Chairman's Letter

Growth, Momentum, Change, Hallmarks of '06, Months Ahead

Growth, momentum and change are among attributes that quickly come to mind as I reflect on State Farm’s past year and on what will be required of us as we move forward.

It’s traditional and helpful to look at business results on an annual basis. But it’s important that we also view them as a single snapshot in a series of photos that portray our progress, part of a continuum in the on going effort to provide State Farm® customers the best possible service and support today and well into the future.

Each year is unique. For State Farm, 2006 was a good year. Positive underwriting and investment results bolstered our financial strength and ability to meet our customers’ growing needs.

Last year we dealt with major hailstorms and tornadoes in the Midwest that produced many thousands of losses, some of them tragic. They were among millions of more routine claims—a new claim every couple of seconds—some of them big, others small, all of them important. We also handled claims that lingered from Hurricane Katrina the year before.

That was something else that made 2006 different:  No hurricane made landfall anywhere we do business. That was a respite from the coastal catastrophes we saw in ’04 and ’05, the kind that force society to confront the harsh realities of what a hurricane can do to coastlines where people have increasingly migrated.

That discourse is happening now—a bit like a clash between a cold front and a warm front, producing thunder and lightning. We’d all like a little less noise and a lot more light.

As we scan State Farm history, we find our business becoming more complex.  Growing political and regulatory issues intersect with shifting demographic trends.  Technology alters customer expectations, impacts how we conduct business, and influences how we organize and compete.

This means we must pay close attention. We must be particularly adept at addressing the societal and political forces that make our markets dynamic, exciting, challenging and full of opportunity. Without hesitation, we must adopt technology and embrace products that allow us to continue to meet customer needs and expectations in timely and cost-effective ways. 

The pace of innovation is affecting us as never before.  The life cycle of ideas and products is shorter. Think VHS to DVD; CD to MP-3 and iPod; dial-up to broadband; analog to digital; mini to nano. 

Long-standing concepts and procedures must be open to scrutiny. Even companies with a legacy of success must change. Otherwise they risk finding themselves listed alongside names like Pan Am and Montgomery Ward in dusty books about the history of business.     

But while certain things constantly evolve, others must not change. 

Our shared values of quality service and relationships, mutual trust, integrity and financial strength have made us the industry leader for decades. We are a mutual company. We have no stockholders. We have members who are our customers. That means we take the longer view and make our customers’ best interests our own. 

"We are a mutual company. We have no stockholders. We have members who are our customers. That means we take the longer view and make our customers’ best interests our own."
Edward B. Rust Jr. – Chairman and Chief Executive Officer

These time-tested principles are guideposts. They keep us centered on a road that leads to continued success in the years to come.

Edward B. Rust Jr.
Chairman and Chief Executive Officer
State Farm Mutual Automobile Insurance Company