USAA 2010 Report to Members

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CONSOLIDATED STATEMENTS OF INCOMECommitting to qualityA continued focus on member experience, proactive expense control and rigorousmanagement of risk contributed to a highly successful year financially, with a netincome of $2.6 billion.Revenue of $18 billion came mostly from strong product sales and retention. Inaddition to members turning to us as a provider for their financial assets, more newmembers looked to USAA to help meet their financial needs. A record 617,000 netnew members joined USAA in 2010.Never forgetting that we are stewards of the membership’s assets, USAA continuedto practice exceptional expense control, evident in our property and casualty insuranceoperation delivering an industry-leading operating expense ratio of 23.6 percent,our lowest in more than 50 years.PRE-TAX INCOME (in millions)Years Ended December 31 (Dollars in millions) 2010 2009 2008REVENUEInsurance premiums $ 11,205 $ 10,363 $ 9,641Investment returns:Interest and dividends earned, net 1,715 1,667 1,517Realized gains on securities sold, net 346 183 584Unrealized gains (losses) on securitiesunsold, net 653 2,090 (1,847)Total investment return 2,714 3,940 254Fees, sales and loan income, net 3,422 2,408 2,008Real estate investment income 190 146 171Servicing and contractual income onsecuritizations — 385 368Other revenue 415 316 470Total revenue 17,946 17,558 12,912$2,090LOSSES, BENEFITS AND EXPENSESNet losses, benefits and settlement expenses 9,160 8,340 8,353$2,917$2,388$2,238$2,221$653$2,928Deferred policy acquisition costs 556 495 471Real estate investment expenses 153 116 110Interest expense 604 516 688Dividends to policyholders 223 196 114Other operating expenses 3,669 3,584 2,785Total losses, benefits and expenses 14,365 13,247 12,521Pre-tax income 3,581 4,311 391Income tax expense (benefit) 944 1,291 (32 )20062007200820092010NET INCOME $ 2,637 $ 3,020 $ 423ALL OTHER INCOMEUNREALIZED GAINS (LOSSES)ON SECURITIES UNSOLD, NET*($1,847)*In 2008, USAA modified the presentation of unrealized gains (losses) from net worth to income.CONSOLIDATED STATEMENTS OF CASH FLOWSMaintaining our focusUSAA produced positive operating cash flows of $4.9 billion due to strongoperational performance, prudent expense management and continued growth inproduct volumes.Every month in 2010, USAA saw positive net cash flows coming from our memberinvestment activities, evidence of members’ trust in the financial stability of USAA.As we continue to build our member insight and understanding, USAA will remainsteadfast in our commitment to quality and member satisfaction.This level of member trust is not something we take lightly, and USAA will continueto be here for our members in their search for financial solutions and stability.CASH FLOWS FROM OPERATING ACTIVITIES (in billions)$4.9Years Ended December 31 (Dollars in millions) 2010 2009 2008CASH FLOWS FROM OPERATING ACTIVITIESNet income $ 2,637 $ 3,020 $ 423Adjustments to reconcile net income to net cashprovided by operating activities:Increase in insurance reserves 645 581 508Interest credited on policyholder deposits 574 524 427Net realized gains (346) (183) (584)Unrealized (gains) losses on securitiesunsold, net (648) (1,920) 1,710Increase in premiums due from policyholders (147) (164) (120)Depreciation and amortization 173 143 189Equity loss (earnings) in real estatepartnerships 5 7 (3)Decrease (increase) in loans held for sale 1,137 (351) 1,387Change in other assets/liabilities 835 1,337 (655)Net cash provided by operating activities 4,865 2,994 3,282$2.8$2.3$3.3$3.0CASH FLOWS FROM INVESTING ACTIVITIESProceeds from investments sold or matured 4,283 4,360 14,244Cost of investments acquired (7,381) (8,399) (16,894)Net increase in bank loans (1,010) (2,568 ) (2,367 )20062007200820092010Other uses (421) (407) (421)Net cash used in investing activities (4,529) (7,014) (5,438)CASH FLOWS FROM FINANCING ACTIVITIESSubscriber’s Account distributions (687) (595 ) (373 )Net (repayment) borrowing of debt (5,527) (76 ) 161Net increase in bank deposits 6,309 4,513 2,068Other 920 1,336 997Net cash provided by financing activities 1,015 5,178 2,853Net increase in cash and cash equivalents 1,351 1,158 697CASH AND CASH EQUIVALENTS —BEGINNING OF YEAR 7,435 6,277 5,580CASH AND CASH EQUIVALENTS —END OF YEAR$ 8,786 $ 7,435 $ 6,27716 USAA 2010 REPORT TO MEMBERS
OUR RESPONSIBILITYSERVING OUR MEMBERS MEANSSERVING OUR COMMUNITIESGiving back to the places where they live and to the causes in whichthey believe remains a vital mission to USAA and its employees andretirees. Through significant gifts of time and money, we’ve made adifference both locally and nationwide.VolunteeringIn 2010, more than 7,800 employee and retireevolunteers reported more than 368,000 hoursgiven. This is equivalent to nearly$7.7 MILLION IN VALUE GIVENBACK TO THEIR COMMUNITIESEducating consumersThe USAA Educational Foundation ® providesconsumers with good information to make informeddecisions on important personal and financialissues. The Foundation, a nonprofit organization,offers a series of free guides available online orby mail at usaaedfoundation.org.Charitable contributions5.2 MILLIONPUBLICATIONSDISTRIBUTEDBY THE USAAEDUCATIONALFOUNDATIONUSAA, the USAA Federal Savings Bank and The USAA Foundation contributed more than$13 MILLION TO NONPROFITSUnited WayMore than 98 percent of USAA employees pledged to give a record $6.7 million to theUnited Way in 2010. With additional funds from USAA retirees and The USAA Foundation,a total of more than $10.3 million will enable United Way to support services fororganizations nationwide.MORE THAN $ 10.3 MILLIONGENERATED IN SUPPORTOF UNITED WAYThe 2010 San Antonio United Waycampaign artwork was created byBill Kleinedler. After being struckby an IED while serving in Iraqin 2006, Bill spent three yearsin surgery and rehabilitation ationbefore he could again hold anduse a pencil. He finally wasable to return to his passionof painting and creation, andstrives to show others thereis help, healing and hopeeven in their darkest hours.SERVING OUR MEMBERS MEANSSERVING OUR ENVIRONMENTThrough our enterprise sustainability program, USAA is committed toconducting business as a responsible steward of our natural resources.We are focused on taking better care of the environment through sound,sustainable business practices that help save money for the membership.In 2010, our continued efforts to be green were recognized by theEnvironmental Protection Agency with EnergyStar awards for ourSan Antonio, Phoenix, Colorado Springs and Tampa campuses.EnergyIn 2010, USAA agreed to purchase 25 percent of its electrical power from renewableenergy sources — including wind power — in its San Antonio and Phoenix offices.This made USAA one of the top FORTUNE 500 ® purchasers of renewable energyin the country, per the EPA’s Green Power Partnership Program. These alternativeenergy initiatives saved the equivalent of enough power to supply more than2,300 homes for a year.USAA’S OVERALLELECTRICAL CONSUMPTIONDECREASED BY 13%Fuel and emissionsOur Commuter Carpool Program saved more than 3.6 million milesof driving and reduced carbon emissions by more than 1,800 tons.Also, USAA saved 125,000 gallons of vehicle fuel in 2010 by usingmore fuel-efficient vehicles, including seven electric and11 hybrid cars and trucks, in our corporate fleet.125,000 GALLONSOF VEHICLE FUELSAVED IN 2010RecyclingUSAA RECYCLED67% OF ITS WASTEThis included nearly 4,700 tons of paper, glass,electronics and other materials. We also removed allplastic foam products from our workplace cafeteriasand replaced them with recyclable, compostable orreusable service ware.PaperWaterIn 2010, USAA reducedfresh water consumption by29 MILLIONGALLONSMore than 3.9 million members chose to have their USAA documentsdelivered electronically in 2010.MORE THAN 943 MILLION PAGES WERESAVED FROM BEING PRINTED AND MAILEDThis is equal to approximately 122,000 trees and helped USAA savemore than $73 million.See legal information on Page 21. USAA 2010 REPORT TO MEMBERS 17
Page 1: USAA 2010 REPORT TO MEMBERSSERVING
Page 4 and 5: Pat & Manuel EscobarUSAA MEMBERS SI
Page 6 and 7: USAA IS MYTerm Life InsuranceHome a
Page 8 and 9: John D. Monahan, USA (Ret.)USAA MEM
Page 10 and 11: USAA’S MISSIONThe mission of the
Page 12 and 13: HOW WE SERVE YOUServing our members
Page 14 and 15: USAA IS OURImparting the Core Value
Page 16 and 17: OUR FINANCIAL STRENGTHMANAGEMENT’
Page 20 and 21: OUR 2010 BOARD OF DIRECTORSSixteen
Page 22 and 23: OUR 2010 EXECUTIVE COUNCILThe day-t
Page 24: THANK YOU and loyalty in 2010.for y

USAA 2010 Report to Members

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