Lower catastrophe losses helped offset a rocky year for State Farm’s stock portfolio in 2018, leading to the largest operating profit in years for the insurer’s property-casualty business, the company announced Friday.
State Farm’s property-casualty business posted a pretax operating profit of $6.3 billion in 2018. That’s after two straight years in the red—losing $1.2 billion in 2016 and $1.7 billion in 2017. Its underwriting profit was “driven by lower losses, which included a decrease in catastrophe losses compared to 2017,” State Farm said in a statement.
“While 2018 was a profitable year for State Farm, we view our financial results over a longer period of time,” State Farm Senior Vice President, Treasurer and Chief Financial Officer Jon Farney said in a statement. “Over the last three years, we have increased our financial strength even with a combined underwriting loss, all while helping millions of our customers recover from the unexpected and live life confidently with the protection that we provide. We have been able to achieve these results because we manage our business responsibly for the long-term, and our agents, their teams and our employees are committed to serving our customers and our communities.”
State Farm spent much of 2018 on a major reorganization that led to job cuts, relocations, and other changes. A year ago, the company’s earnings report said it planned to become a “leaner and stronger company,” referencing the staff changes. It also emptied its downtown Bloomington building and moved employees elsewhere.
State Farm is McLean County’s largest employer. The company has repeatedly said Bloomington will remain its headquarters and employ around 15,000 people here. The company has opened several hub locations in Atlanta, Dallas, and Phoenix.
State Farm is the largest auto and homeowners insurance company in the U.S. Its auto business—about two-thirds of its property-casualty business—posted an underwriting gain of $1.1 billion in 2018. Its homeowners business—the remaining third of the business—saw an underwriting gain of $928 million. Both saw underwriting losses of $2.8 billion each in 2017, caused in part by significant catastrophe losses such as historic wildfires in California and hurricanes Harvey and Irma in the south.
State Farm did see a decline in its stock portfolio, as did many companies. The stock market in 2018 suffered its worst performance since 2008, the height of the Great Recession.
The insurer's net worth now stands at $100.9 billion, up from $97 billion a year ago.
“As a mutual company, we strive to achieve results that allow us to maintain the financial strength necessary to serve our customers and deliver on the promises we make to be there when the unexpected happens,” Farney said.
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