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+” 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-” of HiRoad Assurance Company (HiRoad). AM Best also has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” of Dover Bay Specialty Insurance Company (Dover Bay). Concurrently, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” of State Farm Florida Insurance Company (State Farm Florida) (Winter Haven, FL). The outlook of these Credit Ratings (ratings) is stable. AM Best has also affirmed the FSR of A (Excellent) and the Long-Term ICR of “a+” of State Farm General Insurance Company. The outlook of the FSR is stable while the outlook of the Long-Term ICR is negative. In addition, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” of State Farm Indemnity Company (State Farm Indemnity). The outlook of these ratings is positive. Concurrently, AM Best has affirmed the FSR of A++ (Superior) and the Long-Term ICRs of “aa+” 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.
At the same time, AM Best has upgraded the FSR to A (Excellent) from A- (Excellent) and the Long-Term ICR to “a” from “a-” of State Farm Lloyds (Richardson, TX). 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 categorizes 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 Mutual’s strong net income 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, despite the currently high state of economic uncertainty in the United States. State Farm Mutual, 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 multi-peril, 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 Lloyds reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM. The rating upgrades of State Farm Lloyds recognize its consistently excellent risk-adjusted capitalization and that the company’s underwriting and net leverage ratios have stabilized at levels that are significantly improved relative to levels reported several years ago.
The ratings of State Farm General reflect its balance sheet strength, which AM Best categorizes as very strong, 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 negative outlook for State Farm General’s Long-Term ICR considers deteriorating operating performance and capital erosion observed in 2017 and 2018, when the company was significantly impacted by California wildfire losses. AM Best notes that the company reported much improved results and surplus generation in 2019 and through the first quarter of 2020. If these favorable trends are sustained over the next 12-24 months, the Long-Term ICR outlook could be revised to stable.
The ratings of State Farm Indemnity reflect its balance sheet strength, which AM Best categorizes as strongest, as well as its marginal operating performance, neutral business profile and appropriate ERM. The positive outlook for State Farm Indemnity’s ratings recognizing favorable trends in underwriting results for the past few years. AM Best notes that State Farm has announced significant rate decreases for personal auto insurance in New Jersey, which comprises the entirety of Indemnity’s business. These ratings could be upgraded if the company sustains its improved underwriting performance while maintaining its strongest level of risk-adjusted capitalization. The outlooks could be revised to stable from positive if the company’s operating performance deteriorates from current levels.
The ratings of HiRoad reflect its balance sheet strength, which AM Best categorizes as adequate, as well as its marginal operating performance, limited 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 Dover Bay reflect its balance sheet strength, which AM Best categorizes 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 State Farm Florida reflect its balance sheet strength, which AM Best categorizes as adequate, as well as its adequate 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 categorizes 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 affiliated exclusive agency field force, and a diverse product portfolio of individual ordinary life and fixed annuity products. Further, 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 strong risk-adjusted capitalization ratios. Partially offsetting rating factors are ongoing spread compression within its annuity block, losses within its supplementary contracts line of business and exposure to life business with significant minimum guarantee rates.
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