AM Best affirms the credit ratings of State Farm Mutual Automobile Insurance Company and its subsidiaries

ALDUICK, NJ-(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) of ‘aa+’ (Superior) of State Farm Mutual Automobile Insurance Company (State Farm Mutual) and its affiliates , State Farm Fire and Casualty Company and State Farm County Mutual Insurance Company of Texas (Richardson, Texas), collectively referred to as the State Farm Group. In addition, AM Best affirmed an FSR of A- (Excellent) and a Long-Term ICR of ‘a-‘ (Excellent) on State Farm Florida Insurance Company (State Farm Florida) (Winter Haven, FL). AM Best also affirmed an FSR of A (Excellent) and a Long-Term ICR of ‘a’ (Excellent) on State Farm General Insurance Company (State Farm General). At the same time, AM Best affirmed State Farm Lloyds (Richardson, TX), HiRoad Assurance Company (HiRoad) and State Farm Indemnity Company (State Farm Indemnity) with FSRs of A (Excellent) and Long-Term ICRs of ‘a’ (Excellent). AM Best has also affirmed MGA Insurance Company, Inc.’s FSR of A- (Excellent) and Long-Term ICR of ‘a-‘ (Excellent). (MGA) (Dallas, TX). The outlook for these credit ratings (ratings) is stable.

AM Best also affirmed an FSR of A (Excellent) and a Long-Term ICR of ‘a’ (Excellent) on Dover Bay Specialty Insurance Company (Dover Bay). The outlook for these ratings is negative.

AM Best has also affirmed the FSR of A++ (Superior) and the long-term ICRs of ‘aa+’ (Superior) of State Life Insurance Company and State Life and Accident Insurance Company (collectively State Life Insurance Company). The outlook for these ratings is stable.

All companies are headquartered in Bloomington, Illinois, except where noted.

State Farm, including its property/casualty and life insurance subsidiaries and affiliates, is the largest personal lines insurance organization in the United States based on direct written premiums and the second largest in terms of policyholder surplus. State Farm remains the leading provider of private passenger auto and homeowner insurance in the United States. The organization’s personal lines products are complemented by other lines of business such as commercial multi-threat, commercial auto liability, workers’ compensation and several other lines.

State Farm Group’s ratings reflect the strength of its balance sheet, which AM Best rates as the strongest, as well as its strong operating performance, very favorable business profile and appropriate enterprise risk management (ERM). In addition, the ratings reflect State Farm Group’s long-term record of profitable, albeit sometimes somewhat volatile, debt underwriting and operating results and internal capital generation. This is largely due to growth in the value of its equity investment portfolio, despite challenging market conditions in recent years, and AM Best’s expectation that the company will continue to generate solid earnings and maintain excellent risk-adjusted capitalization in the face of the current high state of economic uncertainty in the United States. Like nearly all major auto underwriters, State Farm experienced underwriting losses in 2021 and the first six months of 2022 in its personal auto line, primarily reflecting both a higher rate of highway crashes since the start of the global pandemic, as well as significant inflation in claims costs resulting from supply chain disruption and higher repair costs. In addition, the group’s capitalization has declined in the first half of 2022 as a result of a significant decline in stock market valuations. Notwithstanding these interim challenges, AM Best believes that State Farm Group’s operations will return to profitability and that capital market volatility will not materially affect either risk-adjusted capitalization or business operations.

Ratings of State Farm Mutual’s subsidiaries and affiliates benefit from shared services, common management, cross-selling of products and services, ERM, common distribution and brand recognition. These positive aspects of the rating are partially offset by State Farm Group’s underwriting volatility, above-average exposure to equity market volatility and susceptibility to weather-related and other natural catastrophes.

State Farm Florida’s ratings reflect its balance sheet strength, which AM Best rates as adequate, as well as its adequate operating performance, neutral business profile and appropriate ERM. The ratings also reflect an upgrade, as determined in the Best Credit Rating Methodology (BCRM), by its parent State Farm Mutual.

State Farm General’s ratings reflect the strength of its balance sheet, which AM Best rates as very strong, as well as its marginal operating results, neutral business profile and appropriate ERM. The ratings also reflect an increase, as defined in BCRM, by its parent State Farm Mutual.

State Farm Lloyds’ ratings reflect the strength of its balance sheet, which AM Best rates as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM.

State Farm Indemnity’s ratings reflect the strength of its balance sheet, which AM Best rates as the strongest, as well as its adequate operating performance, neutral business profile and appropriate ERM.

MGA’s ratings reflect the strength of its balance sheet, which AM Best rates as very strong, as well as its adequate operating performance, limited business profile and appropriate ERM.

Dover Bay’s ratings reflect the strength of its balance sheet, which AM Best rates as very strong, as well as its adequate operating performance, limited business profile and appropriate ERM. The ratings also reflect an increase, as defined in BCRM, by its parent State Farm Mutual.

HiRoad’s ratings reflect the strength of its balance sheet, which AM Best rates as strong, as well as its marginal operating results, limited business profile and appropriate ERM. The ratings also reflect an increase, as defined in BCRM, by its parent State Farm Mutual.

State Farm Life’s ratings reflect the strength of its balance sheet, which AM Best rates as the strongest, as well as its strong operating performance, favorable business profile and appropriate ERM. The ratings also reflect an increase, as defined in BCRM, by its parent State Farm Mutual. In addition, State Farm Life’s valuations benefit from strong brand recognition, sustainable competitive advantages stemming from exclusive on-site executive agency and a diverse product portfolio of individual ordinary life and fixed annuity products. In addition, State Farm Life funds its statutorily required excess reserves (Regulation XXX) related to term life insurance through capital rather than externally through domestic captive or offshore reinsurers. The size of these excess reserves is significant and is viewed favorably by AM Best as it qualitatively improves the group’s strongest level of risk-adjusted capitalization as measured by Best’s capital adequacy ratio (BCAR). Partially offsetting rating factors are continued spread compression in its annuity block, primarily related to additional contracts written in prior years and exposure to life-threatening business with significant minimum guarantee rates.

This press release refers to the credit ratings that are published on the AM Best website. For all rating information relating to the release and relevant disclosures, including details of the agency responsible for issuing each of the individual ratings set out in this release, please see AM Best’s Recent assessment activity Web page. For additional information on the use and limitations of credit score opinions, please see Guide to Best Credit Ratings. For information on the proper use of Best’s credit ratings, Best’s performance ratings, Best’s preliminary credit ratings, and AM Best’s press releases, see A guide to the proper use of Best’s ratings and reviews.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information visit www.ambest.com.

Copyright © 2022 by AM Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Leave a Comment