TABLE OF CONTENTSSalutation . oneIntroduction . 1Scope of Examination . 1Comments - Previous Examinations . 2Company History (includes exhibit of growth and financial history) . 3Charter and Bylaws . 4Management and Control . 5Corporate Records . 8Pecuniary Interest Tenn. Code Ann. § 56-3-103 . 8Fidelity Bond and Other Insurance . 9Retirement Plan and Other Employee Benefits . 10Territory (includes in-force by state) . 11Plan of Operation . 11Loss Experience . 12Agreements with Parent, Subsidiaries and Affiliates . 13Market Conduct . 15Reinsurance . 17Commission Equity . 19Accounts and Records . 19Statutory Deposits . 20Dividends or Distributions . 20Litigation . , . 21Financial Statement. . 22Analysis of Changes in Financial Statement and Comments Resultingfrom Examination . 27Comments and Recommendations . 28Conclusion . 29M a . . 30Organizational Chart . 31

Columbia, TennesseeJune 14, 2012Honorable Julie Mix McPeakCommissionerState of TennesseeDepartment of Commerce and InsuranceNashville, Tennessee 37243Dear Commissioner:Pursuant to your instructions and in accordance with Tennessee Insurance Laws,regulations, and resolutions adopted by the National Association of InsuranceCommissioners (NAIC), a financial examination and market conduct review was madeof the condition and affairs of theTENNESSEE FARMERS MUTUAL INSURANCE COMPANY147 BEAR CREEK PIKECOLUMBIA, TENNESSEE 38401hereinafter and generally referred to as the Company, and a report thereon is submittedas follows:INTRODUCTIONThis examination was called by the Commissioner of Commerce and Insurance of thestate of Tennessee on January 24, 2011. On-site examination work commenced onJune 27, 2011. With the Company having authority to write business only in the state ofTennessee, the examination was not classified as an Association Examination underNAIC Guidelines. The examination was performed by duly authorized representativesof the Department of Commerce and Insurance, state of Tennessee ("TDCI") and wasconducted simultaneously with two other insurance companies in the TennesseeFarmers Insurance Group, all based in Columbia, Tennessee as follows:Tennessee Farmers Assurance CompanyTennessee Farmers Life Insurance CompanySCOPE OF EXAMINATIONThis examination report covers the period from January 1, 2006 to the close of businesson December 31, 2010, and includes any material transactions and/or events occurringsubsequent to the examination date and noted during the course of the examination.I

The examination was conducted in accordance with the NAIC Financial ConditionExaminers Handbook. The examination was planned and performed to evaluate thefinancial condition and identify prospective risks of the Company by obtaininginformation about the Company, including corporate governance, identifying andassessing inherent risks within the Company, and evaluating system controls andprocedures used to mitigate those risks. The examination also included assessing theprinciples used and significant estimates made by management, as well as evaluatingthe overall financial statement presentation and management's compliance withStatutory Accounting Principles and annual statement instructions.All accounts and activities of the Company were considered in accordance with the riskfocused examination process. Independent actuaries were used in the review of theCompany's reserves.In addition, the following topics were reviewed:Comments - Previous ExaminationsCompany HistoryCharter and BylawsManagement and ControlCorporate RecordsPecuniary Interest Tenn. Code Ann.§ 56-3-103Fidelity Bonds and Other InsuranceRetirement Plan and Other Employee BenefitsTerritory (includes in-force/premium by state)Plan of OperationLoss ExperienceAgreements with Parent, Subsidiaries and AffiliatesMarket ConductReinsuranceCommission EquityAccounts and RecordsStatutory DepositsDividends or DistributionsLitigationFinancial StatementCOMMENTS- PREVIOUS EXAMINATIONSThe previous examination was conducted as of December 31, 2005 by authorizedrepresentatives of the TDCI and made no changes to surplus. No recommendationswere made as a result of the examination; however, during the course of theexamination, the Company amended its two custodial agreements with The NorthernTrust Company and First Farmers and Merchants Bank to clarify some technicallanguage pursuant to Tennessee Regulations.2"

COMPANY HISTORYThe Company was incorporated on December 22, 1952 pursuant to the provisions ofthe General Corporate Act of Tennessee, Chapter 90 of the Public Acts of 1929,codified as Sections 3709-3771, inclusive, of the Williams Code of Tennessee.The Company was organized as a successor corporation to the business and affairs ofTennessee Farmers Insurance Company, a stock Tennessee corporation, chartered onNovember 5, 1948 and located in Columbia, Tennessee. The· effect of thisreorganization was to convert the operations and business of Tennessee FarmersInsurance Company from a stock proprietorship to a mutual plan. On December 30,1952 the Company commenced the transaction of insurance business as a state mutualinsurance company.During 1952 and 1953 the Company received subscriptions for advanced surplus andissued certificates in the aggregate amounts of 348,400 and 172,350 respectively, fora total of 520,750 of which 80,550 was advanced by the Tennessee Farm BureauFederation of Columbia, Tennessee, and 440,200 was advanced by 910 members ofthe Farm Bureau Federation. Subsequent to the issuance of the original surplusreceipts, transfers of receipts have been made to other members of the TennesseeFarm Bureau Federation and many of these receipts have been redeemed. Therefore,as of December 31, 2010 a total of surplus-receipts were issued and outstanding in theaggregate amount of 6,900.Effective December 30, 1952 the Company was issued an initial Certificate of Authorityby the Department of Insurance and Banking, state of Tennessee, (currently known asthe Department of Commerce and Insurance, state of Tennessee) to transact thebusiness of insurance in the state of Tennessee. On July 1, 1986 a perpetual certificatewas issued which continues until suspended or revoked. This certificate was amendedeffective July 29, 1987 to include the Surety line of business. At the examination date,the Company is authorized to conduct the business of Property, Vehicle, Casualty andSurety in the state of Tennessee.At December 31, 2010, the Company was licensed in one state, Tennessee.The following exhibit depicts certain aspects of the growth and financial history of theCompany since the previous examination, according to annual statements filed with 3141,977,606,510412, te3Total Surplus

2/31/2010 490,192,403DateAdmittedAssetsLiabilities418, 164,2782,064,524,101436,765,6131,627, 758,488 415,814,584 2,137,009,005 482,313,868 1,654,695,137Total SurplusCHARTER AND BYLAWSCharter:The Charter was filed and recorded with the Secretary of State, State of Tennessee .onDecember 22, 1952. The Charter had been approved by the Department of Insuranceand Banking, State of Tennessee on December 22, 1952.The Charter provided for the operation of a mutual insurance company with a perpetualexistence and established its location in Columbia, Maury County, Tennessee. Theprimary purposes are as follows:1. "Operation of a mutual insurance company under and by virtue of the laws of theState of Tennessee, and particularly under and by virtue of Sections 6317-6440,inclusive, of Williams Code of Tennessee"2. "Empowerment to make contracts of insurance and/or to reinsure or acceptreinsurance upon a mutual basis for the kinds of insurance as followsFireLiabilityDisabilityAutomobileSteam BoilerUse and OccupancyMiscellaneous (except Life)"3. "Authorization of general and specific rights, privileges and powers of theCompany consistent with the provisions of Sections 6317-6340, inclusive, of theWilliams Code of Tennessee pertaining to mutual insurance companies and byvirtue of the General Corporation Act of Tennessee, Chapter 90 of the PublicActs of 1929, Sections 3709-3771, inclusive, of the Williams Code of Tennessee"The Company's charter requires the term of all officers to be established by the bylawsnot to exceed two years and a Board of Directors to be composed of not less than fivenor more than 25 members.4

Bylaws:The Restated Bylaws of the Company in effect at December 31, 2010 were enactedeffective April 9, 1992 in order to comply with the Tennessee Corporation Act of 1986and alleviate any technical deficiencies that may have surfaced since the Company wasincorporated.The Bylaws provide for an annual meeting of members at which a Board of Directors iselected. Officers are elected by the Board annually at the first Board meeting after theannual meeting of members.The Board is charged with managing the business and affairs of the Company. Eachdirector must be a member in good standing of the Company and the Tennessee FarmBureau Federation. Two directors shall be residents of each of the geographicaldivisions into which the state of Tennessee has been divided for membership purposesby the Tennessee Farm Bureau Federation. The remaining directors shall be selectedor elected from the state at large.The current Bylaws are such as generally found in corporations of this type and containno unusual provisions. They provide for regulation of the business and for the conductof the affairs of the Company, directors and its members.Said Bylaws have not been amended during the period of examination.MANAGEMENT AND CONTROLBoard of Directors:Management of the Company is vested in a Board of Directors elected annually. Inaccordance with the Bylaws, the Board shall consist of not less than five nor more than25 members. The composition of the board has been identical for .all three companiescomprising the Tennessee Farmers Group. The following persons had been dulyelected and were serving as members of the Company's Board of Directors atDecember31, 2010:Name, Address and CountyLacy UpchurchCrossville, TN (Cumberland)Jeff AikenTelford, TN (Washington)Willard BrownCookeville, TN (Putnam)Malcolm BurchfielNewbern, TN (Dyer)Principal OccupationPresident & Chairman of theBoard/FarmerFarmerFarmerFarmer5

Name. Address and CountvMartin DavisShelbyville, TN (Bedford)Robert EarhartBristol, TN (Sullivan)Charles HancockBumpus Mills, TN (Stewart)Dan HancockSmithville, TN (DeKalb)James Haskew, Jr.South Pittsburg, TN (Marion)Jason LuckeyHumboldt, TN (Gibson)William Eric MayberryHurricane Mills, TN (Humphreys)Jane MayNewbern, TN (Dyer)David MitchellBlaine, TN (Grainger)William Danny RochelleNunnelly, TN (Hickman)Jack SandersCharleston, TN (Bradley)Catherine ViaBells, TN (Crockett)Principal OccupationGeneral Manager, Bedford CountyUtility District; FarmerCounty ExecutiveFarmerFarmerFarmerFarmerFarmerState FB Women's he Board of Directors is charged with managing the business and affairs of theCompany. Each director must be a member in good standing of the Tennessee FarmBureau Federation, which in turn requires membership in good standing of a countyfarm bureau. Unlike the members of the other companies in the Tennessee FarmersGroup, the Company's Bylaws further require two directors to be residents of each ofthe geographical divisions into which the state of Tennessee has been divided formembership purposes by the Federation, with the remaining directors to be electedfrom the state at large. Though not required by the Charter or Bylaws of the Company,historically 11 members of the Board have also served on the Federation Board ofDirectors.Officers:The Bylaws of the Company provide that the Board of Directors shall elect annually apresident, a first vice president, a chief executive officer, a secretary, a treasurer, andsuch additional officers as the chief executive officer may propose and the Board ofDirectors approve. The following officers were duly elected and were serving in thepositions indicated for the Company at December 31, 2010:6

Lacy UpchurchWilliam Danny RochelleMatthew M. Scoggins, Jr.John LawWayne HarrisEdward LancasterNeal TownsendPresident & Chairman of the BoardFirst Vice PresidentChief Executive OfficerChief Operating Officer, P&C OperationsTreasurerGeneral Counsel and SecretaryChief Marketing OfficerThe Board of Directors has given authority to the Chief Executive Officer (CEO) toappoint such other officers as needed to operate the Company. The following officerswere appointed by the CEO and serving in positions indicated for the Company atDecember 31 , 201 0:Wayne MerrillSteve BurtVice President, Accounting/ControllerChief Information OfficerThe President functions as the Chairman of the Board of Directors and presides over allmeetings of the members and the Board of Directors. The President also serves as aconduit to the executive personnel concerning policy established by the Board ofDirectors. Subject to the control of the Board of Directors, the Chief Executive Officershall have general management and control of the affairs and business of theCompany, and shall perform all other duties and exercise all other powers commonlyincident to his office, or which are required by law.The Company's Investment Committee at December 31, 2010 is as follows:NameWayne MerrillLacy UpchurchMatthew M. Scoggins, Jr.Wayne HarrisDennis StephenEdward LancasterTitleController, Chairman of CommitteePresidentChief Executive OfficerTreasurer/Chief Financial OfficerChief Operating Officer- Life OperationsSecretary/General CounselNon Voting MembersRandy MaxwellDavid WilliamsonInvestment Portfolio ManagerInvestment Portfolio ManagerThe Company's Audit Committee at December 31, 2010 is as follows:NameJeff AikenMartin DavisEric MayberryWilliam Danny RochelleJack or7

Non Voting MembersMatthew M. Scoggins, Jr.Wayne HarrisEdward LancasterWayne MerrillChief Executive OfficerTreasurer/Chief Financial OfficerSecretary/General CounselControllerNice President AccountingThe administrative and executive functions of the Company are performed by the homeoffice staff. The Company has its own marketing division located in the home office inColumbia, Tennessee. The Company is a direct writer marketing insurance productsthrough captive agents. Offices are typically located in county farm bureau officesthroughout Tennessee. These offices are staffed by licensed agents who operate asindependent contractors. Underwriting activities are also performed by home officestaff.Certain services are purchased from outside contractors if needed and are not availablefrom in house personnel. Such services include actuarial analysis and independentaudit.Actuarial Services:Patrick J. Crowe, FCAS, MAAA7371 Wolf Spring TraceLouisville, KentuckyAuditing Services:Johnson Lambert & Co., LLC700 Spring Forest Road, Suite 115Raleigh, North CarolinaA holding company organizational chart is included at the last page of this examinationreport.CORPORATE RECORDSMinutes of meetings of the Company's members, Board of Directors including ExecutiveSession and Investment Committee were reviewed for the period under examination. Ingeneral, such minutes appear to be in proper order and accurately report theproceedings of each respective meeting.PECUNIARY INTEREST TENN. CODE ANN.§ 56-3-103The Company established a conflict of interest policy for its directors and officers toattest to compliance with Tenn. Code Ann.§ 56-3-103, prohibiting officers and directorsfrom having pecuniary interest in investment or disposition of Company funds. Theofficers and directors file annual conflict of interest statements.8

FIDELITY BOND AND OTHER INSURANCEThe Company has elected to self-insure its fidelity coverage. Minimum fidelity bondcoverage of 2,000,000 is suggested by guidelines published in the NAIC FinancialCondition Examiners Handbook. Following is a schedule of insurance that is maintainedby the Company at December 31, 2010:Type of CoverageWorkers Compensation & Employers LiabilityWorkers compensationEmployers' liabilityBodily injury by accidentBodily injury by diseaseAggregate limitCoverage LimitsTennessee statutory limit 1 ,000,000 each accident 1,000,000 each accident 1,000,000Coverage is underwritten by Wausau Business Insurance Company which islicensed in Tennessee.Executive Liability and Entity Security Liability Policyincluding Directors', Officers, Insured Entity andEmployment Practices Liability InsuranceLimit of Liability (inclusive of costs of Defense) 10,000,000Coverage is underwritten by Federal Insurance Company which is licensed inTennessee. A retention of 100,000 per claim applies to Employment PracticesClaims, 10,000 retention per claim applies to Fiduciary Claims and 100,000retention applies to other specific defined claims outlined in. sections of the policy.Commercial General LiabilityEach occurrenceGeneral aggregateProducts-Completed operationsaggregate limitPersonal & advertising limitDamage to premises rentedMedical expense limit (any one person) 2,000,000 2,000,000 2,000,000 2,000,000 50,000 5,000Coverage is underwritten by the Company on their policy form. The policy isissued to the Tennessee Farm Bureau Federation, et al, with the Company listedas a named insured.9

RETIREMENT PLAN AND OTHER EMPLOYEE BENEFITSAt December 31, 2010, the following benefits were available to the Company'semployees:Group Life, Accidental Death and Dismemberment, Long Term Disabilitv InsuranceThe referenced benefits are provided to all full-time employees on a non-contributorybasis and to dependents on a contributory basis. Each insurance plan has a six monthwaiting period and will become effective on the first day of the following month after theirwaiting period. The basic life insurance benefit is two times the employee's annualearnings. The accidental death benefit is equal to four times the life benefit. The longterm disability benefit equals 66 2/3% of the employee's gross monthly income up to 9,000 per month. This amount is offset by benefits payable from Social Security,workers' compensation and any other government plans. The plan sponsor for thesebenefits is Tennessee Farm Bureau Federation and the plan administrator is StandardInsurance Company.Health InsuranceMedical and dental insurance is provided to all full-time employees on a contributoryEmployees may also elect and pay for dependent coverage. The planbasis.additionally covers well care, psychiatric care and prescription drugs.Tennessee Rural Health Improvement Association on behalf of the Companycoordinates the self-funded employee health plans. The Administrative Coordinator isTRH Health Insurance Company and the Claims Administrator- is BlueGrass BlueShieldof Tennessee. Participants in the plan are entitled to certain rights and protectionsunder the Employee Retirement Income Security Act of 1974 (ERISA) and a Statementof ERISA Rights is included in the plan information summary provided to participants.Retirement Plan Defined Benefit Plan)The Company sponsors a defined benefit pension plan for all eligible employees on anon-contributory basis. An employee becomes eligible for the plan when they havereached 21 years of age and have completed one year of eligible service. The benefitsare based on years of service and the employee's highest three consecutive years'average compensation.Retirement Age65 years (normal retirement)62 years with 22 years service55 years with 25 years service10

Retirement Savings Plan (Defined Contribution Plan. 401-KlThe Company offers a 401-K Plan for all eligible employees. An employee becomeseligible on the first April or October following their one year anniversary of employmentand attainment of 21 years of age. The Company matches 30% of the employeecontribution up to a maximum of six percent of eligible earnings. The match is made inthe form of Tennessee Farmers Life Insurance Company and Tennessee FarmersAssurance Company common stock.Years of Service Bonus ProgramThe Company has a tenure bonus program where the employee earns a bonus basedon their years of service. The bonus is calculated using 20 per year for each year ofservice.Other BenefitsOther benefits available for employees include holidays, sick leave, vacation leave,service recognition awards, and educational assistance. The time of service with theCompany determines the eligibility and amounts of time available to the employee.TERRITORYAs of December 31,2010, and as of the date of this examination report, the Companywas licensed to transact business in the state of Tennessee. The Certificate ofAuthority for that jurisdiction was reviewed.During 2010, the Company wrote direct premium in one state:. AmountTennessee 983,817,706Total 983,817,706PLAN OF OPERATIONThe Company operates as a direct writer of property and casualty insurance under themutual plan, insuring risks of the following lines of business:FireAllied linesFarmownersHomeownersInland marineEarthquakeOther liability occurrenceAuto liabilityIIAuto physical damageSuretyBurglary and theft

The insurance business of the Company was produced by a sales and production staffunder the supervision of a Chief Marketing Officer assisted by Regional AgencyManagers. The Company's 441 captive agents at December 31,. 2010 are independentcontractors serving as either Agency Managers or Agents. These agents also marketbusiness for Tennessee Farmers Life Insurance Company.The production offices are primarily located in local Farm Bureau offices in the 95counties of the state of Tennessee. Historically, the Agency Managers have authorizedthe Company to withhold certain prescribed amounts from earned commissions andfees in order to reimburse the individual county Farm Bureau for the cost of facilities andservices used by the agents in the production of business. During 2009, a county officerestructuring program was begun, whereby the actual operating costs of the local officeinsurance operations and County Farm Bureau operations were analyzed and defined.In the counties that have been restructured, the County Farm Bureaus and AgencyManagers entered into Administrative Services and Lease Agreements with TF SupportServices, Inc. (TFSS). TFSS administers the financial transactions between the AgencyManager and the County Farm Bureau Operations, allowing for a more accurate anddefined allocation of operating expenses between the county office insurance .operations and the Farm Bureau operations. As of December 31, 2010, 50 of the 95counties had been restructured. The remaining 45 counties were restructured during2011.During the period under review and through the date of this report, all policy preparationwas performed in the home office and was subject to the underwriting rules adopted bythe Company and promulgated in accordance with approved rates. The adjustment ofclaims is also administered by the Company through its regional claim offices locatedthroughout the state of Tennessee.The largest net amount insured by the Company in any one risk is 600,000. In order topurchase a policy with the Company, the potential insured must be a member of theTennessee Farm Bureau Federation. The policies issued are non-assessable inrelation to contingency premiums. Dividends may be paid to policyholders from earnedsurplus funds as declared by the Board.LOSS EXPERIENCEThe loss experience of the Company for the period under examination, as reported in itsAnnual Statements, is as follows:YearLosses IncurredLAE IncurredPremiumsEarnedLoss Ratio2006 308,790,622 35,123,288 1267.1%12

YearLosses IncurredLAE IncurredPremiumsEarnedLoss 8436,952,648490, 192,40392.4% 1,757,958,973 169,190,189 2,236,490,30686.2%TotalAGREEMENTS WITH PARENT, SUBSIDIARIES AND AFFILIATESThe Company meets the definition of a holding company pursuant to Tenn. Code Ann. §56-11-101.The insurance companies in the Tennessee Farmers Group had previously beenexempt from the statute based upon an order from Commissioner Elaine McReynoldsdated February 12, 1987 which granted the exemption pursuant to Tenn. Code Ann. §56-11-2050). (It is noted that the former part 2, §§ 56-11-201-56-11-215, wasredesignated as part 1, §§56-11-101- 56-11-115, by the code commission in 2008.)During 2004, the TDCI performed a Target Financial Examination of the four companies(Tennessee Farmers Mutual Insurance Company, Tennessee Farmers AssuranceCompany, Tennessee Farmers Life Insurance Company, Tennessee Farmers LifeReassurance Company) in the holding company. The Report on Examination wasmade as of December 31, 2003 and was signed on December 22, 2004. The TDCI andthe four Companies subsequently agreed that, henceforth, all parties are subject to theregistration requirements under Title 56, Chapter 11 Tennessee Code Annotated,"Insurance Holding Company System Act of 1986".The Company started filing Form B "Insurance Company System Annual RegistrationStatement" and Form C "Summary of Registration Statement" with the TDCI for the year2004. This information was filed on April 29, 2005 in compliance with Tenn. Code Ann§ 56-11-205.Management Services Agreements:The Company is a party to Management Services Agreements with two of itsaffiliates, Tennessee Farmers Assurance Company and Tennessee Farmers LifeInsurance Company. Under these agreements, the Company performs allmanagement, administrative and other services that are reasonably necessaryfor the operation of the companies. These services include, but are not limitedto: employee, legal, claims, managerial and accounting.The agreements provide for the Company to be paid for services and supplies inan amount determined in accordance with Treasury Regulation Section 1.48213

2(b)(3) et seq. as codified in United States Internal Revenue Code Title 26. Theagreements call for settlement to be remitted on a quarterly basis.The agreement with Tennessee Farmers Assurance Company was dated April25, 1991 and had an ending date of December 31, 1991 with the option to renewon a calendar year basis thereafter.The agreement with Tennessee Farmers Life Insurance Company was datedDecember 21, 1973 and had an ending date of December 31, 1973 with theoption to renew on a calendar year basis thereafter.During 2010, the Company was paid 4,952,244 by Tennessee FarmersAssurance Company and 7,742,792 by Tennessee Farmers Life InsuranceCompany.Agreement To Allocate Consolidated Federal Income Tax Liability:The Company files a consolidated tax return including the following namedsubsidiaries:Tennessee Farmers Assurance CompanyTennessee Farmers Supp

Williams Code of Tennessee pertaining to mutual insurance companies and by virtue of the General Corporation Act of Tennessee, Chapter 90 of the Public Acts of 1929, Sections 3709-3771, inclusive, of the Williams Code of Tennessee" . Humboldt, TN (Gibson) William Eric Mayberry Hurricane Mills, TN (Humphreys) Jane May Newbern, TN (Dyer) David .