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


                                    FORM 10Q


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

                  For the Quarterly Period Ended June 30, 1998
                           Commission File No. 1-11941


                           FARM FAMILY HOLDINGS, INC.
                    A Delaware Corporation IRS No. 14-1789227

                   344 Route 9W, Glenmont, New York 12077-2910
                  Registrant's telephone number: (518) 431-5000







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

        The number of shares  outstanding  of the  issuer's  common  stock as of
August 13, 1998 is 5,253,813.


<PAGE>


                           FARM FAMILY HOLDINGS, INC.

                                      INDEX



   Part I.   Financial Information

         Item 1.  Financial Statements of Farm Family Holdings, Inc. (unaudited)
                  Consolidated Balance Sheets - (see Note 1)
                  June 30, 1998 and December 31, 1997

                  Consolidated Statements of Income and Comprehensive Income -  
                  (see Note 1)
                  Three months ended June 30, 1998 and 1997 and the
                  six months ended June 30, 1998 and 1997

                  Consolidated Statements of Cash Flow - (see Note 1)
                  Six months ended June 30, 1998 and 1997

                  Notes to Consolidated Financial Statements

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


  Part II.   Other Information

         Item 4.  Submission of Matters to a Vote of Security Holders

         Item 5.  Other Information

         Item 6.  Exhibits and Reports on Form 8-K


                                      -2-


<PAGE>


<TABLE>
ITEM 1


                  FARM FAMILY HOLDINGS, INC. AND SUBSIDIARIES
                   CONSOLIDATED BALANCE SHEETS - (see Note 1)
                                ($ in thousands)
<CAPTION>

                                                                               (Unaudited)
                                                                              June 30, 1998  December 31, 1997
---------------------------------------------------------------------------------------------------------------
Assets
Investments:
     Fixed Maturities
<S>                                                                                  <C>               <C>    
     Available for sale, at fair value
        (Amortized cost: $259,404 in 1998 and $248,984 in 1997 )                    $269,825          $259,199
     Held to maturity, at amortized cost
        (Fair value: $8,949 in 1998 and $9,194 in 1997)                                8,471             8,855
   Equity securities
     Available for sale, at fair value
            (Cost: $3,363 in 1998 and 1997)                                            4,841             4,521
   Mortgage loans                                                                        728             1,660
   Other invested assets                                                                 458               553
   Short-term investments                                                              8,172             5,643
---------------------------------------------------------------------------------------------------------------
             Total investments                                                       292,495           280,431
---------------------------------------------------------------------------------------------------------------
Cash                                                                                   5,523             5,841
Insurance receivables:
   Reinsurance receivables                                                            17,513            12,343
   Premiums receivable, net                                                           33,472            28,141
Deferred acquisition costs                                                            13,437            12,613
Accrued investment income                                                              5,351             5,408
Deferred income tax asset, net                                                         1,881             1,469
Prepaid reinsurance premiums                                                             505             2,044
Receivable from affiliates, net                                                       17,690            17,786
Other assets                                                                           3,404             2,202
---------------------------------------------------------------------------------------------------------------
             Total Assets                                                           $391,271          $368,278
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
LIABILITIES aND STOCKHOLDERS' EQUITY
Liabilities:
   Reserves for losses and loss adjustment expenses                                 $168,411          $156,622
   Unearned premium reserve                                                           72,650            66,069
   Reinsurance premiums payable                                                        2,122             2,564
   Accrued expenses and other liabilities                                             11,735            11,828
   Debt                                                                                    -             1,268
---------------------------------------------------------------------------------------------------------------
             Total liabilities                                                       254,918           238,351
---------------------------------------------------------------------------------------------------------------

Commitments and contingencies
Stockholders' equity:
    Preferred stock $.01 par value 1,000,000 shares authorized
         and no shares issued and outstanding                                              -                 -

    Common stock $.01 par value 10,000,000 shares authorized
         and 5,253,813 shares issued and outstanding                                      53                53
    Additional Paid in Capital                                                        98,140            98,140
    Retained earnings                                                                 30,428            24,342
    Accumulated other comprehensive income                                             7,732             7,392
---------------------------------------------------------------------------------------------------------------
             Total stockholders' equity                                              136,353           129,927
---------------------------------------------------------------------------------------------------------------
             Total Liabilities and Stockholders' Equity                             $391,271          $368,278
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
 See accompanying notes to Consolidated Financial Statements.
</TABLE>
                                      -3-
<PAGE>

<TABLE>

                  FARM FAMILY HOLDINGS, INC. AND SUBSIDIARIES
   CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME - (see Note 1)
                     ($ in thousands, except per share data)

<CAPTION>
                                                                                          (Unaudited)              (Unaudited)
                                                                                       Three Months Ended       Six Months Ended
                                                                                            June 30,                 June 30,
                                                                                        1998         1997        1998       1997
------------------------------------------------------------------------------------------------------------------------------------

Revenues:
<S>                                                                                     <C>          <C>        <C>         <C>    
     Premiums                                                                           $44,929      $35,761    $87,744     $70,734
     Net investment income                                                                4,751        4,510      9,518       8,926
     Realized investment gains, net                                                         216        5,551        342       5,461
     Other income                                                                           264          265        483         485
------------------------------------------------------------------------------------------------------------------------------------
                   Total revenues                                                        50,160       46,087     98,087      85,606
------------------------------------------------------------------------------------------------------------------------------------
Losses and Expenses:
     Losses and loss adjustment expenses                                                 33,988       25,023     66,127      49,720
     Underwriting expenses                                                               11,868       10,107     23,081      20,197
     Interest expense                                                                         -           26         25          52
     Dividends to policyholders                                                               5           74         55         112
------------------------------------------------------------------------------------------------------------------------------------
             Total losses and expenses                                                   45,861       35,230     89,288      70,081
------------------------------------------------------------------------------------------------------------------------------------
Income before federal income tax expense                                                  4,299       10,857      8,799      15,525
Federal income tax expense                                                                1,421        3,637      2,713       5,249
------------------------------------------------------------------------------------------------------------------------------------
             Net income                                                                   2,878        7,220      6,086      10,276
------------------------------------------------------------------------------------------------------------------------------------

Other comprehensive income, net of tax:

Unrealized holding gain (loss) arising during the period
 (net of deferred tax of ($236), ($1,600), ($290) and $32, respectively)                    438        2,972        538        (59)
Reclassification adjustment for gains (losses) included in net income
 (net of tax expense (benefit) of $35, $1,800, $107 and $1,781, respectively)               (65)      (3,343)      (198)     (3,307)
------------------------------------------------------------------------------------------------------------------------------------

             Other comprehensive income                                                     373         (371)        340     (3,366)
------------------------------------------------------------------------------------------------------------------------------------

             Comprehensive income                                                        $3,251       $6,849     $6,426      $6,910
------------------------------------------------------------------------------------------------------------------------------------

Per Common Share:
       Basic earnings per common share                                                    $0.55        $1.37      $1.16       $1.96
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
       Diluted earnings per common share                                                  $0.54        $1.37      $1.15       $1.96
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
       Basic weighted average shares outstanding                                      5,253,813    5,253,813  5,253,813   5,253,813
------------------------------------------------------------------------------------------------------------------------------------
       Diluted weighted average shares outstanding                                    5,313,386    5,253,813  5,307,442   5,253,813
------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to Consolidated Financial Statements.
</TABLE>

                                      -4-


<PAGE>

<TABLE>

                  FARM FAMILY HOLDINGS, INC. AND SUBSIDIARIES
              CONSOLIDATED STATEMENTS OF CASH FLOWS - (see Note 1)
                                ($ in thousands)
<CAPTION>
                                                                                                       (Unaudited)
                                                                                                    For the Six Months
                                                                                                       Ended June 30,
                                                                                                     1998           1997
-------------------------------------------------------------------------------------------------------------------------
Cash Flows From Operating Activities
<S>                                                                                                <C>           <C>    
Net income                                                                                         $6,086        $10,276
-------------------------------------------------------------------------------------------------------------------------

Adjustments to reconcile net income
              to net cash provided by operating activities:
    Realized investment gains                                                                        (342)        (5,461)
    Amortization of bond discount                                                                     145             95
    Deferred income taxes                                                                            (596)          (507)
    Changes in:
         Reinsurance receivables                                                                   (5,170)          (860)
         Premiums receivable                                                                       (5,331)        (7,527)
         Deferred acquisition costs                                                                  (824)        (1,192)
         Accrued investment income                                                                     57           (391)
         Prepaid reinsurance premiums                                                               1,539           (417)
         Receivable from affiliates                                                                    96            205
         Other assets                                                                              (1,202)          (512)
         Reserves for losses and loss adjustment expenses                                          11,789          5,019
         Unearned premium reserve                                                                   6,581          9,364
         Reinsurance premiums payable                                                                (442)         1,557
         Accrued expenses and other liabilities                                                       (93)         2,371
-------------------------------------------------------------------------------------------------------------------------
            Total adjustments                                                                       6,207          1,744
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
            Net cash provided by operating activities                                              12,293         12,020
-------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTiNG ACTIVITIES Proceeds from sales:
    Fixed maturities available for sale                                                               408          3,514
    Equity securities                                                                                   -          5,954
Investment collections:
    Fixed maturities available for sale                                                            22,925          7,334
    Fixed maturities held to maturity                                                                 367            569
    Mortgage loans                                                                                    932             41
Investment purchases:
    Fixed maturities available for sale                                                           (33,541)       (26,880)
    Equity securities                                                                                   -         (1,038)
Change in short-term investments, net                                                              (2,529)          (121)
Change in other invested assets                                                                        95            (62)
-------------------------------------------------------------------------------------------------------------------------
            Net cash used in investing activities                                                 (11,343)       (10,689)
-------------------------------------------------------------------------------------------------------------------------

Cash Flows From Financing Activities
Principal payments on debt                                                                         (1,268)           (19)
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
            Net cash used in financing activities                                                  (1,268)           (19)
-------------------------------------------------------------------------------------------------------------------------
            Net decrease in cash                                                                     (318)         1,312
Cash, beginning of period                                                                           5,841          4,110
-------------------------------------------------------------------------------------------------------------------------
Cash, end of period                                                                                $5,523         $5,422
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
See accompanying notes to Consolidated Financial Statements.
</TABLE>

                                      -5-

<PAGE>


Notes to Consolidated Financial Statements

1.  Accounting for Extended Earnings Program

     The Company's  extended earnings program (the "Program")  provides eligible
     agents with monthly extended  earnings payments for a period of up to eight
     years after the termination of their  association  with the Company.  Since
     the  establishment  of the Program in 1986, these payments have been funded
     entirely from the commissions  earned by successor agents who were assigned
     the right to service the book of business  formerly serviced by an eligible
     agent. In the event that such commissions  were  insufficient to fund these
     extended  earnings  payments,  the Company  would be  responsible  for such
     payments.  In accordance with the accounting policy followed by the Company
     since the inception of the Program,  the Company  considered its obligation
     to be a contingent  liability  and  disclosed the nature and amount of such
     contingent liability in the notes to its consolidated  financial statements
     (see Note 5).

     The Company  plans to  implement  the  guidance of  Statement  of Financial
     Accounting  Standards No. 112 ("FAS 112") to account for the Program.  As a
     result,  the Company intends to restate certain previously issued financial
     statements to record a liability for the Program.  Although the Company has
     not yet finalized the  calculation of this  liability,  the following table
     presents the Company's  current  estimate of the impact of such restatement
     on the Company's consolidated financial statements:

     (Dollars in thousands, except per share data)
<TABLE>
<CAPTION>

                                                               June 30, 1998          December 31, 1997
                                                               -------------          -----------------
                                                          Currently    Restated     Currently    Restated
                                                           Reported   (Estimate)     Reported   (Estimate)
         Balance Sheet:
<S>                                                           <C>         <C>         <C>         <C>   
             Deferred income tax asset, net                    $1,881      $3,707      $1,469      $3,256
             Total assets                                     391,271     393,097     368,278     370,065
             Accrued expenses and other liabilities            11,735      18,807      11,828      17,930
             Total liabilities                                254,918     261,990     238,351     244,453
             Stockholders' equity                             136,353     131,107     129,927     125,612
             Total liabilities and stockholders' equity       391,271     393,097     368,278     370,065

</TABLE>

<TABLE>
<CAPTION>
                                             For the three months ended June 30,              For the six months ended June 30,
                                             -----------------------------------              ---------------------------------
                                                  1998                  1997                      1998                  1997
                                           -------------------   -------------------      -------------------   -------------------
                                          Currently   Restated  Currently   Restated     Currently   Restated  Currently   Restated
                                           Reported  (Estimate)  Reported  (Estimate)     Reported  (Estimate)  Reported  (Estimate)
                                           --------  ----------  --------  ----------     --------  ----------  --------  ----------
         Statements of Income:
<S>                                          <C>        <C>        <C>        <C>           <C>        <C>        <C>        <C>    
             Underwriting expenses           $11,868    $11,926    $10,107    $10,119       $23,081    $23,210    $20,197    $20,243
             Federal income tax expense        1,421      1,402      3,637      3,633         2,713      2,673      5,249      5,233
             Net income                        2,878      2,839      7,220      7,212         6,086      5,997     10,276     10,246
         Per share data:
             Net income-Basic                  $0.55      $0.54      $1.37      $1.37         $1.16      $1.14      $1.96      $1.95
             Net income-Diluted                $0.54      $0.53      $1.37      $1.37         $1.15      $1.13      $1.96      $1.95
</TABLE>

                                      -6-
<PAGE>

     Since  the  Company's  calculation  of the  FAS  112  liability  is not yet
     finalized,  the  actual  impact  of the  restatement  may  differ  from the
     estimated  impact  illustrated  in the tables  above.  The  Company has not
     restated any previously issued financial statements, nor made any provision
     for this potential restatement in the accompanying  Management's Discussion
     and Analysis of Financial Condition and Results of Operations.  The Company
     believes  the  calculation  of its  liability  pursuant  to FAS 112 will be
     completed in the near future.  At that time, the Company intends to restate
     previously issued financial statements.

2.   Summary of Significant Accounting Policies

     The accompanying  consolidated financial statements include the accounts of
     Farm Family  Holdings,  Inc. ("Farm Family  Holdings") and its wholly owned
     subsidiaries  (collectively  referred  to as the  "Company").  The  primary
     subsidiary  of Farm  Family  Holdings  is Farm  Family  Casualty  Insurance
     Company ("Farm Family Casualty"). The operations of the Company are closely
     related with those of its  affiliates,  Farm Family Life Insurance  Company
     ("Farm  Family  Life"),  and Farm Family  Life's  wholly owned  subsidiary,
     United Farm Family Insurance Company ("United Farm Family").

     The  accompanying  unaudited  consolidated  financial  statements have been
     prepared in accordance  with the  instructions to Form 10-Q. In the opinion
     of management,  these statements  contain all adjustments  including normal
     recurring  accruals,  which are  necessary for a fair  presentation  of the
     consolidated  financial  position at June 30,  1998,  and the  consolidated
     results of  operations  for the three  months and the six months ended June
     30,  1998 and 1997,  except for any  adjustments  related to the  Company's
     planned  implementation  of FAS 112 to account  for its  extended  earnings
     program  (See Note 1). The  results  of the  Company's  operations  for any
     interim  period  are  not  necessarily  indicative  of the  results  of the
     Company's  operations  for a full fiscal year.  The year end balance  sheet
     data was derived from audited  financial  statements,  but does not include
     all disclosures required by generally accepted accounting principles.

     Effective  January 1, 1998,  the Company  adopted  Statement  of  Financial
     Accounting  Standards No. 130  "Comprehensive  Income",  which  established
     standards for the reporting and disclosure of comprehensive  income and its
     components,  and restated prior period  financial  statements to conform to
     this reporting standard.

3.   Earnings Per Share

     The  following  table  presents  a  reconciliation  of the  numerators  and
     denominators of the basic and diluted earnings per share computations.
<TABLE>
<CAPTION>

                                                                                        Three months                  Six months
                                                                                       ended June 30,                ended June 30,
                                                                                       --------------                --------------
                                                                                     1998         1997           1998          1997
                                                                                     ----         ----           ----          ----
<S>                                                                            <C>          <C>            <C>          <C>        
    Net income available to common stockholders                                $2,878,000   $7,220,000     $6,086,000   $10,276,000
                                                                            --------------------------------------------------------
    Weighted average number of  shares in basic earnings per share              5,253,813    5,253,813      5,253,813     5,253,813
    Effect of stock options                                                        59,573          ---         53,629           ---
                                                                            --------------------------------------------------------
    Weighted average number of shares in diluted earnings per share             5,313,386    5,253,813      5,307,442     5,253,813
                                                                            --------------------------------------------------------
    Basic net income per share                                                      $0.55        $1.37          $1.16         $1.96
                                                                            --------------------------------------------------------
    Diluted net income per share                                                    $0.54        $1.37          $1.15         $1.96
                                                                            --------------------------------------------------------
</TABLE>
                                      -7-
<PAGE>

4.   Future Application of Accounting Standards

     In June of 1997, the Financial  Accounting Standards Board issued Statement
     of Financial Accounting  Statement (SFAS) 131,  "Disclosures about Segments
     of an Enterprise and Related  Information,"  effective for years  beginning
     after  December 15,  1997.  The adoption of SFAS 131 will result in revised
     and  additional  disclosures  but  will  have no  effect  on the  financial
     position, results of operations, or liquidity of the Company.

     In  February of 1998,  the  Financial  Accounting  Standards  Board  issued
     Statement  of  Financial   Accounting  Statement  (SFAS)  132,  "Employers'
     Disclosures about Pensions and Other  Postretirement  Benefits,"  effective
     for  years  beginning  after  December  15,  1997.  SFAS  132  revises  the
     disclosure  requirements but does not change the measurement or recognition
     of pensions and other post  retirement  benefits.  The adoption of SFAS 132
     will result in revised and additional  disclosures  but will have no effect
     on the  financial  position,  results of  operations,  or  liquidity of the
     Company.

     In June 1998, the Financial  Accounting Standards Board issued Statement of
     Financial  Accounting  Standards  ("SFAS") 133,  "Accounting for Derivative
     Instruments and Hedging Activities." This statement, which is effective for
     the year beginning  January 1, 2000,  establishes  accounting and reporting
     standards for derivative  instruments and for hedging activities.  SFAS 133
     requires  a company  to  recognize  all  derivatives  as  either  assets or
     liabilities  in the  statement  of  financial  position  and measure  those
     instruments  at fair  value.  Management  is  evaluating  the  impact  this
     statement may have on the Company's financial statements.

5.   Contingencies

     The Company is party to numerous legal actions arising in the normal course
     of business.  Management  believes  that  resolution of these legal actions
     will not have a  material  adverse  effect  on its  consolidated  financial
     condition.

     Catastrophes  are an inherent  risk in the property and casualty  insurance
     industry  and  could  produce  significant  adverse   fluctuations  in  the
     Company's  results of operations  and financial  condition.  The Company is
     subject to a concentration of risk within the  Northeastern  United States.
     For the six months ended June 30, 1998 and 1997,  approximately  62% of the
     Company's  direct  premiums  were written in the states of New York and New
     Jersey. As a result of the  concentration of the Company's  business in the
     states of New York and New Jersey, and more generally,  in the Northeastern
     United States,  the Company's  results of operations  may be  significantly
     affected  by  weather   conditions,   catastrophic  events  and  regulatory
     developments  in these two states and in the  Northeastern  United  States,
     despite the Company's  reinsurance  program designed to mitigate the impact
     of these factors.

     As a condition of its license to do business in various states, the Company
     is  required  to  participate  in a variety of  mandatory  residual  market
     mechanisms  (including  mandatory  pools) which provide  certain  insurance
     (most notably  automobile  insurance) to consumers who are otherwise unable
     to obtain such coverages from private insurers. The amount of future losses
     or assessments  from residual  market  mechanisms can not be predicted with
     certainty and could have a material  adverse effect on the Company's future
     results of operations.

     Pursuant  to  agreements  between  the  Company  and its  agents and agency
     managers,  subject to certain  conditions  including  length of service and
     profitability,  certain agents and agency  managers are eligible to receive
     monthly  extended  earnings  payments  for a period  of up to  eight  years
     subsequent  to the  termination  of their  association  with  the  Company.
     Historically, such payments have been funded from commissions earned on the
     agent's or agency manager's book of business  subsequent to the termination
     of the  agent's  association  with  the  Company  in  accordance  with  the
     Company's  agreement with the successor agents and agency managers.  In the
     event that such commissions are insufficient to fund the extended  earnings
     payments, the Company would be responsible for such payments. The aggregate
     outstanding  amount of the extended  earnings  payments which former agents
     and agency  managers  are  entitled  to receive for a period of up to eight
     years subsequent to June 30, 1998 is approximately $4,500,000 (see Note 1).

                                      -8-
<PAGE>


     Many  computer  programs  upon which the Company  relies were created using
     only two digits to identify a year in the date field.  These  programs were
     designed  and  developed  without  considering  the impact of the  upcoming
     change  in  the  century.   If  not  corrected,   many  of  these  computer
     applications could fail or produce erroneous results by or at the beginning
     of the year 2000. The Company's overall plan for dealing with the Year 2000
     problem covers Information  Technology ("IT") systems,  non-IT systems, and
     third party  providers.  The Company has  established a dedicated Year 2000
     team to lead the Company's activities relating to its Year 2000 issues. The
     Company's current state of readiness with respect to each of these elements
     is discussed below.

     All IT systems that the Company  considers to be critical at this time have
     been evaluated for Year 2000 problems.  Management of the Company  believes
     that these systems will have been diagnosed, modified and tested by the end
     of 1998.  The  Company is  currently  testing the  operation  of IT systems
     working  together in an integrated  test  environment  that  replicates the
     Company's live environment. This test exercises software and hardware using
     dates  advanced to Year 2000 and beyond.  There can be no  assurances  that
     testing will discover all potential  Year 2000 problems or that it will not
     reveal additional material problems that will have to be resolved.

     Non-IT   systems   typically   include   embedded    technology   such   as
     microcontrollers.  The  Company's  non-IT  systems  include  machinery  and
     equipment in its buildings, such as elevators,  telephone equipment,  HVAC,
     security and alarm systems, copiers, fax machines, and print shop/mail room
     equipment.  The Company is reviewing these systems for Year 2000 compliance
     with the third party  providers  the Company  uses to service and  maintain
     this equipment.

     The Company uses a variety of third party providers in the normal course of
     conducting  its day to day  operations.  Year 2000 problems may result in a
     loss of service from these providers. The Company believes loss of electric
     power, phone, banking, mail or certain outsourced processing services could
     have an immediate  and critical  adverse  material  impact on the Company's
     operations.  The Company is contacting each of its third party providers to
     determine  if the  provider  is Year 2000  compliant.  If a provider is not
     currently Year 2000 compliant,  and its plans to become Year 2000 compliant
     are uncertain, then the Company intends to seek other providers.

     The  Company's  incremental  costs to address  the Year 2000 issues did not
     have a material  impact on the  Company's  operations in 1997 or during the
     six months  ended June 30,  1998,  and are not  expected to have a material
     impact in the remainder of 1998 or 1999.

     The work of finding, correcting and testing the Company's software for Year
     2000 issues has been done  primarily  by the  Company's  existing IT staff.
     Correction  of Year 2000  issues is a high  priority  project  and other IT
     projects have been deferred due to Year 2000 efforts;  however, the Company
     does not  believe  the  deferral  of other IT  projects  has had a material
     effect on financial  condition or results of  operations  in 1997 or during
     the six months ended June 30, 1998. The Company's IT staff has continued to
     work on other high priority projects concurrent with the Year 2000 project.

     The Company  believes that its most reasonably  likely worst case Year 2000
     scenario  will include  these  elements:  (1) one or more of the  Company's
     third party providers will be unable to provide the services expected,  and
     (2) one or more parts of the  Company's  processing  software  will operate
     incorrectly. The Company believes that its testing of its critical hardware
     and software  will reveal any  significant  Year 2000  problems,  that such
     problems will be capable of  remediation,  and that the Company's  software
     and  hardware  will  perform   substantially  as  planned  when  Year  2000
     processing begins.

                                      -9-
<PAGE>

     Because of the  progress  which has been made  toward  achieving  Year 2000
     compliance, the Company has not made specific contingency plans. If adverse
     development  of the  Company's  plans or  knowledge  of outside  providers'
     non-compliance  becomes  evident,  the Company will  develop and  implement
     contingency plans as required. Despite the Company's efforts to address its
     Year 2000  issues,  there  can be no  assurances  that  Year  2000  related
     failures of the Company's  software,  or that Year 2000 related failures by
     third  parties with which the Company  interacts,  will not have a material
     adverse effect on the Company.

6.   Acquisition of Farm Family Life

     Farm Family  Holdings  entered into an Option  Purchase  Agreement with the
     shareholders  of Farm  Family Life  pursuant to which Farm Family  Holdings
     had,  for a two-year  period  commencing  on July 26,  1996,  the option to
     acquire  Farm Family Life  subject to certain  conditions.  On February 26,
     1998, the Board of Directors of Farm Family Holdings  approved the exercise
     of the option to acquire Farm Family Life and its wholly  owned  subsidiary
     United Farm Family. Under the terms of the Option Purchase Agreement,  Farm
     Family Holdings will pay an exercise price of $37.5 million to acquire Farm
     Family  Life,  consisting  of $31.5  million of common stock of Farm Family
     Holdings,  and $6 million stated value of 6-1/8% voting  preferred stock of
     Farm Family Holdings,  less certain expenses to be paid by Farm Family Life
     in the  acquisition on behalf of the  shareholders of Farm Family Life. The
     proposed  acquisition of Farm Family Life is subject to the approval of the
     shareholders   of  Farm  Family   Holdings  and  receipt  of  all  required
     governmental  approvals.  Management  expects that the  acquisition of Farm
     Family Life will be brought to the shareholders of Farm Family Holdings for
     their approval in 1998.

     The  following  unaudited  pro  forma  consolidated  financial  information
     reflects  the  acquisition  by the  Company of Farm  Family  Life under the
     purchase  method of accounting.  The pro forma  consolidated  balance sheet
     combines  balance sheets of the Company and Farm Family Life as of June 30,
     1998, as if the acquisition had occurred as of June 30, 1998. The pro forma
     consolidated  statements of income  combines the  operations of the Company
     and Farm  Family  Life for the six months  ended June 30,  1998 and for the
     year ended December 31, 1997 as if the  acquisition had occurred on January
     1, 1997.

     The pro forma  adjustment and pro forma  combined  amounts are provided for
     informational  purposes  only  and are not  necessarily  indicative  of the
     actual  financial  position or results of  operations  that would have been
     achieved had the acquisition  been consummated at the dates indicated or of
     future  results.  The pro  forma  financial  statements  should  be read in
     conjunction  with the  historical  financial  statements of the Company and
     Farm Family Life (see Note 1).

     The pro forma financial statements are based upon available information and
     certain  assumptions  that  the  Company  believes  are  reasonable  in the
     circumstances.  The Company's preliminary  allocation of purchase price was
     based upon the  estimated  fair value of assets  acquired  and  liabilities
     assumed.  The actual  allocation  will be based upon  valuations  as of the
     closing date of the acquisition  and,  accordingly,  the final  allocations
     will be different from the amounts herein.

                                      -10-
<PAGE>
<TABLE>


              Farm Family Holdings, Inc.
    Unaudited Pro Forma Consolidated Balance Sheet
                     June 30, 1998
                   ($ in thousands)
<CAPTION>
                                                                                                  Pro Forma
                                                         Farm Family    Farm Family              Adjustments
                                                          Holdings          Life            Dr.             Cr.     Pro Forma
                                                          --------          ----            ---             ---     ---------
ASSETS
Investments
   Fixed maturities
<S>                                                          <C>              <C>         <C>             <C>         <C>           
     Available for sale                                      $269,825         $707,719    $               $           $977,544
     Held to maturity, at amortized cost                        8,471                                                    8,471
   Equity securities                                            4,841           41,121                                  45,962
   Mortgage loans                                                 728           13,259                                  13,987
   Policy loans                                                                 29,842                                  29,842
   Other invested assets                                          458              624                                   1,082
   Short-term investments                                       8,172            5,082                                  13,254
                                                        -----------------------------------------------------------------------
        Total investments                                     292,495          797,647                               1,090,142
                                                        -----------------------------------------------------------------------

Cash                                                            5,523              525                                   6,048
Insurance receivables:
   Reinsurance receivables                                     17,513              810                                  18,323
   Premiums receivable                                         33,472                                 (D)      102      33,370
Deferred acquisition costs                                     13,437           28,374                (B)   28,374      13,437
Present value of future profits                                                        (B)  18,229                      18,229
Accrued investment income                                       5,351           13,491                                  18,842
Property and equipment, net                                                     12,262 (B)   4,281                      16,543
Deferred income tax asset, net                                  1,881                                                    1,881
Prepaid reinsurance premiums                                      505                                                      505
Receivable from affiliates, net                                17,690                                 (D)   17,690           0
Other assets                                                    3,404            2,189 (E)     247    (A)    1,400       4,440
                                                        -----------------------------------------------------------------------
        Total Assets                                         $391,271         $855,298     $22,757        $47,566   $1,221,760
                                                        -----------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
   Reserves for losses and loss adjustment expenses          $168,411        $            $               $           $168,411
   Future policy and contract benefits                                         215,977                                 215,977
   Funds on deposit from policyholders                                         420,579 (B)   2,209                     418,370
   Unearned premium reserve                                    72,650               12                                  72,662
   Accrued dividends to policyholders                                            5,683                                   5,683
   Reinsurance premiums payable                                 2,122                                                    2,122
   Deferred income tax liability                                                36,754 (B)   1,276                      35,478
   Payable to affiliate                                                         17,792 (D)  17,792                           0
   Accrued expenses and other liabilities                      11,735            4,226             (B)(E)      347      16,308
   Debt
   Participating policyholders' interest                                       113,855                                 113,855
                                                        -----------------------------------------------------------------------
        Total liabilities                                     254,918          814,878      21,278             347   1,048,866
                                                        -----------------------------------------------------------------------

Commitments and contingencies
Mandatory redeemable preferred stock                                                                  (A)    5,846       5,846

Stockholders' equity:
   Common stock                                                    53            3,001 (C)   3,001    (A)        8          61
   Additional Paid in Capital                                  98,140                                 (A)   30,686     128,826
   Retained earnings                                           30,428           35,585 (C)  35,585                      30,428
   Accumulated other comprehensive income                       7,732            1,834 (C)   1,834                       7,733
                                                        -----------------------------------------------------------------------
        Total stockholders' equity                            136,353           40,420      40,420          36,694     167,048
                                                        -----------------------------------------------------------------------
Total Liabilities and Stockholders' Equity                   $391,271         $855,298     $61,697         $36,887  $1,221,760
                                                        -----------------------------------------------------------------------
    See accompanying notes to unaudited pro forma consolidated balance sheet.
</TABLE>
                                      -11-
<PAGE>



                           Farm Family Holdings, Inc.
             Notes to Unaudited Pro Forma Consolidated Balance Sheet
                                  June 30, 1998
                                ($ in thousands)

(A)  The following pro forma adjustments reflect the funding
     of the  acquisition  and  consideration  given ($37,500
     less certain expenses  currently  estimated to be equal
     to approximately $960 to be paid by Farm Family Life in
     the acquisition on behalf of the selling stockholders)

     Series A Preferred stock                                           ($5,846)

     Unregistered   common  stock  issued   (772,166  shares
     issued, $.01 par value) in the acquisition  assuming an
     average  closing  price of $39 3/4 if the  closing  had
     occurred on August 10, 1998. The actual average closing
     price and the actual  number of shares of Common  Stock
     that  will be issued to the  selling  stockholders  may
     vary significantly from these amounts.                                  (8)

     Paid in capital                                                    (30,686)

     Expenses relating to acquisition                                     1,400

(B)  The  following  pro forma  adjustments  result from the
     allocation  of the purchase  price for the  acquisition
     based on the fair  value of the  underlying  net assets
     acquired.

     Assets  

     Adjustment of carrying amount of properties occupied by
     Farm  Family  Life based on the  estimated  fair market
     value                                                               $4,281

     Elimination of historical  deferred  acquisition  costs            (28,374)

     Adjustment to record  present  value of future  profits             18,229

     Liabilities

     Adjustment  to reflect the net  deferred tax benefit of
     purchase accounting  adjustments using a statutory rate
     of 34%                                                               1,276

     Adjustment to record liability for Guaranty Funds                     (100)

     Adjustment of carrying  amount of funds on deposit from
     Policyholders based on fair market value                             2,209

(C)  Adjustment    to   eliminate    Farm   Family    Life's
     stockholder's equity

(D)  Adjustment to eliminate intercompany balances

(E)  Adjustment to accrue  additional  expenses  relating to
     the acquisition expected to be incurred                                247


                            -12-
<PAGE>
<TABLE>


              Farm Family Holdings, Inc.
 Unaudited Pro Forma Consolidated Statement of Income
        For the six months ended June 30, 1998
        ($ in thousands, except per share data)
<CAPTION>

                                                                                             Pro Forma
                                                         Farm Family       Farm Family       Adjustments
                                                          Holdings             Life           Dr.          Cr.      Pro Forma
                                                          --------             ----           ---          ---      ---------
Revenues:
<S>                                                           <C>                     <C>    <C>         <C>            <C>  
    Premiums from property/casualty operations                $87,744                 $3     $           $              $87,747
    Premiums from life and health operations                                      15,531                                 15,531
    Net investment income                                       9,518             27,798                                 37,316
    Realized investment gains (losses), net                       342              1,707                                  2,049
    Policy and contract charges                                                    2,406                                  2,406
    Other income                                                  483                493 (c)    434                         542
                                                        ------------------------------------------------------------------------
        Total revenues                                         98,087             47,938        434                     145,591
                                                        ------------------------------------------------------------------------

Losses, Benefits and Expenses:
    Losses and loss adjustment expenses                        66,127                900                                 67,027
    Benefits to policyholders                                                     12,150                                 12,150
    Underwriting & operating expenses                          23,081              4,069 (a)     72  (c)      434        26,788
    Non-recurring charges                                                            176                                    176
    Interest credited to policyholders                                            12,455                                 12,455
    Amortization of policy acquisition costs                                       3,583             (a)    3,583             0
    Amortization of present value of future profits                                      (a)    899                         899
    Interest expense                                               25                                                        25
    Dividends to policyholders                                     55                                                        55
    Participating policyholders' interest                                         12,262 (a)  3,168  (a)      773        14,657
                                                        ------------------------------------------------------------------------
        Total losses and expenses                              89,288             45,595      4,139         4,790       134,232
                                                        ------------------------------------------------------------------------

Income before federal income tax expense                        8,799              2,343      4,573         4,790        11,359

Federal income tax expense                                      2,713                785 (b)     73                       3,571
                                                        ------------------------------------------------------------------------

        Income before preferred stock dividends                 6,086              1,558      4,646         4,790         7,788

        Preferred stock dividends                                                        (a)    184                         184
                                                        ------------------------------------------------------------------------

        Income applicable to common shareholders               $6,086             $1,558     $4,830        $4,790        $7,604
                                                        ------------------------------------------------------------------------

        Net Income per Common Share - Basic                     $1.16                                                     $1.26
                                                        --------------                                            --------------

        Net Income per Common Share - Diluted                   $1.15                                                     $1.25
                                                        --------------                                            --------------

        Weighted average shares - Basic                     5,253,813                                (d)  772,166     6,025,979
                                                        --------------                                            --------------

        Weighted average shares - Diluted                   5,307,442                                (d)  772,166     6,079,608
                                                        --------------                                            --------------
See accompanying notes to unaudited pro forma consolidated statements of income.
</TABLE>


                            -13-
<PAGE>


                 Farm Family Holdings, Inc.
 Notes to Unaudited Pro Forma Consolidated Statements of Income
           For the six months ended June 30, 1998
          ($ in thousands, except per share data)

(a)  Adjustment   resulting   from  the  allocation  of  the
     purchase  price  for  the  acquisition   based  on  the
     estimated  fair value of the  underlying net assets are
     as follows:

     Additional  depreciation  expense incurred due to write
     up of  building  and a change in the useful life of the
     building to 20 years as of 1/1/97                                      $72

     Adjustment   to  reverse   amortization   of   deferred
     acquisition costs                                                   (3,583)

     Participating  policyholders'  share of amortization of
     deferred acquisition costs                                           3,168

     Adjustment to record  amortization  of present value of
     future profits                                                         899

     Participating  policyholders'  share of amortization of
     present value of future profits                                       (773)

     Series A Preferred  stock  dividends on estimated  fair
     value of $5,846 of preferred  stock at a rate of 6 1/8%
     per annum                                                              184


(b)  Adjustment to reflect the federal  income tax effect of
     item (a) above using statutory rate of 34%                              74

(c)  Adjustment to eliminate intercompany balances                          434

(d)  Adjustment to reflect  estimated  additional  shares of
     common  stock  issued in the  acquisition  assuming  an
     average  closing  price of $39 3/4 if the  closing  had
     occurred on August 10, 1998. The actual average closing
     price and the actual  number of shares of common  stock
     that  will be issued to the  selling  stockholders  may
     vary significantly from these amounts.                             772,166

                            -14-

<PAGE>
<TABLE>


                Farm Family Holdings, Inc.
   Unaudited Pro Forma Consolidated Statement of Income
           For the year ended December 31, 1997
         ($ in thousands, except per share data)
<CAPTION>

                                                                                                   Pro Forma
                                                            Farm Family       Farm Family         Adjustments
                                                              Holdings           Life            Dr.         Cr.     Pro Forma
                                                              --------           ----            ---         ---     ---------
Revenues:
<S>                                                              <C>                <C>        <C>        <C>          <C>
     Premiums from property/casualty operations                  $149,220           $9,020     $          $            $158,240
     Premiums from life and health operations                                       30,505                               30,505
     Net investment income                                         18,077           54,964                               73,041
     Realized investment gains (losses), net                        5,406            2,914                                8,320
     Policy and contract charges                                                     5,041                                5,041
     Other income                                                   1,020            1,153 (c)     808                    1,365
                                                           ---------------------------------------------------------------------
         Total revenues                                           173,723          103,597         808                  276,512
                                                           ---------------------------------------------------------------------

Losses, Benefits and Expenses:
     Losses and loss adjustment expenses                          103,301            9,975                              113,276
     Benefits to policyholders                                                      26,843                               26,843
     Underwriting & operating expenses                             41,787            7,747 (a)     158 (c)      808      48,884
     Non-recurring charges                                                             707                                  707
     Interest credited to policyholders                                             24,813                               24,813
     Amortization of policy acquisition costs                                        6,852             (a)    6,852           0
     Amortization of present value of future profits                                       (a)   2,233                    2,233
     Interest expense                                                 102                                                   102
     Dividends to policyholders                                       282                                                   282
     Participating policyholders' interest                                          21,616 (a)   5,994 (a)    1,929      25,681
                                                           ---------------------------------------------------------------------
         Total losses and expenses                                145,472           98,553       8,385        9,589     242,821
                                                           ---------------------------------------------------------------------

Income before federal income tax expense                           28,251            5,044       9,193        9,589      33,691

Federal income tax expense                                          9,747            1,704 (b)     135                   11,586
                                                           ---------------------------------------------------------------------

         Income before preferred stock dividends                   18,504            3,340       9,328        9,589      22,105

         Series A Preferred stock dividends                                                (a)     359                      359
                                                           ---------------------------------------------------------------------

         Income applicable to common shareholders                 $18,504           $3,340      $9,687       $9,589      21,746
                                                           ---------------------------------------------------------------------

         Net Income per Common Share - Basic                        $3.52                                                 $3.61
                                                           ---------------                                          ------------

         Net Income per Common Share - Diluted                      $3.51                                                 $3.60
                                                           ---------------                                          ------------

         Weighted average shares - Basic                        5,253,813                              (d)  773,434   6,027,247
                                                           ---------------                                          ------------

         Weighted average shares - Diluted                      5,270,947                              (d)  773,434   6,044,381
                                                           ---------------                                          ------------
</TABLE>
                            -15-

<PAGE>


                 Farm Family Holdings, Inc.
 Notes to Unaudited Pro Forma Consolidated Statements of Income
            For the year ended December 31, 1997
          ($ in thousands, except per share data)

(a)  Adjustment   resulting   from  the  allocation  of  the
     purchase  price  for  the  Acquisition   based  on  the
     estimated  fair value of the  underlying net assets are
     as follows:

     Additional  depreciation  expense incurred due to write
     up of  building  and a change in the useful life of the
     building to 20 years as of 1/1/97                                     $158

     Adjustment   to  reverse   amortization   of   deferred
     acquisition costs                                                   (6,852)

     Participating  policyholders'  share of amortization of
     deferred acquisition costs,                                          5,994

     Adjustment to record  amortization  of present value of
     future profits                                                       2,233

     Participating  policyholders'  share of amortization of
     present value of future profits                                     (1,929)

     Series A Preferred  stock  dividends on estimated  fair
     value of $5,856 of preferred  stock at a rate of 6 1/8%
     per annum                                                              359

(b)  Adjustment to reflect the federal  income tax effect of
     item (a) above using statutory rate of 34%                             135

(c)  Adjustment to eliminate intercompany balances                          808

(d)  Adjustment to reflect  estimated  additional  shares of
     Common  Stock  issued in the  acquisition  assuming  an
     average  closing  price of $39 3/4 if the  closing  had
     occurred on August 10, 1998. The actual average closing
     price and the actual  number of shares of common  Stock
     that  will be issued to the  selling  stockholders  may
     vary significantly from these amounts.                             773,434

                            -16-

<PAGE>
ITEM 2
------
Management's  Discussion and Analysis of Financial Condition and Results of 
Operations.

General

The following  discussion includes the operations of Farm Family Holdings,  Inc.
("Farm  Family  Holdings")  and  its  wholly  owned  subsidiaries  (collectively
referred to as the "Company"). The primary subsidiary of Farm Family Holdings is
Farm Family Casualty Insurance Company ("Farm Family Casualty").  The operations
of the Company are closely  related  with those of its  affiliates,  Farm Family
Life Insurance Company ("Farm Family Life"), and Farm Family Life's wholly owned
subsidiary, United Farm Family Insurance Company ("United Farm Family").

Farm Family  Casualty is a specialized  property and casualty  insurer of farms,
other  generally  related   businesses  and  residents  of  rural  and  suburban
communities  primarily in the Northeastern  United States.  Farm Family Casualty
provides property and casualty insurance  coverages to members of the state Farm
Bureau(R) organizations in New York, New Jersey, Delaware, West Virginia and all
of the New England states.  Membership in a state Farm Bureau  organization is a
prerequisite  for  voluntary  insurance  coverage  (except for  employees of the
Company and its affiliates).

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

For the six  month  periods  ended  June 30,  1998 and 1997,  34.2%  and  36.5%,
respectively,  of the  Company's  direct  written  premiums  were  derived  from
policies  written  in New York  and,  for the same  periods,  27.8%  and  25.2%,
respectively,  were derived from policies written in New Jersey.  For these same
periods,  no other state  accounted for more than 10.0% of the Company's  direct
written  premiums.  As a result,  the  Company's  results of  operations  may be
significantly affected by weather conditions, catastrophic events and regulatory
developments  in  these  two  states  and  in  the  Northeastern  United  States
generally.

Many computer programs upon which the Company relies were created using only two
digits to identify a year in the date field.  These  programs  were designed and
developed without  considering the impact of the upcoming change in the century.
If not  corrected,  many of these  computer  applications  could fail or produce
erroneous results by or at the beginning of the year 2000. The Company's overall
plan for dealing with the Year 2000 problem covers Information Technology ("IT")
systems, non-IT systems, and third party providers.  The Company has established
a dedicated Year 2000 team to lead the Company's activities relating to its Year
2000 issues. See Note 5 to the accompanying  consolidated  financial  statements
for further discussion on Year 2000.

As  described  in  Note 1 to  the  Company's  Notes  to  Consolidated  Financial
Statements,  the  Company  plans to  implement  the  guidance  of  Statement  of
Financial  Accounting  Standards No. 112 ("FAS 112") to account for its extended
earnings program with its agents and agency managers.  As a result,  the Company
intends to restate certain  previously  issued financial  statements.  Since the
Company has not yet  finalized its FAS 112 related  calculations,  the following
discussion of the  Company's  results of  operations,  and liquidity and capital
resources does not reflect the implementation of FAS 112.

                            -17-


<PAGE>


Safe Harbor Statement under The Private Securities Litigation Reform Act of 
1995:
With exception of historical information,  the matters discussed or incorporated
by  reference  in this Report on Form 10-Q  contain  forward-looking  statements
within the meaning of the Private Securities  Litigation Reform Act of 1995 that
are based on management's current knowledge,  expectations,  estimates,  beliefs
and assumptions.  The forward-looking  statements in this Form 10-Q include, but
are not limited to,  statements  with respect to the  Company's  adoption of the
guidance  provided  in FAS 112 and  estimates  of the  potential  impact  of the
restatement of the Company's  financial  statements,  statements with respect to
the  Company's  potential  acquisition  of Farm Family  Life,  the impact of the
potential  acquisition of Farm Family Life on the earnings and shareholder value
of the Company,  statements  regarding  the  Company's  ability to  successfully
address its year 2000 issues and the estimated  impact  thereof on the Company's
future  financial  condition and results of operations,  projections of revenue,
earnings,  capital structure and other financial items,  statements of the plans
and  objectives  of the  Company or its  management,  and  statements  of future
economic performance and assumptions underlying statements regarding the Company
or  its  business.   Readers  are  hereby   cautioned  that  certain  events  or
circumstances  could  cause  actual  results  to differ  materially  from  those
estimated,  projected, or predicted. The forward-looking statements in this Form
10-Q are not  guarantees  of future  performance  and are subject to a number of
important  risks and  uncertainties,  many of which are  outside  the  Company's
control,  that could cause actual results to differ materially.  These risks and
uncertainties include, but are not limited to, the finalization of the Company's
calculation  of its  liability  pursuant  to FAS 112 and  the  resulting  impact
thereof on the Company's financial statements,  the results of operations of the
Company and Farm Family Life,  fluctuations in the market value of shares of the
Company's common stock, the satisfaction of the closing  conditions set forth in
the Amended and Restated Option Purchase  Agreement (which  conditions  include,
but are not limited to, the approval of the Company's  shareholders  and receipt
of all required government approvals), exposure to catastrophic loss, geographic
concentration  of loss  exposure,  general  economic  conditions  and conditions
specific to the property and casualty insurance industry, including its cyclical
nature, regulatory changes and conditions, rating agency policies and practices,
competitive factors,  claims development and the impact thereof on loss reserves
and the Company's  reserving policy,  the adequacy of the Company's  reinsurance
programs,  developments in the securities  markets and the impact thereof on the
Company's  investment  portfolio,  factors relating to the Company's  ability to
successfully  address its Year 2000  issues and other risks  listed from time to
time in the Company's Securities and Exchange Commission filings,  including the
Form 10-K filed for the fiscal year ended  December 31, 1997 and the  Prospectus
dated July 22, 1996. Accordingly,  there can be no assurance that actual results
will conform to the forward-looking statements in this Form 10-Q.


Results of Operations

The Three Months Ended June 30, 1998 Compared to the Three Months Ended June 30,
1997

Premiums
--------
Premium revenue  increased $9.2 million or 25.6%,  during the three months ended
June 30, 1998 to $44.9  million from $35.8  million for the same period in 1997.
The  increase  in premium  revenue in 1998  resulted  from an  increase  of $5.5
million  in earned  premiums  on  additional  business  directly  written by the
Company, an increase of $2.3 million in earned premiums from assumed reinsurance
business and a decrease of $1.4 million in earned  premiums  ceded to reinsurers
and not retained by the Company. The $5.5 million increase in earned premiums on
additional  business directly written by the Company was primarily  attributable
to an increase of $4.9 million,  or 14.8%, in earned premiums from the Company's
primary  products  (personal  and  commercial  automobile  products  other  than
assigned risk  automobile  business,  the Special Farm  Package,  businessowners
products, homeowners products, and Special Home Package), as well as an increase
of $0.6 million in earned  premiums  from the  Company's  workers'  compensation
business.  As of June 30, 1998, the Company had a total of approximately 161,500
policies  in force.  The number of policies  in force  related to the  Company's
primary products increased by 11.3% to approximately 133,600 as of June 30, 1998
from  approximately  120,000 as of June 30, 1997 and the average  premium earned

                            -18-
<PAGE>


for each such policy  increased  by 3.5% during the three  months ended June 30,
1998 compared to the same period in 1997. Net written  premiums  increased 13.1%
to $48.6  million for the three  months  ended June 30,  1998  compared to $43.0
million for the same  period in 1997.  The  increase in net written  premiums is
primarily attributable to the growth in direct writings to customers, a decrease
in written premium ceded to reinsurers  and, to a lesser extent,  an increase in
the  Company's  voluntary  assumed  reinsurance  business.  Geographically,  the
increase in the Company's  direct  writings came primarily from New Jersey,  New
York, Massachusetts,  Connecticut, Delaware, West Virginia, and Rhode Island. In
addition,  direct writings of all the Company's primary  products,  particularly
personal  automobile,  increased  during the second quarter of 1998.  During the
three months ended June 30, 1998,  premiums from the Company's  direct  writings
(excluding  assigned risk automobile  business premiums received by the Company)
increased $5.5 million  compared to the same period in 1997.  Direct writings in
New  Jersey  accounted  for $2.2  million  ($1.7  million  of  which  represents
increased personal  automobile  business) of the Company's $5.5 million increase
in direct  writings  during the three months ended June 30, 1998 compared to the
same period in 1997.

Net Investment Income
---------------------
Net  investment  income  increased  $0.3 million or 5.3% to $4.8 million for the
three  months ended June 30, 1998 from $4.5 million for the same period in 1997.
The increase in net investment income was primarily the result of an increase in
average cash and invested  assets (at  amortized  cost) of  approximately  $37.7
million,  or 15.2% from June 30,  1998  compared  to June 30,  1997.  The return
realized on the  Company's  cash and  investments  was 6.7% for the three months
ended June 30, 1998 and 7.3% for the same period in 1997.  The  reduction in the
return  realized  on  the  Company's  cash  and  invested  assets  is  primarily
attributable to an increase in investment in tax-exempt  bonds which provide for
a greater  after tax  return.  The  taxable  equivalent  yield on the  Company's
investment  portfolio was 7.1% and 7.5% for the three months ended June 30, 1998
and 1997, respectively.

Realized Investment Gains
-------------------------
Realized  investment  gains decreased $5.3 million to $0.3 million for the three
months  ended June 30, 1998 as  compared to $5.6  million for the same period in
1997.  Realized  investment  gains in the second  quarter of 1997 were primarily
attributable to a realized gain on the sale of a common stock investment.

Losses and Loss Adjustment Expenses
-----------------------------------
Losses and loss adjustment  expenses increased $9.0 million,  or 35.8%, to $34.0
million for the three months ended June 30, 1998 from $25.0 million for the same
period in 1997. Loss and loss adjustment  expenses were 75.6% of premium revenue
for the three  months ended June 30, 1998  compared to 70.0% of premium  revenue
for the same period in 1997. The increase in loss and loss  adjustment  expenses
as a percent of premium  revenue was primarily  attributable  to the increase in
weather related losses during the second quarter of 1998.  Losses believed to be
weather  related  incurred  on the  Company's  direct  written  business  in the
northeast  aggregated  $2.7  million in the three  months  ended  June 30,  1998
compared to $1.1 million for the same period in 1997.  In addition,  the Company
incurred  losses of  approximately  $500,000 as a result of severe weather which
impacted certain midwestern risks which the Company reinsures.

Underwriting Expenses
---------------------
Underwriting expenses increased $1.8 million, or 17.4%, to $11.9 million for the
three months ended June 30, 1998 from $10.1 million for the same period in 1997.
For the three months ended June 30, 1998,  underwriting  expenses  were 26.4% of
premium revenue  compared to 28.3% for the same period in 1997. The reduction in
the Company's underwriting expense ratio was primarily attributable to a smaller
relative  increase in overhead  expenses than in premium  revenue for the period
and the Company's continued expense management initiatives which began in 1998.

                            -19-

<PAGE>


Federal Income Tax Expense
--------------------------
Federal  income tax expense  decreased $2.2 million to $1.4 million in 1998 from
$3.6  million in 1997.  Federal  income tax expense  was 33.1% of income  before
federal  income tax expense for the three months ended June 30, 1998 compared to
33.5% for the same period in 1997.

Net Income
----------
Net income  decreased  $4.3  million to $2.9  million for the three months ended
June 30,  1998 from $7.2  million  for the same  period in 1997  primarily  as a
result of the foregoing factors.

The Six Months Ended June 30, 1998 Compared to the Six Months Ended June 30, 
1997

Premiums
--------
Premium revenue  increased  $17.0 million or 24.0%,  during the six months ended
June 30, 1998 to $87.7  million from $70.7  million for the same period in 1997.
The  increase  in premium  revenue in 1998  resulted  from an  increase of $11.4
million  in earned  premiums  on  additional  business  directly  written by the
Company, an increase of $2.4 million in earned premiums from assumed reinsurance
business and a decrease of $3.2 million in earned  premiums  ceded to reinsurers
and not retained by the Company.  The $11.4 million  increase in earned premiums
on  additional   business   directly   written  by  the  Company  was  primarily
attributable  to an increase of $9.7 million,  or 15.2%, in earned premiums from
the Company's  primary  products  (personal and commercial  automobile  products
other  than  assigned  risk  automobile  business,  the  Special  Farm  Package,
businessowners products, homeowners products, and Special Home Package), as well
as an increase of $1.3 million in earned  premiums from the  Company's  workers'
compensation  business and an increase of $0.4 million in earned  premiums  from
the Company's  other  products.  As of June 30, 1998, the Company had a total of
approximately 161,500 policies in force. The number of policies in force related
to the Company's primary products increased by 11.3% to approximately 133,600 as
of June 30, 1998 from approximately  120,000 as of June 30, 1997 and the average
premium  earned for each such  policy  increased  by 3.5%  during the six months
ended June 30, 1998  compared to the same period in 1997.  Net written  premiums
increased 20.4% to $96.0 million for the six months ended June 30, 1998 compared
to $79.7  million  for the same  period in 1997.  The  increase  in net  written
premiums  is  primarily  attributable  to  the  growth  in  direct  writings  to
customers,  a decrease in written  premium ceded to reinsurers  and, to a lesser
extent,  an increase in the Company's  voluntary assumed  reinsurance  business.
Geographically,  the increase in the Company's  direct  writings came  primarily
from New Jersey, New York, Massachusetts,  Connecticut, Delaware, West Virginia,
and Rhode Island.  In addition,  direct  writings of all the  Company's  primary
products,  particularly  personal  automobile,  increased  during the six months
ended June 30, 1998.  During the six months ended June 30, 1998,  premiums  from
the Company's  direct  writings  (excluding  assigned risk  automobile  business
premiums  received by the Company)  increased $11.5 million compared to the same
period in 1997.  Direct writings in New Jersey  accounted for $5.3 million ($4.0
million of which  represents  increased  personal  automobile  business)  of the
Company's $5.5 million  increase in direct  writings during the six months ended
June 30, 1998 compared to the same period in 1997.

Net Investment Income
---------------------
Net investment income increased $0.6 million or 6.6% to $9.5 million for the six
months  ended June 30, 1998 from $8.9  million for the same period in 1997.  The
increase in net  investment  income was  primarily  the result of an increase in
average cash and invested  assets (at  amortized  cost) of  approximately  $37.7
million,  or 15.2% from June 30,  1998  compared  to June 30,  1997.  The return
realized on the Company's cash and investments was 6.8% for the six months ended
June 30, 1998 and 7.4% for the same period in 1997.  The reduction in the return
realized on the Company's cash and invested assets is primarily  attributable to
an increase in investment  in tax-exempt  bonds which provide for a larger after
tax return. The taxable equivalent yield on the Company's  investment  portfolio
was 7.1% and 7.4% for the six months ended June 30, 1998 and 1997.


                            -20-
<PAGE>


Realized Investment Gains
-------------------------
Realized  investment  gains  decreased  $5.2 million to $0.3 million for the six
months  ended June 30, 1998 as  compared to $5.5  million for the same period in
1997.  Realized  investment  gains in the six months  ended  June 30,  1997 were
primarily  attributable  to a  realized  gain  on the  sale  of a  common  stock
investment.

Losses and Loss Adjustment Expenses
-----------------------------------
Losses and loss adjustment  expenses increased $16.4 million, or 33.0%, to $66.1
million for the six months  ended June 30, 1998 from $49.7  million for the same
period in 1997. Loss and loss adjustment  expenses were 75.4% of premium revenue
for the six months ended June 30, 1998 compared to 70.3% of premium  revenue for
the same period in 1997. The increase in loss and loss adjustment  expenses as a
percent of premium revenue was primarily attributable to the increase in weather
related  losses  during the six months ended June 30, 1998  compared to the same
period in 1997.  Losses believed to be weather related incurred on the Company's
direct  written  business in the  northeast  aggregated  $6.8 million in the six
months ended June 30, 1998 compared to $3.2 million for the same period in 1997.
In addition,  the Company incurred losses of approximately  $500,000 as a result
of severe  weather which  impacted  certain  midwestern  risks which the Company
reinsures.  The increase in weather related losses was primarily attributable to
severe  ice storms  during the first  three  months of 1998 which  impacted  the
upstate New York and Maine territories in which the Company writes business, and
tornadoes and severe  thunder  storms during the second  quarter of 1998,  which
impacted direct insures in the northeast.

Underwriting Expenses
---------------------
Underwriting expenses increased $2.9 million, or 14.3%, to $23.1 million for the
six months  ended June 30, 1998 from $20.2  million for the same period in 1997.
For the six months  ended June 30,  1998,  underwriting  expenses  were 26.3% of
premium revenue  compared to 28.6% for the same period in 1997. The reduction in
the Company's underwriting expense ratio was primarily attributable to a smaller
relative  increase in overhead  expenses than in premium  revenue for the period
and the Company's continued expense management initiatives which began in 1998.

Federal Income Tax Expense
--------------------------
Federal  income tax expense  decreased $2.5 million to $2.7 million in 1998 from
$5.2  million in 1997.  Federal  income tax expense  was 30.8% of income  before
federal  income tax expense for the six months  ended June 30, 1998  compared to
33.8% for the same period in 1997. The decrease in the Company's  federal income
tax expense as a percentage of income before  federal income tax expense for the
six  months  ended  June 30,  1998 as  compared  to the same  period in 1997 was
primarily  attributable  to an increase in tax exempt  interest income earned on
the Company's  investments  reflecting the Company's increased investment in tax
exempt fixed maturities.

Net Income
----------
Net income  decreased $4.2 million to $6.1 million for the six months ended June
30, 1998 from $10.3 million for the same period in 1997 primarily as a result of
the foregoing factors.

Liquidity and Capital Resources

Net cash  provided by operating  activities  was $12.3 million and $12.0 million
during the six month  periods  ended June 30, 1998 and 1997,  respectively.  The
increase in net cash provided by operating activities was primarily attributable
to an increase in reserves  for losses and loss  adjustment  expenses  which was
partially  offset  by an  increase  in  reinsurance  receivables,  as  well as a
decrease in reserves for unearned premiums.

Net cash used in investing  activities  was $11.3 million  during the six months
ending  June 30,  1998  compared  to $10.7  million  for the same period in 1997
primarily  as a result of an  increase  in  investment  collections  from  fixed
maturities,  which was partially offset by an increase in investment  purchases,
as well as an increase in short-term investments by the Company.

                                      -21-
<PAGE>


The Company has in place unsecured lines of credit with two banks under which it
may borrow up to $12.0 million. At June 30, 1998, no amounts were outstanding on
the lines of  credit,  each of which has an annual  interest  rate equal to such
bank's prime rate. On April 1, 1998, Farm Family Casualty  redeemed $1.3 million
principal  amount of surplus notes  bearing  interest at a rate of eight percent
per annum.

Future Application of Accounting Standards

In June of 1997, the Financial  Accounting  Standards Board issued  Statement of
Financial  Accounting  Statement (SFAS) 131,  "Disclosures  about Segments of an
Enterprise  and  Related  Information,"  effective  for  years  beginning  after
December  15,  1997.  The  adoption  of SFAS  131 will  result  in  revised  and
additional  disclosures  but will  have no  effect  on the  financial  position,
results of operations, or liquidity of the Company.

In February of 1998, the Financial  Accounting  Standards Board issued Statement
of Financial Accounting  Statement ("SFAS") 132,  "Employers'  Disclosures about
Pensions and Other Postretirement Benefits," effective for years beginning after
December 31, 1997.  SFAS 132 revises the  disclosure  requirements  but does not
change the  measurement  or  recognition  of pensions and other post  retirement
benefits.  The  adoption  of SFAS 132 will  result  in  revised  and  additional
disclosures  but will have no  effect  on the  financial  position,  results  of
operations, or liquidity of the Company.

In June of 1998, the Financial  Accounting  Standards Board issued  Statement of
Financial   Accounting   Standards  ("SFAS")  133,  "Accounting  for  Derivative
Instruments and Hedging Activities." This statement,  which is effective for the
year beginning January 1, 2000,  establishes  accounting and reporting standards
for  derivative  instruments  and for hedging  activities.  SFAS 133  requires a
company to recognize  all  derivatives  as either assets or  liabilities  in the
statement of financial  position and measure  those  instruments  at fair value.
Management  is  evaluating  the impact this  statement may have on the Company's
financial statements.

Item 4.      Submission of Matters to a Vote of Security Holders.

Farm Family Holdings' annual meeting of Stockholders was held on April 28, 1998.
At the  meeting,  (i) eight  persons  were  elected as  directors of Farm Family
Holdings,  and (ii) the  appointment of Coopers & Lybrand L.L.P.  as Farm Family
Holdings'  independent  auditors for the year 1998 was  ratified.  The number of
votes cast for, against or withheld,  and the number of abstentions with respect
to each such matter is set forth below.
<TABLE>
<CAPTION>

                                                                  For      Against/Withheld        Abstained
                                                                  ---      ----------------        ---------
         Election of Directors:
            Nominee
<S>                                                         <C>                      <C>            <C> 
            Wayne R. Bissonette                             3,684,702                15,378
            Joseph E. Calhoun                               3,685,460                14,620
            Gordon H. Gowen                                 3,684,297                15,783
            Jon R. Greenwood                                3,685,817                14,263
            Frank W. Matheson                               3,685,426                14,654
            John P. Moskos                                  3,682,676                17,404
            Norma R. O'Leary                                3,685,921                14,159
            John I. Rigolizzo, Jr.                          3,684,711                15,369

         Ratification of Auditors:                          3,666,725                 4,267           29,088

</TABLE>
                                      -22-
<PAGE>

Item 5.        Other information

Rule 14a-4 of the  Securities and Exchange  Commission's  proxy rules allows the
Company to use  discretionary  voting authority to vote on matters coming before
an annual  meeting of  stockholders,  if the Company does not have notice of the
matter at least 45 days before the date  corresponding  to the date on which the
Company first mailed its proxy  materials for the prior year's annual meeting of
stockholders or the date specified by an overriding  advance notice provision in
the Company's  by-laws.  The Company's  by-laws  contain such an advance  notice
provision.

The  Company's  by-laws  provide,  in general,  that a proposal for action to be
presented by a stockholder at an annual meeting shall be out of order unless the
proposal is specified in the notice of meeting  given by or at the  direction of
the Board of  Directors  or unless the  proposal  shall have been  submitted  in
writing (in the form  specified in the by-laws) to the  Secretary of the Company
and received at the principal  executive offices of the Company not less than 60
days nor more  than 90 days  prior to the  anniversary  date of the  immediately
preceding annual meeting. In addition to any other applicable requirements,  the
Company's  by-laws also provide,  in general,  that if a stockholder  intends to
make a  nomination  for the  election of  directors  at an annual  meeting,  the
Secretary of the Company must receive  written  notice (in the form specified in
the by-laws) of such intention not less than 60 days nor more than 90 days prior
to the anniversary  date of the immediately  preceding  annual meeting.  For the
Company's Annual Meeting of Stockholders  expected to be held on April 27, 1999,
stockholders must submit such written notice to the Secretary of the Company not
earlier than January 28, 1999 or later than February 27, 1999.

The foregoing is only a summary of the detailed provisions of the by-laws and is
qualified  by reference to the text  thereof.  Stockholders  wishing to submit a
proposal  should  review  the  by-law   requirements   regarding   proposals  by
stockholders and should  communicate with the Secretary of Farm Family Holdings,
Inc., P.O. Box 656, Albany, New York, 12201-0656,  if sent by mail, or 344 Route
9W, Glenmont, New York 12077, if by hand, express mail or overnight courier, for
further information.

This  requirement  is  separate  and  apart  from the  Securities  and  Exchange
Commission's  requirements  that a  stockholder  must  meet in  order  to have a
stockholder proposal included in the Company's proxy statement under Rule 14a-8.
For the Company's  Annual Meeting of  Stockholders  expected to be held on April
27, 1999, any  stockholder  who wishes to submit a proposal for inclusion in the
Company's  proxy  materials  pursuant to Rule 14a-8 must submit such proposal to
the Secretary of the Company on or before November 20, 1998.

                                      -23-

<PAGE>


Item 6:        Exhibits and Reports on Form 8-K

                                  EXHIBIT INDEX

                      FARM FAMILY HOLDINGS, INC. FORM 10-Q
                       FOR THE QUARTER ENDED JUNE 30, 1998


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

*2.1 Plan of Reorganization and Conversion dated February 14, 1996 as amended by
     Amendment No. 1, dated April 23, 1996

*3.1 Certificate of Incorporation of Farm Family Holdings, Inc.

*3.2 Bylaws of Farm Family Holdings, Inc.

4.1  Rights  agreement,  dated as of July 29, 1997,  between the Company and The
     Bank of New York (incorporated by reference to Exhibit 4.1 to the Company's
     Current  Report  on  Form  8-K  filed  with  the  Securities  and  Exchange
     Commission on July 30, 1997)

10.1 Amendment No. 1 to Amended and Restated Option Purchase  Agreement dated as
     of April  28,  1998  (incorporated  by  reference  to  Exhibit  10.1 to the
     Company's Current Report on Form 8-K filed with the Securities and Exchange
     Commission on April 29, 1998)

*Incorporated by reference to Registration Statement No. 333-4446

Reports on Form 8-K
-------------------

        A report  on Form 8-K was  filed on  April  6,  1998  reporting  a press
release issued announcing that its wholly owned subsidiary, Farm Family Casualty
Insurance  Company,  exercised  its right to redeem all  outstanding  debt as of
April 1, 1998.

        A report  on Form 8-K was  filed on April  29,  1998  reporting  a press
release issued announcing the Company's  operating results for the quarter ended
March 31, 1998.

        A report on Form 8-K was filed on May 5, 1998  reporting a press release
regarding the  Company's  decision to exercise its option to acquire Farm Family
Life Insurance Company.

        A report  on Form  8-K was  filed on June  26,  1998  reporting  a press
release  announcing  that it estimated  catastrophic  losses from  tornadoes and
severe  thunder  storms of  approximately  $2.0  million  pre-tax for the second
quarter of 1998.

No financial statements were filed with these Form 8-K's.


<PAGE>


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                           FARM FAMILY HOLDINGS, INC.
                                  (Registrant)




  August 14, 1998       By: /s/ Philip P. Weber
----------------------     ----------------------------------------------
    (Date)                 Philip P. Weber, President & Chief Executive Officer
                           (Principal Executive Officer)




  August 14, 1998       By: /s/ Timothy A. Walsh
-----------------------   -----------------------------------------------
    (Date)                Timothy A. Walsh, Executive Vice President 
                           - Finance & Treasurer
                          (Principal Financial & Accounting Officer)