EXAMINATION REPORT OF
FARMERS MUTUAL HAIL INSURANCE COMPANY OF IOWA
WEST DES MOINES, IOWA
AS OF DECEMBER 31, 2021
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West Des Moines, Iowa
May 31, 2023
HONORABLE DOUG OMMEN
Commissioner of Insurance
Insurance Division
State of Iowa
Des Moines, Iowa
Commissioner:
In accordance with your authorization and pursuant to Iowa statutory provisions, an examination has been made
of the records, business affairs and financial condition of
FARMERS MUTUAL HAIL INSURANCE COMPANY OF IOWA
WEST DES MOINES, IOWA
AS OF DECEMBER 31, 2021
at its Home Office, 6785 Westown Parkway, West Des Moines, Iowa.
INTRODUCTION
Farmers Mutual Hail Insurance Company of Iowa, hereinafter referred to as the “Company”, was last examined as
of December 31, 2016. The examination reported herein was conducted as an examination of an insurance holding company
group by the contracting firm, Risk & Regulatory Consulting, LLC, and examiners of the Iowa Insurance Division. The
Company’s subsidiary, FMH Ag Risk Insurance Company (FMH Ag Risk), was also examined as part of the holding
company group, with a separate examination report prepared for each entity.
SCOPE OF EXAMINATION
This is the regular comprehensive financial examination of the Company covering the intervening period from
January 1, 2017, to the close of business on December 31, 2021, including any material transactions and/or events occurring
and noted subsequent to the examination period.
The examination was conducted in accordance with the National Association of Insurance Commissioners (NAIC)
Financial Condition Examiners Handbook. The Handbook requires that we plan and perform the examination to evaluate
the financial condition, identify current and prospective risks of the Company and evaluate system controls and procedures
used to mitigate those risks. An examination also includes identifying and evaluating significant risks that could cause an
insurer’s surplus to be materially misstated both currently and prospectively.
All accounts and activities of the Company were considered in accordance with the risk-focused examination
process. This may include assessing significant estimates made by management and evaluating management’s compliance
with Statutory Accounting Principles. The examination does not attest to the fair presentation of the financial statements
included herein. If, during the course of the examination an adjustment is identified, the impact of such adjustment will be
documented separately following the Company’s financial statements.
This examination report includes significant findings of fact and general information about the insurer and its
financial condition.
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HISTORY
The Company was incorporated on March 4, 1893, as a crop hail assessment insurance association under the name
of Farmers Mutual Hail Association of Iowa, with its Home Office located in Early, Iowa. In 1941, the Company adopted
its present name, Farmers Mutual Hail Insurance Company of Iowa (FMH) and in 1950 the Company’s existence was made
perpetual. In addition, the issuance of non-assessable policies and the writing of multiple lines were approved.
On December 20, 1991, the Company acquired Farmers Union Co-operative Insurance Company of Nebraska, Inc.
(FUCIC) and contributed $5,000,000 to their surplus. October 1, 2011, the Company entered into a loss portfolio agreement
with FUCIC. The loss portfolio transfer moved all insurance related business activities and obligations of the subsidiary
onto the Company’s books. On September 30, 2014, FUCIC merged into the Company.
On April 1, 2011, Central Iowa Mutual Insurance Association (CIM) merged into the Company. The Company
issued assumption of policy obligations and liability endorsement certificates to all CIM policyholders. As a result of the
statutory merger, the Company also owns 100% of the stock in C.I.M. Agency.
On April 18, 2011, the 100% owned subsidiary, Farmers Mutual Hail Insurance Company (FMHIC,) was formed
in Iowa as a shell company holding required investments mandated by the state of Iowa. Effective September 30, 2015,
FMHIC was merged into the Company.
On February 3, 2014, the Company purchased 1% economic ownership with 51% voting rights in Stratus, LLC.
Stratus, LLC provides reinsurance brokerage services and expertise for the Company.
On April 1, 2015, the Company acquired all issued and outstanding capital stock shares of John Deere Insurance
Company, along with its affiliate John Deere Risk Protection, Inc., from Deere and Company and subsequently renamed
the affiliates FMH Ag Risk Insurance Company and FMH Risk Protection, Inc., respectively.
On February 21, 2020, the Company acquired 50% membership interest in TruAcre Technology, LLC. TruAcre
Technology, LLC is a provider of precision farming equipment and technical services and is headquartered in Muscatine,
Iowa. The acquisition allowed the Company to operationally expand into digital ag solutions.
SURPLUS NOTES
On March 31, 2015, the Company issued a $60 million surplus note to American Equity Investment Life Insurance
Company (AEL) and Fidelity & Guaranty Life Insurance Company (FGLIC), each holding $30 million of the note issued.
The surplus note bears interest at 7.375% per annum. The note matures April 15, 2035. The Company, at its option and
upon notice, may prepay all or part of the note any time after the tenth anniversary of the note closing.
Interest payments made to AEL and FGLIC during the examination period and approved by the Iowa Insurance
Division, were as follows:
2017 - $4,425,000
2018 - $3,503,125
2019 - $4,425,000
2020 - $4,425,000
2021 - $4,425,000
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HOLDING COMPANY ACT
The Company is a member of a Mutual Insurance Holding Company System and properly filed Holding Company
Registrations in accordance with Chapter 521A, Code of Iowa. The Company is the ultimate parent of Farmers Mutual
Hail Insurance Company of Iowa Group, and owns all the outstanding common stock of its subsidiaries, CIM Agency,
FMH Ag Risk Insurance Company, and FMH Risk Protection, Inc.
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The Company has 1% economic ownership and 51% voting rights of Stratus, LLC.
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The Company owns 50% of TruAcre Technology, LLC.
MANAGEMENT AND CONTROL
MEMBERSHIP
A person becomes and is a member of the Company while holding an eligible policy that is in force. Each member
shall be entitled to one vote at any regular or special meeting of the members upon all matters of business, including the
election of directors which vote may be exercised in person or by written proxy.
The regular annual meeting of the members of the Company for the election of Directors and the transaction of
other business shall be held at the Home Office in West Des Moines, Iowa, at 10:00 o’clock A.M. on the first Monday
after the first Saturday in March of each year. The location of this meeting will be determined annually by the president of
the Company, and be made known publicly sixty days in advance, or as otherwise required by law. A special meeting of
the members may be called by the President or Secretary, if deemed necessary, or such a meeting shall be called by the
President upon written request of a majority of the members of the Board, or upon written request of a majority of the
members, by giving ten (10) days' written notice. The number of members on the Board of Directors plus one present in
person at any annual or special meeting of the members shall constitute a quorum for the transaction of business at any
meeting of the members.
BOARD OF DIRECTORS
The number of Directors which shall constitute the whole Board of Directors shall be not less than five nor more
than eleven. Directors shall be elected for a term not to exceed three years and as nearly as may be, one-third thereof shall
be elected annually by the members of the Company at the regular annual meeting of the members. The Board of Directors
may, as provided in the Bylaws, be divided into not more than three classes with the members of one class being elected
at each annual meeting. There is no limit on the number of terms a Director may serve. Vacancies occurring in the Board
of Directors shall be filled by the remaining Directors by the appointment of qualified persons to hold office for the
remainder of the term. Any vacancy occurring on the Board of Directors may be filled by the affirmative vote of a majority
of the remaining Directors to hold office for the remainder of the unexpired term of the director being replaced.
The annual meeting of the Board of Directors shall be held immediately after the adjournment of the annual
meeting of the members; and the Board of Directors shall have the power to hold special meetings, with the exception of
Farmers Mutual
Hail Insurance
Company of Iowa
CIM Agency Stratus, LLC
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FMH Ag Risk
Insurance Company
FMH Risk Protection,
Inc.
TruAcre Technology,
LLC
2
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the annual meeting, within or without the State of Iowa, at such places as may be designated by the Bylaws or by resolution
of the Board. Special meetings of the Board of Directors may be called at any time by the President or Secretary or any
two members of the Board by giving five days written notice in writing to the members of the Board. The members of the
Board of Directors shall have the power to waive notice of any special meeting by unanimous consent.
All meetings of the Board of Directors shall require a quorum present for the transaction of business. A quorum
shall represent 50% of the total number of sitting Directors on the entire Board plus one additional Director. Meetings shall
be conducted in the usual manner of such meetings, and any action of the Board of Directors shall only become official
upon approval through formal vote providing for majority approval by those Directors present at the meeting in which the
action is taken. The President of the Company shall at all times be privileged to vote on any action of the Board.
At December 31, 2021, duly elected and serving as Directors were:
Name and Address Principal Business Affiliation
Term
Ronald P. Rutledge Retired - Chairman of the Board 2023
Urbandale, Iowa Farmers Mutual Hail Insurance Company of Iowa
Shannon D. Rutledge President and Chief Executive Officer 2023
Altoona, Iowa Farmers Mutual Hail Insurance Company of Iowa
Darin L. Roggenburg Executive Vice President, Chief Financial Officer, 2023
Clive, Iowa and Treasurer
Farmers Mutual Hail Insurance Company of Iowa
Deborah L. Ladehoff Senior Vice President, Secretary 2024
Clive, Iowa Farmers Mutual Hail Insurance Company of Iowa
James A. Brost Retired – Independent Director 2022
St. Croix Falls, Wisconsin Farmers Mutual Hail Insurance Company of Iowa
Curtis B. Swain Vice President, General Counsel 2024
Van Meter, Iowa Farmers Mutual Hail Insurance Company of Iowa
William A. Rutledge Vice President, Claims Manager, Assistant Secretary 2022
Polk City, Iowa Farmers Mutual Hail Insurance Company of Iowa
Compensation for Directors shall be fixed by the Board of Directors and is currently set at $80,000 per year.
COMMITTEES
The Board of Directors, by resolution adopted by a majority of the whole Board, may designate three or more
Directors of the Company to constitute an executive committee who shall have and may exercise all of the authority of the
Board in the management of the Company, except (1) fill vacancies among the Directors or a committee of Directors, (2)
amend the Bylaws, (3) adopt a plan of merger or consolidation, and (4) remove an Officer. The Board of Directors by
resolution adopted by a majority of the whole Board may designate other committees. Each committee to consist of at least
one Director of the Company, and to the extent provided in the resolution or the Bylaws of the Company shall have and
may exercise powers and authority of the Board of Directors, subject to the limitations set forth in resolution.
Members of the Executive Committee, Investment Committee, Management Committee or any other committee
shall be appointed for such term as the Board may designate in the resolution establishing the committee, but may be
removed at any time by a vote of a majority of all the directors; and vacancies on a committee may be filled by vote of the
Board.
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The committees and their membership as of December 31, 2021, are as follows:
Executive Committee
Audit Committee
Ronald P. Rutledge Darin L. Roggenburg
Shannon D. Rutledge James A. Brost
Darin L. Roggenburg
Investment Committee
Compensation Committee
Ronald P. Rutledge Deborah L. Ladehoff
Darin L. Roggenburg Darin L. Roggenburg
Shannon D. Rutledge James A. Brost
OFFICERS
Each year the Board, at its regular annual meeting, shall elect by a majority vote a president, who shall be a member
of the Board of Directors, a secretary, and a treasurer, and any other officers it may elect as it may deem advisable. Any of
said offices may be combined and held by one person, except that of president and secretary.
Duly elected officers at December 31, 2021 were as follows:
Name Title
Shannon D. Rutledge President and Chief Executive Officer
Darin L. Roggenburg Executive Vice President, Treasurer and Chief Financial Officer
Deborah Ladehoff Senior Vice President, Secretary
Kenneth J. Liljedahl Senior Vice President, Corporate Administration
Ronald J. Kuethe Executive Vice President, Chief Risk Officer
Patrick J. Faga Executive Vice President, Chief Marketing Officer
Bryant J. Tjeerdsma Senior Vice President, Crop Insurance Underwriting
Kevin A. Johnson Senior Vice President, Sales
Scott W. McEntee Senior Vice President, Accounting, Controller, Assistant Treasurer
David A. DeCapp Senior Vice President, Marketing
The compensation of the Senior Management Team is shown in Exhibit A to be found immediately following the
signature page of this report.
CONFLICT OF INTEREST STATEMENTS
The Company has a written conflict of interest policy statement with procedures in place for the Board of Directors
to review annual disclosures of any material interest or affiliation on behalf the Company’s officers or directors, which is
in conflict with their official duties at the Company.
The Company was not able to produce evidence of a completed and signed conflict of interest statement forms for
certain officers and directors during the examination period.
CORPORATE RECORDS
There were no amendments to the Company’s Articles of Incorporation during the examination period.
The Bylaws were amended and restated on November 2, 2017 to establish the four (4) standing committees of the
Board and to designate the Secretary keep records of all the proceedings of all meetings of the established committees.
The minutes from the meetings of policyholders, the Board of Directors and the committees of the Board were
reviewed for the examination period. The Company was not able to produce the meeting minutes for certain Investment
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Committee and Compensation Committee meetings during the examination period for review.
The Examination Report prepared by the Iowa Insurance Division, as of December 31, 2016, was accepted as
presented to the Board of Directors at a meeting held on May 14, 2018.
INTERCOMPANY AGREEMENTS
Management Service Agreements
The Company entered into a Management Services Agreement with FMH Ag Risk Insurance Company to provide
investment management and advisory services upon the terms and conditions described in the agreement. The agreement
shall be for an initial five-year term and, unless timely notification is given, shall be automatically renewed for additional
one-year terms.
The Company entered into Management Services Agreement with FMH Risk Protection, Inc. to provide business
and organizational strategy, accounting services, legal services, regulatory services, financial and investment management
and advisory services, investment banking and financial services, and strategic and corporate advisory services. The
agreement shall be for an initial five-year term and, unless timely notification is given, shall be automatically renewed for
additional one-year terms.
The Company entered into Management Services Agreement with CIM Agency to provide business and
organizational strategy, accounting services, legal services, regulatory services, actuarial services, financial and investment
management and advisory services, investment banking and financial, strategic and corporate advisory. The Agreement
shall be for an initial five-year term and, unless timely notification is given, shall be automatically renewed for additional
one-year terms.
Federal Tax Sharing Agreement
The Company's federal income tax return is consolidated with FMH Ag Risk Insurance Company, FMH Risk
Protection, Inc. and CIM Agency. The method of allocation between the companies is subject to a written agreement,
approved by the Board of Directors. Allocation is based upon separate calculations with current credit provided for net
losses utilized. Intercompany tax balances are settled annually. As member of the consolidated tax group, the Company has
joint and several liability for the tax liabilities of each member of the group should such member be unable to satisfy its
obligation to the agreement.
FIDELITY BONDS AND OTHER INSURANCE
The Company is protected against loss from any fraudulent or dishonest acts from any of the Company’s directors,
officers, or employees up to a $2,000,000 single loss limit of liability, which meets the NAIC’s suggested minimum amount
of coverage.
The other interests of the Company appear to be adequately protected through coverages afforded by policies in
force with admitted insurers.
EMPLOYEE WELFARE
The Company offers competitive compensation including incentive compensation. The Company also offers
comprehensive benefits including medical, dental, vison , group life, and long-term disability insurance coverages for its
employees.
The Company sponsored a defined benefit pension plan covering U.S. employees. On November 16, 2012 the
Company amended the retirement plan, freezing the entry into the plan after December 31, 2012. The accrued benefit is
frozen effective December 31, 2012 and no additional benefits shall accrue after such date.
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The Company also sponsors a non-qualified defined benefit pension plan and postretirement plan.
As of December 31, 2021, the Company’s financial reporting of pension liabilities was accrued in accordance with
actuarially determined amounts with an offset to the pension cost accrual for the incremental asset amortization.
The Company also offers a defined contribution plan that covers substantially all employees and is designed to
provide retirement benefits. Participants were permitted to contribute up to 100% of their qualifying earnings in 2021, in
accordance with IRS guidelines. The Company will contribute an additional 50% of the first 4% of wages that are
contributed by each participant. These contributions are 100% vested. In addition, the Company may make an additional
matching contribution after the plan year based on years of services. These contributions are vested over 6 years.
REINSURANCE
ASSUMED
The Company’s assumed business is primarily focused on smaller and regional insurance companies with no or
limited coastal risk exposures. The Company assumed reinsurance business from non-affiliated insurance companies on
direct basis and through Regional Treaty Services Corporation, a reinsurance intermediary manager for the purpose of
administering, underwriting, binding, and otherwise managing, on the Company’s behalf, reinsurance of the business
produced by Guy Carpenter & Company, LLC pursuant to a regional accounts and property facultative program services
agreement. The spread of risk includes direct reinsurance for county mutuals in Midwestern states, small to medium sized
regional companies, global coverage placed in the broker market, and crop business where not written on a direct basis.
Non-affiliated assumed reinsurance premiums totaled $44,573,420 for 2021.
Crop Hail Private Quota Share Reinsurance Agreement - Palliser Insurance Company Limited
The Company entered into a Crop Hail Private Quota Share Reinsurance Agreement with Palliser Insurance
Company Limited. The agreement provides that Palliser Insurance Company Limited cede 42.86% of its crop hail private
liability on all business to the Company.
Quota Share Reinsurance Agreement
The Company entered into a Quota Share Reinsurance Agreement with FMH Ag Risk Insurance Company. The
agreement provides that the Company assumes 100% of all business written, including crop hail, crop hail private products,
and multiple peril crop insurance. Affiliated assumed reinsurance premiums totaled $229,063,538 for 2021.
CEDED
The Company has several ceded reinsurance contracts specific to each of the main business segments: Crop, P&C,
Reinsurance, and a Corporate Stop Loss contract in place that serves as a top layer of protection for all business segments.
Ceded reinsurance premiums totaled $631,060,810 for 2021.
Multi-Peril Crop Insurance (MPCI) Standard Reinsurance Agreement
The Standard Reinsurance Agreement is a cooperative financial assistance agreement between the Federal Crop
Insurance Corporation (FCIC) and the Company. FCIC is a government corporation within the USDA authorized to carry
out programs of the Federal Crop Insurance Act. The Risk Management Agency acts on behalf of FCIC to administer all
Federal crop insurance programs. The SRA establishes the terms under which the FCIC provides reinsurance and subsidies
on eligible crop insurance contracts sold by the Company. By regulation, an insurance company must be in good financial
standing and in compliance with the state laws where domiciled and writing business prior to being considered for approval
of an SRA.
The Company may designate an eligible crop insurance contract to the Assigned Risk Fund by State. Contracts not
specifically designated will automatically be assigned to the Commercial Fund by State. The Company shall retain a 20%
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interest in premium and associated ultimate net losses in the Assigned Risk Fund in each State with the remainder ceded to
the FCIC. The Company shall retain at least a 35% interest in premium and associated ultimate net losses in the Commercial
Fund in each State with the remainder ceded to the FCIC.
RAMP Crop Insurance Aggregate Excess of Loss Reinsurance Agreement
The reinsurer shall indemnify the Company for 100% of the amount, if any, by which the aggregate of the
Company’s Subject Net Loss exceeds an amount equal to 115.0% of the sum of the Company’s subject net premium for
business as respects the 2021 RAMP crop insurance season. However, the reinsurer’s liability for subject net loss in the
aggregate shall not exceed $5,640,000 or 100.0% of 30.0%of the sum of the Company’s subject net premium, whichever
the lesser. The contract applies only to that portion of any loss with respect to RAMP crop insurance business that the
Company retains net for its own account (prior to deduction of any reinsurance that inures solely to the benefit of the
Company).
MPCI and Private Products Quota Share Reinsurance Agreement
For each of the respective 2019, 2020 and 2021 MPCI and private products reinsurance years, the Company shall
cede to the reinsurer and the reinsurer shall assume a 100% quota share of a mutually agreed upon premium figure. This
mutually agreed upon premium figure shall in no instance be less than $50 million dollars for MPCI and private products
business combined for each such year, but may be greater than $50 million dollars if agreed upon by both parties for the
given MPCI and private products reinsurance year. The Company may maintain the RAMP aggregate stop loss reinsurance
contract under which premium and recoveries shall insure to the benefit of this contract. This contract applies only to the
portion of any loss, or with respect to MPCI business only to that portion of any loss or gain, that the Company retains net
for its own account (prior to deduction of any reinsurance that inures solely to the benefit of the Company).
Crop Insurance Quota Share Reinsurance Agreement
The Company hereby cedes, and the reinsurer hereby accepts 100% of the quota share amount and the liability
thereon as respects the underwriting gain or underwriting loss of the Company’s MPCI business and crop hail and Named
Peril (CHNP) business, less any reinsurance that inures to the benefit of this contract, equal to an amount determined by
dividing $109,000,000 by the Company’s sum premium (as hereinafter defined).
The ceded liability hereunder shall be split between MPCI and CHNP in the same proportion that the net retained
premiums and gross CHNP premiums bear to the Company’s crop premiums for each respective year. In addition to its
liability set forth above, the reinsurer shall be liable for its quota share amount of 100% of extra contractual obligations and
its quota share amount of 100% of loss in excess of policy limits and its quota share amount of 100% of all declaratory
judgment expense, all as defined herein. The reinsurer shall also be liable for its quota share amount of any losses, fines,
fees and/or penalties under the current Standard Reinsurance Agreement, unless otherwise excluded hereunder.
Multiple Year Combined Crop Aggregate Excess of Loss Reinsurance Agreement
The reinsurer will be liable for the liability which may accrue to the Company as a result of any loss or losses on
policies classified by the Company as crop hail and MPCI businesses.
The reinsurer shall indemnify the Company for 100% of the amount, if any, by which the aggregate of the
Company’s ultimate net loss exceeds an amount equal to 90.0% of the Company’s subject premium for business as respects
the 2021 crop season. However, the reinsurer’s liability for ultimate net loss in the aggregate shall not exceed $83,990,797
or 100% of 10% of the Company’s subject premium, whichever the lesser.
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Multiple Year MCPI Aggregate Excess of Loss Reinsurance Agreement (Layers 1-3)
The contract is to indemnify the Company in respect of the liability that may accrue to the Company as respects
policies classified by the Company as MPCI business. The terms and conditions for 2021 crop season are provided in the
schedule below:
First Layer
Second Layer
Third Layer
Company’s Retention
100% of net retained
premium for the crop
season.
100% of net retained
premium for the crop season
plus the lesser of estimated
net retained premium, or 5%
of the Company’s net
retained p
remium for the
crop season
100% of net retained
premium for the crop season
plus the lesser of estimated
net retained premium
, or
20% of the Company’s net
retained p
remium for the
crop season.
Reinsurer’s Limit
100% of 5% of net retained
premium for the crop season
or 100% of
estimated net
retained premium,
whichever is lesser.
100% of 15% of net retained
premium for the crop season
or 100% of
estimated net
retained premium,
whichever is lesser.
100% of 20% of net retained
premium for the crop season
or 100% of
estimated net
retained premium,
whichever is lesser.
Property Per Risk Excess of Loss Reinsurance Agreement
The reinsurer agrees to reinsure the net excess liability of the Company resulting from any loss occurrence(s) during
the term of this contract under policies, bonds, contracts, binders, or agreements of insurance or reinsurance in force or
which may be written or renewed by the Company during the term of this contract and are classified by the Company as
direct property written by the Company’s property and casualty division.
The reinsurer shall be liable for 100% of the ultimate net loss in excess of $2,000,000 each and every risk, each loss
subject to a limit of $6,000,000 each and every risk, each loss, and further subject to a limit of $15,000,000 any one loss
occurrence.
Equipment Breakdown Quota Share Reinsurance Agreement
The reinsurer shall be liable for 100% of the Company’s net retained liability under equipment breakdown
endorsements to farmowners and homeowners policies.
Farmowners cessions by the Company under this treaty shall not exceed a limit of liability of $25,000,000 on any
one risk without prior written agreement of the reinsurer. It is agreed and understood that for the purposes of this treaty, one
policy constitutes as one risk.
Homeowners cessions by the Company under this treaty shall not exceed a limit of liability of $50,000 on any one
risk without prior written agreement of the reinsurer. It is agreed and understood that for the purposes of this treaty one
policy constitutes as one risk.
Property Catastrophe Excess of Loss Reinsurance Agreement (Layers 1-2)
The reinsurer agrees to reinsure the net excess liability of the Company resulting from any loss occurrence(s) during
the term of this contract under policies, bonds, contracts, binders, or agreements of insurance or reinsurance in force or
which may be written or renewed by the Company during the term of this contract and are classified by the Company as
direct property written by the Company’s property and casualty division, including automobile physical damage
comprehensive coverage.
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First (Layer) Property Catastrophe Excess of Loss Reinsurance - The reinsurer shall be liable with respect to each
and every loss occurrence, for 100% of the ultimate net loss, which is in excess of $5,000,000, but the reinsurer shall not be
liable for more than $5,000,000 in respect of each and every loss occurrence.
Second (Layer) Property Catastrophe Excess of Loss Reinsurance - The reinsurer shall be liable with respect to
each and every loss occurrence, for 100% of the ultimate net loss, which is in excess of $10,000,000, but the reinsurer shall
not be liable for more than $15,000,000 in respect of each and every loss occurrence.
Property Catastrophe Excess of Loss Reinsurance Agreement (Layer 3 - P&C and Assumed Reinsurance)
The reinsurer agrees to reinsure the net excess liability of the Company resulting from any loss or losses) during
the term of this contract under policies, bonds, contracts, binders, or agreements of insurance or reinsurance, or other
evidences of liability, which are issued, accepted or held covered provisionally or otherwise, to a county mutual, by or on
behalf of the Company and which are in force or written or renewed by the Company during the term of this contract and
are classified by the Company as property, including automobile physical damage comprehensive coverage.
Third (Layer) Property Catastrophe Excess of Loss Reinsurance - The reinsurer shall be liable with respect to each
and every loss occurrence, for 100% of the ultimate net loss, which is in excess of $25,000,000, but the reinsurer shall not
be liable for more than $20,000,000 in respect of each and every loss occurrence.
Multi Line Reinsurance Agreement (P&C and Assumed Reinsurance)
The reinsurer agrees to reinsure the net excess liability of the Company resulting from any loss occurrence(s) during
the term of this contract under policies, bonds, contracts, binders, or agreements of insurance or reinsurance in force or
which may be written or renewed by the Company during the term of this contract and are classified by the Company as
follows:
A. Direct and assumed casualty business, including, but not limited to:
a. Farmowners, homeowners, private passenger automobile liability, personal liability, and assumed
county mutual liability business;
b. Personal and farm umbrella business; and
B. Direct property business
Casualty (Umbrella Only) Excess of Loss Reinsurance - As respects to all umbrella business only the reinsurer shall
be liable for 100% of the ultimate net loss in excess of $1,000,000 each and every policy, subject to a limit of $4,000,000
each and every policy.
Casualty (Including Umbrella) Excess of Loss Reinsurance - As respects all casualty and umbrella business the
reinsurer shall be liable for 100% of the ultimate net loss in excess of $300,000 each and every loss occurrence, subject to
a limit of $4,700,000 each and every loss occurrence.
Property Excess of Loss - As respects all property business, the reinsurer shall be liable for 100% of the ultimate
net loss in excess of $500,000 each and every risk, each and every loss occurrence, subject to a limit of $1,500,000 each
and every risk, each and every loss occurrence, and further subject to a limit of $4,500,000 any one loss occurrence.
Multi-Line (Basket) Excess of Loss Reinsurance - In the event a loss occurrence involves losses to both property
and casualty (including umbrella) business, irrespective of whether such losses exceed the applicable retentions provided,
the reinsurer shall be liable in respect of each and every loss occurrence for 100% of the ultimate net loss in excess of
$500,000 each and every loss occurrence subject to a limit of $1,300,000 each and every loss occurrence.
Original Insured Market Loss Warranty Excess of Loss Reinsurance Agreement (P&C and Assumed Reinsurance)
This contract is to indemnify the Company in respect of the liability that may accrue to the Company as a result of
loss or losses arising from earthquake and any ensuing loss, under policies classified by the Company as property business,
including boiler and machinery losses from property business.
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The reinsurer shall be liable in respect of each and every loss occurrence for the ultimate net loss over and above
an initial ultimate net loss of $25,000 up to a limit liability of $7,500,000 each and every loss occurrence. For purposes of
this contract, the term “Loss Occurrence” shall be understood to mean all individual losses arising out of and directly
occasioned by one catastrophe.
Property Aggregate Excess of Loss Reinsurance Agreement (P&C and Assumed Reinsurance)
The reinsurer agrees to reinsure the net excess liability of the Company resulting from any loss or losses) during
the term of this contract under policies, bonds, contracts, binders, or agreements of insurance or reinsurance, or other
evidences of liability, which are issued, accepted or held covered provisionally or otherwise, to a county mutual, by or on
behalf of the Company and which are in force or written or renewed by the Company during the term of this contract and
are classified by the Company as property, including automobile physical damage.
The reinsurer shall be liable for an amount of ultimate net loss equal to the lesser of a loss ratio of 65% or
$28,304,000 in excess of the greater of the Company’s retention of an amount of ultimate net loss equal to a loss ratio of
80% or $23,233,000.
County Mutual Property Facultative Per Risk Reinsurance Agreement
Retentions and limits vary per individual risk with a minimum retention of $1,000,000 and maximum reinsurer’s
limit of $4,000,000.
County Mutual Equipment Breakdown Quota Share Reinsurance Agreement
This treaty applies to policies written by the Company’s assumed business. The reinsurer shall be liable for 100%
of the Company’s net retained liability under Equipment Breakdown endorsements to Farmowners and Homeowners
policies or Equipment Breakdown coverage sections within Commercial and Homeowners policies.
Farmowners cessions by the Company under this treaty shall not exceed a limit of liability of $50,000,000 on any
one risk without prior written agreement of the reinsurer. It is agreed and understood that for the purposes of this treaty, one
policy constitutes as one risk.
Homeowners cessions by the Company under this treaty shall not exceed a limit of liability of $100,000 on any one
risk without prior written agreement of the reinsurer. It is agreed and understood that for the purposes of this treaty one
policy constitutes as one risk.
Corporate Stop Loss Reinsurance Agreement
The reinsurer agrees to reinsure the excess liability which may accrue to the Company under its policies, contracts,
and binders of direct insurance and assumed reinsurance as follows:
1. Business written and classified by the Company as crop hail and allied lines insurance
2. Business written and classified by the Company as FCIC MPCI
3. Business in forces, written on a direct basis and classified by the Company as business written by the Company’s
property and casualty division
4. Business in force classified by the Company as all other business (not business classified as crop hail, FCIC
MPCI, or property and casualty division business)
The reinsurer shall be liable for 97.5% of the amount by which the Company’s net loss exceeds the Company’s
retention, but the liability of the reinsurer shall not exceed the greater of 97.5% of 17.5% of the Company’s total subject net
earned premium or 97.5% of $138,900,000. But in no event shall the liability of the reinsurer exceed 97.5% of $145,000,000.
The Company shall retain an amount of total ultimate net loss equal to 85% of the Company’s total subject net earned
premium.
12
STATUTORY DEPOSIT
The book/adjusted carrying value of securities held in an authorized custodial account, and vested in the Iowa
Commissioner of Insurance for the benefit of all policyholders, totaled $2,379,815. The book/adjusted carrying value of
securities held for special deposits by the following jurisdictions were:
Arkansas $ 50,000 New Mexico $300,896
Delaware $100,000 North Carolina $210,004
Georgia $ 45,018
TERRITORY AND PLAN OF OPERATION
The Company is licensed to write business in 43 states and is an accredited reinsurer in 3 states through a network
of 960 contracted agencies and over 3,600 licensed and appointed agents. The Company specializes in writing crop
insurance both crop hail and government subsidized MPCI. Direct written premiums totaled $913,896,594 for 2021. A
small book of property/casualty business is also written. The Company is currently licensed to write property and casualty
lines in eleven states through a network of over 240 contracted agencies and almost 1,200 licensed and appointed agents.
Direct written premium in the State of Iowa was $207,584,010, which was 22.7% of the Company’s total direct written
premium in 2021.
MPCI is a federally subsidized farm risk management program under the auspices of the FCIC and administered by
the FCIC's Risk Management Agency (RMA). The program is designed to encourage farmers to share, through premium
payments, in the federal government's risk management system. The current program, authorized by Congress in 1980 and
modified in subsequent legislation, provides premium subsidies and reinsurance protection on eligible crop insurance
contracts. The program is administered by the RMA and offered through private carriers pursuant to a Standard Reinsurance
Agreement contract.
GROWTH OF COMPANY
The growth of the Company is reflected by the following data taken from the filed annual statements for the years indicated.
Year
Admitted Assets
Surplus to
Policyholders
Net Premium
Earned
Net Losses
Incurred
Investment
Income Earned
2017
2018
$752,064,465
781,163,404
$450,893,015
436,792,355
$458,168,561
488,560,677
$299,414,609
375,462,675
$5,846,132
7,036,646
2019
805,780,096
448,104,966
602,658,620
503,545,449
5,514,048
2020
758,733,021
426,426,744
532,880,094
454,738,416
5,550,945
2021
917,561,429
478,238,663
552,230,405
387,687,335
3,763,707
ACCOUNTS AND RECORDS
Trial balances were prepared for all years of the examination period. Amounts from the general ledger accounts
were reconciled and found to be in agreement with balances reported on the filed annual statements for assets, liabilities,
income or disbursements.
During the course of the examination, no material aggregate surplus difference was identified from the amount
reflected in the financial statements, as presented in the annual statement on December 31, 2021.
SUBSEQUENT EVENTS
On March 7, 2022, the Board voted to proceed with steps necessary to terminate the pension plan. The termination
was completed on 03/08/2023. The Company accrued a settlement expense of $23,980,318 at December 31, 2022. It was
anticipated that a short fall of in the amount of $4,800,000 would be needed to settle the plan, that amount had increased to
13
$6,651,659 on the actual settlement date.
On December 29, 2022, the Company dissolved its relationship with TruAcre Technology, LLC. The Company
acquired some of the assets of TruAcre at the time of dissolution and contributed them to the newly formed affiliate
company, FMH Precision Solutions, LLC.
On May 3, 2023, the Company announced the launch of its newest company, Ag Brokerage Solutions (ABS), a
unique brokerage company built for farmers and their agents who specialize in the field of agriculture. ABS offers ag-
focused insurance products for agents to supplement their offerings and provide coverage for a wider variety of risks. It’s a
comprehensive outlet for all things agriculture to help FMH agent partners grow their business and allow customers to
continue their farming legacy. ABS currently provides admitted coverage options for agribusiness, animal mortality, farm
and ranch, equine operations, personal lines, pet, transportation, workers’ compensation, and commercial lines. Excess and
Surplus solutions for agricultural-related exposures are slated for release in late 2023.
On May 16, 2023, the Company announced their exit of the property & casualty insurance market. The Company
plans to send non-renewal notices in September 2023 and anticipates a complete exit by December 31, 2024.
14
F I N A N C I A L S T A T E M E N T S
A N D C OM M E N T S T H E R E O N
NOTE: The following financial statements are based on the
statutory financial statements filed by the Company with the
Iowa Insurance Division and present the financial condition of
the Company for the period ending December 31, 2021.
15
STATEMENT OF ASSETS AND LIABILITIES
ASSETS
Not
Ledger Admitted
Admitted
Bonds $113,097,091 $ - $113,097,091
Stocks:
Common stocks 219,036,259 157,658 218,878,601
Real estate:
Occupied by the company 11,720,576 - 11,720,576
Cash and short-term investments 79,352,872 - 79,352,872
Other invested assets 33,773,892 157,375 33,616,517
Investment income due and accrued 1,316,400 702,844 613,556
Premiums and considerations:
Uncollected premiums in course of collection 46,575,418 2,026,318 44,549,100
Reinsurance:
Amounts recoverable from reinsurers 28,461,402 - 28,461,402
Funds held with reinsured companies 113,874 - 113,874
Current federal and foreign income tax recoverable 3,372,538 - 3,372,538
Net deferred tax asset 2,426,312 - 2,426,312
Electronic data processing equipment and software 252,684 175,386 77,298
Furniture and equipment 210,828 210,828 -
Health care and other amounts receivable 204,046 204,046 -
Aggregate write-ins for other-than-invested assets: 393,045,428 11,763,735 381,281,693
Total Assets excluding separate, segregated,
and protected accounts 932,959,619 15,398,190
917,561,429
Total assets $932,959,619 $ 15,398,190 $917,561,429
16
LIABILITIES, SURPLUS AND OTHER FUNDS
Losses $230,537,836
Reinsurance payable on paid losses and loss adjustment expenses 2,461,244
Loss adjustment expenses 9,364,291
Commissions payable, contingent and other 33,338,705
Other expenses 2,829,256
Taxes, licenses and fees 1,135,415
Unearned premiums 36,910,856
Advance premium 870,435
Ceded reinsurance premiums payable 90,542,153
Amounts withheld or retained for account of others 300,231
Remittances and items not allocated (5,382)
Provision for reinsurance 229,063
Payable to parent, subsidiaries, and affiliates 58,388
Aggregate write-ins for liabilities 30,750,276
Total liabilities
$439,322,767
Surplus notes $ 60,000,000
Unassigned funds (surplus)
418,238,663
Surplus as regards policyholders
$478,238,663
Total liabilities and surplus $917,561,429
17
STATEMENT OF INCOME
Underwriting Income
Premiums earned $552,230,405
Deductions
Losses incurred $387,687,335
Loss adjustment expenses incurred 30,577,112
Other underwriting expenses incurred 92,929,275
Total underwriting deductions $511,193,723
Net underwriting gain $ 41,036,682
Investment Income
Net investment income earned $ 3,763,707
Net realized capital gains 14,028,407
Net investment gain $ 17,792,114
Other Income
Net (loss) from agents’ or premium balances charged off $ (201,992)
Finance and service charges not included in premiums 73,498
Aggregate write-ins for miscellaneous income 24,296
Total other income $ (104,198)
Net income before dividends to policyholders $ 58,724,598
Dividends to policyholders -
Net income before federal income tax $ 58,724,598
Federal and foreign income taxes incurred 9,251,200
Net income $ 49,473,398
CAPITAL AND SURPLUS ACCOUNT
Surplus as regards policyholders, December 31, 2020 $426,426,744
Gains and (Losses) in Surplus
Net income $ 49,473,398
Change in net unrealized capital gains 1,560,148
Change in net unrealized foreign exchange capital gain 23,693
Change in net deferred income tax 3,077,562
Change in non-admitted assets (9,204,175)
Change in provision for reinsurance (100,114)
Aggregate write-ins for gains and losses in surplus 6,981,407
Change in surplus as regards policyholders for the year $ 51,811,918
Surplus as regards policyholders, December 31, 2021 $478,238,663
18
CASH FLOW STATEMENT
Cash from Operations
Premiums collected net of reinsurance $ 612,529,440
Net investment income 3,826,290
Miscellaneous income (104,199)
Total $ 616,251,531
Benefit and loss related payments $ 268,948,623
Commissions, expenses paid and aggregate write-ins 110,926,175
Federal income taxes (paid) recovered (6,280,357)
Total $ 373,594,441
Net cash from operations $ 242,657,090
Cash from Investments
Proceeds from investments sold, matured or repaid:
Bonds $ 19,933,273
Stocks 51,226,216
Other invested assets 3,599,041
Miscellaneous proceeds 329,091
Total investment proceeds $ 75,087,621
Cost of investments acquired (long-term only):
Bonds $ 35,658,334
Stocks 21,143,744
Real estate 42,261
Other invested assets 5,866,492
Miscellaneous applications 104,248
Total investments acquired $ 62,815,079
Net cash from investments $ 12,272,543
Cash from Financing and Miscellaneous Sources
Other cash provided (applied) $(278,827,999)
Net cash from financing and miscellaneous sources $(278,827,999)
RECONCILIATION OF CASH AND SHORT-TERM INVESTMENTS
Net change in cash, cash equivalents and short-term investments $ (23,898,366)
Cash, cash equivalents and short-term investments:
Beginning of year 103,251,238
End of period $ 79,352,872
19
CONCLUSION
The cooperation and assistance extended by the officers and employees of the Company is hereby acknowledged.
In addition to the undersigned Dave Heppen, FCAS, MAAA, Andrew Chandler, ACAS, MAAA, and Michael Hall,
FCAS, MAAA, of Risk & Regulatory Consulting, LLC; and Alex Matovu, Aaron Syverson, and Mick Jepsen; Examiners
for the Iowa Insurance Division, participated in the examination and preparation of this report.
Respectfully submitted,
_ /s/ Joshua J. Johnson
Joshua J. Johnson, CFE
Examiner in Charge
Risk & Regulatory Consulting, LLC
On behalf of the Iowa Insurance Division
_ /s/ Amanda Theisen
Amanda Theisen, CFE
Supervisor and Assistant Chief Examiner
Iowa Insurance Division
