Illinois Insurance

Given that the lines No. 1 personal insurer continues to lose market share, analysts and observers question its strategy to reduce the tax rate.

State Farm Mutual Automobile Insurance Co. had humble beginnings in 1922 that the idea of George J. Mecherle, Illinois, a farmer insurance salesman thought he had a better way to sell self-policies for farmers at lower prices. In 79 years, then grew the company a small business in the heart of Illinois farm the first country to automobile insurers and owner of the USA, with 25 regional offices, more than 79000 employees and nearly 70 million policies in force.

Warren Buffett - itself is no stranger to success of the enterprise speech - there is little, called this “one of America’s greatest business stories” and insisted Business Schools study of the company, “because he achieved fabulous success, whereas, according to a path in many ways, despite the dogma of these bodies.

But in recent times, some potholes in the State Farm Mutual path. After four years strong, damages giant in 2000, reported that its net income from all associated companies, including non-insurance partners, had collapsed to $ 408.1 million to $ 626 million from 1999. State Farm Mutual’s wealthy rose from 2.1 billion dollars to 43.7 billion dollars last year, after increasing by $ 4 billion in 1999. State Farm Mutual, said the main reason for the decline was a pretax operating loss of $ 1.9 billion, including $ 3.3 billion insurance loss. An unrealized loss of $ 711.5 million reflects the operating results of the State Farm as a member organizations.

The insurance company of the loss in part to an increase in the loss of gravity, and self-rate cuts, totaling $ 672 million for the year. In June, State Farm, said he plans to adopt auto insurance written in New Jersey because of the continuing losses and charges by the single État’s Insurance Regulatory System.

In addition to finance, the State has had image problems farm in 2000. The company was pleasantly court a historic decision, he ordered the payment of a $ 1.05 billion in its allocation policy owners of generic parts for car repairs. The appeal was rejected in April 2001, but the company hopes, for its struggle for greater justice. And in June 2000, the programme “Dateline NBC” detailed questionable practices used to deny requests for medical treatment medico-Review two companies, State Farm employs. The program has prompted the National Association of Insurance Commissioners at the opening of a multi-state market, the behaviour of the State Farm’s review prejudice to the rights self-practices. The review is not yet complete.

If the state has been firm and a listed company under pressure from investors nervous, his mea culpas have echoed through the canyons of Wall Street. But as a mutual insurance company, he only answers to its policyholders, owners of the company. Even some equity analysts, closes with public authorities market share of competitors companies - namely, Allstate, Progressive and Geico - wonder, like many of its most Manager of its strategy to buy market share , With losses of insurance. At one point, warn analysts, including credit rating agencies have applauded the State Farm for its superb stuffed capital and huge competitive advantages begin May pressure on enterprises to improve their operational performance. Currently, the State Farm hearing the highest AM Best (A + +), Standard & Poor’s (AAA) and Moody’s Investors Service (AAA).

In recent years, the farm state, it has the strategy for keeping rates low in some countries and the reduction in duty rates applied in other countries, all with an eye toward returning to gain market share.