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), collectively referred to as State Farm Group. 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). 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), HiRoad Assurance Company (HiRoad) and State Farm Indemnity Company (State Farm Indemnity). 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.
AM Best also has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” (Excellent) of Dover Bay Specialty Insurance Company (Dover Bay). The outlook of these ratings is negative.
In addition, 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). The outlook of these ratings is stable.
All companies are headquartered in Bloomington, IL, except where specified.
State Farm, including 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. State Farm 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 multi-peril, commercial auto liability, workers’ compensation and several other lines.
The ratings of State Farm Group 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 Group’s long-term record of profitable, if occasionally somewhat volatile, underwriting and operating performance and internal capital generation. This is due in large part 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. Similar to nearly all major automobile insurance writers, State Farm has experienced underwriting losses in 2021 and through the first six months of 2022 in its personal automobile line, primarily reflecting both a higher incidence of highway accidents since the onset of the global pandemic, and significant claim cost inflation as a result of supply chain disruptions and higher repair costs. Furthermore, the group’s capitalization has declined in the first half of 2022 as a result of a significant drop 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 meaningfully impact either its risk-adjusted capitalization or business operations.
The ratings of the subsidiaries and affiliates of State Farm Mutual benefit from shared services, common management, cross selling of products and services, ERM, 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 and other natural 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 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 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 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 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 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, State Farm Life’s ratings 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, primarily relating to supplementary contracts written in prior years, and exposure to life business with significant minimum guarantee rates.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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 A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
