State Farm Profits Fall 56 Percent Between 2010 and 2011

State Farm logoState Farm, the company with the largest share of the country’s private passenger auto coverage market, announced Thursday that year-to-year profits have plummeted.

Profits fell from $1.8 billion in 2010 to $0.8 billion in 2011–a decline of 56 percent–according to an announcement released by the company.

“Our 2011 financial results must be viewed in the context of five catastrophe events that are among the 25 largest in our history,” said Paul Smith–State Farm’s senior vice president, treasurer and chief financial officer–in a prepared statement.  “Even while making a substantial number of catastrophe claim payments to our customers, we’ve maintained the financial strength that gives our customers confidence we’ll be there to serve them whenever they need us.”

Car Insurance Performance

Most of the premiums written by State Farm come from car insurance policyholders, who paid the company $31.7 billion in 2011 for coverage.

Auto premiums account for a little under two-thirds of the total premiums collected by the company.

The numbers included in the announcement showed that premiums written for car coverage actually increased by about 1.2 percent between 2010 and 2011, and claims and loss adjustment expenses for that coverage were actually down about 1.37 percent.

In addition, underwriting losses on auto coverage actually fell from $2.8 billion in 2010 to $1.9 billion last year–a drop of nearly a third.

The Insurance Information Institute explains that an underwriting loss is the amount lost by the insurer on policy sales “after all expenses and losses have been paid. When premiums aren’t sufficient to cover claims and expenses, the result is an underwriting loss. Underwriting losses are typically offset by invest income.”

Performance in Homeowners Coverage

But performance in the homeowners category sagged considerably. Premiums were up 4 percent, but claims and loss adjustment expenses jumped 16.6 percent–going from $13.2 billion to $15.4 billion.

And underwriting losses nearly tripled. They went from $0.9 billion in 2010 to $2.6 billion in 2011, representing a spike of 188 percent.

The overall underwriting loss for the company’s property/casualty division was $4.5 billion, which is an increase of $1.3 billion from the year before.

State Farm’s Overall Position

Despite the bad 2011 performance, State Farm’s combined net worth is still $60.8 billion, according to the financial release.

It still remains one of the top rated auto insurance companies in the country, with the largest overall share of the market.

According to data released by the National Association of Insurance Commissioners on March 1, State Farm collected nearly one-fifth of all premiums paid by Americans for private passenger car insurance–a 19.57 percent share.

The next largest car insurer was Allstate, which collected 10.85 percent of the total.

Annual profits for the country’s other major insurers also fell between 2010 and 2011, though not as drastically as State Farm’s.

Comparing 2011 with 2010, Progressive saw a 5 percent drop in profits, while Allstate saw a decline of 15 percent.

To research how State Farm performs when handling claims and in other areas, consumers can read user-submitted State Farm auto insurance reviews online.

About John Pirro
John Pirro is a licensed fire and casualty insurance agent specializing in various aspects of the auto insurance industry. He worked in the auto body repair industry before taking a reporting position at Online Auto Insurance News.

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