A.M. Best Upgrades Rating of State Farm Indemnity Company.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--April 19, 2004 A.M. Best Co. has upgraded the financial strength rating to B+ (Very Good) from B- (Fair) of State Farm Indemnity Recompense for loss, damage, or injuries; restitution or reimbursement. An indemnity contract arises when one individual takes on the obligation to pay for any loss or damage that has been or might be incurred by another individual. Company (Parsippany, NJ). The outlook for the rating remains positive. The upgrade and positive rating outlook reflect the company's enhanced capital position and improved operating performance trends in recent years. The company's favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. capital position is attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to its reduced underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. leverage position, conservative investment portfolio, as well as generally favorable liquidity and cash flow positions. Recent performance improvement was driven by its seasoned book of business, enhanced rate adequacy and the favorable development of prior year losses. In the years prior to 2002, State Farm Indemnity's capital position exhibited significant volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the with declines in surplus driven almost entirely by underwriting losses, which resulted in elevated underwriting leverage measures. This poor loss experience was partially attributed to the company's previous tier rating structure and the challenging pricing environment at the time. As a result of State Farm's brand name recognition and New Jersey's take-all-comers environment, State Farm Indemnity recognized a substantial increase in exposures. Given the increasing loss costs at the time and the generally unseasoned nature of a large portion of its book of business, the company's experience deteriorated substantially. A.M. Best anticipates continued profitability in State Farm Indemnity's operating results due to the ongoing combination of improved rate adequacy, a more seasoned book of business and better risk segmentation. 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. |
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