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                                                                 Exhibit 10.5

                               FARMERS GROUP, INC.
                           EXECUTIVE INCENTIVE PROGRAM
                     AS AMENDED MAY 7, 1997 AND AUGUST 13, 1997


1.   Purpose

     The Farmers Group, Inc. Executive Incentive Program (the "Program") is
designed to award and compensate key executives who contribute substantially
to the financial success of Farmers Group, Inc., its subsidiaries and its
affiliates (the "Corporation"), and to focus the efforts of such key
executives on the continued success of the Corporation.

2.   Administration

     (a)	The Program shall be administered by the Board of Directors of the
Corporation (the "Board") and by the Compensation Committee of the Board
(the "Compensation Committee"), as hereinbelow described.  The Board shall
have discretion to select key executives who are to be eligible to receive
awards under the Program with respect to each fiscal year, and to determine
the amount of such awards, subject to the terms and conditions set forth
in the Program and such other terms and conditions as are not inconsistent
with the purposes and provisions of the Program.

     (b) The Board may establish such rules and regulations as deemed
appropriate for proper administration of the Program and may modify or revoke
such rules and regulations from time to time.  In addition, the Board may
make such determinations and take such action in connection with the Program
as are necessary.

     (c) All determinations and interpretations of the Board shall be final
and binding, except that all awards are subject to final approval by B.A.T.

3.   Eligibility and Participation

     Eligibility and participation in the Program are restricted to the Chief
Executive Officer of the Corporation and such Home Office Officers and Field
Executives of the Corporation whom the Board, in its discretion, selects to
receive awards under the Program.

4.   Determination and Allocation of Awards

     (a) Awards under the Program shall be made from a pool (the "Pool"),
which Pool for a given year shall consist of twenty percent (20%) of Growth
in Earnings (as hereinbelow defined) for that year, less a factor for a
decrease in Exchange Surplus as also defined below.

     (b) Growth in Earnings for a particular year shall mean the increase in
the USPGAAP Net Income of the Corporation over the USPGAAP Net Income of the
Corporation for the immediately preceding year.  For purposes of determining
the amount of the Pool, USPGAAP Net Income shall be adjusted as follows:

         (1)  Awards paid or accrued under this Program shall be excluded;

         (2) Capital gains or losses attributable to sales of real estate or
             equipment used solely in the Corporation's insurance business
             shall be excluded to the extent that they individually or
             collectively exceed two percent (2%) of  USPGAAP Net Income in
             any one calendar quarter;

         (3) In the event that the statutory rates used in determining Federal
             Income Tax and/or California Franchise Tax are increased or
             decreased in a particular year from the rates applicable during
             the immediately preceding year, or if the method of determining
             and reporting said taxes changes due to a change in accounting
             method required by a recognized rule-making body, said taxes
             applicable to the

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             preceding year shall be recalculated on an equivalent basis in
             determining USPGAAP Net Income for such preceding year;

         (4) Capital gains or losses arising from the sale or other
             disposition of any joint venture investment of F.I.G. Holding
             Company entered into before January 1, 1974 shall be excluded;

         (5) Any expense or income attributable to merger or acquisition
             activities shall be excluded; and 

         (6) Other extraordinary items as approved by the Compensation
             Committee.

     (c) Growth in Earnings for each year shall be determined by the Chief
Financial Officer for the Corporation and verified by the independent
certified public accountants of the Corporation.  The Pool shall be an
accrued liability in the consolidated financial statements of the Corporation
and the amount accrued in the Pool shall not be placed in a separate account
or in trust or otherwise be segregated from the general funds of the
Corporation.

     (d) A three-year weighted average Surplus Ratio shall be calculated and
compared to the Target Surplus Ratio of 33 1/3% (premium written to surplus of
3 to 1).  If the three-year weighted average Surplus Ratio is at or greater
than 33 1/3%, no reduction in the Bonus Pool will be made.  If the three-year
weighted average Surplus Ratio is less than 33 1/3%, the Bonus Pool will be
reduced in the following manner.  A Maximum Reduction of 20% of the Bonus Pool
will be made when the Exchange Surplus Ratio is 28.57% (premium written to
surplus of 3.5 to 1) or lower.  The Maximum Reduction will be reduced
proportionately based on where the three-year weighted average Surplus Ratio
falls between 33 1/3% and 28.57%.  

     (e) The Award to the Chief Executive Officer of the Corporation under the
Program for each year shall not exceed seventy-five percent (75%) of the base
salary paid to the Chief Executive Officer during the year to which the award
relates, except as outlined in section 4(h) below.  The Award amount for the
Chief Executive officer shall be determined by the B.A.T Industries Group
Compensation Committee.

     (f) The Chief Executive Officer shall evaluate the performance and
contribution to the successful operation of the Corporation of each Officer
and Field Executive of the Corporation and shall recommend to the Compensation
Committee each year, prior to the February meeting of the Board, the
percentage of the Pool for the preceding year which he believes should be
awarded to each such individual.  Such recommendations shall be in an amount
not to exceed one hundred percent (100%) of the Pool, except as outlined in
section 4(h) below, less the percentage of the Pool awarded to the Chief
Executive Officer.  Awards for Level I executives shall not exceed 75% of
salary, awards to Level II executives shall not exceed 60% of salary,
awards for Level III executives shall not exceed 40% of salary, except as
outlined in section 4(h) below.  Membership in each level shall be determined
by the Chief Executive Officer at the outset of the performance year.
Generally, Level I executives are direct reports to the CEO, Level II
executives are Home Office and Level III executives are Field Executives, or
more junior executives.

     (g) Each year, prior to the February meeting of the Board, the
Compensation Committee shall receive the recommendations of the Chief
Executive Officer and shall confer with him concerning such recommendations.
Such recommendations will be based on estimated prior year end and financial
results. The Compensation Committee shall then recommend to the Board at the
February meeting of the Board the individuals to receive awards under the
Program and the percentage of the Pool which should be awarded to each such
individual.  The Board shall, in its absolute discretion, select the
individuals to whom awards shall be made under the Program and determine the
percentage of the Pool which shall be awarded to such individuals.  No award
made under the Program shall exceed the maximum award applicable to the level
of the incumbent either 75%, 60%, or 40% of the base salary paid to an
individual during the year to which the award relates, except as outlined in
section 4(h) below.  Final confirmation by the Board based on actual prior
year end results will occur at the May meeting of the Board.

     (h) Payment of EIP awards is contingent upon performance of the
Corporation as it relates to the performance of a peer group of companies.
Depending upon which quartile performance falls, individual awards
may be increased/decreased based on individual performance as shown below:


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<TABLE>
<CAPTION>
         <S>                            <C>
         Peer Group Standing            Award Adjustment
         -------------------            ----------------
         Fourth Quartile                +33 1/3%
         Third Quartile                 No Adjustment
         Second Quartile                -33 1/3% 
         First Quartile                 -66 2/3 %

</TABLE>

Should the Award Pool be insufficient to fund the approved awards in the fourth
quartile, additional funds will be added and expensed.  In no event will the
amount of the additional funds be greater than one-third of the original Pool
for the year.  A comparative analysis is to be provided to the Compensation
Committee each year to substantiate the current year's awards.  

     (i) Payments of awards under the Program shall be within the absolute
discretion of the Board subject to the final approval of B.A.T.  The Board
shall be under no obligation to award all of the Pool or any portion thereof.

     (j) The Pool shall not accumulate from year to year, and any amount in
the Pool not distributed pursuant to the Program shall revert to net income of
this Corporation.

     (k) Payment of awards under the Program shall be made no later than
April 15 after the close of the calendar year to which the award relates.

     (l) The Corporation shall have the right to deduct any sums required to
be withheld by federal, state or other applicable laws from payments of awards
under the Program.

5.   Rights of Participants and Beneficiaries

         (a)  No individual shall have any vested or protectable interest in,
legal right to, or shall otherwise be entitled to, any amount under the
Program until such time as the Board by resolution approves an award to such
individual.  Nothing in the Program shall be deemed to give any individual, or
his or her legal representative or assigns, or any other person or entity
claiming under or through him, any contract or right to participate in the
benefits of the Program.

         (b)  The Corporation shall pay all amounts payable hereunder only to
the individual or beneficiaries entitled thereto pursuant to this Program. The
Corporation shall not be liable for the debts, contracts, or engagements of
any individual or his or her beneficiaries, and rights to payments under this
Program may not be taken in execution by attachment or garnishment, or by any
other legal or equitable proceeding while in the hands of the Corporation; nor
shall any individual or his or her beneficiaries have any right to assign,
pledge, or hypothecate any benefits or payments hereunder.

         (c)  Participation in the Program shall not be construed as
constituting a commitment, guarantee, agreement or understanding of any
kind that the Corporation shall continue to employ any individual.

         (d)  Any individual eligible to participate in the Program may
designate a beneficiary to receive payments of awards under the Program in the
case of such individual's death.

         (e)  Commencing with awards to be made for services rendered, on or
after January 1, 1984 and for which awards are to be paid after January 1,
1985, any individual eligible to participate in the Program may request that
payment of all or a portion of any award be deferred until the occurrence of
retirement, death or permanent disability.  Such request must be made to the
Compensation Committee in writing on or before December 31 of the performance 
year which is the year prior to the date the awards are determined and paid
(i.e., a request must be made on or before December 31, 1988, relating to any
award under the Program which might be determined and paid in 1989).  Such
request shall specify that either 25%, 50%, 75% or 100% of awards which might
be made are to be deferred and shall specify whether such request relates only
to awards relating to services to be performed during the next calendar

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year or to all awards which might be made under the Program in the second
succeeding and all future years.  Once such a request for deferral is made,
it may not be withdrawn by the participant except with respect to any awards
for service to be performed in calendar years following the year in which the
date such request for withdrawal is made.  Any such request for withdrawal
must be made in writing to the Compensation Committee.  If the Board selects
the individual for an award and in its sole discretion consents to the request
for deferred payment, to any amount so deferred there will be interest added
to the deferred amount for each year or partial year the payment of the award
is deferred.  The participant in this Deferred Payment Plan may elect at the
time of initially requesting deferral to commence payment of benefits within
thirty (30) days of retirement, death or the date it is established to the
satisfaction of the Compensation Committee that the participant has a
permanent disability, either in a single payment or in five (5) or ten (10)
equal annual payments to which will be added an interest equivalent from the
first payment date computed as provided above.  On single payments made within
30 days of retirement, death or disability, the interest rate earned between
the date of retirement, death or disability until the date of disbursement
will be based on the average yield of the institutional money market fund in
which the Corporation invests.

     In the event of extreme hardship, any participant may make a written
request to the Compensation Committee for immediate payment.  For this
purpose, an extreme hardship is an unanticipated emergency caused by an event
beyond the control of the participant that would result in severe financial
hardship if early withdrawal were not permitted.  The amount to be withdrawn
must be limited to the amount necessary to meet the emergency.  Amounts
deferred under this Section 5 (e) will be held as part of the general assets
of the Corporation and shall not be set aside or funded in any manner;
provided that deferred amounts and any earnings thereon may be set aside in
one or more non-qualified grantor trusts so long as such arrangements do
not result in benefits hereunder being considered funded for federal tax
purposes.

     Notwithstanding any other provision hereof, to the extent deferred
amounts are funded through one or more grantor trusts, then earnings or
appreciation thereon shall be determined solely by reference to the experience
of assets in such trust or trusts.  This Corporation shall direct the trustee
or trustees of such trust or trusts, as the case may be, as to the investment
of assets in such trust or trusts and the Corporation may, in advising the
trustee, offer, in any manner and to any extent it deems appropriate,
Participants the opportunity to advise the Corporation as to how assets
allocated to their respective accounts are to be invested.  In no event may
Participants communicate directly with any trustee in regard to asset
investment.  Participants shall in no event have rights greater than those of
general creditors of the Corporation with respect to any amounts held in trust.
Any amounts deferred hereunder as well as any earnings are not subject to
anticipation, alienation or hypothecation by any Participant.

6.  Termination of Employment

         (a)  In the event of death, disability or retirement during the year
to which the award relates, a pro rata award shall be paid to any individual
who would have otherwise received an award under the Program.  In the event
of disability or retirement, such award shall be paid to the individual.  In
the event of death, such award shall be paid to the individual's estate or
legal representative, as determined by the Compensation Committee or, in the
event the individual has designated a beneficiary to receive payments of
awards under the Program in the case of such individual's death, to such
beneficiary.

         (b)  In the event of termination of employment for any other reason
during the year to which the award relates, such individual's eligibility to
receive any award for such year shall be terminated, although the Chief
Executive Officer may, at his discretion, recommend to the Compensation
Committee that a pro rata award be made.

         (c)  In the event of termination of a participant's employment in the
Deferred Payment Plan for any reason other than retirement, permanent
disability or death, payment of all deferred amounts in the Deferred Payment
Plan together with the appropriate interest equivalent will be made in a
single payment within 30 days after the employment termination date.  From the
date of termination until distribution, Deferred amounts will earn an interest
rate based on the average yield of the institutional money market fund in
which the Corporation invests. 


7.   Effective Date, Amendment and Termination of Program

         The amendments to the Program adopted by the Board of Directors on
August 5, 1983


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shall be effective for the year ending December 31, 1983.  The amendments
to the Program adopted by the Board of Directors in November 1987 and
in February 1988 shall be effective for the year ending December 31, 1987
and subsequent years.  The amendments to the Program adopted in November 1988
shall be effective for the year ending in December 1988 and subsequent years.
The amendments to the Program adopted in February 1990 shall be effective for
the year ending in December 1990 and subsequent years.  The amendments to the
Program adopted in May and November 1993 shall be effective for the year
ending in December 1993 and subsequent years.  The amendments to the Program
adopted in May and August 1997 shall be effective for the year ending in
December 1997 and subsequent years.  The Program may be amended or terminated
at any time by the Board.  Such amendment or termination shall not adversely
affect or alter any right or obligation with respect to any award previously
made hereunder.

8.   Special Rule

         Benefits under the Program, whether paid currently or deferred under
Section 5, constitute no more than an unsecured promise by the Corporation to
provide said benefits and no participant or beneficiary shall have rights
greater than those of a general creditor of the Corporation in either the
general assets of the Corporation or the assets of any trust established under
Section 7 hereof in connection with such benefits.

9.   Governing Law

         This Program shall be governed by the laws of the State of
California.