State Farm Mutual Automobile Insurance Company: Mission, Vision, Values and Code of Conduct

Background Information 

State Farm Mutual Automobile Insurance Company is the parent company of several affiliates and subsidiaries providing mutual funds, banking products, property, and life insurance. It was founded in 1922 by Jacob “G.J.” Mecherle. Jacob was a retired farmer and insurance salesman with a vision to operate fairly and doing the right thing for the customer ("Get Insurance Quotes - Save On Auto Insurance - State Farm®"). The company has its headquarters located in One State Farm Plaza in Bloomington, Illinois. It started as single auto-line insurance but currently has over 100 products and services that it offers to its customers and handles over 39,000 claims per day. The company is ranked number 36 on the Fortune 500 list of largest companies with close to 19,000 agent offices ("Get Insurance Quotes - Save On Auto Insurance - State Farm®") . It is currently headed by Michael L. Tipsord, who is the Chairman, the President and the CEO of the company ("Get Insurance Quotes - Save On Auto Insurance - State Farm®") . 

Company Mission 

To help people manage everyday life risks, recover from the unexpected and realize their dreams ("Get Insurance Quotes - Save On Auto Insurance - State Farm®"). 

Vision Statement 

To be the customer’s first and best choice in the products and services that the company provides ("Get Insurance Quotes - Save On Auto Insurance - State Farm®"). 

Shared Values 

The success of State Farm is built on the following shared value ("Get Insurance Quotes - Save On Auto Insurance - State Farm®"): 

• Quality service and relationships 

• Mutual trust 

• Integrity 

• Financial Strength 

Company’s Slogan 

The company’s slogan is “Here to Help Life Go Right.” ("Get Insurance Quotes - Save On Auto Insurance - State Farm®"). 

Code of Ethics 

The company takes its shared value of integrity very seriously. In line with its mission, the company experiences thousands of opportunities within which it builds confidence with its customers and associates daily ("Get Insurance Quotes - Save On Auto Insurance - State Farm®"). It has managed to create a trusted brand by living its values and keeping its promises to its customers. 

State Farm expects its employees to conduct the company’s business legally and ethically and demonstrate undivided loyalty to the company in all their business transactions ("Get Insurance Quotes - Save On Auto Insurance - State Farm®"). They are therefore required to avoid situations with conflict of interest between themselves and the company. They are also expected to report suspected money laundering or terrorist financing in the company’s portfolio. Regarding how they relate to each other, the employees are required to treat each other fairly and honestly. 

The company respects and exercises customer confidentiality and intellectual property rights. This means that customer information is handled with utmost confidentiality and employees are required not to reveal any client information obtained from another company to State Farm ("Get Insurance Quotes - Save On Auto Insurance - State Farm®"). They are also required not to reproduce any materials owned by, licensed to, or is subject to the copyright of others without obtaining written permission from the owner. 

Company Products, Services and the Customers 

The company’s products and services are grouped into four major categories. 

Insurance 

Insurance services offered by Smart Farm can be broken down into other smaller subcategories. These are ("Get Insurance Quotes - Save On Auto Insurance - State Farm®"): 

 Vehicle Insurance. The company is the largest automobile insurer in the US. It offers a wide range of insurance coverage options, competitive prices, easy claims processing, and excellent service. It includes car insurance, off-road vehicle insurance, boat insurance, motorhome insurance, and motorcycle insurance. 

 Home and property insurance. State Farm offers insurance services for all homes, apartments or condo. The company also brags of being the largest insurer of homes in the US. Types of home insurance products offered include manufactured home insurance, farm or ranch insurance, condo insurance, renters insurance, and homeowners insurance. 

 Life Insurance. State Farm offers a wide range of high valued life insurance premium structures and products to match its strong financial muscle. They are provided under subsidiary companies called State Farm Life Insurance Company, State Farm Life and Accident Assurance Company. It uses life planning videos and calculator to help clients understand the options available, and identify the right policy to acquire. 

 Health and Disability Insurance. The company offers health and disability insurance products meant to cushion their customers against the high costs of healthcare. Health insurance products include Supplemental Health Insurance (supplements primary health insurance coverage with a predetermined fixed benefit amount for the unbudgeted extra expenses), Medicare Supplement Insurance (designed for senior citizens participating in Medicare and covers costs not catered for by Medicare), and Individual Medical Coverage (intended for people without this type of insurance from their employer or other groups). Disability insurance cushions against problems emanating from disability arising in the line of duty. Things covered include paying rent, car loans, mortgage among other monthly expenses in case of disability. 

 Small Business Insurance. This covers unforeseen occurrences in the small business and entrepreneurs including contractors and home services, food shops and restaurants, specialty schools, professional services, distributors and wholesalers among other small business ventures. 

Banking Services and Loans 

The company offers both banking services and loans to its customers through State Farm Bank. Some of the products offered include checking and savings accounts, credit cards, vehicle loans, and home loans ("Get Insurance Quotes - Save On Auto Insurance - State Farm®"). It has enhanced banking experience to its customers by providing an easy to use and convenient mobile banking platform. Checking and savings in Smart Farm accounts allow the customers to manage money conveniently, save, and earn interest on savings and also to participate in the money market savings. Other banking products offered by Smart Farm include the certificate of deposits, health savings accounts, Coverdell education savings accounts, and individual retirement savings accounts. All these products are available to the residents of the US, while some are specifically designed to be used for certain activities, for example, the Coverdell education savings account is created for savings meant to withdrawn to meet a qualifying education expense. 

State Farm Bank offers mortgage loans for first time home purchase and refinancing running home mortgages. Home loans are provided at either fixed rates or adjustable rates and are advanced for the purchase of a single-family primary residence in the state of Illinois ("Get Insurance Quotes - Save On Auto Insurance - State Farm®") . Car loans are offered for the purchase of both new and used cars at different annual percentage rates, i.e., new cars are financed for rates as low as 3.44% while used cars (manufactured in 2016 or earlier) are advanced at rates as low as 4.24% ("Get Insurance Quotes - Save On Auto Insurance - State Farm®"). Boats, RVs and travel trailers are advanced for as low as 4.39% APR for new items and 5.39% for items manufactured in 2016 or earlier while motorcycles are offered for as low as 6.24% APR for new motorcycles and 6.84% for motorcycles manufactured in 2016 or earlier ("Get Insurance Quotes - Save On Auto Insurance - State Farm®"). 

State Farm Bank also offers Visa Debit Cards dubbed State Farm Rewards Visa to be used in making payments, and Visa Credit Cards dubbed State Farm Good Neighbor Visa given at very competitive APRs ("Get Insurance Quotes - Save On Auto Insurance - State Farm®"). Other cards include State Farm Student Visa credit card designed for students in post-secondary education, and State Farm Bank Business Visa credit card ("Get Insurance Quotes - Save On Auto Insurance - State Farm®"). These cards are available to State Farm policy holders and State Farm Bank customers. 

Investments 

There is a wide range of investment products available at State Farm. They Include ("Get Insurance Quotes - Save On Auto Insurance - State Farm®"): 

 Retirement plans to allow customers to plan for their retirement. 

 Education and savings meant to help customers save for higher education. There are two plans available in this namely 529 Savings Plan (to be used in eligible community colleges, vocational schools, universities and graduate schools across the US) and Coverdell Education Savings Account (meant to be used to cover qualifying education expenses such as tuition and fees, books, supplies, equipment among other education expenses). 

 Mutual Funds. These are meant to guide investor clients to achieve their financial goals. State Farm Investment Planning Services offers a variety of account types and multiple investment products and guides the investors in choosing the best investment plan. 

 Annuities. These include fixed annuities from State Farm Life Insurance Company or State Farm Life and Accident Assurance Company. 

How are the Products and Services Offered? 

State Farm offers these products through its subsidiaries, affiliated companies and agents across the country. The company has an estimated 19,000 agents scattered across the country and provide these services to State Farm’s customers ("Get Insurance Quotes - Save On Auto Insurance - State Farm®"). Some subsidiaries are only licensed in some cities, for example, State Farm Life and Accident Assurance Company is only licensed in New York and Wisconsin and thus only provides the company’s products in these cities only ("Get Insurance Quotes - Save On Auto Insurance - State Farm®"). State Farm Bank only offers home loans to primary home buyers in Illinois alone, while Non-State Farm customers can access other unrestricted State Farms products and Services through State Farm agents across the country. 

E-business Functions and Products 

Through its website, the company offers a range of products and services that a potential client can access online. This include file for a claim, managing your claim, online and mobile banking and online payment services through the visa debit and credit cards, and insurance policy advisory ("Get Insurance Quotes - Save On Auto Insurance - State Farm®"). Clients can log in into the company’s website to access this products and services in their own convenient time and place. 

Financial Information for the Year 2017 

In the year 2017, State Farm property-casualty (P-C) group of companies reported a total underwriting loss of $6.5 billion against a total premium of $63.9 billion compared to an underwriting loss of $5.5 billion in 2016 against a total premium of $61.7 billion in the same year ( Bizjournals.Com , 2018) . Other income lines and investment generated an income of $4.8 billion, reducing the total pretax P-C operating loss to $1.7 billion (Bizjournals.Com, 2018). Nevertheless, the company and its affiliates continue to remain financially stable. State Farm Group’s net worth rose from $87.6 billion in 2016 to $97 billion in 2017 owing to an increase in P-C companies’ unaffiliated stock portfolio (Bizjournals.Com, 2018). 

The company’s combined total revenue for the year 2017 was $78.3 billion, an increase from 2016’s $76.1 billion while net income was $2.2 billion in 2017, an increase from $0.4 billion in 2016 (Bizjournals.Com, 2018). The company performed better in the year 2017 in comparison to 2016. 

Statement of Financial Position (In Millions of Dollars) for the Year 2017 

Assets $ 

Cash and Short Term Investments 2,527 

Bonds 45,751 

Unaffiliated Common & Preferred Stocks 55,303 

Equity in Insurance Subsidiaries 39,030 

Other Assets 18,121 

Total Assets 160,732 

Liabilities 

Claims and Claim Expenses 33,237 

Unearned Premiums 13,132 

Other Liabilities 17,538 

Surplus 

Funds for protection of State Farm Mutual 

policy holders including Investment Fluctuation 

Reserve 53,863 

Funds Assigned for Protection of Customers of 

Subsidiaries 40,816 

Funds Assigned for Catastrophe Reinsurance 

Assumed from Affiliates 2,326 

Total Liabilities and Surplus 160,732 

Income Statement (In Millions of Dollars) for the year 2017 

$ 

Premium Earned 42,420 

Less: Claims 31,092 

Expenses for claims 5,417 

Service and Administrative Fees 10,192 

Underwriting Gain or Loss (4,281) 

Add: Investment Gain and other income 4,039 

Income before Dividends and Taxes (242) 

Less: Dividends to Policyholders 0 

Income Taxes Incurred (Recoverable) (1,944) 

Net Income for the Year 1,702 

Company Ratios 

Liquidity Ratio - it is the ratio between a company’s liquid assets and its short-term borrowings and current liabilities. It measures a company’s ability to settle its debts when they fall due. The higher the liquidity ratio, the better positioned a company is regarding its financial health. There are several liquidity ratios; acid-test ratio, cash ratio, current ratio, net working capital, quick ratio, working capital, and working capital ratio. According to the information above, State Farm’s Liquidity Ratio is given by 

= = 1.63 times. Smart Farm is therefore better placed with regard to its ability to meet its short-term obligations . 

Asset Management Ratio - It shows how effective and efficient a company is in managing its assets to produce sales. They are also referred to as turnover ratios. State Farm’s Asset Management Ratio is given by 

= = = 0.74. State Farm is 74% effective in utilizing its assets. 

Financial Leverage Ratio -It measures how much assets a company holds relative to its equity. Financial Leverage demonstrates the amount of debt employed to finance assets. High financial leverage exposes a company to failure due to inability to pay the debts. State Farm’s Financial Leverage Ratio is given by 

= = = 0.57 State Farm is well leveraged and not facing insolvency. 

Profitability Ratio - It measures a company’s ability to generate profits relative to revenue, operating costs, assets and shareholders’ equity for a particular period. A higher ratio is more preferred. State Farm’s Profitability Ratio is given by 

= = 0.04 

Company Stock Performance 

As at the end of October 2018, State Firm’s stock closed at $79.20 ("Yahoo Is Now Part Of Oath"). This was an improvement after the stock lost some value in the last two weeks of October. However, over the last one year, the stock value has been operating steadily with no significant gains or losses ("Yahoo Is Now Part Of Oath"). The highest value that the stock has obtained was $83.80 with the lowest being $73.83 ("Yahoo Is Now Part Of Oath"). At the current market price of $81.16, market trends predict a drop of the stock value, and thus I would invest in these stocks now. 

Corporate Social Responsibility 

Since its inception, the company has been engaging in activities meant to give back to the community it operates in. According to the company values, the company seeks to build a safer, stronger and more educated society. State Farm has aligned its company mission by supporting social efforts through ("Get Insurance Quotes - Save On Auto Insurance - State Farm®"): 

 Auto and home safety programs and activities that allow people to manage everyday risks 

 Disaster preparedness, recovery programs, and services that help people to recover from unexpected occurrences. 

 Education, economic empowerment and community development projects and programs that help people to realize their dreams such as grants. 

While engaging in these social responsibility activities, the company needs to ensure that it does not lose focus on its core mandate and that it employs the highest level of ethical standards necessary to avoid creating a conflict of interest. 

Conclusion 

Smart Farm has been in existence for almost a decade. The company has grown and diversified its portfolio to offer different types of products needed by the current generation. Currently, the company is ranked the best in auto and home insurance, which demonstrates the market perception that customers’ have on the company ("Get Insurance Quotes - Save On Auto Insurance - State Farm®"). Though it has been reporting losses for the last two years, the company has continued to remain strong and has not been shaken by the losses. The failure of the company’s stock to perform better could be attributed to the loss-making performance in the last two years. The Smart Farm needs to consider distributing its risk to other forms of investment to which will cushion its profits from adverse performance in case of turbulence and high rates of claims in the future. This will help the company to continue cementing its leadership in the insurance industry. 

Works Cited 

Bizjournals.Com, 2018, https://www.bizjournals.com/chicago/prnewswire/press_releases/Illinois/2018/03/01/CG25387. Accessed 12 Nov 2018. 

"Get Insurance Quotes - Save On Auto Insurance - State Farm®". State Farm, 2018, https://www.statefarm.com/. Accessed 12 Nov 2018. 

"Yahoo Is Now Part Of Oath". Finance.Yahoo.Com, 2018, https://finance.yahoo.com/quote/STFGX?p=STFGX&.tsrc=fin-srch. Accessed 12 Nov 2018.