CROP GROWERS CORP, SC 13E3/A, 1997-06-25

CROP GROWERS CORP
SC 13E3/A, 1997-06-25
INSURANCE AGENTS, BROKERS & SERVICE

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As filed with the Securities and Exchange Commission on June 25, 1997

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 13E-3

AMENDMENT NO. 1

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/

<PAGE>

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

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<PAGE>

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. Accordingly, the Company and Fireman's Fund do
not believe that Fireman's Fund, the Merger Subsidiary or the Company were
subject to the requirements of Rule 13e-3 under the Securities Exchange Act
of 1934, as amended, at the time the March 5 Agreement was entered into.
Fireman's Fund, the Merger Subsidiary and the Company are, however, filing
this Schedule 13E-3 to furnish information with respect to the transactions
described herein, although such entities expressly disclaim any obligation to
make this filing.

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<PAGE>

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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<PAGE>

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.

<PAGE>

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.

<PAGE>

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.

<PAGE>

(b), (c) Not applicable.

ITEM 14. FINANCIAL INFORMATION The Company's Annual Report on Form 10-K/A-1
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-1 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.*

(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.*

<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)(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) Preliminary 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 a date to be
determined (as amended).*

(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>
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.

June 25, 1997 FIREMAN'S FUND INSURANCE COMPANY

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

June 25, 1997 CG ACQUISITIONS CORP.

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

June 25, 1997 CROP GROWERS CORPORATION

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

<PAGE>

EXHIBIT INDEX

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

(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. B-1
dated March 5, 1997, which is Exhibit B to
the Proxy Statement and is incorporated
herein by this reference.

<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).

(d) (d)(1) Preliminary copy of Letter to 13
Stockholders, Notice of Special Meeting,
Proxy Statement and form of Proxy for the
Special Meeting of Stockholders of the
Company to be held on a date to be
determined.*

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

(f) Not applicable.

<PAGE>
CROP GROWERS CORPORATION

PROXY STATEMENT

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

SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , JULY , 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 ,
July , 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."

This Proxy Statement is accompanied by copies of 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. These materials are
specifically incorporated by reference in this Proxy Statement and are included
to aid stockholders in their consideration of the Merger.

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 June , 1997 are entitled to notice of and
to vote at the Special Meeting. This Proxy Statement is first being sent to
stockholders on or about June , 1997.

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

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>
TABLE OF CONTENTS

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............................................................................................... 1
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........................................................................... 3
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....................................................... 17
Opinion of Financial Advisor............................................................................. 19
Perspective of Fireman's Fund on the Merger.............................................................. 24
Plans for the Company After the Merger................................................................... 25
Certain Effects of the Merger............................................................................ 25
Relationship Between the Company and Fireman's Fund...................................................... 25
Interests of Certain Persons in the Merger............................................................... 29
Sources and Uses of Funds................................................................................ 30
Certain Federal Income Tax Consequences.................................................................. 30
Public Offerings and Repurchases of Common Stock......................................................... 31
Regulatory Approvals..................................................................................... 32

THE MERGER AGREEMENT....................................................................................... 32
General.................................................................................................. 32
Effective Time........................................................................................... 33
Consideration To Be Received by Stockholders............................................................. 33
Payment for Shares and Options........................................................................... 33
Operations of the Company Prior to the Merger............................................................ 34
Conditions to Consummation of the Merger................................................................. 35
Termination.............................................................................................. 35
Termination Fee.......................................................................................... 36
Accounting Treatment..................................................................................... 36
</TABLE>

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<TABLE>
<CAPTION>
PAGE
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<S> <C>
RIGHTS OF DISSENTING STOCKHOLDERS.......................................................................... 36

STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS................................................ 39
Stock Ownership.......................................................................................... 39
Transactions by Certain Persons in Common Stock.......................................................... 40

MANAGEMENT OF THE COMPANY, FIREMAN'S FUND AND THE MERGER SUBSIDIARY........................................ 41
The Company.............................................................................................. 41
Fireman's Fund and Affiliates............................................................................ 42
The Merger Subsidiary.................................................................................... 43
Certain Proceedings...................................................................................... 43

STOCKHOLDER PROPOSALS...................................................................................... 44

INDEPENDENT PUBLIC ACCOUNTANTS............................................................................. 44

INFORMATION INCORPORATED BY REFERENCE...................................................................... 44

AVAILABLE INFORMATION...................................................................................... 44

ADDITIONAL INFORMATION..................................................................................... 45

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
</TABLE>

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<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 , July , 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 June , (the "Record Date") are entitled to notice
of and to vote at the Special Meeting. On that date, there were 7,973,151 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 modify or withdraw its approval or
recommendation of the Merger, approve or recommend a Superior Proposal (as
defined below) or terminate the Merger Agreement 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. 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 other Company stockholders who are not "interested parties" as defined in
Section 203 of the Delaware

2
<PAGE>

General Corporate Law ("DGCL"). 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 (through June 23)......................................... 10.13 9.50
</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 June 23, 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 $10.00,
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 and its Quarterly Report on Form 10-Q for
the quarterly period ended March 31, 1997 accompany each copy of 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 July , 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 June , 1997 are entitled to notice of and to vote at the
Special Meeting. On that date, there were 7,973,151 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.

7
<PAGE>

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 a third party involved in the crop insurance industry ("Party X"), which
indicated a desire to hold discussions with Company management relating to
possible strategic transactions involving the Company and Party X. On or about
October 21, 1996, a representative of Party X telephoned Lawrence T. Martinez,
the Chief Executive Officer 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

9
<PAGE>

indicated he would be available to meet and asked the representative to
telephone him to arrange a meeting. On October 24, 1996, the representative
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 representatives of Party X. 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 21, 1996, at the initiative of a representative of Party X,
Messrs. Martinez and Hill, a representative of Dean Witter and representatives
of Party X met to continue their prior discussion. In addition to again
reviewing general crop insurance industry conditions, one of the representatives
of Party X outlined a possible transaction between the companies whereby the
Company and Party X would each contribute its crop insurance book of businesses
into a to-be-formed company in exchange for stock in the new company. The
representative indicated that because of the uncertainty surrounding the
possible impact of the Independent Counsel matter and the Company's existing
securities class action, Party X 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 Party X an
alternative transaction structure which contemplated a merger of the Company's
and Party X'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
representatives of Party X to discuss the alternative transaction structure
proposed by the Company. Dean Witter indicated that the structure previously
proposed by Party X 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.
The representatives of Party X 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 Party X, Mr. Martinez, a
representative of Dean Witter and representatives of Party X met to continue
their prior discussions. One of the representatives of Party X indicated that
the Company's proposed transaction structure was not acceptable for the reasons
stated above and he suggested that Party X believed the preferred transaction
structure would be an acquisition of the Company by Party X in a merger pursuant
to which the Company's stockholders would receive stock of Party X. 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
Company's MPCI agreements with Fireman's Fund. 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, Party X 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 Party X
relating to these issues.

10
<PAGE>

On December 27, 1996, Party X 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 Party X, and that each
issued and outstanding share of the Company's Common Stock would be converted
into stock of Party X having an equivalent value of less than $8.00 per share,
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 Party X, settlement of the Company's
outstanding securities class action lawsuit and disposition of the Independent
Counsel matter. Party X 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 Party X to indicate that the proposed
terms were unacceptable to the Company.

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,
representatives of Dean Witter and several representatives of Party X met. The
meeting resulted from Party X's offer to meet with members of the Company's
Board of Directors to discuss Party X's business and the benefits of a possible
merger transaction with Party X. At the meeting, the representatives of Party X
provided an overview of Party X's business and management team. They also
discussed certain benefits Party X perceived of combining the Company's and
Party X'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 Party X 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 Party X was
desirable in view of Fireman's Fund's capital resources and its investor and
reinsurance relationships with the Company. The representatives of Party X
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 Party X'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 Party X, 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,
Party X 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 Party X 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 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 Party X 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, 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
Party X. Mr. Meuschke indicated that Fireman's Fund's principal interest was to
protect its investment in and

11
<PAGE>

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 Board's reasons for settling the
case, principally to remove the contingency created by the case with respect to
the Company, were not, however, based upon the possibility of engaging in a
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 and certain other discussions that had occurred between
representatives of the Company and Party X. 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 Party X and inform its representatives that members of the Board would
be willing to meet with Party X's representatives to discuss the possibility of
a strategic transaction.

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 Party X, 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

12
<PAGE>
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 the Company's legal 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 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

13
<PAGE>

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 and the Company's legal counsel
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 and a representative of Party X to discuss whether
it made sense for Fireman's Fund and Party X 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 Party X was to take
place to discuss the possibility of a transaction which could result in a
combination of the Company's and Party X's 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 Party X 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 AZOA, and
representatives of Party X. The representatives of Party X provided an overview
of Party X's business and management team. Party X also discussed certain
benefits Party X perceived of combining the Company's and Party X's crop
insurance businesses through the merger of the Company into Party X. These
benefits included a leading market position in the MPCI industry, and improved
spread of risk across the United States and economies of scale which might be
realized through the combination of the businesses. None of the benefits
discussed were quantified. In response to a question, a representative of Party
X 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. A representative of Party X also
indicated that based on Fireman's Fund's ownership of the Company's Preferred
Stock and its potential ownership of the Hemmingson and Black Stock, Fireman's
Fund would potentially become a significant stockholder in Party X if Party X
stock was issued in a merger transaction. The Fireman's Fund and Party X
representatives also met separately the same day to discuss the same subjects.

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

14
<PAGE>

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 a representative of Party X again
discussed, by telephone, the possible role of Fireman's Fund if Party X were to
acquire or enter into a strategic transaction with the Company. No agreement was
ever reached between Fireman's Fund and Party X.

On March 1, a representative of Dean Witter telephoned a representative of
Party X to determine if Party X was willing to make a proposal for consideration
by the Board of Directors. A representative of Party X indicated that Party X
was still considering the possibility of making a proposal to the Company
whereby the Company would be merged into Party X and the Company's stockholders
would receive Party X's common stock (which, based on the then current trading
price of Party X's stock, represented less than $9.00 par 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 Party X on February 28 regarding a possible Fireman's Fund role
in the context of a transaction between the Company and Party X, and that
Fireman's Fund did not view reaching an agreement with Party X as likely.

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, Messrs. Horn, Vertin, Martinez, Hill and
representatives of Dean Witter and the Company's legal counsel had numerous
discussions and negotiations with Messrs. Post, Marsh, Friedberg and Meuschke
and 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 the Company's legal counsel 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.

15
<PAGE>

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 Party X and
consequently did not pursue discussions with Party X at that time.

On March 4, 1997, Messrs. Martinez, Hill and Marsh, together with 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 Party X), 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

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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 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 Party X, but decided that
such a transaction would not be commercially feasible.

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 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

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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 view of the wide variety of factors considered in connection with its
evaluation of the terms of 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.

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

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<PAGE>

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.

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 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

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<PAGE>
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.

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.

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<PAGE>
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).

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

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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).

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%

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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.

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

23
<PAGE>
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, 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 stockholders from a financial point of
view. 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.

24
<PAGE>

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 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

25
<PAGE>
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.

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.

26
<PAGE>
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.

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.

27
<PAGE>

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 to the extent required to permit
Fireman's Fund's acquisition of more than 20% of such outstanding shares under
the standstill provision and for purposes of Section 203 of the DGCL. Under the
Consent Agreement, 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 Delaware
General Corporation Law (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).

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.

28
<PAGE>
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>

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

29
<PAGE>
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.

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

30
<PAGE>
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 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

31
<PAGE>
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.

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.

32
<PAGE>
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 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.

33
<PAGE>

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 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

34
<PAGE>
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 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

35
<PAGE>
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 modify or withdraw its approval or recommendation of the Merger,
approve or recommend a Superior Proposal (as defined below) or terminate the
Merger Agreement 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, 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.

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.

36
<PAGE>
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 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

37
<PAGE>

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 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.

38
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

STOCK OWNERSHIP

The following table sets forth, as of May 31, 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 May 31, 1997 was 8,728,868, 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 May 31, 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)(4)........................................................... 16,963 *

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

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

Paul T. Horn (2)(5)....................................................... 83,500 *

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

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

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

Thomas M. Vertin (2)(6)................................................... 129,779 1.5%

All executive officers and directors as a group (8 individuals)
(2)(4)(5)(6)............................................................ 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 April 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

39
<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 6,667 shares of restricted stock, which will vest on June 23, 1997.

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

(6) 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."

40
<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.

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<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.

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<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. With the exception of Dr. Gavazzi, who is an Italian citizen, 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.

DETLAV BREMKAMP, Member.

DR. REINER HAGEMANN, Member.

DR. GERHARD RUPPRECHT, Member.

DR. DIETHART BREIPOHL, Member.

DR. ROBERTO GAVAZZI, Member since 1994; Chairman of the Board of Riunione
Adriatica di Sicurata since 1991; Chairman of the Board of Allianz Via
Assurances since 1993.

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. The case was brought
against the Company by the Independent Counsel appointed to investigate former
United States Secretary of Agriculture Mike Espy and the facts alleged to
underlie the charges are detailed under the caption "Legal Proceedings" in the
Company's Annual Report on Form 10-K accompanying this Proxy Statement. The
Company paid a fine in the amount of $2 million. 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 nolo
contendere plea is neither an admission nor a denial of guilt.

43
<PAGE>
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).

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

44
<PAGE>
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, and both Fireman's Fund and the Merger Subsidiary deny being
affiliates of the Company at the time the March 5 Agreement was entered into,
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

June , 1997

45
<PAGE>

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;

B-1

<PAGE>

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A-1

[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)

DELAWARE 81-0491497
(State or 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)

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. 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

<PAGE>

Part I
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).

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. 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.

2
<PAGE>

PART II

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

3
<PAGE>

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. 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.

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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.

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

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.

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SOFTWARE OPERATIONS

The Company's software operations revenues include sales of VisAgTM
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 VisAgTM
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 VisAgTM, mapping products and hardware are
recognized upon shipment to the customer.

Sales of VisAgTM and other mapping products have not made a significant
contribution to revenues or earnings since their introduction. Management
continues to assess the VisAgTM 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
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.

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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.

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.

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<PAGE>

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 its adequacy of the allowance for uncollectible receivables. The
Company reviewed the historical collection experience of receivables,
collectability of certain balances, and the growth in the volume of premiums
serviced and other receivables in determining the necessary allowance for
uncollectible receivables at December 31, 1996. In addition to the charges
included in agent commissions and other direct costs, the Company recorded
$655,000 and $697,000, respectively, in 1996 and 1995 to the provision for
uncollectible receivables which is included in general and administrative
expenses.

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.

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

8
<PAGE>

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. 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 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.

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<PAGE>

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 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 VisAgTM in December 1995.

10
<PAGE>

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. 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 growth of the Company. During
1996, a portion of the proceeds from the $6.1 million sale of investment
securities were used by the

11
<PAGE>

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.

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<PAGE>

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.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page
----
Independent Auditors' Report 15

Consolidated Financial Statements:

Statements of Operations for the years ended
December 31, 1996, 1995 and 1994 16

Balance Sheets as of December 31, 1996 and 1995 17

Statements of Stockholders' Equity for the years ended
December 31, 1996, 1995 and 1994 18

Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 19

Notes to Consolidated Financial Statements 20

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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