S&P placed its “AAA” financial strength ratings on all State Farm’s interactively rated operating companies on CreditWatch with negative implications, primarily because of large losses in the companies’ automobile and homeowners multi-peril insurance lines in 2001, particularly in the fourth quarter.
State Farm has implemented or is contemplating rate increases within its personal lines sector, but an S&P spokesperson cautioned that the rate increases, which are expected to be implemented gradually, may be “significantly inadequate to cover underwriting losses for the coming year.”
The group recorded an after-tax net loss of $5.0 billion in 2001 versus a modest net income in 2000. Its decline in net worth was $5.7 billion, and its property/casualty underwriting loss was $9.3 billion versus $5.6 billion in 2000.
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