State Farm® Maintains Financial Strength

Mar 01, 2011, 11:00 ET from State Farm

BLOOMINGTON, Ill., March 1, 2011 /PRNewswire/ -- Combined net worth for the State Farm group increased in 2010 by $3.1 billion to end the year at $61.2 billion.  The primary reason for the improvement was a $1.9 billion increase in the value of the property-casualty (P-C) companies' unaffiliated stock portfolio (net of deferred tax).  The increase comes after a $4.8 billion increase in net worth in 2009.  That followed a $10.4 billion decrease in 2008.  State Farm group's net worth is 40 percent higher than it was 10 years ago.

The P-C companies reported a $3.1 billion underwriting loss in 2010, a $0.6 billion improvement from 2009.

"2010 was another economically challenging year for many of our customers," said State Farm Senior Vice President, Treasurer and Chief Financial Officer Paul Smith.  "State Farm has maintained the financial strength needed to serve our customers.  We attribute that strength not only to our continued focus on the customer, but also to our commitment to the fundamentals of our business."

State Farm reported $1.8 billion in after-tax net income in 2010, compared with $0.8 billion in net income in 2009.  The improvement in 2010 was driven by the P-C companies' improved results.

"While it is productive to examine our financial results each year," said Smith, "our priority is to achieve long-term operating results that allow us to maintain a level of financial strength that ensures long-term sustainability.  This strategy is what has allowed us to fulfill the promises we have made throughout the 88 years we have been in business."

The P-C companies reported a pre-tax operating gain of $1.0 billion in 2010, which includes the underwriting loss of $3.1 billion, offset by investment and other income of $4.1 billion.  This compares with a pre-tax operating gain of $0.4 billion in 2009, which included investment and other income of $4.1 billion and an underwriting loss of $3.7 billion.  The State Farm group's net worth is also affected by the results of operations of non-P-C affiliates, which resulted in a gain of $0.6 billion in 2010.

Total revenue, which includes premium revenue, earned investment income and realized capital gains (losses), was $63.2 billion for 2010 compared with $61.5 billion for 2009.

Financial results for State Farm's affiliate companies are incorporated in the State Farm group's financial results.  However, each affiliate's individual results vary.  State Farm's insurance operations consist of eight P-C insurers and three life insurers, each of which is managed on an individual affiliate level.  The P-C insurers are primarily engaged in automobile, health, homeowners and commercial multiple peril (CMP) lines of business.  The net results of State Farm Mutual Automobile Insurance Company, State Farm Indemnity Company, State Farm Guaranty Insurance Company and State Farm County Mutual Insurance Company of Texas include the Auto business as well as the Health and reinsurance lines written by State Farm Mutual.  The net results of State Farm Fire and Casualty Company, State Farm Lloyds, State Farm General Insurance Company and State Farm Florida Insurance Company reflect the Homeowners, CMP and other P-C lines of business.  State Farm Life Insurance Company, State Farm International Life Insurance Company Ltd. and State Farm Life and Accident Assurance Company write the Life and Annuity business.  The State Farm group also provides banking products and mutual funds through affiliated companies.  State Farm provides insurance and financial services products through more than 81 million policies and accounts.

Auto – State Farm's auto insurance business represents 62 percent of the P-C companies' combined net written premium.  Earned premium was $31.4 billion, an increase of 1.6 percent from 2009. Incurred claims and loss adjustment expenses were $26.8 billion.  The underwriting loss was $2.8 billion.

Comparable 2009 figures were: earned premium, $30.9 billion; incurred claims and loss adjustment expenses, $26.2 billion; underwriting loss, $2.7 billion.

Homeowners, CMP, Other – The net written premium for State Farm Fire and Casualty Company, State Farm Lloyds, State Farm General Insurance Company and State Farm Florida Insurance Company represents 35 percent of the P-C companies' combined net written premium.  Earned premium was $17.3 billion, an increase of 5.9 percent from 2009.  Incurred claims and loss adjustment expenses were $13.2 billion.  The underwriting loss was $0.9 billion.

Comparable 2009 figures were: earned premium, $16.3 billion; incurred claims and loss adjustment expenses, $12.9 billion; underwriting loss, $1.5 billion.

Health – The individual health insurance operations for State Farm Mutual reported an underwriting loss of $52 million. Net written premium was $712 million.

Comparable figures for 2009 were: underwriting loss, $29 million; net written premium, $717 million.

Property-Casualty (P-C) – The combined underwriting loss was $3.1 billion on earned premium of $50.3 billion.  This includes results for Auto, Homeowners, Health and other lines. These results, combined with investment and other income of $4.1 billion, resulted in a pre-tax operating profit of $1.0 billion.  The after-tax net income for the P-C companies was $1.3 billion.

Comparable 2009 figures were: earned premium, $48.9 billion; underwriting loss, $3.7 billion; investment and other income, $4.1 billion; pre-tax operating profit, $0.4 billion; net income, $0.4 billion.

Life – State Farm's life affiliates – State Farm Life Insurance Company, State Farm International Life Insurance Company Ltd. and State Farm Life and Accident Assurance Company – added $21 billion of total life insurance in force during the year, bringing the companies' total insurance in force to $757 billion on Dec. 31, 2010.

The life affiliates reported premium income of $4.6 billion in 2010, an increase of $32 million compared with 2009.  In 2010, after-tax net income was $456 million.  Net income was $454 million in 2009.

Results for 2010 included $663 million in dividends to policyholders, compared with dividends of $645 million in 2009.

State Farm Bank® Total assets for State Farm Bank, F.S.B. were $15.1 billion as of year-end 2010, compared with $16.2 billion at the end of 2009.  The Bank reported an after-tax net loss of $35 million in 2010, compared with a 2009 loss of $158 million.  The 2010 results were positively impacted by increased revenues and improved credit quality.    

Mutual Funds – Total assets under management for the retail Mutual Fund operations at the end of 2010 were $5.6 billion, compared with $4.5 billion at the beginning of the year.  State Farm VP Management Corp. and State Farm Investment Management Corp. reported a combined after-tax net loss of $17 million in 2010, following a $21 million loss in 2009.

State Farm Bank, Bloomington, Illinois, is a Member FDIC and an Equal Housing Lender. Insurance and securities products offered by affiliated companies of State Farm Bank are not FDIC insured, are not guaranteed by State Farm Bank and are subject to investment risk, including possible loss of principal invested.

Investing involves risk, including potential for loss.  State Farm VP Management Corp is a separate entity from those State Farm Entities which provide banking and insurance products.

Before investing, consider the funds' investment objectives, risks, charges and expenses.  Contact State Farm VP Management Corp. (1-800-447-4930) for a prospectus containing this and other information.  Read it carefully.  AP2011/02/0330

SOURCE State Farm