S&P removed from CreditWatch and lowered the counterparty credit and financial strength ratings on State Farm’s core operating units to “AA+” from “AAA.” Also removed from CreditWatch was its “A” counterparty credit and financial strength ratings on State Farm Lloyds. The outlook on all these companies is negative.
A large collective operating loss from State Farm core p/c companies and State Farm Lloyds was a factor in the ratings action. The loss includes $ 9.3 billion and is the result of aggressive rate setting nationwide, among other things. S&P considers State Farm Lloyds strategically important to State Farm Mutual Automobile Insurance Co. (SFMA), the group’s parent and the largest insurance company in the U.S.
State Farm retains great strengths, including extremely strong capital, unsurpassed spread of risk for an insurer, an extremely large market position in personal lines insurance, a very substantial and complementary position in life insurance, and an excellent reputation in all major lines of business.
S&P believes management has taken a variety of actions that could significantly
narrow the underwriting and operating losses in 2002 and produce an operating profit in 2003. Nevertheless, the underwriting and operating losses in 2002 will likely be significant. Their magnitude depends on variables such as customer acceptance of significant rate increases and the degree of reduction of loss ratios, particularly in coverages like mold and slab in Texas and automobile personal injury protection in the Northeast.
Topics State Farm
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