1. Indiana University SCOOP Session – Financial Opportunities
Introduce yourself.
Today I will be talking about accounting careers in insurance.
Indiana University SCOOP Session – Financial Opportunities
February 10, 2004

2. DEFINITION Promise Transfer of Risk Indemnity Principle Social Device
Insurance is a promise where the policyholder transfers risk of loss to the insurance company and they promise to indemnify them or put them back in the position where they were.
There is no gain in insurance.
It is also a social device where insurance companies collect premium dollars and facilitate the distribution of money as accidents occur.

3. REGULATION Highly Regulated By the States
Insurance is highly regulated by the states.
So, wherever insurance companies are conducting business, they must comply with the individual state laws.

4. GAAP vs. Statutory Accounting
FINANCIAL STATEMENTS
GAAP vs. Statutory Accounting
Operating Statement
Statement of Assets and Liabilities
Taking a look at the financial statements, you probably are learning more about GAAP accounting in your classes.
The insurance industry uses statutory accounting.

5. OPERATING STATEMENTS - Losses (Cost of Goods Sold)
Earned Premiums (Sales)
- Losses (Cost of Goods Sold)
- Operating Expenses
= Underwriting Profit/Loss
+/- Investment Income
= Operating Net Income
The Operating Statement is as follows:
Earned Premiums equates to Sales
Less Losses which equates to Cost of Goods Sold
Less Operating Expenses
Equals Underwriting Profit/Loss – usually we lose money but make up for it with our investments.
Our Net Income is usually positive because of our investment income, but with all of the economic problems, that’s not been the case recently.

6. STATEMENT OF ASSETS AND LIABILITIES Admitted vs. Non-Admitted
Premium Receivables
+ Investment Assets
- Loss Reserves
- Unearned Premiums
- Operating Liabilities
= Policyholder Protection Fund
Regarding the Statement of Assets and Liabilities or Balance Sheet:
We have the Premium Receivables
Investment Assets, which we have a lot of
Loss Reserves to account for the accidents
Unearned Premiums since policyholders pay premiums upfront
Lastly, the Operating Liabilities which gives us the Policyholder Protection Fund, otherwise known as “owner’s equity”.
The policyholder protection fund shows whether an insurer is solvent.

7. TYPES OF INSURANCE Life Health Property Casualty
All insurance falls into 1 of 4 lines:
Life
Health
Property
Casualty

8. STATE FARM PRODUCT LINES
Auto
Health
Fire
Life
Financial Services
SF Bank
Mutual Funds
State Farm offers Auto, Health, Fire, and Life polices as well as has moved into the Financial Services arena a few years ago where we offer bank and mutual fund products.

9. Source Insurance Information Institute 2000 Fact book
INDUSTRY SCOPE
7,200 domestic insurance companies
2.3 million jobs
$3.4 trillion assets
$900 billion premiums
Taking a look at the insurance industry – read slide
Source Insurance Information Institute 2000 Fact book

10. STATE FARM’S INDUSTRY POSITION
Ranked #25 within Fortune 500
#1 U.S. Auto insurer since 1942
Insure 1 of every 5 automobiles
Met goal - 40 million Auto policies by 2003
#1 U.S. Home insurer since 1964
Insure 1 of every 4 homes
Top U.S. insurer of pleasure boats
State Farm ranks #25 within the Fortune 500 with $49.7 billion in revenues.
We hold a 20% market share in Auto and have been #1 since 1942.
We hold a 25% market share in Fire and have been #1 since 1964.

11. ACCOUNTING STRUCTURE Centralized vs. De-centralized
Corporate
Zone Offices
Insurance Support Centers (ISC’s)
Supervisory vs. Analytical
The accounting structure in insurance companies can either be centralized or decentralized.
State Farm has a centralized environment in their Corporate operations and Insurance Support Centers which house our Data Processing and Payment Centers.
We have a decentralized environment in our 13 Zone offices.
In the Accounting functions, there are either supervisory or analytical positions available.

12. CORPORATE FUNCTIONS Financial Reporting & Analysis Tax
Investment Accounting
I will be discussing some of the State Farm Corporate, Systems, and Zone office functions.
These areas will be representative of other insurance companies but the names of the departments may be different.
Financial Reporting & Analysis is responsible for the financial reporting to each state insurance department.
Tax is responsible for doing the state and federal income taxes, sales/use tax, and personal property tax.
Investment Accounting is not responsible for the investment decisions but maintaining the controls for the investment assets and doing accounting for dividends and interest payments.

13. CORPORATE FUNCTIONS Accounting Benefits Loss Reserves
Data Management Services
Accounting Benefits works with our Savings and Thrift or 401K plan.
Loss Reserves sets up our liabilities and keeps our loss statistics.
Data Management Services is responsible for ad hoc reporting as well as statistical reporting.

14. CORPORATE FUNCTIONS Auditing Treasury Services
General Accounting Services
Internal Auditing goes to the zone offices and claims offices to review their operations to make sure sound internal controls are in place.
Treasury Services was formed to help reduce our bank fees by monitoring our bank agreements.
General Accounting Services perform miscellaneous functions that don’t fit into the other areas.

15. CORPORATE FUNCTIONS Financial Shared Services Accounts Payable
Agency Compensation
Employee Compensation
Travel & Expense
Shared Services Process Analysis
FSS is the department where I work. We have consolidated several zone office processes into a more automated process.
Accounts Payable is responsible for paying vendors.
Agency Comp deals with our agent compensation records.
Employee Compensation pays all of our employee salaries.
Travel and Expense reimburses employees for business expenses and travel.
Process Analysis develops management reports using data generated from these areas.

16. CORPORATE FUNCTIONS Compliance Change Management
Compliance - Since insurance is regulated by individual state laws, the Compliance area was formed to oversee that we are complying with these laws.
Change Management consults, trains, and coordinates changes in our accounting systems.

17. SYSTEMS Financial Business Analyst Current Systems Support
New Systems Development
Create and maintain detailed operating procedures
There are Financial Business Analyst positions available in our Corporate Systems department where you would support current systems, develop new systems, and create and maintain operating procedures.

18. ZONE OFFICE FUNCTIONS Premium Payment Processing
Cash Disbursements / Claims Support
Agency Compensation
Self Audits
Transformational / Expense Analysis
In the Zone offices, there are supervisory positions and a few analytical positions.
There are supervisory positions available in all 5 of these functions.
However, there are only analytical positions available for the transformational/expense analysis responsibilities.

19. GENERAL DUTIES People Skills Organization & Planning Problem Solving
Time Management
Communication
Coordination
The following is a list of general duties or skills that you will find in both the supervisory and analytical positions.
You will work with a lot of different people and will need to organize your day to make sure everything that needs to get done, gets done.
I have found that no day is the same – different things arise that usually require you to use your problem solving skills and communicate with others to get the task completed or problem resolved.

20. SPECIFIC DUTIES Analysts Project Development Operational Assistance
Functional Area of Expertise
Supervisors
Performance Management
There are a few differences you will see between analysts and supervisors.
Analysts’ main responsibilities are project development, assisting the operation, and being an expert in their field.
Supervisors’ main responsibility is performance management, making sure their team members develop and perform at the best of their abilities while getting their responsibilities completed.

21. TECHNICAL TRAINING On-Line Operating Procedures Hardware and Software
PeopleSoft Application
Microsoft
Numerous proprietary applications
Supervisory Skills
CD-ROM Leadership Development Series
In each area, you receive technical training.
At State Farm, our accounting operating procedures are on-line.
We use PeopleSoft for our accounting processes and have numerous company-specific applications.
In addition, supervisors must take leadership classes.

22. PROFESSIONAL DEVELOPMENT
In-House Courses
Insurance Education
ChFC, CLU, CPCU
Professional Designations
CPA, CMA, MBA
The insurance industry promotes professional development either through:
In-house courses, such as human resources and workstation classes,
Insurance education where you can earn many different types of designations such as Chartered Property Casualty Underwriter,
And, Professional Designations are also promoted where you can earn your CPA or MBA.

23. CAREER PATHS Stability Diversity Opportunity Mobility
By working for a larger insurance company, you have flexibility in career paths.
You have the opportunity to work in claims, underwriting, agency, and human resources, even though you may have started in an accounting, finance, or CIS role.
You control your career path.
At State Farm, we post job opportunities online each day. One of the reasons State Farm has a low turnover rate is due to the ability to have a variety of careers.
Opportunity
Mobility

24. 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
For your information, I am providing you with the knowledge and skills desired for candidates seeking employment at State Farm.

25. 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
In addition, listed are traits that State Farm feels are important to possess.

26. BENEFITS Medical and Life Insurance Defined-Benefit Retirement Plan
Profit Sharing (401K match)
Education Costs
Flexible Work Hours
Here are a few benefits that State Farm offers:
Regarding education costs, State Farm reimburses employees for pursuing their bachelors and masters degrees as well as doctorates.
Many associates work a variety of hours; some working as early as 6:00am and others working longer hours to get every Friday off.

27. STATE FARM DATA
25 operations centers are in 13 zones located throughout the United States and Canada.
Our Corporate headquarters are located in Bloomington, IL.

28. STATE FARM DATA 19 Affiliated Companies Mutually owned company
66.3 million policies in force
$112 billion in
Assets (12/31/02)
State Farm Associates
16,749 Agents
79,000 Total Employees
About 1,500 Accounting Employees
Finally, a few more tidbits about State Farm.
Read items on slide.
Source 2002 Annual Report

29. If you have questions, you can log onto our website or see me after class.
Thanks for your time and letting me come talk about the insurance industry and State Farm!