Citing recent adverse underwriting experience in the private passenger auto insurance line of business, the difficult regulatory environment, and the ongoing elevated catastrophe-related loss experience in many regions of the nation, AM Best has revised the outlooks to negative from stable for State Farm and certain subsidiaries.
As previously mentioned, the rating agency changed the outlooks for State Farm Mutual Automobile Insurance Company, State Farm Fire and Casualty Company, and State Farm County Mutual Insurance Company of Texas from stable to negative.
Additionally, AM Best has changed the outlooks for State Farm Florida Insurance Company, MGA Insurance Company, Inc., and State Farm General Insurance Company from stable to negative.
Last but not least, the rating agency changed the outlooks for State Farm Life Insurance Company and State Farm Life and Accident Assurance Company—collectively, the State Farm Life Group—from stable to negative.
"Recent adverse underwriting experience in the private passenger auto insurance line of business and the challenging regulatory environment that have constrained the ability of State Farm (as well as its industry peers) to increase premium rates in a timely fashion, along with continued elevated catastrophe-related loss experience in many parts of the country," are the main reasons for the negative outlooks on the property/casualty rating units, according to AM Best.
State Farm announced back in May that it would no longer be underwriting residential and commercial real estate in the State of California, citing problems with exposure and a difficult reinsurance market.
The company announced at the time that, as of May 27, 2023, State Farm General Insurance Company, its homeowner's insurance provider in California, will no longer be accepting new applications, including those for business and personal lines property and casualty insurance.
AM Best noted that the group's operating performance assessment has been further strained by weather-related losses, specifically from hurricanes, winter storms, convective storms, and wildfires.
In the meantime, the rating agency stated that, considering rating increases for State Farm Life based on implicit support from State Farm Group, the negative outlooks on State Farm Life reflect the negative outlooks on State Farm Group.