AM Best has lowered the financial strength ratings for State Farm Mutual Automobile Insurance Company and its key affiliates. The ratings dropped from A++ to A+, reflecting a shift in how the rating agency views the group’s recent performance. This rating change includes State Farm Fire and Casualty Company and State Farm County Mutual Insurance Company of Texas, together known as the State Farm Group.
Although the ratings lost two pluses, an A+ still signals a “superior” standing in AM Best’s system. The outlook for both the State Farm Group and State Farm Life Group has also improved, moving from negative to stable. The rating agency also cut the long-term issuer credit ratings for these companies from “aa+” to “aa,” keeping them in the superior range.
The downgrade is mainly due to weaker operating performance tied to challenges in underwriting. State Farm has faced higher loss ratios in auto and homeowners insurance, a tough regulatory climate, and significant weather-related losses from hurricanes, storms, and wildfires. These issues have caused five straight years of underwriting losses and four years of operating losses.
Despite this, AM Best sees strong balance sheets at State Farm. The group holds very strong capital reserves, supported by growth in its common stock portfolio, which made up about 72% of surplus as of mid-2025. The company’s business profile is considered very favorable, and its risk management practices meet expectations.
Ratings for some smaller State Farm subsidiaries had different outcomes. For example, MGA Insurance and State Farm Florida Insurance kept high ratings of A- with excellent outlooks, showing solid financial strength. HiRoad Assurance and State Farm Indemnity each hold an A rating, though State Farm Indemnity’s outlook is negative now. Dover Bay Specialty Insurance has a B++ rating with a stable outlook.
On the other hand, State Farm General Insurance in California carries lower ratings—B for financial strength and “bb+” for long-term credit, with a stable financial strength outlook but a negative long-term credit outlook. This reflects weaker balance sheet strength and marginal operating results.
Ratings for some subsidiaries also benefited from their connection to the strong parent company, State Farm Mutual. Overall, while the downgrades highlight recent struggles in underwriting and weather impacts, State Farm’s solid financial foundation and stable outlook offer some reassurance to policyholders and investors alike.