Indiana University Corporate Accounting POOP Session September 19, 2000

DEFINITION Promise Transfer of Risk Indemnity Principle Social Device

REGULATION Highly Regulated By the States

FINANCIAL STATEMENTS Operating Statement Statement of Assets and Liabilities GAAP vs. Statutory Accounting

OPERATING STATEMENTS Earned Premiums (Sales) -Losses (Cost of Goods Sold) -Operating Expenses =Underwriting Profit/Loss +/-Investment Income =Net Income

STATEMENT OF ASSETS AND LIABILITIES Admitted vs. Non-Admitted Premium Receivables +Investment Assets -Loss Reserves -Unearned Premiums -Operating Liabilities =Policyholder Protection Fund

TYPES OF INSURANCE Life Health Property Casualty

Personal –Auto –Home –Liability Commercial –Workers Comp –Malpractice –Aviation –Toxic Waste PROPERTY AND CASUALTY LINES

STATE FARM COMPANIES Auto (Health) Fire Life Bank

STATE FARM IN THE FORTUNE 500

INDUSTRY POSITIONS Policies in force 35,019,774 14,163,912 5,535,848 1,123,546

INDUSTRY SCOPE 7,900 domestic insurance companies 2.3 million jobs $3.4 trillion assets $900 billion premiums Source Insurance Information Institute 1999 Fact book

ACCOUNTING STRUCTURE Centralized vs. De-centralized –Corporate –Regional Offices –Insurance Support Centers (ISC’s) Supervisory vs. Analytical

CORPORATE FUNCTIONS Financial Reporting & Analysis Tax Investment Accounting

CORPORATE FUNCTIONS Mutual Funds/Accounting Benefits Loss Reserves Data Management Services

CORPORATE FUNCTIONS Auditing Treasury Services General Accounting Services

CORPORATE FUNCTIONS Financial Shared Services –Accounts Payable –Agency Compensation –Employee Compensation –Travel-Expense –Shared Services Process Analysis

CORPORATE FUNCTIONS Compliance Change Management

SYSTEMS Financial Business Analyst –Current Systems Support –New Systems Development –Create and maintain detailed operating procedures 30 Month Accounting Business Analyst Trainee

REGIONAL OFFICE FUNCTIONS Premium Payment Processing Cash Disbursements / Claims Support Agency Compensation Self Audits Transformational / Expense Analysis

TECHNICAL TRAINING Operating Procedures Hardware and Software Supervisory Skills

PROFESSIONAL DEVELOPMENT In-House Courses Insurance Education –ChFC, CLU, CPCU Professional Designations –CPA, CMA, MBA

People Skills Performance Management Organization & Planning Problem Solving Time Management Communication DAILY DUTIES - SUPERVISION

DAILY DUTIES - ANALYST Problem Solving Project Development Operational Assistance Coordination Communication Functional Area of Expertise

BENEFITS Medical and Life Insurance Defined-Benefit Retirement Plan Profit Sharing (401K match) Education Costs Flexible Work Hours

CAREER PATHS Stability Diversity Opportunity Mobility

STATE FARM DATA

16 Affiliated Companies 66.7 Million State Farm policies in force Approximately 150,000 State Farm Associates –16,200 Agents –79,300 Employees –1,900 Accounting Employees