State Farm hit with record $13.2 billion underwriting loss in 2022
State Farm said Monday that it would “take actions to improve our operating performance” after eating a record $13.2 billion in underwriting losses in 2022 – in part because of costlier auto insurance claims driven by inflation.
That $13.2 billion in underwriting losses was the highest ever – almost three times more than what State Farm experienced in 2021 (-$4.7 billion). That helped drive State Farm’s operating loss to $8.3 billion for its property-casualty companies in 2022 – after losing $313 million the year prior.
State Farm’s annual operating results “were not at the level we expect as we consider each affiliate’s financial strength and long-term performance,” said Jon Farney, State Farm’s senior vice president, treasurer and chief financial officer, said in a statement Monday. The Bloomington-based insurer releases its annual financial results around this time each year.
“As we take actions to improve our operating performance, we look forward to helping more people in more ways as we begin our next 100 years,” Farney said.
WGLT asked State Farm for more information about what those actions entail.
"We are continuously monitoring and adjusting to trends. Inflationary pressures and supply chain issues, combined with higher claim costs, are driving rate changes," a State Farm spokesperson said. "We continue to adjust to these trends to make sure we are matching price to risk."
State Farm recently announced plans to outsource much of its in-house IT operations – a cost-cutting move that’s expected to impact hundreds of employees. Many have accepted jobs with the outside firm, although an unknown number of employees were not offered jobs or chose to retire instead.
State Farm said 2022’s heavy underwriting losses were driven by “rapidly increasing claims severity and significant additions to prior accident year incurred claims.”
“The 2022 underwriting results reflect significantly higher auto lines incurred claims as well as higher homeowners non-catastrophe incurred claims and another year of catastrophe activity across the country,” State Farm said. The company said it paid $7 billion in catastrophic loss claims.
State Farm’s net worth sunk too. It fell to $131.2 billion, down 8% from the year before. That was driven in part by a “noteworthy decrease” in State Farm’s stock portfolio and the big operating loss.
State Farm made money on homeowners’ insurance (underwriting gain of $849 million) and life insurance (net income of $588 million) in 2022. Auto was the big drag. Auto makes up about 61% of State Farm’s insurance business.
State Farm is not alone in facing challenges in the auto market. Personal auto has been a primary driver of the industry’s weak underwriting results, according to the Insurance Information Institute, an industry think tank. Supply-chain disruption, labor shortages, and costlier replacement parts are all contributing to current and future loss pressures.
State Farm is Bloomington-Normal's largest employer, with over 13,000 employees. The company remains the largest home and auto insurer in the U.S.