The primary reason for the improvement was a $3.8 billion increase in the value of the property-casualty (P-C) companies’ unaffiliated stock portfolio (net of deferred tax). The increase comes after a $10.4 billion decrease in net worth a year ago. In spite of the 2008 decline, the State Farm group’s net worth is 27 percent higher than it was at the beginning of the decade.
The P-C companies reported a $3.7 billion underwriting loss in 2009, a $2.6 billion improvement from 2008.
“The year 2009 marked the end of a turbulent decade that included an unparalleled series of major hurricanes and a major economic recession fueled by an extraordinary credit crisis,” said State Farm Senior Vice President & Treasurer Paul Smith. “In the face of all of that, State Farm remained financially strong, thanks to our unwavering focus on the customer and the fundamentals of our business.”
State Farm reported $777 million in after-tax net income in 2009, compared with a $542 million net loss in 2008. The improvement in after-tax net income in 2009 was driven by the P-C companies’ improved underwriting results.
“We strive to achieve financial results that allow us to maintain a level of financial strength that ensures long-term sustainability,” said Smith. “We resist the temptation to attribute too much significance to short-term operating results without first considering the level of financial strength.”
The P-C companies reported a pre-tax operating gain of $393 million in 2009, which includes the underwriting loss of $3.7 billion, offset by investment and other income of $4.1 billion. This compares with a pre-tax operating loss of $2.1 billion in 2008, which included 2
investment and other income of $4.2 billion and an underwriting loss of $6.3 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 in 2009 of $622 million.
Total revenue, which includes premium revenue, earned investment income and realized capital gains (losses), was $61.5 billion for 2009 compared with the 2008 figure of $61.3 billion.
State Farm’s insurance operations consist of eight P-C insurers and three life insurers. 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 $30.9 billion, an increase of 2.1 percent from 2008. Incurred claims and loss adjustment expenses were $26.2 billion. The underwriting loss was $2.7 billion.
Comparable 2008 figures were: earned premium, $30.3 billion; incurred claims and loss adjustment expenses, $25.6 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 34 percent of the P-C companies’ combined net written premium. Earned premium was $16.3 billion, an increase of 1.9 percent from 2008. Incurred claims and loss adjustment expenses were $12.9 billion. The result was an underwriting loss of $1.5 billion.
Comparable 2008 figures were: earned premium, $16.0 billion; incurred claims and loss adjustment expenses, $15.1 billion; underwriting loss, $3.9 billion.
Health – The individual health insurance operations for State Farm Mutual reported an underwriting loss of $29 million. Net written premium was $717 million. Comparable figures for 2008 were: underwriting loss, $14 million; net written premium, $744 million.
Property-Casualty (P-C) – The combined underwriting loss was $3.7 billion on earned premium of $48.9 billion. This includes results from Auto, Homeowners, Health and other lines. These results, combined with investment and other income of $4.1 billion, resulted in a pre-tax operating gain of $393 million. The after-tax net income for the P-C companies was $384 million.
Comparable 2008 figures were: earned premium, $48.1 billion; underwriting loss, $6.3 billion; investment and other income, $4.2 billion; pre-tax operating loss, $2.1 billion; net loss, $673 million.
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 $24 billion of total life insurance in force during the year, bringing the companies’ total insurance in force to $737 billion on Dec. 31, 2009.
The life affiliates reported premium income of $4.6 billion in 2009, compared with $4.9 billion in 2008. In 2009, after-tax net income was $454 million. Net income was $185 million in 2008 ($315 million when excluding $129 million in write-downs for impairment of invested assets). Results for 2009 included $645 million in dividends to policyholders, compared with dividends of $626 million in 2008.
Bank – Total assets for State Farm Bank®, F.S.B. were $16.2 billion as of year-end 2009, compared with $16.7 billion at the end of 2008. The Bank reported an after-tax net loss of $158 million in 2009, compared with a 2008 loss of $159 million. The 2009 results were significantly impacted by a high provision for loan losses related to the economic recession. Nonetheless, Bank revenues increased 19 percent in 2009, following a 23 percent increase in 2008.
Mutual Funds – Total assets under management for the retail Mutual Fund operations at the end of 2009 were $4.5 billion, compared with $3.5 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 $21 million in 2009, following a $21 million loss in 2008.
