No. 03-15-00436-CV

In the Third Court of Appeals

Austin, Texas

CHARLES O. “CHUCK” GRIGSON,

Appellant,

v.

THE STATE OF TEXAS; THE TEXAS DEPARTMENT OF 

INSURANCE; THE TEXAS COMMISSIONER OF INSURANCE;

and FARMERS GROUP, INC. ET AL., 

Appellees.

On Appeal from the 261st Judicial District Court, Travis County, Texas

Cause No. D-1-GV-02-002501

APPELLEES’ JOINT RESPONSE TO APPELLANT GRIGSON’S 

EMERGENCY MOTION TO STAY THE SENDING OF CLASS NOTICE

Marcy Hogan Greer

State Bar No. 08417650 

mgreer@adjtlaw.com

ALEXANDER DUBOSE JEFFERSON &

TOWNSEND LLP

515 Congress Ave., Suite 2350 

Austin, Texas 78701 

Telephone: 512-482-9300 

Telecopier: 512-482-9303 

M. Scott Incerto 

State Bar No. 10388950 

scott.incerto@nortonrosefulbright.com 

NORTON ROSE FULBRIGHT US LLP

98 San Jacinto Blvd., Suite 1100 

Austin, Texas 78701 

Telephone: 512-474-5201 

Telecopier: 512-536-4598 

COUNSEL FOR DEFENDANTS-APPELLEES 

THE FARMERS PARTIES

Joshua R. Godbey 

State Bar No. 24049996 

joshua.godbey@texasattorneygeneral.gov 

Ryan S. Mindell 

State Bar No. 24089707 

ryan.mindell@texasattorneygeneral.gov 

Jennifer S. Jackson 

State Bar No. 24060004 

jennifer.jackson@texasattorneygeneral.gov 

OFFICE OF THE ATTORNEY GENERAL

P.O. Box 12548 

Austin, Texas 78711-2548 

Telephone: (512) 475-4209 

Fax: (512) 477-2348) 

COUNSEL FOR PLAINTIFFS-APPELLEES, THE 

STATE OF TEXAS, THE TEXAS DEPARTMENT OF 

INSURANCE, AND THE TEXAS COMMISSIONER 

OF INSURANCE

ACCEPTED

03-15-00436-CV

6131184

THIRD COURT OF APPEALS

AUSTIN, TEXAS

7/20/2015 10:39:40 AM

JEFFREY D. KYLE

CLERK

 FILED IN 3rd COURT OF APPEALS AUSTIN, TEXAS 7/20/2015 10:39:40 AM JEFFREY D. KYLE Clerk
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TO THE HONORABLE COURT OF APPEALS:

Appellees, the State of Texas, the Texas Department of Insurance and the 

Texas Commissioner of Insurance (jointly, “the State”) and the Farmers Parties1

(together with the State, the “Settling Parties”) file this Joint Response, asking the 

Court to deny Appellant Grigson’s Emergency Motion to Stay the Sending of 

Class Notice (“Motion to Stay”). The Settling Parties additionally request that the 

Court consider and grant, on an expedited basis, their Joint Motion to Dismiss 

Appeal for Lack of Appellate Jurisdiction and Request for Expedited 

Consideration of Motion (“Motion to Dismiss”). 

PRELIMINARY STATEMENT

Having failed to defeat preliminary approval of the settlement in this 12-

year-old case,2 Appellant Charles O. “Chuck” Grigson (“Grigson”) has now filed a 

baseless interlocutory appeal of the district court’s Order of Preliminary Approval. 

Bootstrapping off that improper appeal, Grigson filed his Motion to Stay, asking 

the Court to prevent the Settling Parties from finally informing the approximately 

 

1 Farmers Group, Inc., Fire Underwriters Association, Farmers Underwriters Association, 

Farmers Insurance Exchange, Fire Insurance Exchange, Texas Farmers Insurance Company, 

Mid-Century Insurance Company of Texas, Mid-Century Insurance Company, Farmers Texas 

County Mutual Insurance Company, Truck Insurance Exchange, and Truck Underwriters 

Association

2 See the “Background Facts” provided in the Appellees’ Joint Motion to Dismiss Appeal for 

Lack of Appellate Jurisdiction and Request for Expedited Consideration of Motion, which are 

incorporated here by reference. Those facts in the Motion to Dismiss and stated here are in the 

personal knowledge of the undersigned, and so, no affidavit in support is needed. TEX. R. APP.

P. 10.2. 
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1.8 million class members about the settlement. In his Motion to Stay, Grigson 

makes several conclusory, incorrect arguments that are all premised on the 

propriety or success of his interlocutory appeal. Because, as demonstrated in the 

Settling Parties’ Motion to Dismiss, there is no conceivable basis for an 

interlocutory appeal in this case, Grigson’s Motion to Stay must also fail. There is, 

in short, no reason to unnecessarily stay class notice, 12 years overdue, for an 

improper appeal over which this Court lacks jurisdiction.

ARGUMENT

I. Grigson Cannot Appeal the Preliminary Approval Order and Therefore 

Cannot Obtain a Stay of Class Notice

Grigson baldly asserts that he is appealing the “order entered on July 6, 2015 

certifying a settlement class action.” Motion to Stay, at 2 ¶ 1 (emphasis added). 

That statement is completely false. The Order from which Grigson purports to 

appeal does not, at any point, certify a class. So, it is not surprising that Grigson 

does not—and cannot—cite any part of the Order of Preliminary Approval

(“Preliminary Approval Order”) to support his claim that it “certified” the 

settlement class action in this case. 

The Preliminary Approval Order, on its face, neither certifies nor refuses to 

certify a class, as demonstrated in the Settling Parties’ Motion to Dismiss (the 

arguments of which are incorporated here by reference). Instead, the Preliminary 

Approval Order expressly recognizes that the settlement classes were certified in 

2003, in an order that was subsequently affirmed by the Texas Supreme Court and 
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this Court. See Motion to Stay, Ex. A: Order of Preliminary Approval (July 6, 

2016) at 2, ¶ 2 (explaining that the district court “has previously certified” the 

settlement classes at issue (emphasis added)); see also Farmers Grp., Inc. v. Lubin, 

222 S.W.3d 417, 420, 427-28 (Tex. 2007) (upholding authority of Texas Attorney 

General to assert class claims under the Insurance Code); Lubin v. Farmers Grp., 

Inc., No. 03-03-00374-CV, 2009 WL 3682602, at *26-32 (Tex. App.—Austin 

Nov. 6, 2009, no pet.) (considering and rejecting intervenors’ objections to 

certification of the settlement classes in this case). Those long-ago certified 

settlement classes have remained unchanged for the past 12 years. 

These facts are fatal to the Motion to Stay. Texas law is clear that an 

interlocutory appeal is permitted only from an order that “certifies or refuses to 

certify a class in a suit brought under Rule 42.” See TEX. CIV. PRAC. & REM. CODE

§ 51.014(a)(3). The order Grigson attempts to appeal didn’t do that. The clear 

lack of appellate jurisdiction over Grigson’s attempted appeal also requires denial 

of Grigson’s Motion to Stay. With no basis to appeal, Grigson has no basis to stay 

the proceedings in this case, nor is he entitled to block class notice.

II. Whether the Final Hearing Occurs as Scheduled Has No Bearing on 

Whether Class Notice Should Be Stayed

Grigson also argues, without explanation, that due to his “appeal” the final

fairness hearing in this case cannot be held as scheduled, and thus, the issuance of 

class notice “will misinform and confuse the putative class and interfere with [the] 
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Court’s jurisdiction.” Motion to Stay at 2, ¶ 2. Once again, that is simply not the 

case.

The final fairness hearing can go forward as scheduled if this Court 

considers and grants the Settling Parties’ Motion to Dismiss on an expedited basis, 

which would render Grigson’s Motion to Stay baseless and moot. But, even if the 

final hearing cannot occur on the currently scheduled date for whatever reason, the 

Preliminary Approval Order deals expressly with that possibility, such that a stay is

unnecessary. Under the Preliminary Approval Order, the district court “expressly 

retains the power to adjourn” the hearing without any further notice. Motion to 

Stay, Ex. A: Order of Preliminary Approval (July 6, 2016) at 9, ¶ 15. The Class 

Notice that has been approved by the district court and will be sent to absent class 

members also expressly informs class members that the date of the final fairness 

hearing may be moved. In a paragraph clearly labeled “When and where will the 

Court decide whether to approve the Settlement?” the approved class notice 

identifies the currently scheduled date and then states that the “Settlement 

Hearing . . . may be moved to a different date or time without additional notice” 

and advises class members to visit the settlement website or to call a toll-free 

phone number to check for any changes to the hearing date. Motion to Stay, Ex. 

A: Order of Preliminary Approval (July 6, 2016) at Ex. 1, p.9, ¶ 21. The sending 

of Class Notice therefore would neither “misinform” nor “confuse” class members, 

as Grigson claims. See Motion to Stay at 2, ¶ 2. To the contrary, the Class Notice 
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is designed, as a required and necessary step of the settlement approval process, to 

benefit absent class members by informing them of the existence and the material 

terms of the settlement and by triggering the ability of the members to participate, 

be heard, and make their own decisions about the settlement.3

 And, as is common 

in class action cases, they are informed of the currently scheduled date for the final 

fairness hearing as well as the fact that the date could change. 4

III. Class Notice Will Be Paid by the Defendants-Appellees Farmers Parties 

and Will Have No Adverse or Irreparable Effect on Class Members

Grigson’s final argument in support of his Motion to Stay is that, should he 

somehow succeed on the merits of his interlocutory appeal of the Preliminary 

Approval Order, sending class notice will be a “waste of policyholder money.” 

Motion to Stay at 3, ¶ 3. And yet again, Grigson’s conclusory and unsupported 

argument is readily shown to be untrue.

First, Grigson’s theory that sending notice would be a “waste of 

policyholder money” is premised on the assumption that notice would have to be 

re-sent, in the event the Court considers his appeal and the date for the fairness 

hearing has to be moved. But, as explained above, the Class Notice already 

contemplates the potential for moving that hearing date, and notifies class 

 

3 See TEX. INS. CODE § 541.266; TEX. R. CIV. P. 42(e)(1)(B).

4 There are many non-appellate reasons why a final hearing would need to be rescheduled after 

the issuance of class notice (e.g., court conflict, work or personal conflict of an attorney, natural 

disaster, etc.) but that does not mean that, in each of those situations, the entire class notice is 

defective and must be re-sent.
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members that it may be moved. Thus, the costs of sending out notice would not be 

wasted in this case, even if the date of the fairness hearing ultimately is moved.

Second, Grigson’s claim that the costs of notice “will be paid with 

policyholder money” such that sending the notice would somehow injure 

policyholders, see Motion to Stay at 3, ¶ 3,5 is thoroughly refuted by the 

undisputed evidentiary record upon which the district court based its Preliminary 

Approval Order. It is undisputed that the costs of notice are being paid by the 

Farmers Parties. Grigson’s argument is that the Farmers Exchanges are reciprocal 

insurance exchanges which are “owned” by the policyholders, such that the 

Exchanges’ surplus funds out of which certain costs will be paid are (he claims) 

“policyholder money.”6

 The evidence is clear and undisputed, however, that 

policyholders do not have ownership rights over the surplus of the Exchanges. 

Instead—as established through the testimony and declaration of Ron Myhan, 

Chief Financial Officer of the Farmers Exchanges, both of which are part of the 

record—policyholders of the Exchanges, like Grigson, do not “possess” the surplus 

 

5 Grigson’s reference to this Court’s 2003 stay order (Ex. C to Grigson’s Motion to Stay) is 

inapposite because, as this Court will recall, the appellants at the time were appealing the district 

court’s decision to certify the settlement classes, and the primary issue before the Court at that 

time was whether the Attorney General could bring and certify this class action at all without 

naming individual class members as representatives. See Lubin v. Farmers Grp., Inc., 222 

S.W.3d 417, 420 (Tex. 2007). 

6 Appellees Farmers Insurance Exchange, Fire Insurance Exchange, and Truck Insurance 

Exchange are the “Farmers Exchanges” or “Exchanges,” which are reciprocal or interinsurance 

exchanges that insure the policies. TEX. INS. CODE ANN. § 942.001, et seq. 
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funds of the Exchanges. Ex. 1, 7/2/2015 Hearing Tr. 50:7-51:14; Ex. 3 at 27, 

Farmers Defs.’ Ex. 11 ¶ 8.

7

Moreover, despite being given ample opportunity in both his briefing and at 

the preliminary approval hearing, Grigson has failed to substantiate his allegation

that payments by the Exchanges will adversely affect policyholders. Instead, that

unsupported contention is again refuted by evidence in the record. The Exchanges 

have a $5.6 billion surplus. Ex. 1, 7/2/2015 Hearing Tr. 53:13-15. Grigson’s 

argument that incurring the cost of approximately $2.5 million to send out class 

notice would somehow negatively impact policyholders is facially absurd. In any 

event, the Settling Parties demonstrated—through the testimony of David Mattax, 

the Texas Commissioner of Insurance; the declarations and testimony of the 

Exchanges’ CFO, Ron Myhan; and other evidence offered in support of 

preliminary approval—that even the Exchanges’ payment of the $84.6 million

settlement from reserves set aside from their $5.6 billion surplus will have no

material adverse effect on surplus, rates, or the class members who are currently 

policyholders of the Exchanges. See Ex. 2, 7/1/2015 Hearing Tr. 97:7-98:7, 101:1-

104:6; Ex. 1, 7/2/2015 Hearing Tr. 46:9-51:18, 53:13-55:8; Ex. 3, Portion of

Exhibits from Preliminary Approval Hearing. If payment of the $84.6 million 

 

7 Myhan also testified that, in addition to the Exchanges, Defendant-Appellee Farmers Group, 

Inc. will be paying a portion of the class notice costs, just as it will be reimbursing the Exchanges 

for a portion of the settlement amount. Ex. 1, 7/2/2015 Hearing Tr. 26:15-30:3. Grigson does 

not contend that money paid by Farmers Group, Inc. is “policyholder money.” 
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settlement will not materially affect policyholders, then there can be no question 

that the $2.577 million in estimated class notice costs (only 3% of the settlement 

value, and less than 0.05% of the value of the Exchanges’ surplus) will have no 

adverse effect on policyholders either.

It is instead Grigson’s Motion for Stay—premised on a groundless 

interlocutory appeal and incorrect, conclusory arguments—that will adversely 

affect the approximately 1.8 million class members who have effectively been shut

out of the settlement approval process for the past 12 years, receiving neither 

notice that the settlement exists nor the opportunity to participate and be heard. No 

more delay in this 12-year case should be allowed. Grigson had the full 

opportunity to participate at the preliminary approval hearing, and he failed in his

opposition—a failure that is not appealable. The other absent class members are 

now due class notice and entitled to be informed as soon as practicable.

CONCLUSION

For all these reasons, the Court should deny Appellant Grigson’s Emergency 

Motion to Stay the Sending of Class Notice. The Settling Parties request all other 

relief to which they are justly entitled.
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Date: July 20, 2015 Respectfully submitted,

/s/ M. Scott Incerto

Marcy Hogan Greer 

State Bar No. 08417650 

mgreer@adjtlaw.com 

ALEXANDER DUBOSE JEFFERSON & TOWNSEND LLP 

515 Congress Avenue, Suite 2350 

Austin, Texas 78701-3562 

Telephone: (512) 482-9300 

Facsimile: (512) 482-9303 

M. Scott Incerto 

State Bar No. 10388950 

scott.incerto@nortonrosefulbright.com 

NORTON ROSE FULBRIGHT US LLP 

98 San Jacinto Blvd., Suite 1100 

Austin, Texas 78701 

Telephone: 512-474-5201 

Telecopier: 512-536-4598 

Darryl W. Anderson

State Bar No. 24008694 

darryl.anderason@nortonrosefulbright.com 

Geraldine W. Young 

State Bar No. 24084134 

geraldine.young@nortonrosefulbright.com 

NORTON ROSE FULBRIGHT US LLP 

1301 McKinney, Suite 5100

Houston, Texas 77010-3095 

Telephone: 713-651-5151 

Telecopier: 713-651-5246 

ATTORNEYS FOR APPELLEES FIRE UNDERWRITERS 

ASSOCIATION, FARMERS GROUP, INC., FARMERS 

UNDERWRITERS ASSOCIATION, FARMERS INSURANCE 

EXCHANGE, FIRE INSURANCE EXCHANGE, TEXAS 

FARMERS INSURANCE COMPANY, MID-CENTURY 

INSURANCE COMPANY OF TEXAS, MID-CENTURY 

INSURANCE COMPANY, FARMERS TEXAS COUNTY 

MUTUAL INSURANCE COMPANY, TRUCK INSURANCE 

EXCHANGE, TRUCK UNDERWRITERS ASSOCIATION
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Respectfully submitted,

KEN PAXTON 

Attorney General of Texas 

CHARLES E. ROY 

First Assistant Attorney General 

JAMES E. DAVIS 

Deputy Attorney General for Civil Litigation 

ROBERT O’KEEFE

Division Chief

Financial Litigation, Tax, and Charitable Trusts Division 

 /s/ Joshua R. Godbey 

JOSHUA R. GODBEY 

Assistant Attorney General 

LEAD ATTORNEY 

State Bar No. 24049996 

Telephone: (512) 475-4209 

joshua.godbey@texasattorneygeneral.gov 

RYAN S. MINDELL 

Assistant Attorney General

State Bar No. 24089707 

Telephone: (512) 936-1721 

ryan.mindell@texasattorneygeneral.gov 

JENNIFER S. JACKSON 

Assistant Attorney General

State Bar No. 24060004 

Telephone: (512) 463-9917 

jennifer.jackson@texasattorneygeneral.gov 

Financial Litigation, Tax, and Charitable Trusts Division 

P.O. Box 12548 

Austin, Texas 78711-2548 

Fax: (512) 477-2348) 

ATTORNEYS FOR PLAINTIFFS-APPELLEES, THE STATE 

OF TEXAS, THE TEXAS DEPARTMENT OF INSURANCE,

AND THE TEXAS COMMISSIONER OF INSURANCE
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CERTIFICATE OF SERVICE

On July 20, 2015, I electronically filed the Appellees’ Joint Response to 

Appellant Grigson’s Emergency Motion to Stay the Sending of Class Notice with 

the Clerk of the Court using the eFile.TXCourts.gov electronic filing system which 

will send notification of such filing to the following (unless otherwise noted 

below). 

Joe K. Longley

Philip K. Maxwell

1609 Shoal Creek Blvd. # 100

Austin, TX 78701

Joe@JoeLongley.com

phil@philmaxwell.com

Counsel for Appellant Charles O. 

“Chuck” Grigson

Michael J. Woods

8620 N. New Braunfels, Ste. 522

San Antonio, TX 78217

MichaelJWoods@sbcglobal.net

Pro Se Intervenor/Objector 

Joseph C. Blanks

P.O. Box 999

Doucette, TX 75942

blanxlex@gmail.com

Counsel for Intervenor Gerald and 

Lesly Hooks

/s/ M. Scott Incerto

M. Scott Incerto
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CERTIFICATE OF COMPLIANCE WITH TEX. R. APP. P. 9.4(i) 

I certify that the foregoing document contains 1,754 words and complies 

with the word limit set forth in Texas Rule of Appellate Procedure 9.4(i).

/s/ M. Scott Incerto

M. Scott Incerto
-13- 

No. 03-15-00436-CV

In the Third Court of Appeals

Austin, Texas

CHARLES O. “CHUCK” GRIGSON,

Appellant,

v.

THE STATE OF TEXAS; THE TEXAS DEPARTMENT OF 

INSURANCE; THE TEXAS COMMISSIONER OF INSURANCE;

and FARMERS GROUP, INC., ET AL., 

Appellees.

On Appeal from the 261st Judicial District Court

Travis County, Texas

Cause No. GV-202501

APPENDIX TO 

APPELLEES’ JOINT RESPONSE TO APPELLANT GRIGSON’S 

EMERGENCY MOTION TO STAY THE SENDING OF CLASS NOTICE

Exhibit 1 

Exhibit 2 

Exhibit 3 

7/2/2015 Preliminary Approval Hearing Transcript (certified)

7/1/2015 Preliminary Approval Hearing Transcript (certified)

A Portion of the Exhibits from the Hearing on Preliminary 

Approval: State/Plaintiff’s Exhibits 10, 11, and 12 and Farmers 

Defendants’ Exhibits’ 11, 12, and 18 (certified)
Exhibit 1 

TO APPELLEES’ JOINT RESPONSE TO APPELLANT GRIGSON’S 

EMERGENCY MOTION TO STAY THE SENDING OF CLASS NOTICE
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REPORTER'S RECORD

VOLUME 2 OF 2 VOLUMES

TRIAL COURT CAUSE NO. D-1-GV-02-002501

STATE OF TEXAS, THE TEXAS

DEPARTMENT OF INSURANCE,

AND THE TEXAS

COMMISSIONER OF

INSURANCE,

Plaintiffs,

VS.

FARMERS GROUP, INC.,

FARMERS UNDERWRITERS

ASSOCIATION, FIRE

UNDERWRITERS ASSOCIATION,

FARMERS INSURANCE

EXCHANGE, FIRE INSURANCE

EXCHANGE, TEXAS FARMERS

INSURANCE COMPANY,

MID-CENTURY INSURANCE

COMPANY OF TEXAS, AND

FARMERS TEXAS COUNTY

MUTUAL INSURANCE COMPANY,

Defendants.

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IN THE DISTRICT COURT

TRAVIS COUNTY, TEXAS

261ST JUDICIAL DISTRICT

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

HEARING ON JOINT MOTION FOR

PRELIMINARY APPROVAL OF SECOND AMENDED

SETTLEMENT AGREEMENT

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

On the 2nd day of July, 2015, the following

proceedings came on to be heard in the above-entitled

and numbered cause before the Honorable Scott H.

Jenkins, Judge presiding, held in Austin, Travis County,

Texas;

Proceedings reported by machine shorthand.
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A P P E A R A N C E S

FOR THE PLAINTIFFS, THE STATE OF TEXAS, THE TEXAS

DEPARTMENT OF INSURANCE, AND THE TEXAS COMMISSIONER OF

INSURANCE:

JOSHUA GODBEY

SBOT NO. 24049996

RYAN MINDELL

SBOT NO. 24089707

JENNIFER JACKSON

SBOT NO. 24060004

Assistant Attorney General

OFFICE OF THE ATTORNEY GENERAL

P.O. Box 12548

Austin, Texas 78711-2548

(512) 475-4209

FOR DEFENDANTS FIRE UNDERWRITERS ASSOCIATION, FARMERS

GROUP, INC., FARMERS INSURANCE EXCHANGE, FIRE INSURANCE

EXCHANGE, TEXAS FARMERS INSURANCE COMPANY, MID-CENTURY

INSURANCE COMPANY OF TEXAS, MID-CENTURY INSURANCE

COMPANY, FARMERS TEXAS COUNTY MUTUAL INSURANCE COMPANY,

TRUCK INSURANCE EXCHANGE, AND TRUCK UNDERWRITERS

ASSOCIATION:

M. SCOTT INCERTO

SBOT NO. 10388950

NORTON ROSE FULBRIGHT

98 San Jacinto Boulevard, Suite 1100

Austin, Texas 78701

(512) 474-5201

DARRYL ANDERSON

SBOT NO. 24008694

NORTON ROSE FULBRIGHT

1301 McKinney, Suite 5100

Houston, Texas 77010-3095

(713) 651-5151

MARCY HOGAN GREER

SBOT NO. 08417650

ALEXANDER, DUBOSE, JEFFERSON & TOWNSEND

515 Congress Avenue, Suite 2350

Austin, Texas 78701

(512) 482-9300
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A P P E A R A N C E S

(CONTINUED)

FOR INTERVENORS GERALD HOOKS AND LESLY HOOKS:

JOSEPH BLANKS

SBOT NO. 02456770

LAW OFFICE OF JOSEPH C. BLANKS

P.O. Box 999

Doucette, Texas 75942

(409) 837-9707

FOR INTERVENOR MICHAEL J. WOODS:

MICHAEL J. WOODS, PRO SE

8620 N. New Braunfels #522

San Antonio, Texas 78217

(210) 822-1560

FOR INTERVENOR CHARLES O. "CHUCK" GRIGSON:

JOE K. LONGLEY

SBOT NO. 12542000

LAW OFFICE OF JOE K. LONGLEY

1609 Shoal Creek Boulevard, Suite 100

Austin, Texas 78701

(512) 477-4444

PHILIP K. MAXWELL

SBOT NO. 13254000

LAW OFFICE OF PHILIP K. MAXWELL

1609 Shoal Creek Boulevard, Suite 100

Austin, Texas 78701

(512) 947-5434
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I N D E X

VOLUME 2

HEARING ON JOINT MOTION FOR

PRELIMINARY APPROVAL OF SECOND AMENDED

SETTLEMENT AGREEMENT

JULY 2, 2015

DEFENDANT FARMERS' WITNESSES

Direct Cross Vol.

RONALD MYHAN

By Mr. Incerto 5 2

By Mr. Mindell 51 2

By Mr. Maxwell 56 2

By Mr. Incerto 105 2

Page Vol.

Defendants Farmers rest................... 107 2

All parties close......................... 107 2

Statements by Mr. Blanks (in lieu of

opening statements earlier)............ 108 2

Statements by Mr. Woods................... 109 2

Statements by Ms. Greer................... 110 2

Court's Ruling............................ 116 2

Adjournment............................... 135 2

Court Reporter's Certificate.............. 136 2
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A. Of course the Exchanges, you know, write the

policies, bill the insureds, and we have -- we receive

the premium payments in cash, and they were put in the

surplus. So we were thinking, okay, if we have the cash

and if the Department of Insurance thinks we're 12 to

18 percent overcharging and we've settled at 6.8, we

will return part of that 12 to 18 percent in terms of

the 6.8 to the policyholders since we're holding the

money to start with.

Q. And then anything over 6.8 percent that's

actually, at least in the view of the State, to be

excessive will be retained by the Exchanges; is that

correct?

A. Yes, it will.

Q. One of the terms in the 2015 supplement of the

settlement agreement is that FGI will reimburse the

Exchanges for attorney-in-fact fees that it collected on

these returned premiums.

A. Of course.

Q. Are you familiar with that?

A. Yes, I am.

Q. Do you believe that's fair?

A. Of course.

Q. Now, this term is in the 2015 agreement. My

question is, is this something that had been discussed
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before 2014, 2015?

A. Yeah, briefly, only because it was assumed from

day one that the management fee would be returned for

these premiums.

Q. What do you mean by day one?

A. Right when we were negotiating the settlement

going, okay, this is what it is, I think we were

actually thinking that this would be -- you know, it was

such a process to get to a settlement considering,

you know, the environment at that time, we figured this

would be paid out pretty quickly and we were making

plans, okay, this is how it gets taken out of premium,

returned to the policyholders, and at the same time the

management fee gets returned, so it was kind of a given

that it would be returned. It wasn't debated at all.

Q. I want to make sure, are we talking about the

2002 time period with the original settlement?

A. Yes.

Q. Because we're dealing with such a long period

of time, I guess I need to ask you to be as specific as

you can with these times.

A. Absolutely.

Q. So there were discussions you're saying between

the Exchanges and FGI regarding returning the management

fee in connection with the original settlement?
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A. Yes.

Q. Had any amount been specifically calculated at

that time?

A. Not the amount, but the understanding was -- it

was just like we do with all the other lines of

business. I mean, you go back to that. The line of

business that's affected, get the management fee for

that line of business and cal -- it's generally a math

exercise. Just calculate the management fee on the

settlement amount of premium, and that's the amount that

comes back.

Q. Mr. Myhan, with respect to the current

settlement, has the amount of attorney-in-fact fees to

be reimbursed by FGI on the return premiums been

calculated?

A. Yes, it has.

Q. Who would -- who supervised that calculation?

A. That'd be me.

Q. And with respect to that calculation, can you

share with us what you determined is the amount of fees

to be reimbursed for the return of premiums?

A. Yes. We've calculated 8.4 million, you know,

with the current settlement that's out there.

Q. Okay. Now, is that a number that includes

expenses for class administration as well as a number
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that includes a portion of the fund that's set out to

fund the credit usage notice class?

A. Absolutely. As the supplement was being

discussed with the board, talking in terms of the

extra -- even though the extra 10 million isn't a return

of premium per se and, you know, some of these other

elements aren't returns of premium, the board and the

audit committee as we were discussing it going, well,

this is really -- we're just sharing this with FGI in

terms of, okay, put this behind us and, you know, moving

on and running a profitable business in Texas, and so,

you know, why doesn't -- why shouldn't FGI participate

in each element of this? And we go, yeah, that's a good

idea. And there was no pushback from FGI once I went to

them and said, hey, this is what we're thinking, and

they go okay.

So, you know -- so basically the

$10 million, supplemental payment, thicker notice

amount, the administrative costs, all that that were

just a part of the management fee to each to kind of

give a placeholder in terms of each group participating

in the outcome here. So that gives you the 8.4 million

when you get all done with all those components.

Q. Technically class administration does not

return a premium, but is there some contribution being
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made there?

A. Yes. We're just applying the management fee to

each of the amounts even if they're not premium related.

Q. Can you tell me how you calculated the amount

of management fee to be returned?

A. Basically, for the homeowners book during these

years, the management fee was -- over this period was

9.17 percent. And so basically we're applying that

rate, you know, specific to the line of business to,

you know, the settlement here.

Q. Mr. Leaman testified in 2003 that the overall

management fee for that year was about 11 percent. Do

you recall that testimony?

A. Yes, I do.

Q. And is that accurate in your view?

A. Yes, it is. We had actually a year or so

before this reduced just the homeowners management fee.

Really as the Texas mold started to accelerate,

you know, FGI wanted to help the Exchanges' capital

position somewhat, so we reduced -- they reduced it a

bit there. Plus we have -- you know, I think Stephen

Leaman quoted the overall management fee, so we have

other books of business that have different management

fees. So, for example, you know, the commercial book

requires a lot more management company touching. It's
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But the other two really don't have any hard and fast

like leverage ratio type of things, but generally they

would like us to kind of keep the surplus notes about at

the level they're at now.

THE COURT: So back when you were at the

2 billion to 2.7 billion ratio -- 2 billion of which was

notes right?

THE WITNESS: Uh-huh.

THE COURT: Did your notes get downgraded?

THE WITNESS: They -- we were -- yeah, we

were in conversations with all three rating agencies at

the time, and yeah, we were getting downgrades from all

three during 2002, 2003.

THE COURT: Just wanted to make sure I

understood this. Go ahead.

Q. (BY MR. INCERTO) Mr. Myhan, you mentioned

earlier that gross written premium today is about

18 billion.

A. Uh-huh.

Q. Is that a good number for 2014?

A. Yes, it is.

Q. How much -- how many billions in claims did the

Exchanges pay out in 2014?

A. Well, each year it kind of varies based on

what's happening, but if we -- you know, we've been
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averaging right about 100 combined ratio for the

enterprise over this last few years, and so that would

be 11 to 12 billion of claims paid each year, plus two

to three billion of loss adjustment expense, the claims

adjusters' salaries. It also includes legal expenses,

things like that. Probably about 3 billion in agents'

commissions, and then expenses too, but -- you know, so

big numbers.

Q. How would you characterize the financial

strength of the Exchanges today compared to 2002?

A. Oh, we're much, much stronger.

Q. In your opinion as CFO, will payment of the

settlement in this case have any material impact on the

Exchanges' ability to pay claims?

A. No, absolutely not.

Q. Will it have any material impact on the overall

financial strength of the Exchanges?

A. No, it will not.

Q. Will it have any material impact on its

ratings?

A. No. It's too small.

Q. Will it have any material impact -- or will it

have any impact in terms of increasing rates for

policyholders?

A. Well, as we heard yesterday, you know,
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obviously it won't from our perspective, but it would be

impossible to actually have that happen since it's based

on -- you know, we file our rates based on the claims

experience and then we try to project what those losses

will be going forward and then come up with a premium

amount that would cover that, and this doesn't affect

losses -- I mean, it doesn't affect premium -- I'm

sorry. It doesn't affect losses at all. And even if

you did have a way to do that, this is a regulated

industry where it's -- you know, that element would

never be allowed by any of the regulators.

Q. When this case arose in 2002 and settlement

discussions ensued, did the Exchanges set up a reserve

for the costs that they were projecting or estimating

going forward?

A. Yeah, at that time we thought this would be

settled fairly quickly. So once a settlement was

reached in principle, we went ahead and set up a reserve

at that time.

Q. What was the estimated amount of reserve?

A. I believe that was around $73 million,

something in that ballpark.

Q. Okay. My question is -- I want to talk to you

about reserves. Is there a difference between reserves

that are set by the Exchanges written in connection with
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claims that are filed by policyholders versus reserves

set up on a lawsuit like this?

A. Oh, very much so. The reserves set up for

claims, et cetera is kind of just a matter of operations

really. The claims reps out in the field, you know,

they're busy working every day to pay claims. It rolls

through our systems, you know, the paids and the

reserves that they're setting up. And then our

actuaries look at those patterns and try to predict,

okay, what are the losses that haven't been reported yet

but have been incurred, and it's kind of a math

exercise. It gives us -- and that's the preponderance

of our -- I think we have about 8 billion of those types

of reserves sitting out there now.

The legal reserves are kind of more of

a -- you know, separately more judgment. For us it's

kind of -- you know, we abide by the statutory

accounting principles. That's what the Exchanges are

governed by. So it becomes a discussion, is this

probable and measurable in terms of what this is. And

for us it has to be, you know, fairly material. We

don't want to keep track of, you know, a thousand

different cases, so we try to say, okay, anything,

you know, that's material, say if it's going to hit us

for maybe more than five million dollars, let's kind of
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set up a reserve for that. And that's -- you know, this

was a -- this was a big one and a high profile one, so,

you know, we went ahead and set up a reserve for this.

Really, you know, my group sets it up by discussing with

the legal department in terms of what we think it's

going to be.

Q. Are the reserves separate from the surplus?

A. Yes. So we set a reserve up and we incur that

expense when we set up the reserve, and it comes out of

surplus at that time. So this -- that initial reserve

came out of 2002 or 2003 surplus. And then when the

amendment came along we bumped the reserve up for the

amount that it's at now, and it came out of the 2014

surplus I guess, just the extra for the 10 million and

the other stuff.

Q. So what would be the impact on the surplus?

Let's assume with me that this settlement is paid in

four months' time. What would be the impact on the

surplus?

A. If it's the amount that's in the amendment

right now, there would be no impact to surplus. It's

been fully reserved.

Q. Are the policyholders owners of the Exchanges?

A. In a sense they are.

Q. In what sense?
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A. In a sense where upon liquidation their claims

get paid first and, you know, they would, you know, be

in line there as owners of the Exchanges. They also

have a voice in electing the board of governors as their

representatives to represent them as policyholders of

the Exchanges.

Q. Can a policyholder of the Exchanges decide that

they want to possess a portion of the surplus? Is that

possible?

A. No. They pay their premiums. And, you know,

so it's a little different if you're -- if you think of

ownership you think of like I own stock in a company or

something, where if there's a big loss your stock would

be worth pennies on the dollar or something. Well, here

you pay your premium and, you know, if we have,

you know, a billion-dollar catastrophe, you know, we

don't ask you for money back. It's just, yep, you paid

your premium and, you know, but that's the extent of

your liability really.

Q. If a subscriber to the Exchanges decides to go

purchase insurance from a different company and not from

the Exchanges --

A. What? Oh, okay.

Q. -- can they continue? Do they have any further

rights in the surplus or access to the Exchanges upon
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termination in their insurance contract?

A. No. Once they move on they're no longer

affiliated. They're no longer a member of the

Exchanges.

Q. Do they have continued liability to the

Exchanges?

A. No, they do not.

Q. With respect to homeowners and auto

policyholders of the Exchanges, do they receive

dividends from the surplus?

A. Not for auto and fire, no.

Q. Do they have any rights to borrow against or to

somehow take advantage of the increase in surplus?

A. No, they do not.

Q. In your opinion as CFO, does payment of this

settlement by the Exchanges affect in any material way

the policyholders' interest in the surplus?

A. It will not.

MR. INCERTO: I'll pass the witness, Your

Honor.

CROSS-EXAMINATION

BY MR. MINDELL:

Q. Mr. Myhan, you mentioned earlier that you lose

money in the arbitrage between your reserve notes and

your investments on that money. Why is that?
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A. Well, the surplus notes are so deeply

subordinated they go into a bit of a premium. Now, if

we had to actually go into the markets during 2002,

there would have been a whopping premium or probably

nobody would have bought them at all because of our

financial ratings were under fire at the time.

But in a stable market like it is now,

we're -- we have a lot of capital. The rating agencies

have given us good ratings. So when people look to buy

these notes from us now, you know, we'd get a better

deal on them. But it still is going to be more than

what we could actually invest those proceeds in.

For example, the Exchanges always have

a -- you know, we've always had a very conservative

investment philosophy, so our duration generally, which

means -- you know, we invest in bonds that are three

years in duration roughly, so we don't make any big bets

on things going either way, and so these notes are

longer duration, so they cost a little more, plus

they're subordinated. So the difference between what we

invested in and what we're paying in interest, there's

always a difference.

Q. And why are your surplus investments so

conservative?

A. You know, generally we keep -- you know, going
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back to 2002 as an example, you know, that was also a

time during a lot of the turmoil in investment markets.

The tech bubble had just burst. There was lots of

things going on. So we're aware of that, so we --

you know, we kind of model our investments in terms of

long horizons in terms of what's possible, good and bad.

And so we -- for that reason we don't make hedging -- we

don't make any big bets on something happening or not.

We kind of hedge our bets and keep a very conservative

profile, which got us through 2008 in fine fashion,

where a lot of our peers had significant impairments and

had some problems.

Q. You mentioned there's approximately 5.6 billion

in the surplus now. Is that across all the Exchanges?

A. Yes, that's all three Exchanges added together.

Q. And why do the Exchanges pool their surplus?

A. Well, the Exchanges all participate in a

pooling of interest reinsurance arrangement. We started

that in 1985. So it allows each of the Exchanges and

all of our subsidiaries, by the way, who participate in

the pooling agreement to have a mix of business which

includes all the Farmers business. So not to get into

any accountant geek stuff here, because I do have some

sympathy for my audience, and people would be taking

their own lives if I got into detail on this, but --
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THE COURT: It just diversifies your risk.

THE WITNESS: Yes. We add all the

premiums together at Farmers Exchange and then it gets

ceded out to the pooling participants. So each of the

Exchanges, no matter what they write on a direct basis,

end up with a mix of business that includes auto and

home and some commercial. For example, in Texas, if we

didn't have that in place, the companies in Texas would

have long been bankrupt, but they were able to cede all

these losses into the pool, and, you know, Farmers

Insurance of Ohio picked up some, Farmers Insurance of

Washington picked up some, the three Exchanges picked up

some. It diluted it, so we were able to keep them all

together.

So it dilutes the risk and also helps us

manage the capital, because then you don't have -- like

the Texas companies would have been, you know, belly up

at that point. It actually costs us money to move money

around in terms of dividends and different things.

There's taxes to be paid and things. So it's a more

efficient way of also managing the capital for all the

entities. And you can see it in the rating agencies

where they rate the Farmers pool and then give the same

rating to all -- you know, they have a big list of all

the companies and just go down the list and give them
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all the same rating because that's the rating of the

Farmers pool. Does that make sense to everybody?

THE COURT: It probably helps in selling

the notes, too, doesn't it?

THE WITNESS: Yes. Yeah, it makes it

easier and more transparent to figure out what we're

doing.

THE COURT: I get it.

Q. (BY MR. MINDELL) You testified a lot about the

challenges that some of the Exchanges faced in 2002 and

2003. Were the Exchanges ever in any danger of

liquidation during that time?

A. We were very close, yes, if this would have

kept going. In our discussions with the California

Insurance Department, there was an understanding that if

our risk based capital levels -- I'm going to throw out

some accounting geek stuff here, but if it fell below

250 percent, we could probably count on them denying

interest to the bondholders, and that's -- what that is

is like they have a minimum level of capital for your

liquidated, and we needed two and a half times that at

least to stay in business for the surplus notes, and we

ended I think 2002 with Farmers Exchange at a

251 percent RBC level, and that was after we had

initiated a quota share program to take some of the
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136

REPORTER'S CERTIFICATE

THE STATE OF TEXAS )

COUNTY OF TRAVIS )

I, Chavela V. Crain, Official Court

Reporter in and for the 53rd District Court of Travis

County, State of Texas, do hereby certify that the above

and foregoing contains a true and correct transcription

of all portions of evidence and other proceedings

requested in writing by counsel for the parties to be

included in this volume of the Reporter's Record, in the

above-styled and numbered cause, all of which occurred

in open court or in chambers and were reported by me.

I further certify that this Reporter's Record of

the proceedings truly and correctly reflects the

exhibits, if any, offered in evidence by the respective

parties.

WITNESS MY OFFICIAL HAND this the 12th day of July,

2015.

/s/ Chavela V. Crain

Chavela V. Crain

Texas CSR 3064, RMR, CRR

Expiration Date: 12/31/2015

Official Court Reporter

53rd District Court

Travis County, Texas

P.O. Box 1748

Austin, Texas 78767

(512) 854-9322
Exhibit 2 

TO APPELLEES’ JOINT RESPONSE TO APPELLANT GRIGSON’S 

EMERGENCY MOTION TO STAY THE SENDING OF CLASS NOTICE
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1

REPORTER'S RECORD

VOLUME 1 OF 2 VOLUMES

TRIAL COURT CAUSE NO. D-1-GV-02-002501

STATE OF TEXAS, THE TEXAS

DEPARTMENT OF INSURANCE,

AND THE TEXAS

COMMISSIONER OF

INSURANCE,

Plaintiffs,

VS.

FARMERS GROUP, INC.,

FARMERS UNDERWRITERS

ASSOCIATION, FIRE

UNDERWRITERS ASSOCIATION,

FARMERS INSURANCE

EXCHANGE, FIRE INSURANCE

EXCHANGE, TEXAS FARMERS

INSURANCE COMPANY,

MID-CENTURY INSURANCE

COMPANY OF TEXAS, AND

FARMERS TEXAS COUNTY

MUTUAL INSURANCE COMPANY,

Defendants.

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IN THE DISTRICT COURT

TRAVIS COUNTY, TEXAS

261ST JUDICIAL DISTRICT

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

HEARING ON JOINT MOTION FOR

PRELIMINARY APPROVAL OF SECOND AMENDED

SETTLEMENT AGREEMENT

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

On the 1st day of July, 2015, the following

proceedings came on to be heard in the above-entitled

and numbered cause before the Honorable Scott H.

Jenkins, Judge presiding, held in Austin, Travis County,

Texas;

Proceedings reported by machine shorthand.
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2

A P P E A R A N C E S

FOR THE PLAINTIFFS, THE STATE OF TEXAS, THE TEXAS

DEPARTMENT OF INSURANCE, AND THE TEXAS COMMISSIONER OF

INSURANCE:

JOSHUA GODBEY

SBOT NO. 24049996

RYAN MINDELL

SBOT NO. 24089707

JENNIFER JACKSON

SBOT NO. 24060004

Assistant Attorney General

OFFICE OF THE ATTORNEY GENERAL

P.O. Box 12548

Austin, Texas 78711-2548

(512) 475-4209

FOR DEFENDANTS FIRE UNDERWRITERS ASSOCIATION, FARMERS

GROUP, INC., FARMERS INSURANCE EXCHANGE, FIRE INSURANCE

EXCHANGE, TEXAS FARMERS INSURANCE COMPANY, MID-CENTURY

INSURANCE COMPANY OF TEXAS, MID-CENTURY INSURANCE

COMPANY, FARMERS TEXAS COUNTY MUTUAL INSURANCE COMPANY,

TRUCK INSURANCE EXCHANGE, AND TRUCK UNDERWRITERS

ASSOCIATION:

M. SCOTT INCERTO

SBOT NO. 10388950

NORTON ROSE FULBRIGHT

98 San Jacinto Boulevard, Suite 1100

Austin, Texas 78701

(512) 474-5201

DARRYL ANDERSON

SBOT NO. 24008694

NORTON ROSE FULBRIGHT

1301 McKinney, Suite 5100

Houston, Texas 77010-3095

(713) 651-5151

MARCY HOGAN GREER

SBOT NO. 08417650

ALEXANDER, DUBOSE, JEFFERSON & TOWNSEND

515 Congress Avenue, Suite 2350

Austin, Texas 78701

(512) 482-9300
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3

A P P E A R A N C E S

(CONTINUED)

FOR INTERVENORS GERALD HOOKS AND LESLY HOOKS:

JOSEPH BLANKS

SBOT NO. 02456770

LAW OFFICE OF JOSEPH C. BLANKS

P.O. Box 999

Doucette, Texas 75942

(409) 837-9707

FOR INTERVENOR MICHAEL J. WOODS:

MICHAEL J. WOODS, PRO SE

8620 N. New Braunfels #522

San Antonio, Texas 78217

(210) 822-1560

FOR INTERVENOR CHARLES O. "CHUCK" GRIGSON:

JOE K. LONGLEY

SBOT NO. 12542000

LAW OFFICE OF JOE K. LONGLEY

1609 Shoal Creek Boulevard, Suite 100

Austin, Texas 78701

(512) 477-4444

PHILIP K. MAXWELL

SBOT NO. 13254000

LAW OFFICE OF PHILIP K. MAXWELL

1609 Shoal Creek Boulevard, Suite 100

Austin, Texas 78701

(512) 947-5434
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I N D E X

VOLUME 1

HEARING ON JOINT MOTION FOR

PRELIMINARY APPROVAL OF SECOND AMENDED

SETTLEMENT AGREEMENT

JULY 1, 2015

Page Vol.

Announcements............................ 25 1

INTERVENOR GRIGSON'S WITNESSES

Direct Cross Vol.

PATRICK KEEL

By Mr. Maxwell 33 1

Page Vol.

Opening Statement by Mr. Godbey.......... 60 1

Opening Statement by Mr. Woods........... 78 1

PLAINTIFF STATE'S WITNESSES

Direct Cross Vol.

DAVID MATTAX

By Mr. Godbey 83 1

By Mr. Incerto 99 1

By Mr. Longley 106 1
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I N D E X

VOLUME 1 - CONTINUED

HEARING ON JOINT MOTION FOR

PRELIMINARY APPROVAL OF SECOND AMENDED

SETTLEMENT AGREEMENT

JULY 1, 2015

DEFENDANT FARMERS' WITNESSES

Direct Cross Vol.

SHANNON WHEATMAN

By Ms. Greer 160 1

By Mr. Maxwell 174 1

By Mr. Blanks 189 1

By Ms. Greer 200 1

By Mr. Maxwell 202 1

By Mr. Blanks 217 1

PLAINTIFF STATE'S WITNESSES

Direct Cross Vol.

DAVID MATTAX (CONTINUED)

By Mr. Longley 219 1

By Mr. Blanks 252 1

By Mr. Woods 266 1

By Mr. Incerto 283 1

By Mr. Longley 290 1

By Mr. Woods 295 1

Page Vol.

Adjournment............................... 300 1

Court Reporter's Certificate.............. 301 1
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VOLUME 1 - CONTINUED

ALPHABETICAL WITNESS INDEX

Direct Cross Vol.

KEEL, PATRICK

By Mr. Maxwell 33 1

MATTAX, DAVID

By Mr. Godbey 83 1

By Mr. Incerto 99 1

By Mr. Longley 106 1

MATTAX, DAVID (CONTINUED)

By Mr. Longley 219 1

By Mr. Blanks 252 1

By Mr. Woods 266 1

By Mr. Incerto 283 1

By Mr. Longley 290 1

By Mr. Woods 295 1

WHEATMAN, SHANNON

By Ms. Greer 160 1

By Mr. Maxwell 174 1

By Mr. Blanks 189 1

By Ms. Greer 200 1

By Mr. Maxwell 202 1

By Mr. Blanks 217 1
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97

break now. How's that sound?

THE COURT: Okay. I'd like a break now,

so we'll all break now for 15 minutes.

(Recess taken)

THE COURT: You may resume.

MR. GODBEY: Thank you, Your Honor.

Q. (BY MR. GODBEY) Commissioner Mattax, will the

payment of this settlement have any effect on the amount

of premiums the Exchanges can charge in the future?

A. No.

Q. Why not?

A. Premiums are determined on a prospective basis,

so anything that this settlement does with respect to

payment of claims will not be able to be recouped, if

you will, in a future rate increase.

Q. Are the Exchanges now subject to rate

regulation in the state of Texas?

A. Yes.

Q. Can you briefly explain what that means?

A. Well, in Texas you have what's called a file

and use system, which means you can file your rates and

use them, but the commissioner of insurance can

disapprove of those rates. And so the Department of

Insurance regularly reviews rates, and if they have

issues with them, it lets the companies know. So the
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98

companies can either withdraw their rates or file new

rates that are more in conformance with what the TDI

actuaries think are appropriate.

Q. Is there any way for a rate regulated entity to

use a settlement payment such as this to increase rates

in the future?

A. No, that would not be permitted.

Q. Commissioner Mattax, were you in the courtroom

when Mr. Woods gave his opening statement?

A. For some of it, yes. I was aware that I was

about to testify, so I ran out real quick.

Q. Did you hear Mr. Woods make a claim that one of

his concerns with the settlement is that the prospective

rate reduction that has already been given by Farmers to

policyholders does not also include the return of

management fee that has been negotiated in the

supplement?

A. Well, if it was a prospective rate reduction,

there wouldn't be a management fee collected because the

rates wouldn't have been charged, so I don't think I

understand the argument. You're talking about the

prospective rate reduction that's already occurred.

Q. That's correct.

A. Right.

Q. The concern that Mr. Woods seems to have
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301

REPORTER'S CERTIFICATE

THE STATE OF TEXAS )

COUNTY OF TRAVIS )

I, Chavela V. Crain, Official Court

Reporter in and for the 53rd District Court of Travis

County, State of Texas, do hereby certify that the above

and foregoing contains a true and correct transcription

of all portions of evidence and other proceedings

requested in writing by counsel for the parties to be

included in this volume of the Reporter's Record, in the

above-styled and numbered cause, all of which occurred

in open court or in chambers and were reported by me.

I further certify that this Reporter's Record of

the proceedings truly and correctly reflects the

exhibits, if any, offered in evidence by the respective

parties.

WITNESS MY OFFICIAL HAND this the 13th day of July,

2015.

/s/ Chavela V. Crain

Chavela V. Crain

Texas CSR 3064, RMR, CRR

Expiration Date: 12/31/2015

Official Court Reporter

53rd District Court

Travis County, Texas

P.O. Box 1748

Austin, Texas 78767

(512) 854-9322

*
Exhibit 3 

TO APPELLEES’ JOINT RESPONSE TO APPELLANT GRIGSON’S 

EMERGENCY MOTION TO STAY THE SENDING OF CLASS NOTICE
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1

REPORTER'S RECORD

VOLUME 1 OF 1 VOLUME

TRIAL COURT CAUSE NO. D-1-GV-02-002501

STATE OF TEXAS, THE TEXAS

DEPARTMENT OF INSURANCE,

AND THE TEXAS

COMMISSIONER OF

INSURANCE,

Plaintiffs,

VS.

FARMERS GROUP, INC.,

FARMERS UNDERWRITERS

ASSOCIATION, FIRE

UNDERWRITERS ASSOCIATION,

FARMERS INSURANCE

EXCHANGE, FIRE INSURANCE

EXCHANGE, TEXAS FARMERS

INSURANCE COMPANY,

MID-CENTURY INSURANCE

COMPANY OF TEXAS, AND

FARMERS TEXAS COUNTY

MUTUAL INSURANCE COMPANY,

Defendants.

)

)

)

)

)

)

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)

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)

)

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)

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)

)

)

)

)

)

IN THE DISTRICT COURT

TRAVIS COUNTY, TEXAS

261ST JUDICIAL DISTRICT

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

A PORTION OF THE EXHIBITS FROM

THE HEARING ON JOINT MOTION FOR

PRELIMINARY APPROVAL OF SECOND AMENDED

SETTLEMENT AGREEMENT

(STATE/PLAINTIFF'S EXHIBITS 10, 11 AND 12

AND FARMERS DEFENDANTS' 11, 12 AND 18)

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

On the 1st day of July, 2015, the following

proceedings came on to be heard in the above-entitled

and numbered cause before the Honorable Scott H.

Jenkins, Judge presiding, held in Austin, Travis County,

Texas;

Proceedings reported by machine shorthand.
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2

A P P E A R A N C E S

FOR THE PLAINTIFFS, THE STATE OF TEXAS, THE TEXAS

DEPARTMENT OF INSURANCE, AND THE TEXAS COMMISSIONER OF

INSURANCE:

JOSHUA GODBEY

SBOT NO. 24049996

RYAN MINDELL

SBOT NO. 24089707

JENNIFER JACKSON

SBOT NO. 24060004

Assistant Attorney General

OFFICE OF THE ATTORNEY GENERAL

P.O. Box 12548

Austin, Texas 78711-2548

(512) 475-4209

FOR DEFENDANTS FIRE UNDERWRITERS ASSOCIATION, FARMERS

GROUP, INC., FARMERS INSURANCE EXCHANGE, FIRE INSURANCE

EXCHANGE, TEXAS FARMERS INSURANCE COMPANY, MID-CENTURY

INSURANCE COMPANY OF TEXAS, MID-CENTURY INSURANCE

COMPANY, FARMERS TEXAS COUNTY MUTUAL INSURANCE COMPANY,

TRUCK INSURANCE EXCHANGE, AND TRUCK UNDERWRITERS

ASSOCIATION:

M. SCOTT INCERTO

SBOT NO. 10388950

NORTON ROSE FULBRIGHT

98 San Jacinto Boulevard, Suite 1100

Austin, Texas 78701

(512) 474-5201

DARRYL ANDERSON

SBOT NO. 24008694

NORTON ROSE FULBRIGHT

1301 McKinney, Suite 5100

Houston, Texas 77010-3095

(713) 651-5151

MARCY HOGAN GREER

SBOT NO. 08417650

ALEXANDER, DUBOSE, JEFFERSON & TOWNSEND

515 Congress Avenue, Suite 2350

Austin, Texas 78701

(512) 482-9300
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3

A P P E A R A N C E S

(CONTINUED)

FOR INTERVENORS GERALD HOOKS AND LESLY HOOKS:

JOSEPH BLANKS

SBOT NO. 02456770

LAW OFFICE OF JOSEPH C. BLANKS

P.O. Box 999

Doucette, Texas 75942

(409) 837-9707

FOR INTERVENOR MICHAEL J. WOODS:

MICHAEL J. WOODS, PRO SE

8620 N. New Braunfels #522

San Antonio, Texas 78217

(210) 822-1560

FOR INTERVENOR CHARLES O. "CHUCK" GRIGSON:

JOE K. LONGLEY

SBOT NO. 12542000

LAW OFFICE OF JOE K. LONGLEY

1609 Shoal Creek Boulevard, Suite 100

Austin, Texas 78701

(512) 477-4444

PHILIP K. MAXWELL

SBOT NO. 13254000

LAW OFFICE OF PHILIP K. MAXWELL

1609 Shoal Creek Boulevard, Suite 100

Austin, Texas 78701

(512) 947-5434
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4

VOLUME 1

EXHIBIT INDEX

STATE/PLAINTIFF'S

NO. DESCRIPTION OFFERED ADMITTED VOL.

10 Jurat; Assets; 31 32 1

Liabilities, Surplus and

Other Funds; and Statement

of Income pages from the

2014 Annual Statement of

Fire Insurance Exchange

filed with the Texas

Department of Insurance

11 Jurat; Assets; 31 32 1

Liabilities, Surplus and

Other Funds; and Statement

of Income pages from the

2014 Annual Statement of

Farmers Insurance Exchange

filed with the Texas

Department of Insurance

12 Jurat; Assets; 31 32 1

Liabilities, Surplus and

Other Funds; and Statement

of Income pages from the

2014 Annual Statement of

Truck Insurance Exchange

filed with the Texas

Department of Insurance
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5

VOLUME 1 - CONTINUED

EXHIBIT INDEX - CONTINUED

FARMERS DEFENDANTS'

NO. DESCRIPTION OFFERED ADMITTED VOL.

11 Declaration of R. Myhan, 30 31 1

May 29, 2015 (Exhibit to

Farmers' Reply in Support

of Joint Motion for

Preliminary Approval)

12 TDI Reports on Surplus 30 31 1

of Farmers Exchanges

(Exhibit to Farmers' Reply

in Support of Joint Motion

for Preliminary Approval)

18 Declaration of Samuel 30 31 1

Issacaroff (Exhibit to

Farmers' Reply in Support

of Joint Motion for

Preliminary Approval)
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2

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7

8

9

10

11

12

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6

STATE OF TEXAS )

COUNTY OF TRAVIS )

I, Chavela V. Crain, Official Court Reporter in and

for the 53rd District Court of Travis County, State of

Texas, do hereby certify that the following exhibits

constitute true and complete duplicates of the original

exhibits, excluding physical evidence, offered into

evidence during the Hearing on Joint Motion for

Preliminary Approval of Second Amended Settlement

Agreement in the above-entitled and numbered cause as

set out herein before the Honorable Scott Jenkins, Judge

of the 53rd District Court of Travis County, State of

Texas, occurring on July 1 and 2, 2015.

WITNESS MY OFFICIAL HAND on this the 16th day of

July, 2015.

/s/ Chavela V. Crain

Chavela V. Crain

Texas CSR 3064, RMR, CRR

Expiration Date: 12/31/2015

Official Court Reporter

53rd District Court

Travis County, Texas

P.O. Box 1748

Austin, Texas 78767

(512) 854-9322
State/Plaintiff's Exhibit 10 
Texas Department of Insurance 

Financial Regulation Division- Financial Analysis Section, Mail Code 303·1A 

333 Guadalupe • P. 0. Box 149104, Austin, Texas 78714·9104 

512-676·6885 telephone • 512490-1008 fax • www.tdl.texas.gov 

STATE OF TEXAS § 

§ 

COUNTY OF TRAVIS § 

The Commissioner of Insurance, as the chief administrative and executive officer and 

custodian of records of the Texas Department of Insurance has delegated to the 

undersigned the authority to certify the authenticity of documents filed with or 

maintained by or within the custodial authority of the Financial Analysis Section of the 

Texas Department of Insurance. 

Therefore, I hereby certify that the attached document is a true and correct copy of the 

document described below. I further certify that the document described below is filed 

with or maintained by or within the custodial authority of the Financial Analysis Section 

of the Texas Department of Insurance. 

The certified document consists of a complete copy of pages 1 , 2, 3, and 4 of the 

Annual Statement, filed by FIRE INSURANCE EXCHANGE, as of December 31, 2014. 

IN TESTIMONY WHEREOF, witness my hand and seal of office at Austin, Texas, this 

24th day of June, 2015. 

DAVID C. MATTAX 

COMMISSIONER OF INSURANCE 

BY· .AMYGARA *~ 'cr---

ASSISTANT CHIEF ANALYST 

FINANCIAL ANALYSIS 
. "": ~ . . . ·.·• 

~--~~~~--1~1~1.1:~~~~-2~·----~~~-

.~IJIOfJ.~Oillct ·4&80Wil!hlia'~ ·.(Sii'Cel:arid.~ ... 

-C~«~SII!a,~and~.C«fe)'. 

-~J: ·--··-.. ........ p;Q.Box¥02 

(Aiea_ ~t) (T~pliDjlo N~) 

Weodland HillS •. CA: US :91'365 

(amtMIL~~P.Q.!!~ 

p~~~q~~!,tt~ 

- . .. ~li!jei!irCA<US'!KJ0.1(t 

~i···· · · ~a.Cclcla~ ITGIOPfiori4 ~., · :~.-

ofFICERS 

.. .. . .. totch~ .. . GdN!!na!l!: . 

a. II INS an origlnai tiling? ...................... . Yes( X J Nol } b. nno. FebR.UII)', 2015 1. ~' ~ .. amendment n:.nnbet.-. _ 

Keith Et.ldns. tlil)':e I1IOYeml:el1. 2D17 

·o:rcor 01 A~F;~c;t ••eo:lrd 01 Govo!T'Or& 

:;, Oallt111od ........ . 

3. IIIU!Ill)er 01 pago& allachlld . 

A IICCa'Y ~.lblic: or O'JIII' olfocor "'"pletllg lr.is cenif.caw ~ .. ,on; a. lder:l·:'f Ill :1W ~ IOhO I'QMC lhe CICQmer.: to 10"*1\ ri't 

c:enlfQ~~t I allac:h«, -.d t"C:I h ~'\l:hU-va. liOCOo.lr8C1, C< ~ 

ollloaiOOOIIllllfll 

by. 

(1) AofhGn'l Jj!F!!ft!i Qt!Sunli!! Pf.a~tc.tUCtproved to me 0'1 tile beSI$ ol sa!islactory evidence to be 

the person wno appearad befc:11 me, 

a1111 

(2J _ __.o~Pf!!;io .• ~....:}~.,ua~s:;_~e.L!:I'foo~r ___ _ 

pioved lO ~r.e on lho basis of ntisfDC'Uiry eo~idence to be 

e\0 person Who appoated befot'o me. 

al1d 

(3) Ron;)'d Gf!lQQf)' Myt!i)n ... -.cts.,-

provect tc me en the basis of subslocwry evidence :o be 

lllo perscn "Ai!O appeared Dofo-e mo 

j. 
ANNUAL.STATEMENT FOR THE YEAR 2014 OF THE f'IRE INSURANCE EXCHANGE 

ASSETS 

·1~ ~~:o, ..... -------,-,..,.----,--~--S~)Z..· 21i11,688t-...--..,...... .__...,.._...Jm!OIJ'., .~;a;......,....,....,...~-iM..,",'jij;,'M2 

~ :;=:i:= 

:22~:~-~.------~~~----~~--~--l~--~--~r----------r--------~r-~----~ 

"'--:---''---~----__..;..;---._:__~1----1.o12,ss1.639 t----''-----....;..-I-.__ ..... ~;CJJ2~1;B:If -..;.;_~_,ou;~.* 

3_:. ~rz.uarvai·~~B):. 

i2.~:~-...~:·· .. 4.. Real estate (SchecUe A): 

4.1 PRiperlles OCCI.IPed by thG company (laaa $ 

enc:umlnnces) ________________ + __ __,:tM,432 1----------t-__ _....3K .... ,432 

4.2 Pnlpelfas held fer u. prodUcdon of b:lomo (less 

s oncumbranccs) -------·t------1-------t------t-----

4..3 Plqxw1fes held fer saJe (1esa $ 

encumllrallces) ________________ -I----~11.31S t------ t-----~lJ1.,31S t-----115,141 

5. Cash($ __ ..s.225~,(1Jl,fi!IS ,ScheckdoE·P81t 1).cashequlvalents 

($ , Schodulo E- Past 2) and shi:IIMarm 

lrnleGner1Ss ($ __ _...13.714,188 , Sc:heclllo DA) ----lt----"7.1t-,811,874 1------ t----"~-.811,874 J---....11Riluo,,058,.!11) 

e. Connc:aJoans(lnc:lullngS pWu~nno;es>-+------ r------t------t------

7. DerlvaiMs(Sc:heduleDB)------------1-----r-·------1----------1-----

8. aherlnvestodassaiS(SdlociloBA) ____________ -1-------t------1-------1------ 9. Rac:ciMIIiafarleCUitllcD ______________ ...... _______ I------t--------1------

10. Soculllos lerdngl'8irMisUidc:ollaterlll assecs (Sc:hcDJio 01.) ____ 1-------t------1---......;_---- a----·5.2t1,3D 

1t. Aggragslowrllo.fnsfarlnwiAidassds---------t----- r------t------1------

12. &lbtGials. Clllh and lnvo$ted assets (Unes 1 to 11)------+--1.754.045,!M9 1--------1.7&4,045,949 _1,849,&17,192 

13. 11&la plants loa. dmlgecl oft (lor TIUo Insurers 

only) -----------------·------1-·-----t------1------ 14. hlesfrnanllncomacbt andaccrued----------f---3,079,000 1------t----·3.019,010 r---3.517,187 

15. Pnlmi&lns and COII:slduiaJiuiias: 

15.1 Uncolloded pramfuma and aganiS' balances In tho course of ................ ~ '1-___ 28,008,559 1----..J §,519,-429 ",519,131 1----.. 17,,814,755 

15.2 Deferred pombDs, agonls' balances and lnslalmenls booked bul 

deferred and notyi!C cbt (lndudlng$ ___ 1,448,068 

eemedWW~b~Jodpaniums) _________ I----'"Ml""'•093•500 1----------2f1.093,58» J---....i"Al~,444,CIJ5 

15.3 Accrulld ~premiums 1111,951 180,951 119,331 

18. Ralnsunlnca: 

18.1 AmcultsrectMiW8bl& from relnsul'als ---------,l----181,932,·t14 1------- ___ 187,932,474 t----184,413,599 

18.2Fundalleldbyrxdaposlledwl!hralnsulad companlos----11-----1-------t------l------ 16.30dleraro:uDnalvablaunderrafns&nncecanrracla ___ -t-----t-------t------1------

17. Amountsl'el:8lvatllorela!fngl0unlnsuredplans _______ i--·---r------1------1------

18.1 CUmlnlrederalandlon!lgnlncometaxi8CC'IIInlbleandlnterasllhereon __ 6,802,247 1-------t----·8,802,247 ._ __ ... :V.,158,918 

18.2 Nelc1Gterred111x111$81 :M,s:B ------ 8,53& 17,351.910 

19. Guatanlyflnb racalvablo OTCift depOIIl 108,214 106,214 1-----

20. Elecrrcri:dalapocesslnQ ecppmcntand software-·-----1-----1------- --·----1------ 21. FumfturD and Gqll!pmenl, lnc:lud!ng hoallh cate delivery assets 

1.1 ) -----·----·--1------1------t------1------- 22. Hal adjuslmelllln assols and l!ablltlosduo to lorelgn exdlange rates ____ ------·-1----·--1------1--·---

23. Rocclwblostromparent.IAJbGidlarlosandaftlla:Ze$ --29,424.648 t----- ___29,424,648 t--_ _.m, ... 656,882 

at. Health care 1.1 .. ) ando#ler amounts receivable- • --------· ------1------ 25. Aggregate write-Ina lor olher than lnvosled assets-----·---·--··- __ ... 20.l!02.507 ··-··------ _ ____20,l!02,507 ___ 15,716,210 

26. Tolal assets CD:duclng Sepatafo Accounta. Segregated AccoCin1s and Protected Cell Accaunls (lJnes 12 to 25) --------......... ~ __ .J.,'1JJ7 ,265,671 _____ 5,519,429 _..2,281,746,242 __ 2,254.162,187 

a. Fmn Sopatate Accc~unU. Segregated Accoutlt8 and Protected cea AcccuU------·----------·--·-- --·---,_ .. ____ ------1------- 28. Total IUnes 26 and 27l 2 287,265 671 5519429 2 281 746.242 2.254 762 187 

1101. 

1102. 

1103. 

DETAILS OF WJUrE.INS 

-------·-----·--·-·-··-···------·· .. --. ··--------·-- ·-·--····-· .. ··--··--·· .... _____ . ____ .. ____ _ ------·-----··--·-··---·-.. --·-·-··-····-·-····-· ··--·-.. ----· -···---··-···----·· ·--.. --------·-- ----------·· .. ---·-·--··········-············-··--·· ~-................. _ .. ____ ·····-··---.. ·------··· ··--·--··----_____ .. __ 1198. Summary of remolnlng wrllo-ins for Une 11 from overflow page .. ·---.. -· ··--· .. ··-··-········ -······--····-····---· ·····--··-·--- -----·--· 

U99. Tocals (IJnes 1101 thrU 1103 dus 1198)(Une 11 above) 

2501. f~Jiilies an3 ckposils in pool& and IS&OCialicns ............................. _ .•.... ··-···-·-.. 20.202.507 ·--·-··--··----·· ____ 20,202,507 ,_ ____ 15,716,2111 

2502. 

2503. 

2598. Summary of remaining writo-ins for Une 251rom awrftow page .. -·-·--···· -··-·····-·-····-····- •.. ····-·---·----·- ··-···----1-·-·-----· 2599. TOials (llnes2501 thru 2503 plus2S98){Une 25 aboVe) 20,202,507 20,l!02,507 15,776.210 

2 
ANNUAL STATEMENT. FOR THE YEAR 2014 OF THt. FIRE INSURANCE EXCHANGE 

.·LiABILITIES, ·suRPLUS,ANo- OTHER ·FuN·os 

. 

. 

2; 

·~-.r~.,.~ra!t·~~~~~.!l.:· .. ~-~$*1pa.tcl.~~)!a~~~F.P.~1.;Column6),_ .. · ·. · · · · · --------r-.,_...·_.·: .....::.;: ' ..··_·:.~::l:_._· 3! ~~-~~~~~~~~-~&f-····· :. . . " .... ···. 150!313;915· ~153.7~~-.m 

4.. . ~-~-~~andolherslmllard*go.s.,..._ ':"'""'".-~..,.,..-~~~~...,.-~~--.-.-:---~ 1----.------. 

~ . C~tWUpens8s c~ t8Xcis;~8ridtoea)-'-"-..;.;..;;_.;.;.;-...-...-:...--:.--~----;_..--t..-~-'---1,03);n&~ . ·w,392 

8,\: ...-~~~c~i.balancikQ!gnlncancttiDea, 4.1M1;isil.._ __ --.. 4~~281· 

·7:t. ~fadii~-~~~-~~s· · ..-. :. . - .... onrea!bodcapilalgalns (IQsaes})-.....,...1--,...,__..,.._,..,. .,...,.,..,.-:""'~~-

. 1~. :Ne#~~Ja:~·.:;;:,···;.;,.;· ·:.;;.··...;.·;_- . ...;.·-~·· .;:.;.~·~·-~·...:· ·.=...· ~.!..;__:..::.:....:....;.._.;..:..;.....:..:....;..:__;...~~__.;.~..;_..;.;_~.;.;.--.;.;.;.;._;;.:..;__ 

8. 8cnDwed money$ and lnlDrasllheruori$ -----

9. Uneamed prenlbM CPwt 1A. Una 38. Cobnn 5) Culler deducllng unearned JX8IIIkJms klf ceded roJnsurance of 

s ___2,515,382,563 and JncJudk1g warranty I8SeMIS of$ and acccued accident and 

hoallh expodenco ralllll rebldslncludrng S far medlca.lloD rD11o ~ porlho Public Hoallh 

Servlc&AcO--------------------------t----=~.784.451 1--449,7119,719 

10. Advllnco pernlum 1R,473,200 -11,004,278 

11. DMdends doctanld and lq)Q1d: 

11.1Stockholdeni-------------------------+------1------

11.2Palqtloldela ___________________________ , ___ __.231,743 ZD,743 

12. Codod relnsunlnce premUns pa)l8blct (net d coding commissions) ~.833,3n 1----'1-:10l,768,5M 

13. FundshDklbyccmpanyunderranurancofntalles (SchedtD F, PaltS, Column 19) 154,005 1,415,002 

14. AmounZa 'dhhold or retained by company ror accxxn or Cllllare _8,755 

·~ ~and~~~---------------------------------lr----------~-------- 18. Provlslan tarrelnswance(lncblrv$ C8I1IJiod) ~ F, Part 8) ---------1--------"~~;QQ<:A,791 1--__.,",718,754 

17. Nea adjustman1s In assets and llablllllesdueto fonJlgn axchangD rates _______ ------4i------t--------

18. ~~-----------------------------------------------+---------~-------- 19. Payablotoparent,subsktlalloaandallillaUis _____________ ----------·-+----- ~-------

2D. ~-----------------------------------------------~~--------~------- 21. Payablotorsoc:urlltos---------·-----------------··--1--~~.393.347.__ ____ _ 22. Payabeebsoadleslendlng __________________________ -+------1---.il"' . .211,300 

2L ~=~~wdw~~---------------------------------·1----------~--------- 24. C.apltalnolol s and lnlenl:sl1henl0n s ----- ~ ~~tar~----------------------------------------~--~~~M~3&~3$~~·~----~7~~349~ 

a Tolllllabllllaexdudlngpratac:ted callllatllllltos (Unos 11hraugh 25}--------------------1---1,5m,&96,042 1--1,533,507,991 • 

28. 8. Tocallablllloa(Lbos28and21) ~~·~-------------------------------------------1---------~--------~ _______________________ . __ -JI--•·s10,&96,012 1-1,533,507,991 

29. ~wri!e-lnslcr speclalaurplua funds-------------------· ·-----·--=---1--------

aa 31. ~~~-----------------------------------------------~---------l---------- Prelenudcapllaletoc:k ___________________________ l--------J-------- 32. Aggnlgalawrile-lns tar oltwlhanlplldal SVIplus funds _________________ _,_ ______ J-------- 33. Surpluanokla---------------------------------·- ___ 100,622,050 ____ 159,622,050 

~. ss. ~~~ud~~--------------------------------------1·----------·--------- Unassigned funds (GUip!us) _____________ , -----------·- _ _610,428,150 1-----"AAtiUI,632,139 

38. Less lreauyltodc, at cost 

38.1 sharos common (value Included In Line 30$ --------- ) -----------

38.2 lharesJQlenud (value n:tudedln Line 31 $ >-----11------1-------- 37. Surplus as rogants~ (Unes291o 3S,Iess 36) (Page 4, Une39) -·----------···--·1---_.:.:Tl:.:..l ::::050~200~ __ .::72:.!11 ::::254~189~ 

38. TOTALS CPana 2. Uno 28, Ccl3) 2,281.746 242 2,254 762,187 

2501. 

2502.. 

2503. 

2598. 

'_2599~ 

2901. 

2902. 

2903. 

DETAILS OF WRITE-INS 

Claia:s paymtls aadD af1er dlla-pracessing close_ •98.403,048) ___(101,943,419) 

thcalhcd drafls and chec:lcs pending cscheaiiiiCnl -·----------~·-···-·-·-· .. ---·---··- ______ 51,568.507. ___ 52.390,190 

Acccmts payable .__32.748,5112 ____ ro,:li0,459 

Summary of remaking wriiCHna ror Uno 25 rrom overflow page--·--·····---···------·-·---····--···---······ ... ·--·---···(201,396) ___ .,.43,043,881) 

T«"als RJnes 25011tw 2503 Dlus 2598ltuna 25 Bllcvel I M 289 356) 1 763 349 

·-.. ·-··----·-····----····-·--.... ···---·-·· .. -········-··--·-···· .. ·--·--···-- ----· .. ·-····-······-- ·-·--·----- ··-------··--·--·--·--·-------·- -··----·-------

2998. Summ81Yol remaining wrfto.lns lor Uno29 from overftow page--------.. --·--·------·-·-- -·--···------- ------ 2999. Totals runes 2901 IJIIU 2903 Dlus 2998lltlne 29 abovel 

3201. -------------·-------····-·-··-··-·-···------·--·-······----····-·-·--·-·-· ---·-········---- 1----------1 

3202. ---------------·-·-··-.. -····-----·-·-·····-·····-···-··---........................... -........................... _ ...................... - ............ ·······--·-·-·······-·· .. . 

3203. -·--·------------------·-······"·-···---·--·--·····-·---.. -·--··----··-····- -··----······-·------ ---------

3298. Summary ol remaining wrlfo.lns fat Une 32 from overftow page···------·--··-....................................... -·--·············· .. ·-·---- .................................. _ ..... ·-···-·-·····-·-·-···· 

3299. TOials rUnes 3201111ru 3203 dus 3298}(Une 32 abovel 

3 
ANNUAL STATEMENT FOR THE YEAR 2014 OF THE ARE INSURANCE EXCHANGE 

STATEMENT OF INCOME 

UNDERWRmNG rHCOUE 

1.. ~eamod(Part1, Unit35. CcbM 4l.__.._'-----------------"-----'-"--+-.;...;.J· t,018,&97,5118 f..o--1.029,332,282. 

DEDUCTIONS: 

.2o LOsses JnC:urred (Palt'2, Lfne 35. Cdtmn 7)--..· _ _....__.;....;...;~--'~-.;..____.;'-'---'--....;.;;..~~...-....J-..__~grrDI,73:J,6l& 1;17,181,-MS 

3. taa~8ilpiii'IS8Sincurrild(Past3.Lht25.CCb'M 1} . 102,432,128 ~1,284,96t 

4. OChw~~·lncUrrad(Pwt3.Une25,Cdumn2) ~--143 ·'li<I:~SI;OM 

·s.· ~~b~dcKlli:dons 1518115) . 

a.·. ToeDI~~{on.21twaugh5) . 1 ~ rs:m · 1 oa 7111.61 

~ ::::::~~~==)~.-~-·~·-,-mna~.---u.~e~~~Une~~~~--~-~-~-------~---~---~-~-------------~-------~-~---~~-------~----~~~----- ,, . 'm.m.185)~,..448;m) 

IHVESliiEHT INCOME 

9. Net lnvestmantlncome eamod (&hlbft ol Nat Investment Income, Uno 17) ___________ + ___ 4,8]8,218 I-8,2Zi,IJ18 

10. Net realzed capital gains or (las&es) less~ gains tax o1 $ 50,187 (Exhlbll of Cap!!al 

~~)) ____________________________________ -{ ___ _11~~~~-~·3G~----_!9~~~W7~ 

11. NetlrMis:lmllcl1galn(loa)(Unes9 + 10l--------------------+----=»",ffii,$1a--__ _.171 ,511,CS! 

OTHER INCOME 

12. Net gain (loss) flam agent1' or premium balances charged oft {amount recovarud 

$ 619,785 ~chargedoft$ 8,299,157 >----------4----l n4,619,3l2)·~--·"n,8!15,232) 

13. Finance and 60Mco c:hargcs nollncludeclln premiums 18,818,320 17,195,1fi8 

14. Aggragale wriiD-Ins for mbcallaneous Income 7. 1:B,9111 1,193,(61 

15. Toralalta'Jncome(Unes 121hnlugh 14) 18,015 929 11.093 !m 

18. Natlnconlo bBfcn dMdoncls 1D poac,tloldcn, after capllal gains tax and bu1ole ol olher loclcmd and foralgn Income taxes 

(I.Ns8+11+16) 3,192,311 U,19:J,413 

17. DMdlndsfDpalqtlddera . 43 140 7l.1115 

18. Net lnccmo. allot dlvldencii1D pollc:yhoCders. eliot capllal gains tax and beforo all olhor todenll and IDnllgn lnc:omG taxes (LN18mhlali1e17) ________________________ .. ___ 3,749,1711---M,12D,168 

19. Federal an:llarelgn Income fBXDs lnlunld 13.018 2131 1 410 841 

20. Nellncomct (line 18mlnua LinD 19)(1D Une22) _________ , ___________ 1---..!!8~7fri:!!!'J!! ,·444~1-----!12~109!!!J:9'li!!!....J 

CAPITAL AND SURPLUS ACCOUNT 

21. SUrpeua as regards~ Decamber 31 prior year (Page 4, LbJ 39, CoUnn 2) 1?1,254,189 1---...IOFRI....,,218,256 

22. Nellncome (fnlm Une 20) -------------·--------___ 8,187,444 1?,JIS,927 

Zl. Netln1nrlfenl(1o)from ProtecmdCelacc:ouniBi __________________ +-----J----- 24. Oalge In net unrea!tzed capllal oalns or (lcmes) less c:apllal galna &al( of S ___ 12 ,971,161 ------1---...!.!42,631,854 ~--;;;JOI\R,132,331 

25. Changelnneturnallzedtaralgnexchangoc:aPial galn(loss) _________________ --1----- ~----

28. Qlangefnnetdalemldh:omolalC '4.021,272) 1,9:9,562 

'ZI. am.., fn nonadmllted asseiS (Elchlbll of Nonadmitted Assets, Line 28, CoL 3) ----------f--~".CITl,fiJ7 {152,111) 

28. OlanQe In~ for relnaurance (Page 3. Line 16, Column 2 minus Column 1) 3,118,963 i-----f2,128,131) 

29. Oa1go In SUIJIIus I1CICBa 1,1m,OOJ __J13,7m,CXX!) 

30. SurJilus (CXillblluf8diD)wllhdtawn fiOm prul8ded calla __________________ -1------1------

31. CWnulallv8effoclolchangosln~plndples--------·------·---~----- ~----

32. C3flbl changes: 

32.1Pmdln--------------------·----------·------------f--------~----- 32-2Transfemldfromsurptus(Stock DIYidand) ___________________ -1------ ~-----

~T~ID~------------------------------------1---------~----- 33. Surplus edJuslmenta: 

33.2TransbrodiDQIIllllll 33.1~fn-------------------------------·-------I·----------~------ (S1rlek0Mdend) __________________________ ._ _____ ~----

33.3Transfemldfrcmcapltal ______________________________ ,_ .•• ________ --------·-----

34. NelremiUanca fromor(fD)HomeOillce---·----------·---------- t------ ~----

35. DivldendsloiiOC:Icholdcn------·-----·····------·--------·---· ·-----~-·---

S6. Change In 1reasury IIDCk (Paue 3, Unea S6.1 and 36.2, Column 2 minus Column 1) ---·-------------·---------1--·----- :rr. Aggrugalewrite-lns for gains and losses in surplus ______________________ .J_. _ ___J(!,!2.=!842~4&'5!2ij __ ~2~842~'8~ 

38. Chango In surplus as regards polcyholders for lhD ~(tines 2211nclgh 37) -···---······---·---·-··-··-·-J.--_.;::49:.:.::,796=0:.::10~---=59::..r.03S==!m=-l 

S9. SurJ11ua as regards J)CIIic:)tiDida December 31 current~ (Une 21 plus Uno 38) (Page 3, Uno 37) 711,19,200 7l1,254, 189 

DETAD.S OF WRfTE.UIS 

0501. Pooled sfalo ot I.R) progrm IIICOIIC --·--·--····-------···---···-···-·······-~-··-··-··-·--··-·-·-··--·--··-··- ___ (518, 115) 1---·--- 0502. ------------------·---·-·· .. ---·-·-----··-·········------ ------4 ------1 0503. -----------------···-······--···---------·-----·----·-···-··-------·-···- ----·-------·---- 0598. Summary of remaining wrlle-lns for Une Slrom overlloW page--······· .. ···-·--.......................... --··--·--·---····· .. ·--·-····· ---------· -· .. ····---

0599. Totals (lines OS011tlru 0503 dus 0598XUne 5 abow) (518 115} 

1401. lliscellancaus inca10 -----··--·-······--···· .. ---················-·-·······-···-: ........... -····--······-····-··-··-···---- -·-----·-·7. 135,9111 1--····· .. -1,193.056 

1402. 

1403. ·-·----------·----·····--···-··· ...... ------·············---··-··-·--··-··-·"·---··· .. ·--···-· .. ··-·-----·- ··---·----·-··-1-------- 1498. Surnmary of remaining write-ins lor Une 14frurn overflow page ................................................. - ............... - ............ ··-······· .. ·· ··-····-·······-·····--· ... -... --··----···--· 

1499. Tolals (lines 1401 lhlu 1403 J)lus 1498)(Uno 14 above) 7, t35 !liD 1,193,056 

3701. Pooled share of ~~~authorized reinsurance ......... ·-····-.. ··--·-········ ......................................................... - ......... ------.. ··· ·-·-·-·--(2.842,4&'5) ···--·-......2,842,'8 

3702. 

3703. ------··----··-·-··· .. ··--· .. --············ .. ····---............................................. _ .._ ....................................... ········--···----·· .. -·--·------·-·-·-

~ 3798. 

3799. 

Summary Dl remaining "Wflle.ins for Line :r71rom overftow page .............................................. - ............................... - ............. _ ............. ·--··-- -·-·······--·---·--

Totals rUnes 3701 fhru 3703 o1us 3798l1Une :r7 abovel (2 842 485) 2,842 9S1 

4 
State /Plaintiffs Exhibit 11 
~ 

~ 

Texas Department of Insurance 

Financial Regulation Division • Financial Analysis Section, Mail Code 303-1 A 

333 Guadalupe • P. 0. Box 149104, Austin, Texas 78714-9104 

512-676-6885 telephone • 512-490-1008 fax • www.tdi.texas.gov 

STATE OF TEXAS § 

§ 

COUNTY OF TRAVIS § 

The Commissioner of Insurance, as the chief administrative and executive officer and 

custodian of records of the Texas Department of Insurance has delegated to the 

undersigned the authority to certify the authenticity of documents filed with or 

maintained by or within the custodial authority of the Financial Analysis Section of the 

Texas Department of Insurance. 

Therefore, I hereby certify that the attached document is a true and correct copy of the 

document described below. I further certify that the document described below is filed 

with or maintained by or within the custodial authority of the Financial Analysis Section 

of the Texas Department of Insurance. 

The certified document consists of a complete copy of pages 1, 2, 3, and 4 of the 

Annual Statement, filed by FARMERS INSURANCE EXCHANGE, as of December 31, 

2014. 

IN TESTIMONY WHEREOF, witness my hand and seal of office at Austin, Texas, this 

24th day of June, 2015. 

DAVID C. MATTAX 

COMMISSIONER OF INSURANCE 

BY:~~ AMYGARCI 

~~ ASSISTANT CHIEF ANALYST 

FINANCIAL ANALYSIS 
PR9PERTY AND CASUALT'( CO~P.AtJIES·· ASSOCI,I\T[ON EDI110~ 

AN.NUAL STATEMENT 

FOR THE VEAA"ENDE[) DECEMBE~:S1. 2014 

OF ntE CO~IDmON ~D AFFI\IRS OF THE 

FARMERS INSURAN.CE EXCH.ANGE, FARMERS GROUP INC., DBA: 

FARMERS: UNDE.RWRITERS· ASSOCIATION, ATTORNEY-IN-FACT 

NAicGflr..,OodL\ . Ooo9 _qgg:_ NAIC:(;~COdt ..m2L Emp!OyWsiDNurrilier GS-2575893 

~~ (Priol) 

Organlud.Uildcu lho I..Awt « Callbnla State of Doltlicilo or PDit Of Enlry Callrctria. 

Co!mtrvofllOmldio Uliiid Slatei or Amedca 

lt!eOrporaiedfOtgmllzQd _____ __..:0312811==jj:l:::B:.._ ____ _ Comm!IIICedBualness ______ 0410611=::::::..:.:928=-------

S1af&r.ary Heme Ofllca '46!!9'Wilslilnt BGufova.iij Los An!Jilei I CA. us 90010 

(StrQot and Nu~be!), (City or Towm, Slalu, COUnllyand Zip Coda) 

Los'Ansel!s. CA. ys 900to 

'(CIIyorTavm. s~. C:O\If'IIIY.8nd.Z.PC'ode) 

P.O. Bole 4402 

(Area CodoJ,{Telepliono Number) 

woodianct HlDs • CA, us st3~ 

(strailfarid NUmbGf' or P .0.. BGx) 

Prlm&IV~ of E!Oaka and Reeordl 

(CitY. ~·Town, smra. C:Outmi and2lp Coda) (Area Coda~ (Tolcphono Nunibllt} 

lnramat Wet!Sifo Address 

(FAXNumbol) 

OFFICERS 

PrealttoCJt;ceo ____ __..:Jetlt!!r=::.u;Jom::.z:.:=::Dal!!y=--·-----

~ry~~-----=~~n~E~WAA~o~~~N~-----

Sl!@i Rtr!Smil!l ••. 

Q1H:EIJ 

Sooa RotietU.Indqu!st= CFO TI8&Wnll 

DIRECTORS OR lHUSTEES Alan Roy Gltincri_..o ., Dalo Anne MM!n -

Donn!!!l Reid " CJ:IIoJoe!Wallace••. 

Sllltocif 

Caunlyof 

Cilfllorilia' ----~lcs~Anqe::==, .. =------:ss: 

President. CEO 

SU~cribed and sworn to before me this 

Doron Eug$\1 Hohl 

So=rllal)' 

a. rs :his an original l!~ng?. _ ............... . 

b. 11110, 

131b ~-

Kolltt Eaki~Public 

February, 2015 . t, S1alo tho amerdmonl numbot ........ 

November 1, 2017 

'OIIic:er ot Allomct)'-ln-F~w. ••Board ot Gavemors 

by, 

~~·· ·eo· 

• 

KEITH EAKINS . Commission 112044162 I ~ . NotarY Public • California I 

los Angeles CCWI11 :!: J i o , o ,MJ co~m. EXf':• Nov t. 2~ttl 

2. Oalo li'cd ............................... .. 

3. N\lfllber of paQe, attactaL. 

(1) ,Jeirmv Jolin Qnfr.r "-"'IVW 

PfOYBd to mB on tllB bBSis of sotislactory evidence 10 bo 

lho person who oppoered before me, 

and 

C2} Qpmn Euggno Holll 

-d~ 

prolted to mo on l.'lo bosis of sallsfactory evldenco w bo 

tho person who appoarod beloro mo. 

and 

proved to moon tile basis ol satis10d0ry evldenoo to be 

lhe peDon who appeun~d bef«o rno. 

Jclm Ts!JeQiao Wuo ·~ 
~ ' 

ANNUAL STATEMENT FOR THE YEAR 2014 OF THE FARMERS INSURANCE EXCHANGE 

ASSETS 

1. Bonds (SchecUe D) _____ ....,-________ ---5,724,078,561 t------- ___s,J24,078.,$1 __.,_5,857,4St,10B 

2. Sioc:ks (Schedulo D): 

2.1 Preterredstoc:ka..___ __ --' _________ +------t------t------t-----

2.2 Commonstoc:ka __ ~-----------+---"·953,346,148 f----4!953,348, M8 r---4.8,147,747 

3. Mmgage loans on real atazo (Sc:hackde B): 

3.1 flrsUens--,-------------·--1-----t-------._ _____ t------,___,. 

3201hertlm,tlnitllens'-----,----------+-···--- t-------~ t------t--..,--.....,...-

"· Real eAite ~A): 4.1 Properties OCCIIpled by tho company (less$ 

enc:umbrances) -------·--------·-- ____ .. .Ji3,4m,211 -·-··----- ___ _..fi3,481,211 ___ 64,961,329 

42 Prqlerlles held for tho producllon of Income (less 

$ ~>-------t-------- t--------t--------r--------

".3 Properlles held tor sale (les8 $ ------

encumbrances) _____________ .. _____ 162,253 t--------t----162.253 t------_.ll..,tl,,3110 

5. Cash($ __(184,8911,847), Sc:hoGJie E • Patt 1), cash oquWalenta 

($ , Schedulo E • Part 2) and shorHerm 

lrlveSnera ($ _.114,181,4&0 , ScllociJio DA) (10,537 ,387)t--------t----1nn,,u,537 ,381) f----,{262.543,3:11) 

6. Corlactloans(lncludlng$ pamlumnolea).---·----t------f-·-----t------

7. Derfvallves(Sd1ecluleDB)-----------+------t------t------t-----'38...,.,,245 

a. OthorlnvestDd 8laata ~ BA) ~.cm.ffil t------ t---.J.~ON,093,ffi1 t--..10~-:.s,125 

9. Recelvableforsocurllles ·- t---........ 143,821,815 _,. _______ -~.821,875 r---1,900,048 

10. Securltios lancing reiiMisled c:o11atera1 assecs (Schedule 01.) ____ ·--·--- r--48,649,018 

11. Aggragalo wrb-lns lor lnwsted aasala t----·--- --· 585, '100 

12. Sublc1als, Clllh and lnveltod aas®s (Unes 1 to 11) . __ 10,944 ,442. 718 __ ,.______ t---.10,944,442, 718 r--10,401,4SI,87S 

13. Tille plants - $ dtatged oft (far Tlllo lnsutars 

~ .. -t--.. -· .. ------.. -----1-------t-------- 14. lnveslmentlnc:amedueandac:auad ... 45,500,823 __ ,. ___ 1,907,738 --~.673.015 '---45,554,837 

15. Premiums and consldela11ons; 

15.1 llnc:laQec:tQd pumtuma and agen1s' balanoea In tho courBG of c:oliDdlorl .~.:m. 113 _38,1114 ,059 l----2<42,313,115 I----J18,954,113 

152 Defemld premiums, agents' balancos and lnstallmenla booked but 

dafarrad and nol,. cbt (Including$ ___ 9,977,1J12 

Gamed butunbilled pumiums) _____ , _____ r--2,658,697 ,015 t----- ~.658,697,015 __2,832,768,906 

15.3Aa:n.ledratrospedlllepamlums ____ 1,248,m7 :-1,248,m7 1,ZJ1,387 

16. Reinsuranclt: 

16.1 Amounls J8CIIMir8ble from ralnsunn --·-----·-·-__ J00,348.745 t---·----- _ __JIXJ,348,745 _ __642,CXI5,215 

162Fundaheld byordeposlredwllhrulnsuteclcompanJes ____ t----- t------r-·-----t------ 16.3 Other amounla I8CeiYalll& under ralnsunlnca conlnlda_ ........ _....... t---·-----t------ 17. .Amountarecelveblo relallng to uninsured plans.. .. .... ------- ___ .. _____ -·----

18.1 eumn fadanll and fonllgn Income eax recoverable and lnlaresllheraon _ r---taS.mz ,562 11fi,m2,5&2 _ __!i64, m. 116 

18.2 Neldofemldtaxassat ____________________ .. :413,845,01!1 ___ ... _57,969,981 :----...'li5,875,005 __ ...311,812,248 

19. Guaranlyfundaracelvallloorondeposlt __ __322,591 -·-·---· r----.322.591 ~1.791 

20. Bac:rronlc data prucesaiv equipment and software 1-· !M8,401 

21. Fumltur& and equipment, lnc:ludng health cant delivery assota 

(S ) - • ----22.805,416 __ __.22,805,416 -----:--·----

22. Nal ~In assets and llablldes duo 10 fonlign exdlange rates ___ .. __ ,._____ -·------

23. Rec:elwiJio$ from parent, GUbsldlalfes and allllltdes _____ 149,926,887 .............. _______ _ ___ ..149,926,887 -------

24. Heallh care($ ) andOihef amounts receivable_ t----· .. ··---- --·---- ------t-------

25.. Aggregate wrila.fns for Olher lhan lnve&ted assets--------............ ·-···-...638.033 ,922 --·--..... 229 ,457.548 ___ a.s76,374 __ , __ ;m,m,CSJ 

Total assets exduding Sepatato Accounta, Segregated Acccunts and Ptoteded CaD Aocoun1s (Lines 12 to 25) -- __ 15,941,531,594 ____350,224.741 __ 15,591,316,853 _15,557 ,125,612 28. 

'0. Fcom Sepatale .Accclunts. Segrega1od Accounls and Prolected Cal Accounts ... _._ .. ____________ ......... ----·-·-·-.............. ·-····· ....... ___ , ........... _ .. _____ .... , .... _ --------

28. Total tUnes 2S and m 15,941.531,594 350,224.741 15,591,316,853 15.557 125.612 

DETAILS OFWJUTE.INS 

1101. Other Invested assets ----------.... ·-----.. - ........ _ ............ _ ........................................... - .... --·----........ _ ...... - ..... _.585,1SJ 

1102. ----------·-------------.. - ,. __ ......................... --.. ·-··-----.. _____ ,._ --------- 1103. 

1198. Summary ol remalnlng wrtle-ins tor Uno 11 1rt1m overflow page ....... ___ .. ..................................... . .. - .......... --......... _ .. _____ ... _ .. ___ ..... - ..... - .......... _. 

1199. Totals 1Unes 1101 ttwu 11031)1us 1198)(Une 11 abcMt) 585 160 

2501. ln:uance-o:apany omed I lie Insurance-ash value .-............................ ____ ;100,591,384 --·-·---·-.. - __ _;100,591,384 I--·-..;161,449,4ZI 

2502. &siness-omed I lie insurancH:aSh value ·-··~-.. ------···--·····- .. _ .......... 11.494,813 _ ............... --.......... - ............. .17,494,673 - ........... _.J6,347,629 

2503. Garanly ftiiCis reco-mable/policyhJider surdarge~ ----......... ----··-·-490,117 ._ ............. __ ......... -·-·-· .... -490,117 ---·---·· .. ·-· 

2598. Summat)' of remaining writo-lns for Uno 251rom OYOO!ow page ___ ...... .._ ....... 229 ,457,548 ·-····oo•o .. 229. 457,548 .......... , _____ ,.,_____ - ............ - ......... __ _ 

2599. TOials(Unes25011tuu25031)1us2588)(Uno25abcMt) 638,033,922 229,457,548 G,576,374 m.197,5 

2 
ANNUAL STATEMENT FOR THE YEAR 2014 OF THE FARMERS INSURANCE EXCHANGE 

LIABILITIES, SURPLUS AND OTHER· FUNDS 

1. t.osaos(Part~~~.~~__,....----,_,....,...,...-.....,.,....,..,.----__,..-------f~~_a..,.,311,193,666 ~U6i,S13,tis1 

2. Refnsutarlc:e payable an paid 1csaes ai1d loss~~ (Schedule F, Palt t, Column 6) lm,!IIK,395 .1Rl,821J,IM8 

3. LGaadlustment~<Pari2A,·t.m35.Coiumn9) · · .:· .~1,043,783,m2 .:...-.-:.1,008;147,431 

... ~payable. COI'IIIngentoommb&lonsandalhar slmlfarchmgos.,.... -----------··-----1--.,....--.,....--.,....-----, 

5. Olber exPenses (eici:ludlng taxes; licenses and t8es) 16,121,595 _13,892,686 

a Taxos.llcansel and fees. (e=ludlng federal and fotaign Income taxao) 'l!i,351,8s2 ~ 13,162, • 

7.1 CUrrent federal ant foreign lncamD taXes (InclUding$ ----- on reallzecl capilal gains (lossos))---J------1------

72 NOtdoiuntld tax llabiity..;.·~_;.;._;_...;:.;.._.;.;.;;._~~......;.~;._;.;..:..._;.;._,_......;._,_'"_..;. ______ .;__ ----- ~_,;......;....;.._; _ _,.,;,;. 

8. Bcrrawed money$ and lniDr8St thereon$ -----

9. Unoamed prvmlum$ (Part 1A. Uno 38, Column 6) (atlor doduc;1lng unoamod premiums lor ceded relnsuranco ol 

$ ____8,008.574, 710 and Including warranty raseMIS of$ and acccued acc:ldont and 

hoallh experience rallng refunds Including $ fer medical loss rallo reba%8 per the Public Healltl 

Selvlce.Act) ____________________ , _____ + __ 3,351,714,702 1-3.103,621,189 

10. Advance premium ",265,1ZJ f----78.550,520 

11. OMdends declared and unpaid: 11.1 Stodcholdefs ________________________ ._ _____ J------

112 Pollcyholdera . __ 1,592,124 1,592,124 

12. Coded RJ!nsur'llnce pranWms payable (net of ceding commissions) --643,1(6,957 ~.637 ,100 

13. Funds held by company under ralnsuranco Walles (Scheclde F, Part 3. Column 19) _1,958,000,711 l____2,444,950,f11/ 

14. Amounm wllhhelcl or ru1a1nec1 by company ror accaunt ot Olhera _ ___2 ,811.749 3,589,936 

15. Aomlllances and l'lem8 nol allccaled 27 ,188,3)1 'ill,749,835 

1e. Provision ror re1nsunu1co (Jncldng s CGI1IIIocl) {Sc:tlcdlle F, Part 8) --------- ___ __!!6,874 _____ st,113 

17. Net adjustments In assail and llabllltlaackJeto rotalgn exchange ra!el------··-------1--·----.._ ____ _ 

18. Dmb~----------------------------------l---------~--------- 19. Payable 10 parent.subsldlarlos and aflillatos_. __________ .. __________ ---·--- _ _61,496,129 

2a ~--------------------------·-------------------------+----------~------ 21. Payablel'oraecurlles-·-------------·-------··--------~-----=M,836,853 ..._ ____ _ 

22. Payable rcr securllies lending __ 48,649,076 

23. Llabllityforamaunlsheldooderunlnsuredplans _________________ ._l-_____ 1------

24. CapltBlnotea$ ----- andln1erest1hefoon$ ----- -------------·-----

~- ~~ror~-----------------------·---------1----~~~m~m5~-----~~1~~~s~M 

28. T0181 Dal:lllftles excluding III'OI8C*ld collllatilllfes (1Jnos tlhnlugh 25>---------.. ------··-1-.11,0,1150,909 r--11,677,404,569 

~- ~cd~----------------------------------------1~--------~--------~ 28.. Totalllabllliea (lms 28 and 27J------------·-·----·---·----t--··11,«S,850,009 r--11.1177,404,519 

29. Aggregale writcHns lar apodal aurplus funds. 45,649,976 f----45,849,978 

3a 31. ~~~-------------------------------------------~--------~------- Prefuntldcepftelatodl _______________________________ ----------· J-------

32. Aggregafowrfle.lns lcrolhet!hanspecial surplus lunds ----------------------+-----1-------

33. Surpluanotes ______________________________ . __________ _2,004,536,999 I-1,845,472,CXlO 

34. Grosspaldlnandc:on!ribuledsurplus __________________________ -·-----I-----

ss. Unasaignodfunds(tuplua) ______________________ , _____ f __ ..2,131,268,969 f-1.!!88,599,127 

38. Leas treasuly stock, Bl cost: 

36.1 shares common (value Included In Uno so S 

36.2 lhlws preferred (value Included In Line 31 $ .. __ ) ----------- --------

:rr. Surplus as regards pallc:)'tlolder (Unes 2910 35,1esa 36) (Page 4, Uno 39) -----------·-·· 4 181,455 944 3 879 721,103 

38. TOTALSIP-2,Lino28.Ccl3) 15,591,DI,853 15,551' 125,672 

DETAILS OF WRJTE.INS 

2501. Claim payants mde after dal~racessing close . ____ (ZT7,707,112)~255,184,491) 

2502. Accanls payable----·---·-·-·---------·---·-.. - ... ··-·----·-···--- ., ____ 184,:m,094 f--·--3)1,251, 113 

2503. lh:ashed cltalls and c:hec:ks pending esdleabralt -------·----.. - __ 44,818,294 f-.-.-33,100,100 

2598. SUtnm81yof remaining wrfte.lns for Uno 25 from CMiftlow pogo ----···----···-·-·- __ 89,729,009 _ ___77,918,192 

2599. Totals fUnes 25011hru 2503 ne 25 above\ 41, tn 885 57,173 514 

2901. haeue cb! to SSHJ MG. tm net delerred tar ·--··--.. ·--__ 45,649,918 ___ 45,649,918 

2902. ···--.................. ____ .. __ .. _________ , ..... ___ ., __ ................... _,_, ............... - .............. _ ....... -...... -.............. - .. _ .. __ , .. ,_ ...... __ ····-··--.. -·-··-·--

2903. ·--·------------·-·- ----·--------·--

2998. Summmy ol remaining wrlte-ms for Line 29 from OYBI'flowpoge -···--··--·---·-·-···--.. ·---· ------··- -------

2999. Totals runes 2901 ttvu 2903 plus 2998)(Une 29 above) 45,649,976 45,649,916 

3201. 

3202. 

3203. 

-----------------------·-----------·-.. ·--·····-·--·- ----·------.. - ·------·-.. ·--.. --..................... _ .... -....... _ .... _. ___ , .. , .. __ ·--··--·· .. ·--.. ·--...... __ , ........... - ........ -. 

·-------------·--··--·--· .. ·-----·-----·----.. ·-· -·-----,_ ___ .. __ 3298. Sunvruuyol remaillng wrlle-lns lor Une32 from CMII'!Iow page--··----------·-·------·-- --·---- ----·- 3299. TOials CLines 3201 lhtU 3203 plus 3298)(Une 32 allow) 

3 
r 

ANNUAL STATEMENT FOR THE YEAR 2014 OF THE FARMERS INSURANCE EXCHANGE 

STATEMENT OF INCOME 

UNDERWRITIHG INCOME 

1. Premluma earned (Pall1, Line 35, Column 4·'--------------·-----+--..J7,Q29,CIIS,663 ~.102.421,194 

DEDUC110HS: 

2. l.ossaslnc:urrad(Part2.Lino35.Cclumn7) ______________ , _______ ,__a,918,93B,312 ___ 4,049,141,132 

3. Loss adJustmenl11lCp8118881ncured (P8113, Line 25; Column 1) 1M,464,165 fDl,131,&19 

... Olhet undelwriUna 8'1p1111S81lncumld (Part 3, Une 25, Column 2) ') .533.848,001 ~.452,012.572 

5. AggregafewritH!s fatundolwrlllng dclcltcllons ~3;575,409)~· -----

8. Total~·~ {unos21hnlugt1S).;.._ __________________ -i---L:.7·!!155!:!!.~615~.~14!!1.L--.!7!.!,199~321~,9!B12:.J 

7. Netlnccmeofprotectedcella;.;_...;_...;._ ___________ , ____ ---·------'-;------~----

8. Net undenwllfng ~or (loss) (Uno 1 minus Une 6 pluu Line 7) '126,589,418) f----....L96,!m,1UI) 

INYESTIIEHT INCOME 

9. Net lnves1ment Income eamecl (Exhibit of Net lnwstment Income, Une 17) ----·-·-· .. ··----·---·--f---.J4,382,58D r-___102,28UIIB 

10. Net realized c:apftal gains or (losses) less c:apllal galna tax of S ___ 5,!113,419 (Exhibit of Capllal 

Gains (losses))____________________ 9 135 750 f28 1123438) 

11. Netlnvostnenlgaln(losa) (Unes 9+ 10)-----------.. -----·-----•-B3,518,D ._. __ J7't~,461,310 

OTHER INCOME 

12. Net gain (loss) lram agents' or premium balances charged oil (amount recoverud 

$ ___ 4,22!1,513 amounldtargedoll$ ___57,282,163 )-·---------~·--~52.9811,250) ~.046,228) 

13. Ananco and aorYieo c:hulgos not lndudod In pr'CiftiUns 114,668,410 1---122,190,182 

14. Aggregate writtHna ror miscellaneous 1nc:ome (73,066,4:&) (41,138,127) 

15. 

18. 

TOialolherlncome(Unes 121hrough 14)--------------·--- ____ ,_1 __ ...,:f~.:.11:.&::BI=..:2l9:::.:,c~lf--.....:ll~lm=:•=821:!..1 

Net lncame beloru dividends 1o polleyholdenl, alter capital gains tax and before all olhcr federal and foreign Income taxes (llnes8+ 11 + 15) ~54.457,431)1---3,567,019 

17. DMclendaCO~ ---------· 2971iD 501 6112 18. Nellncomo, aftof ciMdencb to pollcyholdera. aftof capllal gains tax and before all olhot fedeiBI and lorolgn Income taxes 

(Uno 16 minus L.klo 17) ·----- __J54,755.11l6) ._ ___ 3,Cii5,411 

19. Federal and hnlgn 1ncomo caxes 1nc:urrac1 .. ·----·-· .. ·-----··· l'!il,m 4111 cs1 938 rm 

20. Net Income (lfne 18 mlnul Line 19)(10 Une 22) 2.412 316 55 001.924 

CAPITAL AND SURPLUS ACCOUNT 

21. SurPus as ragalds pallc)t1oldals, December 31 priol year (Page 4, Une 39, Column 2) -·----·----·· .. ··----·--·-···· ___ 3,819,121,103 1--3,150,799,663 

22. Nellncome(lrom line 20) .. ---· .. ··---····--·-.. ------·- ___2,412,316 .___55,003,924 

23. Nellranstera(to)from Prolec18dCel ~------------·------.. ··------ ---------1--·---· 24. Change In net unrealized caPial gslns or (loaes) less capital gains tax or s __ .. _7 ,125.829 ... ___ 169,505,714 1.':11,148,192 

25. Change In netunuallzadfaru91 exdlange c:apltat gain (lOss) ....... ------------+------1------ 26. Change In nut defomld h:ame tax ..... ----·---·---· _ ___{8,1Xll,194) __ __(18,623,126) 

27. Qlango In nanadmiUed assets (Exh!bll of Nonadmllted Assets. Line 28. Col. 3) ---I24.444,629) l-----l7 ,361.&) 

28. Qmnge in puvlslon for relnalrance (Page 3. Line 18, Column 2 minus Column 1) -·····--·--.. -· .. ··-----___ 14,2:9 I-·--_JI,662 

29. QlangelniiUIJIIUSnat9S ··----·----___ J59,064,999 l____j38,318,CXIO) 

30. Surplus (contrlbutadto)wllhdlawn 11om p'Ot8Cled cella ___ .. _____ , ___________ +----·-1------

31. Curnulallw elfect ofc:hangos In accounllng principles ·-----·--.. -· .... ________ , ________ 1-·-----

32. Capftld changes: 

32.1 Paid'"---------------.. ------·----·-.. ---........ ____ , .. --·--·--·------

32.2Transterred from surplus (Siock Oivldand)-----------·-----·------1------l-------

32.3Transfemldtosurplus _______________ ,_ ... _, ______ .. , ... _____ .. -----·-f--··-----

33. Surplus adJu,slmen18: 

33.1 Paid In -·---- _ .. _____ ~----

33.2 Tranaterrud to c:apQal (S1ock OMdand) ___________ ... _ ............. --···-·-......... ---··--.... - .... ··---f---.. -·---

33.3Tranalemld llomcapllal ....... ·----···-·-.. _ .. ___ -----·-1------ 34. Not remitlances from or (CO) Home Office ..... ---··-···--.. ---···-·- ·-----1-·------ 35. Olvldendstosloekholdets -------·-· .. ---·-··-··--· ..................... -.-· .. ·-----·-·- ---·--·-r--------

36. Change In lr8asUJy stock (Page 3,1Jnes 36.1 and 36.2. Column 2 minus Column 1) ----·-·--··-·-·---- ------1------- 37. Aggrega~o wrifo.lns ror ga1ns anc1 1ossea rn surp~us -·---.. ······--·-·--····· ... - ............................. _··········--···J---~3 • ..,::t52:::.c!!M~--.....::3:a.:1.:::19~531=-l 

38. Qutn;e 1n surplus as regards pollc:yhcldefs ror lhe l/981 (Unes 221hrough 37) ----·---.. --·--· .... ·---·---·-.. J---=::31:.!:1 • .t:734~840=-+---=128=92:.:1~440~ 

39. Surplua as rugards pa(lcyt1olders. Oec:ember 31 curren1 year (line 21 plus Line 38) (Page 3, Une 37} 4.181,455,944 3,819.721,103 

0501. 

0502. 

0503.. 

0598. 

0599. 

1.W1. 

1402. 

1403. 

1498. 

1499. 

3701. 

3702. 

DETAILS OF WRIT&IHS 

Pooled shuo af LJD ptagru inca~~e ----------...................... _____ ·-·-·------·· ____j3,575,409)1-·------

--------.. --.--.. ···--··--···--·-· ........... - ........................................................................... _ ............... ~ ·-·--···· .. --·--·····-f--·· .. ·· .... - ........ - .. 

--------------------····-···-····· .. ·-·-····----.. ··-··--·-.. --..... ---------··------ SUmmary of remaining wrlt&-ins for Une 5 from overflow page---· .. ·-·-·-·--.. -·-····· ...... _ ............. ----·········--....... - ...... ··-----··--···--·· -···-·-·----··--

T01als fllnes 0501 thru 0503 Dlus 0598KUne 5 above) 13.515 4(&) 

lnletesl ~ an hnls held···-·----··---·----····----........ _ ............................ ___ ..... - ....... __ ,169,320,922) r--·-... ..169,057 ,841) 

Uiscollaneous (CJpCnSe)/incc:mc ···-·---·--.. - ................................................................................................... ·-······-··-.. .. .... _ ......... 12,673, 128) ................ 28,219,498 

Prmiu;s for ~ I ife insurance --.. ·----....................... _ ............................... - ......................... - .. ·-··-·-·-11183.058) 1--·-·--(121,673) 

Summary of remaining write-Ins lor Line 141ram overflow page ......................................................... - .................. _................... • ... - ....... _ ... ( 189,332) _ ................... ( 178,711) 

Totals fl.lne$ 140111w 1403 plus 1498)1Une 14 above) (73.066 4:&) 141138,727 

Pooled 51are of II'RUlhorized reinsurance ......... - ... ···---............. _ .............. _ .................................... -··----·-· .. ·····--·- .... ______ 2.312,314 ______ .. _JJ14,429 

Net proceeds lrcn ~wned life insurance .............. --....................................................................................................... -............ _JJS0,6110 ___ ............ 2.315,091 

3703. ---·--·-.. --··----······--·-··---·-.. ···---·-···--·-· ......... - ........................................ "····---··· ............. ·---·· .. ··-······-- -·--.. ---·---

3798. Summary of remaining~ tor Line 371rorn overflow page ......................... --........................................... _ ......................... _ .......... --......... - _ ........... _, .... __ _ 

3799. Totals fllnes 3701 llw 3703 Dlus 3798Kllne 37 abovel 3,152 !!14 3 119 531 

4 
State/Plaintiffs Exhibit 12 
., ... 

... 

Texas Department of Insurance 

Financial Regulation Division- Financial Analysis Section, Mail Code 303-1A 

333 Guadalupe • P. 0. Box 149104, Austin, Texas 78714-9104 

512-676-6885 telephone • 512-490-1008 fax • www.tdi.texas.gov 

STATE OF TEXAS § 

§ 

COUNTY OF TRAVIS § 

The Commissioner of Insurance, as the chief administrative and executive officer and 

custodian of records of the Texas Department of Insurance has delegated to the 

undersigned the authority to certify the authenticity of documents filed with or 

maintained by or within the custodial authority of the Rnancial Analysis Section of the 

Texas Department of Insurance. 

Therefore, I hereby certify that the attached document is a true and correct copy of the 

document described below. I further certify that the document described below is filed 

with or maintained by or within the custodial authority of the Financial Analysis Section 

of the Texas Department of Insurance. 

The certified document consists of a complete copy of pages 1 , 2, 3, and 4 of the 

Annual Statement, filed by TRUCK INSURANCE EXCHANGE, as of December 31, 

2014. 

IN TESTIMONY WHEREOF, witness my hand and seal of office at Austin, Texas, this 

24th day of June, 2015. 

DAVID C. MATTAX 

BY~~~ANCE 

.AMYGAR 

ASSIST ANT CHIEF ANALYST 

FINANCIAL ANALYSIS 
PROPERTY AND CASUALTY COMPANIES• A$SOCI~TION, EQO,'IO.N 

ANNUAL STATEMENT. 

FORTtfEYEARENDED DECEMBER.91~2014 

OF Ti-fe CONDIJlON AND AFFAI~ bFTI:IE 

TRUCK INSURANCE EXCHANGE, TRUCK UNDERWRITERS . . , .ASSOCIATION, ATTORNEY-IN-FACT 

NAlC ~ CoCb _!!Q§!L J!!§!_ NAIC cCmpany Code 2;709 Employel'tl iD Number 

!Cilirtmf lPIIOI) California Oiganlzod inlet the Laws of ------.::Celli=OI'I'la=--""":":'-:-~~S!ato ci:Domicile cw Port of Entry 

QN~d~~ -----------------~~~~s~~~·~o~lkM~m~~--------------------------------

li'.c:O~---------..::D21D&=:.:1::935=-· ------ CDfllrnEtneed Business _______ ..::021051=:.:'=935~--------

Siilluttlly Homo Olfibd 4660 Wllshir. Bou!tvaJd 

(SII\iet and Nl.itnblr) (City D1' Town, ~te. Counlry and 21p Oc1clo) 

~ A!!C!!les ,'CA. us 90010 

Malf Addrella 

~9f!Y at Town, Stakt, COullUY&hd ~Code) 

P.O.b4g WOOdland Hllls i OA; USS1365 

(Sirl:el and Number or P.O. Box) 

PrlmfJY~Qna(B.!Io~~f!~. 

to. Ani!!!!!. CA. US90010 

4680 WilshiiO Boulevard 

(Stttlt and Numbor) 

(FAXN!Imbo~ 

OFFICERS 

Pi:a&iden1 ___ -..:JAmhony=· ::::.r...::Jam==:!!~De=Santls=~!.lt-1 ---- CFO, TrCCJ~un:r _____ ---:R:.::o~nald=.;;O:.:.!'!QO!Y::a::~mn.~:::::.-----

~ --------=Dof:::':.:lt'I::.:EPa!::':x::.!IO::.'.:.z:HoHc:.. ______ _ 

KeMoltiWavn! Biln!l!ty •• 

OTHER SCotl RObert llndgui!1' · Vlco Preside Ill 

DIRECTORS OR TRUSTEES Fmnlt Anthor.v Bonotto .. 

Roi'IMI L!e Mam:no~• 

s:a-.oot 

CaUnl.Yor 

C.llfamla n.. -------,Lcis~.::An!M'="·=-Itt=-. ----- So:10; 

Doron Eugeno Hchl 

Socra:ary 

a. Ia lllis an original fiUng? .. ·-. 

b. Hno, 

Ftbruary. 2015 1. SIII!D the Dlllendment 11\lmber. __ ..... 

1&000 on nsoo: 

• 

KEITH EAKJNS . Commission# 2044162 ~ ~ · Notary Public - ~ilamfa J : Los AngeltJs·~ounty . .. j ·; •. . JA'J rorm. N'r:s-NoY 1. 201tl 

2. Oats filed_. ________ _ 

3. Number of pages attached....._._ .. 

A Alllll)l I'W~ or olhltd.le« ~ting t'Acmib1e vw~~~ .. Orir !he lclal:lly of !he imMcu;t whl siP1.,. dC:u"nent 10 ~ lt:h 

c:Ditlo'lcalelsalla:md,andr,OIIIIlo~ ~. 01 ~OI:dly 

af lhul doaimlnl 

b'J, 

(1l Amhonv Jllmtl! DeSumis 

provod to mo on !he basiS of sa:lsfedory evidonce to be 

lho person who eppaar11d before mo, 

end 

(2, Oomr Eugsns Hohl ,._CIIS;grw, 

proved m 1'118 on lho bosls ol S!JIIsfectoly ovlder.co to be 

Cho perscn who appoarcd befOfo mo. 

and 

(3)_!!~--· MlmodS;nct 

provt!d to mo on the basis of solisfDC!Ory evidence to be 

tho pefSOtl who appeared before mo. 

Thomas David Brown" 

G!uy Randolph !!arl!q •• 

OtllD Joel WJIII&ce •• 

Vos( X I Nr.[ I 
"' " 

~ ~· 

~ 

ANNUAL STATEMENT FOR THE YEAR 2014 OF THE TRUCK INSURANCE EXCHANGE 

ASSETS 

1. ~(SchecllleD) ______ ...,.._ _______ __B55,5ff1,573 t----- t--.--.JJIW>~,.51J1,573 t--..J7M __ ,448,863 

2. SlockS (SdledUie D): 

2.1 Prafemldllocks....._ _____________ ~------- J------t------...,_ ___ _ 2.2Cciinmonsroc:ks __ "--_....;.;... __ ...._ ___ . ______ I---Jlll,109,260 t-------t--_,71r1...,,.109.29) ...,__..~1liiR.g,,89S,Oto 

3. Mol1gage kiana an J8lll as1ata (~ 8): 

3.-1 flnltllens.-:.-:-. --~--:--:------------11----- t------t------t--:------

3.20bw~a.~~----~-------------+-----t--------t---------t--------- .... Real es&ldo (Sc:hetit A): 

4,1 Pluperllos occ:upled bot Ulo company (leas$ 

enc:umtnnces)--------------~---_.J•J:R,122 ·------1----...89!1.122 ...,_ __ ..,.~m_,-142 

4.2 Properlles heJd for Ulo production of Income (less 

$ encumbrances) -------t-------J------1------t-----

4.3 Prop8l1les held tar sale (lesa $ 

encumbrances) _______________ ____ ,._54,161 -----·- _____ _54,161 - 294,234 

5. Cash($ ___(81,187 ,111), Sc:heckdo E- Part 1), cash equlvalen1s 

($ , Schedule E • Palf 2) and shorHerm 

lrMI&Irnanb ($ ---14,195,598 , Scbeclllo OA) ---· f---(41,571,515)...,_ ____ ,..___(41,511,515) ~31,594,019) 

6. Ccnnlictloana(lnduclng$ pamlum notes)·--·----- t------J-------t------

7. Dllrlva1Nes(Sc:hedule0B) ________________ -·-···---- -·----------t-----11,815 

a Olharlnvosllldassaiii(SchecUoBA) ________ . __ -f-----t------1-------..., ____ _ 

9. Recelvalllotarsecurllles • ----8,450,000 --·----- ____ 8,450,000 --·---

10. Securllles lendng reinvested collateral assets (Schedule 01.) ____ --··--·- -· ------- ___ _:11,553,538 

11. Aggregale~ for Invested assets . ------·- -·-----t------

12. Subto1als,caahancllnvoltedaatota(llnos1 to 11) •. ____________ 1,591,52B,906 -·----··-- ··--1.591,528,906 _1,496,410,583 

13. 11Uo plants less $ dlarged ott (for Tlllo lnsunn 

ont,) . ------f----·--·-- --·---- ---·--- 14.. lrlvo5fn'lnlncomecfueanclaccrued ...• 4,637,185 -- __ 4,631,185 f--·--3,968,743 

15. Prumlums and cansldenl1lons: 

15.1 Uncollededprernlumaandegenls'balanceslntflocourseofc:ollectlon __ ,.-33,008,740 t----·5,703,409 _--Z/,905,331 t----,.4:; ?11,200,938 

15.2 Deferred prumb'ns. agen1a' balances and fnstallments booked but 

delan8d and not ,al cU (lncldng $ ___ .1,494.271 

eamedbulunbllloclpramlums) __________ __316,194,250 t------- r--"~-.194,250 ...,_ _ _.1RAuo,,294,499 

15.3Acauad I'IICniSp8CIIve pramlums ____ 188,8 ____ 188,8 185,:119 

16. Relnsuranco: 

16.1 Amounla recxMII'8bla from reinsurers 109, 165,048 __ 109, 185,048 r--132,004, 756 

16.2Fundsheldtr,ordaposlledwllhrelnsuradc:ompanles ..... 8,234,913 -··· 8,234,973 l-··------

16.301tler amcunls receivable undel ralnsurance conlnlcls _______ ··--·······--··· -·---·- ----·--·-------

17. Amoun1srec:eiYIItllerelallngtounlnsunldplans ··--··---J------J-------J------ 16.1 CUrrant faderal and kqlgn Income tax I8CO'IUf3ble and Interest !hereon_. ···-·········19,381,819 !---···----·- ___ 19,381,819 r---50,114,004 

16.2 Neldeferredtaxassel ________________ ---··---·- -------1-------1------

19. 

20. 

21. 

22. 

23. 

24. 

25. 

26. 

'ZT. 

28. 

1101. 

1102. 

1103. 

1198. 

1199. 

2501. 

2502. 

2503. 

2598. 

2599. 

0uatantytundsrac:alllablctorondepa$11 . r------_361,fll0 ___ ...361,fll0 __ ___2,f1SI,410 

Bectronlcdara prucesslng equipment and software_··---·---· -·--·----··- ·-··-···---- ····---·-- 1-·------ Fumlluru and equfpmem.lndudlng heallh care deiMicy assets 

($ ) ---------···--······ ·--··---- --·----'"------- -------

Not~ In assets and llablltles duo to foreign oxd1ango rates_. ------·- . ~·-·-- -·------

Reeolvalllos from p8IQnl. GUbsldlarles and allllates -·-·-----:-------r--·---·-- r---35,941,554 

Heallh care($ ) and Olher amounts rec:eiYable ·-··- ··-·-.. ······-··--·-.. ·• ·-········--···-· !-··-···---··-·- ·-----·--· Aggregai8Mit8-lns foro1tlerltlan Invested assets _______ .. --·-···4,7611,814 r-------181,5:9 ___ 3,987,215 _____ 2,488,233 

Tolal assets Ollducing Sepatale Accounta, Segiegated Accounts and 

Protected Cell Accounts (Lines 12 to 25) ---·-··--····--···--- ··--·-·-2.084,068,323 -····-·--6,41M ,949 _____ 2,011,583,314 ___ .1,933,396,090 

From Separate Accounts. Segrugated Accoun1a and Protected Cal 

Accoun1s ·--·--···---··· ··-·--·····---··-··· --··-··----··-··· -··---·-- 1-·---··--- TataiJI.Ines 26 and 27l 2 084,068 323 6 484 949 2,011 583 314 1,933 396 090 

Summcuy of remalnlnO wrlla-lns for Une 11 from overflow PD:Ue ·-·-············ ...... - ............... _........ -·-·········-········---··- ···---···--·-··· .. ········-... ·----·--···--·-· 

Tocals (1Jnes 1101 thru 1103 Dlua 1198){Une II above) 

Other assets --·----·-··--·---······-··-·········-······· ...... ·---·····2.476,332 -····----181,5:9 ___ 1,694,792 f--·----·'•319,198 

Garanty fllllls recoverablelpolicyflolder surcharges ····-·······-··-···-·-·-.. ·---·---···-···-1.582,347 -······----·-······· ···--·-·--·1,582,347 -·--······---

fiJ!ilies and deposits in pools and associations -·--···---····-···-·· ...... --·---·--··-.. ..496,073 ·-····-.. ···-----··- ·--·--···-···-... 496.073 ···---·-1,178.435 

Summasy of remaining wnta-lns lor Une 25 from overflow page-··-·--······ ·-·-·-···· .... .214 ,062 --··········--·----····....... ···········-···--.. 214 ,062 ·····--······-·-··-·--· 

Totals (lines 2501 ttw 2503 CluS2598)11Jne 25aboYe) 4,7611,814 181,5:9 3,987.215 2,488,233 

2 
ANNUAL STATEMENT FOR-THE YEAR 2014 OF THE TRUCK INSURANCE EXCHANGE 

I...'IABILITIES, ·suRPLUS AND OTHER FUNDS 2 PwfarVear 

1. ~-(Part~~3S.~~.,.._...,..._ ---,.---...,.,...-~..,.,..-~--------.,...,.Jf-:-:-~:-'w_,.m:498 .__ _ _.5M...,;~6B7.&ss 

2. Roftluanco~on-~-~~]!lss ~eXpellsea (Sctledulo F, ~ 1. ~ 6) .. :·.700314.,' 1501'"" .:·.252611_ •• ~ a Loa adjustment qienseiJ <Paii 2A. L.bt35• Column a) - -· · - , · --· · · · · - . · · · .!Ol<l .... .-

"' Cornmlss#OOSpayalte. ~~Bndolbot~chalgoa.,-...,.-,---~-------,---1--.......,..__,..-,-,- ..... ....,..,... ___ _ 

5; Olhetexpenses CelrdudinGlllxes; iiCeftSeS and tees)-~-'-~'"'-------'---"-.:.....;.""...._ ___ _.. _ _.. --'-1,064,453 1---_,792,025 

e.- Taxes.llc:enlea~fees(excluding~enciforulgn~t8xes) 2,!17,744 . ~16.153 

7.1· CUmlnl faderal&nd fOreign b:ometaaCJndUdlnli s· on ruallzed capital gains (lossos})---1------1------

7.2 Notditfemld tux'llabllily~..;_;.;_.;:.;..;._;.;....;~...,......:;.__;.:..:..;__;.:... _ _;_...;_.;,_,;..;....;__.....;..;__...-......:.-___ --ir---25·583·652 --~.515.~ 

8. Bonuwed money$ ancllntarast theroon $ -----

9. Unearned pramluma (Part 1A. Uno 38. CoUnn 5) (aft« decfuc;Ung uneamod premiums fof ceded ratnsurance of 

$ ----919,734,322 and lncludingwarranlyreseMIS of$ ----- and accrued acc:ktenl and 

heallh expodonco ralfng refUnds Including S _ f01 modlcallosa rallo rebelo par lho Public Heallh 

SentceAcQ __________________________ +---!"li1.9S6.599 l--464.782,m 

10. Advancepramlum 10,822,313 .__11,464,IBI 

11. DMdends dedarod and w1pait 

11.1 Stoddloldora----------------·--------+-------1------

11.2Pollqt1olclels ·-···--···-----------·-·--·- -···---...23J,434 __ _2311,434 

12. Ceded ra1nsun1nce prambns payable (net of ceding commissions) l09,558,:iD7 J----102,811,CXM 

13. Funds helcl by company under relnsumnce lnlalles (Schedule F, Part3, Column 19) -· f-·--W ,954 713,Dl 

14. Amounts withheld ot relalned by company for accounl of olhera 1,312,6119 1,810,300 

15. Romllances end llama not allccBiad 131.855 

16. PnMalon far Allnsurance {Including S certllled) (Sehedule F, Plllt 8) ---·-----f-·-4,!i93,554 f-.---5,718,322 

17. Net adjus1mants In assets and llabllllleacbtto forulgn axchangera18s _____________ .._ ____ 1------ 18. Draftsoutatandlng _____________________________ r--·--- 1-··------

19. Payablotoparent,subsldlartesand a1Simes-------------·------J---DR11,274,310 1------ ~. ~-----------------------------------------~--·-------l---------- 21. Payableforseaullles Q,03),659 -·-----

22. Payallle for securllles lerdV 11,553,538 

23. LJabllilyforamaun!sheldunderunlnsvredplana __________________ .. __ ----·--- ------

24. Capllalnotos $ and "*'est1henlon $ -----

25. Aggragatewrile-lns for labllillos-------------------------.. --..3.: IIID=IBI=564::..:. 1,ll---..3.: f!5:..:.1~::000:::1·=:..t~5611 

26. Totalllat:lilllleaaxdudlng prOI8CC8d c:eiJ 11ab11111es (Unos 111vaugh 25)'----------------+-·-1.458,878,815 ._1,3l9,1r22,187 

a. 28. TOialllablllllea(Lbes28and27) ~~~~---------------------·----------~------+-----~ ________________ . ______________ 1,458,818,815 ___ 1,319,922,187 

29. Agrpgarewrfte.lns lor speclai!Uplusfunds _____________________ l-----J------

30. 31. Commcnc:aPtalsiDdc-------·----·------·-- Prolemldcopltalstoc:k ________________________ .. ·--·-·-.. ----·-----l---------- ____ ...._ -----

___ _ 

32. Aggraga1e Wlfte.lns for olhertllan apedal SUiplus funds--------

33. SUrplus nates ______________________ .. ___________ __317,IXII,DOO __ m,IXII,DOO 

~- ~~lncd~SIIIplus ____________________________ ~---------1--------

35. Unassigned funds (au:p!ua) _____ , ______________________ .. ____ .. , _______ 3)1,665,559 _____ 2S8,434,903 

36. Leu IJuasUiy Slock. at coat 

36.1 --------- llharus common (value fncbled fn Uneso S -·--·--.. -·--·- ) ------·-------- ------

36.2 lhar8spreforrad (valuo Included fn Une31 $ ) -----·-·-----------

:rr. Surplus as rugarda polleyholdols (Lines 291D 3S,Iess 36) (PIIgo 4, Une 39) ---·---·--.. 618 lOC 559 563 473 903 

38. TOTALSIP-2.Une28 Col.3) 2,077,583,314 1,933,396,090 

DETAILS OF 'WRJTE.mS 

2501. Claim pa)'!Zmls aade after clal~racessing close---·---.. -... ·-·-···-.. ---···----.... - ...... - .... ·-- _______ (63,273,513) ___ .(55,228,744) 

2502. th:ashed drafts and dlCCks pending esd!eat...t 6,28J,049 __ _5,3B,SID 

2503. Pooled share oi~D~Uthorized relnsuranco ----- ....... ·----.... --.... --.. ____ (4,181,569) ______ (4,960,2m) 

2598. Summary of remaining write-Ins for Line 251rom OVOI1low page----·---... - .... ·----.... --·-·--f-·-1,0B6,4m ___ 3,889.583 

2599. T0181sfl!Ms2501 DIIU2503Dius2598\ft.Jna25above\ liD 008 564) (51,000,567 

2901. -·----·---.. -·-·-·--.... -·-·---···· .... ---.. -...... -........... --................................. -............... _ -·---·--.. ·--.. -·- ...... _ .. _________ _ 

2902. 

2903. 

----------------------· .. ·---·-----...... ---.. - -----··-··----- -·-·-·-

2998. SummaiY of remaining write-Ins for Line 291rom CMifftow page---··---.. ··-·--....... -....... ----.. - -··-.. ·--.. ·---- ·-------·- 2999. Totals fU!les 2901 UVU 2903llluS 2998UUne 29 aJxwel 

3201. 

3202. 

3203. 

-----------------------... - .... - ......... _._ .. ___ -·---.. --·---- ... ____ _ 

3298. Summary of remaJnlng wrifiHns fOI Une321rom overftow page--·-------·------·--·----1·------------ -·--·--- 3299. TOCaJs runes 3201 thru 3203!llua 3298l<Une 32 abcMll 

3 
~ 

ANNUAL STATEMENT FOR THE YEAR 2014 OF THE TRUCK INSURANCE EXCHANGE 

STATEMENT OF INCOME 

~vaar UNDERWRITING INCOME 

2 PMrVear 

1. Pramlumaeamed (Part 1, Llne35. Cobnn4>J--'--------------------I--_lt,£62,654.112 f--1,063,643,8 

DEDUCTIONS: 

2.: LosseS lncunad (Part2. Line 35. Column n-------------·-------------1---~ ·!iR8,.12f,228 1---...Jl~uu.llUJJT 

3. Loss ad)l:slmenl ecpen$8S lncunad (Part 3; Line 25, Column 1) --------1----·-· 105,827,745 1nl,624,284 

4. Other undelwrlting elCPensea lncumJd (Part3, Une25, CciUIM 2) <m,464,948 !¥17, M9,519 

5. AggrugaiDwrllll.fnarcWui1derwrlllngdecb:tions---.. _________ , _______ +---CS35,448),_ ___ _ 

8. Totalunderwrtl!ngdodur:tlana(Un8s2shrough5)_· ------------------ 1,071481.413 1 078 481,150 7. NetlncomootPolocCedcalla-· ___ __;__;__; _________________ -l-_. ____ 1-----~ 

8. Net undorwrllfng gain or {loss) (Line 1 miiUS Line 8 plus Uno 7) • 18,827 ,3tt) 1-·-...{14,843, 7!12) INVESTMENT INCOME 

9. Nat lnveltnenllncome earned (Exhlbll of Net tnwsrmenllncame, Line 17) -------------J.-----''1,987,621)..._ _ _,1,743,317 

10. Not raallzad capftal gafns or (losses) less capital gains tax of$ - ...... ___ 48, 724 (Exhibit ot Capital 

~~l>-----------------------------------------J-----~~~009~~--~3~Dn~··~9:D~ 11. Netlnwstmenlgaln(loss)(Unos9+ 10) ______________________ ~--4---1'1,324,628)f---.4,815,23) 

O"niER INCOME 

12. Nee gain (loa) fr1lm agants' or prumbn balances chatged oil (amount racovGreCI 

$ 640,444 emoun1 charged oil$ ___ 8,575,795 ) __ ......... ----···-·-----·--·t------''7,935,351) i-·---(8, 158,400) 

13. Finance and seMco charges not Included In prenWms 17' 172,264 ~.--18,388,958 

14. Aggregate wribHna for mlsceQanaous Income -- (2,953, !64) (2,'1:B,564) 

15. Total o1herlncome (Lines 1201nlugh 14)-----------···-----··-·--·--·----· 6 283749 7 410,987 

18. Nee lncamo beklro dMd8nds 1o pollc-jhddela, alrllr cepllal gains tax and belore all Olher foderal and foreign Income llwJ8 

(Unes8+ 11+ 15) ------------1---___(13,868, 119h .... __(2,SS7,574) 

17. Dlvfdends fo poliC)'holders 44 518 75, 128 

18. Net lnccmo, after dividends 1D policyholder&, aflet capllal gains tax and before aD oCher federal and foreign 1ncom8 taxes 

(Line 16 minus LN 17) -··----·--···--··--------·------ _ _...(D,912,758)1-___j2,642,1m) 

19. Federal and foreign Income taxes lncurrad (6 598 1121 (4 16.8!171 

20. Neclncano(Une1811'11nual.lno19){toUne22) -- r7.314 5851 1503195 

CAPITAL AND SURPLUS ACCOUNT 

21. SUrplus as regards polle)tloldera, Dec:emberlU plorJ11181' (Page 4, Line 39, Cdurm 2) ---- _ _S53,473,91D _534,962,646 

22. Nee Income (from Line 20) ·····--.. -·--··-·-·------····-··-··---·-· -........!1 ,314,586) _____ 1,503,195 

23. Nettnln&fera (to) from Prolectod Celaccounta ··----···---·--------.__ ______ 1------ 24. a.ange In net urnallzed capllat gains or (losses) less capllal gains tax cl S ____ 13,Em,944 ----1-21,518,686 i-·--21,819,611 

25. Olange In netunreallzedfarulgn exchange caP1al gain {loss)---·--··-·---·-·---···---·-··---f....--.·------· -------- 26. Chango In net deferred Income laX ____(2,487 ,468) 1----3,250,928 

%1. Change In nonadmlttBd 8SS8Ia (Eldlltlil of Nonadmllled Assels. Uno 28, Col 3) 3,147,953 i-·---(222,009) 

28. Cbange In provision fof relnsuruncB (Page 3. Line 18, Column 2 minus Column 1) -··-··-------····--f...--.--.-1, 124,768 ____ 3,640,8!17 

29. Chango 1n IUrJifus nacus ___ 40.ooo.ooo i-__z,cm,ooo 30. Surplus (ccntibuledfo)wfthdrawn from protected coils ______________ ., _____________________ ·-------- -··-·---

31. Cunwlallveofteclolchanges ln~prlndples ·-··------·--------4--------._, ____ _ 32. CepftaJ c:llanges: 

32.1 Paid In-------------··----··--·-----······---·-···--··--·-·---------·---·--- 32.2Transferred fr1lm surplus (Stack DMdund) __________ _ 

32.3TransferredfoSUiplus .... __________ , __________________ , .... -·--·-·-···--------··· ----··-- ·---·-·---

33. SUrplus ~Ia: 

33.1 Paid In --·------1-----·---- 1-··------ 33.2 Transtemld 1D capital (S1Ddc Dlvldond) ·-·--·-······-·-·····-············-··-·----········-·-···-·-····· ···--·--···--- ---···----

33.3Transterred from capllal · ... -----··---·--------·-··!-----·---- 1-··------ 34. Not remitlances fr1lm or (to) Horne Office--------.. ---·······-·-·······---·-··-·---··-···-- ------··-·- ·------- 35. Dividends to ISioc:llholclen --·-·---·------··· .. ····-·-·········--···--··--··· -----··-·- -------

36. Chango In lrUasuiY AICk (Page3. Unes 36.1 and 36.2, Column 2 minus Column 1) --······--···-·---···--·- ·------·- ------

!fl. Aggragatewrfte.ina fof gains and losseS In surplus -----·········-······----··········----·····-············-·-··-········· .. J.----l'~178:::c:69:::..1)q_ __ J:(:3:.:,:5:.:::19:..~:•31S~ 

38. 01ange In surplus as regards pollcyholdara for lha raar (lJnes 221hrough 37) --·-··----··-·----·· .. ---·-·--·-··-1---..::55::.:·=23)=656::..,.. __ ...:28:,.~.:·;5.:.:11.~:258=-l 

39. Suqlluaasregards pcllqtloldals, Decomber31 currantyear(Une21 plus Line 38) (Page 3, Une 37) 618,104,559 563,473,91D 

0501. 

0502. 

0503. 

DETAILS OF WRIT&INS 

Pooled &hue af IJi) progra IIICIOW ---------·---··----.. ·---··------····· ___ (535,448)1-·------

---·----------·--·------·-··········-·······-··--·····---------···--··- -----··-·-·- -·------ 0598. Summary cl remainln!J Mlt&lns for Une 5 from CMifftow page---·-·-·-····-··················--·----··········--······-·····- -·---·-··-··-··-- --·--·--·-·- 0599. To1als (l.i1es 0501 t1w 0503 plus 0598)(Une 5 above) (535 4481 

1401. 

1402. 

1403. 

lliscellanccus ~ -·------------·····----·--··-······--···---··-··--··--··-·--·--··· ----~2.953,164) -······-····.(2,759,564) 

1498. SummaiY ot remaining wrile-lns tal Uno 14 frcm OWifflow page--······-··-·············-·· .. ············-.. ·····-··-·-····--·-·-·-·-·-·· ---···----······-·· ···------·----· 1499. Totals (llnoa 14011hN 1403 DIU$ 1498)1Une 14 above) 12 953,1641 (2 759.5641 

3701. Pooled share oltnutharizcd reinsurance--·--··--·-····-·----··························--·····--·······--·····-·-···-······-·· ________ (718,697) ____ ___J3,519,315) 

3702. ···---·-·-·-----·········---··-·-···---·····---·-···-·····························-·············------·· .. ·····-··················-·····--·----········· ·-···-····-·---·······-·-·- ········----·····----- 3703. 

3798. Summary cl remaining 1iillle-lns tor Line 371rorn CN8Iftow page-··-········---····· ···-··-·········-··············-··----·····-·--.. ·-······ -----··--···-·····-··· _____ .. ___ _ 

3799. Totals fl.lnos 3701 1tvu 3703 o1us 3798KUne 3711boW) 1178 697) (3,519,3151 

4 
Farmers Defendants' Exhibit 11 
,, • 

THESTATEOFTEXASANDTEXAS § 

COMMISSIONER OF INSURANCE, § 

§ 

Plaintiffs, § 

§ 

~ § 

§ 

FARMERS GROUP, INC., ET AL. § 

§ 

Defendants. § 

§ 

IN THE DISTRICT COURT 

OF TRAVIS COUNTY 

261st JUDICIAL DISTRICT 

DECLARATION OF RONALD MYHAN 

STATE OF CALIFORNIA § 

§ 

COUNTY OF LOS ANGELES § 

1. My name is Ronald Myhan, my date of bitth is March 27, 1954, and my business 

address is 6301 Owensmouth Ave., Woodland Hills, California, 91367, USA. 

2. I am the Chief Financial Officer of Farmers Insurance Exchange, Fire Insurance 

Exchange, and Truck Insurance Exchange (collectively, "the Farmers Exchanges"). I 

am not an employee of Farmers Group, Inc. ("FGr'). In my role with the Farmers 

Exchanges, I am familiar and interact regularly with the tht·ee Boards of Govetnors of 

each of the Farmers Exchanges ("Boards of Governors"), as well as the Farmers 

Exchanges Audit Committee ("Audit Conunittee"). 

3. None of the Governors on the Boards of Governors and on the Audit Committee are or · 

can be current di.t·ectors, officers, agents, employees, or shareholders of FGI, any attOineyin-fact of a Farmet·s Exchange, or any entities under common ownership with FGI or an 

attotney-in-fact. 

4. The Audit Committee is a joint committee created by resolution of the Boards of Governors 

and, under its Charter, is authorized to t·eview significant legal matters involving the 

Farmers Exchanges. I am familiar with the Audit Committee's actions taken with regard 

to the above-captioned matter ("Texas Litigation"), including the approval of the 

settlement entered into by the Farmers Exchanges in the Te~as Litigation. 

5. The Farmers Exchanges have been advised by the law fmn of Locke Lord LLP ("Locke 

Lord") for over 10 years on insurance-related matters, including Locke Lord's 

representation of the Farmers Exchanges in the matter of Fogel v. FGI, et al., No. 

BC300 142, in the Superior Court of the State of California. 

1 of3 

Farmers 

Defendants' 

Exhibit 

11 

No. D-1-GV-Q2-ooz501 
- . ····-·------------- ·------------·--· 

6. Advised by Locke Lord, the Audit Committee conducted a review of the Second 

Amended Settlement Agreement and Stipulation and the 2015 Supplement to the 

Second Amended Settlement Agreement and Stipulation ("2015 Supplement"). The 

Audit Committee passed a resolution approving the settlement and authorizing me, as the 

Chief Financial Officer of the Fa1mers Exchanges, to sign the final version of the 2015 

Supplement if not materially different than what was presented to the Connnittee. A true 

and correct copy of that resolution is attached hereto as Appendix A. Under that authority, 

I signed the 2015 Supplement to the Second Amended Settlement Agt-eement and 

Stipulation on behalf of the Farmers Exchanges. 

7. As the Chief Financial Officer of the Farmers Exchanges, I am familiar with the current 

finances of the Fanners Exchanges. The current pooled surplus of the Farme1·s Exchanges 

is approximately $5.6 billion. The sutplus has grown by$ 2.9 billion since 2002 tlu·ough 

April2015. The surplus has also grown in relation to the amount of premium written. The 

ratio between premium and surplus has 1isen since 2002, fi·om 26.3% in 2002 to 38.6% in 

2015. 

8. Policyholders of the Farmers Exchanges do not have the power to persona11y possess or 

transmit any pottion of the Farmers Exchanges' sutplus. A member of the Farmers 

Exchanges may not sell his or her policy to another person and does not earn any 

capital gains resulting from increases in the surplus during the time of ownership. The 

Farmers Exchanges do not pay out dividends to their homeowner or auto policyhoiders. 

Sl1ould a policyholder cancel or non-l'enew coverage tluough the Farmers Exchanges, 

thus ceasing to be an Exchange member, the policyholder is not entitled to take with 

him or her any portion of the surplus. 

9. Litigation reserves for the settlement in the Texas Litigation were established in 2003 

and have been updated periodically over the years. These rese1ve amounts are not 

included in the reported su1plus for the Exchanges. Payment of the settlement amounts 

will have no matetial impact on the Fru.mers Exchanges' ability to pay future 

policyholder claims. 

10. The Fanners Exchanges' settlement payment in the Texas Litigation will not be 

factored into future rates and will not result in any changes to the Fanners Exchanges' 

rates. In simple terms, the Exchanges' rates are based on a forward projection of the 

premium needed to cover future anticipated losses and expenses. The settlement 

amounts in this case are largely a return of premiums previously paid to the Farmers 

Exchanges by policyholders. One-time reimbursement expenses of this nature have no 

impact on anticipated future cl!lims and are not used in calculating futut·e rates. 

2of3 

I 
I declare under penalty of petjury that the foregoing is true and correct. 

EXECUTED in Los Angeles County, State of California, on the 29th day of May, 2015. 

RONALD MYHAN 

3 of3 
)> 

""C 

""C 

CD 

::l 

c. 

x· 

)> 

0 

0 

CD 

0 

D) 

D3 

-

c:r 

::l 

a 

?J 

s: 

'< 

::J" 

D) 

::l 

FARMERS EXCHANGES AUDIT COMMITTEE 

CERTIFIED COPY OF RESOLUTIONS 

WHEREAS, the Committee's Charter specifies that the Conunittee 

shall review material litigation of the Exchanges and their 

subsidiaries; 

WHEREAS, the Committee has been provided with the 

background and status of The State of Texas, et al v Fanners 

Group, Inc., et al, a Texas class action as well as other related 

cases and regulatory matters (hereinafter referred to as 'Texas v. 

Fanners'), by the General Counsel and by outside counsel; 

NOW, THEREFORE, BE IT RESOLVED, that the Committee 

hereby acknowledges rec~eipt of the Second Amended Settletnent 

Agreement and S~pulation, the Supplement to the Second 

Amended Settlement Agreement and Stipulation (the "Settlement") 

and other documents relative to Texas v. Farmers; 

BE IT FURTHER. RESOLVED, that the Con1mittee hereby 

approves the Settlement 'in substantially the form as submitted to 

the Committee; an4 

BE IT FURTHER.RESOLVED~ that the Chief Financial Officer of 

the Exchanges is authoriZed on. behalf of the Exchanges· and their 

subsidiaries to sign the finatvetsion of the Settlement so long as 

the :final versio:o. Qf the S~ttlementis: t).pt materially different than · 

what was presented to ~e Connnittee. 

CERTIFICATION 

I, .Doren E. Hohl, do her~by certify that I am the· duly elected, qualified and acting Secretary of 

Ee;umers Insurance Exchange .and :it$ ~:u~~icliati¢s an:d ~Hates, includmg its Audit Committee, 

and that the foregoing is a.full,. true and.oorrecf papy·ofresolutions adopted on January 28, 2015 

by the, Farmers Exchanges AuditComm1ttee~ and the,resolutions are in full force and effect as of 

the date of this certification. 

In witness whereof, I havesignedthisinstrtunentthis 27th day of February, 2015. 

1584960 S020MTD01S ISM38777 

Doren E. Hohl 

Secretary 

/ 

t 

l 

~ 

r 

t 

I 

f 
Farmers Defendants' Exhibit 12 
.. 6/1812015 Display company profile content 

Texas Department of Insurance 

333 Guadalupe St. P.O. Box 149104 Austin, TX 78714-9104 

FARMERS INSURANCE EXCHANGE 

Skip over these navigation links. 

Show Exolanation ofTerms 

Table of Contents 

General Info I Contact Info I Tvoes of Insurance I Use of Credit I Attorney for Sennce I Ratings I Financial Info 1 Premiums 

I Complaint Ratios I CompanyHistorv I Company Officers 

General Information: 

Return to top. 

Type of Entity: 

Status ofTXLicense: 

Company Status: 

License Number: 

NAIC Number: 

TDI Company Number: 

FEIN: 

Home City/State: 

Origin: 

Date Incorporated/Organized: 

Reciprocal (RE) 

Active 

Normal Operations 

27800 

21652 

27800 

952575893 

CA 

Foreign 

04/19/1928 

Date Licensed/Eligible/Registered in Texas: 03/10/1936 

Date Cancelled/Ineligible/Inactive: 

Contact Information: 

Return to top. 

Mailing Address: P 0 Box 2478 Terminal Annex 

Los Angeles CA 90051 

Office Number: (323)932-3200 

Toll Free Number: (800)327-6377 

Fax Number: (323)930-4266 

Physical Address: 4680 Wilshire Blvd 

Los Angeles CA 90010 

Office Number: 

Toll Free Number: 

Fax Number: 

Farmers 

Defendants' 

Exhibit 

12 

No. D·1-GV-D2-Q02501 

https://apps.tdi.state.tx.us/pcci/pcci_show _profile.jsp?tdiNum=27800&compan}Name=F ARM ERS%201NSURANCE%20EXCHAN GE&s}5 T}PeCode=CL 1/4 
611812015 Display company profile content 

Types of Insurance Licensed to Write: 

Retum to top. 

• Accident 

• Aircraft Liability 

• Aircraft Physical Damage 

• Allied Coverages 

• Auto Physical Damage 

• Au to mobile Liability 

• Boiler & Machinery 

• Burglary & Theft 

• Fidelity & Surety 

• Fire 

• Glass 

• Health 

• Inland Marine 

• Liability Other than Auto 

• Livestock 

• Reinsurance All Lines 

• Workers Camp and Emp Liability 

Use of Credit: 

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To determine if a company uses credit information for private passenger automobile or homeowners 

insurance. 

' ' .. '" '' '~.~ "' '.,~~·.-... "'"''=''-'·~··~· ........... ~~·-""'""=~-"'"''~'~1 

Click Here for Use of Credit 

Attorney for Service: 

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· Click Here for Attorney for Service Guidelines 

Chris Granger 

15700 Long Vista Drive 

Austin TX 78728 -3822 

Rating By Financial Organization: 

Retum to top. 

The following organizations rate insurance companies on their financial strength and stability. Some of 

these companies charge for their services. 

Financial Information: 

AM Best 

Weiss Ratings Inc. 

Standard & Poor's 

Moody's Investors Ser\'ice 

Fitch IBCA Duff and Phelps Ratings 

https://apps.tdi.state.tx.us/pcci/pcci_show_profile.jsp?tdiNum=27800&comparl}Name=F ARMERS%20JNSURANCE%20EXCHANGE&s:ys T}PeCode=CL 2/4 
611812015 Displaycornpanyprofile content 

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lAs of: II Dec. 31,2012 II Dec. 31,2013 II Dec. 31, 2014 I 

/Total Assets II $15,530,166,955 II $15,557,125,672 II $15,591,306,853 I 

lrotal Liabilities II $11,779,367,292 II $11,677,404,569 II $11,409,850,909 I 

/Asset to Liability Ratio II 1.3 II 1.3 II 1.3 I 

/capital II $0 II $0 II $0 I 

I Net Surplus II $3,750,799,663 II $3,879,721,103 II $4,181,455,944 I 

jrotal Life Ins II N/A II N/A II N/A I 

Premiums: 

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/As of: II Dec. 31,2012 Dec. 31, 2013 II Dec. 31, 2014 I 

I Life and Annuities I N/A N/A II N/A I 

/Accident and Health $0 $0 I $0 I 

I Property and Casualty $100,164,602 $124,642,834 $118,726,043 I 

/Total Texas Premium $100,164,602 $124,642,834 $118,726,043 I 

I National Premium $3,003,936,159 $3,181,705,924 $3,325,686,627 I 

Complaint Information: 

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When considering the company's complaint index and ratio, be sure to review the company history 

information displayed below for recent acquisitions, mergers, or other events that may affect the 

figures displayed for this company. 

II II Dec 31, 2013 II Dec 31, 2014 II Jun 12, 2015 I 

Confirmed Complaints: II II II I 

Life and Annuityll oil oil ol 

Accident and Health II oil oil ol 

Homeowner II 211 211 ol 

Automobile !I til oil oj 

Workers' Compensation II oJI 

II 

o!J oj 

Complaint Ratio/Index II Ratio II Index Ratio I Index II I 

Life and Annuities !I NIAll N/AII N/AII N/AII N/A I 

Accident and Health II N/A N/AII N/AII N/AII N/A I 

Homeowner I/ .0042 1.145211 .oo5oll 1.249411 N/A I 

Automobile II .0645 11.822511 .oooo/1 .ooooll N/A I 

Workers' Compensation !I .0000 .ooooll .oooo/1 .oooo!l N/A I 

Confirmed Complaints: the number of confirmed complaints closed against the company for the line of 

insurance and year indicated. A complaint is confirmed if the department receives information indicating 

that a company committed any violation of an applicable state insurance law or regulation, a federal 

https://apps.tdi.state.tx.uslpcci/pcci_show_profile.jsp?tdiNum=27800&compan~ame=FARMERS%201NSURANCE%20EXCHANGE&s}6T}P8Code=CL 3/4 
6/18/2015 Displaycompanyprofile content 

requirement the department has authority to enforce or the term or condition of an ins~rance policy or 

certificate. A complaint is also confirmed if the complaint and company's response, constdered together, 

suggest that the company was in error or that the complainant had a valid reason for the complaint. 

Complaint Ratios: the ratio, expressed as a percentage, is the number of closed confirmed complaints 

divided by the number of policies the company had in force for the line of insurance and year indicated. 

Complaint Index: indicates how a company's ratio of the number of complaints to the number of 

policyholders compares to the average for all insurers. The index is calculated by dividing the 

company's percentage of complaints for a specific line of insurance by the company's percentage of the 

policies in force for the same line of insurance. The average index is 1.00. A number less than 1 

indicates fewer complaints than average; a number greater than 1 indicates more complaints than 

average. For the most recent completed year, a given insurer's index may change over time, as policy 

count data is received by TDI. This will affect each insurer's percentage of the total. 

Complaints against an insurance company are not part of the complaint tally above if the insurance 

company served only as a Third Party Administrator (TPA), a company hired simply to administer the 

paperwork of a health plan. Instead, they are included in the complaint record of the insurance 

company or HMO that hired the TPA. If a bonafide self-insured benefit plan hired the TPA, no complaint 

numbers are recorded as a part of the company/TPA's profile. Neither are profiles available for selfinsured plans, as such plans are regulated under federal law. 

Company History: 

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I Date II Event I 

1

07_

15_

2011 1 APPROVED TO WITHDRAW FROM WRillNG TEXAS HOMEOWNER POLICY FORM A (HOA) 

IN TEXAS. 

106-30-20091 

APPROVED ACQUISITION OF 21ST CENTURY INSURANCE COMPANY OF THE SOUTHWEST 

(95971 lAND AIG ADVANTAGE INSURANCE COMPANY (93987) BY COMPANY, FIRE 

INSURANCE EXCHANGE (29750), TRUCK INSURANCE EXCHANGE (84450l AND FARMERS 

GROUP, INC., A SUBSIDIARY OF ZURICH FINANCIAL SERVICES L TO. 

103-02-20001 

COMPANY, FIRE INSURANCE EXCHANGE AND TRUCK INSURANCE EXCHANGE, LOS 

ANGELES, CALIFORNIA ACQUIRED FOREMOST COUNTY MUTUAL INSURANCE COMPANY, B DALLAS, TEXAS AND FOREMOST LLOYDS OF TEXAS, LEWISVILLE, TEXAS. 

PENALTY OF $35,000 PAID BY COMPANY, MID-CENTURY INSURANCE COMPANY, FIRE 

INSURANCE EXCHANGE AND TRUCK INSURANCE EXCHANGE FOR VIOLATIONS FOUND 

DURING A MARKET CONDUCT EXAMINATION IN ARIZONA. 

lo6-14-199411ADDED WORKERS' COMPENSATION & EMPLOYERS' LIABILITY INSURANCE. I 

109-09-19921 PENALTY OF $50,000 PAID BY COMPANY AND MID-CENTURY INSURANCE COMPANY FOR B VIOLATIONS FOUND DURING A MARKET CONDUCT EXAMINATION IN OHIO. 

REINSURED ALL PRIVATE PASSENGER AUTOMOBILE POLICIES AND COMPREHENSIVE 

PERSONAL LIABILITY POLICIES OF TEXAS FARMERS INSURANCE COMPANY (81700l 

AUSTIN, TEXAS. 

lo3-17-194711FORMERLY: FARMERS AUTOMOBILE INTER INSURANCE EXCHANGE (01244}. I 

lo3-10-193611GRANDFATHERED FOR CAPITAL AND SURPLUS REQUIREMENTS I 

Company Officers: 

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For names of the company's current officers, please contact the company at the phone number listed in 

the Contact Information above or on their website. 

https://apps.tdi.state.tx.us/pcci/pcci_show _profile.jsp?tdiNum=27800&compar¥'Jame=F ARM ERS%201NSURANCE%20EXCHANGE&s}S T}1l8Ccxfe=CL 4/4 
611812015 Displaycompanyprofile content 

Texas Department of Insurance 

333 Guadalupe St. P.O. Box 149104 Austin, TX 78714-9104 

FIRE INSURANCE EXCHANGE 

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Show Exolanation of Terms 

Table of Contents 

General Info I Contact Info I Types of Insurance I Use of Credit I Attorney for Service I Ratings 1 Financial Info 1 Premiums 

I Complaint Ratios I Company History I Company Officers 

General Information: 

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Type of Entity: 

Status ofTX License: 

Company Status: 

License Number: 

NAIC Number: 

TDICompanyNumbe~ 

FEIN: 

Home City/State: 

Origin: 

Reciprocal (RE) 

Active 

Normal Operations 

29750 

21660 

29750 

956235715 

CA 

Foreign 

Date Incorporated/Organized: 11/20/1942 

Date Licensed/Eligible/Registered in Texas: 04/11/1950 

Date Cancelled/Ineligible/Inactive: 

Contact Information: 

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Mailing Pddress: P 0 Box 2478 Terminal Annex 

Los Angeles CA 90051 

Office Number: (323)932-3200 

Toll Free Number: (800)327-6377 

Fax Number: (323)930-4266 

Physical Address: 4680 Wilshire Blvd 

Los Angeles CA 90010 

Office Number: 

Toll Free Number: 

Fax Number: 

https://apps.tdi.state.tx.us/pcci/pcci_show_profile.jsp?tdiNum=2975o&compan~ame=FIRE%201NSURANCE%20EXCHANGE&s)STW8Code:;:Cl 1/4 
6/18/2015 Oisplaycompanyprofile content 

Types of Insurance Licensed to Write: 

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• Allied Coverages 

• Burglary & Theft 

• Fire 

• Forgery 

• Glass 

• Inland Marine 

• Liability Other than Auto 

Use of Credit: 

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To determine if a company uses credit information for private passenger automobile or homeowners 

insurance. 

Click Here for Use of Credit 

Attorney for Service: 

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Click Here for Attorney for Service Guidelines 

Chris Granger 

15700 Long Vista Drive 

Austin TX 78728 -3822 

Rating By Financial Organization: 

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The following organizations rate insurance companies on their financial strength and stability. Some of 

these companies charge for their services. 

Financial Information: 

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lAs of: II 

lrotal Assets II 

lrotal Liabilities I 

I Asset to Liability Ratio 

I capital 

I Net Surplus 

AM. Best 

Weiss Ratings Inc. 

Standard & Poor's 

Moody's Investors Sel'\lice 

Fitch IBCA Duff and Phelos Ratings 

Dec. 31,2012 II Dec. 31,2013 

$2,204,004,831 II $2,254,762,187 

$1,541,786,575 II $1,533,507,997 

1.4 II 1.4 

$0 II $0 

$662,218,256 II $721,254,189 

II Dec. 31,2014 

II $2,281,746,242 

II $1,510,696,042 

II 1.5 

II $0 

II $771,050,200 

https://apps.tdi.state.tx.us/pcci/pcci_show_profi e.jsp?tdiNum=29750&cOfll)an~a111EFFIRE%201NSURANCE%20EXCHANGE&sy.;T}P8Code=CL 

I 

I 

I 

I 

I 

I 

-. 

214 
6/1812015 Display company profile content 

{frotal Life Ins II N/A N/A II N/A II 

Premiums: 

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lAs of: II Dec. 31,2012 II Dec. 31,2013 II Dec. 31, 2014 I 

jute and Annuities II N/A II N/A !I N/A ! 

/Accident and Health II $0 I $0 II $0 I 

jPropertyand Casualty II $43,968,061 $90,324,748 II $96,021,357 I 

jrotal Texas Premium II $43,968,061 $90,324,748 II $96,021,357 I I National Premium II II $1,355,100,056 $1,443,245,636 $1,512,462,873 

Complaint Information: 

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When considering the company's complaint index and ratio, be sure to review the company history 

information displayed below for recent acquisitions, mergers, or other events that may affect the 

figures displayed for this company. 

:j II Dec 31, 2013 [I Dec 31, 2014 II Jun 12, 2015 

Confirmed Complaints: II II II 

Life and Annuityll oil all 

Accident and Health II oil oil 

Homeowner II 511 4[1 

Automobile II 111 oil 

Workers' Compensation II oil oil 

Com plaint Ratio/Index II Ratio II Index !I Ratio II Index II 

Life and Annuities II N/AII N/All N/AII N/AII N/A 

Accident and Health II NIAll N/AII N/AII N/A[I N/A 

Homeowner[! .002911 .790711 .002511 .624711 N/A 

Automobile [I .ooooll .ooooll N/A[I N/AII N/A 

Workers' Compensation II N/AII N/AII N/AII N/AII N/A 

I 

I 

I oj 

ol 

oj 

ol 

o! 

I 

I 

I 

I 

I 

I 

Confirmed Complaints: the number of confirmed complaints closed against the company for the line of 

insurance and year indicated. A complaint is confirmed if the department receives information indicating 

that a company committed any violation of an applicable state insurance law or regulation, a federal 

requirement the department has authority to enforce or the term or condition of an insurance policy or 

certificate. A complaint is also confirmed if the complaint and company's response, considered together, 

suggest that the company was in error or that the complainant had a valid reason for the complaint. 

Complaint Ratios: the ratio, expressed as a percentage, is the number of closed confirmed complaints 

divided by the number of policies the company had in force for the line of insurance and year indicated. 

Complaint Index: indicates how a company's ratio of the number of complaints to the number of 

policyholders compares to the average for all insurers. The index is calculated by dividing the 

company's percentage of complaints for a specific line of insurance by the company's percentage of the 

policies in force for the same line of insurance. The average index is 1.00. A number less than 1 

https://apps.tdi.state.tx.uslpcci/pcci_show_profile.jsp?tdiNunF29750&compan}Name= FIRE%201NSU RANCE%20EXCHAN GE&sy.;T}1J9Code=CL 314 
6/18/2015 Displaycompanyprofile content 

indicates fewer complaints than average; a number greater than 1 indicates more complaints than 

average. For the most recent completed year, a given insurer's index may change over time, as policy 

count data is received by TDI. This will affect each insurer•s percentage of the total. 

complaints against an insurance company are not part of the complaint tally above if the insurance 

company served only as a Third Party Administrator {TPA), a company hired simply to administer the 

paperwork of a health plan. Instead, they are included in the complaint record of the insurance 

company or HMO that hired the TPA. If a bonafide self-insured benefit plan hired the TPA, no complaint 

numbers are recorded as a part of the company{fPA•s profile. Neither are profiles available for selfinsured plans, as such plans are regulated under federal law. 

Company History: 

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I Date II Event I 

107-15-20111 APPROVED TO WITHDRAW FROM WRITING TEXAS HOMEOWNER POLICY FORM A (HOA} 

IN TEXAS. 

106-30-20091 

APPROVED ACQUISmON OF 21ST CENTURY INSURANCE COMPANY OF THE SOUTHWEST 

(95971 lAND AIG ADVANTAGE INSURANCE COMPANY (93987) BY COMPANY, TRUCK 

INSURANCE EXCHANGE (84450), FARMERS INSURANCE EXCHANGE C27800l AND FARMERS 

GROUP, INC., A SUBSIDIARY OF ZURICH FINANCIAL SERVICES LTD. 

110-23-20001 PENALTY OF $20,000 FOR VIOLATION OF REQUESTING INSUREDS TO PRODUCE COPIES 

OF THEIR INCOME TAX RECORDS IN TEXAS. 

103-02-20001 COMPANY, FARMERS INSURANCE EXCHANGE AND TRUCK INSURANCE EXCHANGE, LOS 

ANGELES, CALIFORNIA ACQUIRED FOREMOST COUNTY MUTUAL INSURANCE COMPANY, B DALLAS, TEXAS AND FOREMOST LLOYDS OF TEXAS, LEWISVILLE, TEXAS. 

PENALTY OF $35,000 PAID BY COMPANY, FARMERS INSURANCE EXCHANGE, MIDCENTURY INSURANCE COMPANY AND TRUCK INSURANCE EXCHANGE FOR VIOLATIONS 

FOUND DURING A MARKET CONDUCT EXAMINATION IN ARIZONA. 

jo4-11-195011GRANDFATHERED FOR CAPITAL AND SURPLUS REQUIREMENTS I 

Company Officers: 

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For names of the company's current officers, please contact the company at the phone number listed in 

the Contact Information above or on their website. 

https:l/apps.tdi.state.tx.us/pcci/pcci_show_profile.jsp?tdiNum=:29750&compan}Name=FIRE%201NSURANCE%20EXCHANGE&s)ST~Code=CL 4/4 
6/1812015 Display company profile content 

Texas Department of Insurance 

333 Guadalupe St. P.O. Box 149104 Austin, TX 78714-9104 

TRUCK INSURANCE EXCHANGE 

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Show Exolanation of Terms 

Table of Contents 

General Info I Contact Info I Types of Insurance I Use of Credit I Attorney for Service 1 Ratings 1 Financial Info 1 Premiums 

I Complaint Ratios I Company Historv I Company Officers 

General Information: 

Retum to top. 

Type of Entity: 

Status ofTX License: 

Company Status: 

License Number: 

NAIC Number: 

TDI Company Number: 

FEIN: 

Home City/State: 

Origin: 

Reciprocal (RE) 

Active 

Normal Operations 

84450 

21709 

84450 

952575892 

CA 

Foreign 

Date Incorporated/Organized: 02/01/1935 

Date Licensed/Eligible/Registered in Texas: 03/10/1936 

Date Cancelled/Ineligible/Inactive: 

Contact Information: 

Retum to top. 

Mailing Address: P 0 Box 2478 Terminal Annex 

Los Angeles CA 90051 

Office Number: (323)932-3200 

Toll Free Number: (800)327-6377 

Fax Number: (323)930-4266 

Physical Address: 4680 Wilshire Blvd 

Los Angeles CA 90010 

Office Number: 

Toll Free Number: 

Fax Number: 

https:l/apps.tdi.state.tx.us/pcci/pcci_show_profile.jsp?tdiNum=84450&compan}Name=TRUCK%201NSURANCE%20EXCHANGE&s}6T}1)9Code=CL 1/4 
6/18/2015 Display company profile content 

Types of Insurance Licensed to Write: 

Return to top. 

• Accident 

• Aircraft Liability 

• Aircraft Physical Damage 

• Allied Coverages 

• Auto Physical Damage 

• Automobile Liability 

• Boiler & Machinery 

• Burglary & Theft 

• Fidelity & Surety 

• Fire 

• Glass 

• Health 

• Inland Marine 

• Liability Other than Auto 

• Livestock 

• Workers Compand Emp Liability 

Use of Credit: 

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To determine if a company uses credit information for private passenger automobile or homeowners 

insurance. 

Attorney for Service: 

Return to top. 

Click Here for Attorney for Service Guidelines 

Chris Granger 

15700 Long Vista Drive 

Austin TX 78728 -3822 

Rating By Financial Organization: 

Return to top. 

The following organizations rate insurance companies on their financial strength and stability. Some of 

these companies charge for their services. 

Financial Information: 

Return to top. 

AM Best 

Weiss Ratings Inc. 

Standard & Poo~s 

Moodys lnwstors Service 

Fitch IBCA Duff and Phelps Ratings 

https://apps.tdi.state.tx.us/pcci/pcci_show_profile.jsp?tdiNum=84450&compan~ame=TRUCK%20INSURANCE%20EXCHANGE&s}6T~ode=CL 2/4 
6/18/2015 Display company profile content 

lAs of: II Dec. 31,2012 II Dec. 31, 2013 II Dec. 31, 2014 

jrotal Assets ll $1,963,013,951 II $1,933,396,090 II $2,077,583,374 

jrotal Liabilities 

II $1,428,051,305 II $1,369,922,187 II $1,458,878,815 

jAsset to Liability Ratio 

II 1.3 II 1.4 II 1.4 I capital II $0 II $0 II $0 

jNet Surplus II $534,962,646 II $563,473,903 II $618,704,559 

jrotal Life Ins II NIA II NIA II NIA 

Premiums: 

Return to top. 

lAs ot II Dec. 31,2012 II Dec. 31, 2013 II Dec. 31, 2014 

I Life and Annuities II NIA II N/A II N/A 

I Accident and Health I $0 I $0 II $0 

I Property and Casualty $81,943,272 $74,439,212 II $74,247,177 

lrotal Texas Premium $81,943,272 $74,439,212 II $74,247,177 

I National Premium $76 7,653,007 $726,272,215 II $748,336,821 

Complaint Information: 

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When considering the company's complaint index and ratio, be sure to review the company history 

information displayed below for recent acquisitions, mergers, or other events that may affect the 

figures displayed for this company. 

ll Dec 31, 2013 II Dec 31, 2014 II Jun 12, 2015 I 

Confirmed Complaints: 11 jl II I 

0 11 Life and Annuityj o] oj 

Accident and Health II oil 0 11 ol 

Homeowner II oil 0 11 ol 

Automobile II oil o!l oj 

I Workers' Compensation II oil oil oj 

Complaint Ratio/Index II Ratio II Index II Ratio II Index II I 

Life and Annuities II N/AII N/AII NIAll NIAll NIA I 

Accident and Health II N/AII N/AII N/AII NIAll N/A I 

Homeowner II NIAll NIAll N/AII NIAll NIA I 

Automobile !I .ooool~ .ooooll .ooooll N/A I 

Workers' Compensation II .oooo 1 .oooo 1 .ooooll .ooooll NIA I 

I 

I 

l 

I 

I 

I 

l 

Confirmed Complaints: the number of confirmed complaints closed against the company for the line of 

insurance and year indicated. A complaint is confirmed if the department receives information indicating 

that a company committed any violation of an applicable state insurance law or regulation, a federal 

requirement the department has authority to enforce or the term or condition of an insurance policy or 

certificate. A complaint is also confirmed if the complaint and company's response, considered together, 

https://apps.tdi.state.tx.us/pcci/pcci_show _protile.jsp?tdiN um=84450&compan}Name= TRUCK%201NSU RAN CE%20EXCHANGE&s}S T}PeCode=CL 3/4 
611812015 Display company profile content 

suggest that the company was in error or that the complainant had a valid reason for the complaint. 

Complaint Ratios: the ratio, expressed as a percentage, is the number of closed confirmed complaints 

divided by the number of policies the company had in force for the line of insurance and year indicated. 

Complaintlndex: indicates how a company's ratio of the number of complaints to the number of 

policyholders compares to the average for all insurers. The index is calculated by dividing the 

company's percentage of complaints for a specific line of insurance by the company's percentage of the 

policies in force for the same line of insurance. The average index is 1.00. A number Jess than 1 

indicates fewer complaints than average; a number greater than 1 indicates more complaints than 

average. For the most recent completed year, a given insurer's index may change over time, as policy 

count data is received by TDI. This will affect each insurer's percentage of the total. 

Complaints against an insurance company are not part of the complaint tally above if the insurance 

company served only as a Third Party Administrator (TPA), a company hired simply to administer the 

paperwork of a health plan. Instead, they are included in the complaint record of the insurance 

company or HMO that hired the TPA. If a bonafide self-insured benefit plan hired the TPA, no complaint 

numbers are recorded as a part of the company{fPA's profile. Neither are profiles available for selfinsured plans, as such plans are regulated under federal law. 

Company History: 

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I B Date Jl Event I 

APPROVED ACQUismoN OF 21ST CENTURY INSURANCE coMPANY oF THE souTHWEST 

(95971 lAND AIG ADVANTAGE INSURANCE COMPANY C93987l BY COMPANY, FIRE 

INSURANCE EXCHANGE (29750), FARMERS INSURANCE EXCHANGE (27800> AND FARMERS 

GROUP, INC., A SUBSIDIARY OF ZURICH FINANCIAL SERVICES LTD. 

112-12-20031 

APPROVED TO WITHDRAW FROM WRITING MEDICAL MALPRACTICE LIABILITY 

INSURANCE IN TEXAS. COMPANY MAY NOT RE-ENTER MARKET FOR THIS LINE WITHOUT 

PRIOR APPROVAL UNTIL 12/12/2008. 

103-02-20001 

COMPANY, FARMERS INSURANCE EXCHANGE AND FIRE INSURANCE EXCHANGE, LOS 

ANGELES, CALIFORNIA ACQUIRED FOREMOST COUNTY MUTUAL INSURANCE COMPANY, 

DALLAS, TEXAS AND FOREMOST LLOYDS OF TEXAS, LEWISVILLE, TEXAS. 

lo9-19-199SIIAPPROVED TO WITHDRAW FROM THE FARM AND RANCH INSURANCE MARKET IN TEXAS. B I 

PENALTY OF $35,000 PAID BY COMPANY, FARMERS INSURANCE EXCHANGE, MIDCENTURY INSURANCE COMPANY AND FIRE INSURANCE EXCHANGE FOR VIOLATIONS 

FOUND DURING A MARKET CONDUCT EXAMINATION IN ARIZONA. 

lo3-10-193611GRANDFATHERED FOR CAPITAL AND SURPLUS REQUIREMENTS I 

Company Officers: 

Return to top. 

For names of the company's current officers, please contact the company at the phone number listed in 

the Contact Information above or on their website. 

https://apps.tdi.state.tx.us/pcci/pcci_show_profile.jsp?tdiNum:;8445o&compan}Narne=TRUCK%201NSURANCE%20EXCHANGE&sysT~ode=CL 4/4 
Farmers Defendants' Exhibit 18 
! 

NO. GV-202501 

THE STATE OF TEXAS AND TEXAS § 

COMMISSIONER OF INSURANCE, § 

§ 

IN THE DISTRICT COURT 

Plaintiffs, § 

§ OF TRAVIS COUNTY 

v. § 

§ 

FARMERS GROUP, INC., ET AL. § 

§ 

Defendants. § 261st JUDICIAL DISTRICT 

§ 

DECLARATION OF SAMUEL ISSACHAROFF 

STATE OF NEW YORK § 

§ 

COUNTY OF NEW YORK § 

Farmers 

Defendants' 

Exhibit 

1. My name is Samuel Issacharoff, my date of birth is September 15, 1954, and my 

address is 40 Washington Square South Room 411J, New York, NY, 10012-1005, 

USA. 

2. I am the Bonnie and Richard Reiss Professor of Constitutional Law at New York 

University School of Law. I began my teaching career in 1989 at the University of 

Texas, where I held the Joseph D. Jamail Centennial Chair in Law. In 1999, I moved 

to Columbia Law School, where I was the Harold R. Medina Professor in Procedural 

Jurisprudence. A true and correct copy of my current curriculum vitae is attached to 

this declaration. 

3. I am a 1983 graduate of Yale Law School and a fellow ofthe American Academy of 

Arts and Sciences. I also served as the Reporter for the Principles of the Law of 

Aggregate Litigation of the American Law Institute. As indicated on my curriculum 

vitae, I have researched and reviewed numerous class action decisions and other 

authorities and have published a number of articles, chapters, and books on various 

topics related to class actions. I also have extensive practical experience with class 

actions. In particular, I have drafted, consulted on, and participated in the 

administration of many class action settlements throughout the country in both state 

and federal courts. I have also served as an expert witness in more than a dozen class 

actions in general and settlements in particular. 

4. I have served as an expert witness on class-related issues for the Farmers defendants in 

this matter since 2003, and I testified at the May 2003 preliminary approval hearing. I 

18 

No.0.1-GV-GZ-oD2501 
am unable to be at the July 1, 2015, hearing on preliminary approval in this matter, as 

I have a preexisting commitment out of the country during that time. If I were able to 

present live testimony at the hearing, I would offer the following opinions for the 

Court's consideration in connection with the decision on preliminary approval of the 

Second Amended Settlement Agreement, as supplemented ("Settlement Agreement"). 

5. I have reviewed the Fourth Amended Plea in Intervention of Intervenor Charles 0. 

Grigson, as well as the testimony of Mr. Grigson's expert witness, Charles Silver from 

the December 4, 2014, hearing in this matter. I understand Mr. Grigson to be 

challenging the Settlement Agreement because of the issue of how the costs of the 

settlement are to be borne. As I understand the opposition, Mr. Grigson's view is that 

it is unfair and improper for defendant Farmers Group, Inc., not to be funding the entire 

settlement. 

6. Any class settlement is ultimately a question of the proper resolution of the case with 

regard to the claims of the plaintiff class. For example, in Section 3.05 of the ALI 

Principles of Aggregate Litigation there are four criteria that instruct a supervising 

court in the approval of a classwide settlement. The four are: (I) the adequacy of the 

representation of the class; (2) the fairness and reasonableness of the relief obtained in 

light of the risks and costs of further litigation; (3) the equitable treatment of class 

members relative to each other; and ( 4) the absence of collusion in the negotiations. 

The defendants' respective contributions to the funding of the Settlement Agreement 

are not mentioned in this account, nor has this been an issue in reported class action 

decisions with which I am familiar. Instead, the issue is whether the consideration to 

the class members is fair, adequate, and reasonable in exchange for the release of their 

existing claims against the defendants. 

7. In all my experience with class action settlements, I have not seen a court's settlement 

approval tum on the inter-defendant distribution of losses. Nor have I seen an objecting 

class member successfully challenge a class action settlement based on the allocation 

of settlement funding as between the payors of the settlement. The issue for class 

members is the exchange they receive for the release of their claims. To the extent 

there were a dispute over allocation of responsibility among various defendants or their 

insurers, for example, that would most likely be the subject of a different proceeding at 

a different time. 

8. Allocation among different potential cost-bearers does come up in class action 

settlements. In class action settlements of securities and shareholder derivative 

litigation, for example, the settling defendants frequently include the corporation (in 

which the plaintiff is a shareholder/owner) and officers and directors of the corporation. 

The allocation itself is not part of the settlement analysis, except insofar as it might 

indicate that the settlement did not obtain a sufficient amount for the plaintiff class. 

2 
9. In all of my experience, I have never seen an objecting class member successfully 

challenge approval of a class action securities or derivative settlement based on these 

allocation decisions. 

I declare under penalty of pe1jury that the foregoing is true and correct. 

EXECUTED in New York County, State ofNew York, on the 28th day ofMay, 2015. 

Samuel Issacharoff 

3