A.M. Best Affirms Rating for State Farm Group.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--March 4, 2002

A.M. Best Co. has affirmed the A++ (Superior) financial strength rating of the property/casualty and life affiliates of the State Farm Group, Bloomington, Illinois.

This rating reflects State Farm's outstanding capitalization, well-recognized franchise and dominant market presence as the largest property and casualty writer in the United States. Despite sizeable declines in surplus in 2000 and 2001, the group continues to maintain a substantial capital base and correspondingly favorable premium leverage position. The group also benefits from its mutual ownership structure, which affords significantly less pressure in terms of operating returns compared to its publicly traded peers. Without investor pressures as well as its favorable capital position, State Farm can withstand lower operating returns longer than the majority of its peers.

State Farm's market presence is the result of its considerable brand name recognition, cost-efficient exclusive agents, strong customer loyalty and diversified financial services capabilities. With the group's ability to provide quality claims handling, bundling of products and services, as well as cost-reducing incentives to long-term valued customers, State Farm has created an environment that enhances customer loyalty and results in a significant competitive advantage.

State Farm's life affiliates continue to experience positive earnings performance and strong risk-adjusted capitalization, while net written premiums have modestly increased in recent years. The life affiliates benefit considerably in terms of marketing, distribution, and customer reach from the State Farm brand and its strong financial resources.

Although State Farm can withstand lower operating returns longer than its peers, recent results have been particularly unfavorable due to weather-related events, rising loss costs in both the auto and homeowners lines, a surge in mold claims in Texas along with the group's top-line growth pricing. Accordingly, loss and loss adjustment expense ratios have been extremely high, with combined ratios well above those of its similarly rated peers. This underwriting experience, along with unrealized capital losses on the common stock portfolio has led to surplus declines over the last two years.

A.M. Best anticipates that improved results will be generally slow to develop. As a market leader, potential rate increases may be difficult to achieve given the sometimes politicized process. Further, based on State Farm's historical trend in implementing rate changes, it is anticipated that increases will be taken gradually. Improved results will be contingent upon normalized catastrophe activity along with stabilization of the equity markets.

Although substantially improved operating results are unlikely during 2002, State Farm Group's overall capitalization, dominant market presence and outstanding business profile comfortably support the current rating level.

    The financial strength rating of A++ (Superior) is affirmed for
the following State Farm property/casualty and life affiliates:

    --  State Farm County Mutual Insurance Company of Texas
    --  State Farm Fire and Casualty Company
    --  State Farm Mutual Automobile Insurance Company
    --  State Farm Life and Accident Assurance Company
    --  State Farm Life Insurance Company

    The financial strength ratings remain unaffected for the following
State Farm property/casualty affiliates:

    --  State Farm Florida Insurance Company    A- (Excellent)
    --  State Farm Indemnity Company            B- (Fair)
    --  State Farm General Insurance Company    B+ (Very Good)
    --  State Farm Lloyds                       B+ (Very Good)

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.