<PAGE> 1
             UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, DC 20549
--------------------------------------------------------------------------
                                 FORM 10-Q

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

              For the Quarterly Period Ended June 30, 2001

                                     OR

/ /   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   33-94670-01
                    -------------------------------------
                              FARMERS GROUP, INC.
           (Exact name of registrant as specified in its charter)

                                   NEVADA
                       (State or other jurisdiction of
                       incorporation or organization)

                                  95-0725935
                      (IRS Employer Identification No.)

           4680 WILSHIRE BOULEVARD, LOS ANGELES, CALIFORNIA 90010
             (Address of principal executive offices)(Zip Code)

                                (323) 932-3200
             (Registrants telephone number, including area code)

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  / /

Registrant's Common Stock outstanding on June 30, 2001 was 1,000 shares.

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                               FARMERS GROUP, INC.
                                AND SUBSIDIARIES

                           TABLE OF CONTENTS FORM 10-Q

                        FOR THE PERIOD ENDED JUNE 30, 2001


PART I.   FINANCIAL INFORMATION                                             PAGE
                                                                            ----
  ITEM 1. Financial Statements (Unaudited)

          Consolidated Balance Sheets - Assets
             June 30, 2001 and December 31, 2000                              4

          Consolidated Balance Sheets - Liabilities and Stockholders'
             Equity June 30, 2001 and December 31, 2000                       5

          Consolidated Statements of Income
             Six Month Periods ended June 30, 2001 and
             June 30, 2000                                                    6

          Consolidated Statements of Comprehensive Income
             Six Month Periods ended June 30, 2001 and
             June 30, 2000                                                    7

          Consolidated Statements of Income
             Three Month Periods ended June 30, 2001 and
             June 30, 2000                                                    8

          Consolidated Statements of Comprehensive Income
             Three Month Periods ended June 30, 2001 and
             June 30, 2000                                                    9

          Consolidated Statement of Stockholders' Equity
             Six Month Period ended June 30, 2001                            10

          Consolidated Statement of Stockholders' Equity
             Six Month Period ended June 30, 2000                            11

          Consolidated Statements of Cash Flows
             Six Month Periods ended June 30, 2001 and
             June 30, 2000                                                   12

          Notes to Interim Financial Statements                              13

  ITEM 2. Management's Discussion and Analysis of Financial Condition
             and Results of Operations                                       20

  ITEM 3. Quantitative and Qualitative Disclosures about Market Risks        26

PART II.  OTHER INFORMATION                                                  27

SIGNATURES                                                                   28

<PAGE> 4

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
                                 FARMERS GROUP, INC.
                                  AND SUBSIDIARIES
                             CONSOLIDATED BALANCE SHEETS
                               (Amounts in thousands)
                                     (Unaudited)
                                       ASSETS
<TABLE>
<CAPTION>
                                                                   June 30,   December 31,
                                                                     2001         2000
                                                                ------------- ------------
<S>                                                             <C>           <C>
Current assets, excluding Insurance Subsidiaries:
 Cash and cash equivalents                                      $     341,651 $    132,245
 Marketable securities, at market value                                27,209       10,386
 Accrued interest                                                      21,331       41,995
 Accounts receivable, principally from the P&C Group                   43,388       36,052
 Note receivable - affiliate                                          207,000      207,000
 Deferred taxes                                                        48,353       40,609
 Prepaid expenses and other                                            16,117       15,437
                                                                ------------- ------------
  Total current assets                                                705,049      483,724
                                                                ------------- ------------
Investments, excluding Insurance Subsidiaries:
 Fixed maturities available-for-sale, at market value
  (cost: $168,895 and $292,039)                                       163,661      291,795
 Mortgage loans on real estate                                             63           92
 Common stocks available-for-sale, at market value
  (cost: $294,156 and $282,224)                                       239,126      242,066
 Certificates of contribution and surplus notes of the
  P&C Group                                                           184,830      184,830
 Real estate, at cost (net of accumulated depreciation:
  $27,573 and $26,179)                                                 64,649       69,699
 Other investments                                                        840        3,341
                                                                ------------- ------------
                                                                      653,169      791,823
                                                                ------------- ------------
Other assets, excluding Insurance Subsidiaries:
 Notes receivable - affiliates                                        345,000      345,000
 Goodwill (net of accumulated amortization:
  $750,550 and $720,528)                                            1,651,205    1,681,227
 Attorney-in-fact relationships (net of accumulated
  amortization: $534,075 and $512,712)                              1,174,968    1,196,331
 Other assets                                                         266,180      255,174
                                                                ------------- ------------
                                                                    3,437,353    3,477,732
                                                                ------------- ------------
Properties, plant and equipment, at cost:  (net of accumulated
 depreciation: $419,221 and $391,360)                                 447,192      438,371
                                                                ------------- ------------
Investments of Insurance Subsidiaries:
 Fixed maturities available-for-sale, at market value
  (cost: $4,480,325 and $4,349,824)                                 4,540,767    4,365,338
 Mortgage loans on real estate                                         33,155       36,984
 Non-redeemable preferred stocks available-for-sale, at market
  value (cost: $11,128 and $11,128)                                    11,805       11,500
 Common stocks available-for-sale, at market value
  (cost: $385,926 and $330,785)                                       333,899      293,407
 Certificates of contribution and surplus notes of the P&C Group      502,500      502,500
 Policy loans                                                         226,322      218,162
 Real estate, at cost (net of accumulated depreciation:
  $30,751 and $29,369)                                                 86,585       89,426
 Joint ventures, at equity                                              3,315        4,651
 S&P 500 call options, at fair value (cost: $33,146 and $29,696)       17,919       26,271
 Other investments                                                      9,411        5,279
                                                                ------------- ------------
                                                                    5,765,678    5,553,518
                                                                ------------- ------------
Other assets of Insurance Subsidiaries:
 Cash and cash equivalents                                             54,874       84,431
 Marketable securities, at market value                                10,000        9,997
 Reinsurance premiums receivable - P&C Group                                0      111,874
 Accrued investment income                                             72,815       69,922
 Deferred policy acquisition costs and value of life business
  acquired                                                            832,195      838,121
 Securities lending collateral                                         41,856      436,744
 Other assets                                                          61,899       29,151
 Assets held in Separate Account                                       34,239        8,423
                                                                ------------- ------------
                                                                    1,107,878    1,588,663
                                                                ------------- ------------
   Total assets                                                  $ 12,116,319 $ 12,333,831
                                                                ============= ============
The accompanying notes are an integral part of these interim financial statements.

</TABLE>

<PAGE> 5
                                  FARMERS GROUP, INC.
                                   AND SUBSIDIARIES
                              CONSOLIDATED BALANCE SHEETS
                                (Amounts in thousands)
                                      (Unaudited)
                         LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                                   June 30,   December 31,
                                                                     2001         2000
                                                                 ------------ ------------
<S>                                                              <C>          <C>
Current liabilities, excluding Insurance Subsidiaries:
 Notes and accounts payable:
  P&C Group                                                      $          0 $        481
  Other                                                                44,737       53,375
 Accrued liabilities:
  Profit sharing                                                       28,507       58,242
  Income taxes                                                        127,715      115,223
  Other                                                                 5,035        9,715
                                                                 ------------ ------------
   Total current liabilities                                          205,994      237,036
                                                                 ------------ ------------
Other liabilities, excluding Insurance Subsidiaries:
 Real estate mortgages payable                                             14           16
 Non-current deferred taxes                                           543,761      551,097
 Other                                                                116,502      120,405
                                                                 ------------ ------------
                                                                      660,277      671,518
                                                                 ------------ ------------
Liabilities of Insurance Subsidiaries:
 Policy liabilities:
  Future policy benefits                                            3,675,847    3,574,594
  Claims                                                               35,949       32,509
  Policyholders dividends                                                   8            3
  Other policyholders funds                                           189,305      141,544
  Death benefits payable                                               49,229       42,011
 Provision for non-life losses and loss adjustment expenses            67,480       89,936
 Income taxes (including deferred taxes: $88,900 and $97,267)         113,827      121,499
 Unearned investment income                                               931          903
 Reinsurance payable - P&C Group                                      137,289      185,742
 Securities lending liability                                          41,856      436,744
 Other liabilities                                                     46,080       34,983
 Liabilities related to Separate Account                               34,239        8,423
                                                                 ------------ ------------
                                                                    4,392,040    4,668,891
                                                                 ------------ ------------
   Total liabilities                                                5,258,311    5,577,445
                                                                 ------------ ------------

Commitments and contingencies

Company obligated mandatorily redeemable preferred
  securities of subsidiary trusts holding solely junior
  subordinated debentures                                             500,000      500,000
                                                                 ------------ ------------
Stockholders' Equity:
 Class A common stock, $1 par value per share; authorized, issued
  and outstanding:  as of June 30, 2001 - 450 shares, as of
  December 31, 2000 - 500 shares                                         0.45         0.50
 Class B common stock, $1 par value per share; authorized, issued
  and outstanding:  as of June 30, 2001 and
  December 31, 2000 - 500 shares                                         0.50         0.50
 Class C common stock, $1 par value per share; authorized, issued
  and outstanding:  as of June 30, 2001 - 50 shares                      0.05         0.00
 Additional capital                                                 5,212,618    5,212,618
 Accumulated other comprehensive loss (net of deferred
  taxes: ($24,415) and ($23,946))                                     (45,342)     (44,471)
 Retained earnings                                                  1,190,731    1,088,238
                                                                 ------------ ------------
   Total stockholders' equity                                       6,358,008    6,256,386
                                                                 ------------ ------------
     Total liabilities and stockholders' equity                  $ 12,116,319 $ 12,333,831
                                                                 ============ ============
The accompanying notes are an integral part of these interim financial statements.

</TABLE>

<PAGE> 6
                               FARMERS GROUP, INC.
                                AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                             (Amounts in thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                      Six month period
                                                                       ended June 30,
                                                                  ------------------------
                                                                      2001        2000
                                                                  -----------  -----------
<S>                                                               <C>          <C>
Consolidated operating revenues                                   $ 1,578,462  $ 1,680,575
                                                                  ===========  ===========
Management services to property and casualty
 insurance companies; and other:
  Operating revenues                                              $   828,716  $   772,117
  Operating expenses                                                  472,741      434,219
                                                                 -----------   ----------
    Operating income                                                  355,975      337,898
  Net investment income                                                43,415       66,516
  Net realized gains                                                   13,166       36,728
  Dividends on preferred securities of subsidiary trusts              (21,035)     (21,035)
                                                                  -----------   ----------
    Income before provision for taxes                                 391,521      420,107
  Provision for income taxes                                          160,388      171,054
                                                                  -----------   ----------
    Management services income                                        231,133      249,053
                                                                  -----------   ----------
Insurance Subsidiaries:
  Life and annuity premiums                                           133,324      108,270
  Non-life reinsurance premiums                                       300,000      500,000
  Life policy charges                                                 108,715      107,797
  Net investment income                                               186,882      172,757
  Net realized gains                                                   20,825       19,634
                                                                  -----------  -----------
    Total revenues                                                    749,746      908,458
                                                                  -----------  -----------
  Non-life losses and loss adjustment expenses                        212,746      328,963
  Life policyholders' benefits and charges                            224,050      185,098
  Non-life reinsurance commissions                                     79,754      158,553
  General operating expenses                                           77,933       84,113
                                                                  -----------  -----------
    Total operating expenses                                          594,483      756,727
                                                                  -----------  -----------
    Income before provision for taxes                                 155,263      151,731
  Provision for income taxes                                           48,553       51,985
                                                                  -----------  -----------
    Insurance Subsidiaries income                                     106,710       99,746
                                                                  -----------  -----------

Consolidated net income                                           $   337,843  $   348,799
                                                                  ===========  ===========
The accompanying notes are an integral part of these interim financial statements.
</TABLE>

<PAGE> 7
                               FARMERS GROUP, INC.
                                AND SUBSIDIARIES
                           CONSOLIDATED STATEMENTS OF
                              COMPREHENSIVE INCOME
                             (Amounts in thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                      Six month period
                                                                       ended June 30,
                                                                  ------------------------
                                                                      2001        2000
                                                                  -----------  -----------
<S>                                                               <C>          <C>
Consolidated net income                                           $   337,843  $   348,799
                                                                  -----------  -----------
Other comprehensive loss, net of tax:
  Net unrealized holding gains/(losses) on securities,
      net of tax of $3,727 and ($21,704)                                6,921      (40,308)
  Change in effect of unrealized gains/(losses) on other
      insurance accounts, net of tax of ($4,196) and $103              (7,792)         191
                                                                  -----------  -----------
  Other comprehensive loss                                               (871)     (40,117)
                                                                  -----------  -----------
Comprehensive income                                              $   336,972  $   308,682
                                                                  ===========  ===========

The accompanying notes are an integral part of these interim financial statements.
</TABLE>

<PAGE> 8
                               FARMERS GROUP, INC.
                                AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                             (Amounts in thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                     Three month period
                                                                       ended June 30,
                                                                  ------------------------
                                                                      2001        2000
                                                                  -----------  -----------
<S>                                                               <C>          <C>
Consolidated operating revenues                                   $   689,273  $   855,443
                                                                  ===========  ===========
Management services to property and casualty
 insurance companies; and other:
  Operating revenues                                              $   413,642  $   396,785
  Operating expenses                                                  236,337      227,598
                                                                  -----------   ----------
    Operating income                                                  177,305      169,187
  Net investment income                                                22,480       32,566
  Net realized gains                                                    8,727       18,963
  Dividends on preferred securities of subsidiary trusts              (10,517)     (10,517)
                                                                  -----------   ----------
    Income before provision for taxes                                 197,995      210,199
  Provision for income taxes                                           79,342       85,015
                                                                  -----------   ----------
    Management services income                                        118,653      125,184
                                                                  -----------   ----------
Insurance Subsidiaries:
  Life and annuity premiums                                            62,243       56,343
  Non-life reinsurance premiums                                        50,000      250,000
  Life policy charges                                                  54,563       54,058
  Net investment income                                                94,010       86,940
  Net realized gains                                                   14,815       11,317
                                                                  -----------  -----------
    Total revenues                                                    275,631      458,658
                                                                  -----------  -----------
  Non-life losses and loss adjustment expenses                         34,422      164,537
  Life policyholders' benefits and charges                            106,304       95,320
  Non-life reinsurance commissions                                     14,328       79,212
  General operating expenses                                           32,319       41,162
                                                                  -----------  -----------
    Total operating expenses                                          187,373      380,231
                                                                  -----------  -----------
    Income before provision for taxes                                  88,258       78,427
  Provision for income taxes                                           25,578       26,894
                                                                  -----------  -----------
    Insurance Subsidiaries income                                      62,680       51,533
                                                                  -----------  -----------

Consolidated net income                                           $   181,333  $   176,717
                                                                  ===========  ===========

The accompanying notes are an integral part of these interim financial statements.
</TABLE>

<PAGE> 9
                               FARMERS GROUP, INC.
                                AND SUBSIDIARIES
                           CONSOLIDATED STATEMENTS OF
                              COMPREHENSIVE INCOME
                             (Amounts in thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                     Three month period
                                                                       ended June 30,
                                                                  ------------------------
                                                                      2001         2000
                                                                  -----------  -----------
<S>                                                               <C>          <C>
Consolidated net income                                           $   181,333  $   176,717
                                                                  -----------  -----------
Other comprehensive loss, net of tax:
  Net unrealized holding losses on securities,
      net of tax of ($3,810) and ($19,885)                             (7,077)     (36,930)
  Change in effect of unrealized gains on other
      insurance accounts, net of tax of $3,155 and
      $1,082                                                            5,860        2,009
                                                                  -----------  -----------
  Other comprehensive loss                                             (1,217)     (34,921)
                                                                  -----------  -----------
Comprehensive income                                              $   180,116  $   141,796
                                                                  ===========  ===========

The accompanying notes are an integral part of these interim financial statements.

</TABLE>

<PAGE> 10

                                 FARMERS GROUP, INC.
                                  AND SUBSIDIARIES
                   CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                   For the six month period ended June 30, 2001
                               (Amounts in thousands)
                                     (Unaudited)
<TABLE>
<CAPTION>
                                                     Accumulated Other                     Total
                                Common    Additional  Comprehensive        Retained    Stockholders'
                                 Stock     Capital        Loss             Earnings       Equity
                               --------  ----------- -----------------   ------------  ------------
<S>                            <C>       <C>          <C>                <C>           <C>
Balance, December 31, 2000     $      1  $ 5,212,618  $        (44,471)  $  1,088,238  $  6,256,386

Net income                                                                    337,843       337,843

Net unrealized holding gains on
  securities, net of tax of
  $3,727                                                         6,921                        6,921

Change in effect of unrealized
  losses on other insurance
  accounts, net of tax of ($4,196)                              (7,792)                      (7,792)

Cash dividends paid                                                          (235,350)     (235,350)
                               --------  -----------  ----------------   ------------  ------------
Balance, June 30, 2001         $      1  $ 5,212,618  $        (45,342)   $ 1,190,731  $  6,358,008
                               ========  ===========  ================   ============  ============

The accompanying notes are an integral part of these interim financial statements.

</TABLE>

<PAGE> 11

                                 FARMERS GROUP, INC.
                                  AND SUBSIDIARIES
                   CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                   For the six month period ended June 30, 2000
                               (Amounts in thousands)
                                     (Unaudited)
<TABLE>
<CAPTION>
                                                     Accumulated Other                     Total
                                Common    Additional  Comprehensive        Retained    Stockholders'
                                 Stock     Capital        Loss             Earnings       Equity
                               --------  ----------- -----------------   ------------  ------------
<S>                            <C>       <C>          <C>                <C>           <C>
Balance, December 31, 1999     $      1  $ 5,212,618  $        (33,999)  $  1,920,619  $  7,099,239

Net income                                                                    348,799       348,799

Net unrealized holding losses on
  securities, net of tax of
  ($21,704)                                                    (40,308)                     (40,308)

Change in effect of unrealized
  gains on other insurance
  accounts, net of tax of $103                                     191                          191

Cash dividends declared and/or
  paid                                                                     (1,437,025)   (1,437,025)
                               --------  -----------  ----------------   ------------  ------------
Balance, June 30, 2000         $      1  $ 5,212,618  $        (74,116)   $   832,393  $  5,970,896
                               ========  ===========  ================   ============  ============

The accompanying notes are an integral part of these interim financial statements.

</TABLE>

<PAGE> 12

                                 FARMERS GROUP, INC.
                                  AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (Amounts in thousands)
                                     (Unaudited)
<TABLE>
<CAPTION>
                                                                     Six month period
                                                                      ended June 30,
                                                                  -----------------------
                                                                     2001         2000
                                                                  ----------   ----------
<S>                                                               <C>          <C>
Cash Flows from Operating Activities:
 Consolidated net income                                          $  337,843   $  348,799
 Non-cash and operating activities adjustments:
  Depreciation and amortization                                       84,615       81,970
  Amortization of deferred policy acquisition costs and
    value of life business acquired                                   50,299       56,951
  Policy acquisition costs deferred                                  (56,361)     (51,079)
  Life insurance policy liabilities                                  107,487       61,015
  Provision for non-life losses and loss adjustment expenses         (22,455)     (22,947)
  Universal life type contracts:
     Deposits received                                               152,083      152,014
     Withdrawals                                                    (136,780)    (134,439)
     Interest credited                                                40,516       37,135
  Equity in earnings of joint ventures                                   489       10,163
  Gains on sales of assets                                           (37,049)     (56,781)
 Changes in assets and liabilities:
  Current assets and liabilities                                        (264)      58,878
  Non-current assets and liabilities                                   5,695      (32,965)
 Other, net                                                            2,354         (557)
                                                                  ----------  -----------
 Net cash provided by operating activities                           528,472      508,157
                                                                  ----------  -----------
Cash Flows from Investing Activities:
 Purchases of investments available-for-sale                      (1,444,652)    (581,954)
 Purchases of properties                                             (43,018)     (51,747)
 Purchase of surplus notes of the P&C Group                                0     (175,000)
 Purchase of certificates of contribution of the P&C Group                 0     (370,000)
 Proceeds from sales and maturities of investments
  available-for-sale                                               1,378,571      830,039
 Proceeds from sales of properties                                    13,668        4,412
 Proceeds from redemption of notes receivable - affiliate                  0      175,000
 Mortgage loan collections                                             3,858        2,724
 Increase in policy loans                                             (8,160)      (8,955)
 Other, net                                                           (3,031)      (2,014)
                                                                  ----------  -----------
 Net cash used in investing activities                              (102,764)    (177,495)
                                                                  ----------  -----------
Cash Flows from Financing Activities:
 Dividends paid to stockholders                                     (235,350)    (362,025)
 Annuity contracts:
    Deposits received                                                279,621       80,448
    Withdrawals                                                     (316,334)    (145,065)
    Interest credited                                                 26,206       38,407
 Payment of long-term notes payable                                       (2)          (2)
                                                                  ----------  -----------
 Net cash used in financing activities                              (245,859)    (388,237)
                                                                  ----------  -----------

Increase/(Decrease) in cash and cash equivalents                     179,849      (57,575)
Cash and cash equivalents - at beginning of year                     216,676      313,500
                                                                  ----------  -----------
Cash and cash equivalents - at end of period                      $  396,525   $  255,925
                                                                  ==========  ===========

The accompanying notes are an integral part of these interim financial statements.
</TABLE>

<PAGE> 13

                         FARMERS GROUP, INC.
                          AND SUBSIDIARIES
                 NOTES TO INTERIM FINANCIAL STATEMENTS
                            (Unaudited)

A.   Basis of presentation and summary of significant accounting policies

     The accompanying consolidated balance sheet of Farmers Group, Inc. ("FGI")
and its subsidiaries (together, the "Company") as of June 30, 2001, the related
consolidated statements of income, comprehensive income, stockholders' equity
and cash flows for the six month periods ended June 30, 2001 and June 30, 2000,
and the consolidated statements of income and comprehensive income for the
three month periods ended June 30, 2001 and June 30, 2000, have been prepared
in accordance with accounting principles generally accepted in the United
States ("GAAP") for interim periods and are unaudited.  However, in
management's opinion, the consolidated financial statements include all
adjustments (consisting of only normal recurring adjustments) necessary for a
fair presentation of results for such interim periods.  These statements do not
include all of the information and footnotes required by GAAP for complete
financial statements and should be read in conjunction with the consolidated
balance sheets of the Company as of December 31, 2000 and 1999, and the related
consolidated statements of income, comprehensive income, stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
2000.

     Interim results are not necessarily indicative of results for the full
year. All material inter-company transactions have been eliminated.  Certain
amounts applicable to prior years have been reclassified to conform with the
2001 presentation.

     The preparation of the Company's financial statements in conformity with
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements as well as the
reported amounts of revenues and expenses during the reporting periods.  Actual
results could differ from those estimates.

     The Company is attorney-in-fact ("AIF") for three inter-insurance
exchanges: Farmers Insurance Exchange, Fire Insurance Exchange and Truck
Insurance Exchange (collectively the "Exchanges"), which operate in the
property and casualty insurance industry.  On March 7, 2000, the Exchanges
acquired Foremost Corporation of America and its subsidiaries ("Foremost"),
a prominent writer of insurance for manufactured homes, recreational vehicles
and other specialty lines.  Each policyholder of the Exchanges appoints the
Company as the exclusive AIF to provide management services.  For such
services, the Company earns management fees based on a percentage of gross
premiums earned by the Exchanges, their respective subsidiaries, Farmers Texas
County Mutual Insurance Company, Foremost County Mutual Insurance Company and
Foremost Lloyds of Texas (collectively the "P&C Group").  The P&C Group is
owned by the policyholders of the Exchanges, Farmers Texas County Mutual
Insurance Company and Foremost County Mutual Insurance Company as well as the
underwriters of Foremost Lloyds of Texas.  Accordingly, the Company has no
ownership interest in the P&C Group.

     Farmers New World Life Insurance Company ("Farmers Life"), a Washington
based insurance company, is a wholly owned subsidiary of the Company.  Farmers
Life markets a broad line of individual life insurance products, including
universal life, term life and whole life insurance, structured settlement and
annuity products, predominately flexible premium deferred annuities, as well as
variable universal life insurance and variable annuity products.  These
products are sold directly by the P&C Group's agents.

     Farmers Reinsurance Company ("Farmers Re"), a wholly owned subsidiary of
the Company, reinsures a percentage of the auto physical damage business
("APD") written by the P&C Group.  Effective April 1, 2001, the APD reinsurance
agreement between Farmers Re and the P&C Group which had been in force since
January 1998 was cancelled and replaced with a similar APD reinsurance
agreement supported by multiple reinsurers.  As a result of this new
agreement, the monthly premiums assumed by Farmers Re decreases from
$83.3 million to $16.7 million.  Farmers Re continues to assume a quota share
percentage of ultimate net losses sustained by the P&C Group in its APD line
of business.  This treaty, which will remain in effect until terminated by
either party, also provides for the P&C Group to receive a ceding
commission of 18% of premiums with additional experience commissions that
depend

<PAGE> 14

on loss experience.  This experience commission arrangement limits
Farmers Re's potential underwriting gain on the assumed business to 2.5% of
premiums assumed.

     On March 31, 2001, Farmers Re and the P&C Group commuted $89,936,000 of
losses and loss adjustment expenses associated with the 2000 accident year.
As a result, in May 2001, Farmers Re paid the P&C Group $89,936,000 of losses
and loss adjustment expenses and $8,766,000 of accrued interest in settlement
of this commutation.

     References to the "Insurance Subsidiaries" within the consolidated
financial statements are to Farmers Life and Farmers Re.

     In December 1988, B.A.T Industries p.l.c. ("B.A.T"), acquired 100%
ownership of the Company through its wholly owned subsidiary BATUS Financial
Services.  Immediately thereafter, BATUS Financial Services was merged into
FGI.  The acquisition was accounted for as a purchase and, accordingly, the
acquired assets and liabilities were recorded in the Company's consolidated
balance sheets based on their estimated fair values at December 31, 1988.

     In September 1998, the financial businesses of B.A.T, which included the
Company, were merged with Zurich Insurance Company ("ZIC").  The businesses of
ZIC and the financial services businesses of B.A.T were transferred to Zurich
Group Holding ("ZGH"), formerly known as Zurich Financial Services, a Swiss
company with headquarters in Zurich, Switzerland.  This merger was accounted
for by ZGH as a pooling of interests under International Accounting Standards.

     As a result of a unification of the holding structure of the Zurich
Financial Services Group in October 2000, Zurich Financial Services was renamed
Zurich Group Holding, as noted above, and a new group holding company, Zurich
Financial Services, was formed.  As such, references to "Zurich" are to the new
group holding company, Zurich Financial Services.

     In 1998, the Financial Accounting Standards Board ("FASB") released
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities".  This Statement establishes
accounting and reporting standards for derivative instruments (including
certain derivative instruments embedded in other contracts) and for hedging
activities.  SFAS No.133 requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at market value.  Subsequently, in June 1999, the FASB
released SFAS No. 137, "Deferral of the Effective Date of FASB Statement No.
133", which deferred the effective date of SFAS No. 133 to fiscal years
beginning after June 15, 2000.  Finally, in June 2000, the FASB released SFAS
No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities".  This Statement amends the accounting and reporting standards of
SFAS No. 133 for the following items:  normal purchases and normal sales
exception, interest rate risk, recognized foreign-currency-denominated debt
instruments and intercompany derivatives.  This Statement also amends SFAS No.
133 for certain provisions related to the implementation guidance arising from
the Derivative Implementation Group process.  SFAS No. 133, No. 137, and No.138
are effective for financial statements issued by the Company for periods ending
after December 31, 2000.  The adoption of these Statements did not have a
material impact on the Company's consolidated financial statements.

     In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities".  This
Statement revises accounting standards for securitizations and other transfers
of financial assets and collateral.  SFAS No. 140 replaces SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities", and rescinds SFAS No. 127, "Deferral of the Effective Date of
Certain Provisions of FASB Statement No. 125".  This Statement, which is
required to be applied prospectively with certain exceptions, is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after March 31, 2001.  Additionally, this Statement is effective for
recognition and reclassification of collateral and for disclosures relating to
securitization transactions and collateral for fiscal years ending after
December 15, 2000.  The adoption of this Statement did not have a material
impact on the Company's consolidated financial statements.

<PAGE> 15

     In June 2001, the FASB issued SFAS No. 141, "Business Combinations".  This
Statement, effective for all business combinations initiated after June 30,
2001, establishes standards for accounting and reporting business combinations.
It requires that all business combinations be accounted for by the purchase
method and prohibits the pooling of interest method of accounting except for
transactions initiated before July 1, 2001.  This Statement supersedes
Accounting Principles Board ("APB") Opinion No. 16, "Business Combinations",
and FASB Statement No. 38, "Accounting for Preacquisition Contingencies of
Purchased Enterprises".    The adoption of this Statement did not have a
material impact on the Company's consolidated financial statements.

     In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets".  This Statement addresses financial accounting and reporting for
intangible assets acquired individually or with a group of other assets (but
not those acquired in a business combination) at acquisition.  This Statement
also addresses financial accounting and reporting for goodwill and other
intangible assets subsequent to their acquisition.  Upon adoption of this
Statement, goodwill and other intangible assets that are determined to have an
indefinite useful life will no longer be amortized.  Instead, goodwill will be
tested for impairment on an annual basis and intangible assets with indefinite
useful lives will be evaluated each reporting period to determine whether an
indefinite useful life is still supported.  Any intangible asset that is
determined to have a finite useful life shall be amortized over this period and
its useful life shall be evaluated each reporting period to determine whether
revisions to the remaining amortization period are warranted.  This Statement
is effective for financial statements issued for fiscal years beginning after
December 15, 2001 and supersedes APB Opinion No. 17, "Intangible Assets".
Early application is permitted for entities with fiscal years beginning after
March 15, 2001, provided that the first interim financial statements have not
previously been issued.  This Statement is required to be applied at the
beginning of an entity's fiscal year and to be applied to all goodwill and
other intangible assets recognized in its financial statements at that date.
The Company is currently assessing but has not yet determined the impact of
SFAS No. 142 on its consolidated financial statements.

     In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations".  This Statement, effective for fiscal years beginning
after June 15, 2002, establishes the standard to record the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred.  The Company does not expect the adoption of this Statement to have
a material impact on its consolidated financial statements.

B.   Capital structure

     As of June 30, 2001, the Company had three classes of common stock - Class
A Common Stock (the "Class A Shares"), Class B Common Stock (the "Class B
Shares") and Class C Common Stock (the "Class C Shares").  Prior to a
recapitalization of the Company's capital structure which occurred in
connection with a private placement of an aggregate of $1,125,000,000 of
securities by six Zurich RegCaPS Funding Trusts on February 9, 2001, the
Company had 500 shares of Class A Common Stock, par value $1.00 per share, and
500 shares of Class B Common Stock, par value $1.00 per share.  All Class A
Shares were wholly owned by ZGH and all Class B Shares were wholly owned by
Allied Zurich Holdings Limited, an affiliated company created during the
restructuring of B.A.T.

     Subsequently, on February 9, 2001, in connection with the private
placement of the $1,125,000,000 of securities, ZGH exchanged 50 Class A Shares
for 50 shares of Class C Common Stock, par value $1.00 per share.  The Class C
Shares were issued in six series (C-1 through C-6).  ZGH subsequently
contributed each respective series of the Class C Shares to one of six Zurich
RegCaPS Funding Limited Partnerships (collectively, the "Partnerships"), which
are controlled by ZIC.  As a result, upon completion of the recapitalization,
450 Class A Shares were owned by ZGH, 500 Class B Shares were owned by Allied
Zurich Holdings Limited and 50 Class C Shares were owned by the Partnerships.

     The holders of the Class A Shares are entitled to 1.0694444 votes per
share and the holders of Class B Shares are entitled to .1111111 of a vote per
share (each subject to adjustment in the event of any stock dividend, stock
split, stock distribution or combination with respect to any shares of capital
stock of the Company) upon the election of directors and on all other matters
upon which stockholders generally are entitled to vote.  In the event of a
liquidation, dissolution or winding up of the Company, the holders of Class A
Shares are entitled to share equally and ratably with the holders of Class C
Shares in the assets of the Company, if any, remaining after payment of all

<PAGE> 16

liabilities of the Company and the Class C Share liquidation preference, to
the exclusion of the holders of Class B Shares.

     Subject to the rights of the holders of Class C Shares, the holders of
Class A Shares and the holders of Class B Shares shall be entitled to receive
dividends, when and if declared by the Board of Directors, out of funds legally
available therefor.

     The holders of Class C Shares are entitled to 0.375 of a vote per share
upon the election of directors and on all other matters upon which stockholders
generally are entitled to vote.  However, at no time shall the aggregate voting
power of the Class C Shares be greater than 3.375% of the total voting power of
the Company.  Upon any dissolution, liquidation or winding up of the Company,
after payment of the liabilities of the Company and the expenses of such
dissolution, liquidation or winding up, the holders of Class C Shares will be
entitled to receive in the aggregate out of the assets of the Company, before
any payment or distribution is made to the holders of Class A Shares or Class B
Shares, $1,125,000,000 in liquidation preference (the "Class C Liquidation
Preference").  To the extent the amount available for distribution upon
liquidation, dissolution or winding up exceeds the Class C Liquidation
Preference, the holders of Class C Shares are entitled to receive 7.4503311%
(as adjusted from time to time based upon the percentage of the Company's fair
market value represented by the Class C Shares at the time of such adjustment)
of the aggregate amount available for payment of distributions on liquidation
with respect to the Company's common stock.  Amounts payable on the Class C
Shares in connection with the liquidation of the Company in excess of the Class
C Liquidation Preference are payable on a pari passu basis with the holders of
the Class A Shares and any other shares that rank junior to the Class C Shares
with respect to payments upon liquidation.

     The holders of Class C Shares are entitled to receive non-cumulative
dividends when, as and if declared by the Board of Directors out of funds
legally available therefor.  No cash dividends may be declared or paid on any
Class A Shares, Class B Shares or any other shares of common stock that rank
junior to the Class C Shares with respect to payment of dividends, unless (i)
full dividends have been declared for payment on the Class C Shares in an
amount at least equal to the greater of (A) the dividends payable or set apart
during the dividend period during which such cash dividends are paid at the
respective Class C Share indicative rate (as defined in the Certificates of
Designations of Class C-1 through Class C-6 Shares) or (B) 7.4503311% (as
adjusted as set forth above) of the amount of dividends paid or set apart for
payment by the Company on its common shares (including the Class C Shares)
during any relevant dividend period, (ii) the Partnerships have set apart or
paid the full amount of cash remittances (the "RegCaPS Payments") payable to
the holders of the regulatory capital preferred securities (the "RegCaPS")
issued by the Partnerships during any RegCaPS Payments period, (iii) the six
Zurich RegCaPS Funding LLCs (collectively, the "LLC") who hold the RegCaPS,
have set apart or paid certain cash payments during any LLC payment period on
the LLC preferred interests issued by each LLC, and (iv) such dividend does not
cause the net worth of the Company to be less than $3 billion (as adjusted from
time to time).

C.   Material contingencies

     The Company is a party to numerous lawsuits arising from its normal
business activities.  These actions are in various stages of discovery and
development, and some seek punitive as well as compensatory damages.  In the
opinion of management, the Company has not engaged in any conduct which should
warrant the award of any material punitive or compensatory damages.  The
Company intends to vigorously defend its position in each case, and management
believes that, while it is not possible to predict the outcome of such matters
with absolute certainty, ultimate disposition of these proceedings should not
have a material adverse effect on the Company's consolidated results of
operations or financial position.

D.   Company Obligated Mandatorily Redeemable Preferred Securities of
     Subsidiary Trusts Holding Solely Junior Subordinated Debentures

     In 1995, Farmers Group Capital and Farmers Group Capital II (the
"Subsidiary Trusts"), consolidated wholly owned subsidiaries of Farmers Group,
Inc., issued $410 million of 8.45% Cumulative Quarterly Income Preferred
Securities ("QUIPS"), Series A and $90 million of 8.25% QUIPS, Series B,
respectively.  In connection with the

<PAGE> 17

Subsidiary Trusts' issuance of the QUIPS and the related purchase by Farmers
Group, Inc. of all of the Subsidiary Trusts' Common Securities ("Common
Securities"), Farmers Group, Inc. issued to Farmers Group Capital $422,680,399
principal amount of its 8.45% Junior Subordinated Debentures, Series A due on
December 31, 2025, (the "Junior Subordinated Debentures, Series A") and issued
to Farmers Group Capital II $92,783,505 principal amount of its 8.25% Junior
Subordinated Debentures, Series B due on December 31, 2025 (the "Junior
Subordinated Debentures, Series B" and, together with the Junior Subordinated
Debentures, Series A, the "Junior Subordinated Debentures").  The sole assets
of Farmers Group Capital are the Junior Subordinated Debentures, Series A.
The sole assets of Farmers Group Capital II are the Junior Subordinated
Debentures, Series B.  In addition, these arrangements are governed by various
agreements between Farmers Group, Inc. and the Subsidiary Trusts (the
Guarantee Agreements, the Trust Agreements, the Expense Agreements, the
Indentures and Junior Subordinated Debentures) which considered together
constitute a full and unconditional guarantee by Farmers Group, Inc. of the
Subsidiary Trusts' obligations under the Preferred Securities.

     Under certain circumstances, the Junior Subordinated Debentures may be
distributed to holders of the QUIPS and holders of the Common Securities in
liquidation of the Subsidiary Trusts.  As of September 27, 2000, Farmers Group,
Inc. had the option to redeem, in whole or in part, the Junior Subordinated
Debentures.  The QUIPS are subject to mandatory redemption upon repayment of
the Junior Subordinated Debentures at maturity, or upon their earlier
redemption, at a redemption price of $25 per Preferred Security, plus accrued
and unpaid distributions thereon to the date fixed for redemption.

     As of June 30, 2001 and 2000, a total of 20,000,000 shares of QUIPS were
outstanding.

E.   Management fees

    As AIF, the Company, provides management services to the non-claims side of
the P&C Group and receives management fees for the services rendered.  As a
result, the Company received management fees from the P&C Group of $777,489,000
and $726,386,000 for the six month periods ended June 30, 2001 and June 30,
2000, respectively.

F.   Related parties

     As of June 30, 2001, the Company held a $250,000,000 note receivable from
Orange Stone (Delaware) Holdings Limited ("OSDH"), a subsidiary of Zurich.  The
Company loaned $250,000,000 to OSDH on December 15, 1999 and, in return,
received a medium-term note with a 7.50% fixed interest rate that matures on
December 15, 2004.  Interest on this note is paid semi-annually.  Income earned
on this note totaled $9,375,000 in each of the six month periods ended June 30,
2001 and June 30, 2000.

     In addition, as of June 30, 2001, the Company held $302,000,000 of notes
receivable from Zurich (UKISA) Limited ("UKISA"), a subsidiary of Zurich.  The
Company purchased $1,057,000,000 of notes from UKISA on September 3, 1998.
Subsequently, on March 1, 2000, Eagle Star Life Assurance Company Limited
("Eagle Star"), also an affiliate of Zurich, assigned $175,000,000 of matured
surplus notes of the P&C Group to the Company and, in return, the Company
reduced the outstanding balance of the notes receivable from UKISA by
$175,000,000.  Additionally, on September 3, 2000, $25,000,000 of the notes
receivable from UKISA, bearing interest at a coupon rate of 5.44% with an
original maturity date of September 3, 2000, were renewed for medium-term
notes with a 6.80% fixed interest rate maturing in September 2002.

     Finally, on October 23, 2000, to help fund the payment of a $1,075,000,000
special dividend associated with the Zurich capital structure unification in
October 2000, the Company sold $580,000,000 of notes receivable from UKISA to
ZIC for par value.  As a result, as of June 30, 2001, the Company held
$302,000,000 of notes receivable from UKISA with the following amounts,
maturity dates and coupon rates:  $207,000,000 maturing in September 2001 at a
coupon rate of 5.48% and $95,000,000 maturing in September 2002, $25,000,000
of which is at a coupon rate of 6.80% and $70,000,000 of which is at a coupon
rate of 5.67%.  Interest on the UKISA notes is paid semi-annually and for the
six month periods ended June 30, 2001 and June 30, 2000 totaled $9,058,000 and
$26,543,000, respectively.

<PAGE> 18

G.   Certificates of contribution and surplus notes of the P&C Group

     As of June 30, 2001, the Company held $175,000,000 of surplus notes of the
P&C Group.  These notes bear interest at 8.50% annually and mature in March
2005.  These notes were obtained in March 2000 with the assignment of the
$175,000,000 of matured surplus notes of the P&C Group from Eagle Star
(see Note F).

     Additionally, as of June 30, 2001, the Company held $370,000,000 of
certificates of contribution of the P&C Group bearing interest at 7.85%
annually.  These certificates of contribution of the P&C Group were purchased
on March 7, 2000 to help fund the Exchanges' acquisition of Foremost.
Furthermore, the Company continued to hold $23,330,000 of miscellaneous other
certificates of contribution of the P&C Group, which bear interest at various
rates, and a $119,000,000 surplus note of the P&C Group, which bears interest
at 6.10% annually.

     Conditions governing repayment of these amounts are outlined in the
certificates of contribution and the surplus notes.  Generally, repayment may
be made only when the surplus balance of the issuer reaches a certain specified
level, and then only after approval is granted by the issuer's governing Board
and the appropriate state insurance regulatory department.

H.   Supplemental cash flow information

     For financial statement purposes, the Company considers all investments
with original maturities of 90 days or less as cash equivalents.  Following is
a reconciliation of the balance sheet cash and cash equivalent totals to the
consolidated cash flow total:

<TABLE>
<CAPTION>

                                                    Excluding
                                                    Insurance      Insurance
                                                  Subsidiaries   Subsidiaries   Consolidated
                                                  ------------   ------------   ------------
                                                         (Amounts in thousands)
<S>                                               <C>            <C>            <C>
Cash and cash equivalents  -- December 31, 1999   $   217,466    $     96,034   $    313,500
                              Activity through June 2000                             (57,575)
                                                                                 -----------
Cash and cash equivalents  -- June 30, 2000           212,757          43,168   $    255,925
                                                                                 ===========

Cash and cash equivalents  -- December 31, 2000   $   132,245    $     84,431   $    216,676
                              Activity through June 2001                             179,849
                                                                                 -----------
Cash and cash equivalents  -- June 30, 2001           341,651          54,874   $    396,525
                                                                                 ===========

</TABLE>

     Cash payments for interest were $1,795,000 and $1,678,000 for the six
month periods ended June 30, 2001 and June 30, 2000, respectively, while the
cash payment for dividends to the holders of the Company's QUIPS was
$21,035,000 for each of the six month periods ended June 30, 2001 and June 30,
2000.  Cash payments for income taxes were $218,969,000 and $190,935,000 for
the six month periods ended June 30, 2001 and June 30, 2000, respectively.

     On March 7, 2000, the Company purchased $370,000,000 of certificates of
contribution of the P&C Group to help fund the Exchanges' acquisition of
Foremost (see Note G).

I.   Operating segments

     The Company's principal activities are the provision of management
services to the P&C Group and the ownership and operation of the life and
reinsurance subsidiaries.  These activities are managed separately as each
offers a unique set of services.  As a result, the Company is comprised of the
following three reportable operating segments as defined in SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information": the
management services segment, the life insurance segment and the reinsurance
segment.

     As AIF, the management services segment is primarily responsible for
providing management services to the P&C Group.  Management fees earned from
the P&C Group totaled $777,489,000 and $726,386,000 for the six

<PAGE> 19

month periods ended June 30, 2001 and June 30, 2000, respectively.  The life
insurance segment provides individual life insurance products, including
universal life, term life and whole life insurance and structured settlement
and annuity products, as well as variable universal life and annuity products.
Finally, the reinsurance segment provides reinsurance coverage to a percentage
of the auto physical damage business written by the P&C Group.

     The basis of accounting used by the Company's management in evaluating
segment performance and determining how resources should be allocated is
referred to as the Company's GAAP historical basis, which excludes
the effects of the purchase accounting ("PGAAP") adjustments related to the
acquisition of the Company by B.A.T in December 1988 (see Note A).  This
differs from the basis used in preparing the Company's financial statements
included in the SEC Form 10-K and 10-Q reports, which incorporates the effects
of these adjustments.

     The Company accounts for intersegment transactions as if they were to
third parties and, as such, records the transactions at current market prices.
There were no intersegment revenues among the Company's three reportable
operating segments for the six month periods ended June 30, 2001 and June 30,
2000.

     Information regarding the Company's reportable operating segments
follows:

<TABLE>
<CAPTION>
                                        Six month period ended June 30, 2001
             ---------------------------------------------------------------------------------------
------------------
                           GAAP historical basis                             PGAAP adjustments
Consolidated
             ------------------------------------------------------  -------------------------------
------
              Management      Life                                   Management      Life
PGAAP
               services     insurance      Reinsurance     Total      services     insurance
Total       basis
             ------------------------------------------------------  -------------------------------
------ -----------
                                                (Amounts in thousands)
<S>          <C>           <C>            <C>            <C>         <C>           <C>        <C>
<C>
Revenues     $  828,716    $  428,376 (a) $  321,826 (a) $1,578,918  $        0    $   (456)  $
(456)    $1,578,462

Investment
 income          43,723       176,664         22,311        242,698        (308)       (456)
(764)       241,934

Investment
 expenses             0        (7,431)        (4,206)       (11,637)          0           0
0           (11,637)

Net realized
 gains/(losses)  14,192        17,104          3,721         35,017      (1,026)          0
(1,026)      33,991

Dividends
 on preferred
 securities of
 subsidiary
 trusts         (21,035)            0              0        (21,035)          0           0
0           (21,035)

Income before
 provision for
 taxes          446,369       130,044         29,222        605,635     (54,848)     (4,003)
(58,851)    546,784

Provision for
 income taxes   173,690        46,938          9,261        229,889      (13,302)    (7,646)
(20,948)    208,941

Depreciation and
 amortization    30,208        48,853              0         79,061      52,130 (b)   3,723 (c)
55,853      134,914
-----------------------
</TABLE>

(a)  Revenues for the insurance operating segments include net investment
     income and net realized gains/(losses).

(b)  Amount includes PGAAP adjustments associated with the amortization of the
     AIF relationships ($21.4 million) and goodwill ($30.0 million).

(c)  Amount includes PGAAP adjustments associated with the amortization of the
     Value of Life Business Acquired ("VOLBA") asset and the reversal of
     amortization associated with the pre-1988 deferred policy acquisition
     costs ("DAC") asset.


<TABLE>
<CAPTION>
                                        Six month period ended June 30, 2000
             ---------------------------------------------------------------------------------------
------------------
                           GAAP historical basis                             PGAAP adjustments
Consolidated
             ------------------------------------------------------  -------------------------------
------
              Management      Life                                   Management      Life
PGAAP
               services     insurance      Reinsurance     Total      services     insurance
Total       basis
             ------------------------------------------------------  -------------------------------
------ -----------
                                                (Amounts in thousands)
<S>          <C>           <C>            <C>            <C>         <C>           <C>        <C>
<C>
Revenues     $  772,117    $  389,850 (a) $  519,067 (a) $1,681,034  $        0    $   (459)  $
(459)    $1,680,575

Investment
 income          66,826       163,251         15,413        245,490        (310)       (459)
(769)       244,721

Investment
 expenses             0        (5,448)             0         (5,448)          0           0
0            (5,448)

Net realized
 gains/(losses)  36,728        15,980          3,654         56,362           0           0
0            56,362

Dividends
 on preferred
 securities of
 subsidiary
 trusts         (21,035)            0              0        (21,035)          0           0
0           (21,035)

Income before
 provision for
 taxes          473,991       124,548         31,443        629,982     (53,884)     (4,260)
(58,144)    571,838

Provision for
 income taxes   180,199        44,121          9,707        234,027      (9,145)     (1,843)
(10,988)    223,039

Depreciation and
 amortization    28,084        54,726              0         82,810      52,131 (b)   3,980 (c)
56,111      138,921
----------------
</TABLE>

(a)  Revenues for the insurance operating segments include net investment
     income and net realized gains/(losses).

(b)  Amount includes PGAAP adjustments associated with the amortization of the
     AIF relationships ($21.4 million) and goodwill ($30.0 million).

(c)  Amount includes PGAAP adjustments associated with the amortization of the
     VOLBA asset and the reversal of amortization associated with the pre-1988
     DAC asset.

<PAGE> 20

ITEM 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations

General

     The Company's principal activities are the provision of management
services to the P&C Group and the ownership and operation of the Insurance
Subsidiaries.  Revenues and expenses relating to these principal business
activities are reflected in the Company's Consolidated Financial Statements
prepared in accordance with GAAP, which differs from statutory accounting
practices ("SAP"), which the Insurance Subsidiaries are required to use for
regulatory reporting purposes.

     On March 7, 2000, the Exchanges acquired Foremost.  Foremost is the
country's leading writer of manufactured homes and a prominent insurer of
recreational vehicles and other specialty lines.  The Company provides
management services in respect of this business and receives compensation
based on a percentage of gross premiums earned.

     Farmers Life, a wholly owned subsidiary of the Company, underwrites and
sells life insurance, structured settlement and annuity products as well as
variable universal life and variable annuity products.  Revenues attributable
to traditional life insurance products, such as whole life or term life
contracts, as well as structured settlements with life contingencies are
classified as premiums as they become due.  Future benefits are associated with
such premiums (through increases in liabilities for future policy benefits),
and prior period capitalized costs are amortized (through amortization of DAC)
so that profits are generally recognized over the same period as revenue
income.  Revenues attributable to universal life, variable universal life and
variable annuity products consist of policy charges for the cost of insurance,
policy administration charges, surrender charges and investment income on
assets allocated to support policyholder account balances on deposit.  Revenues
for deferred annuity products consist of surrender charges and investment
income on assets allocated to support policyholder account balances.  Expenses
on universal life and annuity policies as well as on variable products include
interest credited to policyholders on policy balances as well as benefit claims
incurred in excess of policy account balances.  Revenues attributable to
structured settlements without life contingencies consist of investment income
on assets allocated to support the policyholder benefits schedule and expenses
consist of interest credited to policyholders on policy balances.

     Farmers Re, a wholly owned subsidiary of the Company, reinsures a
percentage of the auto physical damage business written by the P&C Group.
Effective April 1, 2001, the APD reinsurance agreement between Farmers Re and
the P&C Group which had been in force since January 1998 was cancelled and
replaced with a similar APD reinsurance agreement supported by multiple
reinsurers.  As a result of this new agreement, the monthly premiums
assumed by Farmers Re decreases from $83.3 million to $16.7 million.  Farmers
Re continues to assume a quota share percentage of ultimate net losses
sustained by the P&C Group in its APD line of business.  This treaty, which
will remain in effect until terminated by either party, also provides for the
P&C Group to receive a provisional ceding commission of 18% of premiums.  This
experience commission arrangement limits Farmers Re's potential underwriting
gain on the assumed business to 2.5% of premiums assumed.

Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000

Management Services to Property and Casualty Insurance Companies; and Other

     Operating Revenues.  Operating revenues increased from $396.8 million for
the three months ended June 30, 2000 to $413.6 million for the three months
ended June 30, 2001, an increase of $16.8 million, or 4.2%.  Operating
revenues primarily consist of management fees paid to the Company as a
percentage of gross premiums earned by the P&C Group.  Such premiums increased
from $2,851.5 million in the second quarter of 2000 to $3,034.4 million in the
second quarter of 2001, an increase of $182.9 million, or 6.4% due mainly to
continued growth in all lines of business.

<PAGE> 21

     Operating Expenses.

          Salaries and Employee Benefits. Salaries and employee benefits
     decreased from $104.1 million for the three months ended June 30, 2000 to
     $99.0 million for the three months ended June 30, 2001, a decrease of
     $5.1 million, or 4.9%, due primarily to a decrease in profit sharing
     expenses.

          Buildings and Equipment Expenses.  Buildings and equipment expenses
     decreased from $27.1 million for the three months ended June 30, 2000 to
     $26.6 million for the three months ended June 30, 2001, a decrease of
     $0.5 million, or 1.9%, due primarily to savings generated by renegotiated
     lease contracts.

          Amortization of Attorney-In-Fact Relationships and Goodwill.
     Purchase accounting entries related to the acquisition of the Company by
     B.A.T in December 1988 include goodwill (capitalized at $2.4 billion) and
     the value of the AIF relationships of the P&C Group (capitalized at $1.7
     billion).  Amortization of these two items, which is being taken on a
     straight-line basis over forty years, reduced pretax income by
     approximately $25.7 million in each of the three month periods ended June
     30, 2001 and June 30, 2000.

          General and Administrative Expenses.  General and administrative
     expenses increased from $70.8 million for the three months ended June 30,
     2000 to $85.1 million for the three months ended June 30, 2001, an
     increase of $14.3 million, or 20.2%.  This increase was primarily due to
     increased levels of business activity between periods and increased
     postage expense resulting from the recent privacy notice requirements
     called for by the Gramm-Leach-Bliley Act.

     Net Investment Income.  Net investment income decreased from $32.6 million
for the three months ended June 30, 2000 to $22.5 million for the three months
ended June 30, 2001, a decrease of $10.1 million, or 31.0%.  This decrease was
due mainly to lower investment yields and a decrease in the average invested
asset base resulting from the fact that a sizable portion of the investment
portfolio was liquidated to help fund the payment of the $1,075.0 million
special dividend associated with the Zurich capital structure unification in
October 2000 (see Note F).

     Net Realized Gains.  Net realized gains decreased $10.3 million, from
$19.0 million for the three months ended June 30, 2000 to $8.7 million for the
three months ended June 30, 2001, due primarily to unfavorable market
conditions experienced during the three month period ended June 30, 2001, and
the $1,075.0 million special dividend paid in 2000.

     Dividends on Preferred Securities of Subsidiary Trusts.  Dividend expense
related to the $500.0 million of QUIPS issued in 1995 was $10.5 million for the
three months ended June 30, 2001 and June 30, 2000.

     Provision for Income Taxes.  Provision for income taxes decreased from
$85.0 million for the three months ended June 30, 2000 to $79.3 million for the
three months ended June 30, 2001, a decrease of $5.7 million, or 6.7%, due
mainly to a decrease in pretax income between periods.

     Management Services Income.  As a result of the foregoing, management
services income decreased from $125.2 million for the three months ended June
30, 2000 to $118.6 million for the three months ended June 30, 2001, a decrease
of $6.6 million, or 5.3%.

Insurance Subsidiaries

Farmers Re

     As a result of the new quota share reinsurance agreement, effective April
1, 2001, Farmers Re's assumed premiums decreased from $250.0 million for the
three month period ended June 30, 2000 to $50.0 million for the three month
ended June 30, 2001.  Losses and loss adjustment expenses incurred under this
treaty were $34.4 million for the three months ended June 30, 2001 and $164.5
million for the three months ended June 30, 2000 and non-life reinsurance
commissions were $14.4 million for the three months ended June 30, 2001 and
$79.2 million for the

<PAGE> 22

three months ended June 30, 2000.  Income before taxes
decreased $1.3 million from $15.1 million for the three months ended June 30,
2000 to $13.8 million for the three months ended June 30, 2001 due primarily
to the decrease in underwriting gain between periods resulting from the new
reinsurance agreement.  For the three month periods ended June 30, 2001 and
June 30, 2000, Farmers Re's contribution to net income was $9.5 million and
$10.5 million, respectively.

Farmers Life

     Total Revenues. Total revenues increased from $199.7 million for the three
months ended June 30, 2000 to $212.9 million for the three months ended June
30, 2001, an increase of $13.2 million, or 6.6%.

          Life and Annuity Premiums.  Life and annuity premiums increased $5.9
     million for the three months ended June 30, 2001, or 10.5%, over the three
     months ended June 30, 2000.  This increase was due to a 15.4% growth in
     the volume of traditional life insurance in-force, as well as an 82.2%
     increase in structured settlement with life contingencies premiums over
     the three month period ended June 30, 2001.

          Life Policy Charges.  Life policy charges increased $0.5 million for
     the three months ended June 30, 2001, or 0.9%, over the three months ended
     June 30, 2000, reflecting growth in universal life-type insurance
     in-force.

          Net Investment Income.  Net investment income increased $5.4 million
     for the three months ended June 30, 2001, or 6.8%, over the three months
     ended June 30, 2000.  The increase was due to an increase in average
     invested assets.

          Net Realized Gains.  Net realized gains increased by $1.4 million,
     from $10.2 million for the three months ended June 30, 2000 to $11.6
     million for the three months ended June 30, 2001 due to fixed income and
     equity gains.

     Total Operating Expenses.  Total operating expenses increased from $136.4
million for the three months ended June 30, 2000 to $138.5 million for the
three months ended June 30, 2001, an increase of $2.1 million, or 1.5%.

          Life Policyholders' Benefits and Charges.  Life policyholders'
     benefits expense and charges increased from $11.0 million for the three
     months ended June 30, 2001, or 11.5%, over the three months ended June
     30, 2000.

               Policy Benefits.  Policy benefits, which consist primarily of
          death and surrender benefits on life products, increased $1.8 million
          for the three months ended June 30, 2001, to $38.4 million, due to
          growth in the volume of life insurance in-force.

               Increase in Liability for Future Benefits.  Increase in
          liability for future benefits expense increased from $18.4 million
          for the three months ended June 30, 2000 to $22.8 million for the
          three months ended June 30, 2001.  This increase was primarily
          attributable to a 82.2% increase in deposits for structured
          settlement products.

               Interest Credited to Policyholders.  Interest credited to
          policyholders, which represents the amount credited to policyholder
          funds on deposit under universal life-type contracts and deferred
          annuities, increased from $40.3 million for the three months ended
          June 30, 2000 to $45.1 million for the three months ended June 30,
          2001, an increase of $4.8 million or 11.9%.  This increase reflects
          a growth in the universal life and fixed annuity fund balances.

          General Operating Expenses.  General operating expenses decreased
     from $41.1 million for the three months ended June 30, 2000 to $32.2
     million for the three months ended June 30, 2001, a decrease of $8.9
     million, or $21.7%.

<PAGE> 23

               Amortization of DAC and Value of Life Business Acquired.
          Amortization expense decreased from $27.3 million for the three
          months ended June 30, 2000 to $20.6 million for the three months
          ended June 30, 2001, due to favorable persistency on the Farmers
          Flexible Universal Life ("FFUL") and Farmers Universal Life ("FUL")
          product lines as well as differences in the mix of business.

               Net Commissions.  Net commissions decreased from $1.1 million
          for the three months ended June 30, 2000 to ($0.5) million for the
          three months ended June 30, 2001, due to a 55.1% growth in
          reinsurance activity.

               General and Administrative Expenses. General and administrative
          expenses decreased from $12.7 million for the three months ended June
          30, 2000 to $12.1 million, or 4.7%, for the three months ended June
          30, 2001.  This decrease was due largely to a premium tax refund from
          California.

     Provision for Income Taxes.  Provision for income taxes decreased $22.3
million for the three months ended June 30, 2000 to $21.2 million for the three
months ended June 30, 2001.

     Farmers Life Income.  As a result of the foregoing, Farmers Life income
increased from $41.0 million for the three months ended June 30, 2000 to
$53.2 million for the three months ended June 30, 2001, an increase of $12.2
million, or 29.8%.

Consolidated Net Income

     Consolidated net income of the Company increased from $176.7 million for
the three months ended June 30, 2000 to $181.3 million for the three months
ended June 30, 2001, an increase of $4.6 million, or 2.6%.

Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000

Management Services to Property and Casualty Insurance Companies; and Other

     Operating Revenues.  Operating revenues increased from $772.1 million for
the six months ended June 30, 2000 to $828.7 million for the six months ended
June 30, 2001, an increase of $56.6 million, or 7.3%.  This growth reflects
higher gross premiums earned by the P&C Group, which increased from $5,586.1
million in the first six months of 2000 to $6,014.6 million in the first six
months of 2001 due mainly to continued growth in all lines of business.  Also
contributing to the increase between periods was the fact that revenues earned
in connection with the provision of management services on the business the
P&C Group assumed from Foremost increased $12.0 million due to the fact that
the Foremost acquisition was not completed until March 2000.

     Operating Expenses.

          Salaries and Employee Benefits. Salaries and employee benefits
     increased from $200.8 million for the six months ended June 30, 2000 to
     $210.0 million for the six months ended June 30, 2001, an increase of $9.2
     million, or 4.6%, due primarily to an increase in expenses incurred in
     connection with providing management services to the business assumed from
     Foremost.

          Buildings and Equipment Expenses.  Buildings and equipment expenses
     increased from $50.2 million for the six months ended June 30, 2000 to
     $51.4 million for the six months ended June 30, 2001, an increase of $1.2
     million, or 2.4%, due to expenses incurred in connection with providing
     management services to the business assumed from Foremost.  This increase
     in expense was partially offset by savings generated by renegotiated lease
     contracts.

<PAGE> 24

          Amortization of Attorney-In-Fact Relationships and Goodwill.
     Amortization expense was $51.4 million in each of the six month periods
     ended June 30, 2001 and June 30, 2000.

          General and Administrative Expenses.  General and administrative
     expenses increased from $131.7 million for the six months ended June 30,
     2000 to $160.0 million for the six months ended June 30, 2001, an increase
     of $28.3 million, or 21.5%.  This increase was primarily due to increased
     levels of business activity between periods, increased postage expense
     resulting from the recent privacy notice requirements called for by the
     Gramm-Leach-Bliley Act as well as an increase in expenses incurred in
     connection with providing management services to the business assumed from
     Foremost.

     Net Investment Income.  Net investment income decreased from $66.5 million
for the six months ended June 30, 2000 to $43.4 million for the six months
ended June 30, 2001, a decrease of $23.1 million, or 34.7%.  This decrease was
due mainly to lower investment yields and a decrease in the average invested
asset base resulting from the fact that a sizable portion of the investment
portfolio was liquidated to help fund the payment of the $1,075.0 million
special dividend associated with the Zurich capital structure unification in
October 2000 (see Note F).

     Net Realized Gains.  Net realized gains decreased $23.5 million, from
$36.7 million for the six months ended June 30, 2000 to $13.2 million for the
six months ended June 30, 2001, due primarily to unfavorable market conditions
experienced during the six month period ended June 30, 2001, and the $1,075.0
million special dividend paid in 2000.

     Dividends on Preferred Securities of Subsidiary Trusts.  Dividend expense
was $21.0 million in each of the six month periods ended June 30, 2001 and June
30, 2000.

     Provision for Income Taxes. Provision for income taxes decreased from
$171.1 million for the six months ended June 30, 2000 to $160.4 million for the
six months ended June 30, 2001, a decrease of $10.7 million, or 6.3%, due
mainly to an decrease in pretax income between periods.

     Management Services Income.  As a result of the foregoing, management
services income decreased from $249.1 million for the six months ended June 30,
2000 to $231.1 million for the six months nded June 30, 2001, a decrease of
$18.0 million, or 7.2%.

Insurance Subsidiaries

Farmers Re

     As a result of the new quota share reinsurance agreement, effective April
1, 2001, Farmers Re's assumed premiums decreased from $500.0 million for the
six month period ended June 30, 2000 to $300.0 million for the six months ended
June 30, 2001.  Losses and loss adjustment expenses incurred under this treaty
were $212.7 million for the six months ended June 30, 2001 and $329.0 million
for the six months ended June 30, 2000 and non-life reinsurance commissions
were $79.8 million for the six months ended June 30, 2001 and $158.6 million
for the six months ended June 30, 2000.  Income before taxes decreased $2.2
million from $31.4 million for the six months ended June 30, 2000 to $29.2
million for the six months ended June 30, 2001 due primarily to the decrease in
underwriting gain between periods resulting from the new reinsurance agreement.
For the six month periods ended June 30, 2001 and June 30, 2000, Farmers Re's
contribution to net income was $20.0 million and $21.7 million, respectively.

Farmers Life

     Total Revenues.  Total revenues increased from $389.4 million for the six
months ended June 30, 2000 to $427.9 million for the six months ended June 30,
2001, an increase of $38.5 million, or 9.9%.

          Life and Annuity Premiums.  Life and annuity premiums increased $25.1
     million for the six months ended June 30, 2001, or 23.1%, over the six
     months ended June 30, 2000.  This increase was due to a 24.3%

<PAGE> 25

     growth in the volume of traditional life insurance in-force, as well as a
     168.2 % increase in structured settlement with life contingencies premiums
     over the six months ended June 30, 2000.

          Life Policy Charges.  Life policy charges increased $0.9 million for
     the six months ended June 30, 2001, or 0.9%, over the six months ended
     June 30, 2000, reflecting a 1.4% growth in universal life-type insurance
     in-force.

          Net Investment Income.  Net investment income increased $11.4 million
     for the six months ended June 30, 2001, or 7.3%, over the six months ended
     June 30, 2000.  The increase was due to an increase in average invested
     assets.

          Net Realized Gains.  Net realized gains increased by $1.1 million or
     6.9%, from $16.0 million for the six months ended June 30, 2000 to $17.1
     million for the six months ended June 30, 2001.

     Total Operating Expenses.  Total operating expenses increased from $269.1
million for the six months ended June 30, 2000 to $301.9 million for the six
months ended June 30, 2001, an increase of $32.8 million, or 12.2%.

          Life Policyholders' Benefits and Charges.  Life policyholders'
     benefits expense and charges increased from $185.1 million for the six
     months ended June 30, 2000 to $224.1 million for the six months ended
     June 30, 2001, an increase of $39.0 million, or 21.1%.

               Policy Benefits.  Policy benefits increased $9.3 million for the
          six months ended June 30, 2001 to $81.1 million, due to a 7.1% growth
          in the volume of life insurance in-force.

               Increase in Liability for Future Benefits.  Increase in
          liability for future benefits expense increased from $32.7 million
          for the six months ended June 30, 2000 to $55.2 million for the six
          months ended June 30, 2001.  This increase was primarily attributable
          to a 168.2% increase in deposits for structured settlement products.

               Interest Credited to Policyholders.  Interest credited to
          policyholders increased from $80.6 million for the six months ended
          June 30, 2000 to $87.8 million for the six months ended June 30,
          2001, an increase of $7.2 million or 8.9%, reflecting growth in the
          universal life and fixed annuity fund balances.

          General Operating Expenses.  General operating expenses decreased
     from $84.0 million for the six months ended June 30, 2000 to $77.8 million
     for the six months ended June 30, 2001, a decrease of  $6.2 million, or
     7.4%.

               Amortization of DAC and VOLBA.  Amortization expense decreased
          from $57.0 million for the six months ended June 30, 2000 to $50.3
          million for the six months ended June 30, 2001 due primarily to
          favorable persistency on the FFUL and FUL product lines as well as
          differences in the mix of business.

               Net Commissions.  Net commissions decreased $2.9 million from
          $2.6 million for the six months ended June 30, 2000 to ($0.3) million
          for the six months ended June 30, 2001, due to a 51.7% growth in
          reinsurance activity.

               General and Administrative Expenses.  General and administrative
          expenses increased from $24.4 million for the six months ended June
          30, 2000 to $27.8 million for the six months ended June 30, 2001, an
          increase of $3.4 million or 13.9%, due primarily to business growth
          and new initiatives.

<PAGE> 26

     Provision for Income Taxes.  Provision for income taxes decreased from
$42.3 million for the six months ended June 30, 2000 to $39.3 million for the
six months ended June 30, 2001.

     Farmers Life Income.  As a result of the foregoing, Farmers Life income
increased from $78.0 million for the six months ended June 30, 2000 to $86.7
million for the six months ended June 30, 2001, an increase of $8.7 million, or
11.2%.

Consolidated Net Income

     Consolidated net income of the Company decreased from $348.8 million for
the six months ended June 30, 2000 to $337.8 million for the six months ended
June 30, 2001, a decrease of $11.0 million, or 3.2%.

Liquidity and Capital Resources

     As of June 30, 2001 and June 30, 2000, the Company held cash and cash
equivalents of $396.5 million and $255.9 million, respectively.  In addition,
as of June 30, 2001, the Company had available revolving credit facilities
enabling it to borrow up to $500.0 million in the event such a need should
arise.

     Net cash provided by operating activities increased from $508.2 million
for the six months ended June 30, 2000 to $528.5 million for the six months
ended June 30, 2001, an increase of $20.3 million.  This increase in cash was
due primarily to a $46.5 million increase in life insurance policy liabilities
and a $19.7 million increase resulting from gains on sales of assets.
Partially offsetting these increases in cash were a $20.5 million net decrease
resulting from changes in current and non-current assets and liabilities, an
$11.0 million decrease in consolidated net income as well as a $9.7 million
decrease in equity in earnings of joint ventures.

     Net cash used in investing activities decreased from $177.5 million for
the six months ended June 30, 2000 to $102.8 million for the six months ended
June 30, 2001, an increase in cash of $74.7 million.  This increase in cash was
the result of a $548.5 million increase in proceeds from sales and maturities
of investments available-for-sale and a $370.0 million increase resulting from
the purchase of certificates of contribution of the P&C Group in March 2000.
Partially offsetting these increases in cash was an $862.7 million increase in
purchases of investments available-for-sale.

     Net cash used in financing activities decreased from $388.2 million for
the six months ended June 30, 2000 to $245.9 million for the six months ended
June 30, 2001, resulting in an increase in cash of $142.3 million.  This
increase in cash was due primarily to a $126.7 million decrease in dividends
paid to stockholders coupled with higher cash flows from annuity contracts.


ITEM 3. Quantitative and Qualitative Disclosures about Market Risks

    The market risks associated with the Company's investment portfolios have
not changed materially from those disclosed at year-end 2000.

<PAGE> 27

                        PART II.  OTHER INFORMATION

Item 1. Legal Proceedings.

            The Company is a party to numerous lawsuits arising from its normal
        business activities.  These actions are in various stages of discovery
        and development, and some seek punitive as well as compensatory
        damages.  In the opinion of management, the Company has not engaged in
        any conduct which should warrant the award of any material punitive or
        compensatory damages.  The Company intends to vigorously defend its
        position in each case, and management believes that, while it is not
        possible to predict the outcome of such matters with absolute
        certainty, ultimate disposition of these proceedings should not have a
        material adverse effect on the Company's consolidated results of
        operations or financial position.  In addition, the Company is, from
        time to time, involved as a party to various governmental and
        administrative proceedings.

Item 2. Changes in Securities.  None.

Item 3. Defaults upon Senior Securities.  None.

Item 4. Submission of Matters to a Vote of Security Holders.  None.

Item 5. Other Information.  None.

Item 6. Exhibits and Report on Form 8-K.

            (a) Exhibits.

            16. Letter regarding change in Certifying Accountant.

            (b) Reports on Form 8-K.

            On June 7, 2001, FGI filed a report on Form 8-K announcing a
            change in its Certifying Accountant.

<PAGE> 28

                             FARMERS GROUP, INC.
                              AND SUBSIDIARIES

                                 SIGNATURES




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.

                                                     Farmers Group, Inc.
                                                            (Registrant)

                           August 13, 2001      /s/  Martin D. Feinstein
                           ---------------------------------------------
                           Date                      Martin D. Feinstein
                                                  Chairman of the Board,
                                   President and Chief Executive Officer


                           August 13, 2001       /s/  Gerald E. Faulwell
                           ---------------------------------------------
                           Date                       Gerald E. Faulwell
                                                  Senior Vice President,
                                                 Chief Financial Officer
                                                            and Director