State Farm Profit Surges to $3.2 Billion as Claims DropElizabeth Bunn
State Farm Mutual Automobile Insurance Co., the largest U.S. home and car insurer, said 2012 profit quadrupled as claims costs declined at the unit providing residential coverage.
Net income for the year increased to about $3.2 billion from $800 million a year earlier, the Bloomington, Illinois-based company said today in a statement. Claims costs at the home unit fell to $13.5 billion from $15.4 billion.
Insurers benefited from lower U.S. catastrophe costs in the first nine months of 2012 than a year earlier when tornadoes demolished parts of Tuscaloosa, Alabama, and Joplin, Missouri. Results in the first three quarters cushioned the industry for losses when superstorm Sandy struck in October.
“In the midst of hail and wind events, western wild fires and Hurricane Sandy, State Farm sustained its financial strength,” the company said in its statement.
State Farm’s net worth, a measure of assets minus liabilities, climbed to $65.4 billion on Dec. 31 from $60.8 billion a year earlier. The insurer, which is one of the largest investors in companies including Archer-Daniels-Midland Co. and International Business Machines Corp., benefited from a $1.9 billion gain in the value of the stock portfolio of its property-casualty units.
Revenue rose to $65.3 billion from $64.3 billion in 2011. State Farm is owned by its policyholders and reports results once a year.
Chief Executive Officer Ed Rust’s compensation climbed about 4 percent to $9.64 million. The figure is tied to results spanning three years including customer retention, employee satisfaction and growth, Scott Callicott, a spokesman for the insurer, said in an e-mail.
Allstate Corp., the second-biggest home and auto insurer in the U.S., said last month that annual profit almost tripled to $2.31 billion.
State Farm, which has no publicly traded debt, reports results based on state accounting rules for insurers. Publicly traded insurers must use U.S. generally accepted accounting principles, making comparisons inexact.