Comparison of State Farm Investment and Liberty Mutual Investment

Comparison of Company Profile and Financial Highlights

	State Farm	Liberty Mutual
Organizational form	Mutual company	Stock company
Business Focus	Personal line focus	Commercial line focus
Size (asset value of 2012)	115 billion	40 billion
Return on Equity (2005-2012)	2.71%	7.05%
Combined ratio (2005-2012)	104%	109%

Read the following charts provided:

1. State Farm Mutual Auto Insurance Co. Investment Snapshot
2. State Farm Mutual Auto Insurance Co. Investment Analysis
3. State Farm Mutual Auto Insurance Co. Business Overview
4. Liberty Mutual Insurance Co. Investment Snapshot
5. Liberty Mutual Auto Insurance Co. Investment Analysis
6. Liberty Mutual Insurance Co. Business Overview

Answer the following questions

1. Find average percentages of invested assets in bond and common stock for State Farm and Liberty Mutual.

Investment Composition %	State Farm	Liberty Mutual
Bond (2005-2012 average)
Common Stock (2005-2012 average)

2. Find the net yield on invested assets for State Farm and Liberty Mutual

Net yield on invested assets %	State Farm	Liberty Mutual
2005-2012 Average

3. Compare the bond maturity distribution between State Farm and Liberty Mutual. Which company has a shorter average bond maturity?

4. Briefly describe how State Farm and Liberty Mutual adjust their investment portfolio after the financial crisis in 2007.

5. From the business overview charts of the two companies, which company is more involved in long-tail insurance lines?

6. Comment on the investment strategies and performance of the two companies from the following aspects

Investment	State Farm	Liberty Mutual
Safety (Risk)
Liquidity
Profitability
Stability of the investment performance

7. Try to explain the reasons for the different investment strategies of State Farm and Liberty Mutual.