State Farm(R) Announces $1.25 Billion Mutual Auto Policyholder Dividend Light Hurricane Season Reverses Companywide Net Income Decline



    BLOOMINGTON, Ill., March 1 /PRNewswire/ -- State Farm Mutual Automobile
 Insurance Company, the largest insurer of autos in the nation, announced
 today it will pay $1.25 billion in dividends to its mutual auto insurance
 policyholders in 46 states, the District of Columbia and the Canadian
 province of New Brunswick.
     The record-breaking payment of dividends, approved by the State Farm
 Mutual board of directors, eclipses the previous high of just over $1
 billion in June, 2000.
     The better-than-expected auto results combined with a $4.1 billion
 reduction in catastrophe losses in 2006 resulted in an increase in State
 Farm's companywide net income -- an increase that was almost identical to
 the previous year's decline. In other words, net income in 2006 was almost
 identical to that of 2004. The company is reporting an after-tax net income
 from all sources of $5.32 billion, compared with $5.31 billion in net
 income reported in 2004 (two years ago). State Farm's net income in the
 hurricane- laden year of 2005 was $3.24 billion. The three consecutive
 years of profit follow a three-year period (2001-2003) during which State
 Farm lost nearly $5 billion.
     "2006 was a profitable year, but our evaluation of financial success is
 defined by our accomplishments over a longer period of time than one year,"
 said Michael Tipsord, Vice Chairman, Treasurer and Chief Financial Officer.
 "Given the potential for volatility in the insurance business, we must
 avoid the temptation of attributing too much significance to short-term
 financial results. Our customers expect us to maintain the financial
 strength necessary to deliver on the promises we make to them over a long
 period of time."
     The company is reporting a property-casualty (P-C) underwriting gain in
 2006 of $3.0 billion. It is only the third time in the last ten years a P-C
 underwriting gain has been achieved. The other two years in which that
 happened are 2004 and 1997.
     The combined net worth of the State Farm companies increased by $8.0
 billion to $58.1 billion. The primary reasons for this improvement were the
 insurance operating results and the $3.6 billion realized and unrealized
 gain (net of deferred tax) on P-C companies' unaffiliated stock portfolios.
 State Farm's net worth was also impacted by a pension contribution of $900
 million. The P-C companies reported a pretax operating profit of $6.0
 billion in 2006, including investment and other income of $3.0 billion and
 the underwriting gain of $3.0 billion. This compares with a pretax
 operating profit of $3.5 billion in 2005, which included investment and
 other income of $4.3 billion and an underwriting loss of $779 million. The
 combined net worth of the State Farm companies is also affected by the
 results of operations of non-P-C affiliates, which resulted in a gain for
 the year of $586 million, primarily driven by results for State Farm Life
 Insurance Company.
     Total revenue, which includes premium revenue, earned investment income
 and realized capital gains (losses), was $60.5 billion for 2006 compared
 with the 2005 figure of $59.2 billion.
     State Farm's insurance operations consist of eight P-C insurers and two
 life insurers. The P-C insurers are primarily engaged in automobile,
 health, homeowners and commercial multiple peril (CMP) lines of business.
 The net results of State Farm Mutual Automobile Insurance Company, State
 Farm Indemnity Company, State Farm Guaranty Company and State Farm County
 Mutual Insurance Company of Texas include the Auto, Health and Reinsurance
 lines of business. The net results of State Farm Fire and Casualty Company,
 State Farm Lloyds, State Farm General Insurance Company and State Farm
 Florida Insurance Company reflect the Homeowners, Commercial Multiple Peril
 (CMP) and other P-C lines of business. State Farm Life Insurance Company
 and State Farm Life and Accident Assurance Company write the Life and
 Annuity business. State Farm also provides banking products and mutual
 funds through affiliated companies.
     Auto - State Farm's auto insurance business represents 63 percent of
 the P-C companies' combined net written premium. Earned premiums were $30.7
 billion, an increase of 0.2 percent from 2005. The incurred claims and loss
 expenses were $23.1 billion. The underwriting gain was $945 million.
     Comparable 2005 figures were: earned premium, $30.6 billion; incurred
 claims and loss expenses, $23.8 billion; underwriting gain, $585 million.
     With this latest dividend, State Farm Mutual will have returned $3.8
 billion to auto policyholders in four dividends since 1997. In addition,
 State Farm Mutual reduced its overall auto rate level by 10.2 percent
 between the beginning of 2004 and the end of 2006. This represents $2.9
 billion in implemented auto rate reductions for the Company's customers.
     State Farm does not plan on paying dividends when setting prices, but
 can pay them to customers at the discretion of its board of directors when
 financial results are better than anticipated and business conditions
 permit.
     "As a mutual company, State Farm's primary obligation is to its
 policyholders," said Tipsord. "At State Farm, we work hard to be good
 stewards for our policyholders and to provide them the very best
 combination of product, price, service and financial stability. One way we
 provide value to State Farm Mutual auto policyholders is to pay dividends
 to them when financial results and business conditions permit. Our
 customers' safe driving habits have contributed to our positive
 underwriting results, and we are delighted to pass along the benefits from
 those results to them."
     The size of each policyholder's dividend will vary significantly by
 jurisdiction, but the average per insured vehicle will be about $35.
 Dividend payments will begin in early April and will continue throughout
 the year. Policyholders can expect to receive their dividend near the time
 of their policy renewal. Most customers will receive their dividend by
 check. The dividend for policyholders receiving less than $15 will be
 credited to their State Farm renewal premium.
     State Farm's New Jersey policyholders insured by State Farm Indemnity
 received $130 million in dividends in December 2006.
     Homeowners, CMP, Other - The net written premium for State Farm Fire
 and Casualty Company, State Farm Lloyds, State Farm General Insurance
 Company and State Farm Florida Insurance Company represents 33 percent of
 the P-C companies' combined net written premium. Earned premiums were $15.5
 billion, an increase of 3.6 percent from 2005. The incurred claims and loss
 expenses were $9.8 billion. The result was an underwriting gain of $1.2
 billion.
     Comparable 2005 figures were: earned premiums, $15.0 billion; incurred
 claims and loss expenses, $9.6 billion (after recovery of $4.1 billion from
 internal and external reinsurers under catastrophe reinsurance agreements);
 underwriting gain, $1.4 billion.
     Health - The individual health insurance operations for State Farm
 Mutual reported an underwriting loss of $32 million. Net written premiums
 were $753 million. Comparable figures for 2005 were: underwriting loss, $16
 million; net written premiums, $761 million.
     Property-Casualty (P-C) - The combined underwriting gain was $3.0
 billion on earned premiums of $48.0 billion. This includes results from
 Auto, Homeowners, Health and other lines, as well as the Reinsurance line
 provided by State Farm Mutual. The Reinsurance line of business reported an
 underwriting gain of $755 million in 2006. The total P-C underwriting gain,
 combined with net investment income earned and other income of $3.0
 billion, resulted in a pretax operating profit of $6.0 billion. After-tax
 net income for the P-C companies was $4.8 billion.
     Comparable 2005 figures were: earned premiums, $47.5 billion;
 underwriting loss, $779 million; reinsurance underwriting loss, $2.8
 billion; net investment income earned and other income, $4.3 billion;
 pretax operating profit, $3.5 billion; net income, $3.0 billion.
     Life - State Farm's Life affiliates -- State Farm Life Insurance
 Company and State Farm Life and Accident Assurance Company -- added $42
 billion of total life insurance in force during the year, bringing the
 companies' total insurance in force to $651 billion on Dec. 31, 2006.
     The Life affiliates reported premium income of $3.9 billion in 2006,
 compared with $3.8 billion in 2005. The gain from operations after
 dividends and before taxes was $618 million compared with 2005's reported
 gain of $511 million. The Life affiliates reported an after-tax net income
 of $408 million in 2006. This compares with a net income of $333 million in
 2005.
     Bank - State Farm Bank(R), F.S.B. reported an after-tax net income of
 $24 million in 2006, compared with $22 million in 2005. Total assets for
 the Bank rose to $13.5 billion in 2006 compared with assets of $12.2
 billion at the end of 2005.
     Mutual Funds - Total assets under management for the retail Mutual Fund
 operations at the end of 2006 were $3.9 billion, compared with $2.8 billion
 at the beginning of the year. State Farm VP Management Corp. and State Farm
 Investment Management Corp. reported a combined after-tax net loss of $14
 million in 2006 compared with a loss of $18 million in 2005.
     State Farm Bank, Bloomington, Illinois, is a Member FDIC and an Equal
 Housing Lender. Insurance and securities products offered by affiliated
 companies of State Farm Bank are not FDIC insured, are not guaranteed by
 State Farm Bank and are subject to investment risk, including possible loss
 of principal invested.
     Securities are available through registered representatives of State
 Farm VP Management Corp. State Farm VP Management Corp. is a separate
 entity from those State Farm entities that provide banking products and
 auto, life, fire and health insurance products.
                 2007 State Farm Mutual Policyholder Dividend*
 
                        Percent of prior term
                         Semi-Annual Premium         Total Dividend Amount
 
     Alabama                     8.3%                    $21.6 million
     Alaska                      5.3%                     $2.3 million
     Arizona                    20.3%                    $50.8 million
     Arkansas                   10.2%                    $15.2 million
     California                 15.0%                   $195.2 million
     Colorado                    7.0%                    $19.1 million
     Connecticut                10.7%                     $3.3 million
     Dist. Columbia              3.0%                     $0.6 million
     Florida                     2.0%                    $25.2 million
     Georgia                    11.2%                    $61.8 million
     Hawaii                     25.0%                    $13.0 million
     Idaho                      16.5%                     $7.7 million
     Illinois                    7.5%                    $59.8 million
     Indiana                    14.4%                    $41.9 million
     Iowa                       21.8%                    $25.4 million
     Kansas                     15.1%                    $19.8 million
     Kentucky                   10.4%                    $19.6 million
     Maine                      15.7%                     $5.6 million
     Maryland                    4.0%                    $12.7 million
     Massachusetts              25.0%                     $2.2 million
     Michigan                    3.4%                    $18.8 million
     Minnesota                  25.0%                    $72.0 million
     Missouri                    7.3%                    $21.8 million
     Montana                    23.7%                    $11.9 million
     Nebraska                   16.1%                    $15.8 million
     Nevada                     13.1%                    $13.7 million
     New Hampshire              10.9%                     $4.8 million
     New Mexico                 13.7%                    $13.0 million
     New York                   17.6%                    $79.7 million
     North Carolina             14.5%                    $38.0 million
     North Dakota               22.8%                     $5.2 million
     Ohio                       12.6%                    $57.9 million
     Oklahoma                   12.5%                    $21.4 million
     Oregon                     15.1%                    $25.8 million
     Pennsylvania                4.4%                    $27.1 million
     Rhode Island                3.7%                     $0.1 million
     South Carolina             17.9%                    $45.3 million
     South Dakota               14.9%                     $4.7 million
     Tennessee                   4.1%                    $12.6 million
     Texas**                     7.9%                    $91.0 million
     Utah                       10.9%                    $10.0 million
     Vermont                    13.4%                     $1.8 million
     Virginia                    5.2%                    $15.8 million
     Washington                  4.0%                     $9.9 million
     West Virginia               2.0%                     $2.8 million
     Wisconsin                  12.0%                    $16.6 million
     Wyoming                    20.5%                     $6.4 million
     New Brunswick              25.0%                     $3.1 million
 
 
     *  The following jurisdictions will not receive a dividend:  Delaware,
        Louisiana, Mississippi, New Jersey (New Jersey policyholders insured by
        State Farm Indemnity received $130 million in dividends in
        December 2006), Alberta and Ontario.  Residual market policies are also
        excluded.
     ** Texas dividends are subject to approval by the state Department of
        Insurance.
 
 

SOURCE State Farm Insurance Companies

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