21 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2000 Commission File No. 1-11941 FARM FAMILY HOLDINGS, INC. A Delaware Corporation IRS No. 14-1789227 344 Route 9W, Glenmont, New York 12077-2910 Registrant's telephone number: (518) 431-5000 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 [ ] The number of shares outstanding of the issuer's common stock as of August 8, 2000 is 6,003,984. FARM FAMILY HOLDINGS, INC. INDEX Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets - June 30, 2000 (unaudited) and December 31, 1999 3 Consolidated Statements of Income and Comprehensive Income - Three and Six Months Ended June 30, 2000 and 1999 (unaudited) 4 Consolidated Statements of Cash Flows - Six Months Ended June 30, 2000 and 1999 (unaudited) 5 Notes to Consolidated Financial Statements (unaudited) 6 Review Report of Independent Accountants 11 Item 2. Management's Discussion and Analysis of Financial Condition 12 and Results of Operations Item 3. Quantitative and Qualitative Disclosures of Market Risk 17 Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders 18 Item 6. Exhibits and Reports on Form 8-K 18 FARM FAMILY HOLDINGS, INC. AND SUBSIDIARIES Consolidated Balance Sheets ($ in thousands) (Unaudited) June 30, 2000 December 31, 1999 - -------------------------------------------------------------------------------------------------------------------- ASSETS Investments: Fixed maturities Available for sale, at fair value (Amortized cost: $1,003,641 in 2000 and $1,002,850 in 1999) $957,051 $960,054 Held to maturity, at amortized cost (Fair value: $6,528 in 2000 and $7,820 in 1999) 6,436 7,971 Equity securities - available for sale, at fair value (Cost: $41,124 in 2000 and $42,819 in 1999) 39,491 45,809 Mortgage loans 27,926 26,832 Policy loans 31,645 30,839 Other invested assets 175 176 - -------------------------------------------------------------------------------------------------------------------- Total investments 1,062,724 1,071,681 - -------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents 27,442 19,190 Insurance receivables: Reinsurance receivables 28,256 23,129 Premiums receivable, net 54,526 32,094 Deferred acquisition costs 22,902 17,630 Present value of future profits 28,083 28,571 Accrued investment income 19,234 18,875 Property and equipment, net 14,689 14,520 Deferred income tax asset, net 31,049 29,605 Other assets 6,323 4,884 - -------------------------------------------------------------------------------------------------------------------- Total Assets $1,295,228 $1,260,179 ==================================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Reserves for losses and loss adjustment expenses for property/casualty insurance $194,529 $186,130 Reserves for life policies and contract benefits 246,338 238,272 Funds on deposit from policyholders 411,044 416,971 Unearned premium reserve 99,147 74,364 Accrued dividends to policyholders 5,446 5,263 Reinsurance premiums payable 6,270 4,168 Accrued expenses and other liabilities 18,798 19,471 Participating policyholders' interest 110,171 128,516 - -------------------------------------------------------------------------------------------------------------------- Total liabilities 1,091,743 1,073,155 - -------------------------------------------------------------------------------------------------------------------- Commitments and contingencies Mandatory redeemable preferred stock, redemption value - $5,830; 163,214 Series A shares outstanding 5,830 5,830 Stockholders' equity: Preferred stock, $.01 par value, 836,786 shares authorized, no shares issued and outstanding ---- ---- Common stock, $.01 par value, 10,000,000 shares authorized, 6,113,984 and 6,110,684 shares issued, 6,003,984 and 6,110,684 shares outstanding 61 61 Additional paid-in capital 123,590 123,504 Retained earnings 81,609 60,172 Accumulated other comprehensive loss (4,586) (2,543) Treasury stock, at cost (3,019) ---- - -------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 197,655 181,194 - -------------------------------------------------------------------------------------------------------------------- Total Liabilities and Stockholders' Equity $1,295,228 $1,260,179 ==================================================================================================================== See accompanying notes to Consolidated Financial Statements. FARM FAMILY HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statements of Income and Comprehensive Income ($ in thousands, except per share amounts) (Unaudited) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2000 1999 2000 1999 - --------------------------------------------------------------------------------------------------------------------------------- Revenues: Premiums from property/casualty insurance $48,444 $44,723 $95,966 $93,057 Premiums from life and health operations and contract charges 9,420 9,296 18,983 9,296 Net investment income 18,852 17,442 37,345 22,276 Realized investment gains (losses), net (948) (67) (1,156) 212 Other income 295 459 916 736 - --------------------------------------------------------------------------------------------------------------------------------- Total revenues 76,063 71,853 152,054 125,577 - --------------------------------------------------------------------------------------------------------------------------------- Losses, benefits and expenses: Losses and loss adjustment expenses on property/casualty insurance 36,954 32,923 75,488 69,409 Policyholder contract benefits 13,239 13,537 27,899 13,537 Amortization expense 9,788 9,169 18,539 18,165 Other operating costs and expenses 6,051 6,082 11,725 8,918 Participating policyholders' interest 2,728 2,573 (13,167) 2,573 - --------------------------------------------------------------------------------------------------------------------------------- Total losses, benefits and expenses 68,760 64,284 120,484 112,602 - --------------------------------------------------------------------------------------------------------------------------------- Income before federal income tax expense and preferred stock dividends 7,303 7,569 31,570 12,975 Federal income tax expense 2,185 2,330 9,954 3,993 - --------------------------------------------------------------------------------------------------------------------------------- Income before preferred stock dividends 5,118 5,239 21,616 8,982 Preferred stock dividends 90 85 179 85 - --------------------------------------------------------------------------------------------------------------------------------- Net income attributable to common stockholders 5,028 5,154 21,437 8,897 - --------------------------------------------------------------------------------------------------------------------------------- Other comprehensive income, net of tax: Unrealized holding losses arising during the period (net of deferred tax benefit of $485, $2,523, $968 and $4,253, respectively) (901) (4,686) (1,797) (7,899) Reclassification adjustment for gains included in net income (net of tax expense of $135, $153, $132 and $55, respectively) (250) (284) (246) (103) - --------------------------------------------------------------------------------------------------------------------------------- Other comprehensive loss (1,151) (4,970) (2,043) (8,002) - --------------------------------------------------------------------------------------------------------------------------------- Comprehensive income $3,877 $184 $19,394 $895 ================================================================================================================================= Per Share Data: Net income - basic $0.83 $0.85 $3.52 $1.57 ================================================================================================================================= Net income - diluted $0.82 $0.84 $3.50 $1.56 ================================================================================================================================= Basic weighted average shares outstanding 6,067,936 6,053,559 6,089,527 5,651,477 ================================================================================================================================= Diluted weighted average shares outstanding 6,094,763 6,100,551 6,131,029 5,696,139 ================================================================================================================================= See accompanying notes to Consolidated Financial Statements. FARM FAMILY HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows ($ in thousands) (Unaudited) For the Six Months Ended June 30, 2000 1999 - ------------------------------------------------------------------------------------------------------------------------ Operating Activities Net income $21,437 $8,897 - ------------------------------------------------------------------------------------------------------------------------ Adjustments to reconcile net income to net cash provided by operating activities: Realized investment losses (gains), net 1,156 (212) Amortization of bond discount 2,144 1,264 Amortization and depreciation 19,728 18,826 Interest credited to policyholders 11,724 5,801 Deferred income taxes 5,022 (1,511) Participating policyholders' interest (13,167) 2,573 Dividends to policyholders (5,438) (2,568) Capitalization of deferred acquisition costs (23,323) (20,750) Changes in: Reinsurance receivables (5,127) (2,595) Premiums receivable, net (22,432) (3,650) Accrued investment income (359) (535) Receivable from affiliates, net ---- 1,571 Other assets (1,438) 139 Reserves for property/casualty insurance losses and loss adjustment expenses 8,399 5,067 Reserves for life policies and contract benefits 8,066 3,141 Unearned premium reserve 24,783 4,546 Reinsurance premiums payable 2,102 1,493 Accrued expenses and other liabilities (490) 2,880 - ------------------------------------------------------------------------------------------------------------------------ Total adjustments 11,350 15,480 - ------------------------------------------------------------------------------------------------------------------------ Net cash provided by operating activities 32,787 24,377 - ------------------------------------------------------------------------------------------------------------------------ Investing Activities Proceeds from sales: Fixed maturities 25,715 1,207 Equity securities 2,695 386 Investment collections: Fixed maturities 10,735 33,057 Equity securities 410 434 Investment purchases: Fixed maturities (39,829) (34,753) Mortgage loans (1,500) (2,416) Policy loans issued, net (806) (241) Purchases of property and equipment (1,358) (649) Net cash of subsidiary at date of acquisition ---- 3,295 Acquisition expenses ---- (1,895) - ------------------------------------------------------------------------------------------------------------------------ Net cash used in investing activities (3,938) (1,575) - ------------------------------------------------------------------------------------------------------------------------ Financing Activities Contractholder fund deposits 11,588 59,981 Contractholder fund withdrawals (29,240) (64,455) Payments for purchase of treasury stock (3,019) ---- Exercise of stock options 74 ---- - ------------------------------------------------------------------------------------------------------------------------ Net cash used in financing activities (20,597) (4,474) - ------------------------------------------------------------------------------------------------------------------------ Net increase in cash and cash equivalents 8,252 18,328 Cash and cash equivalents, beginning of period 19,190 10,677 - ------------------------------------------------------------------------------------------------------------------------ Cash and cash equivalents, end of period $27,442 $29,005 ======================================================================================================================== See accompanying notes to Consolidated Financial Statements. Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements include the accounts of Farm Family Holdings, Inc. ("Farm Family Holdings") and its wholly-owned subsidiaries (collectively referred to as the "Company"). The primary subsidiaries of Farm Family Holdings are Farm Family Casualty Insurance Company ("Farm Family Casualty") and Farm Family Life Insurance Company ("Farm Family Life"). The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, these statements contain all adjustments, including normal recurring accruals, which are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The results of the Company's operations for any interim period are not necessarily indicative of the results of the Company's operations for a full fiscal year. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and the related notes included in Farm Family Holdings' December 31, 1999 Form 10-K. 2. Participating Policyholders' Interest A significant portion of the Company's life insurance segment's products is written on a "participating" basis, as defined in the New York State Insurance Law. Profits earned on participating business are reserved for the payment of dividends to participating policyholders, except for the stockholders' share of profits on participating policies, which is limited annually to the greater of 10% of the profit on participating business, or 50 cents per thousand dollars of the face amount of participating life insurance in force. In November 1999, the Company requested an opinion of the Insurance Department of the State of New York (the "Department") as to whether interest credited in excess of the interest guaranteed under certain participating insurance policies, annuities and dividend accumulations ("Excess Interest") and the difference between the guaranteed cost of insurance or premium and the cost of insurance or premium actually charged ("Spreads"), as well as dividends to participating policyholders, could be included in its calculation of the estimate of statutory profits on participating life insurance business allocable to stockholders. In April 2000, the Department approved the Company's request to include Excess Interest and Spreads, as well as dividends to participating policyholders, in its calculation of the estimate of statutory profits on participating life insurance business allocable to stockholders on both a prospective and retrospective basis. Accordingly, the Company's calculation of the estimate of profits on participating life insurance business allocable to stockholders has been revised to include Excess Interest and Spreads on a retrospective and prospective basis. The impact of including Excess Interest and Spreads in the Company's estimate of the profits on participating life insurance business allocable to stockholders increased the profits allocable to stockholders and is included in participating policyholders' interest on the accompanying Consolidated Statements of Income and Comprehensive Income. The effect of retroactively including Excess Interest and Spreads in the Company's calculation of its estimate of profits on participating life insurance business allocable to stockholders for periods through December 31, 1999 increased net income for the three months ended March 31, 2000 by $12.7 million (after tax expense of $6.3 million) or $2.07 per common share on a fully diluted basis. 3. Earnings Per Share The following table presents a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations. Three months ended Six months ended June 30, June 30, 2000 1999 2000 1999 - -------------------------------------------------------------------------------------------------------------------------------- Net income attributable to common stockholders $5,028,000 $5,154,000 $21,437,000 $8,897,000 ================================================================================================================================ Weighted-average number of shares in basic earnings per share 6,067,936 6,053,559 6,089,527 5,651,477 Effect of stock options 26,827 46,992 41,502 44,662 - -------------------------------------------------------------------------------------------------------------------------------- Weighted-average number of shares in diluted earnings per share 6,094,763 6,100,551 6,131,029 5,696,139 ================================================================================================================================ Basic net income per share $0.83 $0.85 $3.52 $1.57 ================================================================================================================================ Diluted net income per share $0.82 $0.84 $3.50 $1.56 ================================================================================================================================ 4. Future Application of Accounting Standards In September 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("Statement 133") and subsequently issued Statement of Financial Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an Amendment of FAS 133" ("Statement 138"). These statements, which are effective for the Company for the year beginning January 1, 2001, establish accounting and reporting standards for derivative instruments and for hedging activities. Management believes that Statements 133 and 138 will not have a material impact on the Company's Consolidated Financial Statements. In 1998, the National Association of Insurance Commissioners ("NAIC") adopted the Codification of Statutory Accounting Principles guidance (the "Codification"), which will replace the current Accounting Practices and Procedures Manual as the NAIC's primary guidance on statutory accounting. Statutory accounting is a comprehensive basis of accounting based on prescribed accounting practices, which include state laws, regulations and general administrative rules, as well as a variety of publications of the NAIC. The Codification provides guidance for the areas where statutory accounting has been silent and changes current statutory accounting in some areas. The NAIC has established January 1, 2001 as the effective date of the Codification. The New York Insurance Department has advised that it intends to proceed with implementation of the Codification, subject to any provisions in New York statute which conflict with particular points in the Codification rules. The Company has not estimated the potential effect of adopting the Codification. In March 2000, FASB issued Interpretation No. 44, "Accounting for Certain Transactions involving Stock Compensation - an interpretation of APB Opinion No. 25" ("FIN 44"), clarifying the accounting rules for stock-based compensation under APB Opinion No. 25, "Accounting for Stock Issued to Employees". FIN 44 is effective July 1, 2000, but certain conclusions in FIN 44 cover specific events if they had occurred after either December 15, 1998 or January 12, 2000. Management believes that FIN 44 will not have a material impact on the Company's Consolidated Financial Statements. 5. Treasury Stock On April 25, 2000, the Company's Board of Directors adopted a stock repurchase plan that authorizes the Company to repurchase shares of its common stock in an aggregate amount of up to $7.5 million. During the second quarter of 2000, the Company repurchased 110,000 shares of its common stock for $3.0 million at an average cost of $27.45 per share. The repurchases were financed through cash generated from operations. As of June 30, 2000, $4.5 million remained authorized under the stock repurchase plan for future share repurchases. 6. Contingencies The Company is party to numerous legal actions arising in the normal course of business. Management believes that resolution of these legal actions will not have a material adverse effect on the Company's consolidated financial condition. 6. Contingencies - Continued Catastrophes are an inherent risk in the property and casualty insurance industry and could produce significant adverse fluctuations in the Company's results of operations and financial condition. The Company is subject to a concentration of risk within the Northeastern United States. For each of the six month periods ended June 30, 2000 and 1999, approximately 59% and 62%, respectively, of the Company's property and casualty direct premiums were written in the states of New York and New Jersey. As a result of the concentration of the Company's business in the states of New York and New Jersey, and more generally, in the Northeastern United States, the Company's results of operations may be significantly affected by weather conditions, catastrophic events and regulatory developments in these two states and in the Northeastern United States, despite the Company's property and casualty reinsurance program designed to mitigate the impact of adverse weather and catastrophic events on the Company's operating results. As a condition of its license to do business in various states, the Company is required to participate in a variety of mandatory residual market mechanisms (including mandatory pools) which provide certain insurance (most notably automobile insurance) to consumers who are otherwise unable to obtain such coverages from private insurers. The amount of future losses or assessments from residual market mechanisms can not be predicted with certainty and could have a material adverse effect on the Company's future results of operations. During the third quarter of 1998, the Company modified the agreements with its agents to include revised conditions under which eligible agents may receive extended earnings payments. In addition to length of service, confidentiality, and non-competition conditions, extended earnings will be paid only if a successor agent(s) assumes the right to service the book of business of the eligible former agent and agrees to become primarily responsible for making the extended earnings payments. In the event that no successor agent(s) assumes the right to service the book of business of an eligible former agent, the Company has no obligation to make the extended earnings payments. The Company has no intention to waive this provision of its agreements with its agents. As a result, the successor agent(s), not the Company, is the primary obligor responsible for extended earnings payments. Since the inception of the Program in 1986, the Company has always been able to identify successor agents willing to assume the rights to service such books of business. The Company acts as guarantor of the amounts payable to eligible former agents who have terminated their association with the Company by successor agents who agree to make the extended earnings payments. At June 30, 2000, the Company was guarantor of $1.5 million for such payments. The Company expects to enforce the terms of the guarantee in the event of default by a successor agent. The Company's liability for funds on deposit from policyholders includes amounts subject to discretionary withdrawal. Withdrawal characteristics as of June 30, 2000 are as follows: ($ in thousands) Amount % of Total - ------------------------------------------------------------------------------------------------------ Surrender charge rate: Greater than or equal to 5% $86,656 21.1% Less than 5%, but still subject to surrender charge 65,759 16.0% Not subject to surrender charge 250,336 60.9% Not subject to discretionary withdrawal 8,293 2.0% - ------------------------------------------------------------------------------------------------------ Total funds on deposit from policyholders $411,044 100.0% ====================================================================================================== 7. Segment Information The Company has two reportable segments: property and casualty insurance and life insurance, which offer different products and services. The property and casualty insurance segment includes activities related to the sale of the Special Farm Package, a flexible multi-line package of insurance coverages, and other insurance products covering, personal and commercial automobiles, businessowners and homeowners. The life insurance segment includes the sale of individual whole life, term and universal life products, single and flexible premium deferred annuity products, single premium immediate annuity products and disability income insurance products. The Company uses operating income (net income excluding realized investment gains (losses) and nonrecurring charges, net of taxes) to measure the financial results of its segments. "Corporate and other" includes holding company activities and operations not directly related to the reportable segments. Summarized segment financial information is as follows: Three months ended Six months ended June 30, June 30, ($ in thousands) 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Premium revenues Property and casualty insurance $48,444 $44,723 $95,966 $93,057 Life insurance 9,420 9,296 18,983 9,296 - ------------------------------------------------------------------------------------------------------------------------------------ Total premium revenues $57,864 $54,019 $114,949 $102,353 ==================================================================================================================================== Net investment income Property and casualty insurance $5,715 $5,122 $11,271 $9,849 Life insurance 13,045 12,205 25,904 12,205 Corporate and other 71 103 149 210 Intersegment eliminations 21 12 21 12 - ------------------------------------------------------------------------------------------------------------------------------------ Total net investment income $18,852 $17,442 $37,345 $22,276 ==================================================================================================================================== Amortization expense Property and casualty insurance Amortization of deferred acquisition costs $9,024 $8,515 $17,459 $17,511 Life insurance Amortization of deferred acquisition costs 209 257 488 257 Amortization of present value of future profits 555 397 592 397 - ------------------------------------------------------------------------------------------------------------------------------------ Total amortization expense $9,788 $9,169 $18,539 $18,165 ==================================================================================================================================== Other operating costs and expenses Property and casualty insurance Underwriting expenses $2,534 $2,601 $5,257 $5,125 Dividends to policyholders 88 38 88 108 Life insurance 3,221 3,378 5,955 3,378 Corporate and other 438 290 885 532 Intersegment eliminations (230) (225) (460) (225) - ------------------------------------------------------------------------------------------------------------------------------------ Total other operating costs and expenses $6,051 $6,082 $11,725 $8,918 ==================================================================================================================================== 7. Segment Information - Continued Three months ended Six months ended June 30, June 30, ($ in thousands) 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Net income Operating income Property and casualty insurance $4,282 $4,783 $7,100 $8,416 Life insurance 1,291 635 2,473 635 Corporate and other (305) (274) (616) (345) - ------------------------------------------------------------------------------------------------------------------------------------ Total consolidated operating income 5,268 5,144 8,957 8,706 Effect of retroactively including Excess Interest and Spreads, net of tax ---- ---- 12,746 ---- Realized investment gains, net of tax (240) 10 (266) 191 - ------------------------------------------------------------------------------------------------------------------------------------ Net income $5,028 $5,154 $21,437 $8,897 ==================================================================================================================================== Federal income tax expense (benefit) Property and casualty insurance $1,597 $1,767 $2,576 $3,467 Life insurance 709 549 7,617 549 Corporate and other (121) 14 (239) (23) - ------------------------------------------------------------------------------------------------------------------------------------ Total federal income tax expense $2,185 $2,330 $9,954 $3,993 ==================================================================================================================================== June 30, December 31, 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Assets Property and casualty $483,609 $446,721 Life insurance 806,109 810,487 Corporate and other 68,900 71,014 Intersegment eliminations (63,390) (68,043) - ------------------------------------------------------------------------------------------------------------------------------------ Total assets $1,295,228 $1,260,179 ==================================================================================================================================== Review Report of Independent Accountants To the Shareholders and Board of Directors Farm Family Holdings, Inc. We have reviewed the accompanying consolidated balance sheet of Farm Family Holdings, Inc. and its subsidiaries as of June 30, 2000, and the related consolidated statements of income and comprehensive income for each of the three-month and six-month periods ended June 30, 2000 and 1999 and the consolidated statements of cash flows for the six-month periods ended June 30, 2000 and 1999. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements for them to be in conformity with generally accepted accounting principles. We previously audited in accordance with generally accepted auditing standards, the consolidated balance sheet as of December 31, 1999, and the related consolidated statements of income and comprehensive income, of stockholders' equity and of cash flows for the year then ended (not presented herein), and in our report dated February 11, 2000 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1999, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. /s/ PricewaterhouseCoopers LLP July 20, 2000 Management's Discussion and Analysis of Financial Condition and Results of Operations General The following discussion includes the operations of Farm Family Holdings, Inc. ("Farm Family Holdings") and its wholly-owned subsidiaries (collectively referred to as the "Company" or "we") and should be read in conjunction with the consolidated financial statements and the related notes included elsewhere within this document. On April 6, 1999, Farm Family Holdings acquired all of the outstanding capital stock of Farm Family Life. As a result of the acquisition, Farm Family Life became a wholly-owned subsidiary of Farm Family Holdings. The acquisition was accounted for under the purchase method of accounting. Accordingly, the financial results of Farm Family Life and Farm Family Life's wholly-owned property and casualty subsidiary, United Farm Family, were included in the Consolidated Financial Statements of Farm Family Holdings subsequent to April 6, 1999. Our operating results are subject to significant fluctuations from period to period depending upon, among other factors, the frequency and severity of losses from weather related and other catastrophic events, the effect of competition and regulation on the pricing of products, changes in interest rates, the impact on reserves and reserving policy caused by property and casualty claims development and variations of actual experience from that assumed for life insurance business as to expected morbidity, lapse rates and other factors used in the development of product pricing, general economic conditions, tax laws and the regulatory environment. As a condition of our license to do business in various states, we are required to participate in a variety of mandatory residual market mechanisms (including mandatory pools) which provide certain insurance (most notably automobile insurance) to consumers who are otherwise unable to obtain such coverages from private insurers. In all such states, residual market premium rates are subject to the approval of the state insurance department and have generally been inadequate. The amount of future losses or assessments from residual market mechanisms cannot be predicted with certainty and could have a material adverse effect on our results of operations. For the six-month periods ended June 30, 2000 and 1999, 36% and 35%, respectively, of our property and casualty direct written premiums were derived from policies written in New York and, for the same periods, 23% and 27%, respectively, were derived from policies written in New Jersey. For these same periods, no other state accounted for more than 10% of our property and casualty direct written premiums. As a result, our results of operations may be significantly affected by weather conditions, catastrophic events and regulatory developments in these two states and in the Northeastern United States generally. Safe Harbor Statement under The Private Securities Litigation Reform Act of 1995: With the exception of historical information, the matters discussed or incorporated by reference in this Report on Form 10-Q are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management's current knowledge, expectations, estimates, beliefs and assumptions. The forward-looking statements in this Form 10-Q include, but are not limited to, statements concerning our exposure to interest rate and market risk, statements regarding the adequacy of the Company's capital resources, liquidity, and other financial items, statements of the plans and objectives of the Company or its management, and statements of future economic performance and assumptions underlying statements regarding the Company or its business. Readers are hereby cautioned that certain events or circumstances could cause actual results to differ materially from those estimated, projected or predicted. The forward-looking statements in this Form 10-Q are not guarantees of future performance and are subject to a number of important risks and uncertainties, many of which are outside the Company's control, that could cause actual results to differ materially. These risks and uncertainties include, but are not limited to, exposure to catastrophic loss, the frequency and severity of weather related losses, geographic concentration of loss exposure in New York, New Jersey and the Northeastern United States generally, the effect of regulatory changes governing personal automobile insurance in New Jersey and the impact thereof on the Company's direct written premium, losses and loss adjustment expenses, the risks associated with the legislative, regulatory and competitive environments in the states in which the Company currently operates, heightened competition, including specifically the intensification of competition, failure to obtain new customers or to retain existing customers, the Company's primary reliance, as a holding company, on dividends from its subsidiaries and the applicable regulatory restrictions on the ability of the Company's subsidiaries to pay such dividends, and conditions specific to the insurance industry, including its cyclical nature, regulatory changes and conditions, rating agency policies and practices, competitive factors, claims development and the impact thereof on loss reserves and the Company's reserving policy, the adequacy of the Company's reinsurance programs, developments in the securities markets and the impact thereof on the Company's investment portfolio, tax law changes and other risk factors listed from time to time in the Company's Securities and Exchange Commission filings including the Company's Form 10-K filed for the fiscal year ended December 31, 1999 and Form 10-Q for the quarter ended March 31, 2000. Accordingly, there can be no assurance that actual results will conform to the forward-looking statements in this Form 10-Q. Results of Operations The Three Months Ended June 30, 2000 Compared to the Three Months Ended June 30, 1999 Insurance Premiums and Contract Charges Premium revenue increased to $57.9 million for the three months ended June 30, 2000 from $54.0 million for the same period in 1999. Premium revenue for property and casualty insurance increased $3.7 million during the three months ended June 30, 2000 to $48.4 million from $44.7 million for the same period in 1999. The increase was primarily attributable to an increase of $2.6 million in premium revenue from our direct writings and a decrease of $2.2 million in premium revenue ceded to reinsurers. The decrease in premium revenue ceded to reinsurers was primarily attributable to a decrease in premiums ceded pursuant to our aggregate stop loss reinsurance program. These increases in premium revenue were partially offset by a $1.1 million decrease in revenue from voluntary assumed reinsurance premiums. The $2.6 million increase in earned premiums on direct writings was primarily attributable to an increase of $2.3 million, or 5.9%, in earned premiums from our primary products (personal and commercial automobile products other than assigned risk automobile business, the Special Farm Package, businessowners products, homeowners products, and Special Home Package) and an increase of $0.3 million, or 3.1%, in earned premiums from other products. The number of policies in force related to our primary products increased by 6.6% to approximately 150,400 as of June 30, 2000 from approximately 141,100 as of June 30, 1999. Total policies in force increased by approximately 11,400, or 6.7%, to 182,500 as of June 30, 2000 compared to 171,100 as of June 30, 1999. Property and casualty net written premiums increased $14.9 million to $63.3 million for the three months ended June 30, 2000 compared to $48.4 million for the same period in 1999. The increase in net written premiums was primarily attributable to an increase of $13.9 million in direct writings (excluding assigned risk automobile business premiums) and a decrease of $2.2 million in ceded reinsurance premiums. Premiums from direct writings increased primarily as a result of the conversion of our personal and commercial automobile policies in certain states from six-month to twelve-month policies. Excluding the impact of converting personal and commercial automobile policies from six-month to twelve-month policies in certain states and premiums from assigned risk automobile business, direct written premiums increased approximately $3.8 million or 7.7% to $53.2 million for the second quarter of 2000 compared to $49.4 million for the same period in 1999. This increase was partially offset by a decrease of $0.9 million in assigned risk automobile premiums and a decrease of $0.3 million in voluntary assumed reinsurance premiums. Excluding the effects of converting personal and commercial automobile policies in certain states from six-month to twelve-month policies and premiums from assigned risk automobile business, direct writings increased in each of the twelve states we serve and for each of our primary products during the second quarter of 2000 compared to the same period in 1999. Life insurance premium revenue increased $0.1 million to $9.4 million for the three months ended June 30, 2000, compared to $9.3 million for the same period in 1999. Life insurance premium revenue includes premiums and contract charges primarily from the sale of individual whole life, term and universal life products, and disability income insurance products. Total collected premium from life insurance policies increased 3.7% to $10.2 million for the second quarter of 2000 compared to $9.8 million for the same period in 1999. Net Investment Income Net investment income increased $1.4 million to $18.8 million for the three months ended June 30, 2000 from $17.4 million for the same period in 1999. Net investment income for the property and casualty insurance segment increased $0.6 million, or 11.6%, to $5.7 million for the three months ended June 30, 2000 from $5.1 million for the same period in 1999. The taxable equivalent yield on the property and casualty insurance segment's investment portfolio for the three months ended June 30, 2000 and 1999 was 7.0% and 6.8%, respectively. The increase in net investment income for the property and casualty insurance segment was primarily the result of an increase in the average cash and invested assets (at amortized cost) of $27.2 million, or 8.2%, and to a lesser extent, an increase in the prevailing interest rate environment. Net investment income for the life insurance segment increased $0.8 million to $13.0 million for the three months ended June 30, 2000, compared to $12.2 million for the same period in 1999. The yield on fixed maturity investments (at amortized cost) was 7.1% for the three months ended June 30, 2000 compared to 6.7% for the same period in 1999, primarily due to an increase in the prevailing interest rate environment. Realized Investment Gains (Losses), Net Net realized investment losses increased to $(0.9) million for the three months ended June 30, 2000 compared to $(0.1) million for the same period in 1999. During the second quarter of 2000, we recorded a $1.8 million writedown of a fixed maturity security, classified as available for sale, as a result of changes in conditions which caused us to conclude that decline in fair value of the investment was other than temporary. There were no such writedowns in the second quarter of 1999. Partially offsetting this writedown in 2000, were net gains on the sale of equities and other fixed maturity securities. Losses and Loss Adjustment Expenses Losses and loss adjustment expenses on property and casualty insurance increased $4.0 million, or 12.2%, to $36.9 million for the three months ended June 30, 2000 from $32.9 million for the same period in 1999. Losses and loss adjustment expenses were 76.3% of premium revenue for the three months ended June 30, 2000 compared to 73.6% of premium revenue for the same period in 1999. The increase in the loss and loss adjustment expense ratio was primarily attributable to an increase in weather-related losses incurred by Farm Family Casualty during the second quarter of 2000. Weather-related losses incurred by Farm Family Casualty during the second quarter of 2000 increased to $2.6 million compared to $1.1 million for the same period in 1999. Amortization Expense Amortization expense increased $0.6 million, or 9.8%, to $9.8 million for the three months ended June 30, 2000 from $9.2 million for the same period in 1999. The increase was primarily attributable to an increase in amortization of deferred acquisition costs for the property and casualty segment of $0.5 million resulting from increased deferred acquisition costs due to the growth in our property and casualty business. Other Operating Costs and Expenses Other operating costs and expenses were $6.1 million for the three months ended June 30, 2000 and 1999. For the three months ended June 30, 2000, property and casualty insurance underwriting expenses (including amortization expenses) were 23.8% of premium revenue compared to 24.9% for the same period in 1999. Federal Income Tax Expense Federal income tax expense decreased $0.1 million to $2.2 million for the three months ended June 30, 2000 from $2.3 million for the same period in 1999. Federal income tax expense was 29.9% of income before federal income tax expense and preferred stock dividends for the three months ended June 30, 2000 compared to 30.8% for the same period in 1999. The Six Months Ended June 30, 2000 Compared to the Six Months Ended June 30, 1999 Insurance Premiums and Contract Charges Premium revenue increased to $114.9 million for the six months ended June 30, 2000 from $102.4 million for the same period in 1999. Premium revenue for property and casualty insurance increased $2.9 million during the six months ended June 30, 2000 to $96.0 million from $93.1 million for the same period in 1999. The increase was primarily attributable to an increase of $4.4 million in premium revenue from our direct writings, due in part to the inclusion of premium revenue of United Farm Family since April 6, 1999, and a decrease of $0.2 million in premium revenue ceded to reinsurers. These increases in premium revenue were partially offset by a $1.4 million decrease in revenue from voluntary assumed reinsurance premiums. The $4.4 million increase in earned premiums on direct writings was primarily attributable to an increase of $3.7 million, or 4.8%, in earned premiums from our primary products (personal and commercial automobile products other than assigned risk automobile business, the Special Farm Package, businessowners products, homeowners products, and Special Home Package) and an increase of $0.7 million, or 4.8%, in earned premiums from other products. Property and casualty net written premiums increased $23.5 million to $120.7 million for the six months ended June 30, 2000 compared to $97.2 million for the same period in 1999. The increase in net written premiums was primarily attributable to an increase of $26.0 million in direct writings (excluding assigned risk automobile business premiums). Premiums from direct writings increased primarily as a result of the conversion of our personal and commercial automobile policies in certain states from six-month to twelve-month policies. Excluding the impact of converting personal and commercial automobile policies from six-month to twelve-month policies in certain states and premiums from assigned risk automobile business, direct written premiums increased approximately $6.8 million or 7.1% to $102.3 million for the first six months of 2000 compared to $95.5 million for the same period in 1999. This increase was partially offset by a decrease of $1.8 million in assigned risk automobile premiums and a decrease of $0.5 million in voluntary assumed reinsurance premiums. Excluding the effects of converting personal and commercial automobile policies in certain states from six-month to twelve-month policies and premiums from assigned risk automobile business, direct writings increased in each of the twelve states we serve and for each of our primary products during the first six months of 2000 compared to the same period in 1999. Life insurance premium revenue was $19.0 million for the six months ended June 30, 2000, compared to $9.3 million for the same period in 1999. Life insurance premium revenue includes premiums and contract charges primarily from the sale of individual whole life, term and universal life products, and disability income insurance products. The 1999 revenue includes amounts subsequent to April 6, 1999, the effective date of Farm Family Holdings' acquisition of Farm Family Life. Net Investment Income Net investment income increased $15.1 million to $37.3 million for the six months ended June 30, 2000 from $22.2 million for the same period in 1999. The increase is primarily attributable to the inclusion of Farm Family Life since April 6, 1999. Net investment income for the property and casualty insurance segment increased $1.4 million, or 14.4%, to $11.3 million for the six months ended June 30, 2000 from $9.9 million for the same period in 1999. The taxable equivalent yield on the property and casualty insurance segment's investment portfolio was 7.0% and 6.9% for the six months ended June 30, 2000 and 1999, respectively. The increase in net investment income for the property and casualty insurance segment was primarily the result of an increase in the average cash and invested assets (at amortized cost) of $41.4 million, or 13.1%, and to a lesser extent, an increase in the prevailing interest rate environment. Net investment income for the life insurance segment was $25.9 million for the six months ended June 30, 2000, compared to $12.2 million for the same period in 1999. The yield on fixed maturity investments (at amortized cost) was 7.1% for the six months ended June 30, 2000 compared to 6.7% for the same period in 1999. The 1999 investment income includes amounts subsequent to April 6, 1999, the effective date of Farm Family Holdings' acquisition of Farm Family Life. Realized Investment Gains (Losses), Net Net realized investment losses increased to $(1.2) million for the six months ended June 30, 2000 compared to a net gain of $0.2 million for the same period in 1999. During the second quarter of 2000, we recorded a $1.8 million writedown of a fixed maturity security as a result of changes in conditions which caused us to conclude that decline in fair value of the investment was other than temporary. There were no such writedowns in the first six months of 1999. Partially offsetting this writedown in 2000, were net gains on the sale of equities and other fixed maturity securities. Losses and Loss Adjustment Expenses Losses and loss adjustment expenses on property and casualty insurance increased $6.1 million, or 8.8%, to $75.5 million for the six months ended June 30, 2000 from $69.4 million for the same period in 1999. Losses and loss adjustment expenses were 78.7% of premium revenue for the six months ended June 30, 2000 compared to 74.9% of premium revenue for the same period in 1999. The increase in the loss and loss adjustment expense ratio was primarily attributable to an increase in the severity of losses incurred on certain of our businessowners, umbrella, and personal automobile (bodily injury coverage) policies during the first quarter of 2000, property losses on two of our voluntary assumed reinsurance contracts during the first quarter of 2000 and an increase in weather-related losses incurred during the second quarter of 2000 compared to the same period in 1999. Other Operating Costs and Expenses Other operating costs and expenses increased $2.8 million to $11.7 million for the six months ended June 30, 2000 from $8.9 million for the same period in 1999. The increase was primarily due to the inclusion of other operating costs and expenses for Farm Family Life subsequent to April 6, 1999, the effective date of Farm Family Holdings' acquisition of Farm Family Life. The 2000 amounts include six months of expenses for Farm Family Life. For the six months ended June 30, 2000, property and casualty insurance underwriting expenses (including amortization expenses) were 23.6% of premium revenue compared to 24.3% for the same period in 1999. Participating Policyholders' Interest Participating policyholders' interest of $(13.2) million reduced losses, benefits and expenses for the six months ended June 30, 2000, compared to participating policyholders' interest of $2.6 million which increased losses, benefits and expenses for the same period in 1999. The 2000 amount includes $19.0 million, which reduced losses, benefits and expenses, representing the pre-tax effect of retroactively including Excess Interest and Spreads in our calculation of the estimate of profits on participating life insurance business allocable to stockholders for periods through December 31, 1999, as discussed in Note 2 to the accompanying Consolidated Financial Statements. Federal Income Tax Expense Federal income tax expense increased $6.0 million to $10.0 million for the six months ended June 30, 2000 from $4.0 million for the same period in 1999. Federal income tax expense was 31.5% of income before federal income tax expense and preferred stock dividends for the six months ended June 30, 2000 compared to 30.8% for the same period in 1999. Liquidity and Capital Resources Farm Family Holdings may receive dividends from subsidiaries, if declared and paid. The New York Insurance Law regulates the distribution of dividends and other payments to Farm Family Holdings by Farm Family Casualty and Farm Family Life. As of December 31, 1999, the maximum amount of dividends that could be paid by Farm Family Casualty without the prior approval of the New York State Insurance Department (the "Department") was approximately $4.3 million. During the first six months of 2000, Farm Family Casualty declared and paid dividends of $0.5 million to Farm Family Holdings. The payment of stockholder dividends by Farm Family Life is subject to the prior approval of the Department. Under the New York Insurance Law, the Superintendent of Insurance has broad discretion to determine whether the financial condition of a stock life insurance company would support the payment of dividends to its shareholders. During the first six months of 2000, Farm Family Life declared and paid dividends of $1.0 million to Farm Family Holdings. The Department approved this amount prior to declaration of the dividend. We have a revolving credit agreement with three banks, which provides for uncollateralized borrowings of up to $30.0 million. At June 30, 2000, no amounts were outstanding. On April 25, 2000, the Company's Board of Directors adopted a stock repurchase plan that authorizes the Company to repurchase shares of its common stock in an aggregate amount of up to $7.5 million. During the second quarter of 2000, we repurchased 110,000 shares of our common stock for $3.0 million at an average cost of $27.45 per share. The repurchases were financed through cash generated from operations. As of June 30, 2000, $4.5 million remained authorized under the stock repurchase plan for future share repurchases. Net cash provided by operating activities was $32.8 million and $24.4 million during the six-month periods ended June 30, 2000 and 1999, respectively. The increase in net cash provided by operating activities was primarily attributable to the additional operating cash flow from Farm Family Life. Net cash used in investing activities was $3.9 million during the six months ending June 30, 2000 compared to $1.6 million for the same period in 1999. The increase in cash used in investing activities resulted primarily from an increase in investment purchases partially offset by an increase in proceeds from investment sales and a net increase in cash from the acquisition of Farm Family Life. Net cash used in financing activities was $20.6 million for the six months ending June 30, 2000 compared to $4.5 million for the same period in 1999. The increase is the result of contractholder fund withdrawals on interest sensitive products exceeding the related deposits for these products to a greater degree than in the prior year. We believe the excess of contractholder fund withdrawals over deposits is primarily related to the strength of the stock market, the prevailing interest rate environment and increased competition from other fixed and variable annuity products. In addition, contractholder fund withdrawals and deposits for Farm Family Life have been included subsequent to April 6, 1999, the effective date of Farm Family Holdings' acquisition of Farm Family Life. The 2000 amounts include six months of financing activities for Farm Family Life. Future Application of Accounting Standards In September 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("Statement 133") and subsequently issued Statement of Financial Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an Amendment of FAS 133" ("Statement 138"). These statements, which are effective for the Company for the year beginning January 1, 2001, establish accounting and reporting standards for derivative instruments and for hedging activities. Management believes that Statements 133 and 138 will not have a material impact on the Company's Consolidated Financial Statements. In 1998, the National Association of Insurance Commissioners ("NAIC") adopted the Codification of Statutory Accounting Principles guidance (the "Codification"), which will replace the current Accounting Practices and Procedures Manual as the NAIC's primary guidance on statutory accounting. Statutory accounting is a comprehensive basis of accounting based on prescribed accounting practices, which include state laws, regulations and general administrative rules, as well as a variety of publications of the NAIC. The Codification provides guidance for the areas where statutory accounting has been silent and changes current statutory accounting in some areas. The NAIC has established January 1, 2001 as the effective date of the Codification. The New York Insurance Department has advised that it intends to proceed with implementation of the Codification, subject to any provisions in New York statute which conflict with particular points in the Codification rules. We have not estimated the potential effect of adopting the Codification. In March 2000, FASB issued Interpretation No. 44, "Accounting for Certain Transactions involving Stock Compensation - an interpretation of APB Opinion No. 25" ("FIN 44"), clarifying the accounting rules for stock-based compensation under APB Opinion No. 25, "Accounting for Stock Issued to Employees". FIN 44 is effective July 1, 2000, but certain conclusions in FIN 44 cover specific events if they had occurred after either December 15, 1998 or January 12, 2000. Management believes that FIN 44 will not have a material impact on the Company's Consolidated Financial Statements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK Our market risks of financial instruments and investment objectives have not materially changed since December 31, 1999. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Farm Family Holdings' Annual Meeting of Stockholders was held on April 25, 2000. At the meeting, (i) eight persons were elected as directors of Farm Family Holdings, (ii) the appointment of PricewaterhouseCoopers LLP as Farm Family Holdings' independent auditors for the year 2000 was ratified and (iii) amendments to the Farm Family Holdings Omnibus Securities Plan were approved. The number of votes cast for, against or withheld, and the number of abstentions with respect to each such matter is set forth as follows: For Against/Withheld Abstained Election of Directors: Nominee Robert L. Baker 4,522,413 11,376 James V. Crane 4,522,509 11,280 Clark W. Hinsdale III 4,522,467 11,322 John W. Lincoln 4,522,095 11,694 Wayne A. Mann 4,521,984 11,805 Edward J. Muhl 4,522,322 11,457 Charles A. Wilfong 4,522,376 11,413 Tyler P. Young 4,522,355 11,434 Ratification of Auditors: 4,508,115 5,421 20,253 Approval of amendments to the Omnibus Securities Plan: 3,239,157 332,339 35,419 ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K EXHIBIT INDEX FARM FAMILY HOLDINGS, INC. FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2000 Exhibit Number Document Description - -------------------------------------------------------------------------------- 2.1 Plan of Reorganization and Conversion dated February 14, 1996 as amended by Amendment No. 1, dated April 23, 1996 (Incorporated by reference to Registration Statement No. 333-4446) 3.1 Certificate of Incorporation of Farm Family Holdings, Inc. (Incorporated by reference to Registration Statement No. 333-4446) 3.2 Bylaws of Farm Family Holdings, Inc. (Incorporated by reference to Registration Statement No. 333-4446) 4.1 Certificate of Designations of Junior Participating Cumulative Preferred Stock of Farm Family Holdings, Inc. (incorporated by reference to Exhibit 4.3 to Form S-8, Registration No. 333-80723 filed with the Securities and Exchange Commission on June 15, 1999) 4.2 Certificate of Corrections to Certificate of Designations of Junior Participating Cumulative Preferred Stock of Farm Family Holdings, Inc. (incorporated by reference to Exhibit 4.4 to Form S-8, Registration No. 333-80723 filed with the Securities and Exchange Commission on June 15, 1999) 4.3 Certificate of Designations of Farm Family Holdings, Inc. Preferred Stock, Series A (incorporated by reference to Exhibit 4.5 to Form S-8, Registration No. 333-80723 filed with the Securities and Exchange Commission on June 15, 1999) 4.4 Rights Agreement, dated as of July 29, 1997, between the Company and The Bank of New York (incorporated by reference to Exhibit 4.1 to the Company's Current Report of Form 8-K/A filed with the Securities and Exchange Commission on June 14, 1999) Exhibit Number Document Description - -------------------------------------------------------------------------------- 4.5 Registration Rights Agreement, dated as of April 6, 1999 by and among Farm Family Holdings, Inc. and the Shareholders of the Farm Family Life Insurance Company (incorporated by reference to Farm Family Holdings, Inc. Form 10-Q for the quarter ended June 30, 1999) 10.1 Amended and Restated Option Purchase Agreement, dated February 26, 1998 among Farm Family Holdings, Inc. and the Shareholders of Farm Family Life Insurance Company, as amended by Amendment No. 1 dated as of April 28, 1998 and Amendment No. 2 dated as of January 14, 1999 (incorporated by reference to the Proxy Statement of Farm Family Holdings, Inc. dated February 17, 1999) 10.2 Amended and Restated Expense Sharing Agreement, made effective as of February 14, 1996, by and among Farm Family Mutual Insurance Company, Farm Family Life Insurance Company and Farm Family Holdings, Inc. (Incorporated by reference to Farm Family Holdings, Inc. Form 10-K for the year ended December 31, 1996) 10.3 Indenture of Lease, made the 1st day of January 1999, between Farm Family Life Insurance Company and Farm Family Casualty Insurance Company (incorporated by reference to Farm Family Holdings, Inc. Form 10-Q for the quarter ended March 31, 1999) 10.4 Underlying Multi-Line Per Risk Reinsurance Contract, effective January 1, 1995, issued to Farm Family Mutual Insurance Company by The Subscription Reinsurer(s) Executing the Interests and Liabilities Agreement(s) Attached Thereto, as amended by Addendum No. 1, effective January 1, 1996 (Incorporated by reference to Registration Statement No. 333-4446), Addendum No. 2, effective January 1, 1996, Addendum No. 3, effective July 26, 1996 (Incorporated by reference to Farm Family Holdings, Inc. 1997 Form 10-K for the year ended December 31, 1996), Addendum No. 4, effective January 1, 1997 (Incorporated by reference to Farm Family Holdings, Inc. Form 10-Q for the quarter ended March 31, 1997), and Termination Addendum, effective December 31, 1997 (Incorporated by reference to Farm Family Holdings, Inc. Form 10-K/A for the year ended December 31, 1997) 10.5 Umbrella Quota Share Reinsurance Contract, effective January 1, 1995, issued to Farm Family Mutual Insurance Company and United Farm Family Insurance Company, as amended by Addendum No. 1, effective January 1, 1995 (Incorporated by reference to Registration Statement No. 333-4446), and Addendum No. 2 effective July 26, 1996 (Incorporated by reference to Farm Family Holdings, Inc. 1997 Form 10-K for the year ended December 31, 1996), Addendum No. 3, effective January 1, 1997 (Incorporated by reference to Farm Family Holdings, Inc. Form 10-Q for the quarter ended March 31, 1997), and Termination Addendum, effective January 1, 1998 (Incorporated by reference to Farm Family Holdings, Inc. Form 10-K/A for the year ended December 31, 1997) 10.6 Form of Membership List Purchase Agreement between Farm Family Mutual Insurance Company and each of the Farm Bureaus (incorporated by reference to Exhibit 10.9 to Form S-1, Registration No. 333-4446 filed with the Securities and Exchange Commission on May 3, 1996) as amended by Amendment No. 1 to Membership List Purchase Agreements, effective July 26, 1996 (incorporated by reference to Farm Family Holdings, Inc.'s Form 10-Q for the quarter ended March 31, 1997) and Amendment No. 2 to Membership List Purchase Agreements (Farm Family Casualty Insurance Company), effective January 1, 1998 (incorporated by reference to Farm Family Holdings, Inc.'s Form 10-Q for the quarter ended June 30, 1999) 10.7 Form of Membership List Purchase Agreement between Farm Family Life Insurance Company and each of the Farm Bureaus, as amended by Amendment No. 1 to Membership List Purchase Agreements (Farm Family Life Insurance Company), effective January 1, 1998 (incorporated by reference to Farm Family Holdings, Inc.'s Form 10-Q for the quarter ended June 30, 1999) 10.8 Farm Family Life Insurance Company Annual Incentive Plan, as amended and restated as of October 27, 1998 (incorporated by reference to Farm Family Holdings, Inc.'s Form 10-Q for the quarter ended June 30, 1999) as amended by Amendment No. 1 to the Farm Family Life Insurance Company Annual Incentive Plan effective July 28, 1999 (incorporated by reference to Farm Family Holdings, Inc.'s Form 10-Q for the quarter ended September 30, 1999) and Farm Family Life Insurance Company Annual Incentive Plan Termination, effective as of April 25, 2000 (filed herewith). 10.9 Farm Family Supplemental Profit Sharing and Money Purchase Plan, effective January 1, 1997 (incorporated by reference to Farm Family Holdings, Inc.'s Form 10-K for the year ended December 31, 1996) as amended by Amendment No. 1 to Supplemental Profit Sharing and Money Purchase Plan effective as of April 27, 1999 (incorporated by reference to Farm Family Holdings, Inc.'s Form 10-Q for the quarter ended June 30, 1999) and Amendment No. 2 to the Farm Family Holdings, Inc. Supplemental Profit Sharing and Money Purchase Plan effective July 28, 1999 (incorporated by reference to Farm Family Holdings, Inc.'s Form 10-Q for the quarter ended September 30, 1999) Exhibit Number Document Description - -------------------------------------------------------------------------------- 10.10 Service Agreement, made effective as of July 25, 1988 by and between Farm Family Mutual Insurance Company and United Farm Family Insurance Company (Incorporated by reference to Registration Statement No. 333-4446) 10.11 Farm Family Life Insurance Company, Farm Family Casualty Insurance Company, Farm Family Holdings, Inc. Officer Severance Pay Plan Effective July 28, 1999 (incorporated by reference to Farm Family Holdings, Inc.'s Form 10-Q for the quarter ended September 30, 1999) 10.12 Farm Family Mutual Insurance Company Supplemental Employee Retirement Plan, adopted as of January 1, 1994 (Incorporated by reference to Registration Statement No. 333-4446) 10.13 Farm Family Holdings, Inc. Directors' Deferred Compensation Plan, effective January 1, 1997 (Incorporated by reference to Farm Family Holdings, Inc. Form 10-K for the year ended December 31, 1996) as amended by Amendment No. 1 dated as of October 27, 1998 (incorporated by reference to Farm Family Holdings, Inc.'s Form 10-K for the year ended December 31, 1998) and Amendment No. 2 effective July 28, 1999 (incorporated by reference to Farm Family Holdings, Inc.'s Form 10-Q for the quarter ended September 30, 1999) 10.14 Farm Family Holdings, Inc. Officers' Deferred Compensation Plan, effective January 1, 1997 (Incorporated by reference to Farm Family Holdings, Inc. Form 10-K for the year ended December 31, 1996) as amended by Amendment No. 1 dated as of October 27, 1998 (incorporated by reference to Farm Family Holdings, Inc.'s Form 10-K for the year ended December 31, 1998) and Amendment No. 2 effective July 28, 1999 (incorporated by reference to Farm Family Holdings, Inc.'s Form 10-Q for the quarter ended September 30, 1999) 10.15 Farm Family Holdings, Inc. Annual Incentive Plan effective, as amended and restated as of October 27, 1998 (incorporated by reference to Farm Family Holdings, Inc.'s Form 10-K for the year ended December 31, 1998) as amended by Amendment No. 1 effective July 28, 1999 (incorporated by reference to Farm Family Holdings, Inc.'s Form 10-Q for the quarter ended September 30, 1999) 10.16 Tax Payment Allocation Agreement effective January 1, 1996 by and between Farm Family Holdings, Inc. and Farm Family Casualty Insurance Company (Incorporated by reference to Farm Family Holdings, Inc. Form 10-K for the year ended December 31, 1996) 10.17 Excess Catastrophe Reinsurance Contract issued to Farm Family Casualty Insurance Company effective January 1, 1997 (incorporated by reference to Farm Family Holdings, Inc. Form 10-Q for the quarter ended March 31, 1997) 10.18 Farm Family Holdings, Inc. Amended and Restated Omnibus Securities Plan, effective as of February 29, 2000 (filed herewith) 10.19 Indenture of Lease made the 1st day of January 1999, between Farm Family Life Insurance Company and New York Farm Bureau, Inc. (filed herewith) 27 Financial Data Schedule (for electronic filing purposes only) Reports on Form 8-K A report on Form 8-K was filed on April 27, 2000 reporting a press release issued announcing operating results for the first quarter ended March 31, 2000. A report on Form 8-K was filed on May 5, 2000 reporting the affirmation of the A.M. Best rating of its subsidiary, Farm Family Life Insurance Company. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FARM FAMILY HOLDINGS, INC. (Registrant) August 9, 2000 By: /s/ Philip P. Weber - ------------------------------------ --------------------------------------- (Date) Philip P. Weber, President & CEO (Principal Executive Officer) August 9, 2000 By: /s/ Timothy A. Walsh - ------------------------------------ --------------------------------------- (Date) Timothy A. Walsh, EVP, CFO & Treasurer (Principal Financial & Accounting Officer)