Bloomington, Ill.-based insurer State Farm reported its net income rose 3 percent for the end of 2007, but its property-casualty business took a nose dive, falling 79 percent over the period.
The company reported Friday that its net income increased $140 million to $5.46 billion in 2007 over the comparative period.
However, p-c underwriting gain was down 79 percent, from $3 billion in 2006 to $621 million in 2007.
The company said that approximately half of the $2.4 billion decline in the underwriting gain resulted from a fourth straight year of auto rate decreases, which also reduced net income.
The primary reason net income increased slightly was because of a significant year-to-year difference in auto policyholder dividends, said State Farm.
Were it not for the declaration of $1.3 billion more in dividends in 2006 than in 2007, net income in 2007 would be 11 percent lower than that of 2006, the company said.
State Farm said this was the fifth consecutive year of profit, following two years of significant losses.
The average annual amount of net income for State Farm through the first eight years of this decade is $1.8 billion.
Total revenue, which includes premium revenue, earned investment income and realized capital gains (losses), was $61.6 billion for 2007 compared with the 2006 figure of $60.5 billion.
State Farm's insurance operations consist of eight p-c insurers and three life insurers.
State Farm's auto insurance business represents 62 percent of the p-c companies' combined net written premium. Earned premiums were $30.2 billion, a decrease of 1.8 percent from 2006. The incurred claims and loss expenses were $24.4 billion. The underwriting loss, fueled in part by $1.2 billion in realized rate reductions, was $659 million.
On its homeowners side of the business, representing 32 percent of the companies' p-c combined net written premium, earned premiums were up 2.7 percent from 2006 to $15.9. The incurred claims and loss expenses were $10.9 billion. The result was an underwriting gain of $462 million.
In its health insurance business, the company reported an underwriting loss of $35 million. Net written premiums were $752 million.
The combined p-c underwriting gain was $621 million on earned premiums of $48.1 billion. This includes results from auto, homeowners, health and other lines, as well as the reinsurance line provided by State Farm Mutual.
These results, combined with investment and other income of $4.6 billion, less auto policyholder dividends of $78 million, resulted in a pretax operating profit of $5.1 billion. After-tax net income for the p-c companies was $5 billion.
The life affiliates reported premium income of $4 billion in 2007, compared with $3.9 billion in 2006.
State Farm Bank, F.S.B., increased total assets to $15.9 billion as of year-end 2007, compared with $13.5 billion at the end of 2006.
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