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Posted on 29 May 02
On May 17th Reuters reported that State Farm lost its "triple-A" credit and financial strength ratings from Standard & Poor's after the No. 1 U.S. auto and home insurer posted a $9.3 billion property and casualty underwriting loss for 2001.
The downgrade suggests a lowered ability for State Farm to pay claims in accordance with the terms of its insurance policies and contracts.
S&P cut its ratings for State Farm's core operating units one notch to "AA-plus" from "AAA." It also affirmed its "single-A" rating for State Farm Lloyds, its Texas property insurance affiliate. Its outlook for these entities is negative, which means conditions are present for possible further cuts.
Bloomington, Illinois-based State Farm insures more than 39.7 million cars and almost 15.5 million homes. Its largest rivals are Allstate Corp.; Farmers Group Inc., part of Zurich Financial Services; Nationwide Group and Progressive Corp.
State Farm spokesman Phil Supple said the downgrade should not affect the company's business, and attributed it to State Farm's 2001 results, "for which we're not pleased."
He said the year saw an outbreak of mold in Texas and other southern U.S. states, and was State Farm's third worst one for catastrophes after 1992, the year of Hurricane Andrew, and 1994, the year of the Northridge, California earthquake.
A.M. Best Co. rates the financial strength of State Farm's core units "A++ (Superior)." Moody's Investors Service rates State Farm "Aaa." Other insurers rated "Aaa" by Moody's include American International Group, Inc. and the United Services Automobile Association.
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