On an underwriting basis — comparing only claims and operating expenses against premiums collected — State Farm Mutual Automobile Insurance reported a loss of $8.6 billion.
At the same point in 2021, State Farm Mutual Auto had generated a net loss of $137 million en route to a full year loss of $722 million.
State Farm, the nation’s largest auto insurer, is also by far the biggest money loser among the Big Four, including Chevy Chase, Md. Geico; Progressive from Mayfield, Ohio; and Allstate of Northbrook.
For three quarters of 2022, Allstate’s auto insurance business generated more than $2 billion in underwriting losses. Geico, the nation’s second-largest auto insurer, reported a nine-month pre-tax insurance loss of $1.4 billion.
Progressive is the major insurer best placed to deal with the high inflation and other negative trends that have rocked the auto insurance business. It generated pre-tax underwriting profit of $389 million on its auto insurance business.
State Farm has the financial resources to absorb such huge losses. The auto unit held a surplus of $124 billion as of Sept. 30, even after the net loss, according to the filing.
But the insurer looks set for a potential record year of losses. The previous largest annual loss in auto insurance was an underwriting hit of $7 billion in 2016. With $8.6 billion through Sept. 30, State Farm already surpasses that.
In an emailed statement, State Farm said it “continues to see impressive growth. The company plans to report its 2022 financial results early next year. It is important to remember that in a company that is so cyclical is like ours, a snapshot does not give a complete picture of a company’s long-term performance.”
Under CEO Michael Tipsord, State Farm has taken advantage of the unprecedented disruption in the highly competitive auto insurance industry to grow at the expense of its main rivals. As a mutual insurer, technically owned by its policyholders, State Farm isn’t under the same shareholder pressure as Allstate and Progressive. Geico, part of publicly traded Berkshire Hathaway, led by Warren Buffett, arguably lives up to the “Oracle of Omaha” more than anyone else.
Allstate is in the midst of unprecedented rate hikes for auto policyholders in an effort to restore profitability as quickly as possible. Geico, too, has significantly increased rates. State Farm’s rate increases have been more measured and it continues to aggressively advertise its prices on television, while Allstate and Geico have backed away from advertising because they are more concerned about profitability than growth.
State Farm’s earned auto premiums of $34.2 billion through September 30 were 10% higher than $31.2 billion in the prior year period.
What was already a difficult year was compounded by the devastation of Hurricane Ian in Florida in September. Unlike most hurricanes, which damage homes and other buildings more than other property, Ian’s flooding hit a lot of cars in total. State Farm has not commented on the size of the auto losses due to Ian.
Florida’s nine-month direct unpaid losses exceeded $2.9 billion. According to the NAIC filing, State Farm’s written premiums in the Sunshine State were only $2.7 billion during that period.
State Farm is also the largest home insurer in the U.S., and that company has bounced back from a difficult 2021. State Farm Fire & Casualty, the company’s leading homeowners insurance unit, generated $357 million in insurance revenue over three quarters. In the same period last year, it posted an insurance loss of $1.8 billion, according to a filing from the NAIC.
Total net income at State Farm Fire & Casualty exceeded $1 billion for nine months. In 2021, the unit generated $245 million in net income thanks to a red-hot stock market that more than made up for insurance losses.
But the State Farm Mutual Auto and State Farm Fire combined generated $4 billion in net losses through September 30 of this year.