Indiana University SCOOP Session – Financial Opportunities September 28, 2004

DEFINITION Promise Transfer of Risk Indemnity Principle Social Device

TYPES OF INSURANCE Life Health Property Casualty

INDUSTRY SCOPE Almost 5,000 domestic insurance companies 2.3 million jobs in 2003 (2.1% average over past 10 years) $885 billion in premiums in 2002 (P/C & L/H) Industry rate of return in 2002: 3.2% in P/C, 1.0% in L/H

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 =Operating Net Income

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

STATE FARM PRODUCT LINES Auto Health Fire Life Financial Services SF Bank Mutual Funds

STATE FARM DATA 20 Affiliated Companies Mutually owned company 74 million policies and accounts in force $136 billion in Assets (12/31/03) State Farm Associates –17,00 Agents –72,000 Total Employees About 2,000 Accounting Employees Source 2003 Annual Report

STATE FARM’S INDUSTRY POSITION Ranked #18 within Fortune 500 #1 U.S. Auto insurer since % Market Share at end of 2003 Almost 40 million Auto policies #1 U.S. Home insurer since % Market Share at end of 2003 Currently almost 25 million Fire policies Top U.S. insurer of pleasure boats

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

CORPORATE FUNCTIONS Financial Reporting & Analysis Tax Investment Accounting

CORPORATE FUNCTIONS 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

CORPORATE SYSTEMS Financial Business Analyst –Current Systems Support –New Systems Development –Create and maintain detailed operating procedures

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

ZONE STRUCTURE

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

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

TECHNICAL TRAINING On-Line Operating Procedures Hardware and Software –PeopleSoft Application –Microsoft –Numerous proprietary applications Supervisory Skills –CD-ROM Leadership Development Series

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

CAREER PATHS Diversity Opportunity Mobility

IDEAL CANDIDATES Accounting majors with a minimum of 9 hours of CIS/MIS Finance and Other majors with a minimum of 9 hours of Accounting and 9 hours of CIS/MIS CIS/MIS majors with a minimum of 9 hours of Accounting “B+” GPA overall and in major

IMPORTANT TRAITS  Real world experiences  Technical skills  GPA  Leadership qualities  Personal presentation  Attitude  Ability to learn  Problem analysis and analytical thinking  Customer service orientation  Adaptability, drive and initiative  Proven track record  Passion for work

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