SAN FRANCISCO
Lee Heidhues 2.8.2025
The Wall Street Journal buried the lede in its recent feature about the home insurance industry in California concentrating on the financial losses incurred by State Farm, “the nation’s largest home- and auto-insurance company, with more than 90 million customers nationwide.”
To mitigate these losses State Farm has cancelled thousands of home insurance policies in California. In a move to protect its bottom line.
said last year it would not renew, by ZIP Code – The range is <5 percent in the lighter colors to > 50 percent in the darker colors
The reality is quite different as a deep dive into the WSJ piece clearly indicates. The truth about State Farm’s financial solvency can be found. It is buried deep in the investigative report.
Excerpted from The Wall Street Journal 2.6.2025
State Farm, the nation’s largest home- and auto-insurance company, with more than 90 million customers nationwide and a million home policies in California, has a strong credit rating and a surplus of well over $100 billion.
The California unit, by contrast, was heavily in the red even before the latest fires. Over the past nine years, it has spent $1.26 for every dollar collected in premiums, resulting in over $5 billion in underwriting losses, the insurer said last Monday.
Consumer advocates said they believe State Farm may be exploiting the separation between the California subsidiary and the parent company to make the unit appear distressed and alone—rather than part of an extremely healthy national insurer—and so bolster its rate demands.
“Chicken Little in Bloomington will tell you that the sky is falling,” said Douglas Heller, director of insurance at the Consumer Federation of America, a consumer-advocacy group, referring to the insurer’s national headquarters in Illinois.
A State Farm spokesman said the company “strongly disagrees” with any suggestion of financial engineering.
State Farm reorganized in 1998 to silo its subsidiary that sells home-insurance in California—called State Farm General Insurance. The company created a similar structure for its Florida home-insurance subsidiary, which operates in risky, hurricane-prone coastal areas. The Florida subsidiary threatened to leave that state in 2009 before dropping tens of thousands of policyholders in hurricane-prone areas. State Farm is a mutual company, owned by its policyholders, which uses a series of subsidiaries to sell insurance and investment products.
Meanwhile, industry representatives have argued in favor of the rate increases in California, saying consumers would suffer if the company collapsed. “This is a very serious situation. We want the market leader to stay,” said Rex Frazier, president of the Personal Insurance Federation of California, which represents State Farm and other insurers. “How much more serious does it have to get before people will approve the rate increase needed?”
Regulators have pushed back on State Farm’s previous demand for a 30% increase. Among their questions to the insurer, according to state filings: Given its claims of financial distress, does it plan to cut bonuses for executives? Or commissions for agents? State Farm responded no to both queries, according to the filings.
Top photo: A State Farm storefront was destroyed by fires in Altadena, Calif., last month. Photo: Michael Nigro/Bloomberg News
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