
closing of the Fireman's Fund Transaction, these options would become
immediately exercisable. The exercise price of all options was the closing
price of Common Stock on the NASDAQ Stock Market on the date of grant. Mr.
Martinez's options are exercisable as follows: 20% on May 31, 1996; 40% on
May 31, 1997; 60% on May 31, 1998; 80% on May 31, 1999; and 100% of such
option shares on May 31, 2001. Messrs. Hill's, Cid's, Bartlett's and
Hargrove's options are exercisable as follows: 33 1/3% on March 26, 1997;
66 2/3% on March 26, 1998; and 100% of such option shares on March 26, 1999.

(2) These amounts represent certain assumed rates of appreciation only.
Potential realizable value is calculated assuming 5% and 10% appreciation in
the price of the Common Stock from the date of grant. Actual gains, if any,
on stock option exercises are dependent on the future performance of the
Common Stock, and overall stock market conditions. The amounts reflected in
this table may not necessarily be achieved.

D-65
<PAGE>
The following table summarizes option exercises during the year ended
December 31, 1996 by the executive officers named in the Summary Compensation
Table above, and the values of the options held by such persons at December 31,
1996.

AGGREGATED OPTION EXERCISES DURING YEAR ENDED DECEMBER 31, 1996
AND VALUE OF OPTIONS HELD AT DECEMBER 31, 1996

<TABLE>
<CAPTION>
NUMBER OF SECURITIES (1)VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS HELD AT HELD AT DECEMBER 31,
SHARES ACQUIRED VALUE DECEMBER 31, 1996 1996
NAME ON EXERCISE REALIZED (EXERCISABLE/UNEXERCISABLE) EXERCISABLE/UNEXERCISABLE)
- --------------------------------- ------------------- ----------- ------------------------- ------------------------
<S> <C> <C> <C> <C>

Lawrence T. Martinez............. -- $ -- 20,000/ 80,000 -- / --

David E. Hill.................... -- $ -- 5,000/ 15,888 -- / --

Tony Cid......................... -- $ -- -- / 10,888 -- / --

Richard A. Bartlett.............. -- $ -- 4,000/ 16,888 -- / --

Raford S. Hargrove, Jr........... -- $ -- 7,000/ 20,150 -- / --

John J. Hemmingson............... -- $ -- 237,500/165,138 -- / --

Gary A. Black.................... -- $ -- 28,125/ 37,547 -- / --
</TABLE>

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

(1) At December 31, 1996, no unexercised options were in the money. The market
value of the Common Stock at December 31, 1996 was $7.00 per share.

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

The following table sets forth, as of March 21, 1997, certain information
with respect to beneficial ownership of the Common Stock by (i) each person or
entity known by the Company to own beneficially more than 5% of the Company's
Common Stock; (ii) each director of the Company; (iii) each executive officer of
the Company named in the Summary Compensation Table; and (iv) all executive
officers and directors as a group. For purposes of this table, beneficial
ownership of securities is defined in accordance with the rules of the
Securities and Exchange Commission and means generally the power to vote or
dispose of securities, regardless of any economic interest therein. Except as
otherwise indicated, the stockholders listed in the table have sole voting and
investment powers with respect to the shares indicated. For the purpose of
determining "Percent of Outstanding Shares," the number of shares of Common
Stock outstanding at March 21, 1997 was 8,726,968, including 754,717 shares of
Common Stock issuable upon

D-66
<PAGE>
conversion of 10,000 shares of the Company's Series A Convertible Preferred
Stock (which currently votes with the Common Stock on an as converted basis).

<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER OWNED OUTSTANDING SHARES
- -------------------------------------------------------------------------- ----------------- ------------------
<S> <C> <C>
Firstar Bank of Minnesota, N.A.(1)........................................ 1,392,416 15.5%
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202

Fireman's Fund Insurance Company(2)....................................... 754,717 8.6%
777 San Marin Drive
Novato, California 94998

Gary A. Black(3).......................................................... 713,040 8.1%
3325 15th Avenue South
Great Falls, Montana 59405

Thomas Vetter(4).......................................................... 457,735 5.3%
955 West Chandler Blvd., Suite 15
Chandler, Arizona 84244

Richard A. Bartlett(4).................................................... 13,679 *

Tony Cid(4)(5)............................................................ 16,963 *

David E. Hill(4).......................................................... 9,029 *

Raford S. Hargrove, Jr.(4)(6)............................................. 12,983 *

Paul T. Horn(4)(6)........................................................ 78,500 *

Lawrence T. Martinez(4)................................................... 20,635 *

John M. Meuschke(4)....................................................... 2,500 *

Manuel Sanchez(4)......................................................... 4,500 *

Thomas M. Vertin(4)(7).................................................... 129,779 1.5%

All executive officers and
directors as a group
(9 individuals)(4)(5)(6)(7)............................................. 286,568 3.3%
</TABLE>

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

* Less than 1%.

(1) Firstar Bank of Minnesota, N.A. holds an irrevocable proxy to vote
1,392,416 shares of Common Stock (which includes 246,713 shares of Common
Stock which could be acquired within 60 days of March 21, 1997 through the
exercise of stock options) of John Hemmingson. Firstar Bank of Minnesota has
no power to dispose of, or direct the disposition of, and no pecuniary
interest in, any of such shares of Common Stock. Firstar Corporation, as the
parent holding company of Firstar Bank of Minnesota, N.A., may be deemed to
beneficially own such shares. This disclosure is made in reliance upon a
statement on Schedule 13G dated March 7, 1997 filed with the Securities and
Exchange Commission. See footnote (2) below regarding Fireman's Fund's
agreement to purchase all of Mr. Hemmingson's shares.

(2) Represents 754,717 shares of Common Stock issuable upon conversion of
10,000 shares of the Company's Series A Convertible Preferred Stock held by
Fireman's Fund (the Preferred Stock currently votes with the Common Stock on
an as converted basis). Does not include 1,827,447 shares which Fireman's
Fund has agreed to purchase, as set forth in the following sentence. On
March 5, 1997, Fireman's Fund notified each of John Hemmingson and Gary
Black that it would exercise its rights under certain right of first refusal
agreements and/or accept the offer made by Black and

D-67
<PAGE>
purchase 1,145,703 and 681,774 shares of Common Stock from Hemmingson and
Black, respectively. The purchases are subject to regulatory approval.
Pending receipt of applicable regulatory approvals, Hemmingson and Black
retain sole voting power with respect to such shares (subject to footnote
(1) above in the case of Hemmingson). This disclosure is made in reliance
upon a statement on Schedule 13D dated March 10, 1997 filed with the
Securities and Exchange Commission.

(3) Includes 31,266 shares of Common Stock which could be acquired within 60
days of March 21, 1997 through the exercise of stock options. See footnote
(2) above.

(4) Includes the following number of shares of Common Stock which could be
acquired within 60 days of March 21, 1997 through the exercise of stock
options: Mr. Vetter, 837 shares; Mr. Bartlett, 8,629 shares; Mr. Cid, 3,629
shares; Mr. Hill, 8,629 shares; Mr. Hargrove, 9,383 shares; Mr. Martinez,
20,000 shares; Mr. Horn, 74,500 shares; Mr. Meuschke, 1,500 shares; Mr.
Sanchez, 4,500 shares; Mr. Vertin, 69,500 shares; and all directors and
executive officers as a group, 196,607 shares.

(5) Includes 6,667 shares of restricted stock, which will vest on June 23,
1997.

(6) Includes 2,000 shares of Common Stock beneficially owned by Mr. Horn's
spouse.

(7) Includes 5,000 shares of Common Stock held jointly with another individual
(2,500 shares of which Mr. Vertin disclaims beneficial ownership of), 3,750
shares of which are held by a corporation owned by Mr. Vertin, and 1,125
shares are held by Mr. Vertin's wife and daughters, all of which Mr. Vertin
is deemed to beneficially own. With respect to 6,225 shares of Common Stock,
Mr. Vertin shares investment power with another individual or individuals.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

TRANSACTIONS WITH FIREMAN'S FUND

In 1996 and 1995, 21.0% and 11.6%, respectively, of the Company's service
fees were derived from premiums underwritten by Fireman's Fund, pursuant to a
multi-peril crop insurance general agency agreement. Under the Company's
agreements with Fireman's Fund, the Company receives all of the expense
reimbursement payable by the federal government for servicing MPCI policies. In
the Company's fiscal years ended December 31, 1996 and 1995, the Company
received $17.9 million and $8.6 million, respectively, of expense reimbursement
for the MPCI policies written by Fireman's Fund and serviced by the Company. In
addition, under the terms of the parties MPCI arrangements, the Company received
$4.1 million and $1.3 million in the Company's fiscal years ended December 31,
1996 and 1995 as their share of the underwriting gains on MPCI polices written
by Fireman's Fund. The agreement with Fireman's Fund was negotiated prior to
John Meuschke's, who serves as Fireman's Fund's designee on the Company's board
of directors, service on the Company's board of directors. See "Executive
Officers and Directors." On March 5, 1997, Fireman's Fund and the Company
entered into a definitive agreement by which Fireman's Fund would acquire the
Company in a cash merger at $10.25 per share. For a further description of the
Company's business relationship with Fireman's Fund, see the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.

TRANSACTIONS WITH TONY COELHO

Tony Coelho served as a director of the Company from April 1995 to January
1997. Mr. Coelho resigned as a director of the Company on January 24, 1997 in
order to pursue other opportunities, which he believed the Company neither had
any interest nor ability to pursue. The Company has had business relationships
with Mr. Coelho from time to time, both before, during and after his term of
service as a director.

COELHO ASSOCIATES LLC. In November 1995, the Company, Mr. Coelho and other
individuals formed Coelho Associates LLC, a Delaware limited company ("Coelho
Associates"). Mr. Coelho is the Chairman and Chief Executive Officer of Coelho
Associates. Coelho Associates was formed to engage in the

D-68
<PAGE>
investment advisory or financial intermediation business. The Company has a 40%
ownership interest and Mr. Coelho has a 20% ownership interest in Coelho
Associates. The Company and Mr. Coelho each made initial capital contributions
in the amounts of $200,000 and $100,000, respectively.

As part of the formation of Coelho Associates, the Company entered into a
lease of office space in New York City (with rental payments of approximately
$12,355 per month), which space is subleased to Coelho Associates. In addition,
the Company made available to Coelho Associates a $1 million line of credit
under the terms of a promissory note due June 30, 1997 (secured by the assets of
Coelho Associates). The note bears interest at a bank prime rate plus 1%. In May
1996, the Company increased the amount available for borrowing under the line of
credit to $3 million. At December 31, 1996, approximately $1.3 million had been
advanced under the promissory note.

In late 1996, the Company and Mr. Coelho entered into discussions relating
to the Company's desire to terminate its interest in Coelho Associates in view
of the Company's desire to focus on its core operations and the business
prospects for Coelho Associates. Accordingly, the Company and Coelho Associates
agreed to terminate further advances under the line of credit in December 1996.
In 1996, the Company wrote off $1.0 million, representing its investment in
Coelho Associates and the amounts outstanding under the line of credit. In
addition, during 1996 and 1995, the Company recognized $201,000 and $89,000,
respectively, as the Company's share of the operating losses of Coelho
Associates. The Company, Mr. Coelho and the other members of Coelho Associates
continue to discuss the terms of the dissolution of this relationship, including
recovery by the Company of its investment in, and loans, to Coelho Associates.
No assurance can be given that such discussions will result in a favorable
outcome for the Company.

CALIFORNIA CROP GROWERS LLC. In February 1995, the Company and a limited
liability company of which Mr. Coelho is a 50% member ("Togar") agreed that
Togar would receive 20% of the net profits derived from the Company's sale of
insurance products and agricultural software and related products in the State
of California in return for Togar's services on behalf of the Company in
California. The Company and Togar have had negotiations regarding the formation
of California Crop Growers, L.L.C., a Montana limited liability company ("CCG"),
in which the Company would have an 80% interest and Togar would have a 20%
interest. For business done in the State of California in 1995 Togar received
$154,000. No amounts were payable for 1996. As a part of the Company's
dissolution of its relationship with Coelho Associates, the Company and Mr.
Coelho have engaged in discussions regarding Mr. Coelho's ongoing role in the
Company's California business. The Company believes that any interest Togar may
have in the California business should be offset against amounts owed the
Company by Coelho Associates. Mr. Coelho has taken the position that he is not
personally liable for the debts or obligations of Coelho Associates and,
accordingly, such offsets may not be appropriate.

STOCK REPURCHASES FROM HEMMINGSON AND BLACK

As part of the separation agreements between the Company and Hemmingson and
Black, the Company agreed to purchase 68,000 and 64,000 shares of its common
stock from Hemmingson and Black, respectively; at a price of approximately $9.88
per share (based on, among other factors, the market price of the stock on the
date the agreement in principle was reached, and the termination of compensation
and benefits to Hemmingson and Black). Additionally, the Company agreed to
purchase up to an additional 8,000 and 4,000 shares of common stock monthly from
each of Hemmingson and Black on the last day of August through December of 1996
at prices related to the then bid and asked price of the stock. Hemmingson and
Black each exercised their options to sell the maximum number of shares to the
Company during the period from August through December 1996. The aggregate
purchase price paid to Hemmingson for the 40,000 shares of common stock was
$289,567 and $144,783 for the 20,000 shares of common stock sold to the Company
by Mr. Black. Additionally, Hemmingson agreed to reduce his ownership in the
Company to less than 10% of the voting stock on an as converted basis by June
30, 1998. See "Executive Compensation--Summary Compensation Table."

D-69
<PAGE>
PART IV

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

(a) The following documents are filed as part of this report:

1. Financial Statements.

The Consolidated Financial Statements are contained herein as listed in
the Index to Consolidated Financial Statements on page 34.

2. Financial Statement Schedules.

All schedules are omitted because they are not applicable, not required,
or the information is included elsewhere in the Consolidated Financial
Statements or Notes thereto.

3. Exhibits.

<TABLE>
<C> <S>
2.1 Acquisition Agreement dated March 5, 1997, between Crop Growers Corporation
and Fireman's Fund Insurance Company (Incorporated by reference to Exhibit
2.1 to the Company's Current Report on Form 8-K, dated February 28, 1997).

2.2 Consent Agreement dated March 5, 1997, between Crop Growers Corporation and
Fireman's Fund Insurance Company (Incorporated by reference to Exhibit 2.2
to the Company's Current Report on Form 8-K, dated February 28, 1997).

2.3 Letter of Intent re Revolving Credit Working Capital Facility dated March 5,
1997 between Crop Growers Corporation and Fireman's Fund Insurance Company
(Incorporated by reference to Exhibit 2.3 to the Company's Current Report on
Form 8-K, dated February 28, 1997).

3.1 Certificate of Incorporation of the Company (Incorporated by reference to
Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996).

3.2 Bylaws of the Company (Incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-1 (File No. 33-77548)).

4 Form of Certificate for Common Stock (Incorporated by reference to Exhibit
4.1 to the Company's Registration Statement on Form S-1 (File No.
33-77548)).

10.1 Amended Managing Agency Agreement between Continental Insurance Companies
and Crop Growers Insurance, Inc., a wholly-owned subsidiary of the Company,
effective as of September 1, 1990, as amended (Incorporated by reference to
Exhibit 10.1 to the Company's Registration Statement on Form S-1 (File No.
33-77548). (Confidential treatment of certain portions of this document has
previously been granted by the Securities and Exchange Commission (the
"Commission")).

*10.2 Employment Agreement with John J. Hemmingson (Incorporated by reference to
Exhibit 10.5 to the Company's Registration Statement in Form S-1 (File No.
33-85808)).

*10.3 Employment Agreement with Gary A. Black (Incorporated by reference to
Exhibit 10.6 to the Company's Registration Statement in Form S-1 (File No.
33-85808)).

*10.4 Employment Agreement with Tony Cid (Incorporated by reference to Exhibit
10.8 to the Company's Registration Statement in Form S-1 (File No.
33-85808)).
</TABLE>

D-70
<PAGE>
<TABLE>
<C> <S>
*10.5 1994 Stock Incentive Plan (Incorporated by reference to Exhibit 10.9 to the
Company's Registration Statement in Form S-1 (File No. 33-85808)).

*10.6 Form of Director and Executive Officer Indemnification Agreement
(Incorporated by reference to Exhibit 10.8 to the Company's Registration
Statement on Form S-1 (File No. 33-77548)).

*10.7 Non-Employee Director Stock Option Plan (Incorporated by reference to
Exhibit 10.11 to the Company's Registration Statement in Form S-1 (File No.
33-85808)).

10.8 General Agency Agreement dated January 1, 1994 by and between Crop Growers
Insurance, Inc. and CNA Insurance Company (Incorporated by reference to
Exhibit 10.19 to the Company's Registration Statement on Form S-1 (File No.
33-77548) (Confidential treatment of certain portions of this document have
previously been granted by the Commission.)).

10.9 Administrative Services and Facilities Agreement dated as of June 1, 1994
between Crop Growers Insurance, Inc. and Texas Crop Growers Insurance
Services, Inc. (Incorporated by reference to Exhibit 10.21 to the Company's
registration statement on Form S-1 (File No. 33-85808)).

10.10 Stock Purchase Agreement dated as of March 14, 1994, among the Company,
Dawson Hail Insurance Co. and the shareholders of Dawson Hail Insurance Co.
(Incorporated by reference to Exhibit 2(1) to the Company's Current Report
on Form 8-K, dated March 14, 1995).

10.11 Agreement dated as of March 14, 1995, among the Company, Dawson Hail
Insurance Co. and Crop Growers of North Dakota, Inc. (Incorporated by
reference to Exhibit 2(2) to the Company's Current Report on Form 8-K, dated
March 14, 1995).

10.12 MPCI General Agency Agreement dated July 10, 1996 by and between Crop
Growers Insurance, Inc. and Fireman's Fund Insurance Company as amended.
(Confidential treatment of certain portions of this document has been
requested) (Incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.)).

10.13 Coelho Associates LLC Limited Liability Company Agreement dated as of
Novembera 16, 1995 between Crop Growers Employer Organization, Inc., Togar
LLC and Robert Bruno. (Incorporated by reference to Exhibit 10.18 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1995,
as amended.)

10.14 Security Agreement dated November 17, 1995 between the Company and Coelho
Associates LLC. (Incorporated by reference to Exhibit 10.19 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1995, as
amended.)

10.15 Amended Promissory Note dated May 31, 1996 from Coelho Associates LLC.
(Incorporated by reference to Exhibit 10.5 to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1996, as amended.)

10.16 License Agreement entered into as of September 6, 1995 between the Company
and Coelho Associates LLC (Incorporated by reference to Exhibit 10.21 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1995,
as amended).

10.17 Crop Growers Corporation Securities Litigation--Memorandum of Understanding
dated February 28, 1997 (Incorporated by reference to Exhibit 99(2) to the
Company's Current Report on Form 8-K, dated February 28, 1997).
</TABLE>

D-71
<PAGE>
<TABLE>
<C> <S>
10.18 Letter Agreement dated January 17, 1997 between Crop Growers Corporation and
the Office of Independent Counsel (Incorporated by reference to Exhibit
99(2) to the Company's Current Report on Form 8-K, dated January 21, 1997).

*10.19 Separation Agreement dated September 23, 1996 between John Hemmingson and
the Company (Incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, as
amended).

10.20 Right of First Offer and First Refusal Agreement dated September 23, 1996
between Fireman's Fund Insurance Company, John Hemmingson, and the Company
(Incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1996, as amended).

*10.21 Separation Agreement dated September 23, 1996 between Gary Black and the
Company (Incorporated by reference to Exhibit 10.3 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, as
amended).

10.22 Right of First Offer and First Refusal Agreement dated September 23, 1996
between Fireman's Fund Insurance Company, Gary Black, and the Company
(Incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1996, as amended).

10.23 Preferred Stock Purchase Agreement dated July 10, 1996 between the Company
and Fireman's Fund Insurance Company (Incorporated by reference to Exhibit
3.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996).

*10.24 Amendment to Employment Agreement Providing for a Leave of Absence dated May
9, 1996 between John Hemmingson and the Company (Incorporated by reference
to Exhibit 6.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996).

*10.25 Amendment to Employment Agreement Providing for a Leave of Absence dated May
9, 1996 between Gary Black and the Company (Incorporated by reference to
Exhibit 6.3 to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996).

10.26 Agreement Granting Irrevocable Proxy relating to John Hemmingson.

10.27 Crop Hail/Named Peril Insurance General Agency Agreement effective as of
January 1, 1997, by and between Crop Growers Insurance, Inc. and Fireman's
Fund Insurance Company.

*10.28 Employment Agreement with Lawrence T. Martinez.

10.29 Amendment No. 1 to MPCI General Agency Agreement effective as of November
27, 1996, by and between Crop Growers Insurance, Inc. and Fireman's Fund
Insurance Company.

21 List of Subsidiaries.

23 Consent of KPMG Peat Marwick LLP.

24 Powers of Attorney.
</TABLE>

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

* Items that are management contracts or compensatory plans or arrangements
required to be filed as an exhibit to this form pursuant to Item 14(a) of
this Form 10-K.

(b) Reports on Form 8-K

None

D-72
<PAGE>
SIGNATURES

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

Dated: July 15, 1997 CROP GROWERS CORPORATION

By /s/ DAVID E. HILL
-----------------------------------------
David E. Hill
CHIEF FINANCIAL OFFICER

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

NAME POSITION DATE
- ------------------------------ -------------------------- -------------

* Chief Executive Officer
- ------------------------------ (principal executive July 15, 1997
Lawrence T. Martinez officer) and Director

/s/ DAVID E. HILL Chief Financial Officer
- ------------------------------ (principal financial and July 15, 1997
David E. Hill accounting officer)

*
- ------------------------------ Director July 15, 1997
Paul T. Horn

*
- ------------------------------ Director July 15, 1997
John M. Meuschke

*
- ------------------------------ Director July 15, 1997
Manuel Sanchez

*
- ------------------------------ Director July 15, 1997
Thomas M. Vertin

/s/ DAVID E. HILL
- ------------------------------ Attorney-in-Fact July 15, 1997
*By: David E. Hill

D-73
<PAGE>
EXHIBIT E

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM 10-Q

(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND
EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 0-23830

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

CROP GROWERS CORPORATION
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 81-0491497
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

10895 LOWELL, SUITE 300
OVERLAND PARK, KANSAS 66210
(Address of principal executive offices) (Zip code)
</TABLE>

(913) 338-7800
(Registrant's telephone number, including area code)

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

The number of shares outstanding of the registrant's common stock on May 1,
1997 was 7,972,551 shares.

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

E-1
<PAGE>
CROP GROWERS CORPORATION

FORM 10-Q
QUARTER ENDED MARCH 31, 1997

INDEX

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I--FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets as of March 31, 1997 (unaudited) and December 31, 1996............................ E-3

Consolidated Statements of Income (unaudited) for the Three Months Ended March 31, 1997 and March 31, 1996.... E-4

Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 1997 and March 31,
1996........................................................................................................ E-5

Notes to Unaudited Consolidated Financial Statements.......................................................... E-6

Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................................................... E-8

PART II--OTHER INFORMATION

Item 1. Legal Proceedings............................................................................................. E-14

Item 2. Changes in Securities......................................................................................... E-14

Item 3. Defaults Upon Senior Securities............................................................................... E-14

Item 4. Submission of Matters to a Vote of Security Holders........................................................... E-14

Item 5. Other Information............................................................................................. E-14

Item 6. Exhibits and Reports on Form 8-K.............................................................................. E-14

SIGNATURES............................................................................................................. E-15
</TABLE>

E-2
<PAGE>
PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

CROP GROWERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
1996
MARCH 31, ------------
1997
------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities, held to maturity.......................................................... $ 1,307,963 $ 1,308,439
Fixed maturities, available for sale........................................................ 5,986,459 5,199,708
------------ ------------
Total investments......................................................................... 7,294,422 6,508,147

Cash and cash equivalents..................................................................... 7,404,434 16,132,126
Premiums receivable, net...................................................................... 167,710,319 71,854,123
Reinsurance balances recoverable.............................................................. 114,827,975 32,625,869
Property and equipment, net................................................................... 5,114,830 5,242,447
Intangible assets, net........................................................................ 9,462,719 9,857,238
Other assets.................................................................................. 14,168,477 16,709,178
------------ ------------
$325,983,176 $158,929,128
------------ ------------
------------ ------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Premiums and commissions payable.............................................................. $ 63,387,643 $ 46,961,297
Accounts payable and accrued liabilities...................................................... 18,938,547 15,767,331
Reinsurance balances payable.................................................................. 81,135,802 17,010,461
Loss reserves................................................................................. 113,361,632 32,147,342
Long-term debt................................................................................ 2,964,564 3,290,672
------------ ------------
Total liabilities......................................................................... 279,788,188 115,177,103

Redeemable preferred stock.................................................................... 10,000,000 10,000,000

Stockholders' equity:
Common stock (par value $.01):
40,000,000 shares authorized; 7,972,251
and 7,970,251 shares issued and outstanding
at March 31, 1997 and December 31, 1996,
respectively.............................................................................. 79,723 79,702
Paid-in capital............................................................................... 36,744,095 36,729,115
Accumulated deficit........................................................................... (653,953) (3,086,499)
Unrealized appreciation of fixed maturity investments, net of taxes........................... 37,623 54,707
Unearned compensation......................................................................... (12,500) (25,000)
------------ ------------
Total stockholders' equity................................................................ 36,194,988 33,752,025
------------ ------------
$325,983,176 $158,929,128
------------ ------------
------------ ------------
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

E-3
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------
MARCH 31, MARCH 31,
1997 1996
----------- -----------
<S> <C> <C>
Revenues:
Service fees.................................................................................. $49,736,836 $66,272,697
Premiums earned and other income.............................................................. 521,968 780,020
Investment income............................................................................. 206,483 561,512
----------- -----------
Total revenues.............................................................................. 50,465,287 67,614,229

Expenses:
Agent commissions and other direct costs...................................................... 36,010,211 46,280,011
Losses incurred and other expense............................................................. 142,358 444,613
General and administrative expense............................................................ 7,481,595 8,028,484
Non-recurring expenses........................................................................ 1,375,000 --
Legal matters................................................................................. 1,134,518 551,396
Interest expense.............................................................................. 93,165 834,037
----------- -----------
Total expenses.............................................................................. 46,236,847 56,138,541
----------- -----------
Income before income tax expense.............................................................. 4,228,440 11,475,688
Income tax expense.......................................................................... (1,682,919) (4,503,163)
----------- -----------
Net income...................................................................................... 2,545,521 6,972,525
Redeemable preferred stock dividend......................................................... (125,000) --
----------- -----------
Net income attributable to common stock......................................................... $ 2,420,521 $ 6,972,525
----------- -----------
----------- -----------
Net income per common share................................................................... $ .30 $ .84
----------- -----------
----------- -----------
Weighted average common shares outstanding.................................................... 7,984,847 8,348,429
----------- -----------
----------- -----------
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

E-4
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------
MARCH 31, MARCH 31,
1997 1996
------------ -------------
<S> <C> <C>
Operating activities:
Net income................................................................................. $ 2,545,521 $ 6,972,525
Adjustments to reconcile net income to net cash (used) provided by operating activities:
Depreciation............................................................................. 396,450 423,297
Amortization............................................................................. 394,519 451,239
Other changes:
Premiums receivable...................................................................... (95,856,196) (114,023,552)
Premiums and commissions payable......................................................... 16,426,346 28,221,592
Accounts payable and accrued liabilities................................................. 3,171,216 8,822,382
Loss reserves............................................................................ 81,214,290 63,615,408
Reinsurance balances recoverable......................................................... (82,202,106) (63,681,920)
Reinsurance balances payable............................................................. 64,125,341 69,072,866
Other.................................................................................... 2,585,487 4,440,964
------------ -------------
Net cash (used) provided by operating activities........................................... (7,199,132) 4,314,801

Investing activities:
Change in company financed premiums........................................................ -- 20,616,941
Purchases of securities--available for sale................................................ (1,240,645) (575,793)
Proceeds from sale and maturity of securities--available for sale.......................... 405,000 570,613
Capitalization of intangible assets........................................................ -- (26,847)
Purchase of property and equipment......................................................... (268,833) (1,168,773)
------------ -------------
Net cash (used) provided by investing activities........................................... (1,104,478) 19,416,141

Financing activities:
Net repayments of note payable to bank..................................................... -- (29,336,900)
Redeemable preferred stock dividend........................................................ (125,000) --
Proceeds from issuance of long-term debt................................................... -- 20,034
Repayments on long-term debt............................................................... (326,108) (370,097)
Repurchase of common stock................................................................. (77,975) (394,063)
Issuance of common stock................................................................... 105,001 6,000
------------ -------------
Net cash used by financing activities...................................................... (424,082) (30,075,026)
------------ -------------
Net decrease in cash and cash equivalents.................................................. (8,727,692) (6,344,084)
Cash and cash equivalents, beginning of quarter............................................ 16,132,126 6,980,570
------------ -------------
Cash and cash equivalents, end of quarter.................................................. $ 7,404,434 $ 636,486
------------ -------------
------------ -------------
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

E-5
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. QUARTERLY PRESENTATION

The unaudited consolidated financial statements have been prepared by Crop
Growers Corporation (the Company) pursuant to the rules and regulations of the
Securities and Exchange Commission applicable to quarterly reports on Form 10-Q.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
management believes that the disclosures are adequate to make the information
presented not misleading. Results of operations for interim periods are not
indicative of results of operations to be expected for the full year ending
December 31, 1997. It is suggested that these unaudited consolidated financial
statements be read in conjunction with the consolidated financial statements and
related notes in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.

In the opinion of management, the information furnished reflects all
adjustments which are of a normal recurring nature and are necessary for a fair
presentation of the Company's financial position as of March 31, 1997 and
December 31, 1996, and the results of its operations and its cash flows for the
three months ended March 31, 1997 and 1996.

2. RECONCILIATION OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Balance at January 1............................................................................ $33,752,025 $44,342,224
Net income.................................................................................... 2,545,521 6,972,525
Change in unrealized appreciation of fixed maturity and equity investments, net of taxes...... (17,084) (3,710)
Restricted stock compensation earned.......................................................... 12,500 12,500
Exercise of stock options..................................................................... 105,001 6,000
Repurchase of common stock.................................................................... (77,975) (394,062)
Dividend payment on redeemable preferred stock................................................ (125,000) --
----------- -----------
Balance at March 31............................................................................. $36,194,988 $50,935,477
----------- -----------
----------- -----------
</TABLE>

3. NON-RECURRING EXPENSES

In connection with the dissolution of its multi-peril crop insurance
("MPCI") agency agreement with CNA Insurance Companies ("CNA") effective for the
1997 crop year, the Company canceled and transferred MPCI policies, previously
written on CNA paper, to Fireman's Fund Insurance Company ("Fireman's Fund"), or
one of the Company's insurance subsidiaries. The Company offered incentive fees
to agents to compensate them for obtaining the necessary cancellation and
rewrite forms from policyholders. In the quarter ended March 31, 1997, the
Company agreed to pay approximately $1.1 million in incentive fees relating to
transferred business. The Company also accrued $275,000 related to the buy-out
of a consulting agreement with a former employee of a company previously
acquired by the Company.

4. LEGAL MATTERS

On February 28, 1997, the Company entered into a settlement agreement
relating to a securities class action lawsuit which had been filed in May, 1995
for $2.5 million, $1.22 million of which was payable by the Company with the
remainder payable under the terms of a directors' and officers' insurance
policy. The

E-6
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. LEGAL MATTERS (CONTINUED)
$1.22 million was accrued at December 31, 1996 and paid on May 1, 1997. In the
three months ended March 31, 1997, the Company incurred legal fees of
approximately $53,000 associated with this matter.

On January 21, 1997, the Company entered a NOLO CONTENDERE plea to two
charges in the matter of UNITED STATES OF AMERICA V. CROP GROWERS CORPORATION,
JOHN J. HEMMINGSON AND GARY A. BLACK (Crim. No. 96-0181(GK)), filed in the
United States Federal District Court in Washington, D.C. The Company paid a fine
in the amount of $2.0 million which was accrued at December 31, 1996 and under
the settlement agreement $1.5 million was paid in February 1997 and $500,000 was
paid in April 1997. In the three months ended March 31, 1997 the Company
incurred legal fees of $1.1 million associated with this matter, including
amounts advanced by the Company pursuant to indemnification agreements between
two former officers and the Company. The counts with respect to which the
Company entered its plea alleged conspiracy to make and conceal illegal campaign
contributions and the making and keeping of false records and accounts under
provisions of the Securities and Exchange Act of 1934. A nono contendere plea is
neither an admission nor a denial of guilt. See also "Part II - Other
Information--Item 1 - Legal Proceedings."

By its terms, the Company's settlement does not compromise or preclude civil
actions by other governmental regulatory authorities, such as the Federal
Election Commission, Securities and Exchange Commission, the USDA, or state or
federal insurance regulatory authorities, or shareholders as a result of the
allegations made by the IC and the Company's NOLO CONTENDERE plea. No assurance
can be given as to what action a regulatory authority might take in response to
the Company's plea and its agreement with the IC.

5. ACQUISITION AGREEMENT

On March 5, 1997, the Company and Fireman's Fund entered into a definitive
agreement by which Fireman's Fund would acquire the Company in a cash merger at
$10.25 per share. Fireman's Fund presently owns convertible preferred stock of
the Company and has exercised its rights to purchase an additional 1,827,477
shares of common stock from former Company executives for $10.00 per share. The
Company consented to such purchases, subject to certain restrictions. The
transaction is subject to, among other things, Company stockholder approval,
regulatory approvals and other customary conditions. On May 8, 1997, the Company
filed a preliminary proxy statement with the Securities and Exchange Commission
relating to this transaction. Because of regulatory approvals and clearances,
the transaction is not expected to close until mid-1997.

6. NEW ACCOUNTING PRONOUNCEMENTS

In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share" which revises the calculation and presentation
provisions of Accounting Principles Board Opinion 15 and related
interpretations. Statement No. 128 is effective for the Company's fiscal year
ending December 31, 1997. Retroactive application will be required. The Company
believes the adoption of Statement No. 128 will not have a significant affect on
its reported earnings per share.

E-7
<PAGE>
CROP GROWERS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

FORWARD-LOOKING INFORMATION

Except for the historical information contained in this Quarterly Report on
Form 10-Q, matters discussed herein may constitute forward-looking information.
Such forward-looking information reflects the Company's current best estimates
regarding future operations, but, since they are only estimates, actual results
may differ materially from such estimates.

A variety of events, most of which are outside the Company's control, cannot
be accurately predicted and may materially impact estimates of future
operations. Important among such factors are weather conditions, natural
disasters, changes in federal or state laws or regulations including, without
limitation, changes to the multi-peril crop insurance ("MPCI") program currently
being considered and future changes which may be made by the Federal Crop
Insurance Corporation ("FCIC") (the federal agency which administers the MPCI
program), funding for the MPCI program, price competition impacting premium
levels and agent commissions, and general economic conditions. Federal
regulations governing aspects of crop insurance are frequently modified, and any
such changes may impact the Company's results of operations.

AGENCY OPERATIONS

SERVICE FEES

The Company's agency operations annual revenues include service fees related
to servicing of MPCI and crop hail insurance, excess loss adjusting expense
reimbursement related to MPCI premiums serviced and profit sharing amounts, if
any, resulting from underwriting gains, if any, on the premiums it services.

For coverage exceeding the basic level of MPCI coverage ("Buy-Up Coverage"),
the Company is entitled to the expense reimbursement payable by the FCIC. This
expense reimbursement is passed through to the Company under its MPCI contracts
with third party insurance companies and is paid directly to the Company for
MPCI premiums underwritten by its property and casualty insurance subsidiaries.
For the 1997 crop year (beginning July 1, 1996), the expense reimbursement for
Buy-Up Coverage was established by the FCIC at 29%. For the 1996 crop year, the
expense reimbursement for Buy-Up Coverage was established by the FCIC at 31%.

For the basic level of MPCI coverage ("Basic Coverage"), the Company retains
a portion of the administrative fee paid by the insured and receives an amount
for loss adjusting expenses (regardless of the loss experience of the insureds),
which amounts are passed through or paid directly to the Company under its MPCI
contracts. For Basic Coverage, the Company's portion of the administrative fee
is up to the first $100 of the fee paid by the insured and the loss adjusting
expense reimbursement which is equal to 4.7% of an imputed premium (based upon a
65% production guarantee at a 100% price election).

The expense reimbursement level for the 1998 and 1999 crop years for Buy-Up
Coverage is limited under the Federal Crop Insurance Reform Act of 1994 (the
"Reform Act") to levels not to exceed 28% and 27.5%, respectively. See the
following paragraph for a discussion of proposed changes to the expense
reimbursement level for the 1998 crop year. Because the Company's MPCI service
fees are directly related to the expense reimbursement established by the FCIC,
the Company's future MPCI service fees will be affected by the reductions in the
level of expense reimbursement. MPCI agent commissions vary by agent depending
on such factors as the volume of premium produced by the agent, whether or not
the agent is responsible for any direct costs and other competitive factors.

E-8
<PAGE>
On March 20, 1997, a draft of the Standard Reinsurance Agreement ("SRA")
(effective for the 1998 crop year) was released by the FCIC. The draft SRA
proposes to revise the expense reimbursement level for Buy-Up Coverage to an
amount equal to a flat $100 per policy plus 18% of the premium related to that
policy (17% in the case of Crop Revenue Coverage policies, a revenue protection
coverage introduced by the FCIC in the 1997 crop year). For Basic Coverage,
private companies would receive a flat dollar amount per policy (not to exceed
$100 per policyholder per county) plus 4.8% of the premium related to that
policy (based on a 50% production guarantee at a 60% price election). The draft
SRA also proposes certain changes to the risk sharing arrangement (calculation
of underwriting gain or loss on premiums retained by private companies) between
private companies and the FCIC. Under the proposed draft, private companies
would receive the expense reimbursement in one installment at the time acreage
reports are reported to and validated by the FCIC. The draft SRA also proposes
certain other changes to the administration of the MPCI program, including
certain compliance and program integrity issues. Earlier in 1997 and as a part
of the Clinton Administration's budget proposal for the government's 1998 fiscal
year, funding for the expense reimbursement was proposed at 24.5% for the 1998
crop year.

The Company is not able to predict whether any or all of the proposed
revisions to the SRA will ultimately be adopted, but believes that the proposed
revisions (particularly the revisions to the expense reimbursement), if
implemented as proposed, would have an adverse impact on the Company's results
of operations in the 1998 crop year (as proposed, the impact on the Company's
service fee revenues based on its 1997 crop year book of business, would have
been to reduce service fee revenues by approximately 16%). The Company cannot
predict what the final terms of the SRA will ultimately be or what other
legislative or administrative actions may occur as a part of the SRA revision
process or the federal budget process. For the 1998 crop year, the Company
intends to negotiate with agents regarding reduced commissions on Buy-Up
Coverage to offset expense reimbursement reductions, however, there is no
assurance that any reduction will be able to be passed through to agents as a
result of competitive or other factors.

Under its MPCI contracts, the Company is also entitled to receive any excess
loss adjustment expense reimbursement from the FCIC. The FCIC pays contracting
insurance companies an amount up to 4% of premium on Buy-Up Coverage for excess
loss adjusting expenses on such coverage if loss ratios on the Company's total
book of MPCI business, by state and by risk retention fund, are in excess of the
ratios established by the FCIC. Generally, the excess loss adjustment expense
reimbursement increases as the loss ratio increases. Under Basic Coverage
policies, the FCIC pays contracting insurance companies an amount up to 1.7% of
the imputed premium for excess loss adjusting expenses in the event loss ratios
on the overall book of Basic Coverage are in excess of loss ratios established
by the FCIC. Effective with the 1998 crop year, the FCIC will no longer pay
excess loss adjustment expense reimbursement to contracting companies. In the
1996 crop year, the Company received approximately $1.6 million in excess loss
adjusting expense reimbursements and expects to receive a similar amount in the
1997 crop year.

Additionally, for the 1997 crop year, the Company has an arrangement with
Fireman's Fund pursuant to which it is entitled to receive a percentage of the
underwriting gains, if any, on crop insurance it services.

The Company's operating results may vary significantly depending on the
underwriting results of the premiums serviced and underwritten by it. The
Company does not assume any of the underwriting loss under its servicing
contracts with third party insurers and under the Company's MPCI agreement with
Fireman's Fund, there is no loss carryforward to reduce future underwriting
gains. Underwriting gains or losses on crop insurance are generally not
determinable until sometime after the second quarter of any year and,
accordingly, the Company expects that revenues, if any, from these arrangements
will typically be recognized in the third and fourth quarters. Underwriting
gains on premiums serviced by the Company are recognized by the Company as
additional service fees and, because they generally have very low related
expenses, can have a material impact on the Company's operating results.
Accordingly, although the Company's risk management strategy is to minimize its
exposure to underwriting risk, the Company's earnings can be materially affected
by factors which impact underwriting results and, accordingly, its

E-9
<PAGE>
portion of any underwriting gains, including the timing and severity of losses
from storms and other natural perils.

AGENT COMMISSIONS AND OTHER DIRECT COSTS

Agent commissions and other direct costs related to marketing and servicing
MPCI are obligations of the Company under its MPCI agreements and, accordingly,
are reflected as expenses of the Company. Other direct costs include loss
adjusting expenses, bureau fees and other costs. These costs, except for loss
adjusting expenses, vary proportionally with the amount of premiums serviced.

Loss adjustment expenses are based on management's estimate of all Company
adjusting costs to settle claims incurred or to be incurred on policies on which
revenue has been recognized. The estimate is reviewed periodically and
variances, if any, in estimated versus actual amounts are reflected in current
operations. In some instances, agents are responsible for loss adjusting
expenses or other direct costs associated with policies sold by them, and those
agents generally receive higher commissions in return for the assumption of
those direct costs. Bureau fees are fees charged by NCIS for providing rates and
procedures required to be used by the FCIC.

RECOGNITION OF SERVICE FEES AND DIRECT COSTS

The Company recognizes service fees from MPCI policies and the related
direct costs as of the sales closing date for the particular policy. The sales
closing date, which is established by the FCIC, is the date on which coverage
for a crop must be bound or renewed by the policyholder and when substantially
all required services relating to placing the insurance have been rendered by
the Company. Unless canceled by the farmer, policies in place from the prior
year automatically renew on the same terms on the sales closing date.

Since sales closing dates precede the date on which farmers plant their
insured crop, MPCI coverage and related premiums are estimated by the Company
until the farmer subsequently submits his or her report on actual acreage
planted. The effects of changes in such estimated premiums are included in the
results of operations in the period in which the estimates are changed.

For crop hail insurance, service fees are recognized when the insurance
coverage is accepted by the insurance company, which is concurrent with the
completion of substantially all services required by the Company. Direct costs
such as agent commissions, loss adjusting and premium taxes are recognized at
the time service fees are recognized.

INSURANCE OPERATIONS

The Company's insurance operations include premiums earned and losses
incurred on MPCI Buy-up, Basic, crop hail, and other coverages underwritten and
retained by the Company's property and casualty insurance subsidiaries.

For the 1996 and 1997 crop years, the Company did not and will not retain
any MPCI premiums underwritten by its insurance company subsidiaries.
Additionally, the Company will not retain any crop hail premiums underwritten by
its insurance company subsidiaries for the 1997 crop hail season.

INVESTMENT INCOME

The Company earns investment income on investment securities and excess cash
invested at certain times of the year, which typically occurs after MPCI and
crop hail premiums are collected. Realized gains and losses on the sale of
investments are also included in investment income.

E-10
<PAGE>
SEASONALITY

The Company's quarterly operating results vary substantially from quarter to
quarter as a result of various factors, including MPCI sales closing dates, crop
production cycles and recognition of underwriting gains, if any. The Company
recognizes the highest amount of service fees and related direct costs in the
first quarter because the sales closing date for the majority of spring crops is
March 15. The majority of these amounts are attributed to service fees related
to MPCI. Virtually all of the Company's service fees and direct costs related to
crop hail insurance are recognized in the second quarter. The Company generally
recognizes its second highest amount of revenues and related direct costs in the
third quarter because the MPCI sales closing date for the majority of fall crops
is September 30. In addition, the Company may recognize a portion of
underwriting gains, if any, on the premiums it underwrites or services in the
third quarter. In the fourth quarter, the Company also recognizes underwriting
gains, if any, on the premiums it underwrites or services, most of the interest
income on MPCI deferred premium financing and service fees on MPCI premiums with
sales closing dates occurring in the fourth quarter. The Company cannot predict
whether MPCI sales closing dates will be changed in the future, but any such
change could have a material effect on the Company's quarterly results of
operations. Because the Company's business is directly tied to the production
cycle of crops, the Company expects that seasonal patterns in its operating
results will continue.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1996

AGENCY OPERATIONS. Service fees decreased $16.6 million to $49.7 million
for the three months ended March 31, 1997 compared to $66.3 million in the three
months ended March 31, 1996. The decrease in service fees was primarily the
result of decreased MPCI premiums serviced in the 1997 crop year due to, among
other things, a loss of premiums due to certain agencies electing to have their
premiums serviced by other insurance companies, the dissolution of the Company's
relationship with CNA (and the need to cancel and transfer policies to Fireman's
Fund), the overall lower level of commodity prices on the Company's insured
crops, and the reduction in the reimbursement rate on MPCI Buy-Up premiums to
29% for the 1997 crop year from 31% for the 1996 crop year. MPCI Buy-Up and
Basic premiums serviced in the three months ended March 31, 1997 were $144.2
million and $32.2 million, respectively, as compared
to $187.4 million and $38.5 million, respectively, in the three months ended
March 31, 1996.

The decrease in service fees was partially offset by $2.4 million in
additional profit sharing revenue recorded in the three months ended March 31,
1997, relating to the 1996 crop year. The additional profit sharing resulted
from better than expected development on estimated losses that were not settled
at December 31, 1996. As the Company continues to complete its claim processing
related to the 1996 crop year, underwriting results may continue to develop
favorably.

Agent commissions and other direct costs decreased $10.3 million to $36.0
million for the three months ended March 31, 1997 compared to $46.3 million for
the three months ended March 31, 1996. The decrease in agent commissions and
other direct costs was the result of the decreased MPCI premiums serviced by the
Company. However, agent commissions increased as a percentage of premiums
serviced in the first quarter of 1997 as compared to 1996 due to competitive
pressures which forced the Company, in several areas of the country, to maintain
historical commission rates offered to agents. The Company believes these
competitive factors together with reductions in the expense reimbursement level
will continue to effect the Company's margins for the foreseeable future.

INSURANCE OPERATIONS. Virtually all of the premiums underwritten by the
Company's property and casualty insurance subsidiaries was reinsured with third
party insurance companies. Accordingly, the impact of the Company's insurance
operations are not material to first quarter operations.

E-11
<PAGE>
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
decreased $547,000 in the three months ended March 31, 1997 to $7.5 million from
$8.0 million in the three months ended March 31, 1996. The decrease was
attributed to cost savings resulting from the restructuring of the Company's
operations in 1996 and continued efforts by the Company to control expenses. The
Company had 401 and 513 employees at March 31, 1997 and March 31, 1996,
respectively.

NON-RECURRING EXPENSES. In connection with the dissolution of its MPCI
agency agreement with CNA effective for the 1997 crop year, the Company canceled
and transferred MPCI policies, previously written on CNA paper, to Fireman's
Fund, or one of the Company's insurance subsidiaries. The Company offered
incentive fees to agents to compensate them for obtaining the necessary
cancellation and rewrite forms from policyholders. In the quarter ended March
31, 1997, the Company agreed to pay approximately $1.1 million in incentive fees
relating to transferred business. The Company also accrued $275,000 related to
the buy-out of a consulting agreement with a former employee of a company
previously acquired by the Company.

LEGAL MATTERS. On February 28, 1997, the Company entered into a settlement
agreement relating to a securities class action lawsuit which had been filed in
May, 1995 for $2.5 million, $1.22 million of which was payable by the Company
with the remainder payable under the terms of a directors' and officers'
insurance policy. The $1.22 million was accrued at December 31, 1996 and paid on
May 1, 1997. In the three months ended March 31, 1997 the Company incurred legal
fees of approximately $53,000 associated with this matter.

On January 21, 1997, the Company entered a NOLO CONTENDERE plea to two
charges in the matter of UNITED STATES OF AMERICA V. CROP GROWERS CORPORATION,
JOHN J. HEMMINGSON AND GARY A. BLACK (Crim. No. 96-0181(GK)), filed in the
United States Federal District Court in Washington, D.C. The Company paid a fine
in the amount of $2.0 million which was accrued at December 31, 1996 and under
the settlement agreement $1.5 million was paid in February 1997 and $500,000 was
paid in April 1997. In the three months ended March 31, 1997 the Company
incurred legal fees of $1.1 million associated with this matter, including
amounts advanced by the Company pursuant to indemnification agreements between
two former officers and the Company. The counts with respect to which the
Company entered its plea alleged conspiracy to make and conceal illegal campaign
contributions and the making and keeping of false records and accounts under
provisions of the Securities and Exchange Act of 1934. A nono contendere plea is
neither an admission nor a denial of guilt. See also "Part II - Other
Information--Item 1--Legal Proceedings."

LIQUIDITY AND CAPITAL RESOURCES

GENERAL

Historically, most of the Company's cash flow has been used to pay premiums
due to the FCIC in the last quarter of the year on behalf of policyholders in
order to earn the spread between the interest charged to the policyholders,
which is equal to the rate established by the FCIC, and the Company's cost of
funds. In November 1996, the Company and Fireman's Fund amended their MPCI
agreement pursuant to which Fireman's Fund financed for the 1996 crop year the
premiums on behalf of the policyholders in exchange for the interest charged on
the deferred premiums. The Company continues to administer the collection of the
receivables and is ultimately responsible for the collection of the balances.
The Company receives a fee for administrative costs related to the premiums
financed.

E-12
<PAGE>
OPERATING ACTIVITIES

Cash used by operating activities was $7.2 million in the three months ended
March 31, 1997 as compared to cash provided by operating activities of $4.3
million in the three months ended March 31, 1996. The increase in cash used by
operating activities in the three months ended March 31, 1997 was primarily due
to the Company settling with insurance companies on crop hail and MPCI premiums
in the first quarter of 1997 versus the fourth quarter of 1995. Additionally,
the Company paid Fireman's Fund approximately $5.0 million for premium
receivables which were financed by Fireman's Fund, and had not yet been paid by
the policyholder. Also, during the three months ended March 31, 1996 the Company
received a $4.0 million tax refund.

INVESTING ACTIVITIES

Cash used by investing activities was $1.1 million in the three months ended
March 31, 1997 compared with cash provided by investing activities of $19.4
million in the three months ended March 31, 1996. The primary source of cash
provided by investing activities in 1996 was the receipt of a substantial
portion of the deferred MPCI premiums financed by the Company in the fourth
quarter of 1995.

FINANCING ACTIVITIES

The Company used cash for financing activities of $424,000 in the three
months ended March 31, 1997 and $30.1 million in the three months ended March
31, 1996. The primary use of cash in 1996 was to repay borrowings of $29.4
million under its line of credit.

CAPITAL RESOURCES

In connection with the March 1997 acquisition agreement between the Company
and Fireman's Fund, Fireman's Fund and the Company have entered into a $15
million working capital line of credit subject to certain borrowing base
limitations. The credit agreement includes restrictive covenants and the
requirement to maintain certain financial ratios and minimum net worth. The
commitment, which expires in March 1998, does not contain any loan or commitment
fees and borrowings bear interest at a national bank's base rate. If the Company
were to terminate the acquisition agreement with Fireman's Fund, any amounts
then outstanding under the line of credit would become immediately due and
payable. The Company is evaluating whether to replace this line of credit with a
commercial line of credit from a financial institution.

The Company believes that the cash generated from operations and the
availability of borrowings under the Fireman's Fund working capital line of
credit will provide sufficient resources to finance the Company's current
operations and projected working capital needs for the next 12 months.

E-13
<PAGE>
PART II--OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

See Part I, Item 3 and Part II, Item 8, Note 16 (Legal Matters), of the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.

ITEM 2. CHANGES IN SECURITIES.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

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

None.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits

None.

(b) Reports on Form 8-K

1. The Company filed a Current Report on Form 8-K dated January 3, 1997
announcing the ruling from the United States District Court for the District of
Columbia on several of the Company's motions to dismiss certain charges against
it related to the investigation of former Secretary of Agriculture Mike Espy by
an Independent Counsel.

2. The Company filed a Current Report on Form 8-K dated January 21, 1997
announcing that the United States District Court for the District of Columbia
had accepted the Company's plea of nolo contendere to two charges brought
against it by the Independent Counsel appointed to investigate former Secretary
of Agriculture Mike Espy.

3. The Company filed a Current Report on Form 8-K dated February 28, 1997
announcing a settlement had been reached between the Company, John Hemmingson
and Gary A. Black, former executives of the Company, and plaintiffs (on behalf
of a class of purchasers of the Company's common stock during the period
February 13, 1995 and May 18, 1995, inclusive) in connection with a securities
class action lawsuit. In addition, the Company announced they had entered into a
definitive agreement with Fireman's Fund Insurance Company whereby Fireman's
Fund Insurance Company would acquire the Company in a cash merger at $10.25 per
share.

E-14
<PAGE>
SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

CROP GROWERS CORPORATION

/s/ DAVID E. HILL
--------------------------------------
David E. Hill
CHIEF FINANCIAL OFFICER

May 15, 1997

E-15
<PAGE>
FORM OF PROXY CROP GROWERS CORPORATION
10895 LOWELL AVENUE, SUITE 300
OVERLAND PARK, KANSAS 66210

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS AUGUST 13, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned appoints Lawrence T. Martinez and David E. Hill, and each of
them, with power to act without the other and with all the right of substitution
in each, the proxies of the undersigned to vote all shares of Crop Growers
Corporation (the "Company") held by the undersigned on July 15, 1997, at the
Special Meeting of Shareholders of the Company, to be held on August 13, 1997 at
9:00 a.m. local time at the offices of the Company, 10895 Lowell Avenue, Suite
300, Overland Park, Kansas 66210, and all adjournments thereof, with all powers
the undersigned would possess if present in person. All previous proxies given
with respect to the meeting are revoked.

Receipt of Notice of Special Meeting of Shareholders and Proxy Statement is
acknowledged by your execution of this proxy. Complete, sign, date, and return
this proxy in the addressed envelope--no postage required. Please mail promptly
to save further solicitation expenses.

<TABLE>
<S> <C> <C> <C>
1. Approval of Merger Agreement, / / FOR the Merger / / AGAINST the Merger / / ABSTAIN
dated May 1, 1997, by and among
Crop Growers Corporation, Fire-
man's Fund Insurance Company and
CG Acquisitions Corp.
</TABLE>

(continued, and to be dated and signed, on other side)
<PAGE>

<TABLE>
<S> <C> <C> <C>
2. To vote with discretionary authority upon such other matters as may come before the meeting. (Discretionary
authority will be only exercised with respect to votes in favor or abstentions.)
/ / APPROVED / / WITHHELD
</TABLE>

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS PROVIDED BY THE UNDERSIGNED
SHAREHOLDER, THIS PROXY WILL BE VOTED "FOR" ITEM 1 LISTED HEREIN, UPON ALL OTHER
MATTERS, THE PROXIES SHALL VOTE AS THEY DEEM IN THE BEST INTERESTS OF THE
COMPANY.

SIGNATURE(S)
_______________________________________
_______________________________________
DATED: __________________________, 1997

INSTRUCTION: When shares are held by
joint tenants, all joint tenants should
sign. When signing as attorney,
executor, administrator, trustee,
custodian, or guardian, please give
full title as such. If shares are held
by a corporation, this proxy should be
signed in full corporate name by its
president or other authorized officer.
If a partnership holds the shares
subject to this proxy, an authorized
person should sign in the name of such
partnership.