State Farm General’s credit standing downgraded

AM Best has downgraded its Financial Strength Rating (FSR) and Long-Term Issuer Credit Rating (Long-Term ICR) for State Farm General Insurance Company.

The rankings company introduced that it has lowered State Farm General’s FSR from A (glorious) to B (honest) and its Long-Term ICR from “a” (glorious) to “bb+” (honest). The score company has additionally revised its outlook for the insurer’s FSR from secure to destructive. AM Best’s outlook for State Farm General’s Long-Term ICR can be destructive.

The revised rankings “reflect State Farm General’s balance sheet strength, which AM Best assesses as weak, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management (ERM),” the rankings company stated.

AM Best stated the downgrades mirror “continued deterioration” within the insurer’s policyholder surplus as of Dec. 31, which drove a corresponding drop in general risk-adjusted capitalization and “weakening balance sheet metrics.”

A big driver of that decline was a pointy enhance in claims severity impacting State Farm General’s umbrella and industrial multi-peril traces, AM Best stated.

“The continuation of the negative outlook on the Long-Term ICR reflects the uncertainty of the company’s ability to stabilize and strengthen its risk-adjusted capitalization given ongoing challenges regarding profitability and internal capital generation, trending adverse reserve development occurring on prior accident years, and the challenging regulatory environment within California’s marketplace that have constrained the ability of State Farm General (as well as industry peers” to extend premium charges in a well timed style,” AM Best stated. “While management is taking corrective actions to stabilize its balance sheet strength, these actions will need time to gain positive traction over the intermediate term.”

Have one thing to say about this story? Let us know within the feedback under.