A.M. Best Downgrades State Farm Florida; Outlook Negative

June 18, 2009

  • June 18, 2009 at 12:39 pm
    John says:
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    It is clear no rate increase needed must just be the economy. Can you sue a rating company if the company you buy your insurance from is really an F but rated as an A and fails in the next hurricane? I’m sure this will never happen though.

  • June 18, 2009 at 2:47 am
    WCFL Agent says:
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    Wow, where are all the State Farm defenders who are so quick to down the new domestics and their financial ratings. This news must have shut them up for the time being, but I’m sure they will crank back up soon with some new reasons to trash anyone they think may give them some competition. With this news, seems they can’t meet the standards that the bill they want Charlie to sign that allows them not to be regulated. That bill is just a way for them to price themselves off risks they want to dump anyway (coastal, older homes, etc.) and undercut everyone else on more desirable (inland, brand new home, etc.) They should make the rules for the deregulation of rates, which I support, the same for everyone and let companies large & small (bigger is not equal to better)compete for business.

  • June 18, 2009 at 3:06 am
    John says:
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    WCFL AGENT,

    I’m confussed why aren’t more the to companies you are talking about writing in the Coastal areas. I have read that some think the large companies will cherry pick. The problem I have is trying to get coverage I find the new companies are already doing the cherry picking. They have more reasons they won’t write a home in the high risk area than anything. So who is telling the truth? The St Pete times showed the rating of the carriers in this area and found most to be D and F. The company my parents left Citizens for is F rated per the St Pete times but the rating co. give them an A? Again where it he truth.

    I wonder if a solid B is better than a watered down A, I guess I will have to wait for the next hurricane to get my answer.

  • June 18, 2009 at 3:07 am
    Outside Observer says:
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    WCFL
    Did you really consider your answer before you submitted it? The article says the downgrade was due to diminished premium receipts from the pending shutdown. Not a surprise for a company that said it had to leave the state due to inadequate income to meet loss costs. It also said Reinsurance was in place to cover. If your main objective was to bash State Farm, Good Job! If you wanted to make a valid point, please retry…

  • June 18, 2009 at 3:19 am
    Arthro says:
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    WCFL, obviously you didn’t read the story before you posted your comments. I have copied the parts of the press release that you obviously missed. Read below,especially the part where it explains the impact of decreased revenues due to non-renewals and the reinsurance program which results in a big PML which is significant but manageable.

    You also missed the fact that on the same day, AM Best downgraded Argus from a C to an D. Another Florida domestic, along the lines of Coral and Peoples’Trust, seems headed for a meltdown.

    By the way, aren’t Coral, Argus, and People’s trust part of the 40 companies Kevin McCarty says are going to save Florida when State Farm leaves?

    “…The deterioration was driven by a sharp decline in net premiums written due to non renewals, wind mitigation discounts, increased reinsurance costs, rate decreases and the suspension of writing most new homeowners and commercial business….”

    “…However, due to the company’s comprehensive reinsurance program, which includes reinsurance from State Farm Mutual, the Florida Hurricane Catastrophe Fund and external reinsurers, the net PML is significant but manageable. Although the parent has continued to provide significant support as noted, A.M. Best believes further support may be required in the case of a significant catastrophic event. Based on State Farm Mutual’s history of supporting the majority of its separately capitalized, stand-alone subsidiaries, A.M. Best anticipates that State Farm Florida’s claims paying ability will be maintained in both the near and intermediate terms….”

  • June 18, 2009 at 3:20 am
    WCFL Agent says:
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    Your first problem is using the St Pete Times, they always put out the absolute truth. I’ve been told by people with SF and read their press releases as well as watched their statements on the news by PR people, they will be out of money and in receivership within 18 months if they did not get their rate increase. Just because they or any other carrier is the largest or been around forever does not mean they are the best or the most sound. Just look at other companies that were the largest, oldest etc, can you say GM, AIG, Merrill Lynch on and on. If you run a large company poorly and make bad decisions you are no better than a small company that makes the same mistakes. I don’t think that that line of thinking, that the newer companies can’t survive the storms holds water any longer. But if they allow all companies to be free of rate regulation, then I’ve said for years that it is the best way to help solve our problems.

  • June 18, 2009 at 3:43 am
    WCFL Agent says:
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    Yes I did read the entire article, not sure of your point. Most of the actions described were taken by SF themselves ie nonrenewals, no longer writing new business etc. As far as the failing domestics, I’m saying that they must run their company in a reasonable fashion or risk going under, but that is not limited to just small carriers. If you write too much exposure in a limited geographic area that is hurricane prone (Florida) you might want to rethink your plans. I just don’t agree with their continued whining and complaining about not getting their rate increases and wanting special treatment with this bill. If they want to deregulate rates (which I have always ageed with) then make it for all carriers, not just a chosen few. Then let the DOI make sure they all meet financial standards to help ensure their survival whether they are large or small or somewhere in between.

  • June 18, 2009 at 4:21 am
    "B" rated Underwriter says:
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    Perhaps AM Best lowering the rating to a B will help SF. As a former HO underwriter employed by an AM Best “B” rated carrier the mortgagees were forcing all of their customers to cancel our policy and rewrite with a B+ or better. This same type of action by banks should reduce SF’s Florida exposure faster than a pullout. Then again are there B+ or better rated companies willing to take on more Florida risk?

  • June 18, 2009 at 4:45 am
    Arthro says:
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    My point was this…you were saying that the bloggers who supported SF were shut up by this news release. But the reasons for the downgrade were understandable and expected – decreased revenues due to nonrenewals. The press release also said that the PML was significant but manageable due to the history of the parent company stepping in to bailout SF Florida and the reinsurance SF Florida purchased. Seemed to me that you were saying the world was falling apart for SF when it isn’t. On the other hand, look at Argus and the questionable situtation for all Florida domestics who rely so heavily on the Cat Fund.

    We agree on de-regulation – in a perfect world it should apply to all carriers. But Florida is not perfect and that’s not going to happen overnight. For now, Florida has a desperate need to keep big capital in the state, and considering the obstacles we have here (Crist, McCarty, economy, housing, etc), this is a step in the right direction.

    Crist contends that the system is working while almost everyone around him says there are huge problems ahead for Florida if we chase out all the big insurers and end up completely dependent on the Cat Fund and Florida domestics. The legislature knows this, that’s why they slam dunked the approval. And That’s why you’ve seen a tremendous amount of support for the bill from people who don’t have a vested interest. If Crist vetoes, Florida falls off into a hole and it’s all on his shoulders. If he signs, at least Florida has a chance and State Farm has a hard time explaining any further withdrawal.

    I see a lot of independents complaining about how unfair this is, but I can’t stop thinking that right now they are making out pretty well at the expense of Florida’s State Farm agents. If this bill passes, they will make out better because I think a bunch of people today are going to look at the higher premium from State Farm and walk, even if they think State Farm is more stable. Todays’ economic situation will force them to go elsewhere.

    And…if you believe Crist and McCarty, State Farm has already been the highest priced insurer in the state for a long time. That means that a whole bunch of consumers have already chosen State Farm in spite of the fact that they are more expensive. But there is a point where they won’t pay more for the greater sense of financial stability.

  • June 19, 2009 at 2:30 am
    concerned says:
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    I don’t understand…you guys are worried about a “B” rating from a company that gave the AIG credit default swaps an “A” rating. If A.M. Best missed the mark on AIG who’s to say they are correct this time. By the way, what rating did the SPT give AIG. I think I can trust the ratings provided by the SPT just as much as I can trust the ratings provided by A.M. Best.



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