April 3, 2008

FAQs: Zurich Small Business Solutions/Farmers proposed transaction

Q: Will Farmers continue to do business with independent agents who currently write this business?The Farmers Exchanges plan to continue and expand their relationships with independent agents nationwide. Through

independent agents in the East, Farmers FACT, Foremost and Bristol West, Farmers does business with more than 35,000

independent agents across the country. Farmers' independent agency network is managed by an established Independent

Agency Market Management team with responsibility for more than $2 billion in gross written premium booked during 2007

through independent agents.

Q: How could this transaction benefit my agency?This transaction essentially will create access to a new company with which your agency can do business. At a time when others

are cutting back agency representation or restricting business, Farmers is enthusiastic about growing. Bringing together Zurich's

and Farmers' small commercial operations will result in distributors and customers benefiting from the best capabilities of both

businesses. Over time, distributors and customers of the combined businesses will have increased access to a broader range of

innovative, competitive products and services with continued support from an even stronger national sales and service

organization.

Q: Does Zurich have the right to sell my renewal rights?No. Independent agents own their renewal rights. Zurich and Farmers do not have the right to sell renewals. What would be

conveyed to Farmers in this transaction are the rights to access renewal information so independent agents can exercise their

renewal rights with Farmers.

Q: Will Farmers exclusive agents be able to access independent agent business through the various systems andapplications?No. Farmers currently does business with independent agents and therefore already has appropriate data security and protocols

in place.

Q: After this transaction closes, on what paper will this business be written? If not in the near future, when will it happen?Post-close, Farmers will continue to use the Zurich Small Business platform to sell small commercial business policies through the

independent agency channel, and write and renew these policies on Zurich paper. Over time, Farmers will begin transitioning

the Zurich Small Business Solutions (SBS) book to Farmers paper, although the brand to be used is still to be determined. This

process is estimated to begin within 18 to 24 months after the close of the transaction.

The exact timing will vary by state and product/line of business. Transfers will depend primarily on the readiness of the Farmers

Insurance Exchanges to write the SBS policies on their own paper. This involves, among other things, filing products and rates in

appropriate states, the Exchanges making appropriate arrangements with agents and other producers, and integrating Zurich SBS

products into systems maintained by Farmers Group, Inc. and the Exchanges.

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In the interim, Zurich companies that underwrite the SBS book and the Exchanges will enter into a reinsurance arrangement at

the closing of the transaction, through which SBS premium will continue to be written on its current paper, but fully ceded to

the Exchanges.

Q: Zurich has certain contingent commission arrangements in place. Will these remain in effect? Will we have to signnew contracts?There will be no changes in 2008 in the areas of agency contracts, commission schedules, profit-sharing arrangements and incen-

tive compensation. There is no need to sign new contracts until the business is transitioned to Farmers paper, which is projected

to be no later than 18 to 24 months after the transaction closes. Recognizing the importance of agency compensation, Farmers

plans to have a competitive compensation package in place for 2009 and beyond. Following the transaction's closing, you will be

contacted by your local marketing representative as contract information and products become available in your state.

Q: Will Farmers' exclusive agents and independent agents compete for the same business? Competition in the marketplace should be no different after this transaction closes. Farmers exclusive agents will gain no advan-

tages over independent agents because of this transaction.

Q: How will channel-conflict issues be managed? Farmers’ exclusive agents will continue to sell Farmers products. Zurich agents will continue to sell Zurich products. Over time, it is

Farmers' intention to transition toward a new, single product suite that will leverage growth across distribution channels.

Q: How will claims be handled and by whom?There will be no immediate change. Claims under Zurich policies will be handled by Zurich Claims; claims under Farmers policies

will be handled by Farmers Claims.

Q: How will independent agents benefit from doing business with Farmers after the transaction is completed? Whatwill Farmers offer us?Farmers has an 80-year history of servicing customers and is financially strong. Farmers has a broad underwriting appetite and a

history of providing incentives for agents to write and retain business. Farmers also is committed to offering superior claims

service through its HelpPoint® facilities and is investing to improve agency ease of doing business. Farmers has a market-leading

product portfolio that will continue to improve.

Q: Zurich has aggressively pushed for new small business through its Internet platform. How will this transitionimpact that strategy?Initially, eZSB will continue to be the platform for Zurich's independent agents. Farmers has been investing to improve agency

ease of doing business, and this will continue to be an important goal.

Q: Zurich's Builder's Risk online program is not part of this transaction. Where is that book of business?As of February 2008, Zurich's Builders Risk and Contractors Equipment programs transferred to the Zurich Programs unit, which is

part of the Zurich North America Commercial business division. Aligning Builders Risk and Contractors Equipment with the

Programs business unit allows it to be managed under the Programs operating model – utilizing its best practices, tools and poli-

cies. Zurich Builders Risk and Contractors Equipment will continue to be administered through Zurich Insurance Services (ZIS).

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Q: What role will Zurich Insurance Services (ZIS) play going forward?Zurich Insurance Services (ZIS), a private company based in Jacksonville, Fla., will continue to administer Zurich's Builders Risk and

Contractors Equipment program business and provide administrative services to support other parts of Zurich North America

Commercial.

Q: Will Zurich's Customer Service Center continue?During the transition, Zurich's Customer Service Center located in Jacksonville, Fla., will continue to service customers on behalf of

Zurich agents registered in the center.

Q: What more can you tell me about Farmers?• Farmers Group, Inc. is a management company, and is owned by Zurich Financial Services.

• Farmers Exchanges wrote $16 billion in total premiums during 2007.

• Farmers has an 80-year history of serving customers and agents.

• Farmers Business Insurance is an organization serving small business customers that had $1.6 billion in annual premium written

during 2007.

• Farmers offers claims service through its award-winning HelpPoint® organization.

• Farmers is investing in technology to improve agency ease of doing business.

• Farmers has a strong portfolio of products and a broad underwriting appetite.

• Farmers has an experienced, responsive sales and marketing team.

• Farmers has a history of being agent-friendly, and is motivated to help agents to write and retain business.

Q: Why is Zurich selling this book of business to Farmers? This transaction is the next step in Zurich Financial Services' efforts to further establish a leading position in the highly attractive

U.S. small commercial market through its ownership of Farmers Group, Inc. and its relationship with the Exchanges. Zurich

continues to view small commercial as one of the highest-potential opportunities in North America.

Independent agents remain a crucial part of this growth strategy. The sale of Zurich North America's Small Business Solutions

book to the Farmers Exchanges and the transfer of the management of this book to Farmers Group, Inc. present an opportunity

to bring best-in-class capabilities to small commercial customers and their agents. As an independent agent, you will be supported

by a strong national sales and service organization dedicated to delivering valued products and services that address the needs of

small commercial customers. This transaction will:

• Result in the Farmers Exchanges becoming the fifth-largest writer of small commercial premium in the U.S. with $2.4 billion of

premium (based on 2007 results)

• Increase your access to a broader range of innovative products and services for your small business customers

• Boost economies of scale, which will facilitate investments in the resources to grow our small commercial business

• Increase and leverage Zurich's investments in people, leading technology and innovative products for the U.S. small commercial

market

Q: What products will be available and when?You will not see any changes until after the transaction closes later this year. The transaction is subject to approvals by the rele-

vant insurance regulatory authorities, and agreement on final terms and conditions. Until then, it will essentially be business as

usual. Zurich's network of independent agents will continue to sell the products as they do today. Going forward, product intro-

duction programs will take place much as they do now – on a product-by-product, state-by-state basis. Depending on the state(s)

where you operate, post-close you may have access to a complete suite of commercial, personal and specialty lines products. We

will share this information with you as it becomes available.

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Q: How does Farmers currently market its products?Farmers Group, Inc. is based in Los Angeles, Calif., and operates in 41 states. Farmers Group, Inc., along with other members of

the Farmers Insurance Group of Companies® (Farmers), markets personal lines auto, homeowners, specialty and life insurance

policies, as well as financial services products. These products are sold by a mix of exclusive agents and independent agents. In

2007, Farmers had 15 million customers and wrote $15.8 billion in GWP.

Farmers Business Insurance unit operates in 35 states – a Core 29 states serviced by Farmers exclusive agents and six independent

agency states in the East. The exclusive agents and independent agents – along with approximately 700 Farmers Business

Insurance employees (located in seven regional centers and Farmers' Home Office) – are responsible for servicing, pricing and

underwriting more than 250,000 customers across three major lines of business: commercial multi-peril, auto and workers'

compensation. In 2007, Farmers Business Insurance wrote $1.6 billion in GWP.

Q: What are the Core 29 states?California, Oregon, Washington, Idaho, Nevada, Arizona, Utah, Montana, Wyoming, Colorado, New Mexico, Texas, Oklahoma,

Kansas, Nebraska, South Dakota, North Dakota, Minnesota, Iowa, Missouri, Arkansas, Illinois, Wisconsin, Michigan, Indiana,

Ohio, Tennessee, Alabama and Virginia.

Q: What is Farmers Group, Inc., and how is it different from the various Farmers Insurance Exchanges? Farmers Group, Inc. is ultimately owned by Zurich Financial Services. Farmers Group, Inc. is not an insurance company, but instead

acts as a holding company of certain other companies. Farmers Group, Inc. or one of its subsidiaries also serves as "attorney-in-

fact" for the Truck Insurance Exchange, Farmers Insurance Exchange and Fire Insurance Exchange (collectively, the “Farmers

Insurance Exchanges”) and their respective policyholders. In this capacity, Farmers Group, Inc. and/or its subsidiaries provide cer-

tain non-claims related administrative services for the Farmers Insurance Exchanges, for which it and/or they receive fees.

Each of the Farmers Insurance Exchanges is an insurer organized under California law and owned by its policyholders.

The Farmers Insurance Exchanges issue various forms of property and casualty insurance, and own a number of other

insurance companies.

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