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State Farm reports record earnings for 2007
By Michelle Koetters
mkoetters@pantagraph.com
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BLOOMINGTON — After a year in which an absence of major catastrophes was offset by an increase in routine claims, State Farm Insurance Cos. still reported record earnings of $5.46 billion in 2007.

The company’s net income increased by 3 percent last year, up from a record $5.32 billion in 2006, according to information released Friday.

“We did well this year, but we try to not put too much weight on one year of successful results,” spokesman Dick Luedke said.

State Farm also released annual salary information for its top leader.

Chairman and Chief Executive Officer Ed Rust earned $11.71 million in 2007. His base salary of $1.77 million stayed the same as 2006, but his results-based bonus increased slightly, from $9.89 million in 2006 to $9.94 million last year.

Last year was the company’s fifth consecutive year of profit, after a $1.6 billion loss in 2002 and a $5 billion loss in 2001.

Its 2007 results were influenced by a variety of factors.

On the plus side, an absence of serious hurricanes or other disasters meant State Farm avoided the major payouts it had seen in years like 2005, when it handed out $6.3 billion to policyholders affected by hurricanes Katrina, Rita and Wilma.

Despite that, its property-casualty underwriting gain — the bread-and-butter division that includes home and auto lines — still dropped 79 percent, from $3 billion in 2006 to $621 million last year.

About half of the $2.4 billion drop was the result of the company’s fourth-straight year of auto rate decreases.

The remainder was due to an increase in non-catastrophe claims — everything from auto accidents to small windstorms and theft, Luedke said. State Farm’s most significant claims were from the California wildfires in 2007, Luedke said.

Still, any gain at all in property-casualty underwriting is rare, he said.

Cutting into dividends

The company also decreased its dividend payment from 2006 to 2007, which helped its bottom line. Last year, State Farm returned $78 million to policyholders, a far cry from the $1.4 billion returned in 2006.

The company’s total revenue was $61.6 billion, a slight rise from the $60.5 billion reported in 2006. That figure includes premium revenue, earned investment income and capital gains.

State Farm now ranks 31st on the Fortune 500 list.

And when the final tally is accrued, State Farm’s net worth jumped nearly 10 percent, from $58.1 billion in 2006 to $63.7 billion last year.

The primary reason for the bump was a $2.5 billion pre-tax gain on investments, as well as the small gain in property-casualty underwriting. The $2.5 billion gain was down from a $3.6 billion gain in 2006, the result of a volatile stock market.

“As we all know, sometimes it performs great and sometimes it doesn’t,” Luedke said. “Our philosophy is a long-term approach. … It’s a buy-and-hold investment approach. It’s served us well for a long, long time.”

State Farm’s average annual earnings so far this decade is $1.8 billion, but a full decade of results gives a better barometer for success, Luedke said.

The company’s 2007 increase is also on par with the industry as a whole. Insurance companies last year saw slight increases or decreases in profit or remained flat, said Robert Hartwig, president and chief economist of the Insurance Information Institute in Washington, D.C.

“Generally speaking, 2007 was the second consecutive strong year for insurers,” Hartwig said. “That was in part because of low catastrophe losses for the second year in a row.”

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Reader comments on this story - 39 total

Note: All views and opinions expressed in reader comments are solely those of the individual submitting the comment, and not those of the Pantagraph or its staff.

helpme wrote on Mar 2, 2008 8:26 PM:

" I have worked at State Farm for 25 years and the first 18 were great The last seven have been heck. We now have a few large egos running the company and they make more than they are worth. The top brass argues that they have to keep up with other executives sorry we are not all dumb enough to believe your lies. How many execs lost their jobs when we lost 8 billion in 2 years no one. You have no risk like other execs at other companies. If other execs lost 8 billion they would have been fired. Not the execs at state farm they get their big salaries & bonuses year after year no matter what. it would take me 150 years to make what they make in a year I do not think the work they do is a 150 years more than I do. So add no job risk and why do they make so much??? Because they can, they set the rules!!!!!. The company has changed and will continue to change to bad it is not for the good. "

Not so Political wrote on Mar 1, 2008 3:06 PM:

" Man sure things change after you have to register to place a comment. None from the time the register when into affect on this post. "

Bill Vit wrote on Mar 1, 2008 9:10 AM:

" As a person, who was fired by SF, you would think I'd be negative, but No. It's a large company with good people and bad people and some get away with murder and some can't get a break. But anyone who thinks that this town would be better off w/o SF needs to get a clue. Think Decatur w/o the charm. As for the insurance policy issue, it's called personal accountibility - know what you are buying. The most powerful force in the world is human stupidity and it cannot be stopped. After reading all these posts, I believe it is running rampant here. "

GC wrote on Mar 1, 2008 8:27 AM:

" I have work there 35 years I have always found that SF invests it money to make money to keep the rates down. I have heard people complain about the service they get a few will call the complaint line to resolve the problem and SF will take the time to do so. If your agent and or CS rep doesn’t give you the help or answers you need please call the complaint line or write a letter to company. As for the one stating there bonus get real as for doing that I hope your upper management fines out about it. For the person that is saying that don’t go to after work happy hours and are getting less then they think they should and from what your you say your boss said to you need to file a complaint with HR as for the rest complaining about SF. Remember we all live in this town and do need to get along. "

trueblue wrote on Mar 1, 2008 8:21 AM:

" I find it amazing as an outsider that there are so many comments on this company that provides so many benefits for the community, their employees and their policyholders. Companies large and small are not perfect; mistakes do happen, some people think they are better than anyone else but in the big picture the companies we work with or have access to are what we make them. Look at all the positives of State Farm ! "

policyholder wrote on Feb 29, 2008 10:05 PM:

" I love reading these posts about SF. I've never posted before, but i've always wondered - how many of you have ever had to file a claim with SF? How were you treated? Was it a small, inexpensive auto claim? Or was it a big, expensive homeowners claim? I've had both. the small inexpensive auto claim was handled fairly and to our satisfaction. The larger homeowners claim... that's a different story. Our agent wasn't there for us. Our claims rep didn't give us the good neighbor treatment. Is SF good for the Bloomington/Normal community? Of course it is. Are they good to their employeees? Probably for most while others are just trying to get by. Do they treat all policyholders as neighbors? No. the bonus that one poster bragged about is larger than the amount we had to dispute on our claim.... Does that make the policyholder feel neighborly about doing business with SF? No. "

Bono wrote on Feb 29, 2008 9:36 PM:

" I too walked into the same gas station w/ my badge on, and the cashier rolled their eyes at me causr i'm a farmer, but i work in the FOOD COURT. "

to MIPS! wrote on Feb 29, 2008 9:00 PM:

" You know I'm an MG4 as well...worked my way up from what is now called an RE1 to where I'm at today (which is as you alluded to first line mgt in systems), and usually I read these posts and wonder why people hate State Farm. Then I read you bragging about your 100K a year salary and 20K bonus, and now I get it... Come on. It's comments like that makes you / us look like garbage.

The people who make MORE than us are just sitting back now laughing about how ignorant and underpaid we are. The people who make LESS sit back and shake there head at our arrogance. Pretty shallow dude. SF is great, has been great to me, great to you, but come on, there's got to be more to life than SF vs. the world in this town.... "

We should all be grateful... wrote on Feb 29, 2008 8:52 PM:

" We should all be grateful for State Farm's presence in the community. That doesn't mean we don't groan when they're in the wrong. But it's a legit company performing a valuable service and employing thousands of employees with good wages and benefits who spend millions here every month. I for one would hate to see the company leave and move to Peoria or Springfield for example. That would WRECK our economy. "

its just not the sf'ers wrote on Feb 29, 2008 7:33 PM:

" Its Country employees too. No one bashes them that I see, but every time I go into a store with my badge on, people's attitudes change. Today I went to a gas station to get some things. The cashier was so friendly to the person in front of me. As soon as I got to the counter, she rolled her eyes at everything I said. "

To:State Farmers wrote on Feb 29, 2008 6:53 PM:

" I work at the farm and make very good money. I am amazed at how many people are so brain washed by the company. Anything they say...they believe. It's like waco texas. "

Not all of us are rich... wrote on Feb 29, 2008 6:10 PM:

" Hello, people. Not everyone at State Farm is a multimillionaire. I have 5 years of college, and a decade of managerial experience, yet, as a lowly PA 2, my "bonus" was only $450. I've been with the company for three and a half years, and my bonus has been less every year. My salary is, keep in mind, with the aforementioned education, under $25,000. I show up to work every day, and go above and beyond what is required of me. But, because I don't whore around, or go out to the bars and drink with my supervisor every Friday night, I'm "anti-social" and have a bad attitude, and have been told that I'll never go far in the company; yet I'm beholden to my job, because I desperately need the health insurance. "

SF Insured wrote on Feb 29, 2008 4:18 PM:

" All I have to say is SF gave me the lowest Auto rates I have ever paid in my LIFE! They also beat out the competition for my HO Policy. They've kept my business with Life/Auto/Home Owners and that's a fact. I wish I could say I don't like SF but they haven't done anything wrong to me. Oh by the way, I used to work there too. Turned out I could make more money elsewhere but you'll have that! They didn't even screw me out of anything they owed me. Anyone who wants to spread a negative opinion on here just back off unless you know what you're talking about- it's a good company! "

to: MIPS! wrote on Feb 29, 2008 4:07 PM:

" I owned a small business and got you beat and do not have to set my but in a dark, smelly, micro management office, in a big dark building. I spent $20,000.00 last year just on vacations, keep up little man. "

to: SFer wrote on Feb 29, 2008 4:05 PM:

" I like SF, everytime I see one of those cheap things hanging around your neck with your ID card on it I hit the SF button on the cash register. That is the button that raises the price on the barcode 10%. Please SF keep making your employees wear those things all the time. I love your company but I have Country Ins. because it is as good but cheaper. "

! yo ho ! wrote on Feb 29, 2008 4:01 PM:

" The profit comes from their investments in oil, and other things that are costing us out the wallet everyday to live. "

MIPS! wrote on Feb 29, 2008 3:37 PM:

" Every dept has mgt bonus calculations. The higher the mgt, the higher percentage bonus. In Systems, MG4s (a common 1st line mgt category) got 18% bonuses. Most of us make well over $100,000/year salary, plus the 18% bonus. I love SF! "

To: MIPS wrote on Feb 29, 2008 3:33 PM:

" No kidding.. I work there and got about $17,000 less. "

SFer wrote on Feb 29, 2008 3:17 PM:

" Last time I'm writing on the blogs. I hate to break it to the people of bloomington, if you do not like SF... we do not care. Do you really think the employees care that the people of bloomingotn dislike us? Do you really think we care if you do not buy State Farm insurance? The answer is "no" to all of it. This is a billion dollar company, not a small business. We care about the entire US and Canada, not just what the ignorant people in bloomington/normal think. For everything that was said about our practices....it looks like we still have record high profits. Chew on that. "

To MIPS wrote on Feb 29, 2008 3:02 PM:

" I'll bite, how did you get a $20,000 bonus, and how many people got them? "

TO Magic Ink and Funny wrote on Feb 29, 2008 2:55 PM:

" The responsibility for explaining coverage belongs to the AGENT. That's what they get paid for! As far as Katrina goes, I don't know how many times it needs to be explained to you nitwits that NO company's homeowners policy covers FLOOD. SF is trying to enforce the language in the policy. You get flood coverage from the GOVT. THe agents in MS should have offered it to everyone and made them sign a waiver if they did not want it. THey lived at or below sealevel for crying out loud! You people who are out to GET the big bad insurance company will never amount to anything. You just sit and complain and blame someone else for your problems. How abou tgetting off your tail, take a risk and make it happen for yourself. "

Numbers wrote on Feb 29, 2008 2:02 PM:

" Wow how could auto rates decease the P/C numbers so much in one year. Maybe someone should be asking about their investments. Sounds to me like their investments did not do so well and they have issues with Subprime or other investments that caused the loss. Sure sounds like the same issues that CNA Insurance had. Maybe there are issues that are below the surface that will come out one day. "

To: How Many? wrote on Feb 29, 2008 1:17 PM:

" You write ..... "If you don't like SF, then shut up and move out of Bloomington. " And this is exactly why you SFers are hated in this town. You think the town is all about you. Thanks for making our point. "

To: to how man? wrote on Feb 29, 2008 12:53 PM:

" You posted " your post says alot about your knowledge (or lack thereof) of insurance coverage. Just becuase someone "thinks" they are insured doesn't mean they are. "

Perhaps people should actually take some accountability and research a purchase of insurance before they spend money on it. Understanding what is covered and what is not covered should be one of the first things you do when agreeing to buy insurance from a company. Why are we so quick to blame the big insurance company when people fail to look after their own purchases and investments? It's called personal accountability.
"

Styles wrote on Feb 29, 2008 12:53 PM:

" State Farm is definitely not perfect but as previously said it has gone above and beyond for its policyholders and to prove to the society that it is an honest and good company. The old saying always holds true, "If you can't anything nice, then don't say anything at all!" It is a great company for its employees, policyholders, and for the communities in which it comes into contact with. GO STATE FARM, WE LOVE YOU AND ALL THAT YOU DO!!!!!!! "

enough wrote on Feb 29, 2008 12:51 PM:

" not much is heard about the +89000 katrina claims that were handled without problems; only the plight of a few thousand policyholders that found they were underinsured makes good press. class action = rich lawyers, nothing more. sf's investments created the profits and those profits could be wiped out with one major hurricane or earthquake. sf has not ruined people's lives...the people's ignorance and sense of entitlement has ruined their lives.

"

To "State Farm stimulus" wrote on Feb 29, 2008 12:45 PM:

" I'd prefer they keep their stimulus package the way it is: if you want your bonus, you earn it. It's not that hard to get at least a 6% merit bonus. "

MIPS! wrote on Feb 29, 2008 12:33 PM:

" You anti-SFers would REALLY hate us if you knew what kind of bonuses we get. $20,000 for me, thank you very much! "

Funny wrote on Feb 29, 2008 12:28 PM:

" I think it's funny that State Farm always getting blamed for policyholders "thinking" they have a certain coverage and they don't. Is it really State Farm's responsibility to follow-up with every policyholder to make sure they really know what coverage they have and if that's really the coverage they want? I don't think so.

What's also funny is how everybody just assumes that State Farm is ripping off policyholders to make their money. The fact of the matter is they make little to no money off of their premiums. They're just smart in making investments, and that's where the profit comes from.

To all those people that live in this town and do nothing but complain about State Farm and it's employees, you need to realize that this town is what it is because of State Farm. Imagine what would happen if State Farm were gone one day! This place would be deserted!! "

Magic Ink wrote on Feb 29, 2008 12:25 PM:

" Everyone knows that it is common practice at SF to use magic ink on their policies. SF agent's sell you a policy with favorable wording, then, when you take the policy home the ink magically changes and takes away all of the coverages you thought you had. This has been working for over 80 years and is how they built such a big, profitable company. "

to: How many? wrote on Feb 29, 2008 12:00 PM:

" your post says alot about your knowledge (or lack thereof) of insurance coverage. Just becuase someone "thinks" they are insured doesn't mean they are. "

To: How Many wrote on Feb 29, 2008 11:58 AM:

" Alot isn't a word. "

Herm Harding wrote on Feb 29, 2008 11:53 AM:

" "How" can we be so negative and sour when something positive is reported by a company that has done so much for this community and the nation in helping people over disasterous accidents and catastrophes? If you were a SF policyholder, You got some excelent refunds and if you had an accident, I am sure you were fairly treated. Thanks SF "

State Farm stimulus? wrote on Feb 29, 2008 11:47 AM:

" Maybe State Farm could provide all of its employees a 'stimulus' package; in the form of a $1,500 bonus? "

to how many wrote on Feb 29, 2008 11:47 AM:

" While I agree with your point, I don't agree with your wording...or misspelling. "

to How many? wrote on Feb 29, 2008 11:45 AM:

" they lost profit in prop/casu. Most of this gain is probably due to investments the company made with idle funds. Most insurance companies would lose money if it was just funded with preimums alone, so they invest money so they can earn a profit and keep our rates lower. "

to How many? wrote on Feb 29, 2008 11:41 AM:

" No insurance company ruins people's lives. c'mon, grow up. As we're seeing in the Katrina case, the truth is finally coming out. State Farm is not perfect, nor is any company, nor any individual, but SF has gone above and beyond what their policies say they are obligated to do. If you don't like SF, then shut up and move out of Bloomington. "

How many? wrote on Feb 29, 2008 11:27 AM:

" How many lives were ruined to make this profit. How many people who thought they were insured were denied coverage so that the biggest rackateering scam could do so well. The aswer is "alot". Crimainal activity is condone in this fascist nation as long as its done on a huge scale and the lobbyists and law makers get paid. "

yo wrote on Feb 29, 2008 11:05 AM:

" i love state farm they are the best "
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