Late last year, State Farm executives announced that the auto giant would record the largest underwriting loss in its 100-year history in 2022. On Monday, the news broke. become official with a hefty figure attached: $13 billion.
“We missed the severity. We didn’t anticipate inflationary pressures,” said Michael Tipsord, CEO of State Farm, at the Property/Loss Insurance Industry Forum last year.
“In 2022, State Farm auto insurers reported record underwriting losses due to the rapidly increasing severity of claims and substantial additions to claims incurred during the previous accident year,” State Farm reported in a media statement this week, which did not disclose the previous year’s stock levels. fee.
By the numbers, auto companies recorded premiums earned as $45.7 billion. Claims incurred and loss adjustment expenses totaled $48.4 billion and other underwriting expenses totaled $10.8 billion. Although premiums earned in 2022 are 10.1% higher than in 2021, underwriting losses have reached a staggering $13.4 billion.
Although other P/C lines—homeowners, commercial risk, and others—generated underwriting profits of $849 million, auto losses dominated, with autos accounting for 61% of recorded premium and other P/C lines 37%.
State Farm’s 2021 auto underwriting loss—$3.5 billion—also fell slightly from the staggering figure booked for 2022.
In total, State Farm said the P/C group of companies reported a combined underwriting loss of $13.2 billion on premium earned of $74.3 billion. The 2022 underwriting loss, combined with investment and other income of $4.9 billion, resulted in a P/C pre-tax operating loss of $8.3 billion versus a loss of $313. million dollars reported in 2021 and a profit of 4.5 billion dollars reported in 2020.
Total revenue, including premium revenue, earned investment income, and realized capital gains and losses, was $89.3 billion for 2022, up 8.6% from $82.2 billion USD for 2021.
The bottom line: State Farm reported a net loss of $6.7 billion in 2022 compared to $1.3 billion in net income in 2021.
Media statements about last year’s financial results highlighted the financial strength of State Farm Mutual Auto Insurance Company despite unfavorable operating results. State Farm Mutual Auto Insurance Company’s net worth ended the year at $131.2 billion, the statement said. While the figure is lower than $143.2 billion at the end of 2021 and $126.1 billion at the end of 2020, the change in 2022 reflects a decline in the value of the company’s unaffiliated equities portfolio. P/C companies, due to falling US stock prices. market, in addition to operating losses.
“While 2022 was a year of significant growth at State Farm, our year-to-date operating results were not at the level we expected when we consider each individual’s financial strength and long-term performance. branch. At the same time, the organization remains financially strong,” said Jon Farney, Senior Vice President, Treasurer and CFO. “We are pleased to be able to support our customers during the pandemic, and we are there to help them through the current period of high inflation. As we take actions to improve the performance of our operations, we look forward to helping more people in more ways as we begin the next 100 years.”
According to the statement, State Farm life insurers paid nearly $600 million in dividends to policyholders and issued a record $110 billion in new policy volumes, bringing individual life insurance effective at the end of 2022 to $1.1 trillion.
Two life companies, State Farm Life Insurance Company and State Farm Life and Accident Assurance Company, reported premium income of $6.2 billion and net income for 2022 of $588 million.
State Farm’s insurance operations include 13 P/Cs and two life insurers, each managed at the individual branch level. In addition to autos, homeowners and CMPs, P/C companies are also involved in the reinsurance and health businesses. Life companies are primarily engaged in individual life insurance and annuities business.
In addition, the State Farm team provides third-party mutual funds and third-party banking products through State Farm affiliated companies that act as intermediaries between the third party and State Farm customers. .