State Farm Profit Down In 2015
Feb. 26--BLOOMINGTON -- State Farm property-casualty companies recorded a pre-tax profit of $1.9 billion in 2015, down from $3.4 billion in 2014, largely because of underwriting losses more than doubling over the previous year.
Although investment and other income was down slightly in 2015, $4 billion compared to $4.3 billion in 2014, that income was able to offset the underwriting losses of $2.1 billion in 2015. Underwriting losses in 2014 were $939 million.
Robert Hartweg, economist and president of the Insurance Information Institute in New York, said, "Where State Farm differentiated themselves is the company's net worth."
The State Farm group's combined net worth rose to $82.7 billion at the end of the year, compared to a net worth of $80 billion at the end of 2014. That was aided by a $3 billion increase in realized capital gains because of two mergers of pharmaceutical companies that that were part of State Farm's stock portfolio, according to State Farm spokesman Dave Phillips.
"It was a good year for State Farm," Phillips said Friday after State Farm announced its financial results. "We are very confident in our ability to meet the needs of our customers."
Hartweg said insurance companies were generally profitable last year "and State Farm would be in line with that."
The future looks good as well, according to Hartweg.
"Barring any major catastrophes, we would expect 2016 to be similar to 2015," he said.
The primary players in State Farm's property-casualty companies are its auto and homeowners' businesses.
State Farm is the leading home and auto insurer in the nation. It has a 20 percent market share for home insurance nationally and 18.2 percent of the U.S. market for auto insurance, according to Phillips.
Relatively good weather, without any hurricanes making landfall in the United States in 2015 and no other major catastrophes, kept claims lower in the homeowners' sector.
State Farm's homeowners', commercial multiple peril and other insurance in that category showed an underwriting gain of $2.1 billion, a slight increase over 2014's gain of $1.9 billion.
However, the auto insurance business, which represents more than 60 percent of the net written premiums for State Farm's property-casualty companies, had an underwriting loss of $4.4 billion, $1 billion more than 2014.
Phillips said the underwriting loss was a result, in part, of more people being on the road and the increasing cost of auto repairs.
Other insurers have had a similar experience, as an improved economy and lower fuel prices have resulted in more driving, Hartweg said.
Americans drove a record 3.1 trillion miles in 2015, according to figures released Monday by the Federal Highway Administration. The previous record, set in 2007, was 3 trillion miles. The miles include buses and trucks as well as passenger vehicles.
State Farm's total revenue was up in 2015, $75.7 billion compared to $71.2 billion the previous year. That includes premium revenue, earned investment income and realized capital gains.
The overall underwriting loss of $2.1 billion came on earned premiums of $58.6 billion. Investment and other income of $4 billion offset the losses, resulting in the $1.9 billion pre-tax operating profit. The property-casualty companies' net income for 2015 was $5.6 billion.
That compares to earned premiums of $56.9 billion, an underwriting loss of $939 million and investment and other income of $4.3 billion in 2014, for a net income of $3.6 billion.
The volatile year on Wall Street was reflected in a $1.8 billion decrease in the property-casualty companies' unaffiliated stock portfolio.
"We did take a hit in that area. We were not immune to that," Phillips said, but "the financial strength of the company allows us to invest for the long term."
___
(c)2016 The Pantagraph (Bloomington, Ill.)
Visit The Pantagraph (Bloomington, Ill.) at www.pantagraph.com
Distributed by Tribune Content Agency, LLC.
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News