State Farm reported its financial results for 2023, experiencing growth in policies while also reporting underwriting losses, due to continued elevated claims severity and significant catastrophe activity, for both the auto and homeowners insurance companies.
The insurer, a heavyweight in auto and homeowners insurance, reported an earned premium of $87.6 billion, contrasted by a combined underwriting loss of $14.1 billion across its property and casualty (P&C) group of companies.
This financial performance marks a noticeable shift from the previous year, with the earned premium up from $74.3 billion in 2022, though underwriting losses also grew from $13.2 billion. The company attributes this fluctuation to improved auto lines underwriting results, counterbalanced by a sharp rise in homeowners' incurred catastrophe claims.
Notably, the auto insurance sector within State Farm registered an underwriting loss of $9.7 billion, showing improvement over the previous year's $13.4 billion loss. However, the homeowners, commercial multiple peril (CMP) and other lines didn't fare as well, with a $4.7 billion underwriting loss, a downturn from a $849 million underwriting gain in 2022.
The health insurance sector of State Farm also experienced a downturn, with a $106 million underwriting loss compared to $81 million in the previous year. Conversely, the life insurance sector provided a silver lining, boasting a net income of $1.2 billion, doubling from the prior year's $588 million.
Despite these challenges, State Farm's P&C pre-tax operating loss stood at $8.5 billion, marginally higher than 2022's $8.3 billion. The insurer managed a net income of $1.2 billion for its life insurance companies but concluded the year with a $6.3 billion net loss, slightly improving from 2022's $6.7 billion.
“While we improved overall auto lines profitability in 2023, our results remain below the level we expect and we’re taking a state-specific approach as we operate,” said SVP, Treasurer and CFO Mark Schwamberger. “Catastrophe losses were widespread in 2023, and our claims and operations team members, along with the State Farm independent contractor agents, responded throughout the year to help customers. State Farm Mutual Automobile Insurance Company remains financially strong, and it is that strength that allows us to handle uncertainty and serve more customers in more ways over the long term.”
State Farm expanded its customer base, adding more than 3 million policies and accounts, now totaling 94 million. The net worth for State Farm Mutual Automobile Insurance Company increased to $134.8 billion, up from $131.2 billion at the end of 2022.
These results are particularly noteworthy following State Farm's decision to exit the California homeowners' market, citing exposure issues and a difficult reinsurance market.
