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State Farm: Bucking the bad news in earnings among U.S. insurers

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Departing from the dismal financial results posted by competitors, State Farm enjoyed increases in earnings and revenue in 2015.

The multiline insurer generated net income of $6.2 billion in year-end 2015 financial results. That’s up from $4.2 billion in net income in 2014, a 47.6 percent increase.

State Farm reported net income of $6.2 billion in 2015, compared with $4.2 billion in net income in 2014. The increase included a $3.0 billion rise in realized capital gains due to two corporate mergers impacting stocks owned within the company’s unaffiliated stock portfolio.

Revenue for all of 2015, including investment income, and realized capital gains (losses), was $75.7 billion for 2015 compared with $71.2 billion for 2014, a 6.3 percent rise.

In the life sector, State Farm Life Insurance Co. and State Farm Life and Accident Assurance Co. also enjoyed gains in 2015 relative to 2014 on several performance measures:

  • Premium income of $5.5 billion in 2015 vs. $5.2 billion in 2014.

  • $582 million in dividends to policyholders in 2015 vs. $574 million in 2014.

  • Net income of $667 million in 2015 vs. $522 million in 2014.

  • Life insurance in force of $844.8 billion in 2015 vs. $819.8 billion in 2014.

State Farm’s results were not uniformly positive. One area of concern for the carrier was underwriting earnings in the property and casualty space, which recorded a loss of $2.1 billion in 2015 on earned premium of $58.6 billion. The negative earnings tops the $939 million underwriting loss recorded in 2014. 

However, combined with investment and other income of $4.0 billion (down $0.3 billion from 2014), State Farm achieved a P&C pre-tax operating profit of $1.9 billion. The combined net worth for the State Farm group ended the year at $82.7 billion compared with $80.0 billion at year-end 2014. 

The State Farm insurance operations consist of nine P-C insurers and two life insurers, each of which is managed on an individual affiliate level. The P-C insurers are primarily engaged in auto, health, homeowners, commercial multiple peril (CMP), and reinsurance lines of business.

State Farm’s financial results contrast with the performance of other major insurers in 2015 that reported red ink or dips in earnings on their bottom line. Among the carriers: Aegon, Ameriprise, Manulife and MetLife and Hong Kong’s AIA Group, Asia’s largest insurer.

These companies attributed their poor results to a host of factors, including the low interest rate environment, a sharp drop in energy (notably oil) prices, as well as underperforming investments, including such vehicles as hedge funds, corporate bonds and private equity. In the case of AIA, weaker regional currencies and stock market volatility were to blame.

One outlier in the recent spate of bad news is Paris-based AXA SA. Led by CEO Henri de Castries, the insurer (France’s largest), enjoyed a net income of 5.62 billion euros ($6.2 billion) in 2015, a nearly 12 percent rise from 5.02 billion euros posted for all of 2014. The result also bested the 5.39 billion-euro average estimate of eight analysts surveyed by Bloomberg.

See also:

Aegon falls as U.S. drives quarterly pretax-profit decline

Ameriprise slumps after client pulls funds in liquidity squeeze

Manulife earnings hit hard by sharp drop in energy prices

MetLife profit falls 45% on private equity, hedge fund slump

Global earnings cuts haven’t been this bad in 7 years


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