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Farmers Insurance Exchange 2023 Update

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Dear Fellow Farmers Insurance Exchange Member:

As we close the books on 2022, Farmers Insurance Group® continues to provide its customers with coverage options to help them manage risk and meet their insurance needs.We strive to deliver the best value and experience to every customer we're privileged to serve. Farmers appreciates your business and looks forward to continuing to earn your confidence formany years to come.

Farmers Insurance Exchange is one of the insurers comprising Farmers Insurance Group®. Farmers Insurance Exchange along with Fire Insurance Exchange and Truck Insurance Exchange, and their subsidiaries and affiliates, provide automobile, homeowners, personal umbrella, and business owners insurance. Formore information, please visit farmers.com.

 

Recent Developments

  • We have transitioned to new Farmers Group, Inc. CEO Raul Vargas as former CEO Jeff Dailey retired after 11 years as CEO on December 31, 2022.
  • Farmers expanded on its digital focused eCheckout initiative to improve customers' purchase and onboarding experience. eCheckout is now available in 26 states for Farmers auto, home, renters, condo, and umbrella products.
  • In a year of elevated weather catastrophes, Farmers responded with our award-winning Catastrophe team to serve our customers and help communities in need, including during Hurricane Ian where Farmers was the first insurer on the scene.

Better Together

  • Farmers became the first U.S. based insurer to sign the United Nations Principles for Sustainable Insurance.
  • Farmers updated its "Diversity & Inclusion" commitment to "Diversity, Equity, Inclusion & Belonging". The addition of Equity and Belonging emphasizes the importance of both within the Farmers culture.
  • Farmers Claims introduced enhanced customer service options for Spanish speaking customers by providing Spanish survey options and introducing a new bilingual skillset option.

Your Voting Rights

As amember of Farmers Insurance Exchange, you have the important right to vote for representatives of the Exchange Board of Governors. To ensure that all our customers have an opportunity to exercise their voting rights, we now have three ways in which you can cast your votes. Youmay vote in person at the AnnualMeeting of Members of Farmers Insurance Exchange, appoint a proxy to act on your behalf by requesting and returning a completed proxy form, or conveniently cast your votes online through your Farmers.com account. Additional information on Farmers Insurance Exchange and your voting options can be found in the FAQs on the other side of this page.

Thank you for your ongoing support and participation.

Sincerely,

Thomas G. Allen
Chair of the Board of Governors of Farmers Insurance Exchange

FREQUENTLY ASKED QUESTIONS

As a member of Farmers Insurance Exchange, we want you to understand the basics of the operation of an Exchange because, as you will see below, you are an owner of the Exchange.

What is an Exchange?

An Exchange is an insurance organization, which operates in most ways like any other insurance company, but with a few key differences. Farmers Insurance Exchange was organized under a provision in the California Insurance Code, which allows insureds to "exchange" policies with other insureds. Because the insureds cannot practically be involved in actually issuing policies, collecting premium, paying commissions to agents, etc., they appoint a third party - called an "attorney-in-fact" (AIF) - to perform those duties on their behalf for a fee. That appointment is made through a document called a "Subscription Agreement." You were asked to sign a Subscription Agreement at the time you applied for insurance with Farmers Insurance Exchange and that is how you became amember (aka subscriber).

Who owns the Exchange?

You do. Subscribers of the Exchange are owners until such time as they no longer have insurance from the Exchange. Subscribers elect a Board of Governors which supervises the financial affairs of the Exchange and the performance of the AIF in conformity with the Subscription Agreement terms.

Why is an AIF fee paid to Farmers Underwriters Association (FUA)?

Under the Subscription Agreementmentioned above, members appoint FUA to perform certain of the tasks, such as policy issuance and collection of premium, which are involved in running an insurance operation. The Subscription Agreement specifies an AIF fee of 20 percent of premium, although FUA has taken less than that amount.

What is FUA?

FUA is the business name utilized by Farmers Group, Inc. (FGI) to describe its functions as the AIF for Farmers Insurance Exchange. FGI is part of the Zurich Insurance Group, Ltd (ZIG), a Swiss company. Neither FUA, FGI nor ZIG has any ownership interest in Farmers Insurance Exchange, which is owned by its subscribers (insureds).

How was your premium dollar spent by Farmers Insurance Exchange in 2022?

Your premium dollar covers Exchange costs including losses incurred, acquisition costs, taxes, license fees, the AIF fee, and any contributions to surplus. For 2022, the AIF fee was 12.3% of the premium dollar, which included the AIF profit of 6.59% of the premium dollar for that year.

Can the Exchange lose money?

If premiums collected exceed claims payments and other expenses (including the fee for the AIF), then the Exchange retains those net premium earnings (as contributions to surplus). If premiums are not sufficient to cover claims and expenses, the Exchange will lose money. That's one reason it is important to build surplus to pay future losses. The AIF does not participate in claims losses and does not enjoy any net premium earnings. Importantly, subscribers are not responsible for any losses the Exchange might suffer.

How can I exercise my right to vote?

You may exercise your voting rights in any of the following ways:

  1. By attending the annualmembers' meeting inWoodland Hills, CA on March 18, 2024 at 2 PM,
  2. Electronically through your Farmers.com account (voting will be available from January 1, 2024 toMarch 8, 2024 and you will be required to
  3. Through mail by requesting a paper proxy from the Subscriber Relations Office (completed proxies must be received by March 8, 2024)

Where can I get more information about the Exchange, or obtain a paper proxy?

You can go to www.farmers.com/about -us for most questions. If you have additional questions or want to obtain a paper proxy along with a postage paid envelope to confidentially return your proxy, please contact::

Subscriber Relations Office

Farmers Insurance Exchange

Attn: Corporate Secretary

P.O. Box 4461

Woodland Hills, CA 91365

subscriber.relations@farmersinsurance.com