USAA    Geico    Metlife

Critical Success Factors     Weight    Rating     Score    Rating       Score       Rating        Score

Financial Position    0.15    2    0.30    3    0.45    4    0.60

Reasonable Premiums    0.14    4    0.56    2    0.28    3    0.42

Product Quality    0.12    4    0.48    1    0.12    3    0.36

Price Competitiveness    0.12    3    0.36    4    0.48    3    0.36

Quality Customer Service    0.10    4    0.40    2    0.20    3    0.30

Profitability    0.10    3    0.30    2    0.20    4    0.40

Customer Loyalty    0.08    4    0.32    2    0.16    3    0.24

Employee Dedication    0.06    4    0.24    1    0.06    2    0.12

Ease of claim filing    0.05    4    0.20    3    0.15    2    0.10

Vehicle repair process    0.04    4    0.16    2    0.08    3    0.12

Deductible payments    0.02    2    0.04    1    0.02    3    0.06

Vendor Management    0.02    2    0.04    3    0.06    4    0.08

Totals    1.00         3.40         2.26         3.16

 

The market for financial services is one of the competitive sectors with USAA getting competition from already well-established firms in the insurance market. Some of the main competitors for USAA in various areas of financial insurance services are GEICO and Metlife. GEICO is the second largest auto insurance company in the United States while Metlife provides insurance, annuities, and employee benefits programs and is among the top providers. Thus, these competing companies offer the majority of the financial services that USAA offers hence analysis of the financial position, opportunities, and threats will help the company position itself strategically.

From the competitive profile matrix of USAA, critical success factors present some of the critical areas that the company must do well if it were to remain relevant and competitive in the financial services industry. For the sake of USAA, for it to continue impressing competition against its competitors, the following areas should be performed well:

Financial position

Reasonable premiums

Product quality

Price competitiveness

Quality customer service

Profitability

Customer loyalty

Employee dedication

Ease of claim filing

Vehicle repair process

Deductible payments

Vendor management

Looking at the competitive profile matrix (CMP), the values assigned to the weight indicate how USAA treat these factors against its competitors. The values of weight assigned show the importance of these factors in assisting USAA to succeed in this competitive industry against GEICO and Metlife companies. The rating, on the other hand, shows the exact performance of USAA in the identified areas as compared to GEICO and Metlife which as the close competitors.

Being financial stable is the priority factor USAA considers for its success in the financial services sector since the financial position weights 0.15. It is only through the financial stability that USAA will be in the position to continue offering insurance services, investments, and banking services among others. The strong financial position allows the company to expand in the future and enter into different product lines though, this presents a threat of more financial mismanagement. Looking at the financial position score of USAA against GEICO and Metlife, 0.30, 045, and 0.60 respectively, it is evident that both GEICO and Metlife are doing well than USAA in terms of financial stability. The low score in terms of the financial stability of USAA is attributed to the company offering many financial services programs than the competitors, GEICO and Midlife that have concentrated on offering few products.

The competitive profile matrix also indicates that, unlike its competitors, GEICO and Metlife, USAA performs well in regard to offering reasonable premiums. The results show that, when it comes to reasonable premiums, USAA scores 0.56 against 0.28 and 0.42 that are scores by GEICO and Metlife respectively. It means, because of the better premiums that USAA, the company is likely to gain more customers in the future than competitors. USAA also offers better product quality compared to GEICO and Metlife since its product quality score indicates that USAA is at 0.48 compared to competitors that have lower scores. High product quality has been facilitated by the continued improvement the company has been experiencing in terms of technology and other areas. USAA does not perform very well when it comes to price competitiveness with GEICO doing better at a higher score than both USAA and Metlife. The low performance regarding price competitiveness has been facilitated by government regulations that tend to discourage higher prices.

USAA is doing well in providing quality customer service compared to its competitors, GEICO and Metlife. With a score of 0.40 more than the competitors, USAA has placed itself strategically to ensure the customers get quality services since they have high labor recruit that provides the needed services to the customers. Due to the decrease in the corporate tax rate and the high safety improvement that has attracted more customers to USAA, the company’s profitability level is doing better. Though the profitability is slightly below that of Metlife, it is more than the level made by GEICO. The lower profitability than Metlife can be attributed to the high labor cost, the weak economy, and issues to do with fraud the company continues to be subjected to. With the introduction of new technology, it is expected that USAA will continue doing well in terms of profitability.

In other critical areas, USAA continues to do relatively well compared to the competitors. These areas include customer loyalty where the company has been leading in the industry, and the factor that USAA continues to improve its services means its customer loyalty will increase. USAA as well enjoys the highest employee dedication with the possibility that the company entails to employee more dedicated employees in what can be seen as a move to have better services delivered to the customers. Employee dedication is one of the strong areas of the company that has seen it continue to have an increased number of customers. Most of the compensation related services at USAA is easy to manage them including ease of claim filing, vehicle repair process, and deductible payments. The competitive profile matrix indicates the company is doing well than two of its competitors because of the possibility of improvement in the use of technology. In overall, looking at all the critical success factors associated with USAA in relation to competitors, the company has the highest score of 3.40. This score is highest compared with GEICO and Metlife whose scores stand at 2.26 and 3.16 respectively. It then means that USAA is competitively better off than the rivals and is doing well in terms of service provision and market.

 

Financial ratio analysis

Liquidity ratio

The liquidity ratios analyze the ability of the company to pay off its current liabilities with the resources available for the company. The liquidity ratios include:

Current ratio

The current ratio measures the ability of the firm to pay off its liabilities within the short term using current assets

Formula= current assets/current liabilities

For USAA= 159,943,618/ 128,540,588= 1.24

The result of current ratio indicates that using its current liabilities, USAA is able to pay its current liabilities yet the company is stable and more investors can come and invest in the USAA.

 

Quick ratio

Measures is the company can pay its current liabilities with assets that can be sold quickly

Formula= (Current assets-inventory- pre-paid  expenses) / current liabilities

For USAA= (159,943,618- 72, 5934,732- 7,732,621)/ 128,540,588

=81,5632, 732/128,540,588= 0.67

The quick ratio result shows that USAA cannot pay off its short term liabilities using assets that can be sold quickly. Therefore, the company should reduce the debts or increase the level of quick assets

Cash ratio

Measures the company’s ability to pay off current liabilities using cash and cash equivalent

Formula= Cash+ cash equivalents/ current liabilities

For USAA, Cash and cash equivalent  totals to 10, 694,892

Cash ratio=  10,694,892/128,540,588= 0.83

The results of the cash ration indicate that the cash and cash equivalents of USAA cannot cover up for the current liabilities of the company. The company can be able to cover up its current liabilities using other assets or should consider increasing cash level.

Working capital

Measures the level at which the current assets of the company exceeds its current liabilities

Working capital= current assets – current liabilities

159,943,618- 128,540,588=31,391, 782

USAA has the ability to meet current obligations since its assets exceed its current liabilities. The company can invite more investors to come and invest in the company.

Profitability ratios

The profitability ratios show the ability of the company to generate income depending on other factors such as revenue, operating cost, and shareholders’ equity.

Gross profit margin

It compares the level of gross profit to the revenue

For USAA, the gross profit margin= 2.843,732/4.643,632* 100= 43.12%

Therefore, USAA has a gross profit margin of 43.12% meaning that the cost of operation is high and the company should consider reducing the cost.

 
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