NU Online News Service, March 2, 11:43 a.m. EST

The busy 2011 catastrophe season had a heavy impact on State Farm's earnings, as the insurer says its net income slid 56 percent over the previous year's results.

“Our 2011 financial results must be viewed in the context of five catastrophe events that are among the 25 largest in our history,” says Paul Smith, State Farm senior vice president, treasurer and chief financial officer in a statement. “Even while making a substantial number of catastrophe-claim payments to our customers, we've maintained the financial strength that gives our customers confidence we'll be there to serve them whenever they need us.”

The Bloomington, Ill.-based insurer reports net income for the full year 2011 of $800 million, down $1 billion from 2010. Revenues increased 2 percent, or more than $1 billion, to $64.3 billion.

State Farm says the combined net worth of the group declined by $400 million to $60.8 billion. That includes a $200 million decrease in net worth related to the P&C companies' unaffiliated stock portfolios. The results also reflect a $200 million pre-tax operating loss for its P&C companies due to the significant catastrophe activity. That figure includes an underwriting loss of $4.5 billion, $1.3 billion higher than the previous year's underwriting loss.

Concerning State Farm's auto-insurance business, which the carrier says represents 62 percent of the P&C business, earned premium increased $300 million to $31.7 billion over 2010. Incurred claims and loss adjustment expenses dropped $700 million to $26.1 billion, while the underwriting loss improved by $900 million to $1.9 billion.

On its homeowners and related companies that constitute 35 percent of the P&C business, earned premium rose $700 million or 5 percent to $18 billion. Incurred claims and loss adjustment expenses rose 17 percent, or $2.2 billion, to $15.4 billion. The underwriting loss increased by $1.7 billion to $2.6 billion.

As a whole, State Farm says its total P&C underwriting loss was $4.5 billion on earned premium of $51.4 billion. When combined with investment and other income of $4.3 billion, the result was a pre-tax operating loss of $200 million.

After-tax net income for P&C in 2011 was $200 million, compared to net income in 2010 of $1.3 billion.

A company spokesman says the company's combined ratio for 2011 was 108.7 compared to 106.2 in 2010.

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Catastrophes Eat into State Farm Earnings

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