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A.M. Best downgrades State Farm General

State Farm

Rating agency A.M. Best Co. said Thursday it has downgraded the financial strength rating of State Farm General Insurance Co., the homeowners unit of State Farm Group, to B (Fair) from A (Excellent).

Its long-term issuer credit rating was also downgraded to “bb+” (Fair) from “a” (Excellent), while the outlook of its financial strength rating has been revised to stable from negative, Best said.

The downgrades reflect continued deterioration in State Farm General’s policyholder surplus at Dec. 31, 2023, which resulted in a corresponding decline in overall risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR) and weakening balance sheet metrics.

“A contributing factor to this decline was sharp increases in claim severity affecting the company’s umbrella and commercial multi-peril lines of business,” Best said.

State Farm General last week said it would non-renew up to 72,000 commercial and personal lines policies in California and exit the commercial apartment insurance market in the state.

The Oldwick, New Jersey-based rating agency in September revised its outlook on Bloomington, Illinois-based State Farm Mutual Auto Insurance Co. and some subsidiaries, including State Farm General, to negative.