[StBernard] State Farm profits

[Westley Annis]

State FarmR Announces $1.25 Billion Mutual Auto Policyholder Dividend 

LIGHT HURRICANE SEASON REVERSES COMPANYWIDE NET INCOME DECLINE 
Bloomington, Illinois, March 1, 2007 - State Farm Mutual Automobile
Insurance Company, the largest insurer of autos in the nation, announced
today it will pay $1.25 billion in dividends to its mutual auto insurance
policyholders in 46 states, the District of Columbia and the Canadian
province of New Brunswick.
The record-breaking payment of dividends, approved by the State Farm Mutual
board of directors, eclipses the previous high of just over $1 billion in
June, 2000.
The better-than-expected auto results combined with a $4.1 billion reduction
in catastrophe losses in 2006 resulted in an increase in State Farm's
companywide net income - an increase that was almost identical to the
previous year's decline.  In other words, net income in 2006 was almost
identical to that of 2004.  The company is reporting an after-tax net income
from all sources of $5.32 billion, compared with $5.31 billion in net income
reported in 2004 (two years ago).  State Farm's net income in the
hurricane-laden year of 2005 was $3.24 billion.  The three consecutive years
of profit follow a three-year period (2001-2003) during which State Farm
lost nearly $5 billion.    
"2006 was a profitable year, but our evaluation of financial success is
defined by our accomplishments over a longer period of time than one year,"
said Michael Tipsord, Vice Chairman, Treasurer and Chief Financial Officer.
"Given the potential for volatility in the insurance business, we must avoid
the temptation of attributing too much significance to short-term financial
results.  Our customers expect us to maintain the financial strength
necessary to deliver on the promises we make to them over a long period of
time." 
The company is reporting a property-casualty (P-C) underwriting gain in 2006
of $3.0 billion.  It is only the third time in the last ten years a P-C
underwriting gain has been achieved.  The other two years in which that
happened are 2004 and 1997.  
The combined net worth of the State Farm companies increased by $8.0 billion
to $58.1 billion.  The primary reasons for this improvement were the
insurance operating results and the $3.6 billion realized and unrealized
gain (net of deferred tax) on P-C companies' unaffiliated stock portfolios.
State Farm's net worth was also impacted by a pension contribution of $900
million.  The P-C companies reported a pretax operating profit of $6.0
billion in 2006, including investment and other income of $3.0 billion and
the underwriting gain of $3.0 billion.  This compares with a pretax
operating profit of $3.5 billion in 2005, which included investment and
other income of $4.3 billion and an underwriting loss of $779 million.  The
combined net worth of the State Farm companies is also affected by the
results of operations of non-P-C affiliates, which resulted in a gain for
the year of $586 million, primarily driven by results for State Farm Life
Insurance Company.
Total revenue, which includes premium revenue, earned investment income and
realized capital gains (losses), was $60.5 billion for 2006 compared with
the 2005 figure of $59.2 billion.
State Farm's insurance operations consist of eight P-C insurers and two life
insurers.  The P-C 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, State Farm Guaranty Company and State Farm County Mutual
Insurance Company of Texas include the Auto, Health and Reinsurance lines of
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 P-C lines of business.  State Farm Life Insurance Company and
State Farm Life and Accident Assurance Company write the Life and Annuity
business.  State Farm also provides banking products and mutual funds
through affiliated companies.
Auto - State Farm's auto insurance business represents 63 percent of the P-C
companies' combined net written premium.  Earned premiums were $30.7
billion, an increase of 0.2 percent from 2005.  The incurred claims and loss
expenses were $23.1 billion.  The underwriting gain was $945 million.
Comparable 2005 figures were: earned premium, $30.6 billion; incurred claims
and loss expenses, $23.8 billion; underwriting gain, $585 million.
With this latest dividend, State Farm Mutual will have returned $3.8 billion
to auto policyholders in four dividends since 1997.  In addition, State Farm
Mutual reduced its overall auto rate level by 10.2 percent between the
beginning of 2004 and the end of 2006.  This represents $2.9 billion in
implemented auto rate reductions for the Company's customers.
State Farm does not plan on paying dividends when setting prices, but can
pay them to customers at the discretion of its board of directors when
financial results are better than anticipated and business conditions
permit. 
"As a mutual company, State Farm's primary obligation is to its
policyholders," said Tipsord.  "At State Farm, we work hard to be good
stewards for our policyholders and to provide them the very best combination
of product, price, service and financial stability.  One way we provide
value to State Farm Mutual auto policyholders is to pay dividends to them
when financial results and business conditions permit.  Our customers' safe
driving habits have contributed to our positive underwriting results, and we
are delighted to pass along the benefits from those results to them."
The size of each policyholder's dividend will vary significantly by
jurisdiction, but the average per insured vehicle will be about $35.
Dividend payments will begin in early April and will continue throughout the
year.  Policyholders can expect to receive their dividend near the time of
their policy renewal.  Most customers will receive their dividend by check.
The dividend for policyholders receiving less than $15 will be credited to
their State Farm renewal premium.
State Farm's New Jersey policyholders insured by State Farm Indemnity
received $130 million in dividends in December 2006. 
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 33 percent of the P-C
companies' combined net written premium.  Earned premiums were $15.5
billion, an increase of 3.6 percent from 2005.  The incurred claims and loss
expenses were $9.8 billion.  The result was an underwriting gain of $1.2
billion.
Comparable 2005 figures were: earned premiums, $15.0 billion; incurred
claims and loss expenses, $9.6 billion (after recovery of $4.1 billion from
internal and external reinsurers under catastrophe reinsurance agreements);
underwriting gain, $1.4 billion.

Health - The individual health insurance operations for State Farm Mutual
reported an underwriting loss of $32 million.  Net written premiums were
$753 million.  Comparable figures for 2005 were: underwriting loss, $16
million; net written premiums, $761 million.
Property-Casualty (P-C) - The combined underwriting gain was $3.0 billion on
earned premiums of $48.0 billion.  This includes results from Auto,
Homeowners, Health and other lines, as well as the Reinsurance line provided
by State Farm Mutual.  The Reinsurance line of business reported an
underwriting gain of $755 million in 2006.  The total P-C underwriting gain,
combined with net investment income earned and other income of $3.0 billion,
resulted in a pretax operating profit of $6.0 billion.  After-tax net income
for the P-C companies was $4.8 billion.
Comparable 2005 figures were: earned premiums, $47.5 billion; underwriting
loss, $779 million; reinsurance underwriting loss, $2.8 billion; net
investment income earned and other income, $4.3 billion; pretax operating
profit, $3.5 billion; net income, $3.0 billion.
Life - State Farm's Life affiliates - State Farm Life Insurance Company and
State Farm Life and Accident Assurance Company - added $42 billion of total
life insurance in force during the year, bringing the companies' total
insurance in force to $651 billion on Dec. 31, 2006.
The Life affiliates reported premium income of $3.9 billion in 2006,
compared with $3.8 billion in 2005.  The gain from operations after
dividends and before taxes was $618 million compared with 2005's reported
gain of $511 million.  The Life affiliates reported an after-tax net income
of $408 million in 2006.  This compares with a net income of $333 million in
2005.
Bank - State Farm BankR, F.S.B. reported an after-tax net income of $24
million in 2006, compared with $22 million in 2005.  Total assets for the
Bank rose to $13.5 billion in 2006 compared with assets of $12.2 billion at
the end of 2005.
Mutual Funds - Total assets under management for the retail Mutual Fund
operations at the end of 2006 were $3.9 billion, compared with $2.8 billion
at the beginning of the year.  State Farm VP Management Corp. and State Farm
Investment Management Corp. reported a combined after-tax net loss of $14
million in 2006 compared with a loss of $18 million in 2005.
State Farm Bank, Bloomington, Illinois, is a Member FDIC and an Equal
Housing Lender.  Insurance and securities products offered by affiliated
companies of State Farm Bank are not FDIC insured, are not guaranteed by
State Farm Bank and are subject to investment risk, including possible loss
of principal invested.
Securities are available through registered representatives of State Farm VP
Management Corp.  State Farm VP Management Corp. is a separate entity from
those State Farm entities that provide banking products and auto, life, fire
and health insurance products.