Farmers

Farmers provides through Farmers Group, Inc. (FGI) and its subsidiaries non-claims related management services to the Farmers Exchanges. FGI receives fee income for the provision of services to the Farmers Exchanges, which are managed but not owned by Farmers Group, Inc. a wholly owned subsidiary of the Group. This segment also comprises the Farmers Re business which includes only reinsurance assumed from the Farmers Exchanges by the Group. The Farmers Exchanges are prominent writers of personal lines and small commercial lines business in the United States.

Business operating profit for Farmers in 2011 decreased by USD 200 million to USD 1.5 billion, or by 12 percent. Farmers Management Services business operating profit increased by USD 5 million to USD 1.4 billion mainly driven by a reduction in operating expenses and 21st Century expenses in 2011 offset in part by lower revenues resulting from the planned run-off of the 21st Century agency auto book of business in the Farmers Exchanges, which are managed but not owned by Farmers Group, Inc., a wholly owned subsidiary of the Group.

Farmers Re business operating profit decreased by USD 205 million to USD 116 million, or by 64 percent, reflecting the net reduction in the All Lines Quota Share reinsurance agreement (All Lines agreement) with the Farmers Exchanges, as well as high weather-related losses in the U.S. in 2011, higher loss trends, and reduced investment income.