State Farm General’s credit rating downgraded | Insurance business America
AM Best has downgraded the insurer’s Financial Strength Rating due to its “weak” balance sheet strength
Insurance News
By Ryan Smith
AM Best has downgraded its Financial Strength Rating (FSR) and Long-Term Issuer Credit Rating (Long-Term ICR) for State Farm General Insurance Company.
The ratings agency said it lowered State Farm General’s FSR to B (adequate) from A (excellent) and its long-term ICR to bb+ (adequate) from a (excellent). The rating agency also revised its outlook for the insurer’s FSR to negative from stable. AM Best’s outlook for State Farm General’s long-term ICR is also negative.
The revised ratings “reflect State Farm General’s balance sheet strength, which AM Best views as weak, as well as its marginal operating performance, neutral business profile and adequate enterprise risk management (ERM),” the ratings agency said.
AM Best said the downgrades reflected a “continued deterioration” in the insurer’s policyholder surpluses as of December 31, which had resulted in a corresponding decline in total risk-adjusted capitalization and “weakening balance sheet metrics.”
A key driver of the decline was a sharp increase in loss severity impacting State Farm General’s umbrella and commercial multi-hazard divisions, AM Best said.
“The continuation of the negative outlook on the long-term ICR reflects the uncertainty about the company’s ability to stabilize and strengthen its risk-adjusted capitalization, given the ongoing challenges in profitability and internal capital generation, the trending unfavorable reserve development in prior accident years and.” “The challenging regulatory environment in the California market has limited State Farm General’s (as well as industry peers’) ability to increase premium rates in a timely manner,” said AM Best. “While management is taking corrective actions to maintain its balance sheet strength To stabilize, these measures will take time in the medium term to have a positive effect.”
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2024-03-28 20:39:07
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