State Farm Reports Net Income Growth for 2004

Net worth for the State Farm group increased by $6.0 billion to $46.3 billion during 2004, according to the company.

The primary reasons for this improvement were the insurance operating results and the $1.6 billion realized and unrealized gain (net of deferred tax) on the property and casualty (P/C) companies’ unaffiliated stock portfolios. The P/C companies reported a pretax underwriting gain of $2.0 billion. This is compared with a pretax operating profit of $3.1 billion in 2003, which included an underwriting loss of $281 million.

The 2004 underwriting results include losses and loss adjustment
expenses totaling $2.9 billion (after reinsurance) related to the four
hurricanes that made landfall in August and September. The State Farm group’s net worth also is affected by the results of operations of non-P/C affiliates, which resulted in a gain for the year of $299 million, primarily driven by results for State Farm Life Insurance Company.

Total revenue for State Farm, which includes premium revenue, earned
investment income and realized capital gains (losses), was $58.8 billion for 2004 compared with the 2003 figure of $56.1 billion. State Farm reported an after-tax net income from all sources of $5.3 billion in 2004 compared with a net income of $2.8 billion in 2003.

State Farm’s insurance operations consist of seven property/casualty
insurers and two life insurers. The property/casualty 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 and State Farm County Mutual Insurance Company of Texas include the auto and health 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 property/casualty lines
of business. State Farm Life Insurance Company and State Farm Life and Accident Assurance Company write the life and annuity business.

The State Farm group insures almost 40 million cars and more than 15 million homes in the United States and Canada. The State Farm group also provides banking products and mutual funds through affiliated companies.

Auto – State Farm’s auto business represents 65 percent of the property/ casualty companies’ combined net written premium. Earned premiums were $31.5 billion, an increase of 1.4 percent from 2003. The incurred claims and loss expenses were $23.0 billion. The underwriting gain was $1.8 billion.

Comparable 2003 figures were: earned premiums, $31.0 billion; incurred claims and loss expenses, $24.2 billion; underwriting loss, $33 million.

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 31 percent of the property/casualty companies’ combined net written premium. Earned premiums were $14.2 billion, an increase of 11.4 percent from 2003. The incurred claims and loss
expenses were $9.3 billion. The underwriting gain was $700 million.

Comparable 2003 figures were: earned premiums, $12.7 billion; incurred claims and loss expenses, $8.7 billion; underwriting gain, $13 million.

Health – The health insurance operations for State Farm Mutual reported an underwriting loss of $68 million on earned premiums of $1.2 billion. Comparable figures for 2003 were: underwriting loss, $155 million; earned premiums, $1.2 billion.

Property-Casualty (P/C) – The combined underwriting gain was $1.96 billion on earned premiums of $47.3 billion. These results, combined with net investment income earned and other income of $3.57 billion, resulted in a pretax operating profit of $5.5 billion. After-tax net income for the P/C companies was $5.1 billion.

Comparable 2003 figures were: earned premiums, $45.3 billion; underwriting loss, $281 million; net investment income earned and other income, $3.4 billion; pretax operating profit, $3.1 billion; net income, $2.5 billion.

Life – State Farm’s life affiliates – State Farm Life Insurance Company
and State Farm Life and Accident Assurance Company – added $30.0 billion of total life insurance in force during the year, bringing the companies’ total insurance in force to $571.0 billion on Dec. 31, 2004.

The life affiliates reported premium income of $3.7 billion in 2004,
compared to $3.6 billion in 2003. The gain from operations after dividends and before taxes was $455 million compared with last year’s reported gain of $489 million. The life affiliates reported an after-tax net income of $247 million in 2004. This compares to a net income of $305 million in 2003.