USAA
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| United Services Automobile Association | |
|---|---|
 |
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| Type | Reciprocal |
| Founded | 1922 |
| Headquarters | San Antonio, Texas, USA |
| Key people | Joe Robles, CEO[1] Greg Schwartz, CIO Roger Chacko, CMO Wayne Peacock, COO Kristi Matus, CFO Wendi Strong, CCO Steve Bennett, Legal Liz Conklin, HR Chris Claus, Pres Stuart Parker, Pres David Bohne, Pres |
| Industry | Financial Services |
| Products | Insurance, Banking, Investing |
| Revenue | ▲$13.416 billion USD (2006) [2] |
| Employees | ~21,800 (December 31, 2006)[2] |
| Website | USAA.COM |
United Services Automobile Association (USAA) is a Fortune 200 financial services company focused on providing banking, investing, and insurance to people and families that serve, or served, in the military of the United States and other selected federal agencies.
USAA was founded in 1922 by a group of U.S. Army officers to self-insure each other when they were unable to secure auto insurance due to the perception that they were a high-risk group.[3] USAA has since expanded to serve officers, NCOs, enlisted, and their families with a full range of property & casualty insurance, banking, life insurance, investment and financial planning products and services.
USAA does not sell or provide service for its insurance and other products through agents. Instead the company was one of the pioneers of direct marketing and most of its business is conducted over the Internet or telephone. A toll-free number was launched in 1978, and Internet support launched in 1999 via USAA.COM.
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[edit] History
The organization was originally called the United States Army Automobile Association. In 1924, the name was changed to United Services Automobile Association, when members of other military services became eligible for membership. The company opened offices in Frankfurt, Germany and London, England, early in its history.
USAA is headquartered in San Antonio, Texas, occupying 286 acres (a former horse farm) with one of the largest single-occupancy buildings in the United States, rivaling the Sears Tower and The Pentagon.[4]
The organization started offering homeowner's and life insurance in the 1960s, and brokerage and banking services in the 1980s.
In 1996, eligiblity was extended to enlisted personnel.[5]
[edit] Lines of business
[edit] Property, casualty, and life insurance
USAA offers a wide range of personal property and casualty (P&C) insurance including automobile insurance, homeowner insurance, renters insurance, and valuable personal property insurance.
In addition to P&C insurance, USAA provides whole life insurance, term life insurance, and annuities. USAA's life insurance policies, while not completely unique in the industry, are different than most offerings since they do not include a war-exclusion clause[6] (also known as a "war clause").
[edit] Banking
Banking services and credit cards are provided by the USAA Federal Savings Bank. The bank was established in the early 1980s. According to the FDIC, as of June 2006, the bank held $20 billion in deposits with more than 2.5 million accounts.
The bank has only one physical location in San Antonio, Texas. Services can be accessed in person, by mail, by phone, or through the internet. The bank provides the ability to deposit checks from home (remote deposit),[7] ATM fee rebates, free standard checks for the life of the account, free online bill pay, and bank-by-mail services. USAA was one of the few major banks to begin offering American Express cards in 2006 in addition to their traditional offering of Mastercard.[8]
[edit] Investing and financial planning
USAA provides a limited discount brokerage service and a family of no-load mutual funds. Mutual funds established by other companies can also be purchased and held in USAA investing accounts. USAA also offers limited free Financial Planning advice, as well as a more thorough flat-fee or hourly-rate financial planning service.
[edit] Other services
USAA offers a mail-order catalog service which, among other things, is known for diamonds and jewelry. It has also made arrangements with other companies to provide discounts to USAA members on rental cars (Avis, Hertz, Budget), flower delivery (TeleFlora), cruises, ADT home security , and FedEx services. For its own investment purposes, USAA operates a real estate company [2] which has holdings including major office buildings, industrial buildings, hotels, and other properties through out the country.
[edit] Target market
USAA's mission statement indicates its focus is to serve its niche market, which consists of members of the U.S. military and their families. To that end, they have always marketed directly to members of the U.S. military. USAA membership is offered to active-duty officers & enlisted personnel, National Guard and Reserve officers & enlisted personnel, and officer candidates. In 2008, membership eligibility was also extended to former military personnel under the age of 35.[9]. Children of USAA members are also eligible to purchase USAA's P&C insurance products, and former members of USAA are allowed to resume membership at any time (without an age limit).
Eligibility can be determined using its website [10]; however, the site does not contain a comprehensive statement of eligibility. USAA has, in the past, published a list [11] of other eligible persons including special agents of the FBI and Secret Service, agents of the various military investigative services (NCIS, OSI, and CID), U.S. Foreign Service Officers, and officers from a variety of other smaller agencies. Recently, USAA has been sharpening its focus on members of the military. So, people working for certain non-military agencies that were accommodated in the past may find that they are no longer eligible. [12]
Historically, only U.S. military officers (among certain other federally sworn officers) were eligible to join USAA, with descendants of USAA members able to purchase insurance from USAA-CIC. It did not matter if one was an active duty or retired officer, one could join at any time. In 1973, membership was opened to members of the National Guard and Reserves, and in the late 1990s, eligibility was expanded to enlisted members of the armed services. As the number of persons who have served on active duty in an enlisted status in the U.S. Armed Forces is quite large, USAA chose to limit the establishment of eligibility to those who are currently on active duty or who have recently separated. The same time limit on establishment of eligibility was then applied to military officers. Former members of the military may join USAA until they reach the age of 35.
[edit] Legal structure
One of the characteristics that allows USAA to operate differently than almost every other Fortune 500 company is that it is not a corporation. The parent company, United Services Automobile Association is an inter-insurance exchange, the establishment of which is provided for under the Texas Insurance Code [3]. This insurance exchange is made up of current and former military officers and NCOs who have taken out P&C policies with USAA; thus they simultaneously are insured by each other and, as a group, own USAA's assets. Theoretically, this implies that each member could be held completely responsible for all the losses of all the other members. However, the insurance code (Sec 942.142) stipulates that should an entity such as USAA accrue a substantial amount of assets, member liability is limited only to the premiums they have paid to USAA. In other words, if an enormous disaster were to result in claims that would wipe out all the assets of USAA, individual members could not legally be called upon to pay for any amount USAA is unable to pay out in claims.
Other insurance services are provided by a variety of wholly-owned subsidiaries. Adult children of USAA members and U.S. military enlisted personnel make up a group known at USAA as "associate members" insured through a subsidiary called USAA-Casualty Insurance Company (USAA-CIC). USAA-CIC is not an insurance exchange but rather a Delaware Insurance Corporation. This is a subtle nuance but is important concerning the return of profits - described below. Non-standard-risk drivers are insured by subsidiaries like USAA's County Mutual Insurance Company or USAA-General Indemnity Company. USAA also insures members in Europe through its subsidiary, USAA Limited. Providing international P&C coverage is uncommon for U.S. based insurance companies, but is provided because so many military families are stationed out-of-country.
[edit] Returning profits to the insured
Since there are no shareholders, profits are retained for financial strength or returned to the members. Returns are accomplished through a Subscriber's Savings Account, or SSA. Each year a portion of USAA's profit is retained as "unassigned," the rest is allocated to each member's SSA using a formula based on the amount of premium the member paid that year as well as the member's SSA balance. The allocation of capital to a member's SSA account occurs early in the calendar year. Late in the calendar year a portion of the member's SSA is distributed to the member via checks or electronic funds transfer. In 2006 the distribution amounted to 4% of the member's SSA balance. Members with more than 40 years of membership or more also receive a special yearly "senior bonus" distribution which amounts to 10% of the member's SSA balance.
The entirety of the SSA belongs to the member, but is only completely distributed if the member no longer has a USAA P&C policy.
Associate members sometimes receive policy dividends instead of distributions of profits, since they are not members of the insurance exchange.
[edit] Miscellaneous information
The stated mission of USAA is to facilitate the financial security of its members, associates and their families through provision of a full range of highly competitive financial products and services. In so doing, USAA seeks to be the provider of choice for the military community.
USAA has offices at its headquarters in San Antonio, TX, a second major office in Phoenix, AZ, as well as other smaller operations in Sacramento, CA, Colorado Springs, CO, Tampa, FL, Norfolk, VA, Highland Falls, NY, London, England and Frankfurt, Germany.
USAA experienced much of its growth under former CEO, retired Air Force Brigadier General Robert F. McDermott. The USAA building was constructed under his tenure and McDermott was also the driving force behind USAA's shift from service-by-mail to service-by-phone. He was succeeded as CEO by retired Air Force General Robert T. Herres. It was under the leadership of Herres that USAA expanded its services to enlisted members of the military and ventured into Internet based financial services.
USAA has more than 6 million members including those doing business with any of its subsidiaries who are eligible to purchase P&C insurance, whether or not they are actually holding a P&C policy. As of 2005 USAA had more than $96 billion in assets under management. Its revenues placed it as number 176 on the 2008 Fortune 500 list.[13]
[edit] Financial ratings
Since it is not a publicly traded corporation, USAA is not bound by the same corporate governance rules as publicly traded companies. Even so, USAA is subject to insurance regulation and examination by all 50 states as well as federal entities like the SEC, FTC, and FDIC. In addition, its records are audited by Ernst & Young as well as the major financial rating agencies.
- A. M. Best Company: A++ (Superior)
- Moody's Investor Service: AAA (Exceptional)
- Standard and Poor's: AAA (Extremely Strong)
[edit] Service ratings
USAA consistently receives the highest customer service ratings available to all financial services companies, not just those in its niche. For its consistently highly-rated customer service, in 2002 JD Power awarded USAA with its Chairman's Award[14], which at that time had only been awarded to 10 companies, none of them in the financial services arena. Since then, USAA has remained at the top of the JD Power ratings for auto insurance[15], home insurance [15], and has also received high JD Power ratings for home equity loans [15] and retail banking services.[15]
In their March 5, 2007 issue, BusinessWeek[16] ranked USAA first in their[17] of "Customer Service Champs", a list of 25 national businesses which included the likes of Four Seasons Hotels, Lexus and Starbucks. USAA repeated as first on BusinessWeek's list in their March 3, 2008 issue.[18]
A 2007 Forrester Research report referenced in the San Antonio Express-News on June 27, 2007,[19] identified USAA as the leader in customer advocacy based on a customer survey. Eighty-eight percent of the USAA customers surveyed said "My financial provider does what's best for me, not just its own bottom line." No other company evaluated scored higher than 78%.
[edit] Employment
USAA employs more than 21,500 personnel at its offices throughout the country, and is frequently cited as one of America's best employers.[4] It has also been recognized specifically as one of America's best employers for former members of the military[5].
USAA was ranked 17th on the Computerworld 100 Best Places to Work for IT Professionals in 2006, and 39th in 2007. [6] In the 2007 Computerworld rating only one company with more IT employees was ranked higher than USAA and only one Texas company (a very small company with only 100 IT employees) was rated higher.
USAA offers a 401(k) with 8% matching, a full-pay-period Christmas bonus, an annual performance bonus of 10% to 20% for all employees (higher for management), an annual 401k retirement performance bonus, tuition reimbursement, onsite fitness and day care centers, onsite cafeterias and food courts, onsite Starbucks, a company store, an online discount employee shopping mall, onsite pharmacy, free covered parking, subsidized van pools, patent bonuses, as well as USAA membership.
[edit] Competition
In focusing its efforts to serve only its niche, USAA is unique in that it is the only Fortune 500 financial services company that focuses primarily on serving members of the U.S. Military and their families.
[edit] Insurance
A major automobile insurance competitor is GEICO, while life insurance competitors include the government's own Servicemembers' Group Life Insurance, AAFMAA (Army and Air Force Mutual Aid Association), and USBA.
[edit] Banking
Major banking competitors include Bank of America-Military Bank, Pentagon Federal Credit Union, and the Navy Federal Credit Union.
[edit] References
- ^ Robert G. Davis Retires As Chairman and CEO of USAA
- ^ a b "USAA 2006 Report to Members." Retrieved on April 23, 2007.
- ^ Spechler, Jay W. (1996). Reasonable Accommodation: Profitable Compliance With the Americans With Disabilities Act., p. 229.
- ^ Chordas, Lori (November 1, 2002), “The ultimate niche: USAA's commitment to serving only people connected to the military, and its unusual structure and sales strategy, set it apart from the rest of the insurance industry.”, Goliath Business News, <http://goliath.ecnext.com/coms2/summary_0199-2199998_ITM>. Retrieved on 8 February 2008
- ^ USAA fact sheet retrieved April 16, 2008
- ^ Answers.com
- ^ USAA,com secure site
- ^ American Express.com
- ^ Eligibility Page
- ^ usaa.com
- ^ Eligibility
- ^ Afsa.org
- ^ USAA 2008 Fortune 500 entry
- ^ JD Power
- ^ a b c d [1]
- ^ Business Week
- ^ list Business Week
- ^ Business Week
- ^ San Antonio Express-News
[edit] External links
- USAA home page
- USAA Real Estate Company
- USAA Educational Foundation, a nonprofit organization providing consumer information
- Company Overview
- Texas Insurance Code Subsection on Interinsurance Exchanges
- USAA Employee Surveys
- USAA history
