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FOR IMMEDIATE RELEASE
OLDWICK - OCTOBER 31, 2018 10:26 AM (EDT)
A.M. Best has upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb+” from “bbb” and affirmed the Financial Strength Rating (FSR) of B++ (Good) of State Farm Florida Insurance Company (SFFIC) (Winter Haven, FL). The outlook of the FSR has been revised to positive from stable while the outlook for the Long-Term ICR remains positive.
The ratings reflect SFFIC’s balance sheet strength, which A.M. Best categorizes as adequate, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The Long-Term ICR upgrade reflects SFFIC’s supportive risk-adjusted capitalization, favorable earnings in most years and explicit support provided by its parent, State Farm Mutual Automobile Insurance Company (SFMAIC), most notably through reinsurance and capital support. The company also benefits considerably from the excellent brand-name recognition and market presence of the State Farm Group (SFMAIC and its affiliates). SFFIC is one of the largest providers of homeowners insurance in Florida. The company’s business profile of neutral is comparable to other players in its peer group. Along with its parent and affiliates, State Farm ranks as the leading provider of personal lines insurance in the state. A.M. Best considers SFFIC’s ERM program to be appropriate for the company’s risk profile. The company has a good risk management oversight and structure, as well as a developed framework with clear risk appetite and tolerance levels in place. While SFFIC’s balance sheet strength is categorized currently as adequate, A.M. Best’s improving view of the company’s quality of capital is the primary driver behind the positive outlook.
Partially offsetting these positive rating factors is the company’s concentration of risk in the Florida homeowners market, which makes SFFIC susceptible to catastrophic loss accumulation, competitive market conditions and regulatory changes. Property catastrophe excess and aggregate reinsurance is in place to protect surplus from claims due to a significant storm or multiple storms, but the net retention on the property catastrophe excess program is high enough that the balance sheet could weaken from such events. This was evident in 2017 with a higher accumulation of losses stemming from Hurricane Irma. SFFIC is also highly dependent upon SFMAIC for capital support as evidenced by $750 million in outstanding surplus notes, which comprises the majority of SFFIC’s overall capital base. However, it is considered to have relatively low risk due to this affiliation.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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