* * PROPERTY AND CASUALTY COMPANIES ASSOCIATION EDITION

Transcription

1 * * PROPERTY AND CASUALTY COMPANIES ASSOCIATION EDITION ANNUAL STATEMENT For the Year Ended December 3, 04 OF THE CONDITION AND AFFAIRS OF THE State Farm Mutual Automobile Insurance Company NAIC Group Code 076, 076 NAIC Company Code 578 Employer s ID Number (Current Period) (Prior Period) Organized under the Laws of Illinois, State of Domicile or Port of Entry Illinois Country of Domicile US Incorporated/Organized 03/9/9 Commenced Business 06/07/9 Statutory Home Office One State Farm Plaza, Bloomington, IL, US 670 (Street and Number) (City or Town, State, Country and Zip Code) Main Administrative Office One State Farm Plaza Bloomington, IL, US (Street and Number) (City or Town, State, Country and Zip Code) (Area Code) (Telephone Number) Mail Address One State Farm Plaza, Bloomington, IL, US 670 (Street and Number or P.O. Box) (City or Town, State, Country and Zip Code) Primary Location of Books and Records One State Farm Plaza Bloomington, IL, US (Street and Number) (City or Town, State, Country and Zip Code) (Area Code) (Telephone Number) Internet Web Site Address Statutory Statement Contact Lyle Rudin (Name) (Area Code) (Telephone Number) (Extension) home.acct-fra.459y00@statefarm.com ( Address) (Fax Number) OFFICERS Name Title Name Title Edward Barry Rust Jr., Chairman of the Board, President and CEO Lynne Madden Yowell, Associate General Counsel and Secretary Paul Joseph Smith, Executive Vice President, Treasurer and CFO, OTHER OFFICERS Sandra Faye Arnold, Vice President - Integrated Solutions Department Mary Eva Crego, Senior Vice President Duane Christopher Farrington, Executive Vice President and Chief Administrative Officer Randall Houston Harbert, Executive Vice President, Chief Agency Sales Marketing Officer Arlene Dresch Hogan, Senior Vice President Susan Quasebarth Hood, Senior Vice President Jeffrey Warren Jackson, Senior Vice President and General Counsel Thomas Loftus, Chief Compliance Officer Christy Ann Moberly, Senior Vice President - Agency and Marketing Joseph Riley Monk Jr., SVP and CAO-Life, VP-Health, Mutual Funds Julia Marie Muscott #, Operations Vice President - Underwriting Mark Aaron Oakley, Systems Vice President and Chief Information Officer Mark Edward Schwamberger *, Vice President and Controller Michael Leon Tipsord, Vice Chairman and Chief Operating Officer Cathy Adams Wallace, Chief Risk Officer Michael Steven Wey, Executive Vice President - Property and Casualty Robert Hun Sang Yi, Senior Vice President, DIRECTORS OR TRUSTEES Dan Eliab Arvizu Gerald Milton Czarnecki Christopher Clay DeMuth Walter Steven Jones William Harry Knight, Jr. Allan Ray Landon # Judith Ann Muhlberg Gary Laurence Perlin # Susan Meredith Phillips Edward Barry Rust Jr. Paul Thomas Stecko Pamela Bristow Strobel Michael Leon Tipsord John D. Zeglis State of County of Illinois McLean ss The officers of this reporting entity, being duly sworn, each depose and say that they are the described officers of said reporting entity, and that on the reporting period stated above, all of the herein described assets were the absolute property of the said reporting entity, free and clear from any liens or claims thereon, except as herein stated, and that this statement, together with related exhibits, schedules and explanations therein contained, annexed or referred to, is a full and true statement of all the assets and liabilities and of the condition and affairs of the said reporting entity as of the reporting period stated above, and of its income and deductions therefrom for the period ended, and have been completed in accordance with the NAIC Annual Statement Instructions and Accounting Practices and Procedures manual except to the extent that: () state law may differ; or, () that state rules or regulations require differences in reporting not related to accounting practices and procedures, according to the best of their information, knowledge and belief, respectively. Furthermore, the scope of this attestation by the described officers also includes the related corresponding electronic filing with the NAIC, when required, that is an exact copy (except for formatting differences due to electronic filing) of the enclosed statement. The electronic filing may be requested by various regulators in lieu of or in addition to the enclosed statement. Edward B. Rust Jr. Lynne M. Yowell Paul J. Smith Associate General Counsel and Secretary Chairman of the Board, President and Chief Executive Officer Executive Vice President, Treasurer and Chief Financial Officer a. Is this an original filing? Yes [ X ] No [ ] Subscribed and sworn to before me b. If no: this 5th day of February, 05. State the amendment number. Date filed 3. Number of pages attached Marcey Hunt, State of Illinois /9/05 * Person having charge of the accounts and finances of the insurer.

2 ASSETS Current Year 3 Prior Year 4 Assets Nonadmitted Assets Net Admitted Assets (Cols. - ) Net Admitted Assets. Bonds (Schedule D) 43,833,635, ,833,635,737 43,4,6,5. Stocks (Schedule D):. Preferred stocks 500,000, ,000, ,000,000. Common stocks 79,00,493, ,00,493,38 7,04,6,03 3. Mortgage loans on real estate (Schedule B): 3. First liens 6,88, ,88,046 6,653, Other than first liens Real estate (Schedule A): 4. Properties occupied by the company (less $ 0 encumbrances) 50,455,95 6,986, ,469,34 57,479,46 4. Properties held for the production of income (less $ 0 encumbrances) 977, ,303 0,46, Properties held for sale (less $ 78,98 encumbrances) 0,93, ,93,779 58,79,70 5. Cash ($ 490,56,076, Schedule E-Part ), cash equivalents ($ 890,975,889, Schedule E-Part ) and short-term investments ($ 5,66,733, Schedule DA),397,98,697,397,98, ,00, Contract loans (including $ premium notes) Derivatives (Schedule DB) Other invested assets (Schedule BA) 5,30,388,439 05,,047 5,96,67,39 4,33,87,44 9. Receivables for securities 753, , Securities lending reinvested collateral assets (Schedule DL) Aggregate write-ins for invested assets Subtotals, cash and invested assets (Lines to ) 30,745,0,734,07,6 30,63,95,3,469,650, Title plants less $ charged off (for Title insurers only) Investment income due and accrued 583,485, ,485, ,467, Premiums and considerations: 5. Uncollected premiums and agents balances in the course of collection 37,364,957 59,8 37,305,89 33,909, Deferred premiums, agents balances and installments booked but deferred and not yet due (including $ 0 earned but unbilled premiums) 5,05,583,6 3,790 5,05,569,47 4,874,837, Accrued retrospective premiums Reinsurance: 6. Amounts recoverable from reinsurers 40,56, ,56,83 40,80,50 6. Funds held by or deposited with reinsured companies 9,66 0 9,66 8, Other amounts receivable under reinsurance contracts Amounts receivable relating to uninsured plans Current federal and foreign income tax recoverable and interest thereon 305,503, ,503, ,849, Net deferred tax asset Guaranty funds receivable or on deposit 3,034, ,034,677 3,090, Electronic data processing equipment and software,40,44,378 97,036,8 43,378, ,44,504. Furniture and equipment, including health care delivery assets ($ ) 9,,63 9,, Net adjustment in assets and liabilities due to foreign exchange rates 68,08, ,08,677 48,656,96 3. Receivables from parent, subsidiaries and affiliates 630,4, ,4,835 49,37,7 4. Health care ($ ) and other amounts receivable Aggregate write-ins for other-than-invested assets,45,93, ,08,48 55,,4 494,464, Total assets excluding Separate Accounts, Segregated Accounts and Protected Cell Accounts (Lines to 5) 4,073,33,35,75,40,40 38,797,90,95 9,337,905,70 7. From Separate Accounts, Segregated Accounts and Protected Cell Accounts Total (Lines 6 and 7) 4,073,33,35,75,40,40 38,797,90,95 9,337,905,70 DETAILS OF WRITE-INS Summary of remaining write-ins for Line from overflow page Totals (Lines 0 through 03 plus 98) (Line above) Other assets,4,359, ,990,4 435,369,83 40,9, Equities and deposits in pools and associations 87,90, ,90,547 8,683, Corporate owned life insurance,86,469 0,86,469,793, Summary of remaining write-ins for Line 5 from overflow page 94,5,56 94,09,94 60, 65, Totals (Lines 50 through 503 plus 598) (Line 5 above),45,93, ,08,48 55,,4 494,464,443

3 LIABILITIES, SURPLUS AND OTHER FUNDS Current Year Prior Year. Losses (Part A, Line 35, Column 8) 9,,090,45 9,04,608,497. Reinsurance payable on paid losses and loss adjustment expenses (Schedule F, Part, Column 6),58,68 8,744, Loss adjustment expenses (Part A, Line 35, Column 9) 8,058,585,484 7,39,60, Commissions payable, contingent commissions and other similar charges Other expenses (excluding taxes, licenses and fees) 5,9,638,73 5,67,36, Taxes, licenses and fees (excluding federal and foreign income taxes) 79,0,55 57,49,37 7. Current federal and foreign income taxes (including $ 0 on realized capital gains (losses)) Net deferred tax liability 6,538,035,70 6,540,095, Borrowed money $ 0 and interest thereon $ Unearned premiums (Part A, Line 38, Column 5) (after deducting unearned premiums for ceded reinsurance of $ 578,838,538 and including warranty reserves of $ 0 and accrued accident and health experience rating refunds including $ for medical loss ratio rebate per the Public Health Service Act),0,4,69 0,469,884, Advance premium 338,039,84 330,48,30. Dividends declared and unpaid:. Stockholders 0 0. Policyholders 0 0. Ceded reinsurance premiums payable (net of ceding commissions) 05,075,658 9,435, Funds held by company under reinsurance treaties (Schedule F, Part 3, Column 9) Amounts withheld or retained by company for account of others,70,985,076,50,699, Remittances and items not allocated 69,79,648 80,33, Provision for reinsurance (including $ certified) (Schedule F, Part 8) Net adjustments in assets and liabilities due to foreign exchange rates Drafts outstanding 873,9,49 809,59,54 9. Payable to parent, subsidiaries and affiliates 55,35 66, Derivatives 0 0. Payable for securities 3,495,049 38,744,797. Payable for securities lending Liability for amounts held under uninsured plans Capital notes $ 0 and interest thereon $ Aggregate write-ins for liabilities 5,79,807,90,07,84,8 6. Total liabilities excluding protected cell liabilities (Lines through 5) 58,9,07,85 53,659,03, Protected cell liabilities 0 8. Total liabilities (Lines 6 and 7) 58,9,07,85 53,659,03, Aggregate write-ins for special surplus funds 60,67,50,38 55,30,88, Common capital stock Preferred capital stock Aggregate write-ins for other than special surplus funds 0,000,000 0,000, Surplus notes Gross paid in and contributed surplus Unassigned funds (surplus) 9,49,373,438 0,347,99, Less treasury stock, at cost: shares common (value included in Line 30 $ 0 ) shares preferred (value included in Line 3 $ 0 ) Surplus as regards policyholders (Lines 9 to 35, less 36) (Page 4, Line 39) 79,876,875,766 75,678,874, Totals (Page, Line 8, Col. 3) 38,797,90,95 9,337,905,70 DETAILS OF WRITE-INS 50. Additional liability for defined benefit plans 3,76,808,75 376,498, Premium deficiency reserve,354,30,968,3,573, Other liabilities 638,665, ,058, Summary of remaining write-ins for Line 5 from overflow page 30,66 54, Totals (Lines 50 through 503 plus 598) (Line 5 above) 5,79,807,90,07,84,8 90. Funds assigned for protection of customers of subsidiaries 33,45,88,563 30,479,6, Investment fluctuation reserve 4,933,066,454,786,78, Funds assigned for catastrophe reinsurance,30,300,479,7,647, Summary of remaining write-ins for Line 9 from overflow page 308,5,83 33,44, Totals (Lines 90 through 903 plus 998) (Line 9 above) 60,67,50,38 55,30,88, Guaranty fund 0,000,000 0,000, Summary of remaining write-ins for Line 3 from overflow page Totals (Lines 30 through 303 plus 398) (Line 3 above) 0,000,000 0,000,000 3

4 STATEMENT OF INCOME Current Year Prior Year UNDERWRITING INCOME. Premiums earned (Part, Line 35, Column 4) 36,96,997,780 34,60,47,34 DEDUCTIONS:. Losses incurred (Part, Line 35, Column 7) 3,547,888,704,037,3, Loss adjustment expenses incurred (Part 3, Line 5, Column ) 6,8,749,343 5,6,75, Other underwriting expenses incurred (Part 3, Line 5, Column ) 9,0,563,948 8,863,95, Aggregate write-ins for underwriting deductions,79,9 03,647, Total underwriting deductions (Lines through 5) 39,54,93,906 36,67,590,66 7. Net income of protected cells 0 8. Net underwriting gain (loss) (Line minus Line 6 plus Line 7) (,957,934,6) (,007,63,03) INVESTMENT INCOME 9. Net investment income earned (Exhibit of Net Investment Income, Line 7) 3,040,30,087,759,098,03 0. Net realized capital gains (losses) less capital gains tax of $ 44,865,76 (Exhibit of Capital Gains (Losses)) 69,48,98 704,88,509. Net investment gain (loss) (Lines 9 + 0) 3,309,70,386 3,463,86,540 OTHER INCOME. Net gain (loss) from agents' or premium balances charged off (amount recovered $ 0 amount charged off $ 3,786,76 ) (3,786,76) (3,954,470) 3. Finance and service charges not included in premiums 09,8,848 05,98, Aggregate write-ins for miscellaneous income (3,6,7) (44,5,59) 5. Total other income (Lines through 4) 0,69,05 (4,908,465) 6. Net income before dividends to policyholders, after capital gains tax and before all other federal and foreign income taxes (Lines ) 554,055,75,43,5, Dividends to policyholders 7,57 8,50 8. Net income, after dividends to policyholders, after capital gains tax and before all other federal and foreign income taxes (Line 6 minus Line 7) 554,038,08,43,96,54 9. Federal and foreign income taxes incurred (49,743,69) (43,97,44) 0. Net income (Line 8 minus Line 9) (to Line ),045,78,70,836,493,966 CAPITAL AND SURPLUS ACCOUNT. Surplus as regards policyholders, December 3 prior year (Page 4, Line 39, Column ) 75,678,874,653 65,4,90,63. Net income (from Line 0),045,78,70,836,493, Net transfers (to) from Protected Cell accounts 0 4. Change in net unrealized capital gains or (losses) less capital gains tax of $,56,86,83 5,456,075,093 9,446,09,66 5. Change in net unrealized foreign exchange capital gain (loss) (,679,6) 49,4, Change in net deferred income tax,58,46,45 (,00,790,545) 7. Change in nonadmitted assets (Exhibit of Nonadmitted Assets, Line 8, Col. 3),88,9,308 4,59,55,50 8. Change in provision for reinsurance (Page 3, Line 6, Column minus Column ) Change in surplus notes Surplus (contributed to) withdrawn from protected cells 0 3. Cumulative effect of changes in accounting principles 0 (,578,5,483) 3. Capital changes: 3. Paid in Transferred from surplus (Stock Dividend) Transferred to surplus Surplus adjustments: 33. Paid in Transferred to capital (Stock Dividend) Transferred from capital Net remittances from or (to) Home Office Dividends to stockholders Change in treasury stock (Page 3, Lines 36. and 36., Column minus Column ) Aggregate write-ins for gains and losses in surplus (5,69,335,5) (,74,869,006) 38. Change in surplus as regards policyholders for the year (Lines through 37) 4,98,00,3 0,436,97, Surplus as regards policyholders, December 3 current year (Line plus Line 38) (Page 3, Line 37) 79,876,875,766 75,678,874,653 DETAILS OF WRITE-INS 050. Premium deficiency reserve,79,9 03,647, Summary of remaining write-ins for Line 5 from overflow page Totals (Lines 050 through 0503 plus 0598) (Line 5 above),79,9 03,647, Finance and service charges assumed 6,38,870 5,587, Net realized foreign exchange gain not related to investments 3,4 (6,56) 403. Insurance department fines and penalties (7,400) (5,600) 498. Summary of remaining write-ins for Line 4 from overflow page (9,703,78) (59,708,59) 499. Totals (Lines 40 through 403 plus 498) (Line 4 above) (3,6,7) (44,5,59) 370. Change in funds assigned for the protection of customers of subsidiaries,766,60,488 3,837,367, Change in investment fluctuation reserve,46,338,96 5,499,338, Change in funds assigned for catastrophe reinsurance 407,653,68 359,0, Summary of remaining write-ins for Line 37 from overflow page (0,589,947,03) (,970,597,03) Totals (Lines 370 through 3703 plus 3798) (Line 37 above) (5,69,335,5) (,74,869,006) 4

5 CASH FLOW Current Year Prior Year Cash from Operations. Premiums collected net of reinsurance 36,578,078,308 34,84,386,943. Net investment income 3,,94,983,89,794, Miscellaneous income 7,945,773 (4,904,88) 4. Total (Lines through 3) 40,007,9,063 37,673,76, Benefit and loss related payments 3,437,445,575,064,733, Net transfers to Separate Accounts, Segregated Accounts and Protected Cell Accounts Commissions, expenses paid and aggregate write-ins for deductions 3,930,98,07 3,954,55, Dividends paid to policyholders 7,57 8,50 9. Federal and foreign income taxes paid (recovered) net of $ 0 tax on capital gains (losses) (587,4,40) 3,435,33 0. Total (Lines 5 through 9) 36,780,536,899 36,5,740,56. Net cash from operations (Line 4 minus Line 0) 3,6,68,64,5,536,73 Cash from Investments. Proceeds from investments sold, matured or repaid:. Bonds 5,453,68,79 5,540,987,549. Stocks,0,903,995,74,830,559.3 Mortgage loans 5,35 0,43.4 Real estate 330,949,88,9,375,338.5 Other invested assets 350,463,49 499,807,097.6 Net gains or (losses) on cash, cash equivalents and short-term investments 7,54 5,8.7 Miscellaneous proceeds 0,683,934.8 Total investment proceeds (Lines. to.7) 7,55,78,340 9,048,80, Cost of investments acquired (long-term only): 3. Bonds 6,005,95,43 6,807,70, Stocks 777,8,75 75,06, Mortgage loans Real estate 346,08,58 36,909, Other invested assets,47,93,530,50,094, Miscellaneous applications 6,003, Total investments acquired (Lines 3. to 3.6) 8,583,708,09 9,4,336,68 4. Net increase (decrease) in contract loans and premium notes Net cash from investments (Line.8 minus Line 3.7 minus Line 4) (,37,979,688) (373,535,4) Cash from Financing and Miscellaneous Sources 6. Cash provided (applied): 6. Surplus notes, capital notes Capital and paid in surplus, less treasury stock Borrowed funds Net deposits on deposit-type contracts and other insurance liabilities Dividends to stockholders Other cash provided (applied) (,038,704,8) (,065,37,703) 7. Net cash from financing and miscellaneous sources (Lines 6. to 6.4 minus Line 6.5 plus Line 6.6) (,038,704,8) (,065,37,703) RECONCILIATION OF CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS 8. Net change in cash, cash equivalents and short-term investments (Line, plus Lines 5 and 7) 859,998,358 8,863, Cash, cash equivalents and short-term investments: 9. Beginning of year 537,00, ,336,57 9. End of year (Line 8 plus Line 9.),397,98, ,00,339 Note: Supplemental disclosures of cash flow information for non-cash transactions: Stocks acquired in satisfaction of a surplus note 43,64, Stock distribution received from JV, LLC, LP,678, Stocks donated to charitable organization (4,007,464) 5

6 UNDERWRITING AND INVESTMENT EXHIBIT Line of Business PART - PREMIUMS EARNED Net Premiums Written per Column 6, Part B Unearned Premiums Dec. 3 Prior Year - per Col. 3, Last Year s Part 3 Unearned Premiums Dec. 3 Current Year - per Col. 5 Part A 4 Premiums Earned During Year (Cols ). Fire Allied lines,50 0 0,50 3. Farmowners multiple peril Homeowners multiple peril Commercial multiple peril Mortgage guaranty Ocean marine Inland marine Financial guaranty Medical professional liability-occurrence Medical professional liability-claims-made Earthquake Group accident and health 58,444, ,444,44 4. Credit accident and health (group and individual),86,6 33,07,78 35,064,86 0,869,08 5. Other accident and health 667,49,450,45,83,996,594,998,733 54,777,7 6. Workers' compensation Other liability-occurrence,347,43 80,93 968,857,98, Other liability-claims-made Excess workers compensation Products liability-occurrence Products liability-claims-made ,9. Private passenger auto liability,35,083,70 5,5,777,37 5,40,946,686,045,94,5 9.3,9.4 Commercial auto liability 309,605,079 95,75,09 0,08, ,3,683. Auto physical damage 3,557,777,88 3,84,544,955 3,55,59,05 3,90,730,09. Aircraft (all perils) Fidelity Surety Burglary and theft Boiler and machinery Credit 5,443 34,388 38,54 47, International 5,087,765 4,980,889 4,5,84 5,86, Warranty Reinsurance-nonproportional assumed property 40,89,539 0,50,970 6,09,877 45,03,63 3. Reinsurance-nonproportional assumed liability 739,670,64 46,494, ,53,07 789,65, Reinsurance-nonproportional assumed financial lines Aggregate write-ins for other lines of business TOTALS 36,98,535,633 0,469,884,776,0,4,69 36,96,997,780 DETAILS OF WRITE-INS Sum. of remaining write-ins for Line 34 from overflow page Totals (Lines 340 through 3403 plus 3498) (Line 34 above)

7 Line of Business UNDERWRITING AND INVESTMENT EXHIBIT PART A - RECAPITULATION OF ALL PREMIUMS Amount Unearned (Running One Year or Less from Date of Policy) (a) Amount Unearned (Running More Than One Year from Date of Policy) (a) 3 Earned but Unbilled Premium 4 Reserve for Rate Credits and Retrospective Adjustments Based on Experience 5 Total Reserve for Unearned Premiums Cols Fire 0. Allied lines 0 3. Farmowners multiple peril 0 4. Homeowners multiple peril 0 5. Commercial multiple peril 0 6. Mortgage guaranty 0 8. Ocean marine 0 9. Inland marine 0 0. Financial guaranty 0. Medical professional liability-occurrence 0. Medical professional liability-claims-made 0. Earthquake 0 3. Group accident and health 0 4. Credit accident and health (group and individual),80,778 33,54,084 35,064,86 5. Other accident and health 79,66,367,45,337,366,594,998, Workers' compensation 0 7. Other liability-occurrence 968, , Other liability-claims-made Excess workers compensation 0 8. Products liability-occurrence 0 8. Products liability-claims-made 0 9.,9.Private passenger auto liability 5,40,946,686 5,40,946, ,9.4Commercial auto liability 0,08,488 0,08,488. Auto physical damage 3,55,59,05 3,55,59,05. Aircraft (all perils) 0 3. Fidelity 0 4. Surety 0 6. Burglary and theft 0 7. Boiler and machinery 0 8. Credit 38,54 38,54 9. International 4,5,84 4,5, Warranty 0 3. Reinsurance-nonproportional assumed property 6,09,877 6,09, Reinsurance-nonproportional assumed liability 366,53,07 366,53, Reinsurance-nonproportional assumed financial lines Aggregate write-ins for other lines of business TOTALS 9,65,83,79 33,54,084 0,45,337,366,0,4, Accrued retrospective premiums based on experience 37. Earned but unbilled premiums 38. Balance (Sum of Lines 35 through 37),0,4,69 DETAILS OF WRITE-INS Sum. of remaining write-ins for Line 34 from overflow page Totals (Lines 340 through 3403 plus 3498) (Line 34 above) (a) State here basis of computation used in each case. Monthly Pro Rata 7

8 UNDERWRITING AND INVESTMENT EXHIBIT PART B - PREMIUMS WRITTEN Line of Business Reinsurance Assumed Reinsurance Ceded From From To To Affiliates Non-Affiliates Affiliates Non-Affiliates Direct Business (a) Net Premiums Written Cols Fire 0. Allied lines,50,50 3. Farmowners multiple peril 0 4. Homeowners multiple peril 0 5. Commercial multiple peril 0 6. Mortgage guaranty 0 8. Ocean marine 0 9. Inland marine 0 0. Financial guaranty 0. Medical professional liability-occurrence 0. Medical professional liability-claims-made 0. Earthquake 0 3. Group accident and health 58,444,44 58,444,44 4. Credit accident and health (group and individual),86,6,86,6 5. Other accident and health 69,03,509 4,539, ,49, Workers' compensation 0 7. Other liability-occurrence 3,73,55 66,440,99,7,347,43 7. Other liability-claims-made Excess workers compensation 0 8. Products liability-occurrence 0 8. Products liability-claimsmade 0 9.,9. Private passenger auto liability 9,943,333,5,575,75,070,89,394 35,80,74,35,083,70 9.3,9.4 Commercial auto liability 76,96,59 40,374,393,77,776 0,457,49 309,605,079. Auto physical damage,76,548,40 853,980,9 339,95 3,09,456 3,557,777,88. Aircraft (all perils) 0 3. Fidelity 0 4. Surety 0 6. Burglary and theft 0 7. Boiler and machinery 0 8. Credit 45,785 5,657 5, International 5,68,69 9,99,074 5,087, Warranty 0 3. Reinsurancenonproportional assumed property XXX 48,3,75 7,339,636 40,89, Reinsurancenonproportional assumed liability XXX 909,58, 69,857, ,670, Reinsurancenonproportional assumed financial lines XXX Aggregate write-ins for other lines of business TOTALS 33,908,74,033 3,47,87,698 35,037,785 77,97,34 365,900,749 36,98,535,633 DETAILS OF WRITE-INS Sum. of remaining writeins for Line 34 from overflow page Totals (Lines 340 through 3403 plus 3498) (Line 34 above) (a) Does the company s direct premiums written include premiums recorded on an installment basis? Yes [ ] No [ X ] If yes:. The amount of such installment premiums $. Amount at which such installment premiums would have been reported had they been recorded on an annualized basis $ 8

9 9 UNDERWRITING AND INVESTMENT EXHIBIT PART - LOSSES PAID AND INCURRED Losses Paid Less Salvage Net Losses Unpaid Net Losses Losses Incurred Reinsurance Net Payments Current Year Unpaid Current Year Recovered (Cols ) (Part A, Col. 8) Prior Year (Cols ) Percentage of Losses Incurred (Col. 7, Part ) to Premiums Earned (Col. 4, Part ) Reinsurance Line of Business Direct Business Assumed. Fire (,0) (,0) 4,000 5,50 (,370) 0.0. Allied lines (,995) (,995) 45,000 84,335 (4,330) (34.) 3. Farmowners multiple peril Homeowners multiple peril (789) (.) 5. Commercial multiple peril Mortgage guaranty Ocean marine Inland marine Financial guaranty Medical professional liability-occurrence Medical professional liability-claims-made Earthquake Group accident and health 60,439,78 60,439,78 53,463,85 65,33,58 48,579, Credit accident and health (group and individual) 3,80, 3,80, 5,843,499 6,58,39 3,495, Other accident and health 388,938,750,3,67 367,67, ,85,56 47,583, ,38, Workers' compensation Other liability-occurrence 0 649, , Other liability-claims-made Excess workers compensation Products liability-occurrence Products liability-claims-made ,9. Private passenger auto liability,036,739,393,60,3,400 4,80,757,954,59,036 6,596,74,67 6,59,0,866,958,78, ,9.4 Commercial auto liability 84,889,856 3,08,96,74,500 4,94,37 80,9,77 56,993,64 37,39, Auto physical damage 8,833,37,67 680,5,609 6,76,358 9,507,3,93,085,0, 994,775,83 9,597,549, Aircraft (all perils) Fidelity Surety Burglary and theft Boiler and machinery Credit 0,03 9,907 9, , International 4,376,949 9,97,3 3,674,080 94,00,55 98,8,53 9,456, Warranty Reinsurance-nonproportional assumed property XXX 38,903 38,903 33,40,530 33,83, , Reinsurance-nonproportional assumed liability XXX 36,870,64 36,870,64 5,4,048 86,300,369 0,99, Reinsurance-nonproportional assumed financial lines XXX Aggregate write-ins for other lines of business TOTALS,7,54,93,08,40,4 7,555,88 3,468,407,056 9,,090,45 9,04,608,497 3,547,888, DETAILS OF WRITE-INS Sum. of remaining write-ins for Line 34 from overflow page Totals (Lines 340 through ) (Line 34 above)

10 UNDERWRITING AND INVESTMENT EXHIBIT PART A - UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES Reported Losses Incurred But Not Reported Net Losses Excl. Incurred But Not Reported (Cols ) Net Losses Unpaid (Cols ) Net Unpaid Loss Adjustment Expenses Reinsurance Deduct Reinsurance Reinsurance Reinsurance Line of Business Direct Assumed Recoverable Direct Assumed Ceded. Fire 4,000 4,000 4,000. Allied lines 45,000 45,000 45,000 7, Farmowners multiple peril Homeowners multiple peril Commercial multiple peril Mortgage guaranty Ocean marine Inland marine Financial guaranty 0 0. Medical professional liability-occurrence 0 0. Medical professional liability-claims-made 0 0. Earthquake Group accident and health 0 53,463,85 (a) 53,463,85 90,88,56 4. Credit accident and health (group and individual) 5,634,65 5,634,65 08,848 5,843,499,657,94 5. Other accident and health 38,934,38 75,84, ,09,433 5,4,04 7,45,949 (a) 440,85,56 09,50, Workers' compensation Other liability-occurrence 3,78,05 483,980 3,55, , , , Other liability-claims-made Excess workers compensation Products liability-occurrence Products liability-claims-made ,9. Private passenger auto liability 3,576,04,48 975,76,0 9,75,98,03 4,85,867,596,69,345,597 9,596,707 4,085,633 6,596,74,67 6,556,86,88 9.3,9.4 Commercial auto liability 54,48,355 3,35,955 8,466,86 57,997,494 0,070,80,559, ,70 80,9,77 07,057,448. Auto physical damage 7,57,66 59,68,07 7,338, ,546,55 30,557,466 0,097,0,085,0,,59,057,780. Aircraft (all perils) Fidelity Surety Burglary and theft Boiler and machinery Credit ,86 9. International 0,345,8 39,959,5 50,304,964 6,663,65 37,04,90 94,00, Warranty Reinsurance-nonproportional assumed property XXX 46,084 46,084 XXX 33,94,446 33,40,530 6,44 3. Reinsurance-nonproportional assumed liability XXX 30,9,87 30,9,87 XXX,8, 5,4,048 34,00, Reinsurance-nonproportional assumed financial lines XXX 0 XXX Aggregate write-ins for other lines of business TOTALS 4,943,06,835,38,446,6 9,84,0,40 6,40,407,64,5,73, ,78,0 3,768,30 9,,090,45 8,058,585,484 DETAILS OF WRITE-INS Sum. of remaining write-ins for Line 34 from overflow page Totals (Lines 340 through ) (Line 34 above) (a) Including $ for present value of life indemnity claims.

11 . Claim adjustment services: UNDERWRITING AND INVESTMENT EXHIBIT PART 3 - EXPENSES Loss Adjustment Expenses Other Underwriting Expenses 3 Investment Expenses. Direct,80,707,0 0 0,80,707,0. Reinsurance assumed 70,768, ,768,390.3 Reinsurance ceded 3,457, ,457,73.4 Net claim adjustment services ( ),969,07, ,969,07,859. Commission and brokerage:. Direct, excluding contingent 85,558,606 3,87,6,56 0 3,37,774,76. Reinsurance assumed, excluding contingent 3,767,80 77,94, ,96,946.3 Reinsurance ceded, excluding contingent 0 46,970, ,970,086.4 Contingent-direct Contingent-reinsurance assumed Contingent-reinsurance ceded Policy and membership fees Net commission and brokerage ( ) 99,36,408 3,47,440,3 0 3,66,766,6 3. Allowances to manager and agents,699,6 805,465,548 6,96 807,8, Advertising 0 485,78, ,78, Boards, bureaus and associations 87,386,886 33,43,48 0 0,630,34 6. Surveys and underwriting reports,679 8,884,90 0 8,886,58 7. Audit of assureds' records Salary and related items: 8. Salaries,9,77,79,59,458,966 3,57,0 3,50,488, Payroll taxes 63,98,50 90,353,07,553,36 55,888,95 9. Employee relations and welfare 65,048,60 303,38,59 3,074,3 94,44,47 0. Insurance 3,435,47,79,405 3,569 5,4,0. Directors' fees,548,60,068,764 7,0,644,485. Travel and travel items 9,895,63 68,3,83 79,78 60,999,74 3. Rent and rent items 49,36,09 74,40,808 3,58,377 46,858, Equipment,038,93 8,30,874 6,756,9 47,097, Cost or depreciation of EDP equipment and software 4,576,34 67,57,455,99,07 87,077, Printing and stationery 4,538,5 6,7,354 58,35 4,788,6 7. Postage, telephone and telegraph, exchange and express 05,77, ,49,037 8,004,65 459,774,07 8. Legal and auditing 4,549,96 30,043,00 5,409,83 60,00,0 9. Totals (Lines 3 to 8) 3,84,888,485 4,600,888,485 65,94,730 8,508,79, Taxes, licenses and fees: 0. State and local insurance taxes deducting guaranty association credits of $ 90, ,89, ,89, Insurance department licenses and fees 0 8,350, ,350, Gross guaranty association assessments 0,480,547 0,480, All other (excluding federal and foreign income and real estate) 0 65,333, ,333, Total taxes, licenses and fees ( ) 0 86,984, ,984,39. Real estate expenses 0 0 0,356,78 0,356,78. Real estate taxes 0 0 9,687,795 9,687, Reimbursements by uninsured plans Aggregate write-ins for miscellaneous expenses 7,56, ,5, 56,4, 695,89,93 5. Total expenses incurred 6,8,749,343 9,0,563,948 43,409,465 (a) 5,77,7, Less unpaid expenses-current year 8,058,585,484 5,37,0,49 8,69,863 3,457,36, Add unpaid expenses-prior year 7,39,60,008 5,44,500,746 79,885,4,76,645, Amounts receivable relating to uninsured plans, prior year Amounts receivable relating to uninsured plans, current year TOTAL EXPENSES PAID (Lines ) 5,66,43,867 9,9,043,75 4,664,76 4,987,3,869 DETAILS OF WRITE-INS 40. Sundry and other expenses 70,836,66 405,4,64 58,64, ,7, Change in adjusting and other unpaid 3,04, ,04, Income from special services (,44,95) (38,99,53) (,9,85) (6,636,333) 498. Summary of remaining write-ins for Line 4 from overflow page Totals (Lines 40 through 403 plus 498) (Line 4 above) 7,56, ,5, 56,4, 695,89,93 (a) Includes management fees of $ to affiliates and $ to non-affiliates. 4 Total

12 EXHIBIT OF NET INVESTMENT INCOME Collected During Year Earned During Year. U.S. Government bonds (a) 36,764,900 33,94,0. Bonds exempt from U.S. tax (a),03,33,790,039,96,736. Other bonds (unaffiliated) (a) 470,335, ,48,5.3 Bonds of affiliates (a) 0 0. Preferred stocks (unaffiliated) (b) 0 0. Preferred stocks of affiliates (b) 0 0. Common stocks (unaffiliated),3,5,78,37,605,534. Common stocks of affiliates 480, , Mortgage loans (c) 99,370 99, Real estate (d) 98,787,55 98,787,55 5. Contract loans Cash, cash equivalents and short-term investments (e) 3,88,05 3,87, Derivative instruments (f) Other invested assets 37,4,399 4,06,36 9. Aggregate write-ins for investment income,06,86,066, Total gross investment income 3,30,488,5 3,34,505,988. Investment expenses (g) 43,409,465. Investment taxes, licenses and fees, excluding federal income taxes (g) 0 3. Interest expense (h) 0 4. Depreciation on real estate and other invested assets (i) 30,794, Aggregate write-ins for deductions from investment income 0 6. Total deductions (Lines through 5) 74,03, Net investment income (Line 0 minus Line 6) 3,040,30,087 DETAILS OF WRITE-INS 090. Miscellaneous,06,86,066, Summary of remaining write-ins for Line 9 from overflow page Totals (Lines 090 through 0903 plus 0998) (Line 9 above),06,86,066, Summary of remaining write-ins for Line 5 from overflow page Totals (Lines 50 through 503 plus 598) (Line 5 above) 0 (a) Includes $,,305 accrual of discount less $ 76,6,95 amortization of premium and less $ 3,99,064 paid for accrued interest on purchases. (b) Includes $ 0 accrual of discount less $ 0 amortization of premium and less $ 0 paid for accrued dividends on purchases. (c) Includes $ 0 accrual of discount less $ 0 amortization of premium and less $ 0 paid for accrued interest on purchases. (d) Includes $ 93,690,578 for company s occupancy of its own buildings; and excludes $ 9,706 interest on encumbrances. (e) Includes $,493,654 accrual of discount less $ 0 amortization of premium and less $ 0 paid for accrued interest on purchases. (f) Includes $ 0 accrual of discount less $ 0 amortization of premium. (g) Includes $ 0 investment expenses and $ 0 investment taxes, licenses and fees, excluding federal income taxes, attributable to segregated and Separate Accounts. (h) Includes $ 0 interest on surplus notes and $ 0 interest on capital notes. (i) Includes $ 30,794,435 depreciation on real estate and $ 0 depreciation on other invested assets. EXHIBIT OF CAPITAL GAINS (LOSSES) Realized Gain (Loss) On Sales or Maturity Other Realized Adjustments 3 Total Realized Capital Gain (Loss) (Columns + ) 4 Change in Unrealized Capital Gain (Loss) 5 Change in Unrealized Foreign Exchange Capital Gain (Loss). U.S. Government bonds Bonds exempt from U.S. tax 6,555,46 0 6,555, Other bonds (unaffiliated) 4,95, ,95,577,33, Bonds of affiliates Preferred stocks (unaffiliated) 666, ,00 500, Preferred stocks of affiliates Common stocks (unaffiliated) 449,0,964 (5,689,493) 443,5,47 3,379,346,99 0. Common stocks of affiliates ,58,08,455 (,30,76) 3. Mortgage loans 0 (340,000) (340,000) Real estate (6,95,476) (,59,053) (8,74,59) (6,073) 0 5. Contract loans Cash, cash equivalents and short-term investments 7,54 0 7, Derivative instruments Other invested assets (,53,393) (35,000) (,388,393) 7,937,094 (30,000,78) 9. Aggregate write-ins for capital gains (losses) 4,44 0 4, Total capital gains (losses) 4,977,605 (8,693,545) 44,84,059 6,6,6,906 (3,3,54) DETAILS OF WRITE-INS 090. Realized gain on intercompany transactions 4,44 0 4, Summary of remaining write-ins for Line 9 from overflow page Totals (Lines 090 through 0903 plus 0998) (Line 9 above) 4,44 0 4,44 0 0

13 EXHIBIT OF NONADMITTED ASSETS Current Year Total Nonadmitted Assets Prior Year Total Nonadmitted Assets 3 Change in Total Nonadmitted Assets (Col. - Col. ). Bonds (Schedule D) Stocks (Schedule D):. Preferred stocks Common stocks Mortgage loans on real estate (Schedule B): 3. First liens Other than first liens Real estate (Schedule A): 4. Properties occupied by the company 6,986,574 6,986, Properties held for the production of income Properties held for sale 0,705,87,705,87 5. Cash (Schedule E-Part ), cash equivalents (Schedule E-Part ) and short-term investments (Schedule DA) Contract loans Derivatives (Schedule DB) Other invested assets (Schedule BA) 05,, ,834,077 98,73, Receivables for securities Securities lending reinvested collateral assets (Schedule DL) Aggregate write-ins for invested assets Subtotals, cash and invested assets (Lines to ),07,6 33,56,54 0,48,90 3. Title plants (for Title insurers only) Investment income due and accrued Premiums and considerations: 5. Uncollected premiums and agents balances in the course of collection 59,8 57,65 98, Deferred premiums, agents balances and installments booked but deferred and not yet due 3,790 55,35 4, Accrued retrospective premiums Reinsurance: 6. Amounts recoverable from reinsurers Funds held by or deposited with reinsured companies Other amounts receivable under reinsurance contracts Amounts receivable relating to uninsured plans Current federal and foreign income tax recoverable and interest thereon Net deferred tax asset Guaranty funds receivable or on deposit Electronic data processing equipment and software 97,036,8 783,78,980 (87,53,30). Furniture and equipment, including health care delivery assets 9,,63 83,7,836 (8,389,36). Net adjustment in assets and liabilities due to foreign exchange rates Receivables from parent, subsidiaries and affiliates Health care and other amounts receivable Aggregate write-ins for other-than-invested assets 900,08,48,73,078,889,8,996,47 6. Total assets excluding Separate Accounts, Segregated Accounts and Protected Cell Accounts (Lines to 5),75,40,40 4,094,3,709,88,9, From Separate Accounts, Segregated Accounts and Protected Cell Accounts Total (Lines 6 and 7),75,40,40 4,094,3,709,88,9,308 DETAILS OF WRITE-INS Summary of remaining write-ins for Line from overflow page Totals (Lines 0 through 03 plus 98) (Line above) Other assets 705,990,4 778,69,630 7,639, Company owned vehicles 6,36,56 66,94,7 40,058, Pension asset 67,955,733,768,54,548,700,98, Summary of remaining write-ins for Line 5 from overflow page Totals (Lines 50 through 503 plus 598) (Line 5 above) 900,08,48,73,078,889,8,996,47 3

14 . Summary of Significant Accounting Policies A. Accounting Practices NOTES TO FINANCIAL STATEMENTS The financial statements of State Farm Mutual Automobile Insurance Company (the Company) are presented on the basis of accounting practices prescribed or permitted by the Illinois Department of Insurance. The Illinois Department of Insurance recognizes only statutory accounting practices prescribed or permitted by the state of Illinois for determining and reporting the financial condition and results of operations of an insurance company, for determining its solvency under the Illinois insurance law. The National Association of Insurance Commissioners (NAIC) Accounting Practices and Procedures Manual (NAIC SAP) has been adopted as a component of prescribed practices by the state of Illinois. During 04 and 03, the Company did not have any permitted practices. State of Domicile /3/04 /3/03 NET INCOME. Company state basis IL $,045,78,70 $,836,493,966. State Prescribed Practices that increase/(decrease) NAIC SAP IL State Permitted Practices that increase/(decrease) NAIC SAP IL NAIC SAP IL $,045,78,70 $,836,493,966 SURPLUS 5. Company state basis IL $79,876,875,766 $75,678,874, State Prescribed Practices that increase/(decrease) NAIC SAP IL State Permitted Practices that increase/(decrease) NAIC SAP IL NAIC SAP IL $79,876,875,766 $75,678,874,653 B. Use of Estimates in the Preparation of the Financial Statements The preparation of financial statements in conformity with Statutory Accounting Principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. It also requires disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. C. Accounting Policy Unearned premiums represent the pro rata portion of premiums written which are applicable to the unexpired terms of policies in force, net of deductions for reinsurance. Accordingly, premiums written are taken into income when earned. Auto policies are generally issued for terms of six months. Accident and health policies are generally issued for terms of twelve months. Expenses incurred in connection with acquiring new insurance business, including such acquisition costs as sales commissions, are charged to operations as incurred. Expenses incurred are reduced for ceding allowances received or receivable. Investment income is recorded when earned. Realized gains and losses on sale of investments are determined by the specific identification method. Net realized gains or losses are shown net of federal income tax. Unrealized capital gains and losses are recorded to unassigned surplus net of deferred income tax. For any decline in the fair value of a bond, common stock, preferred stock or mortgage that is considered to be otherthan-temporary, a valuation adjustment is made and recognized as a realized capital loss. In addition, the Company uses the following accounting policies: () Short-term investments are stated at amortized cost or net asset value. () Investment grade bonds not backed by other loans are stated at amortized cost using the scientific method. Below investment grade bonds not backed by other loans are stated at the lower of amortized cost using the scientific method or fair value. (3) Common stocks are stated at fair value except that investments in the stocks of subsidiaries and affiliates are stated as noted in Note # C (7). (4) Preferred stocks are stated at fair value except that investment in the stock of subsidiaries and affiliates are stated as noted in Note # C (7). (5) Mortgage loans on real estate are stated at either (i) the outstanding principal balance for loans originated by the Company or (ii) amortized cost for loans purchased by the Company. 4

15 NOTES TO FINANCIAL STATEMENTS (6) Loan-backed securities are stated at amortized cost using the scientific method including anticipated prepayments at the date of purchase. Changes in estimated cash flows from the original purchase assumptions are accounted for using the retrospective adjustment method. (7) The Company uses the underlying audited statutory equity method for valuing its interest in U.S. insurance subsidiaries. For its foreign insurance subsidiary, the underlying audited U.S. GAAP equity method adjusted to a statutory basis of accounting is used. For non-insurance subsidiaries whose financial statements are audited by a certified public accountant, the audited GAAP equity method is the basis of valuation. Non-insurance subsidiaries without audited financial statements are nonadmitted and show a book/adjusted carrying value of zero. (8) The Company has ownership interest in joint ventures, partnerships, and limited liability companies. The Company carries these interests based on the underlying audited GAAP equity of the investee. Investments without audited GAAP statements are nonadmitted and show a book/adjusted carrying value of zero. (9) The Company does not hold or issue any derivative financial instruments. (0)The Company utilizes anticipated investment income as a factor in the premium deficiency calculation. ()Unpaid losses and loss adjustment expenses include amounts determined on the basis of claim evaluations and other estimates for reported losses and include an estimate of losses incurred but not reported. The method of making such estimates and establishing the reserve is continually reviewed, and any resulting adjustments are reflected currently. Accordingly, losses and loss adjustment expenses are charged to income as incurred. Losses and loss adjustment expense liabilities are not discounted and are shown net of amounts ceded under reinsurance contracts. Salvage and subrogation recoveries are recorded when received and excluded from claim evaluations and the resulting estimates for reported and unreported losses. While management believes the amount of such liabilities is adequate, the ultimate liability may be in excess of or less than the amount provided. ()The Company has not modified its capitalization policy from the prior period. (3)Not applicable. (4)Company owned and occupied real estate and real estate held for production of income are valued at depreciated cost, less encumbrances. The Company uses straight-line depreciation for these real estate holdings. Investments in real estate that the Company held for sale are not depreciated while they are held for sale. Real estate investments held for sale are valued at the lower of book value or fair value less encumbrances and estimated costs to sell. Independent appraisals are obtained every five years on investments held for production of income or held for sale; if the fair value is less than book value and the amount is deemed non-recoverable, an impairment loss is recognized. (5)Electronic data processing equipment and non-operating software is capitalized in accordance with the Company s capitalization policy. Electronic data processing equipment is valued at depreciated cost using three year, straight-line depreciation with no salvage value. Non-operating software is valued at amortized cost using five year, straight-line amortization and is recorded as a nonadmitted asset. Non-operating software is impaired and recognized as a realized loss when the software is determined to be no longer suitable for its intended purpose.. Accounting Changes and Corrections of Errors A. Describe material changes in accounting principles and/or correction of errors. x x Effective January, 03, SSAPs No. 0 and 9 established new accounting guidance for pensions and other postretirement benefits and superseded SSAPs No. 89 and 4. Under SSAPs No. 0 and 9, non-vested participants are no longer excluded from the benefit obligations. These SSAPs require any underfunded benefit plan amounts, as determined when the benefit obligation exceeds the fair value of plan assets, be recognized as a liability under SSAP No. 5R. As a result of implementation, the Company reported a change in accounting principle which decreased unassigned surplus $,578,5,483, net of $849,88,6 admitted deferred income tax, as of January, 03. Refer to Note for additional disclosures. During 03, the Company determined $48.6 million of 0 software development costs were not capitalized in accordance with SSAP No. 6R and the Company s capitalization policy. At December 3, 0, total assets and total nonadmitted assets were understated by $48.6 million with no impact to net admitted assets, total liabilities or surplus as regards policyholders. As it relates to the Statement of Income, net income was understated by $3. million with an offsetting amount in the surplus reconciliation section, primarily related to the change in nonadmitted assets. At December 3, 03, total assets, total liabilities, net income and surplus reflect appropriate balances. 3. Business Combinations and Goodwill A. Statutory Purchase Method Not applicable. 4.