United Services Automobile Association (USAA)

Company information

• Date Founded: 1922
• Industry: Insurance; banking; financial services
• Corporate Headquarters: San Antonio, Texas
• Type: Private

The United Services Automobile Association (USAA) is based in San Antonio, Texas. Into the mid-2020s, the company had 37,000 US employees. It includes bank, financial services, and insurance divisions. USAA is unique among its competitors in that it is a private company and not publicly traded. USAA's policyholders insure each other and own the company's assets; the company distributes its profits to members rather than stockholders. The company has managed its members' money well, and its net worth grew from $14.6 billion in 2008 to $29.1 billion at the end of 2023. This growth occurred during an economic downturn in which most banks experienced large losses. Into the mid-2020s, there were 13.5 million USAA members, all of whom are current or former military and their families. The company gets top ratings from customers and is often featured on Fortune's list of the hundred best companies to work for in America.

Brief History

USAA was founded in 1922 by twenty-five army officers who agreed to insure each other's automobiles. In 1924, the company motto was "Service to the Services." In spite of the stock market crash and the Great Depression, USAA ended the 1920s with a net profit of $144,000. The number of employees and membership doubled during the Great Depression. In these early years, membership was only available to US military officers. By 1936, 60 percent of all eligible officers were members of USAA. During World War II, large numbers of men joined the military, expanding the pool of potential members.

American Business Magazine selected USAA as one of the hundred best offices in America in 1951. In 1952, USAA opened a new office in Frankfurt, Germany, to serve members of the American occupation forces there. This was its first office outside of San Antonio. The company acquired its first computer in 1957, a punch-card processing machine to automate operations. A new office opened in London, England, in 1962, and USAA started providing homeowner's insurance the same year.

The company underwent significant reform in the 1960s in an effort to modernize processes and reduce turnover. The goal was to improve company morale and customer service. This continued in the 1970s with a focus on employee training and an investment in computers and telecommunications. Several satellite offices were opened in parts of the United States where large numbers of military personnel were stationed. The USAA Federal Savings Bank opened in 1983. The bank offered Visa and MasterCard credit cards and a variety of loans, as well as deposit services. By 1993, the company's assets had reached $33 billion.

Overview

Major William Henry Garrison and twenty-four other army officers decided to found USAA, originally called the United States Army Automobile Association, because their job required them to move frequently. This resulted in high insurance policies and cancellations. Their idea had precedent; it was based on the United States Army Cooperative Fire Association, which was established in 1887 at Fort Leavenworth to provide low-cost fire insurance to officers and their families. USAA's first office opened in San Antonio in 1922; its president, vice president, and board of directors were all active-duty army officers.

The first year was a challenge. The cost of an insurance policy was underestimated, which led to a deficit of $3,000. Subsequently, membership was extended to all active-duty and retired officers of the US Navy and Marine Corps. The change resulted in a new name: the United Services Automobile Association. At the end of 1924, the company had assets of more than $85,000 and more than 3,000 members.

In 1927, the management of USAA was in upheaval, with the secretary-treasurer and general manager fighting over control of the company. The board decided to hire a new leader from outside the company. Major General Ernest Hinds became the general manager and secretary-treasurer on January 1, 1928. He took complete control of the company. His leadership was tested by the stock market crash and the start of the Great Depression. Hinds ensured that USAA invested in government securities early in the financial crisis, preventing the company from losing a significant amount of money. USAA also limited its investments in the stock market to $20,000.

USAA also managed to thrive throughout World War II, despite a decrease in those able to drive. At the end of the 1940s it reported a net profit of $3,225,000. In 1953, it began writing policies in Europe, growing its membership by 43 percent. USAA Life Company was founded in 1963, expanding the company's services to life insurance.

To provide even more services for members, the USAA Investment Management Company, or IMCO, was formed in 1976 to manage mutual funds and provide a brokerage service. The USAA Federal Savings Bank was founded in 1983 and offered consumer loans, home equity, and mortgages. USAA founded a retirement community, the Towers on Park Lane, in San Antonio in 1988.

In the 1990s, USAA had about three million members, 95 percent of whom were active-duty military officers. In 1996, membership expanded to include enlisted personnel. In 1998, the successful addition of retirement and estate planning led to a rollout of a $100 million upgrade to the company's computer networks. The regional offices and headquarters processed 16 million transactions per day. The USAA document imaging system was one of the world's largest; it could scan approximately 650,000 pages and send approximately 5,000 faxes each day without needing to produce a hard copy. This paperless system saved USAA 35,000 square feet of office space.

The company continued to thrive into the twenty-first century. In 2003, many payment options and services became available online, and in 2009, USAA introduced a mobile application (app) that allowed users to deposit checks by taking pictures of them with the phone's camera; the app could also be used for other common banking activities such as checking account balances, transferring funds, and paying bills. USAA was one of the first major banks to develop a mobile banking application. The company's investment practices also allowed it to weather the 2008 global financial crisis relatively comfortably and even grow at a time when many other financial institutions suffered.

Into the late 2010s, USAA was one of the country's largest auto insurers and home insurance companies. It was also considered one of the country's largest direct mail companies since most business is conducted via the Internet, telephone, and mail. In 2015, USAA returned nearly $1.7 billion to its 11.4 million members. By the end of 2018, it had annual revenues of over $31 billion. The company consistently ranked in Fortune's 100 Best Companies to Work for in America due to such benefits as college tuition reimbursement, childcare, and recreation outlets. It has also been ranked on the Forbes list of best large employers for diversity and other national rankings.

In the 2020s, USAA experienced many challenges. Even before the start of the new decade, the company had begun to divest itself of the large number of services it provided and to focus on its core business. In 2019, the company undertook a major change and sold off many segments of its financial services, including the USAA Asset Management Company. This segment was sold to Victory Capitol and Schwab. This trend continued the same year as the company also divested a real estate subsidiary. In 2020, it discontinued its car-buying service.

In 2022, the USAA Federal Savings Bank was penalized by federal regulators for compliance issues for actions that mainly transpired during its rapid period of growth. This resulted in a $140 million fine. In 2023, USAA announced it had laid off 1 percent of its workforce. Additionally, in 2024, the Office of the Comptroller of the Currency issued a cease-and-desist order against USAA Federal Savings Bank, demanding it correct a range of deficiencies. Despite these challenges, USAA continued its commitment to the military community. During the 2024 season, USAA partnered with National Football League players to honor veterans and active-duty service members.

Bibliography

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