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United Services Automobile Association
Type Reciprocal
Founded 1922
Headquarters San Antonio, Texas, USA
Key people Robert Davis, CEO
Joe Robles, CFO
Greg Schwartz, CIO
Dawn Johnson, CMO
Wayne Peacock, COO
Wendi Strong, CCO
Steve Bennett, Legal
Dave Garrison, CPO
Liz Conklin, HR
Chris Claus, Pres
Stuart Parker, Pres
Kristi Matus, Pres
Mike Luby, Pres
Industry Financial Services
Products Insurance, Banking, Investing
Revenue $11.980 billion USD (2005)
Employees ~21,900 (2005)
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. USAA has since expanded to serve officers, NCOs, enlisted, and their families a full range of property & casualty insurance, banking, life insurance, and investment products and services. USAA was one of the pioneers of direct marketing and most of its business is conducted over the Internet or telephone.


Lines of business

Property, casualty, and life insurance

USAA offers a full range of personal property and casualty 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.

Unlike most of its competitors, USAA does not sell or provide service for its insurance and other products through agents. Instead, policies are sold and serviced on-line via the Internet or directly by USAA employees over the telephone. These employees are licensed representatives that are paid a salary rather than a commission.


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 over 2.5 million accounts. The bank has one location in San Antonio, TX. Since relatively few members live in San Antonio, the bank provides remote deposit from home using a common computer scanner via the Internet, 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 offerings of Mastercards and Visas [1].

For many years, while USAA did not market to anyone outside its niche, they would open bank accounts for qualified customers requesting USAA's services. In July 2006 USAA chose to further focus on its target market and will only extend new banking services to people eligible to purchase P&C insurance from USAA. They continue to make an exception for residents of Bexar County (San Antonio, TX) and those people that already have a banking relationship with USAA.

Investing and financial planning

USAA provides a 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.

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, home security, home warranties 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 throughout the country.

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. The criteria for eligibility includes U.S. military service, purchase of at least one P&C product, and a short grace period after separation.

Eligibility can be determined using; however, the site does not contain a comprehensive statement of eligibility. USAA has, in the past, published a list 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 agencies that were accommodated in the past may find that they are no longer eligible [3].

Historically, only U.S. military officers (among 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. However, in the late 1990s, USAA chose to expand eligibility 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. That time limit or grace period extends through the remainder of the calendar year of separation, plus the whole next year.


USAA was founded as the United States Army Automobile Association in 1922. Within a year, it was almost bankrupt, through a series of events including a new leader and expansion to serve all military officers as the United Services Automobile Association, it regained solid footing.

It has always been headquartered in San Antonio, TX. One of its earliest buildings is located on Grayson Street across from the Quadrangle of Fort Sam Houston. While the building is in disrepair, it still bears the shield of "USAAA". After some time, it moved to Hildebrand & Broadway near Brackenridge Park, in what has become one of the AT&T buildings. In the early 1980s, it moved once again to its current headquarters in Northwest San Antonio to a campus of 286 acres on what was a horse farm.

Key Dates: 1922: USAA is established in San Antonio to provide auto insurance for Army officers. 1941: Membership in the association exceeds 22,000. 1948: A New York office is opened. 1956: A new headquarters is completed in San Antonio. 1973: Membership opens to National Guard and Reserves. 1983: USAA Federal Savings Bank and USAA Brokerage Services are established. 1997: Membership extended to enlisted personnel. 1999: A Web site is launched.

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 [4]. 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.

Returning profits to the insureds

Since there are no shareholders, profits are retained for financial strength or returned to the members. Returns are accomplished through an account each member has called the Subscriber 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 and is released in a variety of ways including checks and electronic funds transfer. In 2006 the distribution amounted to 4% of the member's SSA balance. Members with over 40 years of membership or more also receive a special yearly "senior bonus" distribution which amounts to 10% of the member's SSA balance.

While the entirety of the SSA belongs to the member, it is only released in full 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.

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 U.S. 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 owes a great deal of its success and expansive growth to former CEO, retired Air Force Brigadier General Robert F. McDermott. The USAA building, said to be the largest commercial office building in the country and second only in overall square footage to the Pentagon, was constructed under his tenure as CEO. General 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 General Herres that USAA expanded its services to enlisted members of the military and ventured into Internet based financial services.

USAA has over 5 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 over $96 billion in assets under management. Its revenues placed it as number 189 on the 2006 Fortune 500 list.

Financial ratings

Since it is not a 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.

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, 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[5], home insurance[6], and mortgages[7], and has also received high JD Power ratings for home equity loans [8] and retail banking services [9].

In their March 5, 2007 issue, BusinessWeek [10] ranked USAA first in their list of "Customer Service Champs", a list of 25 national businesses which included the likes of Four Seasons Hotels, Lexus and Starbucks.


USAA employs over 21,000 personnel at its offices throughout the country, and is frequently cited as one of America's best employers.[11] It has also been recognized specifically as one of America's best employers for former members of the military[12]. It is one of a dwindling number of companies that continues to offer a defined-benefit pension plan as well as a 401(k) with matching, tuition reimbursement, onsite fitness & day care centers, as well as USAA membership. USAA employees from the entry-level service representative to the executive level routinely receive annual performance bonuses of well over 10% of their regular yearly salary.


USAA, like every large business, is not without controversy. Circa 1980 some disgruntled employees tried to form a union and could be seen marching in front of the headquarters entrance on Fredericksburg Road. In 2001, USAA started a reorganization that resulted in approximately 1,400 workers being laid off, many of whom were IT specialists. Shortly after the layoff, but several years after USAA had started using offshore personnel, the local media created a stir when they realized that USAA was outsourcing some of its IT work to Indian based companies.


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.


A major automobile insurance competitor is GEICO, while life insurance competitors include the government's own Servicemembers' Group Life Insurance, the AAFMAA (Army and Air Force Mutual Aid Association), and the USBA.


Major banking competitors include Bank of America-Military Bank, Pentagon Federal Credit Union, and the Navy Federal Credit Union.

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