State Farm lost $4.5 billion on its property/casualty underwriting in 2011 – which is $1.3 billion more than it lost in 2010. The Bloomington, Illinois-based mutual insurer cited catastrophe claims as the main reason for higher underwriting loss, mirroring overall property/casualty industry experience.
Overall net income for the giant mutual insurer fell in 2011 to about $800 million from $1.8 billion a year earlier, while revenue rose to $64.3 billion, up from $63.2 billion in 2010.
“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 senior vice president and chief financial officer.
In its property/casualty operations, the combined underwriting loss of $4.5 billion was on earned premium of $51.4 billion. These results, combined with investment and other income of $4.3 billion, resulted in a pre-tax operating loss of $0.2 billion. The after-tax net income for the P/C companies was $0.2 billion.
Comparable 2010 figures were: earned premium, $50.3 billion; underwriting loss, $3.1 billion; investment and other income, $4.1 billion; pre-tax operating profit, $1.0 billion; net income, $1.3 billion.
State Farm said its auto insurance business, which represents 62 percent of the P/C companies’ combined net written premium, reported earned premium of $31.7 billion in 2011, an increase of 1.2 percent from 2010. Incurred claims and loss adjustment expenses were $26.1 billion. The underwriting loss on auto business was $1.9 billion.
Comparable 2010 figures for auto insurance were: earned premium, $31.4 billion; incurred claims and loss adjustment expenses, $26.8 billion; underwriting loss, $2.8 billion.
In homeowners and commercial lines, the underwriting loss was $2.6 billion. This includes net written premium for State Farm Fire and Casualty Co., State Farm Lloyds, State Farm General Insurance Co. and State Farm Florida Insurance Co. representing 35 percent of the P/C companies’ combined net written premium. Earned premium was $18.0 billion, an increase of 4.5 percent from 2010. Incurred claims and loss adjustment expenses were $15.4 billion.
Comparable 2010 figures were: earned premium, $17.3 billion; incurred claims and loss adjustment expenses, $13.2 billion; underwriting loss, $0.9 billion.
Combined net worth for the State Farm group declined in 2011 by $0.4 billion to end the year at $60.8 billion. This includes a $0.2 billion decrease in net worth related to the P/C companies’ unaffiliated stock portfolios. The results also reflect the $0.2 billion pre-tax operating loss for the P/C companies, which includes an underwriting loss of $4.5 billion.