UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-K


                 ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1996
                           Commission File No. 2-57299

                     FARM FAMILY CASUALTY INSURANCE COMPANY
                           New York IRS No. 14-1415410

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




        Securities registered pursuant to Section 12(b) of the Act: None
        Securities registered pursuant to Section 12(g) of the Act: None





     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 No


Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.


Farm Family  Casualty  Insurance  Company issued  2,253,878  shares of $1.60 par
common stock (the "Common Stock) to Farm Family Holdings,Inc.  on July 26, 1996.
All of the  Common  Stock is owned by Farm  Family  Holdings,  Inc.  There is no
market for the Common Stock.




                                     PART I


ITEM 1.  BUSINESS

Overview

     Farm Family Casualty Insurance Company (referred to herein as the "Company"
or "FFCIC") is a  specialized  property  and  casualty  insurer of farms,  other
generally related businesses and residents of rural and suburban  communities in
Connecticut,  Delaware,  Maine,  Massachusetts,  New Hampshire,  New Jersey, New
York,  Rhode  Island,  Vermont and West  Virginia.  Established  in 1955 to meet
certain insurance needs of Farm Bureau(R) members in the Northeast,  the Company
provides  flexible,  multi-line  packages  of  insurance  for those  engaged  in
agricultural  pursuits,  as well as automobile,  commercial  general  liability,
workers' compensation, umbrella liability, businessowners,  homeowners and other
insurance  products to rural and  suburban  policyholders  in ten  states.  Life
insurance  products are also sold to many of these customers by Farm Family Life
Insurance  Company  (the  "Life  Company"),  an  affiliate  of the  Company.  In
addition,  the Company's  wholly owned  subsidiary,  Rural Agency and Brokerage,
Inc. ("Rural Agency") places insurance coverages not underwritten by the Company
for the  Company's  policyholders.  The Company is a wholly owned  subsidiary of
Farm Family Holdings, Inc.

     The  Company  is closely  affiliated  with the Farm  Bureaus(R)  in the ten
states in which it operates (collectively,  the "Farm Bureaus"). The Company has
the  exclusive  endorsement  of the Farm  Bureaus  to market  property  casualty
insurance  in  these   states.   Membership  in  state  or  county  Farm  Bureau
organizations  is  generally a  prerequisite  for the issuance or renewal of any
policy by the Company.

     The  Company  markets its  insurance  products  through  more than 200 Farm
Family  agents and field  managers  who are  located  in the rural and  suburban
communities  served  by the  Company.  These  agents  generally  sell  insurance
products  only for the Company and the Life Company.  The Company  believes that
the  distinctive  focus of the Company and its agents on meeting the specialized
insurance needs of rural communities has provided the Company with the knowledge
and experience to adapt to changes in the demographics of its markets and in the
nature of agricultural related businesses. In addition to insuring those engaged
in agricultural pursuits such as dairy, vegetable and fruit farming, the Company
insures  a wide  range of  other  businesses  related  to  agriculture,  such as
distributors of agricultural  products,  horse breeding and training facilities,
landscapers, nurseries, florists, wineries and growers of specialty products. In
recent  years,  the  Company has also  introduced  businessowners  products  for
certain retail and contractor  businesses and for owners of apartment and office
buildings, as well as a homeowners product.

     The Company's  principal  strategy is to maintain its focus on meeting many
of  the  specialized   insurance  needs  of  Northeastern   rural  and  suburban
communities.  The Company's  flagship  product,  the Special Farm Package,  is a
flexible  policy  that  can be  adapted  to  meet  the  needs  of a  variety  of
agricultural  and  agricultural   related   businesses.   As  evidenced  by  its
introduction  of  businessowners  products in 1990,  the  Company  also seeks to
leverage its local reputation,  agency force, knowledge and experience to expand
its product  offerings to a wider variety of customers in the rural and suburban
communities  in which it  currently  operates.  In  addition,  the Company  will
continue to seek to  facilitate  and  expedite  sales,  underwriting  and policy
administration  functions  through the expanded use of local service centers and
computer networking communications with the home office.

Plan of Reorganization and Conversion:

     On  July  26,  1996,  in  accordance  with a  Plan  of  Reorganization  and
Conversion  ( the  "Plan")  filed with and  approved  by the  Superintendent  of
Insurance of the State of New York, the Company converted from a mutual property
and  casualty  insurance  company to a stock  property  and  casualty  insurance
company,  changed its name from Farm  Family  Mutual  Insurance  Company to Farm
Family Casualty Insurance Company,  and became a wholly owned subsidiary of Farm
Family Holdings,  Inc. (the "Holding  Company").  Under the Plan,  eligible Farm
Family  Mutual  policyholders  received  either  shares of  common  stock of the
Holding  Company or cash in exchange  for their  policyholder  interests  in the
Company,  and holders of surplus notes  electing to surrender  such notes in the
reorganization received shares of common stock of the Holding Company or cash in
exchange for such notes.  The principal  purposes of the  reorganization  are to
improve  the  Company's  access to the capital  markets and to raise  capital to
expand and develop  its  business  in the rural and  suburban  areas in which it
currently operates.



<PAGE>


Related  Party Transactions

The operations of the Company are closely related with those of its parent, Farm
Family  Holdings,  Inc.,  and its  affiliates,  the  Life  Company  and the Life
Company's  wholly  owned  subsidiary,   United  Farm  Family  Insurance  Company
("United").  The affiliated  companies  operate under similar Board of Directors
and have similar senior management.  In addition, the affiliated companies share
home office facilities,  data processing equipment,  certain personnel and other
operational expenses.

The Company and the Life Company are parties to an Amended and Restated  Expense
Sharing  Agreement,  effective  as of February  14, 1996 (the  "Expense  Sharing
Agreement"),   pursuant  to  which  shared  expenses  for  goods,  services  and
facilities  are allocated  between the Company and the Life  Company.  Under the
Expense Sharing Agreement,  expenses are allocated in accordance with applicable
provisions of the New York Insurance Law and regulations promulgated thereunder.
Direct expenses are charged as incurred to the Company and the Life Company,  as
applicable,  at cost. For each of the years ended  December 31, 1996,  1995, and
1994, 63%, 61%, and 60%, respectively,  of aggregate operating expenses totaling
$30.7 million, $26.8 million and $23.8 million, respectively,  were allocated to
the Company, under a similar expense sharing arrangement.

The Company and the Life Company are parties to a Lease  Agreement dated July 1,
1988, as amended by Amendment to Lease Agreement,  effective January 1, 1994 (as
so amended,  the "Lease  Agreement")  pursuant to which the Company  leases home
office space in Glenmont, New York from the Life Company.  Annual rent under the
Lease Agreement was $712,000, $687,000, and $629,000 for each of the years ended
December 31, 1996, 1995, and 1994, respectively.

The Company's  reinsurance program includes reinsurance  agreements with United.
In accordance  with the  provisions of these  reinsurance  agreements,  premiums
earned, losses and expenses ceded by the Company to United were as follows:

($ in thousands)                                   1996      1995      1994
----------------------------------------           ----      ----      ----
Premiums earned ...............................  $9,334    $9,238    $9,750
Losses ........................................   7,049     6,447     7,158
Expenses ......................................     446       199       213
Net ...........................................  $1,839    $2,592    $2,379

     The Company and United are  parties to a Service  Agreement  dated July 25,
1988 (the "Service  Agreement")  pursuant to which the Company  provides  United
with certain  administrative  and special services necessary for its operations,
including, but not limited to, claims management, underwriting,  accounting, tax
and  auditing,  investment  management,  and  functional  support  services.  In
addition,  the  Company  provides  United  with  certain  personnel,   property,
equipment  and  facilities  for its  operations.  For  each of the  years  ended
December 31, 1996, 1995, and 1994, United incurred  approximately  $0.7 million,
$0.8 million, and $0.5 million,  respectively,  in direct and allocated expenses
and overhead under the Service Agreement.

Products

     The Company  offers a variety of property and casualty  insurance  products
primarily  designed  to meet the  unique  insurance  needs  of its  agricultural
clients and the general insurance needs of the rural and suburban communities in
which it does business.  Many  policyholders  have more than one policy with the
Company,  most  commonly,  a property  policy (such as a Special Farm Package or
homeowners policy) and an automobile policy.

The  following  table sets forth by product the direct  premiums  written by the
company for the periods indicated:
<TABLE>
<CAPTION>

                                          Year Ended December 31,
($ in millions)
                                       % of           % of           % of
                                1996   Total   1995   Total   1994   Total
                                ----   -----   ----   -----   ----   -----

<S>                             <C>    <C>     <C>    <C>     <C>    <C>

Personal Automobile ......      $50.0  34.2%   $46.5  34.2%   $40.3  33.0%
Special Farm Package             35.9  24.5%    34.0  25.0%    32.7  26.8%
Commercial Automobile            24.1  16.5%    22.7  16.7%    20.2  16.6%
Workers' Compensation             9.7   6.5%     9.1   6.7%     8.1   6.6%
Businessowners                    7.6   5.2%     6.6   4.9%     5.3   4.3%
Homeowners                        6.1   4.2%     5.2   3.8%     4.1   3.4%
Umbrella                          4.6   3.1%     4.4   3.2%     4.2   3.4%
Commercial General Liability      3.9   2.7%     3.4   2.5%     3.0   2.5%
Special Home Package              2.9   2.0%     2.8   2.1%     2.8   2.3%
Fire, Allied, Inland Marine       1.2   0.8%     1.0   0.7%     1.0   0.8%
Products Liability                0.3   0.2%     0.2   0.1%     0.2   0.2%
Pollution                         0.1   0.1%     0.1   0.1%     0.1   0.1%
                                  ---   ---      ---   ---      ---   ---
     Total                     $146.4 100.0%  $136.0 100.0%  $122.0 100.0%
                               ====== =====   ====== =====   ====== =====
</TABLE>

     Personal Automobile.  Personal automobile is the Company's largest product.
The Company's  industry standard policies are generally  marketed in conjunction
with its other products,  such as the Special Farm Package,  the  businessowners
policy or the homeowners policy.

     Special Farm  Package.  The Special Farm  Package,  developed in 1980, is a
flexible, multi-line package of insurance coverages which the Company regards as
its "flagship" product.  As a result of its flexible features,  this product can
be  adapted  to  meet  the  needs  of a  variety  of  agricultural  and  related
businesses. The Special Farm Package policy combines personal, farm and business
property and liability  insurance for the farm owner, as well as owners of other
agricultural related businesses, such as horse breeding and training facilities,
nurseries, wineries and greenhouses.

     Commercial Automobile. Commercial automobile is the Company's third largest
product.  The Company's  industry  standard  policies are generally  marketed in
conjunction with the Special Farm Package or the businessowners policy.

     Workers'  Compensation.  The Company  generally  does not seek to market or
write its  workers'  compensation  policy apart from a Special Farm Package or a
businessowners policy.

     Businessowners.  The Company introduced a businessowners  product (based on
the industry standard policy form) in 1990 to meet the needs of small businesses
within its rural and suburban markets.  This product is marketed to two distinct
groups:  (i) "mercantile  businessowners"  with property based risks,  including
apartment  and  office  building   owners  and  small  to  medium-sized   retail
businesses,  such as  florists  and farm  markets  and (ii)  small,  established
artisan contractors principally serving the agricultural community.

     Special Home Package and  Homeowners  Policy.  The Special Home Package was
developed in 1980 as a companion  product for the Special  Farm Package  policy.
The Company's  homeowners policy,  introduced in 1989, is a standard  homeowners
multi-peril  policy  for the rural and  suburban  homeowner.  Increasingly,  the
homeowners policy is being sold to provide coverage for the insured's  principal
residence,  while the  Special  Home  Package  is used by the  Company to insure
rural-based,  tenant  occupied  residences.  Like the Special Farm Package,  the
Special Home Package  combines  personal and  commercial  property and liability
coverages,  and contains  flexible features which also allow it to be adapted to
meet the needs of a variety of customers.

     Umbrella Liability.  The Company writes commercial and personal line excess
liability  policies  covering  business,  farm and personal  liabilities  of its
policyholders   in  excess  of  amounts  covered  under  Special  Farm  Package,
homeowners,  businessowners and automobile policies. Such policies are available
with limits of $1.0 million to $5.0 million. The Company does not generally seek
to market its excess  liability  policies  unless it also  writes an  underlying
liability policy.

     Commercial  General  Liability.  The Company  writes an  industry  standard
commercial  general  liability policy which is generally  marketed in connection
with the  Special  Farm  Package or, as an  accommodation  to  policyholders  in
connection  with  the  commercial  automobile  policy.  The  commercial  general
liability  policy is generally not written apart from these other policies.  The
policy is usually written by the Company for unique business situations, such as
horse breeding and training  facilities and certain  landscaper risks,  which do
not meet the criteria for liability  coverage under a businessowners  or Special
Farm Package policy. The policy insures businesses against third party liability
from accidents occurring on their premises or arising out of their operations or
products.  Most of the Company's  products  liability line is written as part of
the commercial general liability product.

     Pollution.  The  Company  writes  a small  number  of  pollution  liability
policies  covering  specified farm risks on a  "claims-made"  basis.  The policy
insures against losses  incurred from third party  liability,  including  bodily
injury and property damages, for pollution incidents,  such as those caused from
pesticides,  fertilizers,  herbicides and manure piles.  An "extended  reporting
period" option is available under certain  circumstances  which allows for claim
reporting after the policy expiration.  As of December 31, 1996, The Company had
approximately 260 pollution policies in force.


Marketing

     The following  table sets forth the Company's  direct  written  premiums by
state for the periods indicated:
<TABLE>
<CAPTION>
                                    Year Ended December 31,
($ in millions)               % of                 % of               % of
                    1996      Total     1995      Total    1994      Total
                   -----      -----    -----      -----    -----     -----
<S>             <C>           <C>   <C>           <C>   <C>          <C>
New York ....   $   56.5      38.6% $   53.2      39.1% $   47.0     38.5%
New Jersey ..       33.1      22.6%     28.3      20.8%     23.9     19.6%
Massachusetts       10.3       7.0%     10.5       7.7%     10.1      8.3%
Connecticut .        9.8       6.7%      9.1       6.7%      8.2      6.7%
West Virginia        8.1       5.5%      7.8       5.7%      7.3      6.0%
Maine .......        6.8       4.7%      6.9       5.1%      6.7      5.5%
New Hampshire        6.7       4.6%      6.8       5.0%      6.7      5.5%
Vermont .....        5.7       3.9%      5.3       3.9%      5.0      4.1%
Delaware ....        5.0       3.4%      4.4       3.3%      4.1      3.4%
Rhode Island         4.4       3.0%      3.7       2.7%      3.0      2.4%
                     ---       ---       ---       ---       ---      ---
                $  146.4     100.0% $  136.0     100.0% $  122.0    100.0%
                ========     =====  ========     =====  ========    =====
</TABLE>

     As of December  31,  1996,  the Company  marketed its property and casualty
insurance  products in its ten state region through  approximately 189 full-time
agents, 15 field managers and 10 associate field managers. Many of the Company's
agents are established  residents of the rural and suburban communities in which
they operate and often have specific prior  experience in  agricultural  related
businesses.  The Company's  agents  generally market and write the full range of
its  products.  In addition to  marketing  the  Company's  property and casualty
insurance  products,  the agency force also markets life insurance  products for
the Life Company.  The Company's policies are marketed  exclusively  through its
agency  force.  In 1996  Agent  compensation  was  comprised  entirely  of fixed
commissions, office expense allowances and incentive bonuses.

     The  Company  emphasizes  personal  contact  between  its  agents  and  the
policyholders.  The Company  believes  that its name  recognition,  policyholder
loyalty and policyholder  satisfaction  with agent and claims  relationships are
the principal  sources of new customer  referrals,  cross-selling  of additional
insurance products and policyholder retention. In addition, the Company believes
that its  relationship  with the Farm Bureaus in its target markets promotes the
Company's name recognition and new customer referrals among Farm Bureau members.
See " Relationship with Farm Bureaus."

Relationship with Farm Bureaus

     The Company was organized through the efforts of certain Farm Bureaus,  and
its relationship with the Farm Bureaus in its ten state region continues to be a
fundamental  aspect of its business.  These Farm Bureaus are affiliated with the
American Farm Bureau Federation,  the nation's largest general farm organization
with over four million members,  which has  traditionally  sought to advance the
interests of the  agricultural  community.  The Company was  established in 1955
through the efforts of certain  Farm  Bureaus to provide  property  and casualty
insurance for Farm Bureau  members in the  Northeast.  Substantially  all of the
directors of the Company are associated  with Farm Bureau  organizations  in the
Northeast.  The Company has the  exclusive  endorsement  of the Farm  Bureaus to
market property and casualty insurance in the ten states in which it operates.

     The  endorsement of the Farm Bureaus  generally means that the Farm Bureaus
provide  the  Company  with the  right to  utilize  their  membership  lists and
authorize  the use of  their  name and  service  marks  in  connection  with the
marketing of the Company's  products.  In exchange for these rights, the Company
pays to each of the Farm Bureaus an annual fee of $7.50 per Farm Bureau  member,
pursuant to  agreements  with each Farm Bureau (the  "Membership  List  Purchase
Agreements"). The current term of each Membership List Purchase Agreement is six
years,  commencing on January 1, 1996.  Pursuant to the Membership List Purchase
Agreements,  the Farm Bureaus may not endorse the products of other property and
casualty  insurers  within the Company's ten state region.  The Life Company has
entered into similar  membership list purchase  agreements with each of the Farm
Bureaus.

Underwriting

     The  Company  seeks to write its  commercial  and  personal  lines risks by
evaluating  loss experience and  underwriting  profitability  with  consistently
applied  standards.  The  Company  maintains  information  on all aspects of its
business which is routinely  reviewed by the Company's  staff of underwriters in
relationship to product line profitability. The Company's underwriters generally
specialize by agency territory. Specific information is monitored with regard to
individual  insureds  which is used to assist the  Company  in making  decisions
about policy renewals or modifications.

     The Company  concentrates on its established  major product lines (personal
and  commercial  auto,  Special  Farm  Package,  businessowners  and  homeowners
policies).  It generally  does not pursue the  development of products with risk
profiles with which it is not familiar, nor does it, typically,  actively market
its automobile,  workers'  compensation or general liability  policies except to
policyholders who may also purchase its Special Farm Package,  businessowners or
homeowners  products.  The Company  believes  its  extensive  knowledge of local
markets in its region is a key element in its underwriting process.

Claims

     Claims on insurance  policies written are usually  investigated and settled
by one of the Company's staff claims  adjusters,  located in nine field offices.
The Company's claims philosophy emphasizes timely investigation,  evaluation and
settlement of claims,  while maintaining adequate reserves and controlling claim
adjustment expenses.  The claims philosophy is designed to support the Company's
marketing efforts by providing agents and policyholders with prompt service.

     Claims  settlement  authority  levels are established for each adjuster and
claims manager based upon the employee's ability and level of experience. Claims
are  reported  directly to the claims  department,  located at a field office or
through the central claim reporting unit at the home office.  Specialized  units
exist at the home  office for  no-fault  automobile  and  workers'  compensation
claims, as well as subrogation and large, litigated or certain other claims. The
Company  also has on  staff a  special  investigator  to  investigate  suspected
insurance  fraud,  including  arson.  The claims  department is responsible  for
reviewing all claims,  obtaining  necessary  documentation,  estimating the loss
reserves and resolving the claims.


<PAGE>


Reinsurance

Reinsurance Ceded

     The Company's  reinsurance  arrangements are generally placed directly with
non-affiliated  reinsurers through  reinsurance  brokers.  In addition,  certain
reinsurance  coverages are also placed directly with United.  See "Related Party
Transactions."  The largest net per risk exposure retained by the Company on any
one  individual  property or casualty  risk is  $100,000.  Property and casualty
risks in excess  of  $100,000  are  covered  on an  excess  of loss  basis up to
$250,000  and  $300,000,  respectively,  per risk by United.  Per risk  property
losses in excess of $250,000 but less than $4 million are reinsured on an excess
of loss basis by unaffiliated reinsurers.  Facultative coverage is available for
certain  property  risks in excess of $4 million per risk.  Casualty  losses per
risk in excess of  $300,000  but less than $1 million  (which is  generally  the
maximum limit of liability written by the Company's casualty insurance policies,
other than workers' compensation and umbrella liability policies) are covered on
an excess of loss basis by unaffiliated  reinsurers.  Clash coverage provided by
unaffiliated reinsurers covers casualty losses, including workers' compensation,
in  excess  of $1  million  but less  than $5  million.  In  addition,  workers'
compensation claims, on a per occurrence basis with a $600,000 per person limit,
in excess of $3 million but less than $10 million are separately reinsured on an
excess of loss basis by an unaffiliated reinsurer.  The Company reinsures 95% of
its  umbrella  liability  losses  (including a 5% quota share  participation  by
United)  under $1 million  per loss on a quota  share basis and 100% of umbrella
liability  losses  in  excess  of $1  million  up  to $5  million  per  loss  by
unaffiliated reinsurers.

     The Company 's property  catastrophe  reinsurance  provides for recovery of
95% of the losses over $6 million up to a maximum of $51 million per  occurrence
and  approximately  79% of the  losses  between $3  million  and $6 million  per
occurrence.  The Company  retains the first $3 million of losses per  occurrence
under its property catastrophe program. United is a participant in Farm Family's
property catastrophe reinsurance program and assumes 2% of losses per occurrence
between $11 million and $51 million and  approximately  16% of losses between $3
million and $6 million.

     The insolvency or inability of any reinsurer to meet its obligations to the
Company  could have a material  adverse  effect on the results of  operations or
financial  condition of the Company.  As of December 31, 1996,  more than 95% of
the Company's  reinsurance  program was provided by reinsurers  which were rated
"A-" (Excellent) or above by A.M. Best Company, Inc. ("A.M. Best").

     In June  1995,  the  Company  terminated  its excess  casualty  reinsurance
agreement with American Agricultural  Insurance Company to reduce administrative
and financial costs associated with the reinsurance arrangement. The reinsurance
arrangement  was  commuted for  casualty  and  workers'  compensation  risks for
accident years 1980 to 1988 and prior to 1975. As a result of the termination of
this arrangement, the Company does not have reinsurance in effect for any future
development on casualty and workers' compensation losses for accident years 1980
to 1988 and prior to 1975. The Company  received  approximately  $1.8 million in
cash  as a  result  of the  termination  of  this  arrangement  and  established
additional net loss reserves of approximately  $1.7 million for any casualty and
worker's  compensation losses for accident years 1980 to 1988 and prior to 1975.
Separate reinsurance  agreements with American  Agricultural  Insurance Company,
however,  continue to remain in effect for property and umbrella risks for those
accident years.

     Reinsurance Assumed

     The Company assumes  voluntary  reinsurance  covering  primarily  property,
property  catastrophe and casualty risks located  outside of the Northeast.  The
Company   believes  that,   among  other  benefits,   its  assumed   reinsurance
arrangements  balance to a limited  extent the geographic  concentration  of its
risks in the  Northeast.  The Company  also assumes an  insignificant  amount of
reinsurance covering  substandard  automobile policies from United. For the year
ended  December  31, 1996,  the Company  earned  premiums of $1.6 million  under
various voluntary excess of loss and pro rata reinsurance  agreements.  In 1996,
the Company generally retroceded 50% of all assumed reinsurance to United.

Loss and Loss Adjustment Expense ("LAE") Reserves

     The  Company's  loss  reserve is an  estimate of the unpaid  amount,  as of
December  31, of the  losses  incurred  in both the  current  year and all prior
years. The LAE reserve is an estimate of the unpaid expenses  required to settle
losses  incurred in both the current  year and all prior  years.  The Company is
required to maintain  reserves  for payment of  estimated  loss and LAE for both
reported  claims and claims which have been incurred but not yet  reported.  The
ultimate liability incurred by the company may be different from current reserve
estimates.

     Adjustments in aggregate  reserves,  if any, are reflected in the operating
results of the period during which such  adjustments  are made.  Although claims
for which reserves are established  may not be paid for several years,  reserves
for losses and LAE are not  discounted,  except for  certain  lifetime  workers'
compensation indemnity reserves where the reserves are discounted at 3.5%.

     The following table provides a reconciliation  of beginning and ending loss
and LAE reserve  balances of the Company for each of the years in the three year
period ended December 31, 1996.

<TABLE>

                      Reconciliation of Liability for Loss
                          and Loss Adjustment Expenses
                                ($ in thousands)
<CAPTION>

                                                           For the years ended December 31,
                                                           --------------------------------
                                                            1996         1995         1994
                                                            ----         ----         ----
<S>                                                     <C>          <C>          <C>
Reserves for losses and loss adjustment
expenses at the beginning of the year ...............   $ 137,978    $ 127,954    $ 123,477
Less:Reinsurance recoverables and receivables .......      28,655       28,230       28,761
                                                           ------       ------       ------
Net reserves for losses and loss
adjustment expenses at beginning of year ............     109,323       99,724       94,716
                                                          -------       ------       ------
Provision for losses and loss adjustment expenses for claims occurring in:
   Current year .....................................     101,418       88,366       86,370
   Prior years ......................................      (5,441)      (5,182)      (3,690)
                                                           ------       ------       ------
Total incurred losses and loss adjustment expenses ..      94,977       83,184       82,680
                                                           ------       ------       ------
Loss and loss adjustment expenses payments for claims occurring in:
   Current year .....................................      50,122       40,519       43,232
   Prior years ......................................      39,795       33,066       34,440
                                                           ------       ------       ------
Total payments ......................................      89,917       73,585       77,672
Net reserves for losses and loss
adjustment expenses at end of year ..................     114,383      109,323       99,724
Add:Reinsurance recoverables and receivables ........      26,837       28,655       28,230
                                                           ------       ------       ------
Reserves for losses and loss adjustment expenses at
end of year .........................................   $ 141,220    $ 137,978    $ 127,954
                                                        =========    =========    =========
</TABLE>

Analysis of Loss and Loss Adjustment Expense Development

     The following  table reflects the development of losses and loss adjustment
expenses for the periods  indicated at the end of that year and each  subsequent
year. Each calendar  year-end reserve includes the estimated unpaid  liabilities
for that  accident year and for all prior  accident  years.  The data  presented
under  the  caption  "Cumulative  Amount  of  Reserves  Paid  Through"  show the
cumulative  amounts paid related to the reserve as of the end of each subsequent
year. The data presented under the caption  "Reserves,  Net,  Reestimated as of"
show the original  recorded reserve as adjusted as of the end of each subsequent
year  to  reflect  the   cumulative   amounts  paid  and  all  other  facts  and
circumstances  discovered during each such year. The line "Cumulative Redundancy
(Deficiency)"  reflects the difference  between the latest  reestimated  reserve
amount and the reserve amount as originally established.

     In evaluating the  information in the table below,  it should be noted that
each amount includes the effects of all changes in amounts of prior periods. For
example,  if a loss determined in 1993 to be $150,000 was first reserved in 1985
at $100,000,  the $50,000 deficiency (actual loss minus original estimate) would
be included in the cumulative  deficiency in each of the years 1986 through 1992
shown below. This table presents  development data by calendar year and does not
relate the data to the year in which the accident actually occurred.  Conditions
and trends that have affected the  development of these reserves in the past may
not necessarily recur in the future.



<PAGE>


     The following  table sets forth the development of loss and loss adjustment
expenses  reserves of the Company for the  ten-year  period  ended  December 31,
1996:

<TABLE>
Analysis of Loss and Loss Adjustment Expense Development

($ in thousands)
<CAPTION>

Year Ended December 31,    1986     1987     1988     1989    1990     1991     1992     1993     1994     1995       1996
                          ------   ------   ------   ------  ------   ------   ------   ------    -----   ------     ------
<S>                      <C>      <C>      <C>      <C>      <C>     <C>      <C>      <C>      <C>       <C>       <C>

Reserves for Losses
 and Loss
  Adjustment Expenses .  $41,718  $53,126  $65,543  $78,339  $94,135 $110,135 $117,497 $123,477 $127,954  $137,978  $141,220
Reinsurance Recoverable
 on unpaid losses .....   (5,053)  (5,468)  (7,126) (11,784) (22,123) (25,048) (24,463) (28,761) (28,230) (28,655)   (26,837)
                          ------   ------   ------  -------  -------  -------  -------  -------  -------  -------    -------
Reserves for Losses
 and Loss Adjustment
  Expenses, Net .......   36,665   47,658   58,417   66,555   72,012   85,087   93,034   94,716   99,724   109,323   114,383
                          ======   ======   ======   ======   ======   ======   ======   ======   ======   =======   =======

Reserves, Net,
 Reestimated as of:
One year later ........   37,961   50,145   57,932   69,036   76,786   84,514   91,561   88,296   94,542   103,882
Two years later .......   38,047   50,572   63,348   72,478   76,442   84,305   89,666   82,876   87,592
Three years later .....   39,057   53,540   65,399   72,926   76,832   83,960   86,876   81,556
Four years later ......   39,981   55,303   65,842   73,130   77,879   82,750   85,204
Five years later ......   41,097   55,445   66,289   74,599   77,375   81,690
Six years later .......   41,088   56,018   68,298   74,391   76,811
Seven years later .....   41,072   57,751   68,370   74,578
Eight years later .....   42,622   58,323   68,678
Nine years later ......   42,759   58,754
Ten years later .......   44,734

Cumulative Redundancy
         (Deficiency) .   (8,069) (11,096) (10,261)  (8,023)  (4,799)   3,397    7,830   13,160   12,132    5,441
                          ------  -------  -------   ------   ------    -----    -----   ------   ------    -----

Cumulative Amount of
 Reserves Paid Through:
One year later ........   16,621   21,931   23,852   29,587   29,446   32,708   36,692   34,439   33,066   39,796
Two years later .......   26,294   33,879   40,454   46,469   47,392   53,455   57,236   49,867   53,121
Three years later .....   31,636   42,838   51,147   57,838   60,737   65,951   66,127   62,138
Four years later ......   35,838   48,480   57,239   65,803   67,401   70,176   73,409
Five years later ......   38,588   51,216   62,168   68,950   68,634   74,752
Six years later  ......   39,836   54,644   64,423   68,652   71,697
Seven years later .....   40,920   55,794   63,815   71,075
Eight years later .....   41,693   55,313   65,940
Nine years later ......   41,116   57,174
Ten years later .......   41,698

</TABLE>


     Prior to 1990,  the Company  had a history of  cumulative  deficiencies  in
reserving for losses and LAE. These  deficiencies  were primarily  caused by the
underestimation  of reserves for  workers'  compensation,  automobile  and other
liability  claims.  In 1991,  the Company  reviewed  and revised its process for
estimating  reserves  for losses and LAE,  and in recent  years the  Company has
generally  experienced  overall  redundancies.  The redundancies at December 31,
1996 of $13.2 million, $12.1 million and $5.4 million for the December 31, 1993,
1994 and 1995 reserves,  respectively,  were primarily attributable to favorable
development  of IBNR and  case  reserves  for  personal  automobile,  commercial
automobile, automobile physical damage, and workers' compensation claims.


<PAGE>
<TABLE>
<CAPTION>

                                           Year Ended December 31,
                                           -----------------------
($ in thousands)
<S>                                      <C>        <C>        <C>
                                         1996       1995       1994
                                        -----      -----      -----
Reserve for unpaid losses and loss adjustment expenses:
Gross liability ...................   $141,220   $137,978   $127,954
Reinsurance recoverable ...........     26,837     28,655     28,230
                                        ------     ------     ------
Net liability .....................   $114,383   $109,323   $ 99,724
                                      ========   ========   ========
One year later:
Gross reestimated liability .......              $126,779   $116,672
Reestimated reinsurance recoverable                22,130     22,897
                                                   ------     ------
Net reestimated liability .........              $103,882   $ 94,542
                                                 ========   ========
Two years later:
Gross reestimated liability .......                         $105,637
Reestimated reinsurance recoverable                           18,045
                                                              ------
Net reestimated liability .........                         $ 87,592
                                                            ========
</TABLE>

     The Company  believes  that its reserves at December 31, 1996 are adequate.
Conditions and trends that have  historically  affected the Company's claims may
not necessarily occur in the future. Accordingly, it would not be appropriate to
extrapolate  future  deficiencies or redundancies based on the results set forth
above. Future adjustments to loss reserves and LAE that are unanticipated by the
Company  could have a  material  adverse  impact  upon the  Company's  financial
condition and results of operations.

Investments

     An important component of the operating results of the Company has been the
return on invested  assets.  The Company's  investment  objective is to maximize
current  yield  while  maintaining  safety of  capital  together  with  adequate
liquidity for its insurance operations.  In an effort to improve the quality and
safety of its  investments,  the  Company  embarked  on a plan in 1995 to reduce
significantly  its holdings of non-investment  grade fixed maturity  securities.
The  Company  reduced its  holdings  of NAIC Class 3 through 6 bonds,  generally
considered  non-investment  grade,  from  $10.8  million,  or 5.6% of its  fixed
maturity  portfolio,  as of December  31, 1995 to $6.9  million,  or 3.2% of its
fixed maturity  portfolio,  as of December 31, 1996. Due to uncertainties in the
economic  environment,  however,  it is possible that the quality of investments
currently held in the Company's investment portfolio may change.

     The Company manages all of its investments internally. Investment decisions
and guidelines are made and implemented by the Company's  investment  department
under the  supervision  of an investment  committee  comprised of members of the
board of directors.  In addition, the Company maintains a Credit Watch Committee
comprised of the Chief  Executive  Officer,  Executive Vice President - Finance,
and the Senior Vice President - Investments in order to monitor securities which
have  experienced  late payments,  adverse changes in credit rating or financial
condition of the borrower or any  modifications  of terms. At December 31, 1996,
the Company  had five  investments  totaling  $4.9  million on the Credit  Watch
Report, of which none were considered non-performing or in default.



<PAGE>



The following  table sets forth  certain  information  concerning  the Company's
investments:
<TABLE>
<CAPTION>

($ in thousands)                                               December 31, 1996     December 31, 1995
----------------                                               -----------------     -----------------
Type of Investment                                           Amortized     Market   Amortized    Market
<S>                                                           <C>        <C>        <C>        <C>
                                                                Cost      Value(3)     Cost     Value(3)
Available For Sale Portfolio:
     Fixed Maturities(1)
          United States government and government
            agencies and authorities ......................   $ 11,017   $ 11,305   $ 22,700   $ 24,243
          States, municipalities and political subdivisions     42,568     43,950     21,871     23,480
          Public utilities ................................     26,244     26,233     20,008     21,126
          All other corporate bonds .......................    109,241    111,643     99,311    104,245
          Mortgage-backed securities ......................      9,676     10,342      1,082      1,130
          Redeemable preferred stock ......................      8,095      8,277      6,722      6,965
                                                                 -----      -----      -----      -----
               Total Fixed Maturities .....................   $206,841   $211,750   $171,694   $181,189

     Equity securities ....................................      2,546      7,908        334      4,746
                                                                 -----      -----        ---      -----
               Total Available for Sale ...................   $209,387   $219,658   $172,028   $185,935
                                                              ========   ========   ========   ========

Held to Maturity Portfolio:
     Fixed Maturities(2)
          States, municipalities and political subdivisions   $  5,423   $  5,482   $  5,925   $  6,298
          All other corporate bonds .......................      4,359      4,491      6,461      6,802
                                                                 -----      -----      -----      -----

          Total Held to Maturity ..........................   $  9,782   $  9,973   $ 12,386   $ 13,099
                                                              ========   ========   ========   ========

     Mortgage loans .......................................   $  1,745   $  1,745   $  1,822   $  1,822
     Short-term investments ...............................      1,982      1,982      6,532      6,532
     Other Invested Assets ................................        748        748      1,246      1,246
                                                                   ---        ---      -----      -----

          Total Investments ...............................   $223,664   $234,106   $194,014   $208,634
                                                              ========   ========   ========   ========


--------------------------------------------------------------------------------

(1)  Fixed maturities (bonds,  redeemable  preferred stocks and  mortgage-backed
     securities)  and equity  securities in the Available for Sale Portfolio are
     carried at market value in the  consolidated  financial  statements  of the
     Company. Mortgage loans, cash and short-term investments and other invested
     assets are carried at cost, which approximates market value.

(2)  Fixed maturities in the Held to Maturity Portfolio are carried at amortized
     cost.

(3)  The Company primarily obtains market value information  through the pricing
     service  offered  by  Interactive  Data  Corporation.   Market  values  are
     also obtained, to a lesser extent,  from various  brokers who provide price
     quotes.

</TABLE>

<PAGE>


     The  Company's  investments  in  fixed  maturity  securities  are  composed
primarily of  intermediate-term,  investment grade  securities.  The table below
contains  additional  information  concerning  the  investment  ratings  of  the
Company's fixed maturity investments at December 31, 1996.

<TABLE>
<CAPTION>
                                      Amortized    Market
Type/Ratings  of  Investment(1)          Cost      Value     Percentage(4)
------------  --  -------------          ----      -----     -------------
                                            ($  in  Thousands)
<S>                                   <C>        <C>          <C>
Available for Sale Portfolio:(2)
--------------------------------
     U.S. Government and Agencies .   $ 19,740   $ 20,665       9.8%
     AAA ..........................     20,229     21,034       9.9%
     AA ...........................     30,900     31,145      14.7%
     A ............................     62,070     64,205      30.3%
     BBB ..........................     66,075     66,876      31.6%
                                      --------   --------     -----
          Total BBB or Better .....    199,014    203,925      96.3%
     BB ...........................      5,877      5,924       2.8%
     B and Below ..................      1,950      1,901       0.9%
                                      --------   --------     -----
          Total Available for Sale    $206,841   $211,750     100.0%
                                      ========   ========     =====

Held to Maturity Portfolio:(3)
     U.S. Government and Agencies .          0          0       0.0%
     AAA ..........................   $  3,115   $  3,188      32.0%
     AA ...........................      1,270      1,326      13.3%
     A ............................      4,091      4,207      42.2%
     BBB ..........................          0          0       0.0%
                                      --------   --------     -----
          Total BBB or Better .....      8,476      8,721      87.4%
     BB ...........................      1,306      1,252      12.6%
     B and Below ..................          0          0       0.0%
                                      --------   --------     -----
          Total Held to Maturity ..   $  9,782   $  9,973     100.0%
                                      ========   ========    =====

(1) The  ratings  set  forth in this  table are  based on the  ratings,  if any,
assigned  by  Standard  & Poor's  Corporation  ("S&P").  If S&P's  ratings  were
unavailable,  the equivalent  ratings  supplied by Moody's  Investors  Services,
Inc., Fitch Investors Service,  Inc. or the NAIC were used where available.  The
percentage of securities  that were not assigned a rating by S&P at December 31,
1996 was 4.7%.

(2) Fixed  maturities in the Available for Sale  Portfolio are carried at market
value in the consolidated financial statements of the Company.

(3) Fixed maturities in the Held to Maturity  Portfolio are carried at amortized
cost.

(4) Represents  percent of market value for classification as a percent of total
for each portfolio.

</TABLE>


<PAGE>


     The table  below sets forth the  maturity  profile of the  Company's  fixed
maturity  investments  as of December  31, 1996

<TABLE>
<CAPTION>

                                         Amortized    Market
Maturity                                   Cost(1)   Value(2) Percentage

<S>                                      <C>        <C>          <C>
Available for Sale:
1 year or less .......................   $    771   $    746       0.4%
More than 1 year through 3 years .....     13,354     13,490       6.4%
More than 3 years through 5 years ....      9,719     10,253       4.8%
More than 5 years through 10 years ...     98,271     99,677      47.1%
More than 10 years through 15 years ..     44,228     44,784      21.1%
More than 15 years through 20 years ..     14,032     14,389       6.8%
More than 20 years ...................     16,790     18,069       8.5%
Mortgage backed securities ...........      9,676     10,342       4.9%
                                            -----     ------       ---
Total ................................   $206,841   $211,750     100.0%
                                         ========   ========     =====

Held to Maturity:
1 year or less .......................   $    350   $    358       3.6%
More than 1 year through 3 years .....        706        716       7.2%
More than 3 years through 5 years ....        211        207       2.1%
More than 5 years through 10 years ...      3,186      3,173      31.8%
More than 10 years through 15 years ..      5,329      5,519      55.3%
More than 15 years through 20 years ..       --         --         0.0%
More than 20 years ...................       --         --         0.0%
                                            -----      -----     -----
Total ................................   $  9,782   $  9,973     100.0%
                                         ========   ========     =====

(1) Fixed  maturities in the Available for Sale  Portfolio are carried at market
value in the consolidated  financial statements of the Company. Fixed maturities
in the Held to Maturity Portfolio are carried at amortized cost.

(2) The Company obtains market value  information  primarily through the pricing
service  offered  by  Interactive  Data  Corporation.  Market  values  are  also
obtained, to a lesser extent, from various brokers who provide price quotes

</TABLE>

   The average  duration and average  maturity of the Company's  fixed  maturity
investments  as of  December  31,  1996 were  approximately  6.2 and 10.1 years,
respectively.  As a result,  the market value of the Company's  investments  may
fluctuate  significantly  in response to changes in interest rates. In addition,
the Company may also be likely to experience investment losses to the extent its
liquidity  needs  require  the  disposition  of  fixed  maturity  securities  in
unfavorable interest rate environments.

     For the year ended  December 31, 1996,  compared  with the prior year,  the
amortized  cost of the Company's  cash and invested  assets  increased  16.0% to
$227.8   million.   As  a  result  of  the  reduction  in  holdings  of  certain
non-investment grade securities,  the Company anticipates that future investment
yields may be lower than they  otherwise  would be. For the years ended December
31, 1996, 1995 and 1994, the Company's net investment  income,  average cash and
invested assets and return on average cash and invested assets were as follows:

<TABLE>
<CAPTION>

                                                Years Ended December 31,
($ in millions)
<S>                                          <C>       <C>       <C>
                                                 1996      1995      1994
                                                 ----      ----      ----
Net investment income ....................   $   15.6  $   14.3  $   13.2
Average cash and invested assets .........   $  212.0  $  187.8  $  173.9
Return on average cash and invested assets        7.5%      7.6%      7.6%

</TABLE>

<PAGE>


Information Services

     The Company's automated information  processing  capabilities are supported
by  centralized  computer  systems and a network of personal  computers  linking
agents,  claims offices and service  centers with the Company's home office data
center and information  services division.  This network enables field employees
and agents to work  directly  with clients in response to service  questions and
policy  transactions.  A specialized client information system containing policy
and claim information for each customer's portfolio is utilized by the Company's
agents to monitor  policy  activity.  Also,  personalized  summaries of material
events  affecting  each agent's  policies  are updated  daily on the network and
forwarded to agents.  Substantially  all of the Company's  information  services
equipment,  including the centralized  computer systems and computer network, is
owned by the Life  Company.  Information  systems  expenses  are  shared  by the
Company and the Life Company pursuant to an agreement. (See Item 1:
Business-Related Parties.)

A.M. Best Rating

     A.M. Best,  which rates insurance  companies based on factors of concern to
policyholders,  currently assigns an "A-" (Excellent) rating (its fourth highest
rating category) to Farm Family Casualty.  A.M. Best assigns "A" or "A-" ratings
to  companies  which,  in  its  opinion,  have  demonstrated  excellent  overall
performance when compared to the standards  established by A.M. Best.  Companies
rated  "A"  or  "A-"  have  a  strong  ability  to  meet  their  obligations  to
policyholders  over a long period of time. In  evaluating a company's  financial
and  operating  performance,  A.M.  Best  reviews the  company's  profitability,
leverage and liquidity,  as well as the company's book of business, the adequacy
and soundness of its reinsurance,  the quality and estimated market value of its
assets,  the adequacy of its loss  reserves,  the  adequacy of its surplus,  its
capital  structure,  the  experience  and  competency of its  management and its
market  presence.  No assurance  can be given that A.M. Best will not reduce the
Company's current rating in the future.

Competition

     The property  and  casualty  insurance  market is highly  competitive.  The
Company  competes  with  stock  insurance  companies,  mutual  companies,  local
cooperatives and other underwriting organizations.  Certain of these competitors
have substantially greater financial, technical and operating resources than the
Company.  The Company's ability to compete successfully in its principal markets
is  dependent  upon a number of  factors,  many of which  (including  market and
competitive  conditions) are outside the Company's control. Many of the lines of
insurance written by the Company are subject to significant  price  competition.
Some  companies  may offer  insurance at lower  premium rates through the use of
salaried  personnel  or other  methods,  rather than agents paid on a commission
basis,  as the Company does. In addition to price,  competition  in the lines of
business written by the Company is based on quality of the products, quality and
speed of  service  (including  claims  service),  financial  strength,  ratings,
distribution systems and technical expertise.

Seasonality

     Although the insurance business generally is not seasonal,  losses and loss
adjustment  expenses  tend to be higher  for  periods  of  severe  or  inclement
weather.

Employees

     The Company  shares many of its  employees  with Farm  Family  Life.  As of
December  31, 1996,  the total number of full time  employees of the Company and
Farm Family Life was 389 employees in  aggregate,  of which 286 were employed in
the home office.  Based on annual time studies,  63% of total employee expenses,
including  salary  expense,  is  currently  allocated  to the Company and 37% is
allocated to Farm Family Life, Farm Family Holdings and United Farm Family.  See
"Certain  Relationships and Related  Transactions".  None of these employees are
covered by a collective bargaining agreement,  and the Company believes that its
employee relations are good.

Effect of Regulation

     General

     The Company is regulated by  government  agencies in the states in which it
does business. Such regulation usually includes (i) regulating premium rates and
policy  forms,  (ii) setting  minimum  capital and surplus  requirements,  (iii)
regulating  guaranty  fund  assessments  and residual  markets,  (iv)  licensing
companies, adjusters and agents, (v) approving accounting methods and methods of
setting statutory loss and expense reserves,  (vi) setting  requirements for and
limiting the types and amounts of investments,  (vii) establishing  requirements
for the  filing  of  annual  statements  and  other  financial  reports,  (viii)
conducting   periodic  statutory   examinations  of  the  affairs  of  insurance
companies,  (ix)  approving  proposed  changes in control and (x)  limiting  the
amount of dividends that may be paid without prior regulatory approval.

     Insurance  companies  are also  affected  by a variety of state and federal
legislative  and  regulatory  measures  and judicial  decisions  that define and
extend the risks and benefits for which insurance is sought and provided.  These
include  redefinitions  of risk  exposure in areas such as  products  liability,
environmental  damage  and  workers'   compensation.   Certain  state  insurance
departments  and  legislatures  may prevent  premium  rates for some  classes of
insureds  from  reflecting  the level of risk  assumed by the  insurer for those
classes.  Several  states  place  restrictions  on the  ability of  insurers  to
discontinue  or withdraw from some lines of  insurance.  Such  developments  may
adversely affect the profitability of various lines of insurance.

     Risk-Based Capital

     State  insurance  departments  use a methodology  developed by the NAIC for
assessing  the adequacy of statutory  surplus of property and casualty  insurers
which includes a risk-based  capital formula that attempts to measure  statutory
capital and surplus  needs based on the risks in a company's mix of products and
investment  portfolio.   The  formula  is  designed  to  allow  state  insurance
regulators to identify potential inadequately  capitalized companies.  Under the
formula,  a company  determines its "risk-based  capital" ("RBC") by taking into
account certain risks related to the insurer's  assets  (including risks related
to its investment portfolio and ceded reinsurance) and the insurer's liabilities
(including  underwriting  risks  related  to the nature  and  experience  of its
insurance  business).  The risk-based capital rules provide for different levels
of regulatory  attention  depending on the ratio of a company's  total  adjusted
capital to its "authorized  control level" of RBC. Based on calculations made by
the Company,  the risk-based  capital level for the Company exceeds a level that
would trigger  regulatory  attention.  At December 31, 1996, the Company's total
adjusted  capital  was $83.2  million,  and the  threshold  requiring  the least
regulatory attention was $26.7 million.

     NAIC-IRIS Ratios

     The NAIC's Insurance  Regulatory  Information System ("IRIS") was developed
by a committee of state insurance regulators and is primarily intended to assist
state insurance departments in executing their statutory mandates to oversee the
financial condition of insurance companies operating in their respective states.
IRIS identifies 12 ratios for the property and casualty  insurance  industry and
specifies a range of "usual  values" for each ratio.  Departure  from the "usual
value" range on four or more ratios may lead to increased  regulatory  oversight
from  individual  state  insurance  commissioners.  The Company did not have any
ratios which varied from the "usual value" range in 1996, 1995 or 1994.

Risk Factors

     In  addition  to the normal  risks of  business,  the Company is subject to
significant  risk  factors,  including  but not  limited  to:  (i) the  inherent
uncertainty  in the process of  establishing  property-liability  loss reserves,
including  reserves for the cost of pollution claims, and the fact that ultimate
losses could  materially  exceed  established  loss reserves and have a material
adverse  effect on results  of  operations  and  financial  condition;  (ii) the
potential  material  adverse  impact  on its  financial  condition,  results  of
operations  and cash  flow of  losses  arising  out of  catastrophes;  (iii) the
insolvency or inability of any reinsurer to meet its  obligations to the Company
may have a material  adverse effect on the business and results of operations of
the Company;  (iv) the need to maintain  appropriate levels of statutory capital
and  surplus,   particularly   in  light  of   continuing   scrutiny  by  rating
organizations  and  state  insurance  regulatory  authorities,  and to  maintain
acceptable financial strength or claims-paying ability ratings; (v) there can be
no assurance  that the Company  will be able to maintain  its current A.M.  Best
rating  and that the  Company's  business  and  results of  operations  could be
materially  adversely  affected  by a rating  downgrade;  (vi) the fact that the
property  and  casualty  market  is  highly   competitive  and  certain  of  its
competitors may have substantially  greater  financial,  technical and operating
resources than the Company;  (vii) the extensive  regulation and  supervision to
which the Company is subject, various regulatory initiatives that may affect the
Company,  and regulatory and other legal actions  involving the Company;  (viii)
the impact on the revenues  and  profitability  of the Company  from  prevailing
economic,  regulatory,  demographic and other conditions in New York, New Jersey
and the other states in which the company  operates;  (ix) the fact that since a
substantial  portion of the Company's  business is  concentrated in a relatively
small  number of  states,  a  significant  change in or the  termination  of the
Company's  relationship  with the Farm  Bureaus in certain of these states could
have a materially  adverse  effect on the Company's  results of  operations  and
financial   condition;   and  (x)  the  inherent  uncertainty  in  the  economic
environment  may cause the  quality  of the  investments  currently  held in the
Company's investment  portfolio to change. The Company has experienced,  and can
be expected in the future to experience,  storm and weather related losses which
may have a material  adverse  impact on the  Company's  results  of  operations,
financial condition and cash flow.



"Safe Harbor"  statement under the Private  Securities  Litigation Reform Act of
1995

     With the  exception of  historical  information,  the matters  discussed or
incorporated  by  reference  in this  Report  on Form  10-K are  forward-looking
statements that involve risks and uncertainties  that could cause actual results
to  differ  materially  from  those  expected  and  projected.  Such  risks  and
uncertainties  include,  but are not  limited  to, the  following:  exposure  to
catastrophe  losses,  general economic conditions and conditions specific to the
property  and  casualty   insurance  industry  including  its  cyclical  nature,
regulatory  changes  and  conditions,  rating  agency  policies  and  practices,
competitive factors,  claims development and the impact thereof on loss reserves
and the Company's  reserving policy,  the adequacy of the Company's  reinsurance
programs, developments in the securities markets and the impact on the Company's
investment  portfolio and other risks  indicated in this Report on Form 10-K and
other risk  factors  listed from time to time in the  Company's  Securities  and
Exchange Commission Filings.

Executive Officers of the Registrant
                                                                      Date First
                                                                       Elected
                                                                      Officer of
Name                  Age   Position Presently Held with Registrant   Registrant
----                  ---   ---------------------------------------   ----------
Philip P. Weber        48   President & Chief Executive Officer          1987
James J. Bettini       42   Executive Vice President - Operations        1990
Victoria M. Stanton    37   Executive Vice President,                    1991
                             General Counsel and Secretary
Timothy A. Walsh       35   Executive Vice President - Finance           1996
William T. Conine      48   Senior Vice President - Information Services 1985
Stuart C. Henderson    41   Senior Vice President - Casualty Operations  1991
Raymond A. Osterhout   52   Senior Vice President - Investments          1987
Dale E. Wyman          54   Senior Vice President - Marketing            1989

     There are no family  relationships among any of such officers nor are there
any arrangements or  understandings  between any person pursuant to which he/she
was elected as an officer.  All  officers  serve at the pleasure of the Board of
Directors,  but subject to the foregoing, are elected for terms of approximately
one year until the next Annual Meeting of the Company.

     All the  Executive  Officers of the  Registrant  have been  employed by the
Registrant in various executive or  administrative  capacities for at least five
years, except for the following:

     Mr. Walsh has served as Executive  Vice  President - Finance & Treasurer of
Farm Family Holdings, Inc. and Executive Vice President - Finance since December
1996 and Treasurer of Farm Family  Holdings,  Inc. from October 1996 to December
1996.  Mr.  Walsh was Senior Vice  President  - Finance of Farm Family  Casualty
Insurance  Company from March 1996 to December  1996,  and Director of Corporate
Development of FFCIC from August 1995 to March 1996.  Previously,  Mr. Walsh was
Vice President,  Finance & Chief Financial Officer with MPW Industrial Services,
Inc., Columbus,  OH, from April 1994 to August 1995, Corporate Controller of NSC
Corporation, Methuen, MA from July 1992 to April 1994 and Senior Manager at KPMG
Peat Marwick from July 1983 to July 1992.

ITEM 2.  PROPERTIES

     The Company  currently  leases space for its home office in  Glenmont,  New
York from the Life Company.  The lease  provides for the Company to pay the Life
Company  an annual  rental of  approximately  $712,000.  The  lease  expires  on
December 31, 1998. See "Related Party Transactions".

ITEM 3.  LEGAL PROCEEDINGS

     The  Company is subject to  litigation  in the normal  course of  business.
Based upon information  presently available to it, the Company does not consider
any  threatened  or  pending  litigation  to be  material.  However,  given  the
uncertainties  attendant  to  litigation,  there  can be no  assurance  that the
Company's  results of operations and financial  condition will not be materially
adversely affected by any threatened or pending litigation.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

                                     PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
                STOCKHOLDER MATTERS

     Pursuant to the Plan of Reorganization and Conversion (see Item 1. Business
- Plan of  Reorganization  and Conversion) , the Company issued 2,253,878 shares
of $1.60 par common stock to Farm Family Holdings,  Inc., on July 26, 1996 . All
of the Company's common stock is owned by Farm Family Holdings, Inc. There is no
market for the  Company's  common stock.  No dividends  were paid in 1996 on the
Company's  common stock. As an insurance  company  domiciled in the state of New
York, the Company's  dividend payments are restricted by New York state law. The
Company currently does not plan to pay dividends in the foreseeable future.

ITEM 6.  SELECTED FINANCIAL DATA

     The following table sets forth certain consolidated  financial data for the
Company and its subsidiary prior to and after the reorganization pursuant to the
Plan that took place during 1996. The consolidated  statement of income data set
forth below for the years ended December 31, 1996,  1995,  1994 and 1993 and the
consolidated  balance  sheet data as of  December  31,  1996,  1995 and 1994 are
derived from the  consolidated  financial  statements  of the Company which have
been audited by Coopers & Lybrand L.L.P,  independent auditors. The consolidated
statement  of  income  data  for  the  year  ended  December  31,  1992  and the
consolidated  balance  sheet data as of  December  31, 1993 and 1992 are derived
from the unaudited consolidated financial statements of the Company. The Company
believes that such  unaudited  financial  data fairly  reflect the  consolidated
results of operations and the  consolidated  financial  condition of the Company
for  such  periods.  This  data  should  be  read  in  conjunction  with  Item 7
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations  as  well as  Item 8  Financial  Statements  and  Supplementary  Data
included elsewhere herein.



<PAGE>

<TABLE>
<CAPTION>

($ in millions)                                                            Year Ended December 31,
                                                                           -----------------------
<S>                                                       <C>        <C>       <C>       <C>        <C>
Statement of Income Data:                                    1996       1995      1994      1993       1992
-------------------------                                    ----       ----      ----      ----       ----
Revenues:
Premiums ..............................................   $  130.8   $  116.9  $  101.5  $   96.7   $   90.0
Net Investment Income .................................       15.6       14.3      13.2      13.8       12.9
Net realized investment gains (losses) ................       (0.6)       0.9       1.3      (0.2)       1.0
Other Income(1) .......................................        0.9        0.9       0.7       0.7        0.5
                                                               ---        ---       ---       ---        ---
Total Revenues ........................................      146.7      133.0     116.7     111.0      104.4
                                                             -----      -----     -----     -----      -----
Losses and Expenses:
Losses and loss adjustment expenses ...................       95.0       83.2      82.7      73.2       72.1
Underwriting expenses .................................       37.6       34.9      28.8      26.8       24.0
Early retirement program expense ......................        1.2        --        --        --         --
Interest and other expense ............................        0.5        0.3       0.3       0.3        0.3
                                                                --        ---       ---       ---        ---
Total losses and expenses .............................      134.3      118.4     111.8     100.3       96.4
                                                             -----      -----     -----     -----       ----
Income before federal income tax and extraordinary item       12.4       14.6       4.9      10.7        8.0
Federal income tax expense ............................        3.8        5.0       1.4       3.1        1.8
                                                               ---        ---       ---       ---        ---
Income before extraordinary item ......................        8.6        9.6       3.5       7.6        6.2
Extraordinary item - Demutualization expense ..........        1.5        --        --        --         --
                                                               ---
Net Income ............................................   $    7.1   $    9.6  $    3.5  $    7.6   $    6.2
                                                          ========   ========  ========  ========   ========

Balance Sheet Data (at December 31):
Total investments(2) ..................................   $  233.9   $  207.9  $  170.6  $  177.7   $  160.8
Total assets ..........................................      308.6      278.3     243.1     244.1      221.5
Long term debt ........................................        1.3        2.7       2.7       2.8        2.8
Total liabilities .....................................      208.2      204.1     190.1     183.6      175.0
Total equity(2) .......................................      100.4       74.2      53.0      60.5       46.5

GAAP Ratios:
Loss and loss adjustment expense ratio(3) .............       72.6%      71.1%     81.5%     75.7%      80.2%
Underwriting expense ratio(4) .........................       28.7%      29.8%     28.4%     27.7%      26.6%
Combined ratio(5) .....................................      101.3%     100.9%    109.9%    103.4%     106.8%

Statutory Data:
Statutory Combined Ratio (6)...........................      101.8%     101.0%    108.9%    104.2%     106.0%
Statutory Surplus .....................................   $   83.2   $   55.9  $   42.9  $   39.1   $   33.5
Ratio of annual written premiums to surplus -
statutory basis(7) ....................................       1.61x      2.16x     2.46x     2.52x      2.73x

(1)  Primarily  represents  service  fee income on the  Company's  property  and
casualty insurance business.

(2) Due to the  adoption by the  Company on  December  31, 1993 of SFAS No. 115,
"Accounting  for  Certain  Investments  in Debt and  Equity  Securities,"  total
investments and stockholder's equity were adjusted to reflect changes in market
value,  which  resulted  in an increase of $6.8  million,  a reduction  of $11.1
million an  increase  of $11.7  million,  and a decrease  of $2.3  million as of
December 31, 1993, 1994, 1995 and 1996, respectively.

(3) Calculated by dividing losses and loss  adjustment  expenses by premiums.

(4)  Calculated  by dividing underwriting  expenses by premiums.

(5) The sum of the Loss and Loss Adjustment  Expense Ratio and the  Underwriting
Expense Ratio.

(6)  Calculated  by  dividingstatutory  net written  premiums  for the period by
statutory surplus at the end of the period.

</TABLE>


<PAGE>


ITEM 7.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS

The following  analysis of the consolidated  results of operations and financial
condition  of  the  Company  should  be  read  in  conjunction   with  "Selected
Consolidated  Financial  Data," the  Consolidated  Financial  Statements and the
accompanying notes to the Consolidated Financial Statements included elsewhere
herein.

Corporate Profile
The  following  discussion  and analysis of financial  condition  and results of
operations  includes the operations of Farm Family  Casualty  Insurance  Company
("Farm Family  Casualty") and Farm Family  Casualty's  wholly owned  subsidiary,
Rural Agency and Brokerage,  Inc.  (collectively  referred to as the "Company").
Farm Family Casualty is a wholly owned subsidiary of Farm Family Holdings,  Inc.
The  operations  of the  Company  are also  closely  related  with  those of its
affiliates,  Farm Family Life  Insurance  Company and Farm Family Life Insurance
Company's wholly owned subsidiary, United Farm Family Insurance Company.

Conversion and Initial Public Offering
On July 26, 1996,  Farm Family Mutual  Insurance  Company ("Farm Family Mutual")
converted from a mutual property and casualty insurance company to a stockholder
owned  property  and  casualty  insurance  company  and  became a  wholly  owned
subsidiary of Farm Family Holdings,  Inc.  pursuant to a plan of  Reorganization
and Conversion (the "Plan of Conversion").  In addition,  Farm Family Mutual was
renamed Farm Family Casualty Insurance Company. As part of the Plan, Farm Family
Holdings was formed and the Farm Family Mutual policyholders  received 2,237,000
shares of Farm Family Holding's common stock and $11,735,000 in cash in exchange
for their membership interest in Farm Family Mutual.

On July 23, 1996,  Farm Family  Holdings made an initial public  offering of its
common  stock at a price of $16 per share.  Farm Family  Holdings  received  net
proceeds  of  $41,453,000  for  2,786,000  shares  sold  in the  initial  public
offering.  In addition,  Farm Family  Holdings  received  $3,427,000 for 214,000
shares  purchased  by  policyholders  of Farm  Family  Mutual in a  subscription
offering. In addition,  pursuant to the Plan, holders of Farm Family Mutual debt
could elect to exchange  their debt  instruments  for shares of common  stock or
cash.  As a result,  there were  17,000  common  shares and  $1,107,000  in cash
exchanged for debt with an outstanding principal amount of $1,371,000.

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

Operating Environment
The  operating  results of companies  in the  property  and  casualty  insurance
industry have  historically  been subject to  fluctuations  due to  competition,
economic  conditions,  weather and various other factors.  Factors affecting the
results of operations of the property and casualty  insurance  industry  include
price competition and aggressive  marketing which  historically have resulted in
higher  combined loss and expense  ratios.  The Company's  premium  revenue is a
function of changes in average  premiums per policy and the growth in the number
of policies.  Premium rates are regulated by the state insurance  departments in
the states in which the Company operates.  Because of the nature of the property
and casualty insurance industry, it is difficult to predict future trends in the
industry's overall profitability.

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.  Residual  market premium rates for automobile
insurance  have  generally  been  inadequate.  The  amount of  future  losses or
assessments from residual market  mechanisms can not be predicted with certainty
and could have a material adverse effect on the Company's results of operations.

For the years ended December 31, 1996, 1995, and 1994,  38.6%,  39.1% and 38.5%,
respectively,  of the  Company's  direct  written  premiums  were  derived  from
policies  written in New York and 22.6%,  20.8%, and 19.6%,  respectively,  were
derived from policies written in New Jersey.  For these periods,  no other state
accounted for more than 10.0% of the company's  direct  written  premiums.  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.

Products
The Special Farm Package is a flexible, multi-line package of insurance coverage
which the Company regards as its "flagship" product. For the year ended December
31, 1996, 24.5% of the Company's total direct premiums written were derived from
the Special Farm Package product.

The Company concentrates on its primary products:  personal and commercial auto,
the Special  Farm  Package its  businessowners,  and  homeowners  policies.  The
Company  underwrites  its  commercial  and  personal  lines risks by  evaluating
historical loss experience,  current prevailing market  conditions,  and product
profitability with consistently applied standards. The adequacy of premium rates
is affected  mainly by the severity  and  frequency of claims and changes in the
competitive, legal and regulatory environment in which the Company operates.

Expense Management
During the fourth quarter of 1996, the Company announced the implementation of a
voluntary early  retirement  program and other changes to the Company's  benefit
plans as part of its continuous expense management program. The Company recorded
a nonrecurring charge, net of an income tax benefit of $405,000, of $752,000 for
the Company's  share of the costs of this voluntary  early  retirement  program.
Eligibility for the program was based on age and years of service.  In addition,
effective  January 1, 1997,  the Company froze  benefits  available  through its
defined  benefit plan and enhanced its defined  contribution  plan. As a result,
the  Company's  contributions  to the defined  contribution  plan will vary to a
greater  extent based upon the Company's  profitability  than the  contributions
previously  required to fund its defined  benefit  plan.  The Board of Directors
also approved an annual incentive plan for officers.

Results of Operations

     The Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

Premiums
Premium revenue increased $13.9 million or 11.8%, during the year ended December
31, 1996 to $130.8  million from $116.9 million in 1995. The increase in premium
revenue in 1996 resulted from an increase of $11.1 million in earned premiums on
additional business directly written by the Company (principally in New York and
New Jersey) and an increase of $2.4 million in earned  premiums  retained by the
Company and not ceded to reinsurers,  in addition to an increase of $0.4 million
in earned  premiums  assumed.  The $11.1 million  increase in earned premiums on
additional  business directly written by the Company was primarily  attributable
to an increase of $9.9 million,  or 9.2%, in earned  premiums from the Company's
primary  products  (personal  and  commercial  automobile  products  other  than
assigned  risk  business,  the Special Farm  Package,  businessowners  products,
homeowners  products,  and  Special  Home  Package)  and to an  increase of $0.7
million in earned  premiums on  workers'  compensation  business.  The number of
policies in force related to the Company's primary products increased by 8.6% to
approximately 114,000 in 1996 from approximately 105,000 in 1995 and the average
premium earned for each such policy  increased by 0.6% in 1996. The $2.4 million
increase in earned premiums  retained by the Company was primarily the result of
a change  in the  terms  of  certain  of the  Company's  reinsurance  agreements
pursuant to which the earned premiums ceded by the Company were reduced.

Net Investment Income
Net  investment  income  increased $1.3 million or 9.1% to $15.6 million for the
year ended  December  31, 1996 from $14.3  million in 1995.  The increase in net
investment  income was  primarily the result of an increase in cash and invested
assets  (at  amortized  cost) of  approximately  $34.7  million,  or 17.7%.  The
increase in average cash and invested  assets was primarily  attributable to the
capital contribution of $18.0 million from Farm Family Holdings received in July
1996. The average return  realized on the Company's cash and invested assets was
7.5% in 1996 and 7.6% in 1995.

Net Realized  Investment Gains (Losses) Net realized investment losses were $0.6
million for the year ended  December 31, 1996 compared to a gain of $0.9 million
in 1995.

Losses and Loss Adjustment Expenses
Losses and loss adjustment  expenses increased $11.8 million, or 14.2%, to $95.0
million for the year ended  December  31, 1996 from $83.2  million in 1995.  The
increase in losses and loss  adjustment  expenses was primarily  attributable to
the  overall  growth in the  Company's  business,  as well as the  frequency  of
weather related losses in the Northeastern United States during the three months
ended March 31, 1996.  Loss and loss  adjustment  expenses were 72.6% of premium
revenue in 1996  compared to 71.1% of premium  revenue in 1995.  Losses and loss
adjustment  expenses believed to be weather related  aggregated $10.6 million in
1996 compared to $5.2 million in 1995.

Underwriting Expenses
Underwriting  expenses increased $2.7 million, or 7.7%, to $37.6 million for the
year ended December 31, 1996 from $34.9 million for the same period in 1995. For
the year ended  December 31, 1996,  underwriting  expenses were 28.7% of premium
revenue  compared to 29.8% in 1995. 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.

Federal Income Tax Expense
Federal  income tax expense  decreased $1.2 million to $3.8 million in 1996 from
$5.0  million in 1995.  Federal  income tax expense  was 30.4% of income  before
federal  income  taxes in 1996  compared to 34.2% in 1995.  The  decrease in the
Company's  effective  federal income tax rate was primarily  attributable  to an
increase in tax exempt interest income in 1996.

Income Before Extraordinary Item Income before extraordinary item decreased $1.0
million to $8.6 million in 1996 from $9.6 million in 1995  primarily as a result
of the foregoing factors.

Net Income
Net income  decreased  $2.5 million to $7.1 million in 1996 from $9.6 million in
1995  primarily  as a result of the  foregoing  factors  and the  impact of $1.5
million of expenses  related to the  demutualization  of the  Company  which the
Company has identified as an extraordinary  item, as well as the  implementation
of a voluntary early  retirement  program which resulted in a one time charge to
earnings of $0.8 million,  net of income tax benefit of $0.4 million,in the last
quarter of 1996.

The Year Ended December 31, 1995 Compared to the Year Ended December 31, 1994

Premiums
Premium revenue increased $15.5 million or 15.2%, during the year ended December
31, 1995 to $116.9  million from $101.5 million in 1994. The increase in premium
revenue in 1995 resulted from an increase of $14.3 million in earned premiums on
additional business directly written by the Company (principally in New York and
New Jersey) and an increase of $2.3 million in earned  premiums  retained by the
Company and not ceded to reinsurers,  which were partially  offset by a decrease
of $1.1 million in earned premiums assumed. The $14.3 million increase in earned
premiums on additional  business  directly  written by the Company was primarily
attributable to an increase of $10.8 million,  or 11.1%, in earned premiums from
the Company's  primary  products  (personal and commercial  automobile  products
other than assigned  risk  business,  the Special Farm  Package,  businessowners
products,  homeowners products,  and Special Home Package) and to an increase of
$1.8  million  in earned  premiums  on  assigned  risk  business.  The number of
policies in force related to the Company's primary products increased by 8.4% to
approximately  105,000 in 1995 from approximately 97,000 in 1994 and the average
premium earned for each such policy  increased by 2.5% in 1995. The $2.3 million
increase in earned premiums  retained by the Company was primarily the result of
a change  in the  terms  of  certain  of the  Company's  reinsurance  agreements
pursuant  to which both the amount of earned  premiums  ceded by the Company and
the ceding  commissions  received by the Company were reduced.  The $1.1 million
decrease in earned premiums  assumed was attributable to a reduction in premiums
assumed from mandatory pools as a result of the depopulation of such pools.

Net Investment Income
Net  investment  income  increased $1.1 million or 8.6% to $14.3 million for the
year ended  December  31, 1995 from $13.2  million in 1994.  The increase in net
investment  income was  primarily the result of an increase in cash and invested
assets (at amortized cost) of approximately  $17.2 million,  or 9.6%. The return
realized on the Company's cash and invested assets was 7.6% in 1995 and 1994.

Net Realized Investment Gains
Net realized  investment gains were $0.9 million for the year ended December 31,
1995 compared to $1.3 million in 1994.


Losses and Loss Adjustment Expenses
Losses and loss adjustment  expenses  increased $0.5 million,  or 0.6%, to $83.2
million for the year ended  December  31, 1995 from $82.7  million in 1994.  The
increase in losses and loss  adjustment  expenses was primarily  attributable to
the overall growth in the Company's  business and was significantly  offset by a
reduction  in the  loss  and  loss  adjustment  expense  ratio.  Loss  and  loss
adjustment  expenses were 71.1% of premium  revenue in 1995 compared to 81.5% of
premium  revenue in 1994. The decrease in the loss and loss  adjustment  expense
ratio was  primarily  attributable  to  improved  loss  ratios on the  Company's
personal and commercial  automobile  lines and to a decline in the frequency and
severity  of weather  related  property  losses in 1995 as  compared  with 1994.
Losses and loss adjustment  expenses  believed to be weather related  aggregated
$5.2 million in 1995 compared to $7.9 million in 1994. To a much lesser  extent,
the  decrease  in  the  loss  and  loss  adjustment  expense  ratio  on  assumed
reinsurance also  contributed to the decrease in the Company's  overall loss and
loss adjustment expense ratio during 1995.

Underwriting Expenses
Underwriting  expenses increased $6.1 million,  or 21%, to $34.9 million for the
year ended December 31, 1995 from $28.8 million for the same period in 1994. For
the year ended  December 31, 1995,  underwriting  expenses were 29.8% of premium
revenue  compared  to 28.4% in 1994.  A  reduction  in 1994 of $2.2  million  in
amounts  accrued for the Company's share of the deficit of the New Jersey Market
Transition Facility had a favorable impact on the Company's underwriting expense
ratio in that year.  Without  taking into account the effect of this  reduction,
underwriting expenses in 1994 would have been 30.5% of premium revenue

Federal Income Tax Expense
Federal income tax expense increased $3.6 million to $5.0 million in 1995 from $
1.4  million in 1994.  Federal  income tax  expense  was 34.2% of income  before
federal  income tax expense in 1995  compared to 29.1% in 1994.  The increase in
the Company's  effective  federal income tax rate was primarily  attributable to
the  increase in income  before  federal  income tax expense,  certain  expenses
related to the  demutualization  of Farm Family  Mutual,  and  reductions in tax
exempt interest income in 1995.

Net Income Net income  increased  $6.1 million to $9.6 million in 1995 from $3.5
million in 1994 primarily as a result of the foregoing factors.


Liquidity and Capital Resources

Historically,  the  principal  sources  of the  Company's  cash  flow  have been
premiums,  investment income,  maturing investments,  and proceeds from sales of
invested  assets.  In  addition  to the  need for  cash  flow to meet  operating
expenses,  the liquidity  requirements  of the Company  relate  primarily to the
payment of losses and loss adjustment  expenses.  The liquidity  requirements of
the Company vary because of the uncertainties regarding the settlement dates for
liabilities  for unpaid  claims and because of the  potential  for large losses,
either individually or in the aggregate.

During 1996,  the Company  continued  to reduce its  holdings of  non-investment
grade  fixed  maturities  to  improve  the  overall  quality  of its  investment
portfolio.  The aggregate  carrying value of fixed maturity  securities rated as
non-investment  grade by the NAIC was  reduced to $6.9  million,  or 3.2% of its
fixed maturity  portfolio,  at December 31, 1996 from $10.8 million,  or 5.6% of
its fixed maturity  portfolio,  at December 31, 1995. High yield corporate bonds
constituted most of the  non-investment  grade securities held by the Company as
of  December  31,  1996.  As a result of the  reduction  in  holdings of certain
non-investment grade securities,  the Company anticipates that future investment
yields  may be lower  than  they  otherwise  would be.  Approximately  4% of the
Company's  investment  portfolio  consists  of  investments  in  mortgage-backed
securities.  The  mortgage-backed  securities held by the Company as of December
31, 1996 were  primarily  GNMA,  FNMA,  and  Federal  Home Loan  Mortgage  Corp.
pass-through  securities.  The  Company  currently  has no  investments  in such
derivative financial instruments as futures, forward, swap, or option contracts,
or other financial instruments with similar characteristics. The market value of
the Company's  fixed maturity  investments is subject to  fluctuations  directly
attributable  to prevailing  rates of interest as well as other  factors.  As of
December 31, 1996,  the aggregate  market value of the Company's  fixed maturity
investments  exceeded the aggregate  amortized cost of such  investments by $5.1
million.  As of December 31, 1995,  the aggregate  market value of the Company's
fixed  maturity  investments  exceeded  the  aggregate  amortized  cost  of such
investments by $10.2 million

The Company has in place an  unsecured  line of credit with Key Bank of New York
under which it may borrow up to $2.0  million.  At December 31, 1996,  no amount
was outstanding on the line of credit which has an annual interest rate equal to
the bank's prime rate. In addition,  the Company had notes  payable  outstanding
consisting  of $0.3  million of  debentures  and $1.0  million  of  subordinated
surplus certificates  (collectively "the Surplus Notes"). The Surplus Notes bear
interest at the rate of 8% per annum,  have no maturity  date, and principal and
interest are repayable only with the approval of the Insurance Department of the
State of New York.

Net cash provided by operating activities was $12.1 million,  $16.4 million, and
$8.6  million  during  the  years  ended  December  31,  1996,  1995,  and 1994,
respectively.  The decrease in cash provided by operating activities in 1996 was
primarily  attributable  to the decrease in net income which included the impact
of $1.5 million of expenses related to the  demutualization of the Company which
the Company has  identified  as an  extraordinary  item during 1996  compared to
1995.  The  increase in net cash  provided by operating  activities  in 1995 was
primarily  attributable to the increase in net income and a decrease in payments
for losses and loss adjustment expenses during 1995 compared to 1994.

Net cash used in investing activities was $30.3 million, $18.5 million, and $7.7
million during the years ended December 31, 1996, 1995, and 1994,  respectively.
The increase in net cash used in investing activities in 1996 resulted primarily
from a reduction in proceeds on the maturities and sales of fixed maturities and
the  investment  of the Capital  Contribution  from the  Company's  parent.  The
increase in net cash used in investing  activities in 1995 resulted from the net
increase  in cash  available  from the  Company's  operations  during 1995 and a
corresponding  increase  in  investments  in  short-term  investments  and fixed
maturities.

Net cash provided by financing  activities  for the year ended December 31, 1996
of $20.0  million was the result of a Capital  Contribution  from the  Company's
parent on July 26, 1996.

The Company  purchases  reinsurance  in part to mitigate  the impact of large or
unusual  losses and loss  expenses on its  liquidity.  As a condition of writing
business in certain  states,  the Company  participates in a number of mandatory
pools and the  Company may be  required  to pay  assessments  to the extent such
pools require the funding of deficits in the future.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The response to Item 8 is submitted as a separate section of this report.

ITEM 9.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
             ACCOUNTING AND FINANCIAL DISCLOSURE

There were no  disagreements  with our  independent  auditors on accounting  and
financial disclosure.




<PAGE>


                                    PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


                                   MANAGEMENT


DIRECTORS
---------

The following persons were elected as Directors on March 7, 1996:



                                    Served as
       Name                        Age   Term Expires           Director Since
       ----                        ---   ------------           --------------
   (1) William M. Stamp, Jr         57   April 22, 1997             1975
(1)(3) John W. Lincoln              58   April 22, 1997             1984
   (2) Robert L. Baker              47   April 22, 1997             1988
(2)(3) Randolph C. Blackmer, Jr     55   April 22, 1997             1984
   (1) Fred G. Butler, Sr           68   April 22, 1997             1981
   (1) Joseph E. Calhoun            62   April 22, 1997             1990
       James V. Crane               35   April 22, 1997             1994
   (1) Stephen J. George            57   April 22, 1997             1989
   (1) Gordon H. Gowen              70   April 22, 1997             1991
   (2) Jon R. Greenwood             43   April 22, 1997             1995
(1)(3) Clark W. Hinsdale III        41   April 22, 1997             1993
       Richard A. Jerome            48   April 22, 1997             1995
   (1) Arthur D. Keown, Jr          51   April 22, 1997             1993
   (1) Daniel R. LaPointe           59   April 22, 1997             1987
   (2) Wayne A. Mann                63   April 22, 1997             1994
       Frank W. Matheson            71   April 22, 1997             1996
   (1) Norma R. O'Leary             63   April 22, 1997             1983
       John I. Rigolizzo            43   April 22, 1997             1995
       Harvey T. Smith              51   April 22, 1997             1994
   (2) Charles A. Wilfong           39   April 22, 1997             1991
       Tyler P. Young               36   April 22, 1997             1995

         (1) Members of Executive Committee and Investment Committee
         (2) Members of the Audit Committee
         (3) Members of the Compensation Committee

All of the  Registrant's  Directors have been engaged in farming  operations for
over 5 years. There is no family  relationship  among any of the Directors.  Mr.
Stamp is  Chairman of the Board and Mr.  Lincoln is Vice  Chairman of the Board.
None of the directors hold another position with the Company.

EXECUTIVE OFFICERS
------------------
Information regarding executive officers of the Company in Item 1 of this Report
under the caption  "Executive  Officers of the  Registrant"  in Part I hereof is
incorporated herein by reference.




<PAGE>


ITEM 11.  EXECUTIVE COMPENSATION

     The following table sets forth  information  regarding the  compensation of
the Chief  Executive  Officer  and the other most highly  compensated  executive
officers of Farm Family Casualty Insurance Company.  The figures below represent
the  aggregate  compensation  paid to such  executive  officers  by Farm  Family
Holdings,  Inc. (the  "Corporation"),  Farm Family  Casualty  Insurance  Company
("FFCIC"),  Farm Family Life Insurance  Company (the "Life  Company") and United
Farm  Family  Insurance  Company  ("United")  (collectively,  the  "Companies").
Pursuant to an expense sharing  arrangement  among the Companies,  0.58% of such
aggregate  compensation  expense in 1996 was charged to the Corporation,  62.55%
was  charged to FFCIC,  34.44% was  charged  to the Life  Company  and 2.44% was
charged to United. <TABLE>

                           SUMMARY COMPENSATION TABLE
<CAPTION>
                               Annual Compensation
                                                            -------------------
<S>                                   <C>    <C>          <C>           <C>            <C>
     Name and                                                           Other Annual   All Other
Principal Position                    Year     Salary      Bonus        Compensation Compensation
------------------                    ----     ------      -----        -------------------------
Philip P. Weber                       1996   $285,000     $114,000(1)   $     __(2)    $4,090(3)
President & Chief Executive Officer   1995    240,000            0            __(2)     1,449(4)
                                      1994    210,000            0            __(2)     1,547(5)

Victoria M. Stanton                   1996    150,000       45,000(1)         __(2)     4,090(6)
Executive Vice President,             1995    118,000       11,150        13,643(7)     4,377(8)
General Counsel & Secretary           1994    108,000          200        11,083(7)     3,513(9)

James J. Bettini                      1996    131,154       39,900(1)        __ (2)     4,090(10)
Executive Vice President-Operations   1995    114,500       10,000        14,898(7)     4,271(11)
                                      1994    104,500            0        12,525(7)     3,438(12)

Timothy A. Walsh                      1996     91,308       28,500(1)        __ (2)       840(13)
Executive Vice President - Finance    1995     30,000(14)        0             0            0

Dale E. Wyman                         1996    118,000            0        13,676(15)    1,318(16)
Senior Vice President - Marketing     1995    112,000            0        11,650(7)     1,309(17)
                                      1994    107,000            0        10,430(7)     1,353(18)

Charles E. Simon(19)                  1996    160,223            0            __(2)   173,678(20)
                                      1995    152,550            0        17,384(21)    4,599(23)
                                      1994    146,750            0        14,358(22)    4,247(24)
--------------------------------------------------------------------------------
</TABLE>


 (1)   Represents  bonus paid by the Corporation to the named executive  officer
       for  the  officer's   role  in  the  initial   public   offering  of  the
       Corporation's Common Stock.

  (2)  Does not include  certain  compensation  in the form of  perquisites  and
       other  personal  benefits  provided  to the named  executive  officer for
       services to the Companies  during the year reported,  the aggregate value
       of which did not exceed 10% of total annual salary and bonus.

  (3)  Represents a  contribution  by the  Companies to Mr.  Weber's  account of
       $2,940 under the Farm Family  Employee  "Savings Plus" Plan (the "Savings
       Plus Plan"),  and a group term life  insurance  premium of $1,150 paid by
       the  Companies  for the benefit of Mr.  Weber,  of which $696 was taxable
       income.

  (4)  Represents a contribution by the Companies to Mr. Weber's account of $240
       under the Savings Plus Plan, and a group term life  insurance  premium of
       $1,209 paid by the Companies for the benefit of Mr. Weber,  of which $696
       was taxable income.

 (5)   Represents a contribution by the Companies to Mr. Weber's account of $240
       under the Savings Plus Plan, and a group term life  insurance  premium of
       $1,307 paid by the Companies for the benefit of Mr. Weber,  of which $696
       was taxable income.

  (6)  Represents a contribution  by the Companies to Ms.  Stanton's  account of
       $2,940  under the  Savings  Plus Plan,  and a group  term life  insurance
       premium of $1,150 paid by the Companies  for the benefit of Ms.  Stanton,
       of which $264 was taxable income.

  (7)  Includes a car allowance of $8,640 paid by the Companies.

  (8)  Represents a contribution  by the Companies to Ms.  Stanton's  account of
       $3,244  under the  Savings  Plus Plan,  and a group  term life  insurance
       premium of $1,133 paid by the companies for the benefit of Ms. Stanton of
       which $245 was taxable income.

  (9)  Represents a contribution  by the Companies to Ms.  Stanton's  account of
       $2,390  under the  Savings  Plus Plan,  and a group  term life  insurance
       premium of $1,124 paid by the companies for the benefit of Ms. Stanton of
       which $179 was taxable income.

(10)   Represents a contribution  by the Companies to Mr.  Bettini's  account of
       $2,940  under the  Savings  Plus Plan,  and a group  term life  insurance
       premium of $1,150 paid by the Companies  for the benefit of Mr.  Bettini,
       of which $406 was taxable income.

(11)   Represents a contribution  by the Companies to Mr.  Bettini's  account of
       $3,175  under the  Savings  Plus Plan,  and a group  term life  insurance
       premium of $1,096 paid by the Companies  for the benefit of Mr.  Bettini,
       of which $365 was taxable income.

(12)   Represents a contribution  by the Companies to Mr.  Bettini's  account of
       $2,352  under the  Savings  Plus Plan,  and a group  term life  insurance
       premium of $1,086 paid by the Companies  for the benefit of Mr.  Bettini,
       of which $324 was taxable income.

(13)   Represents a group term life  insurance  premium of $840 paid by the
       Corporation  for the benefit of Mr. Walsh, of which $185 was taxable
       income.

(14)   Mr. Walsh joined FFCIC as Director of Corporate Development in August
       1995.

(15)   Includes a car allowance of $8,916 paid by the Companies.

(16)   Represents a contribution by the Companies to Mr. Wyman's account of $240
       under the Savings Plus Plan, and a group term life  insurance  premium of
       $1,078  paid by the  Companies  for the  benefit of Mr.  Wyman,  of which
       $1,071 was taxable income.

(17)   Represents a contribution by the Companies to Mr. Wyman's account of $240
       under the Savings Plus Plan,  and an insurance  premium of $1,069 paid by
       the Companies  for the benefit of Mr. Wyman,  of which $1,002 was taxable
       income.

(18)   Represents a contribution by the Companies to Mr. Wyman's account of $240
       under the Savings Plus Plan,  and an insurance  premium of $1,113 paid by
       the  Companies  for the benefit of Mr.  Wyman,  of which $945 was taxable
       income.

(19)   Mr. Simon resigned his positions with the Companies effective November
       15, 1996.  See "Settlement Agreement".

(20)   Represents an amount of $172,528 paid or to be paid to Mr. Simon pursuant
       to a Separation  Agreement  and General  Release  whereby he resigned his
       positions with the Companies effective November 15, 1996 (see "Settlement
       Agreement"),  and a group term life  insurance  premium of $1,150 paid by
       the  Companies  for the benefit of Mr.  Simon,  of which $975 was taxable
       income.

(21)   Includes a car  allowance of $8,640 and gasoline  credit card payments of
       $4,434 paid by the Companies.

(22)   Includes a car  allowance of $7,200 and gasoline  credit card payments of
       $3,585 paid by the Companies.

(23)   Represents a  contribution  by the  Companies to Mr.  Simon's  account of
       $3,390  under the  Savings  Plus Plan,  and a group  term life  insurance
       premium of $1,209 paid by the  Corporation  for the benefit of Mr. Simon,
       of which $ 1,152 was taxable income.

(24)   Represents a  contribution  by the  Companies to Mr.  Simon's  account of
       $2,940  under the  Savings  Plus Plan,  and a group  term life  insurance
       premium of $1,307 paid by the  Corporation  for the benefit of Mr. Simon,
       of which $ 696 was taxable income.

Severance Plan

Each of the officers of the Corporation is eligible for severance benefits under
FFCIC's and the Life Company's joint Officer  Severance Pay Plan (the "Severance
Plan") when such  officer's  employment is terminated  under defined  qualifying
conditions,  which  include,  but are not limited to, certain sales of assets or
mergers or other corporate  reorganizations  involving the Companies.  Under the
Severance  Plan,  the  Companies  will  pay to a  qualifying  officer  severance
benefits  generally  equal to the greater of (i) one week's salary for each year
of service with the  Companies or (ii) 24 months salary in the case of the Chief
Executive Officer, 12 months salary in the case of a Senior Vice President and 6
months salary in the case of any other officer.

Settlement Agreement

Pursuant to the Severance  Plan,  Charles E. Simon has entered into a Separation
Agreement and General Release (the "Settlement Agreement") pursuant to which Mr.
Simon  resigned his position  with the  Companies  effective  November 15, 1996.
Pursuant to the Settlement Agreement,  Mr. Simon receives an amount equal to the
total amount Mr.  Simon would have  received for (i) the  Severance  Plan,  (ii)
premium for medical and dental insurance through December of 1997, and (iii) the
Companies'  1996  contribution  to Mr.  Simon's  "Savings  Plus" Plan if he were
employed by the Companies at year end. In addition,  pursuant to the  Settlement
Agreement,  Mr.  Simon  received an amount equal to the value of his accrued but
unused  vacation  time. As a material  inducement  to enter into the  Settlement
Agreement,  Mr. Simon  executed a general  release  releasing  the Companies and
their  Related  Persons (as defined in the  Settlement  Agreement)  from certain
obligations  including,  but not limited to, any claims arising out of or in any
way related to (i)  ownership  of any common  stock of the  Companies,  (ii) Mr.
Simon's  employment  with the Companies and the  conclusion  thereof,  (iii) any
severance plan, and (iv) any future  Voluntary  Retirement  Incentive Plan which
may be offered to employees of the Companies.

Pension Benefits

The  Corporation  and FFCIC are  participating  employers  under the Farm Family
Employee  Retirement Plan (the "Retirement  Plan").  Substantially  all salaried
employees of the Corporation  who were  participants in the Plan on December 31,
1996,  including  executive  officers,  are eligible to receive pension benefits
under the  Retirement  Plan.  The  Retirement  Plan is a  tax-qualified  defined
benefit  retirement  plan  which is subject to the  Employee  Retirement  Income
Security  Act of 1974,  as  amended.  Federal  law  limits the amount of pension
benefits that can be accrued and  compensation  that can be  recognized  under a
tax-qualified  retirement plan such as the Retirement  Plan. FFCIC has adopted a
non-qualified  unfunded retirement plan, the Farm Family  Supplemental  Employee
Retirement  Plan (the "SERP"),  for the payment of those  benefits at retirement
that cannot be accrued under the  Retirement  Plan on account of the Federal law
limits on the amount of pension  benefits  that can be accrued and  compensation
that can be recognized  under the Retirement  Plan. The practical  effect of the
SERP is to provide for the calculation of retirement benefits on a uniform basis
for all employees.  Benefit  payments under the Retirement Plan and the SERP are
allocated among the Corporation,  FFCIC, the Life Company and United pursuant to
expense  sharing  arrangements.  New benefit  accruals under the Retirement Plan
were discontinued as of December 31, 1996.

The table below  illustrates the approximate  annual  retirement  benefits which
would be payable at age 65 under the Retirement  Plan and, if applicable,  under
the SERP.


Average Annual                    Years of Service
Compensation      15         20         25         30         35

  $100,000    $ 30,000   $ 40,000   $ 50,000   $ 60,000   $ 60,000
   150,000      45,000     60,000     75,000     90,000     90,000
   200,000      60,000     80,000    100,000    120,000    120,000
   250,000      75,000    100,000    125,000    150,000    150,000
   300,000      90,000    120,000    150,000    180,000    180,000
   350,000     105,000    140,000    175,000    210,000    210,000
   400,000     120,000    160,000    200,000    240,000    240,000

For purposes of calculating  retirement benefits, a participant's average annual
compensation  ("Average Annual  Compensation") shall be equal to a participant's
compensation  during the five calendar years (out of the last ten calendar years
of employment) for which the participant's  compensation was highest, divided by
five.  Compensation,  as  used  to  calculate  retirement  benefits,  means  the
aggregate  of the  amounts  listed in the Summary  Compensation  Table under the
captions  "Salary,"  "Bonus" and "Other Annual  Compensation" and the portion of
the amount listed under the caption "All Other  Compensation"  which corresponds
to the part of the  group  term  life  insurance  premium,  if any,  paid by the
Corporation  which is taxable  as income to the  participant  in the  Retirement
Plan.

The  credited  years of service  as of  December  31,  1996 for Mr.  Weber,  Mr.
Bettini,  Mr. Simon, Ms. Stanton, Mr. Walsh and Mr. Wyman were 17.0, 18.0, 24.4,
6.0, 2.0, 14.9, respectively.

The annual pension benefit under the Retirement Plan and, when  applicable,  the
SERP, equals 2.0% of Average Annual Compensation  multiplied by years of service
(not to exceed 30 years).  Benefits under the  Retirement  Plan and the SERP are
not subject to Social Security or other offset amounts.

COMPENSATION OF DIRECTORS

In 1996,  the Chairman of the Board and the Vice Chairman of the Board  received
an annual  retainer  of $10,000  and $4,500  respectively.  All other  directors
received an annual  retainer of $3,000.  Directors  also received a daily fee of
$500 for meetings of the boards of directors of the companies,  $250 per meeting
of a board committee and $250 per day for attendance at other company functions.
Effective  January 1, 1997,  the Chairman of the Board and Vice  Chairman of the
Board receive an annual retainer of $20,000 and $10,000 respectively.  All other
directors receive an annual retainer of $5,000.  Also effective January 1, 1997,
daily  meeting  fees were  increased  to $1,000  for  meetings  of the boards of
directors of the companies,  $500 per meeting of a board  committee and $500 per
day for  attendance  at other  company  functions.  Effective  January  1, 1997,
Directors  may defer their  compensation  pursuant to a  non-qualified  deferred
compensation  plan.  Directors are reimbursed  for  reasonable  travel and other
expenses of attending  meetings of the boards of directors and board  committees
and other functions. Fees and expenses paid to directors are allocated among the
Corporation,  FFCIC,  the Life  Company and United  pursuant to expense  sharing
arrangements.

CHANGE IN CONTROL ARRANGEMENTS

Certain  of  the  Corporation's  compensation  plans  applicable  to  the  named
executive  officers   appearing  in  the  Summary   Compensation  Table  include
provisions  regarding payments pursuant to such plans in the event of the change
of control of the Corporation.  Except for the Corporation's  Omnibus Securities
Plan,  which is described in "Item III - Approval of the  Corporation's  Omnibus
Securities  Plan," in the Proxy Statement,  plans containing such provisions are
described below.  These provisions are generally  applicable to all participants
in such plans.

ANNUAL INCENTIVE PLAN

In 1996,  the Board of  Directors  of the  Corporation  adopted  the Farm Family
Holdings,  Inc. Annual  Incentive Plan (the "Annual  Incentive Plan") to provide
incentives  and  financial  rewards to officers  and other key  employees of the
Corporation  selected for  participation  by the Board of Directors.  The Annual
Incentive Plan authorizes the payment of cash awards  calculated as a percentage
of  base  salary  with  the  applicable   percentage  determined  based  on  the
performance  of  the  participant  assessed  according  to  the  achievement  of
predefined goals derived from the  Corporation's  and its affiliates'  strategic
plans and budgets. Except in the event of a Change of Control (as defined in the
Annual  Incentive  Plan),  achievement  of  a  target  performance  level  is  a
prerequisite  to the receipt of an award pursuant to the Annual  Incentive Plan.
In the event of a Change of Control, each participant will receive payment of an
amount equal to the greater of the  participant's  actual Earned Award or Target
Award  Opportunity  (both as defined in the Annual  Incentive Plan) for the plan
year  in  which  the  Change  of  Control  occurs,  regardless  of  whether  the
participant achieved the target performance level.

OFFICERS' DEFERRED COMPENSATION PLAN

In 1996,  the Board of Directors  of the  Corporation  adopted a  non-qualified,
unfunded Officers' Deferred Compensation Plan (the "Deferred Compensation Plan")
pursuant to which officers of the Corporation and its affiliates selected by the
Board of Directors as eligible to participate in the Deferred  Compensation Plan
may elect to defer  compensation  payable by the  Corporation or its affiliates.
Participants  may elect to receive  their  Accrued  Benefit  (as  defined in the
Deferred  Compensation  Plan) in a single  lump sum or in five (5),  ten (10) or
fifteen (15) equal annual  installments  commencing upon the date of termination
of service with the Corporation. In the event of a Change of Control (as defined
in  the  Deferred  Compensation  Plan),  each  participant  shall  receive  that
participant's   entire   Accrued   Benefit,   in  a  single   sum,  as  soon  as
administratively practicable following the date of the Change of Control.

Compensation Committee Interlocks and Insider Participation

In 1996,  the  Corporation's  Compensation  Committee  was  comprised of John W.
Lincoln,  Randolph C.  Blackmer,  Clark W. Hinsdale III and John P. Moskos.  Mr.
Lincoln is Vice Chairman of the Board of Directors of the Corporation.



<PAGE>


Report of the Compensation Committee of Farm Family Holdings, Inc., Compensation
Committee of Farm Family Casualty  Insurance Company and Executive  Committee of
Farm Family Casualty Insurance Company on Executive Compensation

Overview

This report is the first report submitted to stockholders  since the Corporation
became  a  publicly-held  entity  in  July  1996,  upon  the  conversion  of its
subsidiary,  FFCIC, from a mutual property casualty insurance company to a stock
property casualty insurance company.  Prior to the formation of the Corporation,
the  Executive  Committee  of the Board of  Directors  of FFCIC (the  "Executive
Committee")  recommended to FFCIC's Board the salaries of the executive officers
for 1996. In 1996,  the Board of Directors of the  Corporation  established  the
Corporation's  Compensation  Committee for the purposes of  recommending  to the
Board policies and plans concerning salaries,  bonuses and other compensation of
the  Corporation's  officers.  In addition,  in 1996,  the Board of Directors of
FFCIC established FFCIC's  Compensation  Committee and the  compensation-related
functions of the Executive  Committee were  transferred to FFCIC's  Compensation
Committee.  The  Compensation  Committees  of  the  Corporation  and  FFCIC  are
collectively  referred to herein as the "Compensation  Committees." During 1996,
FFCIC  retained  an  independent  compensation  consulting  firm to educate  the
Compensation  Committees  with respect to incentive  compensation  arrangements.
Working with the consulting firm, the Corporation's  Compensation  Committee has
recommended  to the  Board of  Directors  of the  Corporation  and the Board has
adopted an Omnibus  Securities  Plan,  subject to shareholder  approval,  and an
Annual  Incentive  Plan for 1997 which are intended to provide  incentives  that
encourage and reward the creation of additional shareholder value.

Except for bonuses paid by the  Corporation  in 1996 to certain of the executive
officers appearing in the Summary  Compensation Table, all compensation prior to
and following the conversion of FFCIC was paid by FFCIC and allocated  among the
Corporation,  FFCIC, the Life Company and United  (collectively the "Companies")
pursuant  to expense  sharing  arrangements  among the  Companies.  This  report
reflects the  compensation  philosophy of the Corporation and FFCIC, as endorsed
by the Executive  Committee and the Compensation  Committees and approved by the
Boards of Directors of the Corporation and FFCIC.

Components of Executive Compensation

The  components  of  the  1996  compensation  for  executive   officers  of  the
Corporation,  including the Chief Executive Officer,  consist of base salary and
bonus. Annual incentive  compensation and long-term incentive compensation plans
have been put in place for 1997.

Base Salary. Base salary for each executive officer is set based on a subjective
evaluation of the recommendations of the Chief Executive Officer,  salary levels
in effect for comparable positions in the market place, personal performance and
potential future contributions to the Companies.  The 1996 base salaries for the
executive  officers were recommended by the Executive  Committee and approved by
the Board of Directors of FFCIC.

Bonus.  In 1996,  the  Compensation  Committee  of the Board of Directors of the
Corporation recommended,  and the Board approved, the payment by the Corporation
of a 1996 bonus to Mr. Weber, Mr. Bettini,  Ms. Stanton,  and Mr. Walsh for such
officers'  roles in the  initial  public  offering of the  Corporation's  Common
Stock.

Annual  Incentive  Compensation  . During 1996, the  Corporation's  Compensation
Committee  recommended,  and the Board  approved,  an Annual  Incentive  Plan to
provide  incentives and financial rewards to officers and other key employees of
the  Corporation and its  subsidiaries  who are responsible for or contribute to
the management,  growth or profitability of the business of the Corporation,  or
its subsidiaries. The Annual Incentive Plan became effective January 1, 1997 and
will tie annual incentive compensation to performance goals.

Long-Term Incentive  Compensation.  In addition,  during 1996, the Corporation's
Compensation  Committee  recommended,  and the Board adopted,  the Corporation's
Omnibus  Securities  Plan (the "Plan") which is being  submitted for approval by
the  stockholders  of the  Corporation  at the  Annual  Meeting.  The  Board  of
Directors  of  the  Corporation  has  approved  the   Compensation   Committee's
recommendation of grants of non-qualified  options to certain executive officers
of the Corporation and its subsidiary,  FFCIC,  pursuant to the Plan, subject to
the approval of the Plan by the  stockholders  of the  Corporation at the Annual
Meeting.  The grants of  non-qualified  options  were based in part on insurance
industry  survey  data.  See "Item III - Approval of the  Corporation's  Omnibus
Securities Plan."

CEO Compensation

For 1996, Mr. Weber's base salary was established at $285,000.  Mr. Weber's 1996
base salary was set based on a subjective  evaluation of salary levels in effect
for comparable positions in the marketplace,  personal performance and potential
future  contributions to the Companies.  In 1996, the Compensation  Committee of
the Board of Directors of the Corporation  recommended,  and the Board approved,
the  payment  of a 1996  bonus in the amount of  $114,000  to Mr.  Weber for Mr.
Weber's role in the initial public offering of the  Corporation's  common stock.
In addition, during 1996, the Compensation Committee recommended,  and the Board
approved subject to approval of the Plan by the stockholders of the Corporation,
the grant to Mr. Weber of non-qualified  stock options to purchase 75,000 shares
of Common Stock of the  Corporation  under the Plan. See "Item III - Approval of
the Corporation's Omnibus Securities Plan."

Compliance with Internal Revenue Code Section 162(m)

Section  162(m)  of the  Internal  Revenue  Code,  enacted  in  1993,  generally
disallows a tax deduction to public companies for  compensation  over $1 million
paid to the Chief  Executive  Officer  and four  other most  highly  compensated
executive  officers.  Qualifying  performance-based  compensation  will  not  be
subject to the deduction limit if certain  requirements are met. The Corporation
has not paid any compensation to any executive  officers that was not deductible
by reason of the  prohibition in Section  162(m).  The  Compensation  Committees
believe that tax deductibility is a important factor, but not the sole factor to
be  considered  in  setting  executive  compensation  policy.  Accordingly,  the
Compensation  Committees  generally  intend to take such reasonable steps as are
required to avoid the loss of a tax deduction due to Section 162(m), but reserve
the  right,  in  appropriate  circumstances,   to  pay  amounts  which  are  not
deductible.

Compensation Committee of Farm Family Holdings, Inc.

Randolph C. Blackmer, Jr.
Clark W. Hinsdale III
John W. Lincoln
John P. Moskos

Compensation Committee of Farm Family Casualty Insurance Company

Randolph C. Blackmer, Jr.
Clark W. Hinsdale III
John W. Lincoln

Executive Committee of Farm Family Casualty Insurance Company

Fred G. Butler           Daniel R. LaPointe
Joseph E. Calhoun        John W. Lincoln
Stephen J. George        Norma R. O'Leary
Gordon H. Gowen          William M. Stamp, Jr.
Clark W. Hinsdale III    Richard D. Tryon

COMMON STOCK PERFORMANCE GRAPH

The graph is omitted  because all of the common  stock of Farm  Family  Casualty
Insurance Company is held by Farm Family Holdings, Inc. There is no public share
price for the common stock of Farm Family Casualty Insurance Company, nor is the
common stock publicly traded.







<PAGE>


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
               MANAGEMENT


      (1)                       (2)                    (3)               (4)
                                                                       Percent
                 Name and Address of           Amount and Nature of       of
Title of Class    Beneficial Owner             Beneficial Ownership     Class
--------------    ----------------             --------------------     -----
 common stock    Farm Family Holdings, Inc.     2,253,878 shares         100%
                 P.O. Box 656
                 Albany, NY 12201-0656

Farm Family  Holdings is the actual owner of all the shares shown in column (3).
No shares are owned by Directors or by Executive Officers.

ITEM 13.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Life Company

Substantially  all of the directors  and  executive  officers of the Company are
also directors and executive officers of the Life Company.

Expense Sharing Agreement

The Company,  the Holding Company and the Life Company are parties to an amended
and  restated  expense  sharing  agreement,  effective  February  14,  1996 (the
"Expense  Sharing  Agreement")  pursuant  to which  shared  expenses  for goods,
services and  facilities  are  allocated  among the parties in  accordance  with
applicable provisions of the New York Insurance Law and regulations  promulgated
thereunder.  For the year ended December 31, 1996, shared expenses totaled $30.7
million of which 63% or $19.3 million was allocated to the Company.

Lease Agreement

The Company and the Life Company are parties to a Lease Agreement, dated July 1,
1988, as amended by Amendment to Lease Agreement,  effective January 1, 1994 (as
so amended,  the "Lease  Agreement"),  pursuant to which the Company leases home
office space in Glenmont, New York from the Life Company.  Annual rent under the
Lease Agreement for the year ended December 31, 1996 was $712,000.

United

Per Risk Reinsurance Contract

The  Company  and  United  are  parties  to an  Underlying  Multi-Line  Per Risk
Reinsurance  Contract,  effective January 1, 1995, as amended by Addendum No. 1,
effective  January  1, 1996 and  Addendum  No. 2,  effective  January  1,  1996,
Addendum No. 3, effective  July 26, 1996, and Addendum No. 4, effective  January
1, 1997 (as so  amended,  the "Per Risk  Reinsurance  Agreement").  For the year
ended December 31, 1996, net earned premiums ceded by the Company to United were
$8.0 million.

Umbrella Reinsurance Agreement

United has assumed 5% of the Company's net liability  retained under an Umbrella
Quota  Share  Reinsurance  Contract,  effective  January 1, 1995,  as amended by
Addendum No. 1, effective  January 1, 1995 and Addendum No. 2 effective July 26,
1996 (as so amended, the "Umbrella Reinsurance  Agreement").  For the year ended
December  31,  1996,  net written  premiums  ceded by FFCIC to United  under the
Umbrella Reinsurance Agreement were $0.2 million.

Catastrophe Reinsurance Contract

United has  assumed  16.67% of the 1st layer and 2% of the 3rd and 4th layers of
the  Company's per  occurrence  losses under an Excess  Catastrophe  Reinsurance
Contract,  effective January 1, 1997 (the "Catastrophe  Reinsurance  Contract").
For the year ended December 31, 1996,  net earned  premiums ceded by the Company
to  United  were  $0.11  million  under  a   reinsurance   contract   containing
substantially similar terms.



<PAGE>


Assumption Agreement

The Company  and United  were  parties to an  Assumption  Agreement,  commencing
January 1, 1995 (the  "Assumption  Agreement"),  pursuant  to which the  Company
retroceded to United a portion of its assumed reinsurance  obligations each year
during the term of the Agreement. For the year ended December 31, 1996, premiums
of $1.0  million  were  retroceded  to  United.  The  Assumption  Agreement  was
terminated effective December 31, 1996.

Service Agreement

The Company and United are parties to a Service  Agreement,  dated July 25, 1988
(the "Service  Agreement"),  pursuant to which the Company  provides United with
certain  services,   property,   equipment  and  facilities  necessary  for  its
operations.  For the year ended December 31, 1996, United incurred approximately
$0.7 million in direct and  allocated  expenses  and overhead  under the Service
Agreement.

Farm Bureaus

Membership List Purchase Agreement

The Company has entered into a Membership List Purchase Agreement, commencing on
January  1,  1996,  with the Farm  Bureau in each of the ten  states in which it
operates  (collectively,  the "Farm Bureaus").  Pursuant to each Membership List
Purchase Agreement,  Farm Bureau membership lists are provided to the Company on
an exclusive basis for the purpose of marketing its insurance products.  For the
year ended  December 31, 1996,  the Company paid  approximately  $571,000 to the
Farm Bureaus, in the aggregate, under the Membership List Purchase Agreements.





<PAGE>



                                     PART IV


ITEM 14.       EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
               FORM 8-K

                (a)  The following documents are filed as part of this Form 10-K

                1.   The  audited  consolidated   financial  statements  of  the
                     Registrant as listed in the "Index to Financial Statements"
                     submitted as a separate section of this report beginning on
                     page F-1.

                2.   An "Index to Financial Statement  Schedules" has been filed
                     as a part of this report beginning on page S-1.

                3.   Exhibits

                     An "Exhibit  Index" has been filed as a part of this Report
                     beginning on page E-1 hereof and is incorporated  herein by
                     reference.

               (b)   Reports on Form 8-K:

                     None


<PAGE>


             FARM FAMILY CASUALTY INSURANCE COMPANY AND SUBSIDIARY
                          INDEX TO FINANCIAL STATEMENTS
                          Year Ended December 31, 1996



Report of Independent Accountants                                        F-2

Consolidated Balance Sheets as of December 31, 1996 and 1995             F-3

Consolidated Statements of Income for the Years Ended
   December 31, 1996, 1995 and 1994                                      F-4

Consolidated Statements of Stockholder's Equity for the Years Ended
   December 31, 1996, 1995 and 1994                                      F-5

Statements of Consolidated Cash Flows for the Years Ended
   December 31, 1996, 1995  and 1994                                     F-6

Notes to Consolidated Financial Statements                           F-7 to F-19













                                       F-1


<PAGE>






                        Report of Independent Accountants


To the Shareholder and Board of Directors of
Farm Family Casualty Insurance Company

We  have  audited  the  consolidated  financial  statements  and  the  financial
statement  schedules of Farm Family  Casualty  Insurance  Company and Subsidiary
listed in Item 14(a) of this Form 10-K. These financial statements and financial
statement  schedules are the  responsibility  of the Company's  management.  Our
responsibility  is to  express  an opinion  on these  financial  statements  and
financial statement schedules based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion the financial statements referred to above present fairly, in all
material respects,  the consolidated  financial position of Farm Family Casualty
Insurance  Company  and  Subsidiary  as of December  31, 1996 and 1995,  and the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended  December 31, 1996 in conformity  with generally
accepted  accounting  principles.  In addition,  in our opinion,  the  financial
statement  schedules referred to above, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material respects,
the information required to be included therein.


                                                 Coopers & Lybrand L.L.P.
Albany, New York
February 13, 1997








                                       F-2


<PAGE>
<TABLE>


FARM FAMILY CASUALTY INSURANCE COMPANY & SUBSIDIARY
Consolidated Balance Sheets
 ($ in thousands)
<CAPTION>

As of December 31,
                                                                                       1996       1995
ASSETS

<S>                                                                                 <C>        <C>
Investments:
   Fixed Maturities
     Available for sale, at fair value
        (Amortized cost: $206,841 in 1996 and $171,694 in 1995 ) ................   $211,750   $ 181,189
     Held to maturity, at amortized cost
        (Fair value: $9,973 in 1996 and $13,100 in 1995) ........................      9,782      12,386
     Equity securities
        Available for sale, at fair value (Cost: $2,546 in 1996 and $334 in 1995)      7,908       4,746
   Mortgage loans ...............................................................      1,745       1,822
   Other invested assets ........................................................        748       1,246
   Short-term investments .......................................................      1,982       6,532
                                                                                       -----       -----
             Total investments ..................................................    233,915     207,921
                                                                                     -------     -------

   Cash .........................................................................      4,108       2,410
   Insurance receivables:
     Reinsurance receivables ....................................................     10,743      13,773
     Premiums receivable ........................................................     22,663      21,791
   Deferred acquisition costs ...................................................     10,682      10,527
   Accrued investment income ....................................................      4,709       4,260
   Deferred income tax asset, net ...............................................      1,531        --
   Prepaid reinsurance premiums .................................................      1,944       1,864
   Receivable from affiliates, net ..............................................     16,489      13,860
   Other assets .................................................................      1,826       1,434
                                                                                       -----       -----
             Total Assets .......................................................  $ 308,610   $278,288
                                                                                   =========   ========

LIABILITIES AND STOCKHOLDER'S EQUITY

Liabilities:
    Reserves for losses and loss adjustment expenses ............................  $ 141,220    $137,978
    Unearned premium reserve ....................................................     55,945      52,799
    Reinsurance premiums payable ................................................        641       2,635
    Accrued expenses and other liabilities ......................................      9,081       7,788
    Debt ........................................................................      1,304       2,707
    Deferred income tax liability, net ..........................................       --           217
                                                                                       -----         ---
             Total liabilities ..................................................    208,191     204,124
                                                                                     -------     -------

Stockholder's equity:
    Common Stock $1.60 par value 3,200,000 shares authorized,
        2,253,878 shares issued and outstanding .................................      3,606        --
    Additional paid in capital ..................................................     84,125        --
    Retained earnings ...........................................................      6,012      65,284
    Net unrealized investment gains .............................................      6,676       8,998
    Minimum pension liability adjustment ........................................       --          (118)
                                                                                       -----        ----
             Total stockholder's equity .........................................    100,419      74,164
                                                                                     -------      ------
             Total Liabilities and Stockholder's Equity .........................  $ 308,610   $ 278,288
                                                                                   =========   =========

See accompanying notes to Consolidated Financial Statements.
</TABLE>



                                       F-3
<PAGE>

<TABLE>

FARM FAMILY CASUALTY INSURANCE COMPANY & SUBSIDIARY  Consolidated  Statements of
Income ($ in thousands)

<CAPTION>
Year Ended December 31,                                                        1996        1995       1994
                                                                            ---------    --------   --------
<S>                                                                         <C>          <C>        <C>
Revenues:
Premiums ................................................................   $ 130,780    $116,936   $101,466
Net investment income ...................................................      15,633      14,326     13,190
Realized investment gains (losses), net .................................        (640)        912      1,340
Other income ............................................................         905         840        696
                                                                                  ---         ---        ---
Total revenues ..........................................................     146,678     133,014    116,692
                                                                              -------     -------    -------

Losses and Expenses:
Losses and loss adjustment expenses .....................................      94,977      83,184     82,680
Underwriting expenses                                                          37,593      34,902     28,768
Early retirement program expense ........................................       1,157        --         --
Interest expense ........................................................         167         216        220
Dividends to policyholders ..............................................         373         122         51
                                                                                  ---         ---         --
Total losses and expenses ...............................................     134,267     118,424    111,719
                                                                              -------     -------    -------
Income before federal income tax expense and extraordinary item .........      12,411      14,590      4,973

Federal income tax expense ..............................................       3,770       4,984      1,447
                                                                                -----       -----      -----
Income before extraordinary item ........................................       8,641       9,606      3,526

Extraordinary item - demutualization expenses ...........................       1,543         --         --
                                                                                -----       -----      -----
Net income ..............................................................    $  7,098    $  9,606   $  3,526
                                                                             ========    ========   ========


See accompanying notes to Consolidated Financial Statements.

</TABLE>






                                       F-4


<PAGE>

<TABLE>

FARM FAMILY CASUALTY INSURANCE COMPANY AND SUBSIDIARY
Consolidated Statements of Stockholder's Equity
 ($ in thousands)

<CAPTION>

Year Ended December 31                                                                 1996        1995        1994

<S>                                                                                     <C>          <C>          <C>
Common stock
------------
Balance, beginning of year .......................................................      $ --         $ --         $ --
Common stock issued ..............................................................       3,606         --           --
                                                                                         -----       ------       ------
Balance, end of year .............................................................       3,606         --           --
                                                                                         -----       ------       ------

Additional paid in capital
--------------------------
Balance, beginning of year .......................................................        --           --           --
Paid in Capital during the year ..................................................      16,321         --           --
Transfer of Surplus Notes to Paid in Capital .....................................       1,434         --           --
Demutualization of Farm Family Mutual ............................................      66,370         --           --
                                                                                        ------       ------       ------
Balance, end of year .............................................................      84,125         --           --
                                                                                        ------       ------       ------

Retained earnings
-----------------
Balance, beginning of year .......................................................      65,284       55,678       52,152
Net income .......................................................................       7,098        9,606        3,526
Demutualization of Farm Family Mutual ............................................     (66,370)        --           --
                                                                                       -------       ------       ------
Balance, end of year .............................................................       6,012       65,284       55,678
                                                                                         -----       ------       ------

Net unrealized appreciation (depreciation) of investments
---------------------------------------------------------
Balance, beginning of year .......................................................       8,998       (2,701)       8,360
Change in unrealized appreciation (depreciation), net ............................      (2,322)      11,699      (11,061)
                                                                                        ------       ------      -------
Balance, end of year .............................................................       6,676        8,998       (2,701)
                                                                                         -----        -----       ------

Minimum pension liability adjustment
------------------------------------
Balance, beginning of year .......................................................        (118)        --           --
Minimum pension liability adjustment .............................................         118         (118)        --
                                                                                       -------       ------       ------
Balance, end of year .............................................................        --           (118)        --
                                                                                       -------       ------       ------
Total Stockholder's Equity .......................................................   $ 100,419    $  74,164    $  52,977
                                                                                     =========    =========    =========



See accompanying notes to Consolidated Financial Statements.

</TABLE>




                                       F-5


<PAGE>

<TABLE>

FARM FAMILY CASUALTY INSURANCE COMPANY AND SUBSIDIARY Statements of Consolidated
Cash Flows ($ in thousands)

<CAPTION>

Year ended December 31                                                               1996         1995         1994
                                                                                     ----         ----         ----
CASH FLOWS FROM OPERATING ACTIVITIES:

<S>                                                                                  <C>          <C>         <C>
Net income                                                                           $7,098       $9,606      $3,526
                                                                                     ------       ------      ------
Adjustments   to  reconcile  net  income  to  net  cash  provided  by  operating
activities:
Realized investment (gains) losses ........................................             640        (912)
                                                                                                             (1,340)
Amortization of bond discount .............................................             134          62          77
Deferred income taxes .....................................................            (498)        581         596
Extraordinary item - demutualization expense ..............................           1,543          --          --

Changes in:
Reinsurance receivables ...................................................           3,030       1,254       1,910
Premiums receivable .......................................................            (872)     (3,062)     (2,732)
Deferred acquisition costs ................................................            (155)     (1,856)        (39)
Accrued investment income .................................................            (449)       (213)       (426)
Prepaid reinsurance premiums ..............................................             (80)        (58)       (367)
Receivable from affiliates, net ...........................................          (2,629)     (3,293)      1,699
Other assets ..............................................................             (57)        742        (803)
Reserves for losses and loss adjustment expenses ..........................           3,242      10,024       4,477
Unearned premium reserve ..................................................           3,146       3,956       4,541
Reinsurance premiums payable ..............................................          (1,994)     (1,394)          4
Accrued expenses and other liabilities ....................................           1,588       1,001      (2,030)
Income taxes payable ......................................................            --          --          (459)
                                                                                     ------      ------        ----
Total adjustments .........................................................           6,589       6,832       5,108
                                                                                      -----       -----       -----
Net cash provided by operating activities before extraordinary item .......          13,687      16,438       8,634
Extraordinary item - demutualization expense ..............................          (1,543)       --          --
                                                                                     ------      ------       -----
Net cash provided by operating activities .................................          12,144      16,438       8,634
                                                                                     ------      ------       -----

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sales:
Fixed maturities available for sale .......................................           5,670      28,466      26,100
Other invested assets .....................................................             144        --           732
Investment collections:
Fixed maturities available for sale .......................................           9,405      15,435      16,025
Fixed maturities held to maturity .........................................           2,561         514         418
Mortgage loans ............................................................              77          68          58
Investment purchases:
Fixed maturities available for sale .......................................         (51,050)    (58,339)    (54,010)
Fixed maturities held to maturity .........................................            --        (1,598)     (1,040)
Equity securities .........................................................          (2,042)       --          --
Change in short-term investments, net .....................................           4,550      (3,519)         90
Change in other invested assets ...........................................             344         480       3,186
Proceeds from sale of property and equipment ..............................            --          --           711
                                                                                    -------      ------         ---
Net cash used in investing activities .....................................         (30,341)    (18,493)     (7,730)
                                                                                    -------     -------      ------

CASH FLOWS FROM FINANCING ACTIVITIES

Capital contribution - Common Stock .......................................           3,606        --          --
Capital contribution - Paid in Capital ....................................          16,321        --          --
Principal payments on debt ................................................             (32)        (42)        (34)
                                                                                        ---         ---         ---
Net cash provided by (used in) financing activities .......................          19,895         (42)        (34)
                                                                                     ------         ---         ---
Net increase (decrease) in cash ...........................................           1,698      (2,097)        872
Cash, beginning of year ...................................................           2,410       4,507       3,635
                                                                                      -----       -----       -----
Cash, end of year .........................................................        $  4,108    $  2,410    $  4,507
                                                                                   ========    ========    ========

See accompanying notes to Consolidated Financial Statements.

</TABLE>

                                      F-6


1.      Summary of Significant Accounting Policies

        Basis of Presentation:

     The accompanying  consolidated  financial  statements have been prepared in
conformity  with  generally  accepted  accounting  principles  and  include  the
accounts of Farm Family Casualty  Insurance Company ("Farm Family Casualty") and
its  wholly  owned  subsidiary,   Rural  Agency  and  Brokerage,  Inc.,  ("RAB")
(collectively  referred  to as the  "Company").  The  Company is a wholly  owned
subsidiary of Farm Family Holdings,  Inc. All significant  intercompany balances
and transactions have been eliminated.  The preparation of financial  statements
in accordance with generally accepted accounting  principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period. Actual results could differ from those estimates.

     The Company provides property and casualty  insurance  coverages to members
of the state Farm Bureau organizations in New York, New Jersey,  Delaware,  West
Virginia and all of the New England states.  Membership in the state Farm Bureau
organizations is a prerequisite  for voluntary  insurance  coverage,  except for
employees of the Company and its affiliates.

     The operations of the Company are closely related to 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").
(see Note 10.) Farm Family Life is a stock life  insurance  company owned by the
state Farm Bureau organizations of the ten states in which the Company operates.
The Company and Farm Family Life are  affiliated  by common  management,  shared
agents and employees and similar Boards of Directors.

Investments:

     Fixed   maturities   include  bonds,   redeemable   preferred   stocks  and
mortgage-backed  securities.  Investments in fixed  maturities which the Company
has both the ability and positive  intent to hold to maturity are  classified as
held to maturity and carried at amortized cost.  Fixed  maturities  which may be
sold prior to their  contractual  maturity are  classified as available for sale
and are carried at fair value.  The difference  between  amortized cost and fair
value of fixed  maturities  classified  as available  for sale,  net of deferred
income taxes, is reflected as a component of stockholder's equity.

     Equity securities include common and non-redeemable  preferred stocks which
are carried at fair value. The difference  between cost and fair value of equity
securities,  less  deferred  income  taxes,  is  reflected  as  a  component  of
stockholder's equity.

     Mortgage loans are carried at their outstanding principal balance.

     The carrying values of all investments are reviewed on an ongoing basis. If
this  review  indicates  a  decline  in fair  value  below  cost is  other  than
temporary,  the  Company's  carrying  value in the  investment is reduced to its
estimated  realizable value and a specific write-down is taken. Such write-downs
are included in realized investment gains and losses.

     Short-term investments are carried at cost which approximates fair value.

     Investment income consists primarily of interest and dividends. Interest is
recognized on an accrual  basis and  dividends  are recorded on the  ex-dividend
date.  Interest  income  on  mortgage-backed  securities  is  determined  on the
effective  yield  method  based  on  estimated  principal  repayments.  Realized
investment gains and losses are determined on a specific identification basis.

Income Taxes:

     The income tax provision is calculated under the liability method. Deferred
income tax assets and liabilities  are recorded based on the difference  between
the financial  statement and tax bases of assets and liabilities and the enacted
tax rates. The principal assets and liabilities  giving rise to such differences
are reserves for losses and loss adjustment expenses,  unearned premium reserve,
and deferred acquisition costs. Deferred income taxes also arise from unrealized
investment  gains  or  losses  on  equity  securities  and on  fixed  maturities
classified as available for sale.

                                       F-7


<PAGE>


Property-Liability Insurance Accounting:

     Premiums  are deferred and earned on a pro rata basis over the terms of the
respective policies. Amounts paid for ceded reinsurance premiums are reported as
prepaid reinsurance premiums and amortized over the remaining contract period in
proportion  to  premium.  Premiums  receivable  are  recorded  at  cost  less an
allowance for doubtful accounts.

     Policy  acquisition  costs that vary with and are primarily  related to the
production of business have been deferred.  Deferred acquisition costs primarily
consist of agents'  compensation,  premium taxes, and certain other underwriting
expenses.  Such deferred  acquisition  costs are amortized as premium revenue is
recognized. Deferred acquisition costs are limited to their estimated realizable
value,  which  gives  effect to the  premium  to be earned,  related  investment
income,  and losses and loss adjustment  expenses expected to be incurred as the
premium is earned.

     Reserves for losses and loss adjustment expenses represent estimates of the
ultimate  amounts  necessary  to settle  reported  losses  and a  provision  for
incurred but not reported  claims of insured losses.  The reserve  estimates are
based on known facts and circumstances,  including the Company's experience with
similar cases and historical trends involving reserving patterns, loss payments,
pending  levels of unpaid  claims  and  product  mix,  as well as other  factors
including  court  decisions,  economic  conditions  and  public  attitudes.  The
reserves for losses and loss adjustment expenses include case basis estimates of
reported losses,  estimates of incurred but not reported losses based upon prior
experience adjusted for current trends, and estimates of losses to be paid under
assumed  reinsurance  contracts.  Estimated  amounts of recoverable  salvage and
subrogation  are  deducted  from the  reserves  for losses  and loss  adjustment
expenses.  The establishment of appropriate reserves, as well as related amounts
recoverable  under  reinsurance  contracts is an inherently  uncertain  process.
Reserve  estimates  are regularly  reviewed and updated,  using the most current
information  available.  Any resulting  adjustments,  which may be material, are
reflected in current operations (see Note 7).


2.      Plan of Reorganization and Conversion

     On July 26,  1996,  Farm Family  Mutual  Insurance  Company  ("Farm  Family
Mutual")  converted from a mutual property and casualty  insurance  company to a
stockholder  owned property and casualty  insurance company and changed its name
to Farm Family Casualty Insurance Company. The conversion was made pursuant to a
Plan of  Reorganization  and  Conversion  ("the Plan") which was approved by the
Superintendent  of the New York State Insurance  Department and approved by vote
of the  policyholders.  As part of the Plan, Farm Family Holdings was formed and
the policyholders received 2,237,000 shares of Farm Family Holdings common stock
and $11,735,000 in cash in exchange for their membership interest in Farm Family
Mutual.  Farm Family  Casualty issued  2,253,878  shares of common stock to Farm
Family Holdings, and became a wholly owned subsidiary of Farm Family Holdings in
accordance with the Plan.

     On July 23, 1996 Farm Family  Holdings made an initial  public  offering of
its common stock at a price of $16 per share.  Farm Family Holdings received net
proceeds  of  $41,453,000  for  2,786,000  shares  sold  in the  initial  public
offering.  In addition,  Farm Family  Holdings  received  $3,427,000 for 214,000
shares  purchased  by  policyholders  of Farm  Family  Mutual in a  subscription
offering.

     As part of the Plan,  holders of Farm Family Mutual debt (see Note 8) could
elect to  exchange  their debt  instruments  for  shares of stock or cash.  As a
result,  there were 17,000 shares and $1,107,000 in cash exchanged for debt with
an outstanding principal amount of $1,371,000 plus accrued interest thereon.



                                       F-8


<PAGE>


3.      Investments

The  amortized  cost,  fair  value and  gross  unrealized  gains  and  losses of
available for sale  securities  and held to maturity  securities at December 31,
1996 and 1995 are as follows:

<TABLE>
($ in thousands)
<CAPTION>
                                                        Amortized   Gross Unrealized      Fair
                                                          Cost       Gains    Losses      Value
                                                          ----       -----    ------      -----
<S>                                                    <C>        <C>        <C>        <C>
1996
Available for Sale
------------------
Fixed maturities:

U.S. Government & Agencies .........................   $ 11,017   $    367   $     79   $ 11,305
States, Municipalities & Political Subdivisions ....     42,568      1,500        118     43,950
Corporate ..........................................    135,485      3,918      1,527    137,876
Mortgage-backed Securities .........................      9,676        666       --       10,342
Redeemable Preferred Stock .........................      8,095        276         95      8,277
                                                          -----        ---         --      -----
Total fixed maturities .............................    206,842      6,727      1,819    211,750
Equity securities ..................................      2,546      5,431         69      7,908
                                                          -----      -----         --      -----
Total Available for Sale ...........................   $209,388   $ 12,158   $  1,888   $219,658
                                                       ========   ========   ========   ========
Held to Maturity
----------------
Fixed maturities:
States, Municipalities & Political Subdivisions ....   $  5,423   $     93   $     34   $  5,482
Corporate ..........................................      4,359        186         54      4,491
                                                          -----        ---         --      -----
Total Held to Maturity .............................   $  9,782   $    279   $     88   $  9,973
                                                       ========   ========   ========   ========
1995
Available for Sale
------------------
Fixed maturities:
U.S. Government & Agencies .........................   $ 12,797   $    596      $----   $ 13,393
States, Municipalities & Political Subdivisions ....     21,871      1,675         66     23,480
Corporate ..........................................    119,319      7,040        987    125,372
Mortgage-backed Securities .........................     10,985        995       --       11,980
Redeemable Preferred Stock .........................      6,722        322         80      6,964
                                                          -----        ---         --      -----
Total fixed maturities .............................    171,694     10,628      1,133    181,189
Equity securities ..................................        334      4,440         28      4,746
                                                            ---      -----         --      -----
Total Available for Sale ...........................   $172,028   $ 15,068   $  1,161   $185,935
                                                       ========   ========   ========   ========

Held to Maturity
----------------
Fixed maturities:
States, Municipalities & Political Subdivisions ....   $  5,925   $    373      $----   $  6,298
Corporate ..........................................      6,461        354         13      6,802
                                                          -----        ---         --      -----
Total Held to Maturity .............................   $ 12,386   $    727   $     13   $ 13,100
                                                       ========   ========   ========   ========


</TABLE>




                                       F-9


<PAGE>


     The  table  below  presents  the  amortized  cost and  fair  value of fixed
maturities at December 31, 1996, by contractual maturity.  Actual maturities may
differ from contractual maturities as a result of prepayments.

<TABLE>

($ in thousands)
<CAPTION>

                                            Available for Sale    Held to Maturity
                                            ------------------    ----------------
                                           Amortized     Fair    Amortized     Fair
                                             Cost       Value       Cost      Value

<S>                                        <C>        <C>        <C>        <C>
Due in one year or less ................   $    771   $    746   $    350   $    358
Due after one year through five years ..     23,073     23,743        917        923
Due after five years through ten years .     98,271     99,677      3,186      3,173
Due after ten years ....................     75,050     77,242      5,329      5,519
                                             ------     ------      -----      -----
                                            197,165    201,408      9,782      9,973
Mortgage-backed securities .............      9,676     10,342       --         --
                                              -----     ------      -----      -----
Total ..................................   $203,841   $211,750   $  9,782   $  9,973
                                           ========   ========   ========   ========
</TABLE>


     Unrealized  investment gains and losses on fixed  maturities  classified as
available for sale and equity securities  included in  policyholders'  equity at
December 31, 1996 are as follows:

<TABLE>

$ in thousands)
<CAPTION>
                                           Cost/                                              Net
                                        Amortized      Fair         Gross Unrealized      Unrealized
                                           Cost       Value          Gains     Losses        Gains
                                           ----       -----          -----     ------        -----
<S>                                     <C>          <C>         <C>         <C>         <C>
Fixed maturities available for sale .   $ 206,841    $ 211,750   $   6,728   $   1,819   $   4,909
Equity securities ...................       2,546        7,908       5,431          69       5,362
                                            -----        -----       -----          --       -----
Total ...............................   $ 209,387    $ 219,658   $  12,159   $   1,888      10,271
                                        =========    =========   =========   =========
Deferred income taxes ...............                                                       (3,595)
                                                                                            ------
Total ...............................                                                    $   6,676
                                                                                         =========

</TABLE>

     The  change  in  unrealized  appreciation   (depreciation)  of  investments
included in stockholders' equity for the years ended December 31, 1996, 1995 and
1994 was as follows:

<TABLE>

($ in thousands)
<CAPTION>
                                         1996        1995        1994
                                         ----        ----        ----
<S>                                   <C>         <C>         <C>
Fixed maturities available for sale   $ (4,586)   $ 17,197    $(17,236)
Equity securities .................        950         802         477
Other invested assets .............         63         (63)       --
                                            --         ---
                                        (3,573)     17,936     (16,759)
Deferred income taxes .............      1,251      (6,237)      5,698
                                         -----      ------       -----
                                      $ (2,322)   $ 11,699    $(11,061)
                                      ========    ========    ========

</TABLE>

     The components of net investment income are as follows:

<TABLE>

($ in thousands)
<CAPTION>
                                        1996        1995        1994
                                        ----        ----        ----
<S>                                  <C>         <C>         <C>
Interest on fixed maturities .....   $ 15,492    $ 14,561    $ 13,546
Dividends from equity securities .         53          19          23
Interest on mortgage loans .......        169         180         182
Interest on short-term investments        385         315         145
Other, net .......................       --          (406)       (381)
                                       ------        ----        ----
Total investment income ..........     16,100      14,669      13,515
Investment expense ...............       (467)       (343)       (325)
                                         ----        ----        ----
Net investment income ............   $ 15,633    $ 14,326    $ 13,190
                                     ========    ========    ========

</TABLE>


                                      F-10




     A summary of realized investment gains (losses), net as follows:

<TABLE>

($ in thousands)

<CAPTION>
                          1996      1995     1994
                        ------    ------   ------
<S>                     <C>       <C>      <C>
Fixed maturities ....   $ (567)   $  912   $1,241
Equity securities ...     --        --         99
Other invested assets      (73)     --       --
                           ---      ---      ---
                        $ (640)   $  912   $1,340
                        ======    ======   ======

</TABLE>


4.      Fair Value of Financial Instruments

         The estimated fair value of financial  instruments  has been determined
         using  available   market   information   and   appropriate   valuation
         methodologies.  The estimated fair value of financial  instruments  are
         not  necessarily  indicative  of the amounts  the Company  might pay or
         receive  in  actual  market  transactions.  Potential  taxes  and other
         transaction costs have not been considered in estimating fair value. As
         a  number  of the  Company's  significant  assets  (including  deferred
         acquisition   costs,   and  deferred   income  taxes)  and  liabilities
         (including  reserves for losses and loss  adjustment  expenses) are not
         considered  financial  instruments,  the disclosures that follow do not
         reflect the fair value of the Company as a whole.

         The following  table  presents the carrying value and fair value of the
         Company's financial instruments at December 31, 1996 and 1995.


<TABLE>

<CAPTION>

($ in thousands)                                     1996                  1995
----------------                                     ----                  ----
                                             Carrying      Fair    Carrying      Fair
                                               Value      Value      Value      Value
                                               -----      -----      -----      -----
Assets
------
<S>                                          <C>        <C>        <C>        <C>
Fixed maturities .........................   $221,532   $221,723   $193,575   $194,289
Equity securities ........................      7,908      7,908      4,746      4,746
Mortgage loans ...........................      1,745      1,745      1,822      1,822
Cash and short-term investments ..........      6,090      6,090      8,942      8,942
Premiums receivable, net .................     22,663     22,663     21,791     21,791
Receivable from affiliates, net ..........     16,489     16,489     13,860     13,860
Accrued investment income and other assets      6,535      6,535      6,940      6,940
Liabilities
-----------
Accrued expenses and other liabilities ...      9,081      9,081      7,788      7,788
Debt .....................................      1,304      1,304      2,707      2,707

</TABLE>


     The following  methods and  assumptions  were used in  estimating  the fair
value disclosures for the financial instruments:

             Fixed  maturities and equity  securities -- The fair value is based
             upon quoted  market  prices  where  available  or from  independent
             pricing services.

             Mortgage loans -- The fair value is based on discounted  cash flows
             using  discount  rates  at  which  similar  loans  would be made to
             borrowers with similar characteristics.

             Cash and short-term investments -- Due to their short-term,  highly
             liquid nature, their carrying value approximates fair value.

             Premiums  Receivable,  net;  Accrued  Investment  Income  and Other
             Assets;  Receivable from Affiliates,  net; and Accrued Expenses and
             Other Liabilities -- Due to their short-term nature, their carrying
             value approximates fair value.

             Debt -- The fair  value is based on  discounted  cash  flows  using
             current borrowing rates for similar debt arrangements.

                                      F-11
5.      Reinsurance

     The Company  assumes and cedes  insurance to participate in the reinsurance
market,  limit maximum losses and minimize exposure on large risks.  Reinsurance
contracts do not relieve the Company from its  obligations to  policyholders  as
the primary  insurer.  The Company  evaluates  the  financial  condition  of its
reinsurers  and  monitors  concentrations  of credit risk  arising  from similar
geographic regions, activities and economic characteristics of the reinsurers to
minimize its exposure to significant losses from reinsurer insolvencies. Amounts
recoverable  are  regularly  evaluated  by  the  Company  and an  allowance  for
uncollectible  reinsurance is provided when  collection is in doubt. At December
31, 1996 and 1995,  the Company  determined  it was not  necessary to provide an
allowance for uncollectible reinsurance.

     The Company's reinsurance program also includes reinsurance agreements with
United  Farm  Family.  (see Note 10.) The  effects of  reinsurance  on  premiums
written and earned, and losses and loss adjustment  expenses  incurred,  for the
years indicated were as follows:

<TABLE>
<CAPTION>

                                                                              Year Ended
                                                                             December 31,
($ in thousands)
                                                                      1996         1995         1994
                                                                 ---------    ---------    ---------
<S>                                                              <C>          <C>          <C>
Premiums written
Direct ...........................................               $ 146,408    $ 135,963    $ 122,039
Assumed ..........................................                   6,462        6,261        7,577
Ceded to United Farm Family ......................                  (9,336)      (9,237)      (9,776)
Ceded to non-affiliates ..........................                  (9,690)     (12,153)     (14,226)
                                                                    ------      -------      -------
Premiums written, net of reinsurance .............               $ 133,844    $ 120,834    $ 105,614
                                                                 =========    =========    =========
Premiums earned
Direct ...........................................               $ 142,794    $ 131,717    $ 117,384
Assumed ..........................................                   6,931        6,552        7,690
Ceded to United Farm Family ......................                  (9,334)      (9,238)      (9,750)
Ceded to non-affiliates ..........................                  (9,611)     (12,095)     (13,858)
                                                                    ------      -------      -------
Premiums earned, net of reinsurance ..............               $ 130,780    $ 116,936    $ 101,466
                                                                 =========    =========    =========

Losses and loss adjustment expenses incurred
Direct ...........................................               $  99,954    $  91,176    $  91,467
Assumed ..........................................                   4,630        4,658        4,513
Ceded to United Farm Family ......................                  (7,277)      (6,604)      (7,378)
Ceded to non-affiliates ..........................                  (2,330)      (6,046)      (5,922)
                                                                    ------       ------       ------
Losses and loss adjustment expenses incurred,
net of reinsurance ...............................               $  94,977    $  83,184    $  82,680
                                                                 =========    =========    =========
</TABLE>


6.      Income Taxes

         The  components of the deferred  income tax assets and  liabilities  at
December 31, 1996 and 1995 are as follows:

<TABLE>


($ in thousands)

<CAPTION>
Deferred Income Tax Assets                                     1996      1995
                                                              -------   -------
<S>                                                           <C>       <C>
Reserves for losses and loss adjustment expenses ..........   $ 4,423   $ 4,444
Unearned premium reserve ..................................     3,774     3,559
Accrued expenses and other liabilities ....................       789       474
Investments ...............................................       148        68
                                                                  ---        --
Total deferred income tax assets ..........................     9,134     8,545
                                                                -----     -----
Deferred Income Tax Liabilities
Deferred acquisition costs ................................     3,739     3,685
Unrealized investment gains, net ..........................     3,595     4,846
Other assets ..............................................       269       231
Total deferred income tax liabilities .....................     7,603     8,762
                                                                -----     -----
Net deferred income tax asset (liability) .................   $ 1,531   $  (217)
                                                              =======   =======
</TABLE>

                                      F-12




     There was no  valuation  allowance  for  deferred  income  tax assets as of
December 31, 1996 or 1995. In assessing the  realization of deferred tax assets,
management  considers  whether it is more likely than not that the  deferred tax
assets will be  realized.  Management  primarily  considered  the  existence  of
taxable  income in the carryback  period in making this  assessment and believes
the benefits of the  deductible  differences  recognized as of December 31, 1996
and 1995 will ultimately be realized.

     The components of income tax expense (benefit) are as follows:

<TABLE>

($ in thousands)
<CAPTION>
                             Year Ended December 31,
                              1996       1995      1994
                           -------    -------   -------
<S>                        <C>        <C>       <C>
Current ................   $ 4,268    $ 4,403   $   851
Deferred ...............      (498)       581       596
Total income tax expense   $ 3,770    $ 4,984   $ 1,447

</TABLE>

     The Company paid income taxes of  $4,592,000,  $3,952,000 and $2,209,000 in
1996, 1995 and 1994  respectively.  A reconciliation of the differences  between
the Company's  effective  rates of tax and the United States  federal income tax
rates follows:

<TABLE>
<CAPTION>

                                                                 Year Ended December 31,
($ in thousands)                                       % of                % of                 % of
                                                      Pretax              Pretax               Pretax
                                              1996    Income       1995   Income       1994    Income
                                              ----    ------       ----   ------       ----    ------
<S>                                        <C>        <C>       <C>        <C>       <C>        <C>
Income tax provision at prevailing rates   $ 4,243    34.19%    $ 5,006    34.31%    $ 1,691    34.00%
Tax effect of:
Tax exempt interest income .............      (107)    (.86)        (11)    (.08)        (67)   (1.35)
Dividends received deduction ...........      (156)   (1.26)       (148)   (1.01)       (140)   (2.81)
Other, net .............................      (210)   (1.69)        137      .94         (37)    (.74)
                                              ----    -----         ---      ---         ---     ----
Federal income tax expense .............   $ 3,770    30.38%    $ 4,984    34.16%    $ 1,447    29.10%
                                           =======    =====     =======    =====     =======    =====
</TABLE>


    7.  Reserves for Losses and Loss Adjustment Expenses

     As  described  in Note 1, the Company  establishes  reserves for losses and
loss  adjustment  expenses on reported and  incurred but not reported  claims of
insured losses.  The  establishment of appropriate  reserves for losses and loss
adjustment expenses is an inherently uncertain process and the ultimate cost may
vary  materially  from the recorded  amounts.  Reserve  estimates  are regularly
reviewed  and  updated,  using  the  most  current  information.  Any  resulting
adjustments, which may be material, are reflected in current operations.


                                      F-13




     The  following  table  provides a  reconciliation  of beginning  and ending
liability balances for reserves for losses and loss adjustment  expenses for the
years ended December 31, 1996, 1995 and 1994.

<TABLE>
<CAPTION>

                                                                      Year Ended December 31,
                                                                      -----------------------
                                                                  1996         1995         1994
                                                                  ----         ----         ----
($ in thousands)
<S>                                                            <C>          <C>          <C>
Reserves for losses and loss adjustment
expenses at beginning of year ..............................   $ 137,978    $ 127,954    $ 123,477
Less reinsurance recoverables and receivables ..............      28,655       28,230       28,761
                                                                  ------       ------       ------
Net reserves for losses and loss adjustment
expenses at beginning of year ..............................     109,323       99,724       94,716
                                                                 -------       ------       ------
Incurred losses and loss adjustment expenses:
Provision for insured events of current year ...............     100,418       88,366       86,370
Decrease in provision for
insured events of prior years ..............................      (5,441)      (5,182)      (3,690)
                                                                  ------       ------       ------
Total incurred losses and loss adjustment expenses .........      94,977       83,184       82,680
                                                                  ------       ------       ------

Payments:
Losses and loss adjustment expenses
attributable to insured events of current year .............      50,122       40,519       43,232
Losses and loss adjustment expenses
attributable to insured events of prior years ..............      39,795       33,066       34,440
                                                                  ------       ------       ------
Total Payments: ............................................      89,917       73,585       77,672
                                                                  ------       ------       ------
Net reserves for losses and loss
adjustment expenses at end of year .........................     114,383      109,323       99,724
Plus reinsurance recoverables and receivables ..............      26,837       28,655       28,230
                                                                  ------       ------       ------
Reserves for losses and loss adjustment
expenses at end of year ....................................   $ 141,220    $ 137,978    $ 127,954
                                                               =========    =========    =========
</TABLE>



     The  Company  does not  discount  reserves  for losses and loss  adjustment
expenses except for certain lifetime workers'  compensation  indemnity  reserves
assumed  from  mandatory  pools.  The  amount of such  discounted  reserves  was
$4,184,000 (net of a discount of  $1,185,000),  $4,754,000 (net of a discount of
$1,192,000)  and $4,876,000  (net of a discount of $1,217,000)  for December 31,
1996, 1995 and 1994, respectively.

    8.  Debt

     At  December  31,  1996,  debt  consists  of  $301,000  of  debentures  and
$1,003,000 of subordinated surplus certificates. The debentures and subordinated
surplus certificates bear interest at the rate of 8% per annum, have no maturity
date,  and principal  and interest are  repayable  only with the approval of the
Insurance  Department of the State of New York. No single holder holds more than
5% of the  outstanding  debentures or  subordinated  surplus  certificates.  The
Company  paid  interest of  $279,000,  $217,000 and $220,000 for the years ended
December 31, 1996, 1995 and 1994, respectively.

     At December  31, 1996,  the Company had an available  line of credit with a
bank for $2,000,000. There were no amounts outstanding on this line of credit at
December 31, 1996.




                                      F-14

    9.     Benefits Plans

Pension Plan:
The  Company  and Farm  Family  Life  sponsor  a  qualified
multi-employer   noncontributory   defined   benefit   pension   plan   covering
substantially  all of the Company's and Farm Family Life's  full-time  employees
who meet the  eligibility  requirements.  Benefits  under the  pension  plan are
primarily based upon the employee's length of service and the employee's average
compensation  for  certain  periods  during  the last years of  employment.  The
Company's  funding policy for its defined benefit pension plan is to make annual
contributions  in accordance  with accepted  actuarial  cost methods  subject to
regulatory funding limitations.  Effective January 1, 1997, the Company and Farm
Family  Life froze  benefits  available  through the defined  benefit  plan.  In
addition,  the Company  implemented a voluntary early retirement  program in the
fourth quarter of 1996. (See note 13).

     The net pension expense for the plan is as follows:

<TABLE>
<CAPTION>


($ in thousands)                                  Year Ended December 31,
                                                   1996       1995       1994
                                                -------    -------    -------
<S>                                             <C>        <C>        <C>
Service cost ................................   $   869    $   708    $   777
Interest cost on projected benefit obligation     1,411      1,384      1,225
Actual return on plan assets ................      (854)    (1,844)      (401)
Net amortization (deferral) .................      (447)       632       (756)
Voluntary early retirement program ..........     2,069       --         --
                                                  -----     ------     ------
Total pension expense .......................   $ 3,048    $   880    $   845
                                                =======    =======    =======
</TABLE>


     The  Company's  portion of net  periodic  pension  expense,  excluding  the
expense of the voluntary early  retirement  program for the years ended December
31, 1996, 1995 and 1994 was $607,000,  $537,000 and $516,000,  respectively.  In
addition,  the Company's  portion of the expense  related to the voluntary early
retirement program was $1,135,000 for 1996.

     Assumptions  used in the  determination  of pension  obligations and assets
were:

<TABLE>
<CAPTION>
                             Year Ended December 31,

                                                         1996       1995       1994
                                                       -------    -------    -------
<S>                                                      <C>        <C>        <C>
Weighted-average discount rate .................         7.00%      6.40%      7.90%
Rate of increase in compensation levels ........         4.00%      3.40%      4.90%
Expected long-term rate of return on plan assets         8.00%      8.00%      8.00%

</TABLE>


         The following table summarizes the funded status of the pension plan:
Year Ended December 31,

<TABLE>
<CAPTION>
                                                                  1996        1995
                                                              --------    --------
($ in thousands)
Actuarial present value of benefit obligations:
<S>                                                           <C>         <C>
Vested ....................................................   $ 21,075    $ 17,901
Nonvested .................................................       --           338
                                                                ------         ---
Accumulated benefit obligation ............................     21,075      18,239
Effect of projected future salary increases on past service       --         3,204
                                                                ------       -----
Projected benefit obligation ..............................     21,075      21,443
Plan assets at fair value .................................     18,881      17,112
                                                                ------      ------
Projected benefit obligation in excess of plan assets .....   $ (2,194)   $ (4,331)
                                                              ========    ========
</TABLE>

                                      F-15


<PAGE>



     The accrued pension liability of the plan was as follows:

<TABLE>
<CAPTION>

                             Year Ended December 31,
                                    1996 1995
                                                            -------    -------
($ in thousands)
<S>                                                        <C>        <C>
Projected benefit obligation in excess of plan assets ..   $(2,194)   $(4,331)
Unrecognized prior service asset .......................      --          114
Unrecognized net gain from past
experience different from that assumed .................      --        3,880
Unrecognized net asset at transition ...................      --         (558)
Minimum liability adjustment ...........................      --         (232)
                                                            ------       ----
Accrued pension liability ..............................   $(2,194)   $(1,127)
                                                           =======    =======
</TABLE>

Incentive Savings Plan:
     The Company and Farm Family Life sponsor an employee incentive savings plan
which is qualified under Section 401(k) of the Internal  Revenue Code. Under the
provisions of this plan,  employees may  contribute 1% to 16% of their  eligible
compensation,  with up to 6% being eligible for matching  contributions from the
Company. In addition,  the Company contributed 1% of eligible compensation up to
$240 to the plan for all eligible  employees in 1996,  1995 and 1994.  Effective
January 1, 1997, the Company will contribute 3% of the eligible  compensation to
the plan and a matching 25% of the first 6% of eligible compensation deferred by
each  eligible  employee.  Also,  the  Company  may  elect  to  make  additional
discretionary  contributions to the plan. The Company's expense  associated with
the  plan  was  $182,000,   $138,000  and  $155,000  in  1996,  1995  and  1994,
respectively.

Postretirement Benefits Other Than Pensions:

     The Company  and Farm  Family Life  provide  life  insurance  benefits  for
retired  employees meeting certain age and length of service  requirements.  The
Company's postretirement benefit plan is currently unfunded and noncontributory.
Benefits under the postretirement benefit plan are provided by a group term life
insurance policy.

     Effective  January 1, 1995, the Company  adopted SFAS No. 106,  "Employers'
Accounting for Postretirement  Benefits Other than Pensions",  which changed the
accounting  for the Company's  postretirement  benefit plan from a cash basis by
requiring  accrual of the  expected  cost of providing  benefits  under the plan
during the years that the employee renders the necessary service to the Company.

     Net  periodic  postretirement  benefit  expense for the plan  included  the
following:
<TABLE>
<CAPTION>
                                        Year Ended December 31,
($ in thousands)
                                            1996      1995
                                            ----      ----
<S>                                         <C>       <C>
Service cost ...........................    $ 27      $ 37
Interest cost ..........................      63        73
Return on assets .......................     --        --
Amortization of transition obligation ..      47        47
Voluntary early retirement program .....      41       --
                                              --      ----
Total ..................................    $178      $157
                                            ====      ====

</TABLE>

     The Company  incurred  postretirement  benefit  expenses on a cash basis of
$6,000  for the year ended  December  31,  1994.  The  Company's  portion of net
periodic  postretirement  benefit expense,  excluding the expense related to the
voluntary  early  retirement  program,  for each of the years ended December 31,
1996 and 1995 was $66,000.  In addition,  the  Company's  portion of the expense
related to the voluntary early retirement program was $22,000 for 1996.

                                      F-16


<PAGE>


     Tthe plan's  postretirement  benefit obligation  reconciled with the plan's
funded status and the amount  recognized in the Company's  consolidated  balance
sheets was as follows:

<TABLE>
<CAPTION>

                                                                   Year Ended December 31,
($ in thousands)
                                                                        1996       1995
                                                                        ----       ----
<S>                                                                  <C>        <C>
Accumulated postretirement benefit obligation:
Retirees .........................................................   $  (487)   $  (534)
Other fully eligible plan participants ...........................      (182)      (260)
Other active plan participants ...................................      (293)      (452)
                                                                        ----       ----
Obligation at year-end ...........................................      (962)    (1,246)
Plan assets ......................................................      --         --
                                                                        -----     -----
Funded status ....................................................      (962)    (1,246)
Unrecognized transition obligation ...............................       805        893
Unrecognized net loss ............................................       (95)       238
                                                                         ---        ---
Accrued postretirement benefit liability at year-end .............   $  (252)   $  (115)
                                                                     =======    =======
</TABLE>


     The discount rate used to determine the accumulated  postretirement benefit
obligation was 7.0% at December 31, 1996 and 6.4% at December 31, 1995.

   10.  Related Party Transactions

     The operations of the Company are closely related with those of Farm Family
Life and Farm Family Life's  wholly owned  subsidiary,  United Farm Family,  and
with the  Company's  parent,  Farm Family  Holdings.  The  affiliated  Companies
operate under similar  Boards of Directors and have similar  senior  management.
The affiliated  Companies share home office premises,  branch office facilities,
data processing  equipment,  certain personnel and other  operational  expenses.
Expenses are shared based on each Company's  estimated level of usage. The gross
shared expenses and the Company's share of such expenses is summarized below:

($ in thousands)
                                Company's Share
                                ---------------
                        Gross Shared
Year Ended December 31,   Expenses   Amount    Percentage
-----------------------   --------   ------    ----------
         1996             $30,689   $19,379        63%
         1995              26,650    16,182        61
         1994              23,833    14,402        60

     Farm Family  Life held  $813,000 of the  Company's  debentures  in 1994 and
1995. In July 1996 the Company  repurchased the debentures  owned by Farm Family
Life for the principal amount of $813,000 plus accrued interest of $37,000.  The
Company  incurred  interest  expense of $37,000 in 1996 and  $65,000 in 1995 and
1994 on the debentures  held by Farm Family Life.  During 1994, the Company sold
its data processing equipment to Farm Family Life at net book value.

     The Company's  reinsurance  program  includes  reinsurance  agreements with
United Farm Family.  In  accordance  with the  provisions  of these  reinsurance
agreements, the Company recognized commission income (expenses) of approximately
$191,000,  $2,000,  and ($39,000) during the years ended December 31, 1996, 1995
and 1994,  respectively.  A summary of the effect of the reinsurance  agreements
with United Farm Family on premiums written and earned is described in Note 5.

     Receivable from affiliates  represents  amounts due from United Farm Family
pursuant to a reinsurance  agreement and amounts due from Farm Family  Holdings,
Farm Family Life and United Farm Family for shared expenses.


                                      F-17

     Currently,  Farm Family Life and its wholly owned  subsidiary,  United Farm
Family,   prepare  their  financial  statements  in  accordance  with  statutory
accounting practices.  Such practices vary significantly from generally accepted
accounting  practices.  The following financial information was derived from the
statutory basis financial statements for Farm Family Life and United Farm Family
as of and for the year ended December 31, 1996:

<TABLE>
<CAPTION>
                       Total    Statutory      Net
($ in thousands)      Assets     Surplus     Income
----------------      ------     -------     ------
<S>                  <C>        <C>        <C>
Farm Family Life .   $721,129   $ 74,081   $  8,111
United Farm Family     31,378     13,571      2,134

</TABLE>

11.      Dividends to Stockholders and Statutory Financial Information

     The Company is  restricted  by law as to the amount of dividends it can pay
to stockholders without the approval of regulatory authorities.

     Net income and surplus of the Company,  as determined  in  accordance  with
statutory accounting practices are as follows:

<TABLE>
<CAPTION>
($ in thousands)  1996             1995           1994
                  ----             ----           ----
<S>              <C>              <C>           <C>
Net income       $7,221           $6,735        $3,196
Surplus          83,194           55,916        42,870

</TABLE>


     The National  Association of Insurance  Commissioners  ("NAIC") has adopted
risk based capital  ("RBC")  requirements  that require  insurance  companies to
calculate  and report  information  under a risk-based  formula  which  measures
statutory capital and surplus needs based on a regulatory  definition of risk in
a company's mix of products and its balance sheet. The  implementation of RBC is
not expected to affect the  operations of the Company  since its Total  Adjusted
Capital  exceeds the  threshold  level of regulatory  action,  as defined by the
NAIC.

12.     Commitments, Contingencies and Uncertainties

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

     Catastrophes  are an inherent  risk in the property and casualty  insurance
industry and could produce  significant  adverse  fluctuations  in the Company's
results of  operations  and  financial  condition.  Since the  Company  operates
primarily within the Northeastern U.S., it is subject to a concentration of risk
within this geographic  region.  For the years ended December 31, 1996, 1995 and
1994,  approximately  61%, 60% and 58%,  respectively,  of the Company's  direct
written  premiums were derived from  policies  written in the states of New York
and New Jersey. The Company uses its reinsurance  program to mitigate the impact
on net income of large or unusual losses and loss adjustment  expense  activity.
However,  the  Company  is  required  by  law  to  participate  in a  number  of
involuntary  reinsurance  pools and such pools may from time to time  experience
deficits which could result in losses to the Company.

     The Company is a party to a Membership List Purchase Agreement with each of
the state  Farm  Bureaus in the ten states in which it  conducts  business.  The
Membership List Purchase  Agreements are for six years  commencing on January 1,
1996. For the year ended December 31, 1996, the Company paid a total of $571,000
to the Farm Bureaus pursuant to the Membership List Purchase Agreements. For the
years ended  December 31, 1995 and 1994, the Company paid $547,000 and $516,000,
respectively,  to the Farm Bureaus under  substantially  similar Membership List
Purchase Agreements in effect for such periods.

     Pursuant  to an  agreement  between  the  Company and its agents and agency
managers,  subject  to  certain  conditions  including  length  of  service  and
profitability,  certain  agents  and agency  managers  are  eligible  to receive
monthly extended  earnings payments for a period of up to eight years subsequent
to the termination of their  association  with the Company.  Historically,  such
payments  have been  funded  from  commissions  earned on the  agent's or agency
manager's  book  of  business  subsequent  to the  termination  of  the  agent's
association with the Company in accordance with the Company's agreement with the
successor  agents and agency  managers.  In the event that such  commissions are
insufficient  to fund the  extended  earnings  payments,  the  Company  would be
responsible for such payments.  The aggregate outstanding amount of the extended
earnings  payments  which  former  agents and agency  managers  are  entitled to
receive for a period of up to eight  years  subsequent  to December  31, 1996 is
$3,341,000.

                                      F-18

13.     Extraordinary Item and Non-Recurring Expenses

     During 1996,  the Company  incurred  expenses of $1,543,000  related to the
demutualization  of Farm Family  Mutual which the Company has  identified  as an
extraordinary item. These expenses consisted primarily of printing, postage, and
legal costs.

     Pursuant  to the  Statement  of  Financial  Accounting  Standards  No.  87,
"Employers'  Accounting  for  Pensions",  the Company  recorded a  non-recurring
expense,  net of an  income  tax  benefit  of  $405,000,  of  $752,000,  for the
Company's share of the costs of a voluntary early retirement  program offered to
certain eligible employees in 1996. Eligibility for the program was based on age
and years of service.



                                      F-19


<PAGE>


             FARM FAMILY CASUALTY INSURANCE COMPANY AND SUBSIDIARY
                     INDEX TO FINANCIAL STATEMENT SCHEDULES
                          Year Ended December 31, 1996

The following  additional  financial  statement schedules are furnished herewith
pursuant to the requirements of Form 10-K.


                                                          Page
                                                          ----
Schedule I    Summary of Investments -
               Other than Investments in Related Parties   S-2

Schedule IV   Reinsurance                                  S-3

Schedule VI   Supplemental Information Concerning
               Property - Casualty Insurance Operations    S-4







                                       S-1


<PAGE>

<TABLE>

             FARM FAMILY CASUALTY INSURANCE COMPANY AND SUBSIDIARY
                       SCHEDULE 1 - SUMMARY OF INVESTMENTS
                    OTHER THAN INVESTMENTS IN RELATED PARTIES
                                DECEMBER 31, 1996
                                ($ in thousands)
                                                                      Amortized            Balance Sheet
<CAPTION>
Type of Investment                                                      Cost    Fair Value Carrying Value
------------------                                                      ----    ---------- --------------
<S>                                                                    <C>        <C>          <C>
Available for sale
------------------
Fixed maturities:
United States Government and government agencies ...................   $ 11,017   $ 11,305     $ 11,305
States, municipalities and political subdivisions ..................     42,568     43,950       43,950
Public utilities ...................................................     26,244     26,233       26,233
Corporate ..........................................................    109,241    111,643      111,643
Mortgage-backed ....................................................      9,676     10,342       10,342
Redeemable preferred stock .........................................      8,095      8,277        8,277
                                                                          -----      -----        -----
Total fixed maturities .............................................    206,841    211,750      211,750
                                                                        -------    -------      -------

Equity securities:
Common stocks:
Public utilities ...................................................      1,219      1,314        1,314
Banks, trusts and insurance companies ..............................        244      5,490        5,490
Industrial and miscellaneous .......................................      1,083      1,104        1,104
                                                                          -----      -----        -----
Total equity securities ............................................      2,546      7,908        7,908
                                                                          -----      -----        -----
Total available for sale ...........................................    209,387    219,658      219,658
                                                                        =======    =======      =======

Held to maturity
----------------
States, municipalities and political subdivisions ..................      5,423      5,482        5,423
Corporate ..........................................................      4,359      4,491        4,359
                                                                          -----      -----        -----
Total held to maturity .............................................      9,782      9,973        9,782
                                                                          =====      =====        =====
Mortgage loans on real estate ......................................      1,745      1,745        1,745
Short-term investments .............................................      1,982      1,982        1,982
Other invested assets ..............................................        748        748          748
                                                                            ---        ---          ---
Total investments ..................................................   $223,644   $234,106     $233,915
                                                                       ========   ========     ========
</TABLE>

                                       S-2


<PAGE>

<TABLE>

             FARM FAMILY CASUALTY INSURANCE COMPANY AND SUBSIDIARY
                            SCHEDULEIV - REINSURANCE
                                ($ in Thousands)

<CAPTION>

                                         Earned  Premiums
                                         ----------------                  Percentage
                                           Ceded to   Assumed               of Amount
                                 Gross      Other    From Other            Assumed to
                                 Amount   Companies  Companies  Net Amount    Net
                                 ------   ---------  ---------  ----------    ---
<S>                            <C>        <C>        <C>        <C>           <C>
Year Ended December 31, 1996
Property/Casualty Insurance    $142,794   $ 18,945   $  6,931   $130,780      5.3%

Year Ended December 31, 1995
Property/Casualty Insurance     131,717     21,333      6,552    116,936      5.6%

Year Ended December 31, 1994
Property/Casualty Insurance     117,384     23,608      7,690    101,466      7.6%


</TABLE>



                                      S-3


<PAGE>

<TABLE>

             FARM FAMILY CASUALTY INSURANCE COMPANY AND SUBSIDIARY
                                   SCHEDULE VI
                SUPPLEMENTAL INFORMATION CONCERNING CONSOLIDATED
                     PROPERTY-CASUALTY INSURANCE OPERATIONS
                                ($ in thousands)
<CAPTION>
                                                                                        Claims
                                                                                       & Claim
                           Reserve for                                                Adjustment
                              Unpaid                                                    Expense
                              Claims                                                   Incurred   Amortization Paid Claims
                  Deferred   & Claim    Discount                             Net      Related to   of Deferred   and Claim
                Acquisition Adjustment   if any     Unearned     Earned  Investment Current  Prior Acquisition Adjustment    Premium
                   Costs     Expenses   Deducted    Premiums    Premiums   Income    Year     Year    Costs     Expenses     Written
Affiliation with
Registrant
---------------------------
<S>                 <C>       <C>                    <C>        <C>       <C>     <C>       <C>       <C>       <C>         <C>
Year Ended
December 31, 1996
Property and

Casualty business   $ 10,682  $141,220               $55,945    $130,780  $15,633 $100,418  $(5,441)  $26,348   $89,917     $133,844

Year Ended
December 31, 1995
Property and
Casualty business     10,527   137,978                52,799     116,936   14,326   88,366   (5,182)   23,162    73,585      120,834

Year Ended
December 31, 1994
Property and
Casualty business      8,671   127,954                48,843     101,466   13,190   86,370   (3,690)   19,469    77,672      105,614



</TABLE>

                                       S-5


<PAGE>
<TABLE>


                                 EXHIBIT INDEX

                FARM FAMILY CASUALTY INSURANCE COMPANY FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 31, 1996
<CAPTION>
                                                                                         Sequential
                                                                                         Page Number
Exhibit Number          Document Description

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

 10.2         Amended and Restated  Expense  Sharing  Agreement,  made effective
              as of February 14, 1996,  by and  among  Farm  Family  Casualty
              Insurance  Company,  Farm  Family  Life Insurance Company and Farm
              Family Holdings,  Inc.  incorporated by reference to Farm Family
              Holdings, Inc. Form 10-K for the fiscal year ended December 31,
              1996

*10.3         Indenture of Lease, made the 1st day of January 1988, between Farm
              Family Life  Insurance  Company and Farm Family  Mutual  Insurance
              Company as amended by the Amendment to
              Lease, effective January 1, 1994

 10.4         Underlying Multi-Line Per Risk Reinsurance Contract, effective
              January 1, 1995, issued to Farm Family Mutual Insurance Company by
              The Subscription Reinsurer(s)Executing the Interests
              and Liabilities Agreement(s) Attached Thereto, as amended by
              Addendum No. 1, effective January 1, 1996 (Incorporated by
              reference to Registration Statement No. 333-4446), Addendum No. 2,
              effective January 1, 1996, Addendum No. 3 effective July 26, 1996
              incorporated by reference to Farm Family Holdings, Inc. Form 10-K
              for the fiscal year ended December 31, 1996

 10.5         Umbrella Quota Share Reinsurance Contract,  effective January 1,
              1995, issued to Farm Family Mutual Insurance Company and United
              Farm Family Insurance Company,  as amended by  Addendum  No.  1,
              effective  January  1,  1995  (Incorporated  by  reference  to
              Registration  Statement  No.  333-4446),  and Addendum No. 2
              effective  July 26, 1996 incorporated by reference  to Farm Family
              Holdings,  Inc.  Form 10-K for the fiscal year ended December 31,
              1996

*10.6         Excess  Catastrophe  Reinsurance  Contract  effective January 1,
              1996, issued to Farm Family Mutual Insurance Company

*10.7         Assumption  Agreement,  commencing  January  1,  1995,  between
              Farm  Family Mutual Insurance Company and United Farm Family
              Insurance Company

*10.8         Service  Agreement,  made  effective  as of July 25, 1988 by and
              between  Farm Family Mutual Insurance Company and United Farm
              Family Insurance Company

*10.9         Form of Membership  List  Purchase  Agreement  between Farm Family
              Mutual  Insurance Company and each of the Farm Bureaus

*10.10        Farm Family Mutual Insurance Company 8% Subordinated Surplus
              Certificate,  as amended by Certificate of Amendment No. 1 and
              Trust Indenture,  dated as of December 29, 1976 relating to the 8%
              Subordinated Surplus Certificates

*10.11        Farm Family Mutual Insurance Company 5% Debenture, as amended by
              Certificate of Amendment, effective January 1, 1969, Certificate
              of Amendment No. 2, effective January 1, 1979, Certificate of
              Amendment No. 3 and Supplemental Trust Indenture, dated as of
              August 25, 1955 Amending Trust Indenture, dates as of May 16, 1955
              Relating to The 5% Debentures, as amended by Certificate of
              Amendment, dated as of August 25, 1955, Certificate of Amendment
              No. 2, dated as of August 25, 1955, Certificate of Amendment No. 3
              dated as of August 25, 1955

                                       E-1
<PAGE>

                                                                                         Sequential
                                                                                         Page Number
Exhibit Number       Document Description

*10.12        Farm Family Mutual Insurance  Company Officer  Severance Pay Plan,
              adopted effective August 1, 1994

*10.13        Farm Family Mutual Insurance Company  Supplemental  Employee
              Retirement Plan, adopted as of January 1, 1994

 10.17        Farm Family Supplemental Savings and Profit Sharing Plan effective
              January 1, 1997 incorporated by reference to Farm Family Holdings,
              Inc.  Form 10-K for the fiscal year ended December 31, 1996

 10.18        Tax Payment Allocation Agreement Farm Family Holdings,  Inc. and
              Subsidiary effective January 1, 1996 by and between Farm Family
              Holdings,  Inc. and Farm Family  Casualty Insurance Company
              incorporated by reference to Farm Family Holdings,  Inc. Form 10-K
              for the fiscal year ended December 31, 1996

 21           Subsidiaries of the Registrant

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


</TABLE>




                                       E-2


<PAGE>


                     FARM FAMILY CASUALTY INSURANCE COMPANY
                                   EXHIBIT 21
                         SUBSIDIARIES OF THE REGISTRANT

Subsidiaries                                                               State
------------                                                               -----
Rural Agency and Brokerage, Inc. ("RAB") is a wholly owned
subsidiary of Farm Family Casualty Insurance Company                         NY

Rural Insurance Agency and Brokerage of Massachusetts, Inc.
is a wholly owned subsidiary of RAB.                                         MA

R.A.A.B of W. Va., Inc. is a wholly owned subsidiary of RAB.                 WV





                                       E-3


<PAGE>



        Pursuant to the  requirements  of Section 13 or 15(d) 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 CASUALTY INSURANCE COMPANY

                                         By:     /s/  Philip P. Weber
                                         ----------------------------
                                          Philip P. Weber, President
                                             March 21, 1997



<PAGE>

<TABLE>

                                                        SIGNATURES


Pursuant to the requirements of Securities Exchange Act of 1934, this report has
been signed below by the following  persons on behalf of the  Registrant  and in
the capacities and on the dates indicated.

<S>                               <C>                                    <C>                         <C>
                                  President  and CEO
/s/ Philip P. Weber               (Principal Executive Officer)          /s/ Arthur D. Keown, Jr.    Director
-------------------               -----------------------------          ------------------------    --------
Philip P. Weber                   March 6, 1997                          Arthur D. Keown, Jr.        March 6, 1997

                                  Executive Vice President-Finance
                                  (Principal Financial & Accounting
/s/ Timothy A. Walsh              Officer)                               /s/ Daniel R. LaPointe      Director
--------------------              --------                               ----------------------      --------
Timothy A. Walsh                  March 6, 1997                          Daniel R. LaPointe          March 6, 1997


/s/ Robert L. Baker               Director                               /s/ John W. Lincoln         Director
-------------------               --------                               -------------------         --------
Robert L. Baker                   March 6, 1997                          John W. Lincoln             March 6, 1997


/s/ Randolph L. Blackmer, Jr.     Director                               /s/ Wayne A. Mann           Director
-----------------------------     --------                               -----------------           --------
Randolph C. Blackmer, Jr.         March 6, 1997                          Wayne A. Mann               March 6, 1997


/s/ Fred G. Butler, Sr.           Director                               /s/ Frank W. Matheson       Director
-----------------------           --------                               ---------------------       --------
Fred G. Butler, Sr.               March 6, 1997                          Frank W. Matheson           March 6, 1997


/s/ Joseph E. Calhoun             Director                               /s/ Norma R. O'Leary        Director
---------------------             --------                               --------------------        --------
Joseph E. Calhoun                 March 6, 1997                          Norma R. O'Leary            March 6, 1997


/s/ James V. Crane                Director                                                           Director
------------------                --------                               ------------------------    --------
James V. Crane                    March 6, 1997                          John I. Rigolizzo, Jr.      March 6, 1997


/s/ Stephen J. George             Director                               /s/ Harvey T. Smith         Director
---------------------             --------                               -------------------         --------
Stephen J. George                 March 6, 1997                          Harvey T. Smith             March 6, 1997


                                  Director                               /s/ William M. Stamp, Jr.   Director
------------------                --------                               -------------------------   --------
Gordon H. Gowen                   March 6, 1997                          William M. Stamp, Jr.       March 6, 1997


/s/ Jon R. Greenwood              Director                               /s/ Charles A. Wilfong      Director
--------------------              --------                               ----------------------      --------
Jon R. Greenwood                  March 6, 1997                          Charles A. Wilfong          March 6, 1997


/s/ Clark W. Hinsdale III         Director                               /s/ Tyler P. Young          Director
-------------------------         --------                               ------------------          --------
Clark W. Hinsdale III             March 6, 1997                          Tyler P. Young              March 6, 1997


/s/ Richard A. Jerome             Director
---------------------             --------
Richard A. Jerome                 March 6, 1997


</TABLE>