Farmers Insurance receives approval to acquire Zurich North America Commercial's Small Business Solutions book renewal rights

Los Angeles — June 16, 2008 — Farmers Insurance Group,® the nation's third-largest personal lines property and casualty insurance group, operating from Los Angeles since 1928, announced today that all regulatory approvals have been obtained for Truck Insurance Exchange (the "Exchange"), which is one of the Farmers Exchanges, to acquire the rights to access renewals on Zurich North America Commercial's Small Business Solutions (SBS) book of business. In addition, the management of the SBS book of business will transfer to Farmers Group, Inc.

"We are pleased that we can now go forward with the integration of Farmers Business Insurance and Zurich Small Business Solutions,” said Paul N. Hopkins, chief executive officer of Farmers Group, Inc. “It will enhance the depth and breadth of products available to customers, create an enhanced distribution capability that competes even more effectively in both the exclusive agent and independent agent channels, and will benefit our entire organization."

The SBS book consists of four primary lines of business: business owner's policy (BOP) for property, general liability and umbrella, commercial auto and workers' compensation — and is sold in 49 states plus the District of Columbia.

Although the management of the SBS book will shift to Farmers immediately, the full transition of the business to Farmers Business Insurance is estimated to occur within 18 to 24 months.

In the interim, Zurich companies that underwrite the SBS book and the Exchange will enter into a reinsurance arrangement, through which SBS premium will continue to be written on its current paper, but fully ceded to the Exchange. Other terms of the proposed transaction were not disclosed.

In 2007, Farmers Small Business Insurance unit produced $1.6 billion in gross written premium. This transaction will make the Exchange one of the top-five carriers in the U.S. small business market. The SBS book is estimated at approximately $700 million.

Mhayse Samalya, president of Farmers Business Insurance, added, “The economics of the small commercial business and the increasing level of sophistication and investment needed to do everything from predictive analytics, new product development, building state-of-the-art automation capabilities while at the same time continuing to implement processing efficiencies, makes winning in small commercial a game of scale.” Samalya added, “At $2.3 billion of small commercial, we now have that scale. Our goal is to leverage our size and substantial resources into a regional field based model that seeks to solve problems for agents.”

Mr. Samalya noted to better serve the thousands of Independent agents that currently offer SBS products, Farmers has appointed Carl N. Hackling as the new leader of the small commercial business distributed through independent agents. Samalya noted that Mr. Hackling will be field based and will immediately assume all responsibility for the distribution and underwriting of this business.

Jerry Carnahan, EVP of Exclusive Agency Field Operations, remarked “This transaction will result in significant investments that will also help our Farmers Agents win with customer focused products and industry leading systems.” He further stated that the field-based strategy is perfectly suited to support our local agents that provide advice and service in the communities that we serve. “

Farmers Group, Inc. is a wholly owned subsidiary of Zurich Financial Services, an insurance-based financial services provider with a global network of subsidiaries and offices in North America and Europe as well as in Asia Pacific, Latin America and other markets. Farmers® is the nation's third-largest Personal Lines Property & Casualty insurance group. Property and casualty products are underwritten and issued by the Farmers Insurance Exchange, Truck Insurance Exchange and Fire Insurance Exchange and their subsidiaries, which Farmers Group, Inc. manages but does not own. Headquartered in Los Angeles and doing business in 50 states, the Farmers insurers provide Homeowners, Auto, Business, Life insurance and financial services to more than 10 million households. For more information about Farmers, visit our Web site at


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