State Farm reported a significant financial turnaround in 2024, achieving a net income of $5.3 billion, a stark contrast to the $6.3 billion net loss experienced in 2023. This recovery, driven by capital gains and a considerable decrease in its pretax operating loss, was announced amidst ongoing controversy surrounding the insurer’s request for rate increases in California.
Financial Performance
The previous year’s loss, which included underwriting results and $6 billion in investment and other income, was considerably trimmed to $111 million. Improvements were particularly notable in automobile underwriting results. However, the company also noted the impact of increased homeowners’ catastrophe claims, which played a role in its broader operational landscape.
Earned premiums for State Farm’s property and casualty companies rose to $103 billion from $87.6 billion. The combined underwriting loss narrowed to $6.1 billion, reflecting a substantial improvement from the $14.1 billion loss in 2023. Furthermore, the auto insurance underwriting loss, which accounts for approximately 65% of the company’s property and casualty net written premium, decreased to $2.7 billion in 2024 from $9.7 billion the previous year.
State-Specific Approach
Chief Financial Officer Mark Schwamberger stated that State Farm will continue its “state-specific approach” to its operations. This strategy emphasizes the financial strength of each affiliate as crucial for upholding commitments to policyholders. The company’s ability to manage risk at the state level is a key component of its operational model.
Schwamberger highlighted the impact of the January Los Angeles wildfires, noting that the company processed over 11,750 claims and paid nearly $2.2 billion in losses related to the event. This underscored the need for comprehensive risk assessment and management in its operations to effectively respond to large-scale events.
State Farm Life Insurance Co. and State Farm Life and Accident Assurance Co. also contributed to the positive financial performance. The entities reported a net income increase to $1.7 billion from $1.2 billion. At year-end, these life insurance entities had $1.18 trillion in individual life insurance in force, indicating strong consumer confidence in the company.
California Rate Hike Discussions
The release of the annual results came shortly after Schwamberger met with California Insurance Commissioner Ricardo Lara and other officials. The discussions focused on the company’s request for emergency action on interim property rate increases, ranging from 15% to 38%. However, Commissioner Lara stated that State Farm had not provided sufficient evidence to justify the emergency rate hikes.
The insurer has signaled potential policy cancellations if the rate hike request is denied. Since their initial meeting, State Farm has met with Lara again, advocating for an immediate 22% increase in homeowner premiums, coupled with adjustments for rental and condo policies to address losses stemming from the significant wildfire-related claims.
In January, State Farm reported paying nearly $500 million in claims following the Los Angeles wildfires, processing a total of 10,100 claims for home and auto damage resulting from the fires.
