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 September 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
November 12, 1998 is 5,253,813.


                                          1
<PAGE>


                           FARM FAMILY HOLDINGS, INC.

                                      INDEX



   Part I.   Financial Information

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

                   Consolidated  Statements of Income and Comprehensive  Income
                   Three months ended  September 30, 1998 and 1997 and the nine
                   months ended September 30, 1998 and 1997

                   Consolidated  Statements  of Cash  Flow  Nine  months  ended
                   September 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 6.  Exhibits and Reports on Form 8-K



                                          2

<PAGE>


<TABLE>
<CAPTION>



                  FARM FAMILY HOLDINGS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                ($ in thousands)

                                                                               (Unaudited)
                                                                            September 30, 1998     December 31, 1997*
--------------------------------------------------------------------------------------------------------------------
Assets
Investments:
     Fixed Maturities
     <S>                                                                            <C>                <C>  
     Available for sale, at fair value
        (Amortized cost: $270,293 in 1998 and $248,984 in 1997 )                    $286,143             $259,199
     Held to maturity, at amortized cost
        (Fair value: $8,770 in 1998 and $9,194 in 1997)                                8,457                8,855
   Equity securities
     Available for sale, at fair value
            (Cost: $3,363 in 1998 and 1997)                                            4,538                4,521

   Mortgage loans                                                                        710                1,660
   Other invested assets                                                                 416                  553
   Short-term investments                                                              7,647                5,643
------------------------------------------------------------------------------------------------------------------
             Total investments                                                       307,911              280,431
------------------------------------------------------------------------------------------------------------------
Cash                                                                                   5,711                5,841
Insurance receivables:
   Reinsurance receivables                                                            22,265               12,343
   Premiums receivable, net                                                           33,638               28,141
Deferred acquisition costs                                                            14,095               12,613
Accrued investment income                                                              5,035                5,408
Deferred income tax asset, net                                                         1,200                4,422
Prepaid reinsurance premiums                                                             358                2,044
Receivable from affiliates, net                                                       17,339               17,786
Other assets                                                                           3,489                2,202
------------------------------------------------------------------------------------------------------------------
             Total Assets                                                           $411,041             $371,231
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
   Reserves for losses and loss adjustment expenses                                 $176,966             $156,622
   Unearned premium reserve                                                           73,115               66,069
   Reinsurance premiums payable                                                        3,189                2,564
   Accrued expenses and other liabilities                                             16,672               21,474
   Debt                                                                                    -                1,268
------------------------------------------------------------------------------------------------------------------
             Total liabilities                                                       269,942              247,997
------------------------------------------------------------------------------------------------------------------

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                                                        92,906               92,906
    Retained earnings                                                                 37,074               22,883
    Accumulated other comprehensive income                                            11,066                7,392
------------------------------------------------------------------------------------------------------------------
             Total stockholders' equity                                              141,099              123,234
------------------------------------------------------------------------------------------------------------------
             Total Liabilities and Stockholders' Equity                             $411,041             $371,231
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
 See accompanying notes to Consolidated Financial Statements.

*Amounts have been  restated for certain  items as more fully  described in Note
2-Prior Period Adjustments.
                                          3
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
                  FARM FAMILY HOLDINGS, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                     ($ in thousands, except per share data)

                                                                                        (Unaudited)                 (Unaudited)
                                                                                     Three Months Ended           Nine Month Ended
                                                                                        September 30,               September 30,  
                                                                                     1998          1997*         1998         1997*
------------------------------------------------------------------------------------------------------------------------------------

Revenues:
<S>                                                                                 <C>            <C>         <C>          <C>     
     Premiums                                                                       $45,660        $38,457     $133,404     $109,191
     Net investment income                                                            4,815          4,603       14,333        3,529
     Realized investment gains, net                                                     192            187          534        5,649
     Other income                                                                       269            234          752          719
------------------------------------------------------------------------------------------------------------------------------------
                   Total revenues                                                    50,936         43,481      149,023      129,088
------------------------------------------------------------------------------------------------------------------------------------
Losses, Expenses and Other:
     Losses and loss adjustment expenses                                             32,936         26,701       99,063       76,421
     Underwriting expenses                                                           11,538         10,985       35,129       31,961
     Interest expense                                                                     -             25           25           77
     Dividends to policyholders                                                          64             65          119          177
------------------------------------------------------------------------------------------------------------------------------------
             Total losses and expenses                                               44,538         37,776      134,336      108,636
             Gain on partial reduction of extended earnings liability                (6,318)             -       (6,318)           -
------------------------------------------------------------------------------------------------------------------------------------
             Total losses, expenses and other                                        38,220         37,776      128,018      108,636
------------------------------------------------------------------------------------------------------------------------------------
Income before federal income tax expense                                             12,716          5,705       21,005       20,452
Federal income tax expense                                                            4,258          1,877        6,814        6,858
------------------------------------------------------------------------------------------------------------------------------------
             Net income                                                               8,458          3,828       14,191       13,594
------------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss), net of tax:

Unrealized holding gain arising during the period
 (net of deferred tax of ($1,879), ($111), ($2,186) and ($1,692)                      3,489            206        4,060        3,142
respectively)
Reclassification adjustment for gains (losses) included in net income income
 (net of tax expense (benefit) of $101, $255, $208 and $2,036 respectively)            (188)          (474)        (386)     (3,781)
------------------------------------------------------------------------------------------------------------------------------------
             Other comprehensive income (loss)                                        3,301          (268)        3,674        (639)
------------------------------------------------------------------------------------------------------------------------------------
             Comprehensive income                                                   $11,759         $3,560      $17,865      $12,955
------------------------------------------------------------------------------------------------------------------------------------
Per Common Share:
       Basic earnings per common share                                                $1.61          $0.73        $2.70        $2.59
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
       Diluted earnings per common share                                             $ 1.59          $0.72        $2.67        $2.58
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
       Basic weighted average shares outstanding                                  5,253,813      5,253,813    5,253,813    5,253,813
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
       Diluted weighted average shares outstanding                                5,303,707      5,286,348    5,306,257    5,264,658
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to Consolidated Financial Statements.

*Amounts have been  restated for certain  items as more fully  described in Note
2-Prior Period Adjustments.
</TABLE>


                                          4
<PAGE>
<TABLE>
<CAPTION>


                  FARM FAMILY HOLDINGS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                ($ in thousands)
                                                                                                        (Unaudited)
                                                                                                    For the Nine Months
                                                                                                      Ended September
                                                                                                     1998          1997*
-------------------------------------------------------------------------------------------------------------------------
Cash Flows From Operating Activities
<S>                                                                                               <C>            <C>    
Net income                                                                                        $14,191        $13,594
-------------------------------------------------------------------------------------------------------------------------

Adjustments to reconcile net income
              to net cash provided by operating activities:
    Realized investment gains                                                                       (534)        (5,649)
    Amortization of bond discount                                                                     231           259
    Deferred income taxes                                                                           1,048        (1,397)
    Gain on partial reduction of extended earnings liability                                      (6,318)             -
    Changes in:
         Reinsurance receivables                                                                  (9,922)          (676)
         Premiums receivable                                                                      (5,497)        (9,437)
         Deferred acquisition costs                                                               (1,482)        (2,064)
         Accrued investment income                                                                    373            83
         Prepaid reinsurance premiums                                                               1,686          (272)
         Receivable from affiliates                                                                   447          (499)
         Other assets                                                                             (1,287)          (725)
         Reserves for losses and loss adjustment expenses                                          20,344         9,077
         Unearned premium reserve                                                                   7,046        12,584
         Reinsurance premiums payable                                                                 625         2,273
         Accrued expenses and other liabilities                                                     1,712         3,405
-------------------------------------------------------------------------------------------------------------------------
            Total adjustments                                                                       8,472         6,962
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
            Net cash provided by operating activities                                              22,663        20,556
-------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTiNG ACTIVITIES Proceeds from sales:
    Fixed maturities available for sale                                                             1,414         3,514
    Equity securities                                                                                   -         6,257
Investment collections:
    Fixed maturities available for sale                                                            36,709        13,542
    Fixed maturities held to maturity                                                                 376           582
    Mortgage loans                                                                                    950            62
Investment purchases:
    Fixed maturities available for sale                                                          (59,047)       (42,425)
    Equity securities                                                                                   -        (1,081)
Change in short-term investments, net                                                             (2,004)        (1,302)
Change in other invested assets                                                                        77           (41)
-------------------------------------------------------------------------------------------------------------------------
            Net cash used in investing activities                                                (21,525)       (20,892)
-------------------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
Principal payments on debt                                                                        (1,268)           (27)
-------------------------------------------------------------------------------------------------------------------------
            Net cash used in financing activities                                                 (1,268)           (27)
-------------------------------------------------------------------------------------------------------------------------
            Net decrease in cash                                                                    (130)          (363)
Cash, beginning of period                                                                           5,841         4,110
-------------------------------------------------------------------------------------------------------------------------
Cash, end of period                                                                                $5,711        $3,747
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
See accompanying notes to Consolidated Financial Statements.

*Amounts have been  restated for certain  items as more fully  described in Note
2-Prior Period Adjustments.
</TABLE>
                                          5
<PAGE>

Notes to Consolidated Financial Statements

1. 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 September 30, 1998, and the consolidated
results of operations for the three months and the nine months ended
September 30, 1998 and 1997. 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.

2. Prior Period Adjustments

Previously, the Company accounted for its extended earnings program
pursuant to Statement of Financial Accounting Standards No. 5. The
restatement of certain amounts within the Company's consolidated financial
statements relates to the Company's retroactive adoption effective January
1, 1994 of Statement of Financial Accounting Standards No. 112 "Employers'
Accounting for Postemployment Benefits" ("Statement 112") to account for
the Company's extended earnings program with its agents and agency managers
(collectively referred to hereafter as "agents"). Pursuant to agreements
between the Company and its agents, subject to certain conditions including
length of service, confidentiality, and non-competition, certain agents 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 by deductions from
the commissions earned by successor agents who have assumed the right to
service the books of business previously serviced by eligible former agents
subsequent to the termination of the former agent's association with the
Company.

                                          6
<PAGE>


The Company has restated certain amounts within its consolidated financial
statements as of December 31, 1997 and for the three months and the nine
months ended September 30, 1997. The following table presents the restated
and previously reported amounts:
<TABLE>
<CAPTION>

     (Dollars in thousands, except per share data)
                                                                          December 31, 1997
                                                                  Previously
                                                                   Reported            Restated
         Balance Sheet:
<S>                                                                  <C>                   <C>   
             Deferred income tax asset, net                          $1,469                $4,422
             Total assets                                           368,278               371,231
             Accrued expenses and other liabilities                  11,828                21,474
             Total liabilities                                      238,351               247,997
             Stockholders' equity                                   129,927               123,234
             Total liabilities and stockholders' equity             368,278               371,231

</TABLE>
<TABLE>
<CAPTION>
                                                   For the three months ended           For the nine months ended
                                                            September 30,                      September 30,
                                                                1997                               1997
                                                             ----------                         ----------
                                                   Previously                           Previously
                                                    Reported           Restated          Reported          Restated
         Statements of Income:
<S>                                                  <C>                <C>               <C>               <C>    
             Underwriting expenses                   $10,605            $10,985           $30,803           $31,961
             Federal income tax expense                2,009              1,877             7,257             6,858
             Net income                                4,077              3,828            14,353            13,594
         Per share data:
             Net income-Basic                          $0.77              $0.73             $2.73             $2.59
             Net income-Diluted                        $0.77              $0.72             $2.70             $2.58

</TABLE>
As a result of changes in the agreements between the Company and its agents, a
significant portion of the Statement 112 liability was reduced during the third
quarter of 1998 (see Note 5).

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 ended           Nine months ended
                                                                                     September 30,               September 30,
                                                                                     -------------               -------------
                                                                                  1998         1997           1998          1997
                                                                                 ------       -------        ------        ------
<S>                                                                             <C>          <C>           <C>          <C>        
    Net income available to common stockholders                                 $8,458,000   $3,828,000    $14,191,000  $13,594,000
                                                                            --------------------------------------------------------
    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                                                         49,894       32,535         52,444        10,845
                                                                            --------------------------------------------------------
    Weighted average number of shares in diluted earnings per share              5,303,707    5,286,348      5,306,257     5,264,658
                                                                            --------------------------------------------------------
    Basic net income per share                                                       $1.61        $0.73          $2.70         $2.59
                                                                            --------------------------------------------------------
    Diluted net income per share                                                     $1.59        $0.72          $2.67         $2.58
                                                                            --------------------------------------------------------
</TABLE>
                                          7
<PAGE>

4. Future Application of Accounting Standards

In June of 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Statement No. 131, "Disclosures about Segments of
an Enterprise and Related Information," ("Statement 131") effective for
years beginning after December 15, 1997. The adoption of Statement 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 No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits," ("Statement
132") effective for years beginning after December 15, 1997. Statement 132
revises the disclosure requirements but does not change the measurement or
recognition of pensions and other post retirement benefits. The adoption of
Statement 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 No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("Statement 133"). This statement,
which is effective for the Company for the year beginning January 1, 2000,
establishes accounting and reporting standards for derivative instruments
and for hedging activities. Statement 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 the Company's 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 nine months ended September 30, 1998 and 1997, approximately 63% 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, nor can future losses 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 (collectively referred to hereafter as "agents"), subject to certain
conditions including length of service, confidentiality, and non-competition,
certain agents 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 by deductions
from the commissions earned by successor agents who have assumed the right to
service the books of business previously serviced by eligible former agents
subsequent to the termination of the former agent's association with the
Company. As of June 30, 1998, the Company has recorded a $10,157,000 liability
for the extended earnings program (the "Program") in accordance with Statement
of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" ("Statement 112") to account for the Program.
                                          8
<PAGE>
During the third quarter of 1998, the Company modified the agreements with
its agents to include revised conditions under which eligible agents may
receive extended earnings payments. In addition to the conditions described
previously, extended earnings will be paid only if a successor agent(s)
assumes the right to service the book of business of the eligible former
agent and agrees to become primarily responsible for making the extended
earnings payments. In the event that no successor agent(s) assumes the
right to service the book of business of an eligible former agent, the
Company has no obligation to make the extended earnings payments. The
Company has no intention to waive this provision of its agreements with its
agents. As a result, the successor agent(s), not the Company, will be the
primary obligor responsible for extended earnings payments. Since the
inception of the Program in 1986, the Company has always been able to
identify successor agents willing to assume the rights to service such
books of business. The Company will act as guarantor of the amounts payable
to eligible former agents who have terminated their association with the
Company by successor agents who agree to make the extended earnings
payments. The Company expects to enforce the terms of the guarantee in the
event of default by a successor agent. During the third quarter of 1998,
when the Company's modified agreements with its agents became effective,
$6,318,000 of the Company's Statement 112 liability was reduced and the
Company recorded a net gain on this reduction of $4,107,000 ($6,318,000
less taxes of $2,211,000). The Company is primary liable for its remaining
Statement 112 liability which is $3,643,000 and represents the aggregate
amount owed by the Company to eligible former agents who have terminated
their association with the Company and are currently receiving extended
earnings payments. The Company's remaining Statement 112 liability is being
funded by deductions from the commissions earned by successor agents who
have assumed the right to service the books of business previously serviced
by eligible former agents who have terminated their association with the
Company pursuant to agreements with such agents. Funding from successor
agents is subject to the ability of the successor agents to generate
sufficient commissions to satisfy the liability.

Many computer programs and other computer systems upon which the Company relies
were created using only two digits to identify a year in the date field. If not
corrected, many of these computer applications could fail or produce erroneous
results by or at the beginning of the year 2000. In 1996, management began
considering Year 2000 issues as they affect the Company and began to develop a
Year 2000 plan. 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 Year 2000 team to lead the
Company's activities relating to its Year 2000 issues. The Company's Year 2000
team works with the Company's senior management, legal and business units on
Year 2000 issues. 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 IT
systems, or that Year 2000 related failures by third parties with which the
Company interacts, will not have a material adverse effect on the Company's
results of operations, liquidity and financial condition.

In addition to its own computer systems and third-party providers, the Company
may also have exposure in its property/casualty operations to Year 2000 claims
asserted under certain insurance policies it has sold to customers. There can be
no assurances that Year 2000 related claims will not emerge and that such claims
will not have a material adverse effect on the Company's results of operations,
liquidity and financial condition.


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
number of shares of common and preferred stock to be issued will depend
upon the average closing price of the Company's common stock during the 20
trading days prior to the third business day preceding the closing of the
acquisition. The proposed acquisition of Farm Family Life is subject to the
approval of the shareholders of Farm Family Holdings and the satisfaction
of certain closing conditions. A special meeting of stockholders has been
called for December 2, 1998 at which the Company's stockholders will vote
on a proposal to approve the proposed acquisition. If the stockholders
approve the transaction, the Company expects to close the acquisition of
Farm Family Life in December 1998.
                                          9
<PAGE>

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 September
30, 1998, as if the acquisition had occurred as of September 30, 1998. The
pro forma consolidated statements of income combines the operations of the
Company and Farm Family Life for the nine months ended September 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.

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>
<CAPTION>


                           Farm Family Holdings, Inc.
                 Unaudited Pro Forma Consolidated Balance Sheet
                               September 30, 1998
                                ($ in thousands)
                                                                                                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                                        $286,143       $719,898    $               $             $1,006,041
     Held to maturity, at amortized cost                          8,457                                                      8,457
   Equity securities                                              4,538         36,321                                      40,859
   Mortgage loans                                                   710         15,164                                      15,874
   Policy loans                                                                                                             30,321
                                                                                30,321
   Other invested assets                                            416            639                                       1,055
   Short-term investments                                         7,647          4,938                                      12,585
                                                      -----------------------------------------------------------------------------
        Total investments                                       307,911        807,281                                   1,115,192
                                                      -----------------------------------------------------------------------------

Cash                                                              5,711          2,985                                       8,696
Insurance receivables:
   Reinsurance receivables                                       22,265          1,130                                      23,395
   Premiums receivable                                           33,638                               (D)       99          33,539
Deferred acquisition costs                                       14,095         25,395                (B)   25,395          14,095
Present value of future profits                                                        (B)  16,421                          16,421
Accrued investment income                                         5,035         12,061                                      17,096
Property and equipment, net                                                     12,718 (B)   4,095                          16,813
Deferred income tax asset, net                                    1,200                                                      1,200
Prepaid reinsurance premiums                                        358
                                                                                                                               358
Receivable from affiliates, net                                  17,339                               (D)   17,339               0
Other assets                                                      3,489          1,911 (E)     211    (A)    1,400           4,211
                                                      -----------------------------------------------------------------------------
        Total Assets                                           $411,041       $863,481     $20,727         $44,233      $1,251,016
                                                      -----------------------------------------------------------------------------
                                                      -----------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
   Reserves for losses and loss adjustment expenses            $176,966       $           $               $               $176,966
   Future policy and contract benefits                                         221,054                                     221,054
   Funds on deposit from policyholders                                         419,208 (B)      77                         419,131
   Unearned premium reserve                                      73,115                                                     73,115
   Accrued dividends to policyholders                                            5,585                                       5,585
   Reinsurance premiums payable                                   3,189                                                      3,189
   Deferred income tax liability                                                38,426 (B)   1,667                          36,759
   Payable to affiliate                                                         17,438 (D)  17,438                               0
   Accrued expenses and other liabilities                        16,672          4,263             (B)(E)      311          21,246
   Debt
   Participating policyholders' interest                                       116,332                                     116,332
                                                      -----------------------------------------------------------------------------
        Total liabilities                                       269,942        822,306      19,182             311       1,073,377
                                                      -----------------------------------------------------------------------------
   Commitments and contingencies
Mandatory redeemable preferred stock                                                                  (A)    5,846           5,846

Stockholders' equity:
   Common stock                                                      53          3,001 (C)   3,001    (A)       10              63
   Additional Paid in Capital                                    92,906                               (A)   30,684         123,590
   Retained earnings                                             37,074         36,256 (C)  36,256                          37,074
   Accumulated other comprehensive income                        11,066          1,918 (C)   1,918                          11,066
                                                      -----------------------------------------------------------------------------
        Total stockholders' equity                              141,099         41,175      41,175          30,694         171,793
                                                      -----------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity                     $411,041       $863,481     $60,357         $36,851      $1,251,016
                                                      -----------------------------------------------------------------------------
                                                      ----------------------------------------------------------------------------- 
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
                               September 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 (1,032,794 shares issued,
$.01 par value) in the acquisition assuming an average
closing price of $29 23/32 if the closing had occurred on
October 16, 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.                                                              (10)

Paid in capital                                                         (30,684)

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 a current appraisal of the estimated
fair market value of the building. In addition, based on
information contained in the current appraisal and an
evaluation of the current condition of the building, the
estimated useful life has been changed to 20 years                       $4,095

Elimination of historical deferred acquisition costs                    (25,395)
     
Adjustment to record present value of future profits
calculated based on a discount rate equal to each year's
earned rate for traditional insurance products, which range
from 8% to 9%, and each year's credited rate for annuities
and universal life products, which range from 6% to 7%, less
the excess of net assets acquired over the purchase price.
The earned rate for traditional life insurance products and
the credited rate for annuities and universal life products
is the rate used by Farm Family Life to credit interest to
policyholders' funds held by these products. The amount of
interest accrued on the unamortized present value of future
profits balance during the year was $0.4 million. The
interest accrual rate was 6.5% for universal life products,
6.3% for annuities, and 9.0% for traditional life products.

For traditional insurance products, the present value of
future profits is amortized, with interest in proportion to
the ratio of estimated annual revenues over the contract
period. For universal life contracts and annuity contracts,
the present value of future profits is amortized at a
constant rate based upon the amount expected to be realized
over the life of the contracts, which is reevaluated
annually. For most life insurance, a 15-year to 40-year
amortization period is used, and a 20-year period is used
for annuities. Approximately $2.1 million is expected to be
amortized during each of the years ended December 31, 1998,
1999, 2000, 2001 and 2002.                                               16,421
                                         12
<PAGE>



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

Liabilities

Adjustment to reflect the net deferred tax benefit of purchase
accounting adjustments using a statutory rate of 34%                      1,667

Adjustment to record liability for Guaranty Funds                          (100)

Adjustment of carrying amount of funds on deposit from
policyholders based on fair market value. Policyholder funds held
at variable rates are carried at their account value which
approximates fair value. The fair value of policyholder funds
held at fixed rates is the present value of the funds calculated
using current market rates.                                                  77

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

(D) Adjustment to eliminate intercompany balances

(E)  Adjustment  to  accrue  additional  costs  relating  to  the
acquisition expected to be incurred                                        (211)
                                         13
<PAGE>
<TABLE>
<CAPTION>


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

                                                                                                   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               $133,404                 $39    $            $              $133,443
    Premiums from life and health operations                                       23,002                                  23,002
    Net investment income                                      14,333              41,445                                  55,778
    Realized investment gains (losses), net                       534               3,184                                   3,718
    Policy and contract charges                                                     4,342                                   4,342
    Other income                                                  752                 703 (c)    650                          805
                                                        --------------------------------------------------------------------------
        Total revenues                                        149,023              72,715        650                      221,088
                                                        --------------------------------------------------------------------------

Losses, Benefits, Expenses and Other:
    Losses and loss adjustment expenses                        99,063               1,481                                 100,544
    Benefits to policyholders                                                      22,788                                  22,788
    Underwriting & operating expenses                          35,129               6,710 (a)    105  (c)       650        41,294
    Non-recurring charges                                                             203                                     203
    Interest credited to policyholders                                             16,564                                  16,564
    Amortization of policy acquisition costs                                        5,300             (a)     5,300           (0)
    Amortization of present value of future profits                                       (a)  1,215                        1,215
    Interest expense                                               25                                                          25
    Dividends to policyholders                                    119                                                         119
    Participating policyholders' interest                                          16,317 (a)  4,710  (a)     1,044        19,983
                                                        --------------------------------------------------------------------------
        Total losses, benefits and expenses                   134,336              69,363      6,030          6,994       202,735

Gain on partial reduction of extended earnings liability       (6,318)                  -                                  (6,318) 
                                                        --------------------------------------------------------------------------
        Total losses, benefits, expenses and other            128,018              69,363      6,030          6,994       196,417
                                                        --------------------------------------------------------------------------

Income before federal income tax expense                       21,005               3,352      6,680          6,994        24,671

Federal income tax expense                                      6,814               1,123 (b)    107                        8,044
                                                        --------------------------------------------------------------------------
        Net Income before preferred stock dividends            14,191               2,229      6,787          6,994        16,627

        Preferred stock dividends                                                         (a)    269                          269
                                                        --------------------------------------------------------------------------
        Net Income applicable to common shareholders          $14,191              $2,229     $7,055         $6,994       $16,358
                                                        --------------------------------------------------------------------------
        Net Income per Common Share - Basic                     $2.70                                                       $2.60
                                                        --------------                                              --------------
        Net Income per Common Share - Diluted                   $2.67                                                       $2.58
                                                        --------------                                              --------------
        Weighted average shares - Basic                     5,253,813                                 (d) 1,032,794     6,286,607
                                                        --------------                                              --------------
        Weighted average shares - Diluted                   5,306,257                                 (d) 1,032,794     6,339,051
                                                        --------------                                              --------------
  
See accompanying notes to unaudited pro forma consolidated statements of income.

</TABLE>

                                         14
<PAGE>



                           Farm Family Holdings, Inc.
         Notes to Unaudited Pro Forma Consolidated Statements of Income
                            For the nine months ended
                               September 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 an adjustment of
the fair market value of the building based on a current
appraisal and a change in the estimated useful life of the
building to 20 years based on information contained in the
current appraisal and an evaluation of the current condition of
the building.                                                              $105 

Adjustment to reverse amortization of deferred acquisition costs         (5,300)

Participating  policyholders'  share of  amortization of deferred
acquisition costs                                                         4,710

Adjustment  to record  amortization  of  present  value of future
profits                                                                   1,215

Participating policyholders' share of amortization of present
value of future profits                                                  (1,044)

Series A Preferred stock dividends on estimated fair value of
$5,846 of preferred stock at a rate of 6 1/8% per annum                     269

(b) Adjustment to reflect the federal income tax effect of item
(a) above using statutory rate of 34%                                       107

(c) Adjustment to eliminate intercompany balances                           650

(d) Adjustment to reflect estimated additional shares of common
stock issued in the acquisition assuming an average closing price
of $29 23/32 if the closing had occurred on October 16, 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.                                1,032,794
                                         15

<PAGE>
<TABLE>
<CAPTION>


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

                                                                                                   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                            43,320             7,748 (a)     158 (c)      808        50,418
     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                                          21,617 (a)   5,994 (a)    1,929        25,682
                                                          ------------------------------------------------------------------------
         Total losses and expenses                               147,005            98,555       8,385        9,589       244,356
                                                          ------------------------------------------------------------------------

Income before federal income tax expense                          26,718             5,042       9,193        9,589        32,156

Federal income tax expense                                         9,218             1,702 (b)     135                     11,055
                                                          ------------------------------------------------------------------------

         Net Income before preferred stock dividends              17,500             3,340       9,328        9,589        21,101

         Series A Preferred stock dividends                                                (a)     358                        358
                                                          ------------------------------------------------------------------------

         Net Income applicable to common shareholders            $17,500            $3,340      $9,686       $9,589       $20,743
                                                          ------------------------------------------------------------------------

         Net Income per Common Share - Basic                       $3.33                                                    $3.30
                                                          ---------------                                           --------------

         Net Income per Common Share - Diluted                     $3.32                                                    $3.29
                                                          ---------------                                           --------------

         Weighted average shares - Basic                       5,253,813                               (d)1,032,794     6,286,607
                                                          ---------------                                           --------------

         Weighted average shares - Diluted                     5,270,947                               (d)1,032,794     6,303,741
                                                          ---------------                                           --------------
</TABLE>

                                          16

<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 an adjustment of
the fair market value of the building based on a current
appraisal and a change in the estimated useful life of the
building to 20 years based on information contained in the
current appraisal and an evaluation of the current condition of
the building.                                                              $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                     358

(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 $29 23/32 if the closing had occurred on October 16, 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.                                1,032,794

                                         17
<PAGE>


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 nine month periods ended September 30, 1998 and 1997, 34.5% and 36.6%,
respectively, of the Company's direct written premiums were derived from
policies written in New York and, for the same periods, 28.4% and 25.7%,
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.

As described in Note 2 to the Company's Notes to Consolidated Financial
Statements, the Company has implemented the guidance of Statement of Financial
Accounting Standards No. 112 ("Statement 112") to account for its extended
earnings program with its agents and agency managers. As a result, the Company
has restated certain amounts within the Company's consolidated financial
statements relating to the retroactive adoption of Statement 112.
                                         18
<PAGE>

Year 2000
---------

Many computer programs and other computer systems upon which the Company relies
were created using only two digits to identify a year in the date field. If not
corrected, many of these computer applications could fail or produce erroneous
results by or at the beginning of the year 2000. In 1996, management began
considering Year 2000 issues as they affect the Company and began to develop a
Year 2000 plan. 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 Year 2000 team to lead the
Company's activities relating to its Year 2000 issues. The Company's Year 2000
team works with the Company's senior management, legal and business units on
Year 2000 issues. The Company's current state of readiness with respect to each
of its IT systems, non-IT systems and third-party providers is discussed below.

The Company uses a process consisting of the following five phases to approach
Year 2000 compliance of its IT systems: (1) Inventory (cataloging the systems
portfolio); (2) Assessment (identifying possible Year 2000 related failures and
developing strategies to remediate them); (3) Remediation (creating or acquiring
corrections to deficiencies); (4) Testing (confirming whether remediation is
successful); and (5) Implementation (installing solutions).

Critical IT systems include product administration systems, key financial
systems and core IT infrastructure. The inventory and assessment phases have
been completed for all critical IT systems. The phases of remediation and
testing of critical IT systems have been 95% completed as of September 30, 1998.
Management of the Company believes that the phases of remediation, testing and
implementation for critical IT systems will be completed by the end of 1998.
Noncritical IT systems include certain other business applications which the
Company does not believe to be critical. The inventory phase has been completed
for the Company's noncritical IT systems as of September 30, 1998. The
assessment, remediation, testing and implementation phases for the Company's
noncritical IT systems are ongoing and are expected to be completed by the end
of 1999.

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 the integrated 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 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's Year 2000 effort also includes a systematic assessment of the Year
2000 compliance status of third-party providers. The Company believes loss of
public utilities, 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, through
letters, questionnaires and/or interviews depending upon the nature of the
product or service supplied, to determine if the provider is Year 2000
compliant. As of September 30, 1998, the Company had received responses from
approximately 85 percent of such third-parties. Many of the responses indicate
that the products or services provided are expected to be Year 2000 compliant.
However, few providers have provided written assurances that they are currently
Year 2000 compliant. The Company continues to track the status of third-party
providers' Year 2000 compliance progress and a follow-up program is under way
with providers that have not responded. Management believes that the process of
evaluating the Year 2000 compliance status of the Company's third-party
providers who provide mission critical services and products will be completed
by June 30, 1999.

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 nine months
ended September 30, 1998, and are not expected to have a material impact in the
remainder of 1998 or 1999. These costs are being funded through operating cash
flows.
                                       19
<PAGE>

The phases of inventory, assessment, remediation, testing and implementation of
the Company's software for Year 2000 issues have been done primarily by the
Company's existing IT staff. Correction of Year 2000 issues is a high priority
project and certain other less critical 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 the Company's financial condition or
results of operations in 1997 or during the nine months ended September 30,
1998. The Company's IT staff has continued to work on other high priority
projects concurrent with the Year 2000 project.

The Company has not conducted a comprehensive analysis of the operational
problems and costs that would be reasonably likely to result from the failure to
achieve Year 2000 compliance on a timely basis. The Company believes that its
most reasonably likely worst case Year 2000 scenarios may include these
elements: (1) one or more parts of the Company's IT systems will operate
incorrectly, thereby resulting in a temporary shutdown or miscalculation in a
system which may have an adverse effect on the Company's operations and (2) one
or more of the Company's third-party providers will be unable to provide the
products or services expected which may have an adverse effect on the Company's
operations. Because of the progress which has been made toward achieving Year
2000 compliance with the Company's IT systems, an IT system contingency plan has
not been developed. 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.
If testing reveals material problems that cannot be remediated, then the Company
intends to develop such contingency plans as are practical based on the
alternatives available. A contingency plan has not been developed for dealing
with the scenario where one or more of the Company's third-party providers will
be unable to provide the services expected. If management believes that a
third-party provider is not Year 2000 compliant, or that a third-party
provider's Year 2000 compliance status is uncertain, then the Company intends to
seek other providers or develop such contingency plans as are practical based on
the alternatives available.

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 IT systems, or that
Year 2000 related failures by third parties with which the Company interacts,
will not have a material adverse effect on the Company's results of operations,
liquidity and financial condition.

In addition to its own computer systems and third-party providers, the Company
may also have exposure in its property/casualty operations to Year 2000 claims
asserted under certain insurance policies it has sold to customers. Although the
Company generally does not issue insurance policies intended to cover risks
related to the Year 2000 issue, there can be no certainty regarding future
judicial or legislative interpretations of coverage. There can be no assurances
that Year 2000 related claims will not emerge and that such claims will not have
a material adverse effect on the Company's results of operations, liquidity and
financial condition.
                                     
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
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 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 governmental 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
                                       20
<PAGE>

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/A 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 September 30, 1998 Compared to the Three Months Ended
September 30, 1997

Premiums
--------
Premium revenue increased $7.2 million or 18.7%, during the three months ended
September 30, 1998 to $45.7 million from $38.5 million for the same period in
1997. The increase in premium revenue in 1998 resulted from an increase of $4.7
million in earned premiums on additional business directly written by the
Company, an increase of $0.3 million in earned premiums from assumed reinsurance
business and a decrease of $2.2 million in earned premiums ceded to reinsurers
and not retained by the Company. The $4.7 million increase in earned premiums on
additional business directly written by the Company was primarily attributable
to an increase of $4.6 million, or 13.4%, 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 $0.3 million in earned premiums from the Company's workers' compensation
business. As of September 30, 1998, the Company had a total of approximately
164,900 policies in force. The number of policies in force related to the
Company's primary products increased by 10.0% to approximately 136,450 as of
September 30, 1998 from approximately 124,100 as of September 30, 1997 and the
average premium earned for each such policy increased by 4.2% during the three
months ended September 30, 1998 compared to the same period in 1997.

Net written premiums increased 10.6% to $46.3 million for the three months ended
September 30, 1998 compared to $41.8 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, Vermont, New Hampshire and Rhode Island. In addition,
direct writings of all the Company's primary products, particularly personal
automobile, increased during the third quarter of 1998. During the three months
ended September 30, 1998, premiums from the Company's direct writings (excluding
assigned risk automobile business premiums received by the Company) increased
$3.9 million compared to the same period in 1997. Direct writings in New Jersey
accounted for $2.2 million ($1.6 million of which represents increased personal
automobile business) of the Company's $3.9 million increase in direct writings
during the three months ended September 30, 1998 compared to the same period in
1997.

Net Investment Income
---------------------
Net investment income increased $0.2 million or 4.6% to $4.8 million for the
three months ended September 30, 1998 from $4.6 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 $32.2 million, or 12.0% as of September 30, 1998 compared to
September 30, 1997. The taxable equivalent yield on the Company's investment
portfolio was 7.1% and 7.2% for the three months ended September 30, 1998 and
1997, respectively.
                                         21
<PAGE>


Realized Investment Gains
-------------------------
Realized investment gains were $0.2 million for the three months ended September
30, 1998 and 1997.

Losses and Loss Adjustment Expenses
-----------------------------------
Losses and loss adjustment expenses increased $6.2 million, or 23.4%, to $32.9
million for the three months ended September 30, 1998 from $26.7 million for the
same period in 1997. Loss and loss adjustment expenses were 72.1% of premium
revenue for the three months ended September 30, 1998 compared to 69.4% 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 third quarter of 1998.
Losses believed to be weather related incurred on the Company's direct written
business in the northeast aggregated $3.3 million in the three months ended
September 30, 1998 compared to $1.2 million for the same period in 1997. The
impact of the weather related losses incurred by the Company during the three
months ended September 30, 1998 was largely offset by the Company's aggregate
stop loss reinsurance program.

Underwriting Expenses
---------------------
Underwriting expenses increased $0.5 million, or 5.0%, to $11.5 million for the
three months ended September 30, 1998 from $11.0 million for the same period in
1997. For the three months ended September 30, 1998, underwriting expenses were
25.3% 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.

Gain on Partial Reduction of Extended Earnings Liability
-------------------------------------------------------
The Company recorded a gain on the partial reduction of its extended earnings
liability of $6.3 million during the three months ended September 30, 1998,
which was the result of modifications made to the agreements with the Company's
agents and agency managers that relieved the Company of the primary obligation
to make extended earnings payments. The Company is primarily liable for its
remaining Statement 112 liability which represents the aggregate amount owed by
the Company to eligible former agents who have terminated their association with
the Company and are currently receiving extended earnings payments.

Federal Income Tax Expense
--------------------------
Federal income tax expense increased $2.4 million to $4.3 million in 1998 from
$1.9 million in 1997. The increase in federal income tax expense was primarily
attributable to the foregoing factors as well as the gain on partial reduction
of extended earnings liability of $6.3 million. Federal income tax expense was
33.5% of income before federal income tax expense for the three months ended
September 30, 1998 compared to 32.9% for the same period in 1997.

Net Income
----------
Net income increased $4.7 million to $8.5 million for the three months ended
September 30, 1998 from $3.8 million for the same period in 1997 primarily as a
result of the foregoing factors, including the gain on partial reduction of 
extended earnings liability of $6.3 million.


The Nine Months Ended September 30, 1998 Compared to the Nine Months Ended
September 30, 1997

Premiums
--------
Premium revenue increased $24.2 million or 22.2%, during the nine months ended
September 30, 1998 to $133.4 million from $109.2 million for the same period in
1997. The increase in premium revenue in 1998 resulted from an increase of $16.1
million in earned premiums on additional business directly written by the
Company, an increase of $2.7 million in earned premiums from assumed reinsurance
business and a decrease of $5.4 million in earned premiums ceded to reinsurers
and not retained by the Company. The $16.1 million increase in earned premiums
on additional business directly written by the Company was primarily
attributable to an increase of $14.3 million, or 14.5%, in earned premiums from
                                         22
<PAGE>

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 $1.6 million in earned premiums from the Company's workers'
compensation business and an increase of $0.2 million in earned premiums from
the Company's other products. As of September 30, 1998, the Company had a total
of approximately 164,500 policies in force. The number of policies in force
related to the Company's primary products increased by 10.0% to approximately
136,450 as of September 30, 1998 from approximately 124,100 as of September 30,
1997 and the average premium earned for each such policy increased by 4.2%
during the nine months ended September 30, 1998 compared to the same period in
1997.

Net written premiums increased 17.1% to $142.2 million for the nine months ended
September 30, 1998 compared to $121.5 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 nine months ended September 30, 1998. During the nine months ended
September 30, 1998, premiums from the Company's direct writings (excluding
assigned risk automobile business premiums received by the Company) increased
$15.4 million compared to the same period in 1997. Direct writings in New Jersey
accounted for $7.7 million ($5.6 million of which represents increased personal
automobile business) of the Company's $15.4 million increase in direct writings
during the nine months ended September 30, 1998 compared to the same period in
1997.

Net Investment Income
---------------------
Net investment income increased $0.8 million or 5.9% to $14.3 million for the
nine months ended September 30, 1998 from $13.5 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 $32.2 million, or 12.2% as of September 30, 1998 compared to
September 30, 1997. The taxable equivalent yield on the Company's investment
portfolio was 7.1% and 7.3% for the nine months ended September 30, 1998 and
1997.

Realized Investment Gains
-------------------------
Realized investment gains decreased $5.1 million to $0.5 million for the nine
months ended September 30, 1998 as compared to $5.6 million for the same period
in 1997. Realized investment gains in the nine months ended September 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 $22.7 million, or 29.6%, to $99.1
million for the nine months ended September 30, 1998 from $76.4 million for the
same period in 1997. Loss and loss adjustment expenses were 74.3% of premium
revenue for the nine months ended September 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 nine months ended September
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 $10.0 million in the nine months ended September 30, 1998 compared to
$4.4 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. The impact of the weather related losses incurred by the Company
during the nine months ended September 30, 1998 was partially offset by the
Company's aggregate stop loss reinsurance program.
                                         23
<PAGE>

Underwriting Expenses
---------------------
Underwriting expenses increased $3.1 million, or 9.9%, to $35.1 million for the
nine months ended September 30, 1998 from $32.0 million for the same period in
1997. For the nine months ended September 30, 1998, underwriting expenses were
26.3% of premium revenue compared to 29.3% 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.

Gain on Partial Reduction of Extended Earnings Liability
--------------------------------------------------------
The Company recorded a gain on the partial reduction of its extended earnings
liability of $6.3 million during the nine months ended September 30, 1998, which
was the result of modifications made to the agreements with the Company's agents
and agency managers that relieved the Company of the primary obligation to make
extended earnings payments. The Company is primarily liable for its remaining
Statement 112 liability which represents the aggregate amount owed by the
Company to eligible former agents who have terminated their association with the
Company and are currently receiving extended earnings payments.

Federal Income Tax Expense
--------------------------
Federal income tax expense decreased $0.1 million to $6.8 million in 1998 from
$6.9 million in 1997. Federal income tax expense was 32.4% of income before
federal income tax expense for the nine months ended September 30, 1998 compared
to 33.5% 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 nine months ended September 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 increased $0.6 million to $14.2 million for the nine months ended
September 30, 1998 from $13.6 million for the same period in 1997 primarily as a
result of the foregoing factors, including the gain on partial reduction of
extended earnings liability of $6.3 million.

Liquidity and Capital Resources
-------------------------------
Net cash provided by operating activities was $22.7 million and $20.6 million
during the nine month periods ended September 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
and reserves for unearned premiums which was partially offset by an increase in
reinsurance receivables and premium receivables.

Net cash used in investing activities was $21.5 million during the nine months
ending September 30, 1998 compared to $20.9 million for the same period in 1997
primarily as a result of an increase in investment purchases from fixed
maturities, and an increase in short-term investments, which were partially
offset by an increase in investment purchases by the Company.

The Company has in place unsecured lines of credit with two banks under which it
may borrow up to $12.0 million. At September 30, 1998, no amounts were
outstanding on the lines of credit, each of which has an annual interest rate
equal to each bank's respective 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.


                                         24
<PAGE>


Future Application of Accounting Standards
------------------------------------------
In June of 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Statement No. 131, "Disclosures about Segments of an
Enterprise and Related Information," ("Statement 131") effective for years
beginning after December 15, 1997. The adoption of Statement 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 No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits," ("Statement 132") effective for
years beginning after December 15, 1997. Statement 132 revises the disclosure
requirements but does not change the measurement or recognition of pensions and
other post retirement benefits. The adoption of Statement 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 No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("Statement 133"). This statement, which is effective
for the Company for the year beginning January 1, 2000, establishes accounting
and reporting standards for derivative instruments and for hedging activities.
Statement 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.

                                         25
<PAGE>


Item 6:        Exhibits and Reports on Form 8-K

                                  EXHIBIT INDEX

                      FARM FAMILY HOLDINGS, INC. FORM 10-Q
                    FOR THE QUARTER ENDED SEPTEMBER 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                Farm Family Life  Insurance  Company,  Farm Family  Casualty
                    Insurance  Company,  Farm  Family  Holdings,   Inc.  Officer
                    Severance Pay Plan Effective August 1, 1994, as amended July
                    29, 1997, and as further amended July 28, 1998


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

Reports on Form 8-K

A report on Form 8-K was filed on August 7, 1998 reporting a press
release issued announcing the Company's operating results for the quarter ended
June 30, 1998.

No financial statements were filed with the Form 8-K.

                                         26
<PAGE>

                            SUMMARY PLAN DESCRIPTION

                       FARM FAMILY LIFE INSURANCE COMPANY
                     FARM FAMILY CASUALTY INSURANCE COMPANY
                           FARM FAMILY HOLDINGS, INC.

                           OFFICER SEVERANCE PAY PLAN
                             Effective July 28, 1998

Purpose
-------
Farm Family Life Insurance Company (hereinafter referred to as "Life"), Farm
Family Casualty Insurance Company (hereinafter referred to as "Casualty") and
Farm Family Holdings, Inc. (hereinafter referred to as "Holdings") have adopted
a severance pay plan effective August 1, 1994, amended July 29, 1997 and further
amended July 28, 1998, the purpose of which is to provide financial benefits to
officers of Life, Casualty or Holdings who lose their positions under Severance
Qualifying Conditions.

Eligible Officers
-----------------
All officers of Life, Casualty and Holdings (hereinafter collectively referred
to as the Companies) are eligible for severance benefits under this plan.

Definitions
-----------
1. Cause: An officer's:

(a) felony conviction or the failure of an officer to contest prosecution
for a felony;

(b) willful misconduct or dishonesty, any of which is directly and
materially harmful to the business or reputation of Life, Casualty or
Holdings;

(c) theft, participation in any material fraudulent conduct, or other acts
involving material misappropriation of property;

(d) habitual drunkenness or habitual drug abuse;

(e) material and willful disclosure of any confidential information;

(f) unlawful discrimination and/or unlawful sexual harassment by an
officer;

(g) serious breach of Life's, Casualty's or Holding's policies; or

(h) continuing inattention to or continuing neglect of the duties to be
performed by an officer which inattention or neglect is not the result
of illness or accident.
                                         27
<PAGE>


2. Change in Control: A change in control of Life, Casualty or Holdings of a
nature that would be required to be reported in response to Item 6(e) of
schedule 14A of Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), whether or not Life, Casualty or Holdings is
subject to the Exchange Act at such time; provided, however, that without
limiting the generality of the foregoing, a Change in Control will in any event
be deemed to occur if and when:

(a) any person (as such term is used in paragraphs 13(d) and 14(d)(2) of
the Exchange Act, hereinafter in this definition, "Person"), other
than Life, Casualty or Holdings, or a subsidiary of Life, Casualty or
Holdings or employee benefit plan of Life, Casualty or Holdings,
becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly of securities of Life, Casualty
or Holdings representing more than twenty-five percent (25%) of the
combined voting power of Life's, Casualty's, or Holdings' then
outstanding securities;

(b) stockholders approve a merger, consolidation or other business
combination (a "Business Combination") other than a Business
Combination in which holders of common stock of Life, Casualty or
Holdings immediately prior to the Business Combination have
substantially the same proportionate ownership of common stock of the
surviving corporation immediately after the Business Combination as
immediately before;

(c) stockholders approve either (i) an agreement for the sale or
disposition of all or substantially all of Life's, Casualty's, or
Holding's assets to any entity that is not a subsidiary of one of said
Companies, or (ii) a plan of complete liquidation; or

(d) the persons who were members of the Board of Directors immediately
before a tender offer by any Person other than Life, Casualty or
Holdings or a subsidiary of Life, Casualty or Holdings, or before a
merger, consolidation or contested election, or before any combination
of such transactions, cease to constitute a majority of the Board of
Directors as a result of such transaction or transactions.

3. Salary: The highest rate of wages, salaries and fees for professional
services, and other amounts received by the officer for personal services
actually rendered in the course of employment with the Companies within the last
2 years, on an annualized basis. Salary does include taxable reimbursements or
other expense allowances, fringe benefits (cash and non cash), and moving
expenses. Salary does not include:

(a) any bonus paid to the officer whether paid pursuant to an annual
incentive plan or otherwise;

(b) any distribution from a plan of deferred compensation;

(c) amounts realized from the exercise of a non qualified stock option, or
when restricted stock (or property) held by an officer either becomes
freely transferable or is no longer subject to substantial risk of
forfeiture; and
                                         28
<PAGE>

(d) amounts realized from the sale, exchange or other disposition of stock
acquired under a qualified stock option.

Severance Qualifying Conditions
-------------------------------
An Eligible Officer whose employment with Life, Casualty or Holdings is
terminated, is eligible for severance benefits, if his or her employment is
terminated under the following conditions ("Severance Qualifying Conditions"):

The officer's employment with Life, Casualty or Holdings is (i) involuntarily
terminated due to the officer not satisfactorily performing the duties of his or
her position with such Company; (ii) terminated due to the elimination of the
officer's position and the officer is not offered another position of comparable
responsibility and compensation with Life, Casualty or Holdings ("Elimination of
Position Termination"); or (iii) terminated due to a Change in Control of Life,
Casualty or Holdings and the officer is not offered a position of comparable
responsibility and compensation by the acquiring or resulting company ("Change
in Control Termination"); AND

The officer executes a release of all claims against Life, Casualty and Holdings
acceptable to Life, Casualty and Holdings.

The termination of an officer's employment with Life, Casualty or Holdings, for
any of the following reasons shall not be treated as a Severance Qualifying
Condition:

1. If an officer resigns, abandons his or her job, fails to return from an
approved leave of absence or initiates termination on any similar basis
other than pursuant to Elimination of Position Termination or Change in
Control Termination; or

2. If an officer is terminated for Cause.

The decision of whether an officer's termination is a Severance Qualifying
Condition shall be determined solely at the Companies' discretion.

Policy
------
The Companies will pay severance pay equal to the greater of:

1. one week's Salary for each Year of Service or

2. (i) 36 months Salary in the case of the Chief Executive Officer; 
  (ii) 24 months Salary in the case of an Executive Vice President; 
 (iii) 12 months Salary in the case of a Senior Vice President; and 
  (iv) 6 months Salary in the case of any officer other than the Chief Executive
       Officer, Executive Vice Presidents, and Senior Vice Presidents

to an Eligible Officer who meets the Severance Qualifying Conditions set forth
above. Any bonuses or performance or merit reviews that are pending or in
process shall not affect the amount of any officer's severance benefits.
                                         29
<PAGE>

In the event an officer becomes eligible for severance benefits due to a
Severance Qualifying Event with respect to Life, Casualty or Holdings or any
combination of the Companies less than all three of the Companies, then Salary
shall include only the amount of Salary which would be allocated to the company
for which there is a Severance Qualifying Event for the Eligible Officer
pursuant to the Amended and Restated Expense Sharing Agreement dated February
14, 1996 or any successor agreement thereto.

Year of Service shall mean a period of 12 months during which the individual is
an officer and/or employee of Life, Casualty or Holdings and does not include
any service as:

1. A leased employee;
2. An independent contractor; or
3. An employee or agent of the Company compensated pursuant to an agent's
training allowance program, agent's, independent agent's, regional
manager's contract or other contract of the same general character.

The decision of how benefits will be paid will be made by the Companies in their
sole discretion. The Companies will pay all benefits under this plan from their
general assets.

Certain Additional Payments by the Companies
--------------------------------------------
In the event it shall be determined that any payment, award, benefit or
distribution (or any acceleration of any payment, award, benefit or
distribution) by the Companies (or any of their affiliated entities) or any
entity which effectuates a Change in Control (or any of its affiliated entities)
to or for the benefit of an Eligible Officer (whether pursuant to the terms of
this Officer Severance Pay Plan or otherwise, but determined without regard to
any additional payments required under this Section) (the "Payments") would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code") (or any similar tax that may hereafter be
imposed), or any interest or penalties are incurred by the Eligible Officer with
respect to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Companies shall pay to the Eligible Officer an additional payment (a "Gross
Up Payment") in an amount such that after payment by the Eligible Officer of all
taxes (including any Excise Tax) imposed upon the Gross Up Payment, the Eligible
Officer retains an amount of the Gross Up Payment equal to the sum of (x) the
Excise Tax imposed upon the Payments and (y) the product of any deductions
disallowed for federal, state or local income tax purposes because of the
inclusion of the Gross Up Payment in the Eligible Officer's adjusted gross
income and the highest applicable marginal rate of federal, state or local
income taxation, respectively, for the calendar year in which the Gross Up
Payment is to be made. For purposes of determining the amount of the Gross Up
Payment, the Eligible Officer shall be deemed to (i) pay federal income taxes at
the highest marginal rates of federal income taxation for the calendar year in
which the Gross Up Payment is to be made, (ii) pay applicable state and local
income taxes at the highest marginal rate of taxation for the calendar year in
which the Gross Up Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes and (iii) have otherwise allowable deductions for federal, state and
local income tax purposes at least equal to those disallowed because of the
inclusion of the Gross Up Payment in the Eligible Officer's adjusted gross
income.
                                         30
<PAGE>

Subject to the provisions of this Section, all determinations required to be
made under this Section, including whether and when a Gross Up Payment is
required and the amount of such Gross Up Payment, and the assumptions to be
utilized in arriving at such determinations, shall be made by tax counsel,
compensation consultants or auditors of nationally recognized standing (the
"Independent Advisors") selected by the Companies and reasonably acceptable to
the Eligible Officer which shall provide detailed supporting calculations both
to the Companies and the Eligible Officer within fifteen (15) business days of
the receipt of notice from the Companies or the Eligible Officer that there has
been a Payment, or such earlier time as is requested by the Companies
(collectively, the "Determination"). All fees and expenses of the Independent
Advisors shall be borne solely by the Companies. The Gross Up Payment under this
Section with respect to any Payments shall be made no later than thirty (30)
days following such Payment. If the Independent Advisors determine that no
Excise Tax is payable by the Eligible Officer, it shall furnish the Eligible
Officer with a written opinion to such effect, and to the effect that failure to
report the Excise Tax, if any, on the Eligible Officer's applicable federal
income tax return will not result in the imposition of a negligence or similar
penalty. The Determination by the Independent Advisors shall be binding upon the
Companies and the Eligible Officer. In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account hereunder
at the time the Gross Up Payment is made, the Eligible Officer shall repay to
the Companies at the time that the amount of such reduction in Excise Tax is
finally determined (but, if previously paid to the taxing authorities, not prior
to the time the amount of such reduction is refunded to the Eligible Officer or
otherwise realized as a benefit by the Eligible Officer) the portion of the
Gross Up Payment that would not have been paid if such Excise Tax had been
applied in initially calculating the Gross Up Payment, plus interest on the
amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the
Code. In the event that the Excise Tax is determined to exceed the amount taken
into account hereunder at the time the Gross Up Payment is made (including by
reason of any payment the existence or amount of which cannot be determined at
the time of the Gross Up Payment), the Companies shall make an additional Gross
Up Payment and shall indemnify and hold the Eligible Officer harmless in respect
of such excess (plus any interest and penalties payable with respect to such
excess) at the time that the amount of such excess is finally determined. The
Eligible Officer shall cooperate, to the extent his or her expenses are
reimbursed by the Companies, with any reasonable requests by the Companies in
connection with any contests or disputes with the Internal Revenue Service in
connection with the Excise Tax.

Review of Denial of Benefits/Appeal Process
-------------------------------------------
If an officer does not receive benefits to which the officer thinks he or she is
entitled, the officer may file a claim for those benefits. The Vice
President-Human Resources will rule on the claims within 60 days of receipt of
the claim. In the case of claims made by the Vice President-Human Resources, the
Chief Executive Officer of the Companies shall make such review and
determination. If claims are denied, in whole or in part, the officer will be
notified in writing. A copy of the ruling and a statement supporting the
decision will be given to the officer. The notice will indicate why the claims
were denied, and either describe any additional information necessary to grant a
claim or instruct the officer on how to appeal the denial.
                                         31
<PAGE>

After an officer receives notice of denial of his or her claims, the officer may
appeal to the Plan Administrator, in writing within 60 days. If the officer does
not make an appeal within 60 days, the original decision will become final. The
officer may include in the written appeal any reasons for appeal and any
information to support the officer's rights to benefits. The Plan Administrator
will then reexamine all the facts and come to a final decision. The officer will
be notified of this decision within 60 days of the time that the officer submits
the written appeal, unless there are special circumstances, such as a hearing.
The officer will be notified if an extension is required. However, in no case
will the officer receive the Plan Administrator's decision later than 120 days
after the appeal is submitted. The notice of final decision will include
specific reasons for the decision and identify the plan provisions relied upon.

Amendment or Termination of the Plan
------------------------------------
The Companies reserve the right to amend or terminate the plan at any time, with
or without advance notice, by action of the Board of Directors. Provided,
however, that no amendment or termination of the plan will reduce the amount the
Companies agree to pay officers covered by the Plan at the time of the amendment
or termination, in the event of a Severance Qualifying Condition below the
following amounts:

(i)   36 months Salary in the case of the Chief Executive Officer; 
(ii)  24 months Salary in the case of an Executive Vice President; 
(iii) 12 months Salary in the case of a Senior Vice President; and
(iv)  6 months Salary in the case of an officer other than the Chief Executive
      Officer, Executive Vice Presidents and Senior Vice Presidents.

Further, it is provided, that no amendment or termination of the plan adversely
affecting the right of any officer to severance pay hereunder due to a Change in
Control of Life, Casualty or Holdings, shall be effective if made after the
Board of Directors has approved such Change in Control.

Employee rights under ERISA
---------------------------
As a participant in this plan, officers are entitled to certain rights and
protection under ERISA. ERISA provides that all plan participants shall be
entitled to:

Examine, free of charge, at the administrative office in their geographic
area, all plan documents and copies of all documents filed by the plan with the
U.S. Department of Labor.

Obtain copies of all plan documents and other plan information upon
written request to the plan administrator. The plan administrator may make a
reasonable charge for the copies.

In addition to creating rights for the plan participants, ERISA imposes
obligations on the people who are responsible for the operation of the plan. The
people who operate the plan, called "fiduciaries" of the plan, have a duty to do
so prudently and in the interest of all plan participants and beneficiaries.
                                         32
<PAGE>

No one, including the Companies or any other person, may discriminate
against employees to prevent them from obtaining a benefit or exercising their
rights under ERISA.

If a claim for a benefit is denied in whole or in part, an employee must
receive a written explanation of the reason for the denial. Employees also have
the right to have the plan administrator review and reconsider any claim.

Under ERISA, there are steps employees can take to enforce the above
rights. For instance, if a participant in the plan requests materials from the
plan administrator and does not receive them within thirty days, the participant
may file suit in a federal court. In such a case, the court may require the plan
administrator to provide the materials and pay up to $100 a day until the
participant receives the materials, unless the materials were not sent because
of reasons beyond the control of the plan administrator. If a claim for benefits
is denied or ignored, in whole or in part, the participant may file suit in a
state or federal court.

If any employee is discriminated against for asserting that person's
rights, assistance may be sought from the U.S. Department of Labor or the
participant may file suit in a federal court. The court will decide who should
pay court costs and legal fees. If the participant is successful, the court may
order the person sued to pay these costs and fees. If the participant loses, the
court may order that person to pay these costs and fees, for example, if it
finds a claim is frivolous.

If a participant has any questions about the plan, the participant should
contact the Human Resources Department of the Companies. If a participant has
any questions about this statement or about his or her rights under ERISA, the
nearest area office of the Labor-Management Services Administration, U.S.
Department of Labor, should be contacted.

General Information. Officers should note the following information about
the severance plan:

     Plan Sponsor. The Plan is sponsored by:

     Farm Family Life Insurance  Company 
     Farm Family Casualty  Insurance Company
     Farm Family Holdings,  Inc. 
     P.O. Box 656 
     Albany,  New York 12201-0656  
     Telephone Number (518) 431-5000

Plan Administrator: Farm Family Life Insurance Company is the plan
administrator. The plan administrator makes the rules and regulations necessary
to administer the plan. The plan administrator shall have the responsibility and
discretionary authority to interpret the terms of this plan, to determine
eligibility for benefits and to determine the amount of the benefits. The
interpretations and determinations of the plan administrator shall be final and
binding.

Agent for legal process: The Vice President-Human Resources of Life and
Casualty shall be the agent for service of legal process for all of the
Companies. Any communications should be sent to the following address:
                                         33
<PAGE>

     Vice  President-Human  Resources  
     Farm Family Life  Insurance  Company 
     Farm Family Casualty Insurance Company 
     Route 9W 
     Glenmont, NY 12077

     Mailing Address: 
     P.O. Box 656 
     Albany, NY 12201-0656

Legal process may also be served on the plan administrator at the following
address:

     Farm Family Life Insurance Company 
     Attn.: Human Resources  Department 
     Route 9W 
     Glenmont, NY 12077

     Mailing Address: 
     P.O. Box 656 
     Albany, NY 12201-0656

Plan year: The records of the plan are kept on a calendar year basis.

Identification number: If an officer needs to discuss the plan with a
federal government agency, he or she should reference the plan number 510. The
Company's employer identification numbers are:

     Farm  Family  Life  Insurance  Company   14-1400831  
     Farm  Family  Casualty Insurance Company 14-1415410
     Farm Family Holdings, Inc. 14-1789227

                                         34
<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)




November 13, 1998    By:/s/ Philip P. Weber
-----------------    -----------------------------------------------------------
     (Date)            Philip P. Weber, President & Chief Executive Officer
                               (Principal Executive Officer)




November 13, 1998    By:/s/ Timothy A. Walsh
-----------------    -----------------------------------------------------------
     (Date)             Timothy A. Walsh, Executive Vice President - Finance & 
                                             Treasurer
                             (Principal Financial & Accounting Officer)
                                         35