Insurance company

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

OLDWICK, NJ–(BUSINESS WIRE)–AM Best has affirmed State Farm Mutual Automobile’s Financial Strength Rating (FSR) of A++ (Superior) and Long-Term Issuer Credit Rating (Long-Term ICR) of “aa+” (Superior) 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 confirmed 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 confirmed State Farm General Insurance Company’s (State Farm General) long-term FSR of A (Excellent) and long-term ICR of “a” (Excellent). At the same time, AM Best confirmed the FSR of A (Excellent) and the long-term ICR of “a” (Excellent) from State Farm Lloyds (Richardson, TX), HiRoad Assurance Company (HiRoad) and State Farm Indemnity Company (State Agricultural Indemnity). AM Best has also confirmed the FSR of A- (Excellent) and the long-term ICR of “a-” (Excellent) of MGA Insurance Company, Inc. (MGA) (Dallas, TX). The outlook for these Credit Ratings (ratings) is stable.

AM Best has also confirmed the FSR of A (Excellent) and the long-term ICR of “a” (Excellent) of Dover Bay Specialty Insurance Company (Dover Bay). The outlook for these ratings is negative.

In addition, AM Best confirmed the FSR of A++ (higher) and the long-term ICRs of “aa+” (higher) for State Farm Life Insurance Company and State Farm Life and Accident Assurance Company (collectively referred to as State Farm Life). The outlook for these ratings is stable.

All companies are headquartered in Bloomington, Illinois, unless otherwise noted.

State Farm, including its subsidiary and affiliated property and casualty and life insurance companies, is the largest personal lines insurance company in the United States by direct written premiums and the second largest by policyholder surplus. State Farm remains the leading provider of personal home and auto insurance in the United States. The organization’s personal insurance products are complemented by other lines of business such as commercial property and casualty, 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 operational performance, highly favorable business profile and appropriate enterprise risk management (ERM). In addition, the ratings reflect State Farm Group’s long-term track record of profitable, if at times somewhat volatile, underwriting and operating performance and internal capital generation. This is largely due to the growth in value of its equity investment portfolio, despite the difficult market conditions of recent years, and AM Best’s expectations that the company will continue to generate strong earnings and to maintain excellent risk-adjusted capitalization in the face of the high level of economic uncertainty in the United States. Like almost all major auto insurers, State Farm suffered underwriting losses in 2021 and the first six months of 2022 in its personal auto line, primarily reflecting both a higher incidence of motor vehicle accidents since the start of the global pandemic and claims for cost inflation due to supply chain disruptions and higher repair costs. In addition, the group’s capitalization fell in the first half of 2022 due to 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 financial market volatility will not have a material impact on its risk-adjusted capitalization or business operations.

State Farm Mutual subsidiary and affiliate ratings benefit from shared services, common management, cross-selling of products and services, ERM, common distribution and brand recognition. These positive rating aspects are partially offset by State Farm Group’s variability in underwriting, its above-average exposure to equity market volatility, and its sensitivity to weather-related and other natural disasters.

State Farm Florida’s ratings reflect its balance sheet strength, which AM Best assesses as adequate, as well as adequate operating performance, neutral business profile and appropriate ERM. The ratings also reflect the increase, as defined in Best’s Credit Rating Methodology (BCRM), of its parent company, 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 performance, neutral business profile and appropriate ERM. The ratings also reflect the increase, as defined within BCRM, of its parent company, State Farm Mutual.

State Farm Lloyds’ ratings reflect the strength of its balance sheet, which AM Best rates as very strong, as well as 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 assesses 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 the increase, as defined within BCRM, of its parent company, State Farm Mutual.

HiRoad’s ratings reflect the strength of its balance sheet, which AM Best assesses as strong, as well as its marginal operating performance, limited business profile and adequate ERM. The ratings also reflect the increase, as defined within BCRM, of its parent company, 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 operational performance, favorable business profile and appropriate ERM. The ratings also reflect the increase, as defined within BCRM, of its parent company, State Farm Mutual. Additionally, State Farm Life ratings benefit from strong brand recognition, sustainable competitive advantages from an agency field team of exclusive contractors, and a diverse product portfolio of insurance products. -ordinary life and fixed annuities. In addition, State Farm Life funds its excess reserves required by law (Regulation XXX) related to term life insurance out of capital rather than externally through domestic captives or offshore reinsurers. The amount of these excess reserves is significant and viewed favorably by AM Best, as it qualitatively improves the group’s highest risk-adjusted level of capitalization, as measured by Best’s capital adequacy ratio (BCAR). Partially offsetting rating factors are continued spread compression within its annuity block, primarily related to additional contracts written in previous years, and exposure to life business with significant minimum guaranteed 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 relevant disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Assessment Activity Web page. For more information on the use and limitations of credit rating opinions, please see Best Credit Score Guide. For more information on the proper use of Best’s Credit Scores, Best’s Performance Ratings, Best’s Preliminary Credit Ratings, and AM Best’s press releases, please see Guide to 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 more than 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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