State Farm Returns to Black With $777M Profit in 2009

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March 1, 2010 Monday 03:32 PM EST

445 words

State Farm Returns to Black With $777M Profit in 2009

Chad Hemenway

BLOOMINGTON, Ill.

In 2009, State Farm handled nearly 13 million fire and automobile claims and paid out more than $32 billion -- an average of $88 million every day. The largest U.S. home and auto insurer still managed to turn a $777 million profit in 2009, compared with a $542 million loss the prior year.

Net worth for the State Farm group was $58.1 billion in 2009, an increase of $4.8 billion. The company said a $3.8 billion increase in the value of its property/casualty companies' stock portfolio was the primary reason for the improvement. The group's net worth decreased more than $10 billion in 2008.

According to its annual report, State Farm experienced policy growth in home and auto, adding 185,000 and 186,000 policies, respectively, in the face of declining sales of automobiles as well as increasing numbers of home foreclosures and policy reductions in Florida.

In the Sunshine State, State Farm Florida recently agreed to stay in the property market after getting a 14.8% across-the-board rate increase for homeowners and condominium unit policies, and permission to not renew up to 125,000 of its 810,416 residential property policies (BestWire, Dec. 16, 2009). However, the company's results in 2009 were not promising. State Farm spokesman Dick Luedke said the Florida company's net worth was $366 million in 2009, compared with $608 million at the end of 2008 and $822 million in 2007.

State Farm Florida recorded a combined ratio of 194 in 2009 and took an underwriting loss of $464 million during a year without any major storms, he said. Since its inception in 1998, State Farm Florida has recorded an underwriting loss of about $2 billion and a combined ratio of 126. Luedke said rates remain inadequate in most lines of business in Florida.

State Farm Group said its total property/casualty underwriting loss improved $2.6 billion from 2008 to $3.7 billion in 2009. Including this loss, P/C companies recorded a pretax operating gain of $393 million in 2009, compared with an operating loss of $2.1 billion in 2008. Catastrophes cost State Farm $3.6 billion in 2009, compared with $6.3 billion in 2008.

Auto insurance earned premiums increased 2.1% to $30.9 billion, compared with 2008, and property insurance earned premiums rose nearly 2% to $16.3 billion.

According to BestLink, which provides online access to A.M. Best's Global Insurance & Banking Database, State Farm Group in 2008 held a 21.4% homeowners multiperil market share and a 17.9% private passenger auto market share in the United States.

State Farm Group currently has a Best's Financial Strength Rating of A++ (Superior).

(By Chad Hemenway, associate editor, BestWeek: [email protected])

March 2, 2010

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