                                                                                                   ACCEPTED
                                                                                               03-15-00436-CV
                                                                                                       6131184
                                                                                    THIRD COURT OF APPEALS
                                                                                               AUSTIN, TEXAS
                                                                                         7/20/2015 10:39:40 AM
                                                                                             JEFFREY D. KYLE
                                                                                                        CLERK
                                 No. 03-15-00436-CV

                           In the Third Court of Appeals                 FILED IN
                                   Austin, Texas                  3rd COURT OF APPEALS
                                                                       AUSTIN, TEXAS
                                                                  7/20/2015 10:39:40 AM
                      CHARLES O. “CHUCK” GRIGSON,                     JEFFREY D. KYLE
                               Appellant,                                  Clerk


                                         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                       Joshua R. Godbey
State Bar No. 08417650                  State Bar No. 24049996
mgreer@adjtlaw.com                      joshua.godbey@texasattorneygeneral.gov
ALEXANDER DUBOSE JEFFERSON &            Ryan S. Mindell
TOWNSEND LLP                            State Bar No. 24089707
515 Congress Ave., Suite 2350           ryan.mindell@texasattorneygeneral.gov
Austin, Texas 78701                     Jennifer S. Jackson
Telephone: 512-482-9300                 State Bar No. 24060004
Telecopier: 512-482-9303                jennifer.jackson@texasattorneygeneral.gov
                                        OFFICE OF THE ATTORNEY GENERAL
M. Scott Incerto                        P.O. Box 12548
State Bar No. 10388950                  Austin, Texas 78711-2548
scott.incerto@nortonrosefulbright.com   Telephone: (512) 475-4209
NORTON ROSE FULBRIGHT US LLP            Fax: (512) 477-2348)
98 San Jacinto Blvd., Suite 1100
Austin, Texas 78701                     COUNSEL FOR PLAINTIFFS-APPELLEES, THE
Telephone: 512-474-5201                 STATE OF TEXAS, THE TEXAS DEPARTMENT OF
Telecopier: 512-536-4598                INSURANCE, AND THE TEXAS COMMISSIONER
                                        OF INSURANCE
COUNSEL FOR DEFENDANTS-APPELLEES
THE FARMERS PARTIES
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 Parties 1

(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.


                                             -1-
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



                                           -2-
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]




                                          -3-
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



                                         -4-
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.


                                                -5-
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.


                                                -6-
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.”


                                                -7-
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.




                                            -8-
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


                                -9-
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




         -10-
                           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                            Michael J. Woods
Philip K. Maxwell                         8620 N. New Braunfels, Ste. 522
1609 Shoal Creek Blvd. # 100              San Antonio, TX 78217
Austin, TX 78701                          MichaelJWoods@sbcglobal.net
Joe@JoeLongley.com
phil@philmaxwell.com                      Pro Se Intervenor/Objector

Counsel for Appellant Charles O.
“Chuck” Grigson

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




                                       -11-
      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




                                        -12-
                         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   7/2/2015 Preliminary Approval Hearing Transcript (certified)

Exhibit 2   7/1/2015 Preliminary Approval Hearing Transcript (certified)

Exhibit 3   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)




                                   -13-
              Exhibit 1
 TO APPELLEES’ JOINT RESPONSE TO APPELLANT GRIGSON’S
EMERGENCY MOTION TO STAY THE SENDING OF CLASS NOTICE
                                                              1


 1                        REPORTER'S RECORD
                        VOLUME 2 OF 2 VOLUMES
 2             TRIAL COURT CAUSE NO. D-1-GV-02-002501
 3   STATE OF TEXAS, THE TEXAS    ) IN THE DISTRICT COURT
     DEPARTMENT OF INSURANCE,     )
 4   AND THE TEXAS                )
     COMMISSIONER OF              )
 5   INSURANCE,                   )
              Plaintiffs,         )
 6                                )
     VS.                          )
 7                                )
                                  )
 8   FARMERS GROUP, INC.,         )
     FARMERS UNDERWRITERS         ) TRAVIS COUNTY, TEXAS
 9   ASSOCIATION, FIRE            )
     UNDERWRITERS ASSOCIATION,    )
10   FARMERS INSURANCE            )
     EXCHANGE, FIRE INSURANCE     )
11   EXCHANGE, TEXAS FARMERS      )
     INSURANCE COMPANY,           )
12   MID-CENTURY INSURANCE        )
     COMPANY OF TEXAS, AND        )
13   FARMERS TEXAS COUNTY         )
     MUTUAL INSURANCE COMPANY,    )
14            Defendants.         ) 261ST JUDICIAL DISTRICT

15     -------------------------------------------------

16
                    HEARING ON JOINT MOTION FOR
17             PRELIMINARY APPROVAL OF SECOND AMENDED
                        SETTLEMENT AGREEMENT
18

19     --------------------------------------------------

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

21 proceedings came on to be heard in the above-entitled

22 and numbered cause before the Honorable Scott H.

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

24 Texas;

25         Proceedings reported by machine shorthand.
                                                             2


 1                   A P P E A R A N C E S

 2
   FOR THE PLAINTIFFS, THE STATE OF TEXAS, THE TEXAS
 3 DEPARTMENT OF INSURANCE, AND THE TEXAS COMMISSIONER OF
   INSURANCE:
 4
        JOSHUA GODBEY
 5      SBOT NO. 24049996
        RYAN MINDELL
 6      SBOT NO. 24089707
        JENNIFER JACKSON
 7      SBOT NO. 24060004
        Assistant Attorney General
 8      OFFICE OF THE ATTORNEY GENERAL
        P.O. Box 12548
 9      Austin, Texas 78711-2548
        (512) 475-4209
10

11
   FOR DEFENDANTS FIRE UNDERWRITERS ASSOCIATION, FARMERS
12 GROUP, INC., FARMERS INSURANCE EXCHANGE, FIRE INSURANCE
   EXCHANGE, TEXAS FARMERS INSURANCE COMPANY, MID-CENTURY
13 INSURANCE COMPANY OF TEXAS, MID-CENTURY INSURANCE
   COMPANY, FARMERS TEXAS COUNTY MUTUAL INSURANCE COMPANY,
14 TRUCK INSURANCE EXCHANGE, AND TRUCK UNDERWRITERS
   ASSOCIATION:
15
        M. SCOTT INCERTO
16      SBOT NO. 10388950
        NORTON ROSE FULBRIGHT
17      98 San Jacinto Boulevard, Suite 1100
        Austin, Texas 78701
18      (512) 474-5201

19      DARRYL ANDERSON
        SBOT NO. 24008694
20      NORTON ROSE FULBRIGHT
        1301 McKinney, Suite 5100
21      Houston, Texas 77010-3095
        (713) 651-5151
22
        MARCY HOGAN GREER
23      SBOT NO. 08417650
        ALEXANDER, DUBOSE, JEFFERSON & TOWNSEND
24      515 Congress Avenue, Suite 2350
        Austin, Texas 78701
25      (512) 482-9300
                                                     3


 1                    A P P E A R A N C E S
                           (CONTINUED)
 2

 3
     FOR INTERVENORS GERALD HOOKS AND LESLY HOOKS:
 4
          JOSEPH BLANKS
 5        SBOT NO. 02456770
          LAW OFFICE OF JOSEPH C. BLANKS
 6        P.O. Box 999
          Doucette, Texas 75942
 7        (409) 837-9707

 8

 9 FOR INTERVENOR MICHAEL J. WOODS:

10        MICHAEL J. WOODS, PRO SE
          8620 N. New Braunfels #522
11        San Antonio, Texas 78217
          (210) 822-1560
12

13
     FOR INTERVENOR CHARLES O. "CHUCK" GRIGSON:
14
          JOE K. LONGLEY
15        SBOT NO. 12542000
          LAW OFFICE OF JOE K. LONGLEY
16        1609 Shoal Creek Boulevard, Suite 100
          Austin, Texas 78701
17        (512) 477-4444

18        PHILIP K. MAXWELL
          SBOT NO. 13254000
19        LAW OFFICE OF PHILIP K. MAXWELL
          1609 Shoal Creek Boulevard, Suite 100
20        Austin, Texas 78701
          (512) 947-5434
21

22
23

24

25
                                                                 4


 1                        I N D E X

 2                         VOLUME 2

 3
                 HEARING ON JOINT MOTION FOR
 4          PRELIMINARY APPROVAL OF SECOND AMENDED
                     SETTLEMENT AGREEMENT
 5
                         JULY 2, 2015
 6

 7 DEFENDANT FARMERS' WITNESSES

 8                            Direct       Cross            Vol.

 9 RONALD MYHAN
        By Mr. Incerto              5                        2
10      By Mr. Mindell                          51           2
        By Mr. Maxwell                          56           2
11      By Mr. Incerto            105                        2

12
                                                     Page   Vol.
13

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

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

16 Statements by Mr. Blanks (in lieu of
      opening statements earlier)............         108    2
17
   Statements by Mr. Woods...................         109    2
18
   Statements by Ms. Greer...................         110    2
19
   Court's Ruling............................         116    2
20
   Adjournment...............................         135    2
21
   Court Reporter's Certificate..............         136    2
22
23

24

25
                                                               26


 1     A.     Of course the Exchanges, you know, write the

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

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

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

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

 6 18 percent overcharging and we've settled at 6.8, we

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

 8 the 6.8 to the policyholders since we're holding the

 9 money to start with.

10     Q.     And then anything over 6.8 percent that's

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

12 excessive will be retained by the Exchanges; is that

13 correct?

14     A.     Yes, it will.

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

16 settlement agreement is that FGI will reimburse the

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

18 these returned premiums.

19     A.     Of course.

20     Q.     Are you familiar with that?

21     A.     Yes, I am.

22     Q.     Do you believe that's fair?

23     A.     Of course.

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

25 question is, is this something that had been discussed
                                                            27


 1 before 2014, 2015?

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

 3 day one that the management fee would be returned for

 4 these premiums.

 5     Q.   What do you mean by day one?

 6     A.   Right when we were negotiating the settlement

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

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

 9 such a process to get to a settlement considering,

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

11 would be paid out pretty quickly and we were making

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

13 returned to the policyholders, and at the same time the

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

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

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

17 2002 time period with the original settlement?

18     A.   Yes.

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

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

21 you can with these times.

22     A.   Absolutely.

23     Q.   So there were discussions you're saying between

24 the Exchanges and FGI regarding returning the management

25 fee in connection with the original settlement?
                                                                 28


 1     A.      Yes.

 2     Q.      Had any amount been specifically calculated at

 3 that time?

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

 5 was just like we do with all the other lines of

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

 7 business that's affected, get the management fee for

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

 9 exercise.     Just calculate the management fee on the

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

11 comes back.

12     Q.      Mr. Myhan, with respect to the current

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

14 be reimbursed by FGI on the return premiums been

15 calculated?

16     A.      Yes, it has.

17     Q.      Who would -- who supervised that calculation?

18     A.      That'd be me.

19     Q.      And with respect to that calculation, can you

20 share with us what you determined is the amount of fees

21 to be reimbursed for the return of premiums?

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

23 with the current settlement that's out there.

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

25 expenses for class administration as well as a number
                                                            29


 1 that includes a portion of the fund that's set out to

 2 fund the credit usage notice class?

 3     A.     Absolutely.   As the supplement was being

 4 discussed with the board, talking in terms of the

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

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

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

 8 audit committee as we were discussing it going, well,

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

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

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

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

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

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

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

16 they go okay.

17                 So, you know -- so basically the

18 $10 million, supplemental payment, thicker notice

19 amount, the administrative costs, all that that were

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

21 give a placeholder in terms of each group participating

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

23 when you get all done with all those components.

24     Q.     Technically class administration does not

25 return a premium, but is there some contribution being
                                                                 30


 1 made there?

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

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

 4     Q.     Can you tell me how you calculated the amount

 5 of management fee to be returned?

 6     A.     Basically, for the homeowners book during these

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

 8 9.17 percent.     And so basically we're applying that

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

10 you know, the settlement here.

11     Q.     Mr. Leaman testified in 2003 that the overall

12 management fee for that year was about 11 percent.       Do

13 you recall that testimony?

14     A.     Yes, I do.

15     Q.     And is that accurate in your view?

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

17 before this reduced just the homeowners management fee.

18 Really as the Texas mold started to accelerate,

19 you know, FGI wanted to help the Exchanges' capital

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

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

22 Leaman quoted the overall management fee, so we have

23 other books of business that have different management

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

25 requires a lot more management company touching.     It's
                                                                45


 1 But the other two really don't have any hard and fast

 2 like leverage ratio type of things, but generally they

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

 4 the level they're at now.

 5                THE COURT:     So back when you were at the

 6 2 billion to 2.7 billion ratio -- 2 billion of which was

 7 notes right?

 8                THE WITNESS:     Uh-huh.

 9                THE COURT:     Did your notes get downgraded?

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

11 were in conversations with all three rating agencies at

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

13 three during 2002, 2003.

14                THE COURT:     Just wanted to make sure I

15 understood this.   Go ahead.

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

17 earlier that gross written premium today is about

18 18 billion.

19     A.   Uh-huh.

20     Q.   Is that a good number for 2014?

21     A.   Yes, it is.

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

23 Exchanges pay out in 2014?

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

25 what's happening, but if we -- you know, we've been
                                                              46


 1 averaging right about 100 combined ratio for the

 2 enterprise over this last few years, and so that would

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

 4 to three billion of loss adjustment expense, the claims

 5 adjusters' salaries.    It also includes legal expenses,

 6 things like that.    Probably about 3 billion in agents'

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

 8 big numbers.

 9     Q.     How would you characterize the financial

10 strength of the Exchanges today compared to 2002?

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

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

13 settlement in this case have any material impact on the

14 Exchanges' ability to pay claims?

15     A.     No, absolutely not.

16     Q.     Will it have any material impact on the overall

17 financial strength of the Exchanges?

18     A.     No, it will not.

19     Q.     Will it have any material impact on its

20 ratings?

21     A.     No.   It's too small.

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

23 have any impact in terms of increasing rates for

24 policyholders?

25     A.     Well, as we heard yesterday, you know,
                                                              47


 1 obviously it won't from our perspective, but it would be

 2 impossible to actually have that happen since it's based

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

 4 experience and then we try to project what those losses

 5 will be going forward and then come up with a premium

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

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

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

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

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

11 never be allowed by any of the regulators.

12     Q.    When this case arose in 2002 and settlement

13 discussions ensued, did the Exchanges set up a reserve

14 for the costs that they were projecting or estimating

15 going forward?

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

17 settled fairly quickly.   So once a settlement was

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

19 at that time.

20     Q.    What was the estimated amount of reserve?

21     A.    I believe that was around $73 million,

22 something in that ballpark.

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

24 about reserves.   Is there a difference between reserves

25 that are set by the Exchanges written in connection with
                                                                     48


 1 claims that are filed by policyholders versus reserves

 2 set up on a lawsuit like this?

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

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

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

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

 7 through our systems, you know, the paids and the

 8 reserves that they're setting up.     And then our

 9 actuaries look at those patterns and try to predict,

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

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

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

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

14 of reserves sitting out there now.

15                  The legal reserves are kind of more of

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

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

18 accounting principles.     That's what the Exchanges are

19 governed by.    So it becomes a discussion, is this

20 probable and measurable in terms of what this is.           And

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

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

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

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

25 for maybe more than five million dollars, let's kind of
                                                               49


 1 set up a reserve for that.     And that's -- you know, this

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

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

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

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

 6 going to be.

 7     Q.     Are the reserves separate from the surplus?

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

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

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

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

12 amendment came along we bumped the reserve up for the

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

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

15 the other stuff.

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

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

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

19 surplus?

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

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

22 been fully reserved.

23     Q.     Are the policyholders owners of the Exchanges?

24     A.     In a sense they are.

25     Q.     In what sense?
                                                                   50


 1     A.      In a sense where upon liquidation their claims

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

 3 in line there as owners of the Exchanges.        They also

 4 have a voice in electing the board of governors as their

 5 representatives to represent them as policyholders of

 6 the Exchanges.

 7     Q.      Can a policyholder of the Exchanges decide that

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

 9 possible?

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

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

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

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

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

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

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

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

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

19 your liability really.

20     Q.      If a subscriber to the Exchanges decides to go

21 purchase insurance from a different company and not from

22 the Exchanges --

23     A.      What?     Oh, okay.

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

25 rights in the surplus or access to the Exchanges upon
                                                            51


 1 termination in their insurance contract?

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

 3 affiliated.    They're no longer a member of the

 4 Exchanges.

 5     Q.   Do they have continued liability to the

 6 Exchanges?

 7     A.   No, they do not.

 8     Q.   With respect to homeowners and auto

 9 policyholders of the Exchanges, do they receive

10 dividends from the surplus?

11     A.   Not for auto and fire, no.

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

13 somehow take advantage of the increase in surplus?

14     A.   No, they do not.

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

16 settlement by the Exchanges affect in any material way

17 the policyholders' interest in the surplus?

18     A.   It will not.

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

20 Honor.

21                      CROSS-EXAMINATION

22 BY MR. MINDELL:

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

24 money in the arbitrage between your reserve notes and

25 your investments on that money.    Why is that?
                                                              52


 1     A.   Well, the surplus notes are so deeply

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

 3 we had to actually go into the markets during 2002,

 4 there would have been a whopping premium or probably

 5 nobody would have bought them at all because of our

 6 financial ratings were under fire at the time.

 7                 But in a stable market like it is now,

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

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

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

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

12 what we could actually invest those proceeds in.

13                 For example, the Exchanges always have

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

15 investment philosophy, so our duration generally, which

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

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

18 on things going either way, and so these notes are

19 longer duration, so they cost a little more, plus

20 they're subordinated.   So the difference between what we

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

22 always a difference.

23     Q.   And why are your surplus investments so

24 conservative?

25     A.   You know, generally we keep -- you know, going
                                                               53


 1 back to 2002 as an example, you know, that was also a

 2 time during a lot of the turmoil in investment markets.

 3 The tech bubble had just burst.     There was lots of

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

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

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

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

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

 9 We kind of hedge our bets and keep a very conservative

10 profile, which got us through 2008 in fine fashion,

11 where a lot of our peers had significant impairments and

12 had some problems.

13     Q.   You mentioned there's approximately 5.6 billion

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

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

16     Q.   And why do the Exchanges pool their surplus?

17     A.   Well, the Exchanges all participate in a

18 pooling of interest reinsurance arrangement.     We started

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

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

21 the pooling agreement to have a mix of business which

22 includes all the Farmers business.     So not to get into

23 any accountant geek stuff here, because I do have some

24 sympathy for my audience, and people would be taking

25 their own lives if I got into detail on this, but --
                                                                  54


 1                  THE COURT:     It just diversifies your risk.

 2                  THE WITNESS:     Yes.   We add all the

 3 premiums together at Farmers Exchange and then it gets

 4 ceded out to the pooling participants.        So each of the

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

 6 end up with a mix of business that includes auto and

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

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

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

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

11 Insurance of Ohio picked up some, Farmers Insurance of

12 Washington picked up some, the three Exchanges picked up

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

14 together.

15                  So it dilutes the risk and also helps us

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

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

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

19 around in terms of dividends and different things.

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

21 efficient way of also managing the capital for all the

22 entities.   And you can see it in the rating agencies

23 where they rate the Farmers pool and then give the same

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

25 the companies and just go down the list and give them
                                                                  55


 1 all the same rating because that's the rating of the

 2 Farmers pool.     Does that make sense to everybody?

 3                  THE COURT:     It probably helps in selling

 4 the notes, too, doesn't it?

 5                  THE WITNESS:     Yes.   Yeah, it makes it

 6 easier and more transparent to figure out what we're

 7 doing.

 8                  THE COURT:     I get it.

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

10 challenges that some of the Exchanges faced in 2002 and

11 2003.    Were the Exchanges ever in any danger of

12 liquidation during that time?

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

14 kept going.     In our discussions with the California

15 Insurance Department, there was an understanding that if

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

17 some accounting geek stuff here, but if it fell below

18 250 percent, we could probably count on them denying

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

20 is like they have a minimum level of capital for your

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

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

23 ended I think 2002 with Farmers Exchange at a

24 251 percent RBC level, and that was after we had

25 initiated a quota share program to take some of the
                                                              136


 1                     REPORTER'S CERTIFICATE

 2

 3 THE STATE OF TEXAS    )

 4 COUNTY OF TRAVIS      )

 5                     I, Chavela V. Crain, Official Court

 6 Reporter in and for the 53rd District Court of Travis

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

 8 and foregoing contains a true and correct transcription

 9 of all portions of evidence and other proceedings

10 requested in writing by counsel for the parties to be

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

12 above-styled and numbered cause, all of which occurred

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

14         I further certify that this Reporter's Record of

15 the proceedings truly and correctly reflects the

16 exhibits, if any, offered in evidence by the respective

17 parties.

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

19 2015.

20
                          /s/ Chavela V. Crain
21                        Chavela V. Crain
                          Texas CSR 3064, RMR, CRR
22                        Expiration Date: 12/31/2015
                          Official Court Reporter
23                        53rd District Court
                          Travis County, Texas
24                        P.O. Box 1748
                          Austin, Texas 78767
25                        (512) 854-9322
              Exhibit 2
 TO APPELLEES’ JOINT RESPONSE TO APPELLANT GRIGSON’S
EMERGENCY MOTION TO STAY THE SENDING OF CLASS NOTICE
                                                              1


 1                        REPORTER'S RECORD
                        VOLUME 1 OF 2 VOLUMES
 2             TRIAL COURT CAUSE NO. D-1-GV-02-002501
 3   STATE OF TEXAS, THE TEXAS    ) IN THE DISTRICT COURT
     DEPARTMENT OF INSURANCE,     )
 4   AND THE TEXAS                )
     COMMISSIONER OF              )
 5   INSURANCE,                   )
              Plaintiffs,         )
 6                                )
     VS.                          )
 7                                )
                                  )
 8   FARMERS GROUP, INC.,         )
     FARMERS UNDERWRITERS         ) TRAVIS COUNTY, TEXAS
 9   ASSOCIATION, FIRE            )
     UNDERWRITERS ASSOCIATION,    )
10   FARMERS INSURANCE            )
     EXCHANGE, FIRE INSURANCE     )
11   EXCHANGE, TEXAS FARMERS      )
     INSURANCE COMPANY,           )
12   MID-CENTURY INSURANCE        )
     COMPANY OF TEXAS, AND        )
13   FARMERS TEXAS COUNTY         )
     MUTUAL INSURANCE COMPANY,    )
14            Defendants.         ) 261ST JUDICIAL DISTRICT

15     -------------------------------------------------

16
                    HEARING ON JOINT MOTION FOR
17             PRELIMINARY APPROVAL OF SECOND AMENDED
                        SETTLEMENT AGREEMENT
18

19     --------------------------------------------------

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

21 proceedings came on to be heard in the above-entitled

22 and numbered cause before the Honorable Scott H.

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

24 Texas;

25         Proceedings reported by machine shorthand.
                                                             2


 1                   A P P E A R A N C E S

 2
   FOR THE PLAINTIFFS, THE STATE OF TEXAS, THE TEXAS
 3 DEPARTMENT OF INSURANCE, AND THE TEXAS COMMISSIONER OF
   INSURANCE:
 4
        JOSHUA GODBEY
 5      SBOT NO. 24049996
        RYAN MINDELL
 6      SBOT NO. 24089707
        JENNIFER JACKSON
 7      SBOT NO. 24060004
        Assistant Attorney General
 8      OFFICE OF THE ATTORNEY GENERAL
        P.O. Box 12548
 9      Austin, Texas 78711-2548
        (512) 475-4209
10

11
   FOR DEFENDANTS FIRE UNDERWRITERS ASSOCIATION, FARMERS
12 GROUP, INC., FARMERS INSURANCE EXCHANGE, FIRE INSURANCE
   EXCHANGE, TEXAS FARMERS INSURANCE COMPANY, MID-CENTURY
13 INSURANCE COMPANY OF TEXAS, MID-CENTURY INSURANCE
   COMPANY, FARMERS TEXAS COUNTY MUTUAL INSURANCE COMPANY,
14 TRUCK INSURANCE EXCHANGE, AND TRUCK UNDERWRITERS
   ASSOCIATION:
15
        M. SCOTT INCERTO
16      SBOT NO. 10388950
        NORTON ROSE FULBRIGHT
17      98 San Jacinto Boulevard, Suite 1100
        Austin, Texas 78701
18      (512) 474-5201

19      DARRYL ANDERSON
        SBOT NO. 24008694
20      NORTON ROSE FULBRIGHT
        1301 McKinney, Suite 5100
21      Houston, Texas 77010-3095
        (713) 651-5151
22
        MARCY HOGAN GREER
23      SBOT NO. 08417650
        ALEXANDER, DUBOSE, JEFFERSON & TOWNSEND
24      515 Congress Avenue, Suite 2350
        Austin, Texas 78701
25      (512) 482-9300
                                                     3


 1                    A P P E A R A N C E S
                           (CONTINUED)
 2

 3
     FOR INTERVENORS GERALD HOOKS AND LESLY HOOKS:
 4
          JOSEPH BLANKS
 5        SBOT NO. 02456770
          LAW OFFICE OF JOSEPH C. BLANKS
 6        P.O. Box 999
          Doucette, Texas 75942
 7        (409) 837-9707

 8

 9 FOR INTERVENOR MICHAEL J. WOODS:

10        MICHAEL J. WOODS, PRO SE
          8620 N. New Braunfels #522
11        San Antonio, Texas 78217
          (210) 822-1560
12

13
     FOR INTERVENOR CHARLES O. "CHUCK" GRIGSON:
14
          JOE K. LONGLEY
15        SBOT NO. 12542000
          LAW OFFICE OF JOE K. LONGLEY
16        1609 Shoal Creek Boulevard, Suite 100
          Austin, Texas 78701
17        (512) 477-4444

18        PHILIP K. MAXWELL
          SBOT NO. 13254000
19        LAW OFFICE OF PHILIP K. MAXWELL
          1609 Shoal Creek Boulevard, Suite 100
20        Austin, Texas 78701
          (512) 947-5434
21

22

23
24

25
                                                               4


 1                           I N D E X

 2                           VOLUME 1

 3
                   HEARING ON JOINT MOTION FOR
 4            PRELIMINARY APPROVAL OF SECOND AMENDED
                       SETTLEMENT AGREEMENT
 5
                           JULY 1, 2015
 6

 7                                               Page     Vol.

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

 9
     INTERVENOR GRIGSON'S WITNESSES
10
                                   Direct    Cross        Vol.
11
     PATRICK KEEL
12        By Mr. Maxwell              33                   1

13                                               Page     Vol.

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

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

16
     PLAINTIFF STATE'S WITNESSES
17
                                   Direct    Cross        Vol.
18
   DAVID MATTAX
19      By Mr. Godbey                 83                   1
        By Mr. Incerto                          99         1
20      By Mr. Longley                         106         1

21
22
23

24

25
                                                                   5


 1                           I N D E X
                       VOLUME 1 - CONTINUED
 2
                   HEARING ON JOINT MOTION FOR
 3            PRELIMINARY APPROVAL OF SECOND AMENDED
                       SETTLEMENT AGREEMENT
 4
                           JULY 1, 2015
 5

 6 DEFENDANT FARMERS' WITNESSES

 7                               Direct       Cross           Vol.

 8 SHANNON   WHEATMAN
        By   Ms. Greer             160                         1
 9      By   Mr. Maxwell                          174          1
        By   Mr. Blanks                           189          1
10      By   Ms. Greer             200                         1
        By   Mr. Maxwell                          202          1
11      By   Mr. Blanks                           217          1

12

13 PLAINTIFF STATE'S WITNESSES

14                               Direct       Cross           Vol.

15 DAVID MATTAX (CONTINUED)
        By Mr. Longley                            219          1
16      By Mr. Blanks                             252          1
        By Mr. Woods                              266          1
17      By Mr. Incerto                            283          1
        By Mr. Longley                            290          1
18      By Mr. Woods                              295          1

19
                                                    Page      Vol.
20
     Adjournment...............................         300    1
21
     Court Reporter's Certificate..............         301    1
22
23

24

25
                                                             6


 1                     VOLUME 1 - CONTINUED

 2

 3                  ALPHABETICAL WITNESS INDEX

 4
                               Direct         Cross     Vol.
 5
     KEEL, PATRICK
 6        By Mr. Maxwell          33                     1

 7 MATTAX, DAVID
        By Mr. Godbey              83                    1
 8      By Mr. Incerto                            99     1
        By Mr. Longley                           106     1
 9
   MATTAX, DAVID (CONTINUED)
10      By Mr. Longley                            219    1
        By Mr. Blanks                             252    1
11      By Mr. Woods                              266    1
        By Mr. Incerto                            283    1
12      By Mr. Longley                            290    1
        By Mr. Woods                              295    1
13
   WHEATMAN, SHANNON
14      By Ms. Greer             160                     1
        By Mr. Maxwell                            174    1
15      By Mr. Blanks                             189    1
        By Ms. Greer             200                     1
16      By Mr. Maxwell                            202    1
        By Mr. Blanks                             217    1
17

18

19
20

21

22
23

24

25
                                                                 97


 1 break now.   How's that sound?

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

 3 so we'll all break now for 15 minutes.

 4                 (Recess taken)

 5                 THE COURT:    You may resume.

 6                 MR. GODBEY:    Thank you, Your Honor.

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

 8 payment of this settlement have any effect on the amount

 9 of premiums the Exchanges can charge in the future?

10     A.   No.

11     Q.   Why not?

12     A.   Premiums are determined on a prospective basis,

13 so anything that this settlement does with respect to

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

15 you will, in a future rate increase.

16     Q.   Are the Exchanges now subject to rate

17 regulation in the state of Texas?

18     A.   Yes.

19     Q.   Can you briefly explain what that means?

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

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

22 use them, but the commissioner of insurance can

23 disapprove of those rates.     And so the Department of

24 Insurance regularly reviews rates, and if they have

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


 1 companies can either withdraw their rates or file new

 2 rates that are more in conformance with what the TDI

 3 actuaries think are appropriate.

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

 5 use a settlement payment such as this to increase rates

 6 in the future?

 7     A.   No, that would not be permitted.

 8     Q.   Commissioner Mattax, were you in the courtroom

 9 when Mr. Woods gave his opening statement?

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

11 about to testify, so I ran out real quick.

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

13 his concerns with the settlement is that the prospective

14 rate reduction that has already been given by Farmers to

15 policyholders does not also include the return of

16 management fee that has been negotiated in the

17 supplement?

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

19 there wouldn't be a management fee collected because the

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

21 understand the argument.   You're talking about the

22 prospective rate reduction that's already occurred.

23     Q.   That's correct.

24     A.   Right.

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


 1                     REPORTER'S CERTIFICATE

 2

 3 THE STATE OF TEXAS    )

 4 COUNTY OF TRAVIS      )

 5                     I, Chavela V. Crain, Official Court

 6 Reporter in and for the 53rd District Court of Travis

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

 8 and foregoing contains a true and correct transcription

 9 of all portions of evidence and other proceedings

10 requested in writing by counsel for the parties to be

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

12 above-styled and numbered cause, all of which occurred

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

14         I further certify that this Reporter's Record of

15 the proceedings truly and correctly reflects the

16 exhibits, if any, offered in evidence by the respective

17 parties.

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

19 2015.

20
                          /s/ Chavela V. Crain
21                        Chavela V. Crain
                          Texas CSR 3064, RMR, CRR
22                        Expiration Date: 12/31/2015
                          Official Court Reporter
23                        53rd District Court
                          Travis County, Texas
24                        P.O. Box 1748
                          Austin, Texas 78767
25                        (512) 854-9322
     *
              Exhibit 3
 TO APPELLEES’ JOINT RESPONSE TO APPELLANT GRIGSON’S
EMERGENCY MOTION TO STAY THE SENDING OF CLASS NOTICE
                                                              1


 1                        REPORTER'S RECORD
                        VOLUME 1 OF 1 VOLUME
 2             TRIAL COURT CAUSE NO. D-1-GV-02-002501
 3   STATE OF TEXAS, THE TEXAS    ) IN THE DISTRICT COURT
     DEPARTMENT OF INSURANCE,     )
 4   AND THE TEXAS                )
     COMMISSIONER OF              )
 5   INSURANCE,                   )
              Plaintiffs,         )
 6                                )
     VS.                          )
 7                                )
     FARMERS GROUP, INC.,         )
 8   FARMERS UNDERWRITERS         )
     ASSOCIATION, FIRE            ) TRAVIS COUNTY, TEXAS
 9   UNDERWRITERS ASSOCIATION,    )
     FARMERS INSURANCE            )
10   EXCHANGE, FIRE INSURANCE     )
     EXCHANGE, TEXAS FARMERS      )
11   INSURANCE COMPANY,           )
     MID-CENTURY INSURANCE        )
12   COMPANY OF TEXAS, AND        )
     FARMERS TEXAS COUNTY         )
13   MUTUAL INSURANCE COMPANY,    )
              Defendants.         ) 261ST JUDICIAL DISTRICT
14
       -------------------------------------------------
15
                    A PORTION OF THE EXHIBITS FROM
16                 THE HEARING ON JOINT MOTION FOR
               PRELIMINARY APPROVAL OF SECOND AMENDED
17                       SETTLEMENT AGREEMENT
             (STATE/PLAINTIFF'S EXHIBITS 10, 11 AND 12
18            AND FARMERS DEFENDANTS' 11, 12 AND 18)

19     --------------------------------------------------

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

21 proceedings came on to be heard in the above-entitled

22 and numbered cause before the Honorable Scott H.

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

24 Texas;

25         Proceedings reported by machine shorthand.
                                                             2


 1                   A P P E A R A N C E S

 2
   FOR THE PLAINTIFFS, THE STATE OF TEXAS, THE TEXAS
 3 DEPARTMENT OF INSURANCE, AND THE TEXAS COMMISSIONER OF
   INSURANCE:
 4
        JOSHUA GODBEY
 5      SBOT NO. 24049996
        RYAN MINDELL
 6      SBOT NO. 24089707
        JENNIFER JACKSON
 7      SBOT NO. 24060004
        Assistant Attorney General
 8      OFFICE OF THE ATTORNEY GENERAL
        P.O. Box 12548
 9      Austin, Texas 78711-2548
        (512) 475-4209
10

11
   FOR DEFENDANTS FIRE UNDERWRITERS ASSOCIATION, FARMERS
12 GROUP, INC., FARMERS INSURANCE EXCHANGE, FIRE INSURANCE
   EXCHANGE, TEXAS FARMERS INSURANCE COMPANY, MID-CENTURY
13 INSURANCE COMPANY OF TEXAS, MID-CENTURY INSURANCE
   COMPANY, FARMERS TEXAS COUNTY MUTUAL INSURANCE COMPANY,
14 TRUCK INSURANCE EXCHANGE, AND TRUCK UNDERWRITERS
   ASSOCIATION:
15
        M. SCOTT INCERTO
16      SBOT NO. 10388950
        NORTON ROSE FULBRIGHT
17      98 San Jacinto Boulevard, Suite 1100
        Austin, Texas 78701
18      (512) 474-5201

19      DARRYL ANDERSON
        SBOT NO. 24008694
20      NORTON ROSE FULBRIGHT
        1301 McKinney, Suite 5100
21      Houston, Texas 77010-3095
        (713) 651-5151
22
        MARCY HOGAN GREER
23      SBOT NO. 08417650
        ALEXANDER, DUBOSE, JEFFERSON & TOWNSEND
24      515 Congress Avenue, Suite 2350
        Austin, Texas 78701
25      (512) 482-9300
                                                     3


 1                    A P P E A R A N C E S
                           (CONTINUED)
 2

 3
     FOR INTERVENORS GERALD HOOKS AND LESLY HOOKS:
 4
          JOSEPH BLANKS
 5        SBOT NO. 02456770
          LAW OFFICE OF JOSEPH C. BLANKS
 6        P.O. Box 999
          Doucette, Texas 75942
 7        (409) 837-9707

 8

 9 FOR INTERVENOR MICHAEL J. WOODS:

10        MICHAEL J. WOODS, PRO SE
          8620 N. New Braunfels #522
11        San Antonio, Texas 78217
          (210) 822-1560
12

13
     FOR INTERVENOR CHARLES O. "CHUCK" GRIGSON:
14
          JOE K. LONGLEY
15        SBOT NO. 12542000
          LAW OFFICE OF JOE K. LONGLEY
16        1609 Shoal Creek Boulevard, Suite 100
          Austin, Texas 78701
17        (512) 477-4444

18        PHILIP K. MAXWELL
          SBOT NO. 13254000
19        LAW OFFICE OF PHILIP K. MAXWELL
          1609 Shoal Creek Boulevard, Suite 100
20        Austin, Texas 78701
          (512) 947-5434
21
22
23

24

25
                                                               4


 1                           VOLUME 1

 2                        EXHIBIT INDEX

 3

 4 STATE/PLAINTIFF'S
   NO. DESCRIPTION               OFFERED     ADMITTED   VOL.
 5
   10   Jurat; Assets;              31           32      1
 6      Liabilities, Surplus and
        Other Funds; and Statement
 7      of Income pages from the
        2014 Annual Statement of
 8      Fire Insurance Exchange
        filed with the Texas
 9      Department of Insurance

10 11     Jurat; Assets;                31       32      1
          Liabilities, Surplus and
11        Other Funds; and Statement
          of Income pages from the
12        2014 Annual Statement of
          Farmers Insurance Exchange
13        filed with the Texas
          Department of Insurance
14
     12   Jurat; Assets;                31       32      1
15        Liabilities, Surplus and
          Other Funds; and Statement
16        of Income pages from the
          2014 Annual Statement of
17        Truck Insurance Exchange
          filed with the Texas
18        Department of Insurance

19
20

21

22
23

24

25
                                                                5


 1                   VOLUME 1 - CONTINUED

 2                EXHIBIT INDEX - CONTINUED

 3
   FARMERS DEFENDANTS'
 4 NO. DESCRIPTION                  OFFERED   ADMITTED   VOL.

 5 11   Declaration of R. Myhan,       30         31      1
        May 29, 2015 (Exhibit to
 6      Farmers' Reply in Support
        of Joint Motion for
 7      Preliminary Approval)

 8 12   TDI Reports on Surplus         30         31      1
        of Farmers Exchanges
 9      (Exhibit to Farmers' Reply
        in Support of Joint Motion
10      for Preliminary Approval)

11 18   Declaration of Samuel          30         31      1
        Issacaroff (Exhibit to
12      Farmers' Reply in Support
        of Joint Motion for
13      Preliminary Approval)
14

15

16
17

18

19

20

21

22
23

24

25
                                                             6


 1 STATE OF TEXAS   )

 2 COUNTY OF TRAVIS )

 3

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

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

 6 Texas, do hereby certify that the following exhibits

 7 constitute true and complete duplicates of the original

 8 exhibits, excluding physical evidence, offered into

 9 evidence during the Hearing on Joint Motion for

10 Preliminary Approval of Second Amended Settlement

11 Agreement in the above-entitled and numbered cause as

12 set out herein before the Honorable Scott Jenkins, Judge

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

14 Texas, occurring on July 1 and 2, 2015.

15      WITNESS MY OFFICIAL HAND on this the 16th day of

16 July, 2015.

17

18                      /s/ Chavela V. Crain
                        Chavela V. Crain
19                      Texas CSR 3064, RMR, CRR
                        Expiration Date: 12/31/2015
20                      Official Court Reporter
                        53rd District Court
21                      Travis County, Texas
                        P.O. Box 1748
22                      Austin, Texas 78767
                        (512) 854-9322
23

24

25
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



                                                          *~ 'cr---
                                                    BY·.AMYGARA
                                                        ASSISTANT CHIEF ANALYST
                                                        FINANCIAL ANALYSIS
.   "":   ~   .   .   .·.·•




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                                                                                                                         a. II INS an origlnai tiling? .......................     Yes( X   J Nol }
                                                                                                                         b.     nno.
                                                                           FebR.UII)', 2015                                   1. ~' ~.. amendment n:.nnbet.-. _
                                                                                                                              :;, Oallt111od ........ .
                                                                                                                              3. IIIU!Ill)er 01 pago& allachlld .
                         Keith Et.ldns.tlil)':e
                         I1IOYeml:el1. 2D17
                         ·o:rcor 01 A~F;~c;t ••eo:lrd 01 Govo!T'Or&               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.tUCt-


                                                                                  proved to me 0'1 tile beSI$ ol sa!islactory evidence to be
                                                                                  the person wno appearad befc:11 me,

                                                                                  a1111
                                                                                                  .•~....:}~.,ua~s:;_~e.L!:I'foo~r_ _ __
                                                                                  (2J _ __.o~Pf!!;io

                                                                                  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
                            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------
         &lbtGials. Clllh and lnvo$ted assets (Unes 1 to 11)------+--1.754.045,!M9 1------ --1.7&4,045,949 _1,849,&17,192
  12.
  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 c o m p a n l o s - - - - 1 1 - - - - -                        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$81                                                                        :M,s:B - - - - - -                           8,53&                 17,351.910
  19.    Guatanlyflnb racalvablo OTCift depOIIl                                                       108,214                                      106,214 1 - - - - -
  20.    Elecrrcri:dalapocesslnQ ecppmcntand s o f t w a r e - · - - - - - 1 - - - - -                           1------- --·---- 1------
  21.    FumfturD and Gqll!pmenl, lnc:lud!ng hoallh cate delivery assets
               1.1                        ) - - - - - · - - - - · - - 1------1------ t------ 1-------
  22.                                                                        1----·-- 1 - - - - - - 1 - - · - - -
         Hal adjuslmelllln assols and l!ablltlosduo to lorelgn exdlange rates ____ - - - - - - · -
  23.    Rocclwblostromparent.IAJbGidlarlosandaftlla:Ze$                                --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


                                                                                                                                       _____ ____ _____
         DETAILS OF WJUrE.INS
1101.     -------·-----·--·-·-··-···------··..--. ··--------·-- ·-·--····-·..··--··--·· ....                              .    ..
          ------·-----··--·-··---·-..--·-·-··-····-·-····-· ··--·-..----· -···---··-···----·· ·--..---- ----·--
                                                                                                                                               _____ __
1102.
1103.     ----------··..---·-·--··········-············-··--·· ................. _..____ ·····-··---..·------··· ··--·--··----
                                                                                       ~-                                         ..
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

  . ·~-.r~.,.~ra!t·~~~~~.!l.:· .. · ·. · · ·
  . 2; .. ~-~$*1pa.tcl.~~)!a~~~F.P.~1.;Column6),_
                                                                                                 ·                     ·              --------r-.,_...·_.·:. . .::.;: '. ··_·:.~::l:_._·
   3!     ~~-~~~~~~~~-~&f-·····                                                           :.          .                                      . " .... ···.                      150!313;915· ~153.7~~-.m
    4.. . ~-~-~~andolherslmllard*go.s.,..._':"'""'".-~..,.,..-~~~~...,.-~~--.-.-:---~ 1----.------.
   ~ . C~tWUpens8s c~ t8Xcis;~8ridtoea)-'-"-..;.;..;;_.;.;.;-...-...-:...--:.--~----;_..--t..-~-'---1,03);n&~       . ·w,392
   8,\: ...-~~~c~i.balancikQ!gnlncancttiDea,                                                        4.1M1;isil..___--..4~~281·
   ·7:t. ~fadii~-~~~-~~s·                                                      ·..-. :. .- .... onrea!bodcapilalgalns (IQsaes})-.....,...1--,...,__..,.._,..,. .,...,.,..,.-:""'~~-
  . 1~. :Ne#~~Ja:~·.:;;:,···;.;,.;··:.; .· . .;.·;._-...;.·-~··.;:.;.~·~·-~·...:··.=...·~.!..;__:..::.:....:....;.._.;..:..;.....:..:....;..:__;...~~__.;.~..;_..;.;_~.;.;.--.;.;.;.;._;;.:..;__
    8. 8cnDwed money$                        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.
      ~~·~-------------------------------------------1---------~--------~
   8. Tocallablllloa(Lbos28and21) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _._ _-JI--•·s10,&96,012 1-1,533,507,991

   29.    ~wri!e-lnslcr speclalaurplua                     funds-------------------· · - - - - - · - - = - - - 1 - - - - - - - -
   aa  ~~~-----------------------------------------------~---------l----------
   31. 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
          DETAILS OF WRITE-INS
2501. Claia:s paymtls aadD af1er dlla-pracessing close_                                                                                                                          •98.403,048) ___(101,943,419)
2502..thcalhcd drafls and chec:lcs pending cscheaiiiiCnl                 -·----------~·-···-·-·-·..- - - · - - - · · -                                               ______ 51,568.507. _ _ _52.390,190
2503. Acccmts payable                                                                                                                                                   .__32.748,5112 ____ro,:li0,459
2598. Summary of remaking wriiCHna ror Uno 25 rrom overflow page--·--·····---···------·-·---····--···---······... ·--·---···(201,396) ___.,.43,043,881)
'_2599~
      T«"als RJnes 25011tw 2503 Dlus 2598ltuna 25 Bllcvel                                                                   IM 289 356)      1 763 349
2901.                                                             ·-..·-··----·-····----····-·--....···---·-··.. -········-··--·-····..·--·--···-- ----·..·-····-······-- ·-·--·-----
2902.
2903.
                                                                           ··-------··--·--·--·--·-------·- -··----·-                                                                              ------
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 + 1 0 l - - - - - - - - - - - - - - - - - - - - + - - - - = » " , f f i i , $ 1 a - -_ __.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----ln4,619,3l2)·~--·"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:
              33.1~fn-------------------------------·-------I·----------~------
              33.2TransbrodiDQIIllllll (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) - - - · - - - - - - - - - - - - - · - - - - - - - - -
              Aggrugalewrite-lns for gains and losses in surplus _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _.J_._ ___J(!,!2.=!842~4&'5!2ij_ _~2~842~'8~
                                                                                                                                                                                                  1--·-----
      :rr.
      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.     Summary Dl remaining "Wflle.ins for Line :r71rom overftow page ..............................................-         ...............................- ............._ .............·--··-- -·-·······--·---·--
    3799.     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 CA. us 90010
                                                                                                                                                          I



                                                      (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)                                                              (Area CodoJ,{Telepliono Number)

                                                    P.O. Bole 4402                                                                       woodianct HlDs • CA, us st3~
                                           (strailfarid NUmbGf' or P.0.. BGx)

Prlm&IV~ of E!Oaka and Reeordl



                              (CitY. ~·Town, smra. C:Outmiand2lp 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~-----

                                                                                                 Q1H:EIJ
                                                                                Sooa RotietU.Indqu!st= CFO TI8&Wnll


                                                                                    DIRECTORS OR lHUSTEES
                                                                                         Alan Roy Gltincri_..o .,
                                                                                            Dalo Anne MM!n -
                                                                                             Donn!!!l Reid "
                            Sl!@i Rtr!Smil!l ••.                                            CJ:IIoJoe!Wallace••.                                                 Jclm Ts!JeQiao Wuo ·~

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




                                                                                           Doron Eug$\1 Hohl
                         President. CEO                                                        So=rllal)'

                                                                                                            a. rs :his an original l!~ng?. _ ................
SU~cribed and sworn to before me this                                                                       b. 11110,
                                                              February, 2015         .
                              ~-                                                                               t, S1alo tho amerdmonl numbot........


         Eaki~Public
              131b                                                                                             2. Oalo li'cd .................................
                                                                                                               3. N\lfllber of paQe, attactaL.
Kolltt
November 1, 2017
'OIIic:er ot Allomct)'-ln-F~w. ••Board ot Gavemors



                                                    by,
                                                                     (1)           ,Jeirmv Jolin Qnfr.r
                                                                                 "-"'IVW
                                                                     PfOYBd to mB on tllB bBSis of sotislactory evidence 10 bo
                                                                     lho person who oppoered before me,
~~··
~
          .
                              KEITH EAKINS ·eo·
                         Commission 112044162
                       . NotarY Public • California I
                                                            I       and

                                                                    C2}            Qpmn Euggno Holll
                                                                                      -d~


J   •
        i o , o ,MJ         co~m. EXf':• Nov t.02~ttl
                           los Angeles CCWI11       :!:             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.
                            ANNUAL STATEMENT FOR THE YEAR 2014 OF THE FARMERS INSURANCE EXCHANGE

                                                                                            ASSETS

        1. Bonds (SchecUe D) _ _ _ _ _....,-_ _ _ _ _ _ _ _ ---5,724,078,561                                                t - - - - - - - ___s,J24,078.,$1 __.,_5,857,4St,10B
        2.   Sioc:ks (Schedulo D):
             2.1 Preterredstoc:ka..____ _--'_ _ _ _ _ _ _ _ _                                   +------ t------ t------ t - - - - -
             2.2 Commonstoc:ka _ _~-----------+---"·953,346,148                                                                                          f----4!953,348, M8 r---4.8,147,747
        3.   Mmgage loans on real atazo (Sc:hackde B):
           3.1 f l r s U e n s - - , - - - - - - - - - - - - - · - - 1 - - - - - t - - - - - - - .__ _ _ _ _ t------,___,.
           3201hertlm,tlnitllens'-----,----------+-···--- t-------~ t - - - - - - t--..,--.....,...-
        "· Real eAite ~A):
             4.1 Properties OCCIIpled by tho company (less$
                   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-----'38...,.,,245                                           t------
       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


      14.
             ~
             lnveslmentlnc:amedueandac:auad
                                                                                            ..- t - -..-·..- - - - --..           -----1------- t--------
                                                                                                          ...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

                 dafarrad and     nol,.
             152 Defemld premiums, agents' balancos and lnstallmenla booked but
                                    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, 116                                                     m.
      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
      28. 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
      '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
             Other Invested assets - - - - - - - - - -....·-----..- ........ _                          ............_ ........................................... - .... --·----........_ ......- ....._.585,1SJ
    1101.
    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 ( l o s s o s ) ) - - - 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.
  19.
         Dmb~----------------------------------l---------~---------
         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
                                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.
               Gains   (losses))____________________
               Net realized c:apftal gains or (losses) less c:apllal galna tax of S _ _ _5,!113,419 (Exhibit of Capllal
                                                                                                                                    9 135 750     f28 1123438)
       11.     Netlnvostnenlgaln(losa) (Unes 9+ 1 0 ) - - - - - - - - - - -..- - - - - · - - - - - • - B 3 , 5 1 8 , 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.                    ror
               Aggregate writtHna miscellaneous 1nc:ome                                                     (73,066,4:&)      (41,138,127)
       15. TOialolherlncome(Unes 121hrough 1 4 ) - - - - - - - - - - - - - - · - - - _ _ _ _,_ _ _...,:f~.:.11:.&::BI=..:2l9:::.:,c~lf--.....:ll~lm=:•=821:!..1
                                                                                                                                       1
       18. 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------
                                                                                                                         .......




r
       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 P a i d ' " - - - - - - - - - - - - - - -..- - - - - - · - - - - · -..---........_ _ _ _,.. - - · - - · - - · - - - - - -
              32.2Transterred from surplus (Siock             Oivldand)-----------·-----·------1------ l-------
                                                                                                       f--··-----
              32.3Transfemldtosurplus _ _ _ _ _ _ _ _ _ _ _ _ _ _ _,_..._, ______..,..._ _ _ _ _ ..- - - - - · -
       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
              DETAILS OF WRIT&IHS
    0501.        Pooled shuo af LJD ptagru inca~~e - - - - - - - - - -......................_ _ _ _ _·-·-·------·· ____j3,575,409)1-·------
    0502.        - - - - - - - -..- - . - -..···--··--···--·-·...........- ..........................................................................._ ...............~ ·-·--····..--·--·····- f--··..··....- ........-             ..
    0503..       --------------------····-···-·····..·-·-····----..··-··--·-..--..... -------- -··------
    0598.     SUmmary of remaining wrlt&-ins for Une 5 from overflow page---·..·-·-·-·--..-·-····· ......_ .............----·········--.......- ...... ··-----··--···--·· -···-·-·----··--
    0599.     T01als fllnes 0501 thru 0503 Dlus 0598KUne 5 above)                                                                                               13.515 4(&)
    1.W1.   lnletesl ~ an hnls held···-·----··---·----····----........_............................___ ..... - .......__,169,320,922) r--·-.....169,057 ,841)
    1402.   Uiscollaneous (CJpCnSe)/incc:mc ···-·---·--..- ...................................................................................................·-······-··-.. .. ...._ .........12,673, 128) ................ 28,219,498
    1403.   Prmiu;s for ~ I ife insurance - -..·----....................... _ ...............................- ......................... - .. ·-··-·-·-11183.058) 1--·-·--(121,673)
    1498. Summary of remaining write-Ins lor Line 141ram overflow page .........................................................- .................._................... •...- ......._ ... ( 189,332) _ ................... ( 178,711)
    1499. Totals fl.lne$ 140111w 1403 plus 1498)1Une 14 above)                                                                                                                                (73.066 4:&)                 141138,727
    3701.        Pooled 51are of II'RUlhorized reinsurance .........- ...···---............._ .............._ ....................................-··----·-·.. ·····--·- ....______2.312,314 ______.._JJ14,429
    3702.        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
                                                             ASSISTANT 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)
Oiganlzod inlet the Laws of       ------.::Celli=OI'I'la=--""":":'-:-~~S!ato ci:Domicile cw Port of Entry                                                          California
QN~d~~ -----------------~~~~s~~~·~o~lkM~m~~--------------------------------
                                                                                                        CDfllrnEtneed Business _ _ _ _ _ _ _..::021051=:.:'=935~--------
li'.c:O~---------..::D21D&=:.:1::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
                          ~9f!Y at Town, Stakt, COullUY&hd ~Code)

Malf Addrella                                    P.O.b4g                                                                               WOOdland Hllls i OA; USS1365
                                      (Sirl:el and Number or P.O. Box)

PrlmfJY~Qna(B.!Io~~f!~.                                                              4680 WilshiiO Boulevard
                                                                                       (Stttlt and Numbor)
                                to. Ani!!!!!. CA. US90010




                                                                                                                                                 (FAXN!Imbo~


                                                                                           OFFICERS
                                            ::::.r...::Jam==:!!~De=Santls=~!.lt-1- - - -
                   Pi:a&iden1 _ _ _-..:JAmhony=·                                                               CFO, TrCCJ~un:r _____---:R:.::o~nald=.;;O:.:.!'!QO!Y::a::~mn.~:::::.-----
                   ~ --------=Dof:::':.:lt'I::.:EPa!::':x::.!IO::.'.:.z:HoHc:.._______

                                                                                             OTHER
                                                                             SCotl RObert llndgui!1' ·Vlco Preside Ill


                                                                              DIRECTORS OR TRUSTEES
                  KeMoltiWavn! Biln!l!ty ••                                       Fmnlt Anthor.v Bonotto ..                                              Thomas David Brown"
                                                                                       Roi'IMI L!e Mam:no~•                                              G!uy Randolph !!arl!q ••
                                                                                                                                                          OtllD Joel WJIII&ce ••


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




                                                                                       Doron Eugeno Hchl
                                                                                            Socra:ary

                                                                                                         a. Ia lllis an original fiUng? .. ·-.                    Vos( X   I    Nr.[   I
                                                                                                         b. Hno,
                                                           Ftbruary. 2015                                  1. SIII!D the Dlllendment 11\lmber.__ .....
                                                                                                           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


1&      .
                  000




                         KEITH EAKJNS
                                      on



                      Commission# 2044162
                                           nsoo:



                                                            ~
                                                                 provod to mo on !he basiS of sa:lsfedory evidonce to be
                                                                 lho person who eppaar11d before mo,


~
  :
                  · Notary Public - ~ilamfa
                       Los AngeltJs·~ounty .
                                                           J..   end
                                                                 (2,          Oomr Eugsns Hohl
j • ·; •. . rorm. N'r:s-NoY 201tl
                 JA'J                   1.
                                                                                   ,._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.
                                  ANNUAL STATEMENT FOR THE YEAR 2014 OF THE TRUCK INSURANCE EXCHANGE

                                                                                               ASSETS

"'
"         1.
          2.
                ~(SchecllleD) _ _ _ _ _ _...,..__ _ _ _ _ _ _

                SlockS (SdledUie D):
                                                                                                      __B55,5ff1,573 t - - - - -                          t--.--.JJIW>~,.51J1,573   t--..J7M
                                                                                                                                                                                           __ ,448,863

                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                                                                             !---···----·- ___ 19,381,819 r---50,114,004
                CUrrant faderal and kqlgn Income tax I8CO'IUf3ble and Interest !hereon_. ···-·········19,381,819
       16.2     Neldeferredtaxassel _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - - - · · - - - · - - - - - - - - 1------- 1 - - - - - -
       19.      0uatantytundsrac:alllablctorondepa$11                                              . r------_361,fll0                                     _ _ _...361,fll0 _ _ ___2,f1SI,410
       20.      Bectronlcdara prucesslng equipment and software_··---·---·                           -·--·----··- ·-··-···---- ····---·--                                           1-·------
       21.      Fumlluru and equfpmem.lndudlng heallh care deiMicy assets
                      ($                            ) ---------···--······ ·--··---- - - · - - - - '"------- - - - - - - -
       22.      Not~ In assets and llablltles duo to foreign oxd1ango rates_. - - - - - - · -                                                       .    ~·-·-- - · - - - - - -
       23.      Reeolvalllos from p8IQnl. GUbsldlarles and allllates                                 -·-·----- :-------                                  r--·---·-- r---35,941,554
       24.      Heallh care($                               ) and Olher amounts rec:eiYable ·-··- ··-·-.. ······-··--·-.. ·• ·-········--···-·           !-··-···---··-·- ·-----·--·
       25.      Aggregai8Mit8-lns foro1tlerltlan Invested assets _ _ _ _ _ _ _ .. --·-···4,7611,814 r-------181,5:9 _ _ _ 3,987,215 _____ 2,488,233
       26.      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
       'ZT.     From Separate Accounts. Segrugated Accoun1a and Protected Cal
                 Accoun1s                                                   ·--·--···---··· ··-·--·····---··-··· --··-··----··-··· - · · - - - · - -                                1-·---··---
       28.      TataiJI.Ines 26 and 27l                                                            2 084,068 323          6 484 949      2,011 583 314                                       1,933 396 090


     1101.
     1102.
     1103.
     1198.      Summcuy of remalnlnO wrlla-lns for Une 11 from overflow PD:Ue ·-·-············ ......- ..............._........ -·-·········-········---··- ···---···--·-··· .. ········-... ·----·--···--·-·
     1199.      Tocals (1Jnes 1101 thru 1103 Dlua 1198){Une II above)
     2501. Other assets --·----·-··--·---······-··-·········-······· ......·---·····2.476,332 -····----181,5:9 _ _ _ 1,694,792 f--·----·'•319,198
     2502. Garanty fllllls recoverablelpolicyflolder surcharges ····-·······-··-···-·-·-.. ·---·---···-···-1.582,347 -······----·-······· ···--·-·--·1,582,347 -·--······---
     2503. fiJ!ilies and deposits in pools and associations -·--···---····-···-··...... --·---·--··-....496,073 ·-····-.. ···-----··- ·--·--···-···-...496.073 ···---·-1,178.435
     2598. Summasy of remaining wnta-lns lor Une 25 from overflow page-··-·--······ ·-·-·-···· .... .214 ,062 --··········--·----····....... ···········-···--.. 214 ,062 ·····--······-·-··-·--·
     2599. 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.
   a
         Roftluanco~on-~-~~]!lss ~eXpellsea (Sctledulo F, ~ 1. ~ 6)
         Loa adjustment qienseiJ <Paii 2A. L.bt35• Column a) - -·
                                              ·- , · --· · · · · - . · · ·
                                                                                                                                                    ..   :·.700314.,' 1501'""
                                                                                                                                                         .!Ol<l          ....
                                                                                                                                                                                                    ~
                                                                                                                                                                                        .:·.252611_••
                                                                                                                                                                                                        .-

   "' 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------------ -------------..                                      IIID=IBI=564::..:.,ll---..3.:f!5:..:.1~::000:::1·=:..t~5611
                                                                                                        --..3.:
                                                                                                                                                                           1


  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 c l o s e - - - · - - -..-...·-·-···-..---···----....- ......-                     ....· - - _______(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
                                                                                                                                                                                                               2
                                                                                                                                                                                                         PMrVear
                                                                        UNDERWRITING INCOME
        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$8S lncunad (Part 3; Line 25, Column 1)                           105,827,745            1nl,624,284  --------1----·-·
        4. Other undelwrlting elCPensea lncumJd (Part3, Une25, CciUIM 2)                          <m,464,948              !¥17, M9,519
        5. AggrugaiDwrllll.fnarcWui1derwrlllngdecb:tions---.._ _ _ _ _ _ _ _ _,_ _ _ _ _ _ _+---CS35,448),__ _ __
        8.    Totalunderwrtl!ngdodur:tlana(Un8s2shrough5)_·- - - - - - - - - - - - - - - - - -                                                                                1,071481.413                 1 078 481,150
        7. NetlncomootPolocCedcalla-·_ _ ___;__;__;_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _-l-_._ _ _ _ 1-----~
        8. Net undorwrllfng gain or {loss) (Line 1 miiUS Line 8 plus Uno 7)               •18,827,3tt) 1-·-...{14,843,7!12)
                                                                          INVESTMENT INCOME
        9.    Nat lnveltnenllncome earned (Exhlbll of Net tnwsrmenllncame, Line 17) -------------J.-----''1,987,621)...__                                                                                  _,1,743,317
      10.     Not raallzad capftal gafns or (losses) less capital gains tax of$ - ......___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 1 4 ) - - - - - - - - - - - · · · - - - - - · · - · - - · - - · - - - - ·                 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
              DETAILS OF WRIT&INS
    0501.       Pooled &hue af IJi) progra IIICIOW - - - - - - - - - · - - - · · - - - -..·---··------····· _ _ _ (535,448)1-·------
    0502.
    0503.                    ---·----------·--·------·-··········-·······-··--·····---------···--··- -----··-·-·- -·------
    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.       lliscellanccus ~ -·------------·····----·--··-······--···---··-··--··--··-·--·--··· ----~2.953,164) -······-····.(2,759,564)
    1402.
    1403.
    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                       §        IN THE DISTRICT COURT
      COMMISSIONER OF INSURANCE,                    §
                                                    §
                             Plaintiffs,            §
                                                    §        OF TRAVIS COUNTY
      ~                                             §
                                                    §
      FARMERS GROUP, INC., ET AL.                   §
                                                    §
                             Defendants.            §        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 attOiney-
               in-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.
                                                                                    Farmers
                                                                                   Defendants'
                                                     1 of3                           Exhibit
                                                                                       11
                                                                                No. D-1-GV-Q2-ooz501
                                                                                                       I
     -   .   ····-·-------------                           ·------------·--·




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 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
                                                                                                             /




                    FARMERS EXCHANGES AUDIT COMMITTEE
                                CERTIFIED COPY OF RESOLUTIONS                                                    t

                                                                                                                 l
                       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                                         r
                       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                        t
                       subsidiaries to sign the finatvetsion of the Settlement so long as
                       the :final versio:o. Qf the S~ttlementis: t).pt materially different than ·
                                                                                                                 I
                                                                                                                 f
                       what was presented to ~e Connnittee.

                                                CERTIFICATION
)>
""C
       I, .Doren E. Hohl, do her~by certify that I am the· duly elected, qualified and acting Secretary of
""C
CD     Ee;umers Insurance Exchange .and :it$ ~:u~~icliati¢s an:d ~Hates, includmg its Audit Committee,
::l
c.     and that the foregoing is a.full,. true and.oorrecf papy·ofresolutions adopted on January 28, 2015
x·     by the, Farmers Exchanges AuditComm1ttee~ and the,resolutions are in full force and effect as of
)>
       the date of this certification.
0
0
CD     In witness whereof, I havesignedthisinstrtunentthis 27th day of February, 2015.
0
D)


-c:r
D3
::l

a
?J
s:                                                                     Doren E. Hohl
'<
::J"
                                                                       Secretary
D)
::l



       1584960 S020MTD01S ISM38777
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 1Premiums
       I Complaint Ratios I CompanyHistorv I Company Officers

       General Information:
         Return to top.


        Type of Entity:                                   Reciprocal (RE)

         Status ofTXLicense:                              Active
         Company Status:                                   Normal Operations

         License Number:                                   27800
         NAIC Number:                                      21652
         TDI Company Number:                               27800
         FEIN:                                             952575893
         Home City/State:                                  CA

         Origin:                                           Foreign

         Date Incorporated/Organized:                      04/19/1928
         Date Licensed/Eligible/Registered in Texas:       03/10/1936
         Date Cancelled/Ineligible/Inactive:


       Contact Information:
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          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                                                                  Farmers
                                  Los Angeles CA 90010
                                                                                                                   Defendants'
           Office Number:                                                                                            Exhibit
         Toll Free Number:                                                                                                12
                                                                                                               No. D·1-GV-D2-Q02501
             Fax Number:



     https://apps.tdi.state.tx.us/pcci/pcci_show_profile.jsp?tdiNum=27800&compan}Name=FARM ERS%201NSURANCE%20EXCHAN GE&s}5T}PeCode=CL       1/4
611812015                                                                                      Display company profile content

   Types of Insurance Licensed to Write:
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        •   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:
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     The following organizations rate insurance companies on their financial strength and stability. Some of
     these companies charge for their services.

                                                                                               AM Best
                                                                                          Weiss Ratings Inc.
                                                                                          Standard & Poor's
                                                                                       Moody's Investors Ser\'ice
                                                                                 Fitch IBCA Duff and Phelps Ratings




   Financial Information:

https://apps.tdi.state.tx.us/pcci/pcci_show_profile.jsp?tdiNum=27800&comparl}Name=FARMERS%20JNSURANCE%20EXCHANGE&s:ysT}PeCode=CL   2/4
611812015                                                                Displaycornpanyprofile content
     Return to top.


           lAs of:                         II       Dec. 31,2012                           Dec. 31,2013
                                                                                II                                  II          Dec. 31, 2014
                                                                                                                                                           I
           /Total Assets
           lrotal Liabilities
                                           II       $15,530,166,955
                                                    $11,779,367,292
                                                                                II         $15,557,125,672
                                                                                          $11,677,404,569
                                                                                                                    II          $15,591,306,853        I
                                           II                                   II                                  II          $11,409,850,909
                                                                                                                                                           I
           /Asset to Liability Ratio                                      1.3 II
           /capital
                                           II                                                                 1.3   II                          1.3    I
           INet Surplus
                                           II                             $0 II                             $0 II                                $0    I
                                                     $3,750,799,663
           jrotal Life Ins
                                           II                                   II              $3,879,721,103
                                                                                                                    II           $4,181,455,944        I
                                           II                            N/A II                               N/A II                            N/A    I

  Premiums:
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       /As of:                                  I    Dec. 31,2012                          Dec. 31, 2013                        Dec. 31, 2014
                                                                                                                    II                                 I
      ILife and Annuities                       I                         N/A                                 N/A II                            N/A    I
      /Accident and Health                                                 $0                                  $0   I                           $0     I
      IProperty 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
      INational 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                                                                                                   oj
                                                                                         oJI                             o!J
           Complaint Ratio/Index                      II   Ratio    II       Index         I     Ratio   II   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 self-
     insured plans, as such plans are regulated under federal law.


   Company History:
     Retum to top.


       I    Date       II                                                     Event                                                   I
       1
        07 _15 _2011 1APPROVED TO WITHDRAW FROM WRillNG TEXAS HOMEOWNER POLICY FORM A (HOA)
                            IN TEXAS.
                    APPROVED ACQUISITION OF 21ST CENTURY INSURANCE COMPANY OF THE SOUTHWEST
                    (95971 lAND AIG ADVANTAGE INSURANCE COMPANY (93987) BY COMPANY, FIRE
       106-30-20091 INSURANCE EXCHANGE (29750), TRUCK INSURANCE EXCHANGE (84450l AND FARMERS
                    GROUP, INC., A SUBSIDIARY OF ZURICH FINANCIAL SERVICES LTO.
                            COMPANY, FIRE INSURANCE EXCHANGE AND TRUCK INSURANCE EXCHANGE, LOS



       B
       103-02-20001 ANGELES, CALIFORNIA ACQUIRED FOREMOST COUNTY MUTUAL INSURANCE COMPANY,
                            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

       B
       109-09-19921 PENALTY OF $50,000 PAID BY COMPANY AND MID-CENTURY INSURANCE COMPANY FOR
                            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}ST}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
     Skip over these navigation links.


                                                           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:
    Retum to top.


    Type of Entity:                                    Reciprocal (RE)
    Status ofTX License:                               Active
    Company Status:                                    Normal Operations
    License Number:                                    29750
    NAIC Number:                                       21660
    TDICompanyNumbe~                                   29750
    FEIN:                                             956235715
    Home City/State:                                  CA
    Origin:                                           Foreign
    Date Incorporated/Organized:                       11/20/1942
   Date Licensed/Eligible/Registered in Texas:        04/11/1950
    Date Cancelled/Ineligible/Inactive:


  Contact Information:
    Retum to top.


    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:
     Retum to top.

         •   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:
      Retum to top.


      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.

                                                                              AM. Best
                                                                          Weiss Ratings Inc.
                                                                          Standard & Poor's
                                                                       Moody's Investors Sel'\lice
                                                                 Fitch IBCA Duff and Phelos Ratings




   Financial Information:
      Retum to top.


                                                           Dec. 31,2012                   Dec. 31,2013               Dec. 31,2014
        lAs of:                                 II                               I                             II                         I
        lrotal Assets                           II          $2,204,004,831                  $2,254,762,187     II     $2,281,746,242      I
                                                                                 II
        lrotal Liabilities                      I           $1,541,786,575       II         $1,533,507,997     II     $1,510,696,042      I
        IAsset to Liability Ratio                                          1.4   II                      1.4   II                   1.5   I
        Icapital                                                           $0    II                     $0 II                       $0    I
        INet Surplus                                          $662,218,256       II           $721,254,189 II            $771,050,200     I
https://apps.tdi.state.tx.us/pcci/pcci_show_profi   e.jsp?tdiNum=29750&cOfll)an~a111EFFIRE%201NSURANCE%20EXCHANGE&sy.;T}P8Code=CL             214
 6/1812015
                                                                     Display company profile content

           {frotal Life Ins
                                              II                          N/A                                 N/A    II                          N/A    II

    Premiums:
     Return to top.


           lAs of:                           II       Dec. 31,2012                             Dec. 31,2013                      Dec. 31, 2014
                                                                                II                                   II                                 I
           jute and Annuities
                                             II                       N/A       II                            N/A    !I                          N/A !
           /Accident and Health
       jPropertyand Casualty
                                             I
                                                             $43,968,061
                                                                          $0    I                             $0     I                           $0    I
                                             II                                                   $90,324,748       II               $96,021,357       I
       jrotal Texas Premium
       INational Premium
                                             II              $43,968,061
                                                       $1,355,100,056
                                                                                                  $90,324,748       II               $96,021,357       I
                                             II                                                $1,443,245,636       II           $1,512,462,873        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.


      :j
                                                        II     Dec 31, 2013               [I      Dec 31, 2014              I    Jun 12, 2015          I
           Confirmed Complaints:
                                                        II                                I                                 II                         I
                                      Life and Annuityll                                oil                               all                      oj
                                  Accident and Health II                                oil                               oil                      ol
                                          Homeowner II                                  511                               4[1                      oj
                                                    I
                                           Automobile                                   111                    oil                                 ol
                              Workers' Compensation I                                  oil                     oil                                 o!
           Com plaint Ratio/Index                       II   Ratio   II
                                                                           Index         !I      Ratio I Index I                                       I
                                    Life and Annuities II        N/AII               N/All           N/AII   N/AII                    N/A              I
                                  Accident and Health II         NIAll               N/AII           N/AII   N/A[I                    N/A              I
                                          Homeowner[!          .002911          .790711           .002511      .624711                N/A              I
                                           Automobile   [I     .ooooll          .ooooll              N/A[I          N/AII             N/A              I
                              Workers' Compensation II           N/AII            N/AII              N/AII          N/AII             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
    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 self-
     insured plans, as such plans are regulated under federal law.


   Company History:
      Return to top.


              Date                                                          Event                                            I
       I               I
                           APPROVED TO WITHDRAW FROM WRITING TEXAS HOMEOWNER POLICY FORM A (HOA}
       107-15-20111        IN TEXAS.
                           APPROVED ACQUISmON OF 21ST CENTURY INSURANCE COMPANY OF THE SOUTHWEST
                           (95971 lAND AIG ADVANTAGE INSURANCE COMPANY (93987) BY COMPANY, TRUCK
       106-30-20091        INSURANCE EXCHANGE (84450), FARMERS INSURANCE EXCHANGE C27800l AND FARMERS
                           GROUP, INC., A SUBSIDIARY OF ZURICH FINANCIAL SERVICES LTD.
                     PENALTY OF $20,000 FOR VIOLATION OF REQUESTING INSUREDS TO PRODUCE COPIES
        110-23-20001 OF THEIR INCOME TAX RECORDS IN TEXAS.
                           COMPANY, FARMERS INSURANCE EXCHANGE AND TRUCK INSURANCE EXCHANGE, LOS
       103-02-20001
       B                   ANGELES, CALIFORNIA ACQUIRED FOREMOST COUNTY MUTUAL INSURANCE COMPANY,
                           DALLAS, TEXAS AND FOREMOST LLOYDS OF TEXAS, LEWISVILLE, TEXAS.
                           PENALTY OF   $35,000 PAID BY COMPANY, FARMERS INSURANCE EXCHANGE, MID-
                           CENTURY 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
    Skip over these navigation links.


                                                          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:                                   Reciprocal (RE)
   Status ofTX License:                              Active
   Company Status:                                   Normal Operations

   License Number:                                   84450
   NAIC Number:                                      21709
   TDI Company Number:                               84450
   FEIN:                                             952575892
   Home City/State:                                  CA

   Origin:                                           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:
      Return to top.

      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.

                                                                AM Best
                                                           Weiss Ratings Inc.
                                                            Standard & Poo~s
                                                         Moodys lnwstors Service
                                                   Fitch IBCA Duff and Phelps Ratings




   Financial Information:
      Return to top.

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
       jrotal Assets                               $1,963,013,951
                                                                              II                 Dec. 31, 2013
                                                                                                 $1,933,396,090
                                                                                                                         II          Dec. 31, 2014
                                                                                                                                                               I
       jrotal Liabilities
                                         ll
                                                   $1,428,051,305
                                                                              II                                        II            $2,077,583,374
                                                                                                                                                               I
       jAsset to Liability Ratio
                                         II
                                                                       1.3
                                                                              II                 $1,369,922,187
                                                                                                                        II            $1,458,878,815           l
       Icapital
                                         II                                   II                                 1.4 II                              1.4       I
       jNet Surplus
                                         II                             $0    I                                  $0 II                                $0       I
       jrotal Life Ins
                                         II              $534,962,646
                                                                              II                   $563,473,903         II             $618,704,559            I
                                         II                            NIA II                                    NIA II                              NIA       l
   Premiums:
     Return to top.


       lAs ot                                 II    Dec. 31,2012                                 Dec. 31, 2013                       Dec. 31, 2014
                                                                                   II                                    II
      ILife and Annuities                     II                        NIA        I                             N/A                                 N/A
                                                                                                                         II
      IAccident and Health                    I                          $0        I                              $0     II                          $0
      I Property and Casualty                             $81,943,272                                $74,439,212                        $74,247,177
                                                                                                                         II
      lrotal Texas Premium                                $81,943,272                                $74,439,212 II                     $74,247,177
      INational Premium                                  $76 7,653,007                              $726,272,215 II                    $748,336,821



   Complaint Information:
    Return to top.


    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.



                                                    l       Dec 31, 2013                    II      Dec 31, 2014                II   Jun 12, 2015          I
       Confirmed Complaints:                        11
                                                                                           jl                                   II                         I
                                   Life and Annuityj                                      o]                                  0 11                        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
    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}ST}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 self-
      insured plans, as such plans are regulated under federal law.


    Company History:



       B
      Return to top.


        I     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.
                     APPROVED TO WITHDRAW FROM WRITING MEDICAL MALPRACTICE LIABILITY
        112-12-20031 INSURANCE IN TEXAS. COMPANY MAY NOT RE-ENTER MARKET FOR THIS LINE WITHOUT
                     PRIOR APPROVAL UNTIL 12/12/2008.
                     COMPANY, FARMERS INSURANCE EXCHANGE AND FIRE INSURANCE EXCHANGE, LOS
        103-02-20001 ANGELES, CALIFORNIA ACQUIRED FOREMOST COUNTY MUTUAL INSURANCE COMPANY,
                     DALLAS, TEXAS AND FOREMOST LLOYDS OF TEXAS, LEWISVILLE, TEXAS.


        B
        lo9-19-199SIIAPPROVED TO WITHDRAW FROM THE FARM AND RANCH INSURANCE MARKET IN TEXAS.
                            PENALTY OF $35,000 PAID BY COMPANY, FARMERS INSURANCE EXCHANGE, MID-
                            CENTURY INSURANCE COMPANY AND FIRE INSURANCE EXCHANGE FOR VIOLATIONS
                            FOUND DURING A MARKET CONDUCT EXAMINATION IN ARIZONA.
                                                                                                                              I

        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                  §      IN THE DISTRICT COURT
              COMMISSIONER OF INSURANCE,                    §
                                                            §
                                     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                     §


                      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
       Farmers
      Defendants'
         Exhibit
           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
