State Farm Cos. Under Review

A.M. Best Co. placed the “B+” (Very Good) financial strength rating on a subsidiary of State Farm Mutual Automobile Insurance Company—State Farm General Insurance Company (Bloomington, Ill.)—under review with negative implications. Weakened stand-alone capitalization of the company, expectations that near term operating results will be unfavorable and uncertainty regarding adequate financial support from the parent drove the action.

State Farm General provides property coverage in California and currently has marginal capitalization and lackluster operating performance. Although State Farm General has increased rates and issued a moratorium on new business, the immediate benefit will be modest given the annual term of the homeowner policy and the challenging California regulatory environment.

A.M. Best projects that the stand-alone capitalization of State Farm General is below the standards of the current rating. A formal capital commitment from the parent is required in light of the continued deterioration in results and increases in State Farm General’s premium leverage position.