Press Release - JULY 12, 2018

A.M. Best Affirms Credit Ratings of State Farm Mutual Automobile Insurance Company and Its Subsidiaries


CONTACTS:
 Michael T. Venezia
Senior Financial Analyst—P/C
+1 908 439 2200, ext. 5034
michael.venezia@ambest.com

Bruno Caron, FSA, MAAA
Financial Analyst—L/H
+1 908 439 2200, ext. 5144
bruno.caron@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

OLDWICK - JULY 12, 2018
A.M. Best has affirmed the Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa+” of State Farm Mutual Automobile Insurance Company (State Farm Mutual) and its affiliates, State Farm Fire and Casualty Company and State Farm County Mutual Insurance Company of Texas (Richardson, TX). In addition, A.M. Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a+” of State Farm General Insurance Company. A.M. Best also has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” of State Farm Indemnity Company. Additionally, A.M. Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” of State Farm Lloyds (Richardson, TX). A.M. Best also has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” of Dover Bay Specialty Insurance Company. In addition, A.M. Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” of HiRoad Assurance Company. Concurrently, A.M. Best has affirmed the FSR of A++ (Superior) and the Long-Term ICRs of “aa+” of State Farm Life Insurance Company and State Farm Life and Accident Assurance Company (together referred to as State Farm Life). All companies are headquartered in Bloomington, IL, except where specified. The outlook of these Credit Ratings (ratings) is stable.

The ratings of State Farm Mutual reflect its balance sheet strength, which A.M. Best categorizes as strongest, as well as its strong operating performance, very favorable business profile and appropriate enterprise risk management (ERM).

Additionally, the ratings of State Farm Mutual reflect its cumulative net income despite higher automobile personal injury claims costs and more severe catastrophic weather-related events in recent years. State Farm Mutual, its subsidiary and affiliated property/casualty and life insurance companies comprise the largest personal lines insurance organization in the United States based on direct premiums written and the second largest in terms of policyholders’ surplus. The State Farm group is the leading provider of homeowners’ and private passenger automobile insurance in the United States. The organization’s personal lines products are complemented by other lines of business such as commercial multi-peril, commercial auto liability, workers’ compensation and several other lines.

Banking and other financial services are offered through affiliates to further enhance the sale of personal lines products. The State Farm group’s main distribution channel is its exclusive independent agency force, which along with mass advertising, has contributed to high customer retention rates and below average expense ratios. The ratings of the subsidiaries and affiliates of State Farm Mutual also benefit from shared services, common management, cross selling of products and services, common distribution and brand name recognition.

These positive rating aspects are offset in part by the State Farm group’s underwriting variability, above average exposure to equity market volatility and susceptibility to frequent and severe catastrophe activity. However, these concerns are mitigated partially by actions that management continues to implement to consolidate underwriting and claims handling, manage property exposure in high risk areas, increase rates where appropriate, upgrade and modernize systems, enhance its exclusive independent agency force and expand production by providing additional customer access points.

The ratings of State Farm General Insurance Company reflect its balance sheet strength, which A.M. Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate ERM. The ratings also reflect lift, as defined within Best’s Credit Rating Methodology (BCRM), from its parent, State Farm Mutual.

The ratings of State Farm Indemnity Company reflect its balance sheet strength, which A.M. Best categorizes as strongest, as well as its marginal operating performance, neutral business profile and appropriate ERM.

The ratings of State Farm Lloyds reflect its balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM.

The ratings of Dover Bay Specialty Insurance Company reflect its balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM.

The ratings of HiRoad Assurance Company reflect its balance sheet strength, which A.M. Best categorizes as adequate, as well as its adequate operating performance, limited business profile and appropriate ERM. The ratings also reflect lift, as defined within BCRM, from its parent, State Farm Mutual.

The ratings of State Farm Life reflect its balance sheet strength, which A.M. Best categorizes as strongest, as well as its strong operating performance, favorable business profile and appropriate ERM. The ratings also reflect lift, as defined within BCRM, from its parent, State Farm Mutual.

Additionally, the ratings of State Farm Life also benefit from strong brand-name recognition, sustained competitive advantages derived from an affiliated exclusive agency field force, and a diverse product portfolio of individual ordinary life and fixed annuity products. Further, State Farm Life finances its statutorily required excess reserves (Regulation XXX) related to term life insurance rather than externally through either domestic captives or offshore reinsurers. The amount of these excess reserves is sizeable and is viewed favorably by A.M. Best, as it qualitatively enhances the group’s strong risk-adjusted capitalization ratios. Partially offsetting rating factors are ongoing spread compression within its annuity block, losses within its supplementary contracts line of business and exposure to life business with significant minimum guarantee rates.

This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source.


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