OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Ratings (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, TX). In addition, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” (Excellent) of State Farm Florida Insurance Company (State Farm Florida) (Winter Haven, FL). AM Best also has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” (Excellent) of State Farm General Insurance Company (State Farm General). Concurrently, AM Best has affirmed the FSR of A++ (Superior) and the Long-Term ICRs of “aa+” (Superior) of State Farm Life Insurance Company and State Farm Life and Accident Assurance Company (together referred to as State Farm Life). At the same time, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” (Excellent) of State Farm Lloyds (Richardson, TX). AM Best also has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” (Excellent) of MGA Insurance Company, Inc. (MGA) (Dallas, TX). The outlook of these Credit Ratings (ratings) is stable.
Additionally, AM Best has revised the outlooks to negative from stable and affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” (Excellent) of Dover Bay Specialty Insurance Company (Dover Bay).
AM Best also has upgraded the FSR to A (Excellent) from A- (Excellent) and the Long-Term ICR to “a” (Excellent) from “a-” (Excellent) of HiRoad Assurance Company (HiRoad). The outlook of these ratings is stable.
Lastly, AM Best has upgraded the FSR to A (Excellent) from A- (Excellent) and the Long-Term ICR to “a” (Excellent) from “a-” (Excellent) of State Farm Indemnity Company (State Farm Indemnity). The outlook of these ratings has been revised to stable from positive. All companies are headquartered in Bloomington, IL, except where specified.
The ratings of State Farm Mutual reflect its balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, very favorable business profile and appropriate enterprise risk management (ERM).
Additionally, the ratings reflect State Farm’s sustained net income and internal capital generation 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. State Farm Mutual, together with its subsidiary and affiliated property/casualty and life insurance companies, comprise the largest personal lines insurance organization in the United States based on direct premiums written and the second largest in terms of policyholders’ surplus. The State Farm group remains the leading provider of private passenger automobile and homeowners’ insurance in the United States. The organization’s personal lines products are complemented by other lines of business such as commercial multiperil, commercial auto liability, workers’ compensation and several other lines. The ratings of the subsidiaries and affiliates of State Farm Mutual benefit from shared services, common management, cross selling of products and services, common distribution and brand name recognition. These positive rating aspects are offset in part by the State Farm group’s underwriting variability, above-average exposure to equity market volatility and susceptibility to weather-related catastrophes.
The ratings of State Farm Florida reflect its balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, neutral business profile and appropriate ERM. The ratings also reflect lift, as defined within Best’s Credit Rating Methodology (BCRM), from its parent, State Farm Mutual.
The ratings of State Farm General reflect its balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, neutral business profile and appropriate ERM. The ratings also reflect lift, as defined within BCRM, from its parent, State Farm Mutual.
The ratings of State Farm Life reflect its balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, favorable business profile and appropriate ERM. The ratings also reflect lift, as defined within BCRM, from its parent, State Farm Mutual.
Additionally, the ratings of State Farm Life benefit from strong brand-name recognition, sustained competitive advantages derived from an exclusive contractor agency field force, and a diverse product portfolio of individual ordinary life and fixed annuity products. Furthermore, State Farm Life finances its statutorily required excess reserves (Regulation XXX) related to term life insurance through capital rather than externally through either domestic captives or offshore reinsurers. The amount of these excess reserves is sizeable and viewed favorably by AM Best, as it qualitatively enhances the group’s strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). Partially offsetting rating factors are ongoing spread compression within its annuity block and exposure to life business with significant minimum guarantee rates.
The ratings of State Farm Lloyds reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM.
The ratings of MGA reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate ERM.
The ratings of Dover Bay reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate ERM. The ratings also reflect lift, as defined within BCRM, from its parent, State Farm Mutual. The negative outlooks reflect concerns around underwriting and operating profitability as the company writes mainly in a catastrophe-exposed area that saw elevated losses in 2020.
The ratings of HiRoad reflect its balance sheet strength, which AM Best assesses as strong, as well as its marginal operating performance, limited business profile and appropriate ERM. The ratings also reflect lift, as defined within BCRM, from its parent, State Farm Mutual. The rating actions follow implementation of a 100% quota share automobile reinsurance contract with State Farm Mutual, beginning in 2021.
The ratings of State Farm Indemnity reflect its balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate ERM. The rating upgrades reflect improved underwriting and operating performance trends in recent years.
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