Standard & Poor’s has affirmed its ‘AA’ counterparty credit and financial strength ratings on State Farm Mutual Automobile Insurance Co. (SFMA) and five other interactively rated members of the State Farm Insurance Group (State Farm).
Standard & Poor’s also affirmed its ‘AA-‘ counterparty credit and financial strength ratings on related entity, State Farm Lloyds (SF Lloyds). The outlook is stable.
“The affirmations are based on State Farm’s leading business position in personal lines insurance including auto, homeowners, and life; the results of the company’s better than expected pretax operating loss; extremely strong capital and risk spread; and life insurance group profile commensurate with the rating, offset by the continued unfavorable operating results,” said Standard & Poor’s credit analyst Charles Titterton.
State Farm is the world’s largest writer of personal auto and homeowners’ multiperil insurance and a major provider of individual life insurance. With the exception of SF Lloyds, which is rated one notch below the other companies, all rated operating units are considered to have a core relationship with SFMA, the parent company, and, therefore, are accorded the ratings on SFMA. SF Lloyds is considered strategically important to SFMA.
Standard & Poor’s believes that State Farm’s property/casualty (P/C) earnings will continue recovering in 2003, and that a small pretax operating profit is possible.
In 2004, earnings should improve further as the organization benefits from a continuing strengthening in pricing adequacy and initiatives in loss mitigation and underwriting. Assuming historically average losses from natural events and frequencies holding steady, Standard & Poor’s expects that State Farm’s P/C operations should book a pretax operating profit of $2 billion.
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