US insurer State Farm says its car insurance division suffered an underwriting loss of US$13.4 billion in 2022 due to rapidly increasing claims severity and significant additions to prior accident year incurred claims.
State Farm’s car insurance business represented 61 per cent of its 13 P-C (property and casualty) companies’ combined net written premium. Earned premium was US$45.7 billion. Incurred claims and loss adjustment expenses were US$48.4 billion while all other underwriting expenses totalled US$10.8 billion.
In the previous year, earned premium was US$41.5 billion, incurred claims and loss adjustment expenses were US$34.6 billion, all other underwriting expenses were US$10.3 billion, and the underwriting loss was US$3.5 billion.
Despite the 2022 result, the State Farm Mutual Automobile Insurance Company remains financially strong, ending 2022 with a net worth of US$131.2 billion compared with US$143.2 billion in 2021 and US$126.1 billion in 2020. The change during 2022 includes a decrease in the value of the P-C group of companies’ unaffiliated stock portfolio, driven by decreases in the US equities market, along with the P-C group’s pre-tax operating loss.
State Farm’s P-C group of companies, which are managed on an individual affiliate level, reported earned premium of US$74.3 billion and a combined underwriting loss of US$13.2 billion. This result compared to an underwriting loss of US$4.7 billion on earned premium of US$67.2 billion in 2021, along with US$401 million in dividends to State Farm Mutual Automobile Insurance Company policyholders.
According to State Farm, the 2022 underwriting results also reflect higher homeowners’ non-catastrophe incurred claims and another year of catastrophe activity across the country. The 2022 underwriting loss, combined with investment and other income of US$4.9 billion, resulted in a P-C pre-tax operating loss of US$8.3 billion, which compares to the US$313 million loss reported in 2021 and the US$4.5 billion profit reported in 2020.
Total revenue, which includes premium revenue, earned investment income, and realised capital gains (losses) was US$89.3 billion for 2022 compared to US$82.2 billion for 2021. State Farm reported a net loss of US$6.7 billion in 2022 compared to US$1.3 billion of net income in 2021.
“While 2022 was a year of significant growth at State Farm, our annual operating results were not at the level we expect as we consider each affiliate’s financial strength and long-term performance. At the same time, the organisation remains financially strong,” said Jon Farney, Senior Vice President, Treasurer and Chief Financial Officer. “We’re pleased we could assist our customers during the pandemic and we’re there to help them navigate the current period of high inflation. As we take actions to improve our operating performance, we look forward to helping more people in more ways as we begin our next 100 years.”