Even though State Farm’s auto businesses suffered a loss in 2013, the property/casualty companies reported a $230 million underwriting gain, State Farm reported.
The $230 million gain of $230 million on earned premium of $54.5 billion compared with an underwriting loss of $1.7 billion in 2012, State Farm said, adding that overall P/C operating profit was $4.3 billion investment and other income of $4.1 billion
Net income for the P/C companies was $4.6 billion.
State Farm’s auto insurance business, representing 61 percent of the P/C companies’ combined premium, suffered an underwriting loss was $2.4 billion.
[Last weekend, Berkshire Hathaway’s chairman, Warren Buffett, in his annual letter, highlighting the $1.1 billion underwriting profit at his firm’s GEICO insurance unit in 2013, drew a comparison to State Farm, noting that State Farm— which he called “by far the country’s largest insurer and a well-managed company besides” — had posted an underwriting loss in nine of the 12 years ending in 2012.
“Competitive dynamics almost guarantee that the insurance industry…will continue its dismal record of earning subnormal returns as compared to other businesses,” Buffett’s letter said.
Buffett also bragged that GEICO has leapfrogged Allstate to become the second-largest U.S. auto insurer.]
In conjunction with its earnings statement, State Farm Executive Vice President, Treasurer and Chief Financial Officer Paul Smith, said, “State Farm’s priority, as it has been throughout our 91-year history, is to focus on our customers’ needs and expectations and maintain the long-term financial strength they depend on. We have thousands of opportunities to connect with customers every day as they continue to turn to us for the brand they trust and the products they desire.”
For homeowners, commercial multiple peril and other lines written through State Farm Fire and Casualty Co., State Farm Lloyds, State Farm General Insurance Co., and State Farm Florida Insurance Co., the underwriting gain was $2.1 billion.
Individual health insurance operations for State Farm Mutual reported an underwriting loss of $46 million.
Earned premiums for auto and the property lines each increased about 4.0 percent in 2013—with auto insurance premiums increasing 3.9 percent to $33.4 billion, and the other P/C lines, 4.0 percent to $19.0 billion.
The State Farm insurance operations consist of nine 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, commercial multiple peril and reinsurance lines of business.
Source: State Farm