AM Best has downgraded the financial strength ratings of State Farm Mutual Automobile Insurance Company and its affiliates to A+ from A++, reflecting a revision to Best’s assessment of the group’s operating performance.
The affiliates included in the rating action are State Farm Fire and Casualty Company and State Farm County Mutual Insurance Company of Texas.
State Farm Mutual and the two affiliates are collectively referred to as State Farm Group. While the revised ratings no longer have two pluses following the A, the A+ ratings are still considered “superior” in AM Best’s rating methodology.
AM Best also downgraded the long-term issuer credit ratings of these companies to “aa” (Superior) from “aa+” (superior), taking the same actions on the members of State Farm Life Group.
The outlook on the State Farm Group and State Farm Life Group ratings is now stable, revised from negative.
AM Best has also taken ratings actions on separate property/casualty subsidiaries of State Farm Group, mainly affirming ratings but changing rating outlooks on some. Among the subsidiaries included in these actions is State Farm’s California homeowners insurer, State Farm General Insurance Company, which carries the lowest ratings. AM Best has affirmed the FSR of B (fair) and the long-term ICR of “bb+” (fair) of State Farm General.
Related: AM Best Downgrades State Farm General Ratings; Another Downgrade for State Farm General: S&P Lowers Rating to A-
Explaining the specifics of the primary downgrades for State Farm Mutual, State Farm Fire and Casualty and State Farm County Mutual of Texas, the AM Best announcement said the rating agency is lowering its operating performance assessment to adequate from strong as a result of adverse underwriting experience. The underwriting experience has been driven by elevated loss ratios in the private passenger auto and homeowners insurance lines of business, a challenging regulatory environment, and elevated weather-related losses from hurricanes, convective storms, and wildfires.
All these factors, AM Best noted, have contributed to five consecutive years of underwriting losses, and four consecutive years of operating losses for State Farm Group.
Related: Analysis: State Farm Bolsters Surplus by Freeing Up Billions in Loss Reserves
Explaining the still superior level of group’s ratings, AM Best said it assesses the balance sheet strength of State Farm Group at the strongest level, its business profile assessment is very favorable and the Group’s enterprise risk management is assessed as appropriate.
The balance sheet strength assessment level is supported by the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR).
“Internal capital generation has benefited by capital appreciation in its common stock portfolio, which represents approximately 72 percent of its surplus at second quarter of 2025,” AM Best said in a media statement.
Actions on the remaining P/C insurance companies are detailed below.
- MGA Insurance Company, Inc. FSR affirmed at A- (excellent) and long-term ICR of affirmed at “a-” (excellent). MGA’s ratings reflect strong balance sheet strength, marginal operating performance, limited business profile and appropriate ERM.
- State Farm Florida Insurance Company FSR affirmed at A- (excellent) and long-term ICR affirmed at “a-” (excellent). State Farm Florida’s ratings reflect adequate balance sheet strength and operating performance, limited business profile and appropriate ERM.
- HiRoad Assurance Company FSR affirmed at A (excellent) and long-term ICR at “a” (excellent) with a stable outlook. HiRoad’s ratings reflect strong balance sheet strength, marginal operating performance, limited business profile and appropriate ERM.
- State Farm Indemnity Company FSR affirmed at A (excellent) and long-term ICR at “a” (excellent), with a negative outlook. State Farm Indemnity’s ratings reflect very strong balance sheet strength, marginal operating performance, neutral business profile and appropriate ERM.
- Dover Bay Specialty Insurance Company FSR affirmed at B++ (good) and long-term ICR at “bbb+” (good), with a stable outlook. Dover Bay’s ratings reflect its very strong balance sheet strength, marginal operating performance, limited business profile and appropriate ERM.
- State Farm General FSR affirmed at B (fair) and long-term ICR at “bb+” (fair). The FSR outlook is stable, while the long-term ICR outlook is negative. State Farm General’s ratings reflect weak balance sheet strength, marginal operating performance, limited business profile and appropriate ERM.
- State Farm Lloyds FSR affirmed at A (excellent) and long-Term ICR at “a” (excellent). The FSR outlook is stable while the long-term ICR is positive. State Farm Lloyds’ ratings reflect its very strong balance sheet strength, adequate operating performance, neutral business profile and appropriate ERM.
The ratings of MGA, State Farm Florida, State Farm Indemnity, Dover Bay Specialty, and State Farm General reflect lift from its parent, State Farm Mutual, AM Best said.