I had to face that problem head on at Geico. Byrne, who successively ran insurers Geico and Fireman's Fund (until it was sold by its parent, Fund American, which Byrne still heads): ''I've thought State Farm the single-best- managed insurance company in the country. As for State Farm's operating ability, it is so strong that even the competition steps up with applause. companies, headed by IBM at $75 billion, had a market value above $25 billion. That would put it ahead of the top-dollar financial services company, insurer American International Group (recent valuation: $19 billion), and in a class with such market giants as Johnson & Johnson and Amoco (each just north of $25 billion). If State Farm were publicly traded and that $18 billion - the company's book value, so to speak - were accorded just a middling price-to-book multiple, State Farm could easily have a total market value of $25 billion. And in the core measurement of wealth, equity capital, which in this industry is called surplus, State Farm is a far bigger rock than the Rock: State Farm weighs in at $18 billion, Prudential at $8 billion. Counting all its businesses, which include a large life insurance operation, State Farm last year earned almost $26 billion in premiums, ranking second only to Prudential, which had roughly $28 billion. Indisputably, the company has the financial power to deal with almost any challenge. But management's past record of mowing down obstacles suggests that these too will be cut to size in a deft, State Farm way. Yes, the company has its problems - among them a recent slump in profits, political clamor for cheaper auto insurance, and even a few cranky agents. All the evidence indicates that State Farm's management is of star quality and always has been. Why should they be, the cynics ask, given that their owners seem barely to rate the name and that their managers, Lord save us, don't even have stock options? In this case, burn the conventional wisdom. Conventional wisdom holds that mutuals are not well run. It is a mutual insurance company, owned by its policyholders. State Farm has no stockholders, never has raised a dime in the capital markets, and for its entire 69-year history has subsisted solely on retained earnings. Yet, paradoxically, this capitalistic achiever has the outlines of a Russian collective. And it offers up management lessons on getting close to the customer - something every business pines to do these days and State Farm does almost without equal. In the huge, fragmented market for auto and homeowners' insurance, it is the leader by a mile and still gaining. companies and has actually been attacked in court for being too rich. Consider: - In dollar worth, State Farm is bigger than all but a fistful of U.S. This marvel is State Farm Insurance of Bloomington, Illinois, and from its low-profile culture rises a batch of high- stepping reasons to grant it notice. flail about, shrinking and waffling over what they want to be, the industry's most successful corporation - indeed, one of the nation's great businesses - marches steadily forward, unchanged in character and goals. (FORTUNE Magazine) – AS FINANCIAL SERVICE companies all over the U.S.
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