Well, State Farm’s net worth is 68% higher than the end of 2002 – after the just reported $10.4 billion drop!

‘plain that Sop! I didn’t make it up, it’s the latest from the National Underwriter.

State Farm today reported its net worth dropped $10.4 billion—to end the year at $53.3 billion—and an after-tax loss of $542 million for 2008.

The Bloomington, Ill.-based mutual insurer said the primary reason for the decrease was the $9.2 billion decline in the value of the property-casualty company’s stock portfolio. The decline comes after five consecutive years of net worth increases, and despite the decline, the company’s net worth is 68 percent higher than it was at the end of 2002, the company said.

The company reported an after-tax loss of $542 million in 2008, compared with net income of $5.46 billion in 2007. State Farm said “extraordinary levels of catastrophe losses” adversely affected its 2008 results.

“It is imperative in our business to achieve financial results that enable us to grow and maintain the necessary level of financial strength that ensures long-term sustainability. As a result, one should not attribute too much significance to short-term operating results without first considering the level of financial strength,” said Michael Tipsord, vice chairman, treasurer and chief financial officer.

State Farm reported the p-c company’s pretax operating loss at $2.1 billion in 2008, which includes the underwriting loss of $6.3 billion. This was partially offset by investment and other income of $4.2 billion. The result compares with a pretax operating profit of $5.1 billion in 2007. The State Farm group’s net worth was also affected by the results of operations of non-p-c affiliates, which resulted in a loss for the year of $244 million.

Total revenue was $61.3 billion for 2008 compared with the 2007 figure of $61.6 billion.

State Farm said its auto business, which accounts for 63 percent of the p-c company’s combined earned premium, was $30.3 billion, an increase of $100 million from 2007. Incurred claims and loss expenses were $25.6 billion, translating into an underwriting loss of $2.7 billion.

Homeowners earned premium was $16 billion in 2008, compared to $15.9 billion in 2007. Claims and loss expense stood at $15.1 billion, resulting in an underwriting loss of $3.9 billion.

The company’s property-casualty business combined underwriting loss, which also includes health, affiliates and other underwriting entities, was $6.3 billion on earned premium of $48.1 billion. This translates into a pretax operating loss of $42.1 billion. The after-tax net loss for the p-c company was $673 million.

In an analyst’s note, Meyer Shields with Stifel Nicolaus called State Farm’s weak underwriting results good news for its competitors. He singled out Allstate, Progressive and Erie as beneficiaries. The results, he said, mean State Farm is not charging enough rate and will have to make increases to compensate for losses.

4 thoughts on “Well, State Farm’s net worth is 68% higher than the end of 2002 – after the just reported $10.4 billion drop!”

  1. Where did State Farm have “extraordinary levels of catastrophe losses” in 2008? The Ike losses were mostly to the Texas wind pool.

  2. It was an active tornado year and SF has a large rural presence so I would suspect that played into it. Also, auto prices have really been depressed for a few years and I believe those losses are catching up with the carriers. SF is one big auto carrier.

    On might call 2008 a “perfect storm” for the insurance insustry.

  3. Maybe “that’s why” – great choice, by the way. I enjoyed it so much that I didn’t realize I hadn’t hit publish for the post that just went up!

    I passed through the Delta last week Sup and small State Farm agency that looked sad and lonely. I never hear anything about positive things the company is doing for their local agents. Anything on the grapevine out there, Sup?

  4. Jackie Wilson never received the credit he should have for his contrbution to his era. His stuff is still good..

    SF has always been very successful at keeping things quiet as to what goes on within the company. Being a mutual company, they do not have to have the transparency a publicly traded company does. Historically their agents have been very loyal and quiet.

    I have heard nothing about FL sitauation lately. I am sure there is much going on down there with the entire situation and the company trying to reassure their agents. The spin by Gov. Crist and Kevin McCarty is there are plenty of carriers that will pick up all the business. They never mentione how the financial solvency of those carriers compares to SF.

    I go back to Sop’s initial thoughts. This will be a long “picture show” so load up on popcorn.

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