MIRA INFORM REPORT
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Report Date : |
18.03.2013 |
IDENTIFICATION DETAILS
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Name : |
STATE FARM MUTUAL AUTOMOBILE INS CO |
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Registered Office : |
1 State Farm Plz Ste D3 Bloomington, IL 61710-0001 |
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Country : |
United States |
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Year of Establishment : |
1922 |
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Legal Form : |
Private Parent |
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Line of Business : |
General Insurance |
RATING & COMMENTS
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MIRA’s Rating : |
Ba |
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RATING |
STATUS |
PROPOSED CREDIT LINE |
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41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
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Status : |
Satisfactory |
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Payment Behaviour : |
No Complaints |
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Litigation : |
Clear |
NOTES :
Any query related to this report can be made on
e-mail: infodept@mirainform.com
while quoting report number, name and date.
ECGC Country Risk Classification List – March 31st, 2011
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Country Name |
Previous Rating (31.12.2010) |
Current Rating (31.03.2011) |
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United States |
A1 |
A1 |
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Risk Category |
ECGC
Classification |
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Insignificant |
A1 |
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Low |
A2 |
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Moderate |
B1 |
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High |
B2 |
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Very High |
C1 |
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Restricted |
C2 |
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Off-credit |
D |
Company name and address
State Farm Mutual Automobile Ins Co
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Business
Description
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State Farm Mutual Automobile Insurance, headquartered in Bloomington, Ill.,
is the parent of the State Farm family of companies-wholly-owned subsidiaries
that provide property and life insurance coverage. The company serves nearly
73 million auto, fire, life and health policies in the United States and
Canada. It also offers financial services products including banking and
mutual funds. George J. Mecherle, a retired farmer, founded State Farm Mutual
Automobile Insurance Company in 1922. It initially concentrated on meeting
auto insurance needs of Illinois farmers through a mutual organization owned
by the customers. In 1965, the company began marketing health insurance.
State Farm Mutual Automobile Insurance Company is a mutual insurance company
and as such does not have any shareholders. State Farm has more than 16,000
service agents throughout the United States and Canada. |
Industry
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Industry |
Insurance (Property and Casualty) |
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ANZSIC 2006: |
6322 - General Insurance |
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NACE 2002: |
6603 - Non-life insurance |
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NAICS 2002: |
52412 - Direct Insurance (except Life,
Health, and Medical) Carriers |
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UK SIC 2003: |
6603 - Non-life insurance |
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US SIC 1987: |
6331 - Fire, Marine, and Casualty
Insurance |
Key Executives (Emails Available)
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News
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1 - Profit &
Loss Item Exchange Rate: USD 1 = USD 1
2 - Balance Sheet Item Exchange Rate: USD 1 = USD 1
Corporate Overview
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Overview
State Farm Mutual Automobile Insurance Company is mutual life insurance company
based in the US. The company has a diversified product portfolio and strong
distribution network which have enabled it to grow its policy holders’
surplus. The continued underwriting loss is a cause of concern for State Farm.
It could witness growth in revenue due to increased demand for auto insurance
and retirement products. State Farm’s performance could be adversely affected
by pricing pressure and catastrophic losses.
Strengths
The company has strong policyholders’ surplus which ensures its
ability to absorb possible losses, especially in times of current economic
imbalances. State Farm reported policyholders’ surplus of $61.2 billion as of
December 31, 2010 as compared to $58.1 billion as of December 31, 2009, an
increase of 5.3%. The primary reason for the improved surplus was a $1.9
billion increase in the value of the property-casualty companies' unaffiliated
stock portfolio. State Farm net worth has grown over 40% in the last ten years
since 2000. An increased policyholder surplus ensures long term sustainability
for the company and its ability to pay back policyholders in the form of claims
and dividends.
State Farm is a mutual insurance company, implying that there are no shareholders.
The company is owned entirely by its policyholders and the ownership either
extends to all or certain classes of policyholders. These policyholders can
expect the company's highest priority in safeguarding their interests.
Additionally, the policyholders can be compensated by means of dividends as
well. A shareholding company will have to keep the shareholders interest in
mind as well, which on certain occasions might be unfavorable for the
policyholders. The only problem of a mutual insurance company is trouble in
raising new capital, but with a net worth of $61.2 billion as of December 31,
2010, the company might not need access to the capital markets in the coming
next years.
State Farm offers a variety of insurance products and services in the US
and parts of Canada. It offers automobile, life and annuity, homeowners, condo
owners, renters, loan-term care, and boat insurance products. State Farm
provides its insurance products through a widespread group of its agents. The
company through State Farm Bank offers banking products and services including
checking accounts, savings accounts, money market accounts, home mortgage
loans, visa credit cards, and online banking. It also offers fund management
services. The company’s diversified product portfolio and strong hold in the
market, makes it one of the preferred insurers for the consumers.
State Farm has a strong distribution network which increases its
products reach to its customers. The company distributes its various products
and services through more than 18,000 agents who are qualified professionals
with principal function to assist policyholders. State Farm also operates 30
operations centers and over 300 claims offices to quicken the documentation of
new generation and claims. The agents provide valuable information about
insurance, the risks involved and ways to protect oneself from the risks to
maximize money's worth. The agents select an insurance plan that works for the
needs of auto, home, life and health. The company's agents are also trained to
provide the customer with information on a variety of loan and deposit products
offered through State Farm Bank. The wide spread network of agents in the US
and Canada enables State Farm to be accessible to its present and prospective
clients at all times.
Weaknesses
State Farm, one of the largest homeowners’ insurers in Florida, has been
troubled by continued losses from the region. The Florida region has been
troubled by continued catastrophic events in the past. State Farm was running
in losses of $20m per month because of its policies in Florida which has been
hit by hurricanes like Ivan, Frances, and Wilma in the past, each causing a
damage of at least $8 billion. In early 2010, the company announced that it
will start canceling policies of 125,000 customers beginning August 1, 2010.
State Farm Florida started sending out cancellation notices to nearly a fifth
of its 714,000 customers, majority of them being in the hurricane-prone coastal
regions. State Farm could continue to suffer future losses from the region till
it has huge number of policies written in the region. Additionally, its
withdrawal from the region could affect policyholders’ confidence in other
regions.
The company reported underwriting losses in 2010 which was preceded by
underwriting losses in 2009. The property and casualty companies of State Farm
reported underwriting losses of $3.1 billion and $4 billion in 2010 and 2009,
respectively. State Farm's auto insurance business, which represented 62% of
the property and casualty companies' combined net written premium, also
reported underwriting losses. In 2010, the auto insurance business reported
underwriting loss of $2.7 billion; and Homeowners, CMP, and Other businesses,
together, reported underwriting loss of $0.9 billion. State Farm could consider
changing its pricing strategy, reducing expenses and/or improving quality of
policies written to improve underwriting profits.
Opportunities
Demand for
Retirement Products in the US
The increased demand for retirement solutions due to changing
demographics will open avenues for further revenue generation. According to the
US Census Bureau, between 2010 and 2050, the US is expected to record rapid
growth in its older population. Americans ages 65 and older are expected to
double to 88.5 million by 2050 from the projected population of 40.2 million in
2010. The baby boomers will be entering this category in 2011. As of July 2010,
the age of the baby boomers would be 46 to 64 years old. This will shift the
structure of population aged 65 and older from 13% in 2010 to 19% by 2030. The
baby boomers turning 65 and older are expected to redirect their investment
assets for retirement purposes. In such an environment, the company could focus
on product development, based on the forthcoming requirements of the population
to enhance revenue growth.
Rising Demand for Auto Insurance
State Farm is seeking opportunity in its commercial automobile direct
insurance. The US is the second largest car market in the world and witnessed
growth in the recent past after continued slump, post the economic crisis.
According to industry estimates, in February 2011, the US car market witnessed
a growth of approximately 27% for the sixth straight month of year-on-year
increase. All major car makers including Toyota Motor Corp., General Motors
Co., Chrysler Group LLC, and Ford Motor Co. reported double digit growth in
2010, driven by increased sales in the second half of the year. Being the
largest auto mobile insurer in the US, State Farm could witness increase in its
premium through car insurance.
Threats
The underwriting losses of the company resulted in State Farm increasing
prices; however, this has lead to decline in new insurance. In 2010, the
company increased car insurance rates in 32 states and decreased it in 10
states, resulting increase of 2.8% in auto insurance rate. In the first two
months of 2011, State Farm raised prices in eight states and cut prices in one.
The rate hikes has given an opportunity to other comparatively smaller
insurance providers like Geico Corp. and Progressive Corp.; the third largest
and fourth largest auto insurance provider, respectively; an opportunity to add
policy holders. On the other hand State Farm's policyholder count remained
stable at 42.5 million drivers. With continuous underwriting losses, State Farm
will have to increase prices and faces the risk of losing policy counts to its
nearest rivals even if they raise their own prices from current levels.
Given the nature of State Farm's operations, it is subject to extensive
regulation under the laws of the US and its various states, and the other
jurisdictions in which it operates. Changes in any government regulations are
going to adversely affect the demand for or profitability of the company. State
Farm wanted to raise its rate by 47% in Florida last year because of its huge
losses in the region. The regulators rejected the plea made by the company. In
a settlement with the regulators it was granted to increase rates by just 14.8%
and was not allowed to withdraw from that region completely. Moreover,
government’s involvement in the insurance or reinsurance markets could
displace insurance or reinsurance currently available from the private market
and adversely affect business, results of operations or financial condition.
State Farm General's business is slightly concentrated in California and
Florida. The company is one of the biggest property writers in California and
has a significant exposure in Florida. Both these regions have been witnesses
to earthquakes and floods in the recent past. Owing to the high risk exposure,
reinsurance is also not easy to find. The company's exposure to such
catastrophe prone regions can result in future losses. However, its withdrawal
from the Florida region which shall be carried out in phases might reduce
future claims to a certain extent.
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Corporate Structure News
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State Farm
Mutual Automobile Ins Co |
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Company Name |
Company Type |
Location |
Country |
Industry |
Sales |
Employees |
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Parent |
Bloomington, IL |
United States |
Insurance (Property and Casualty) |
31,584.0 |
68,000 |
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Subsidiary |
Bloomington, IL |
United States |
Insurance (Accident and Health) |
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13,000 |
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Subsidiary |
Bloomington, IL |
United States |
Insurance (Property and Casualty) |
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13,000 |
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Subsidiary |
Bloomington, IL |
United States |
Investment Services |
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10,000 |
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Branch |
Duluth, GA |
United States |
Investment Services |
32.7 |
2,000 |
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Branch |
Austin, TX |
United States |
Investment Services |
350.4 |
1,600 |
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Branch |
Murfreesboro, TN |
United States |
Investment Services |
199.5 |
1,500 |
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Subsidiary |
Bloomington, IL |
United States |
Commercial Banks |
|
1,322 |
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Branch |
Kernersville, NC |
United States |
Investment Services |
284.7 |
1,300 |
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Branch |
St Paul, MN |
United States |
Investment Services |
172.9 |
1,300 |
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Branch |
Charlottesville, VA |
United States |
Investment Services |
172.9 |
1,300 |
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Branch |
Greeley, CO |
United States |
Investment Services |
172.9 |
1,300 |
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Branch |
Bakersfield, CA |
United States |
Consumer Financial Services |
42.3 |
1,300 |
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Branch |
Columbia, MO |
United States |
Investment Services |
262.8 |
1,200 |
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Branch |
Tempe, AZ |
United States |
Investment Services |
159.6 |
1,200 |
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Branch |
Lincoln, NE |
United States |
Investment Services |
33.4 |
1,200 |
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Branch |
Parsippany, NJ |
United States |
Investment Services |
240.9 |
1,100 |
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Branch |
Dupont, WA |
United States |
Investment Services |
146.3 |
1,100 |
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Branch |
Ballston Spa, NY |
United States |
Investment Services |
20.9 |
1,100 |
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Branch |
Winter Haven, FL |
United States |
Investment Services |
133.0 |
1,000 |
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Branch |
Newark, OH |
United States |
Investment Services |
126.4 |
950 |
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Branch |
Columbia, MO |
United States |
Consumer Financial Services |
39.3 |
900 |
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Subsidiary |
Aurora, ON |
Canada |
Investment Services |
|
900 |
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Branch |
Burlington, ON |
Canada |
Investment Services |
45.5 |
160 |
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Branch |
Mississauga, ON |
Canada |
Investment Services |
19.8 |
70 |
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Branch |
London, ON |
Canada |
Investment Services |
11.4 |
40 |
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Branch |
Calgary, AB |
Canada |
Investment Services |
5.7 |
20 |
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Branch |
Kingsville, ON |
Canada |
Investment Services |
1.1 |
4 |
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Branch |
Brantford, ON |
Canada |
Insurance (Property and Casualty) |
0.9 |
3 |
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Branch |
Windsor, ON |
Canada |
Investment Services |
0.8 |
3 |
|
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Branch |
Tulsa, OK |
United States |
Investment Services |
21.3 |
800 |
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Branch |
Rohnert Park, CA |
United States |
Investment Services |
57.9 |
720 |
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Branch |
West Lafayette, IN |
United States |
Investment Services |
153.3 |
700 |
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Branch |
Dallas, TX |
United States |
Insurance (Property and Casualty) |
93.1 |
700 |
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Branch |
New Albany, OH |
United States |
Investment Services |
93.1 |
700 |
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Branch |
Westlake Village, CA |
United States |
Investment Services |
142.4 |
650 |
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Branch |
Portage, MI |
United States |
Investment Services |
131.4 |
600 |
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Branch |
Salem, OR |
United States |
Investment Services |
122.6 |
560 |
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Branch |
El Paso, TX |
United States |
Investment Services |
53.2 |
400 |
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Branch |
Irvine, CA |
United States |
Investment Services |
65.7 |
300 |
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Branch |
Roseville, CA |
United States |
Investment Services |
65.7 |
300 |
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Branch |
Canonsburg, PA |
United States |
Investment Services |
65.7 |
300 |
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Branch |
Livonia, MI |
United States |
Investment Services |
54.8 |
250 |
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Branch |
Birmingham, AL |
United States |
Investment Services |
31.8 |
250 |
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Branch |
San Jose, CA |
United States |
Investment Services |
49.3 |
225 |
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Branch |
Arlington Hts, IL |
United States |
Investment Services |
43.8 |
200 |
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Branch |
Columbia, SC |
United States |
Investment Services |
39.4 |
180 |
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Branch |
Decatur, GA |
United States |
Investment Services |
35.0 |
160 |
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Branch |
Elmhurst, IL |
United States |
Investment Services |
32.9 |
150 |
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Branch |
Bothell, WA |
United States |
Investment Services |
32.9 |
150 |
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Branch |
South Jordan, UT |
United States |
Investment Services |
30.7 |
140 |
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Branch |
St Louis, MO |
United States |
Investment Services |
27.4 |
125 |
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Branch |
Tualatin, OR |
United States |
Investment Services |
26.5 |
121 |
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Branch |
Brookfield, WI |
United States |
Investment Services |
26.3 |
120 |
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Branch |
New Orleans, LA |
United States |
Investment Services |
25.4 |
116 |
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Branch |
Minneapolis, MN |
United States |
Investment Services |
25.2 |
115 |
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Branch |
Wyoming, MI |
United States |
Investment Services |
24.1 |
110 |
|
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Branch |
Rochester, NY |
United States |
Investment Services |
21.9 |
100 |
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Branch |
Kennesaw, GA |
United States |
Investment Services |
21.9 |
100 |
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Branch |
Melville, NY |
United States |
Investment Services |
21.9 |
100 |
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Branch |
Troy, MI |
United States |
Investment Services |
21.9 |
100 |
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Branch |
Charlotte, NC |
United States |
Investment Services |
21.9 |
100 |
|
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Branch |
Tukwila, WA |
United States |
Investment Services |
21.9 |
100 |
|
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Branch |
Raleigh, NC |
United States |
Investment Services |
21.9 |
100 |
|
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Branch |
Salem, OR |
United States |
Investment Services |
21.9 |
100 |
|
|
Branch |
Kennesaw, GA |
United States |
Investment Services |
21.9 |
100 |
|
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Branch |
Fresno, CA |
United States |
Investment Services |
21.9 |
100 |
|
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Branch |
Las Vegas, NV |
United States |
Investment Services |
20.8 |
95 |
|
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Branch |
Ormond Beach, FL |
United States |
Investment Services |
19.9 |
91 |
|
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Branch |
West Des Moines, IA |
United States |
Investment Services |
19.7 |
90 |
|
|
Branch |
La Vista, NE |
United States |
Investment Services |
19.7 |
90 |
|
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Branch |
Mililani, HI |
United States |
Investment Services |
19.7 |
90 |
|
|
Branch |
Uniontown, OH |
United States |
Investment Services |
18.0 |
82 |
|
|
Branch |
Midlothian, VA |
United States |
Investment Services |
17.5 |
80 |
|
|
Branch |
Livonia, MI |
United States |
Investment Services |
17.5 |
80 |
|
|
Branch |
Burnsville, MN |
United States |
Investment Services |
17.5 |
80 |
|
|
Branch |
Jacksonville, FL |
United States |
Consumer Financial Services |
10.6 |
80 |
|
|
Branch |
Sugar Land, TX |
United States |
Investment Services |
16.4 |
75 |
|
|
Branch |
Boise, ID |
United States |
Investment Services |
15.1 |
69 |
|
|
Branch |
Anchorage, AK |
United States |
Investment Services |
14.2 |
65 |
|
|
Branch |
Spokane, WA |
United States |
Investment Services |
14.2 |
65 |
|
|
Branch |
Chicago, IL |
United States |
Investment Services |
14.2 |
65 |
|
|
Branch |
Houston, TX |
United States |
Investment Services |
13.1 |
60 |
|
|
Branch |
N Little Rock, AR |
United States |
Investment Services |
13.1 |
60 |
|
|
Branch |
Corpus Christi, TX |
United States |
Investment Services |
13.1 |
60 |
|
|
Branch |
Macon, GA |
United States |
Investment Services |
12.0 |
55 |
|
|
Branch |
Waco, TX |
United States |
Investment Services |
12.0 |
55 |
|
|
Branch |
Fairmont, WV |
United States |
Investment Services |
12.0 |
55 |
|
|
Branch |
New Hyde Park, NY |
United States |
Investment Services |
11.2 |
51 |
|
|
Branch |
Springfield, MO |
United States |
Investment Services |
11.0 |
50 |
|
|
Branch |
El Paso, TX |
United States |
Investment Services |
11.0 |
50 |
|
|
Branch |
North Charleston, SC |
United States |
Investment Services |
11.0 |
50 |
|
|
Branch |
Peoria, IL |
United States |
Investment Services |
11.0 |
50 |
|
|
Branch |
Tulsa, OK |
United States |
Investment Services |
11.0 |
50 |
|
|
Branch |
Montgomery, AL |
United States |
Investment Services |
11.0 |
50 |
|
|
Branch |
Canton, MI |
United States |
Investment Services |
11.0 |
50 |
|
|
Branch |
Flowood, MS |
United States |
Investment Services |
11.0 |
50 |
|
|
Branch |
Westerville, OH |
United States |
Investment Services |
11.0 |
50 |
|
|
Branch |
Indianapolis, IN |
United States |
Investment Services |
11.0 |
50 |
|
|
Branch |
Valparaiso, IN |
United States |
Investment Services |
11.0 |
50 |
|
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Branch |
Corinth, TX |
United States |
Investment Services |
11.0 |
50 |
|
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Branch |
Knoxville, TN |
United States |
Investment Services |
9.9 |
45 |
|
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Branch |
Orange Park, FL |
United States |
Investment Services |
9.6 |
44 |
|
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Branch |
Norman, OK |
United States |
Investment Services |
8.8 |
40 |
|
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Branch |
Billings, MT |
United States |
Investment Services |
8.8 |
40 |
|
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Branch |
Wichita, KS |
United States |
Investment Services |
8.8 |
40 |
|
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Branch |
Dallas, TX |
United States |
Investment Services |
8.8 |
40 |
|
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Branch |
Brooklyn Center, MN |
United States |
Investment Services |
8.8 |
40 |
|
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Branch |
Lubbock, TX |
United States |
Investment Services |
8.8 |
40 |
|
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Branch |
Lexington, KY |
United States |
Investment Services |
8.3 |
38 |
|
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Branch |
Springfield, IL |
United States |
Investment Services |
8.1 |
37 |
|
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Branch |
Indianapolis, IN |
United States |
Investment Services |
7.9 |
36 |
|
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Branch |
Bedford, NH |
United States |
Investment Services |
7.7 |
35 |
|
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Branch |
Mishawaka, IN |
United States |
Investment Services |
7.4 |
34 |
|
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Branch |
Rockford, IL |
United States |
Investment Services |
7.4 |
34 |
|
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Branch |
Wilmington, NC |
United States |
Investment Services |
7.2 |
33 |
|
|
Branch |
Cedar Rapids, IA |
United States |
Investment Services |
6.6 |
30 |
|
|
Branch |
Asheville, NC |
United States |
Investment Services |
6.6 |
30 |
|
|
Branch |
Columbus, GA |
United States |
Investment Services |
6.6 |
30 |
|
|
Branch |
Durham, NC |
United States |
Investment Services |
6.6 |
30 |
|
|
Branch |
Madison, WI |
United States |
Investment Services |
6.6 |
30 |
|
|
Branch |
Surprise, AZ |
United States |
Investment Services |
6.6 |
30 |
|
|
Branch |
Flint, MI |
United States |
Investment Services |
6.6 |
30 |
|
|
Branch |
Mcallen, TX |
United States |
Investment Services |
6.6 |
30 |
|
|
Branch |
Myrtle Beach, SC |
United States |
Investment Services |
6.6 |
30 |
|
|
Branch |
Dover, DE |
United States |
Investment Services |
6.6 |
30 |
|
|
Branch |
Mobile, AL |
United States |
Investment Services |
6.6 |
30 |
|
|
Branch |
Fort Wayne, IN |
United States |
Investment Services |
6.6 |
30 |
|
|
Branch |
Evansville, IN |
United States |
Investment Services |
6.4 |
29 |
|
|
Branch |
New Albany, IN |
United States |
Investment Services |
6.1 |
28 |
|
|
Branch |
Weatherford, TX |
United States |
Investment Services |
6.1 |
28 |
|
|
Branch |
San Francisco, CA |
United States |
Investment Services |
5.9 |
27 |
|
|
Branch |
Southaven, MS |
United States |
Investment Services |
5.7 |
26 |
|
|
Branch |
San Ramon, CA |
United States |
Investment Services |
5.7 |
26 |
|
|
Branch |
Beaumont, TX |
United States |
Investment Services |
5.5 |
25 |
|
|
Branch |
Austin, TX |
United States |
Investment Services |
5.5 |
25 |
|
|
Branch |
Cedar Rapids, IA |
United States |
Investment Services |
5.5 |
25 |
|
|
Branch |
Saginaw, MI |
United States |
Investment Services |
5.5 |
25 |
|
|
Branch |
Orlando, FL |
United States |
Investment Services |
5.5 |
25 |
|
|
Branch |
Biloxi, MS |
United States |
Investment Services |
5.5 |
25 |
|
|
Branch |
Southborough, MA |
United States |
Investment Services |
5.3 |
24 |
|
|
Branch |
Champaign, IL |
United States |
Investment Services |
4.8 |
22 |
|
|
Branch |
Conyers, GA |
United States |
Investment Services |
4.6 |
21 |
|
|
Branch |
Moline, IL |
United States |
Investment Services |
4.4 |
20 |
|
|
Branch |
Nacogdoches, TX |
United States |
Investment Services |
4.4 |
20 |
|
|
Branch |
Mesquite, TX |
United States |
Investment Services |
4.4 |
20 |
|
|
Branch |
Jacksonville, FL |
United States |
Investment Services |
4.4 |
20 |
|
|
Branch |
Virginia Beach, VA |
United States |
Investment Services |
4.4 |
20 |
|
|
Branch |
Chicago, IL |
United States |
Investment Services |
4.4 |
20 |
|
|
Branch |
Arlington, TX |
United States |
Investment Services |
4.4 |
20 |
Executives Report
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State Farm inks
marketing deal with 'Cars 2'
Pantagraph (Bloomington, IL): 01 July 2011
[What follows is the full text of the news story.]
July
01--BLOOMINGTON --Lightning McQueen wants to win the World Grand Prix, and
Mater gets caught up in a su-per-secret spy mission.
In the midst of those
adventures, State Farm Insurance Cos. also hopes the pals from "Cars
2" will help it build its own business in an increas-ingly competitive
industry.
The
Bloomington-based insurance giant inked another marketing deal with
Disney/Pixar in conjunction with the sequel, which opened as the top-grossing
movie in theaters last weekend. A similar deal was in place for the original
"Cars" movie in 2006.
"We just saw
an opportunity to connect to the story in the movie and the things in stood for
... it just felt really true to the (State Farm) brand," said Tim Van
Hoof, advertising director for State Farm. "Dis-ney has a very powerful
brand that connects with young families. That's a great demographic for
us."
Van Hoof declined
to discuss financial terms of the deal, but advertising spending in the
insurance industry is competitive and growing.
Advertising Age
estimates that State Farm Mutual Auto Insurance Co. spent $665.6 million on
U.S. advertising in 2010, ranking it 57th among the top 100 national advertisers.
Among its closest competitors, Allstate Corp. spent $541.7 million, ranking it
65th; Progressive Corp. spent $743.4 million, ranking it 51st; and Berkshire
Hathaway, which owns businesses including rival Geico Corp., spent $1.34
billion, ranking it 23rd.
And Kantar Media
reported that among the top 10 advertising sectors, spending in the
tenth-ranked insurance industry grew at the fastest pace, 29 percent, for the
first quarter of 2011, to more than $1.2 billion.
"State Farm
has spent a lot of time in the last five, 10 years going after the younger
market," said Jeri Beggs, an associate professor of marketing at Illinois
State University. "They're very comfortable buying (insurance) online;
they really don't need to see some-body."
Beggs said trying
to reach that market through the sponsorship was "just such a
natural."
That, despite the
fact that State Farm does not appear in the movie. Instead, it is linked
through its "Agents on a Mission" promotion.
The campaign
actually began months ago and included appearances by life-sized Cars
characters at 30 cities across the country prior to the movie's opening.
Online, people can now enter the "Agents on a Mission" sweepstakes,
which includes 18,000 prizes, a cache that represents State Farm's 18,000
agents. Agents distribute promotional giveaways.
Sponsorships are
becoming increasing popular with companies, Beggs said, in part because today's
technology allows for 'appointment TV,' while the Internet and social media
create new opportunities.
"It's just
battling the technology, battling the clutter, trying to do something new and
different to capture consumers' attention," she said.
"There's so
many people just zipping through those commercials."
___
To see more of The
Pantagraph, or to subscribe to the newspaper, go to http://www.pantagraph.com.
Copyright (c)
2011, The Pantagraph, Bloomington, Ill.
Distributed by
McClatchy-Tribune Information Services.
For more
information about the content services offered by McClatchy-Tribune Information
Services (MCT), visit www.mctinfoservices.com, e-mail
services@mctinfoservices.com, or call 866-280-5210 (outside the United States,
call +1 312-222-4544)
|
|
|
Cancellation to litigation: failure to update new address prompts
lawsuit against State Farm
American Agent &
Broker
01 May 2011
By Zalma, Barry
|
[What follows is
the full text of the article.] Litigation
between an insurer and its insured is always expensive and often
unproductive. When insurers and their agents act professionally and provide
the service promised, they avoid litigation. Those who are careless,
untrained and lack any knowledge of local law and regulations are almost
guaranteed to become parties to a lawsuit. Insurance
companies and insurance agents must be familiar with the statutory law in each
jurisdiction where business is done controlling cancellation. Each state has
its own rules and regulations concerning proper notice and how that notice
must be given. State Farm Mutual Automobile Insurance learned that lesson
when its agent failed to enter into its an insured's change of address. In
Andre Banton v. State Farm Mutual Automobile Insurance Co., No. 3D09-3359
(Fla.App. 02/23/2011), the insurer mailed a non-payment notice of
cancellation to the insured's prior address. Although the insured had advised
the agent of his new address, that information did not make it to the
insured. When the agent received a copy of the notice of cancellation, the
agent did not advise the company that the address had changed and failed to
contact the insured to work around the failure to pay premium. In essence,
the agent did nothing. Andre Banton,
the insured and plaintiff, admitted that he received actual notice of the
cancellation from the State of Florida (not the insurer) one day before the accident
for which he sought coverage. He did nothing to reinstate his insurance after
he received actual notice. However, Banton proved that he never received the
notice of cancellation mailed by State Farm. As a result of
the accident and the denial of his claim, Banton sued State Farm for coverage
and appealed from a final summary judgment in favor of State Farm Automobile
Insurance Co. on a claim for comprehensive loss benefits. Banton filed a
complaint against State Farm for benefits under an insurance policy for
losses sustained when his automobile was stolen. State Farm denied coverage
asserting non-payment of premium prior to the loss and sought summary
judgment predicated upon cancellation that it alleged was properly mailed to
Banton to his last known address for the policy as required by statute.
Banton claimed that several weeks prior to the date of loss, he went to a
State Farm office, verbally informed an agent that he moved to a different
residence, and was told that the new address would be entered into State
Farm's. Banton admitted that he received, approximately one day before the
date of loss, a letter from the Florida Dept. of Motor Vehicles stating the
policy had been cancelled. State Farm argued in the alternative that
regardless of the statute, Banton's deposition testimony demonstrated
Banton's actual notice of the policy's cancellation, which should prohibit
Banton's claim from being enforced. The trial court
granted summary judgment in favor of State Farm because Banton had actual
notice of the cancellation via the DMV letter establishing that State Farm
effectively cancelled the policy. The Florida Court of Appeals reversed
because the insurer failed to properly cancel the policy of insurance in
accordance with state statutes. Florida's
statutory language was the basis for the Court of Appeals determination that
the trial court erred in granting summary judgment. Florida statutes provide
that no notice of cancellation of a policy shall be effective unless mailed
or delivered by the insurer to the named insured and to the named insured's
insurance agent at least 45 days prior to the effective date of cancellation,
except that, when cancellation is for nonpayment of premium, at least 10
days' notice of cancellation accompanied by the reason therefore shall be
given. Here, Banton's
receipt of the notice of cancellation from State Farm is entirely in dispute,
as the trial court correctly found. There is no legal authority to support
State Farm's argument that actual notice of an automobile insurance policy
cancellation can be imputed to an insured by any means other than that which
is provided by the plain text of the statute. Accordingly, the Court of
Appeals reversed the trial court's entry of summary judgment and remanded the
case for proceedings consistent with this opinion, that is, give the insured
the coverage. This case
teaches multiple important lessons for an insurance agent or broker that
applies to every insured and every policy of insurance: (1) Insurance is
a service business where the key to being an effective agent or broker is to
provide service to the insured. a. When an
insured advises a change of address that information must be delivered to the
insurer immediately by fax, email or entry into the insurer's computer system b. Inform the
insured about the impact of a failure to pay premium promptly c. When the
insured has not paid shortly before the due date, the agent should remind the
insured of the obligation d. When the
insured needs assistance within the power of the agent it should be provided
promptly. (2) The agent
must have a system in place to personally contact an insured who fails to pay
premium. (3) When the
insurer issues a notice of cancellation with a copy to the agent it is
imperative that the agent contact the insured to make sure he or she received
the notice and that the cancellation can be voided if premium is paid. a. If nothing
else it will earn the agent commission it would not otherwise earn b. It will
protect the insured c. It will
protect the insurer and keep them properly on a risk. Failure to
provide the service will cause the insured, the insurer, and usually the
agent or broker to become a party to a lawsuit. By providing the service an
agent or broker is trained to provide litigation and expensive errors and
omissions claims can be avoided. More on the Web: * Bad faith:
Wronged insureds can collect punitive, consequential damages * Read your
application * "Illegal
rescission" is on oxymoron Read these
related articles at PropertyCasualty360.com Barry Zalma,
Esq., CFE, is a California attorney specializing in insurance coverage,
insurance claims handling and fraud who serves as a consultant and expert for
insurers and policyholders. He founded Zalma Insurance Consultants in 2001
and serves as its senior consultant. He published the e-books,
"Rescission of Insurance in California," "Insurance
Fraud," "Zalma on Diminution in Value Damages," "Arson
for Profit" and "Zalma on California Claims Regulations." A
twice monthly newsletter, "Zalma's Insurance Fraud Letter," is
available at his website www.zalma.com. Zalma now blogs as "Zalma on
Insurance" at http://barryzalma.blogspot.com. Contact him at
zalma@zalma.com.
|
|
Bad faith: wronged insureds can collect punitive, consequential damages
National Underwriter Property & Casualty Insurance
11 April 2011
By Reitz, Diana B.
|
[What follows is
the full text of the article.] THE TERM
"bad faith" is one of the most disparaging terms risk managers can
level against their insurers. Bad-faith allegations are made after a claim
has been poorly handled in the eyes of the risk manager, with a lawsuit often
following. Successfully
proving a bad-faith allegation requires proof of more than mere negligence.
The insurer must have knowingly acted in an unreasonable manner. The damages
facing an insurer found guilty of bad-faith dealings are more than financial.
The insurer's reputation also can be seriously damaged. The stakes are so
high, in fact, that some insurers have sued their policyholders for reverse
bad faith, alleging that because the policyholder also acted in bad faith,
the insurer's actions should be negated. With so much on
the line, it's important to know what really constitutes "bad
faith." At its heart, it is the intentional failure by an insurer to
perform the duties of good faith and fair dealing that are implied in law. An insurer may
be acting in bad faith when it refuses to pay a claim and has no reasonable
basis for doing so; or when it has intentionally failed to determine whether
it had a reasonable basis for so refusing. This area of
insurance law has been developed by case law and legislative or regulatory
action in almost all jurisdictions. Additionally, many states have recognized
the tort of bad faith in insurance transactions. Bad-faith cases
have arisen around an insurer's failure to handle property-insurance claims
in good faith; its failure to reasonably settle liability claims within policy
limits; and its failure to tender a defense under the duty to defend. All contracts
have an implied promise of good faith and fair dealing. Generally, however,
damages for the breach of the requirement of good faith and fair dealing are
contractual in nature. In other words,
the amount of possible damages that will be paid for breaching the contract
are defined in the contract. In a typical contractual claim, consequential
and punitive damages are rarely, if ever, available to the aggrieved party. In insurance
transactions, the requirements of good faith and fair dealing are more
stringent, with broader damages. This more stringent requirement arises out
of the importance of insurance to society and the general concept that the
bargaining power of the policyholder and the insurance company are not equal. Unlike typical
contractual claims, consequential and punitive damages are often available to
parties that can prove the insurer in some way acted in bad faith. Courts have
defined bad faith in various ways, but the definitions often have synonymous
meanings. As noted by the
court in Zilisch v. State Farm Mutual Automobile Insurance Company, "The
appropriate inquiry is whether there is sufficient evidence from which
reasonable jurors could conclude that in the investigation, evaluation and
processing of the claim, the insurer acted unreasonably and either knew or
was conscious of the fact that its conduct was unreasonable." DEVELOPMENT OF
BAD FAITH The tort of bad
faith is a fairly recent one that arose in the second half of the 20th
century. In liability settings, extra-contractual damages have been available
to insureds since the 1940s, when the courts began to hold insurers
responsible for excess judgments over policy limits in cases that the insurer
refused to settle. In other words,
the insurer could have reasonably settled a liability claim within policy
limits but decided, at the insured's expense, to "try their luck"
at trial. The development
of bad-faith principles in the handling of first-party claims and the
awarding of punitive damages originated more recently--during the 1980s in
most jurisdictions. California was
the first state to hold that there is an independent tort action for the
bad-faith handling of claims in a first-party context. In California's
Gruenberg v. Aetna Ins. Co., the insured owner of a cocktail lounge became
involved in an argument with a firefighter at the scene of a fire at the
insured's premises. The owner was arrested and subsequently charged with
arson and defrauding an insurer. After the fire
the insurance company demanded in writing that the insured submit to sworn
examination. The insured's lawyer informed the insurer that no statements
would be made until the resolution of the arson charge. The insurer
refused to delay the sworn examination and denied the loss for failure to
comply with policy conditions. The court dismissed the charges against the
insured for lack of probable cause, and the insured informed the insurer that
he would now comply with the examination request. The company reaffirmed the
denial of coverage. Subsequently,
the insured brought an action, stating that as a result of the outrageous
conduct and bad faith of the insurer, he suffered economic damage, emotional
distress, loss of earnings and other damages. He sought compensatory and
punitive damages. The insured
prevailed. The court held that Aetna's refusal (without proper cause) to pay
the covered claim gave rise to a tort cause of action for breach of an
implied covenant of good faith and fair dealing. EVOLUTION OF THE
CONCEPT Generally, the
evolution of the doctrine in various jurisdictions has been a three-step
process: * Recognition
that insurance contracts contain a duty of good faith and fair dealing. If
that duty is breached, the law recognizes extra-contractual damages. Such
extra-contractual damages include amounts the insured has to pay in excess of
policy limits when the insurer refuses to settle within the limits of
liability; attorney's fees; and other consequential damages. * Policyholders
have a tort action for bad faith dealing on the part of insurance companies
which involves malice or fraud. *
Extra-contractual damages, up to and including punitive awards in some
jurisdictions, are available for actions not amounting to fraud or malice by
the insurer (i.e., when an insurer knows that it does not have a reasonable
basis to deny a claim but denies it anyway). FURTHER REFINING
OF BAD FAITH FOR FIRST-PARTY CLAIMS The standards
used to prove or disprove bad-faith allegations arising from first-party
claims have been refined with time. Typical arguments include: Good-faith
error: An insurance company may make a good-faith erroneous decision, or at
least a decision that is later disagreed with by a fact finder, without
subjecting itself to bad-faith liability. Prolonged
investigation without cause: An Alabama court held that an insurer might open
itself to bad-faith damages for prolonging an investigation beyond reasonable
limits. Placing
extra-contractual limitations on coverage: A Tennessee court of appeals held
that placing a limitation on coverage that is not contained in the policy
gives rise to bad-faith damages under the state's "refusal to pay in
good faith" insurance statute. Nonrenewal or
policy termination: The Alabama Supreme Court has held that the tort of bad
faith does not apply to the insurer's alleged bad-faith nonrenewal of a
policy. REVERSE BAD
FAITH Insurers have
recently begun to sue their customers for "reverse bad faith,"
which may be defined as the "tortious breach of the covenant of good
faith and fair dealing by the insureds." In other words,
insurers are holding their insureds to the same standards that insurers must
meet. At least two states, California and Ohio, have declined to allow such
actions. In Stephens v.
Safeco Ins. Co., adjudicated in Montana, both the insured and the insurer
were held to have acted in bad faith in the settlement of a property claim.
The jury had assessed the insured's mental-distress damages under his bad
faith claim as $38,000. However, the
jury had allocated the insured's wrongful conduct at 53 percent, and the
insurer's at 47 percent. The insurer argued that the insured could recover
nothing on the bad-faith claim, as the insured's wrongful conduct exceeded
that of the insurer's. The court
disagreed. The court held that the tort of bad faith serves to discourage
oppression in contracts that necessarily give one party a superior position
(such as insurance contracts) and that the action is not available to the
party in the superior position. Therefore, the insurer could not use the
insured's bad faith to off-set its own bad-faith conduct. * Diana B.
Reitz, CPCU, AAI, is editorial director, Business Compliance Dept., Reference
Division, The National Underwriter Co., in Erlanger, Ky.
|
|
Louisiana's high insurance rates blamed on several factors
New Orleans CityBusiness
31 March 2011
By David Muller
Insurance firms
Wenatchee Business
Journal
01 January 2011
|
[What follows is
the full text of the article.] INSURANCE FIRMS Listed by 2010
premium volume. Firm name Phone Address Fax Rank Web site E-mail 1
Sterling Health Plans
509-662-0363 620 N. Emerson, Suite 300, 509-662-7876 Wenatchee, WA 98801 www.sterlingplans.com 2
Northwestern Mutual
509-662-0200 Financial Network 509-663-3933 18 S. Mission, Suite 200, david.parson@nmfn. Wenatchee, WA 98801 com www.parsons-group.com 3
AAA Insurance
1-877-222-4678 221 N. Mission, Wenatchee, 509-662-1751 WA 98801 brendapickering@ www.aaawa.com aaawin.com 4
Martin-Morris Agency Inc.
509-663-1331 925 Fifth St., Suite 509-665-0827 Wenatchce, WA 98801 www.martinmorris.com 5
Mitchell, Reed and Associates
509-665-0500 Inc. 509-664-4004 124 E. Penny Road, No. 101, miker@mitchellreed- Wenatchee, WA 98801 insurance.com www.mitchellreedinsurance.com 6
Masterplan Financial and
509-782-0572 Insurance Solution Inc. 509-782-0561 1013 Cottage Ace., Suite 2, paul@masterplanfin. Cashmere (P.O. Box 394, com Cashmere, WA 98815) 7 John
White--State Farm
509-662-1488; 800- Insurance 285-7027 115 N. Chelan St., Wenatchee 509-662-2092 (P.O. Box 2748, Wenatchee, john.white.b7wz@ WA 98807) statefarm.com johnwhiteins.com 8
Hill Insurance Agency
509-782-3829 113 Cottage Ave., Cashmere 509-782-2117 (P.O. Box K, Cashmere, khill@farmersagent. WA, 98815) com www.farmersagent.com/khill 9
Allstate Insurance
509-664-7058 342 N. Wenatchee Ave. jasonellard@ Wenatchee, WA 98801 allstate.com 10
Metropolitan Life ins. Company
509-662-4443 10 First St. Suite 122, 509-662-7798 Wenatchee, WA 98801 tmcnair@metlife.com; www.tommcnair@netlife.com bmcnair@metlife. com 11
Brad Huddle Agency
509-664-4000 235 n Mission St., Wenatchee, 509-664-4040 WA 98801 bradhuddle@ www.allstateagencies.com/ allstate.com bradhuddle 12
Libke Insuranee Associates Inc.
509-662-1800 600 N. Chelan St., Wenatchee
(P.O509-662-1800 WA 98807) info@libke.com www.libke.com 13
Country Insurance and
509-663-1927 Financial Services 509-662-9400 25 N. Wenatchee Ave., Suite kim.mcgregor@coun- 220, Wenatchee, WA 98801 tryfinancial.com www.countryfinancial.com 14
Country Financial
509-888-5433 3 N Wenatchee Aye, Ste. 2, 509-888-0899 Wenatchee, WA 98801 zane.bock@countryfi- www.countryfinancial.com nancial.com 15
Country Financial
509-663-3800 1 S Chelan, Ste. A, 509-663-6880 Wenatchee, WA 98801 laurie.mooney@coun- www.countryfinancial.com tryfinancial.com 16
Country Financial
509-884-9505 636 Valley Mall Pkwy, Ste, 509-8848845 211, East Wenatchee, WA david.phillips@coun- 98802 tryfinancial.com www.countryfinancial.com 17
Country Financial
509-682-1433 144 E. Woodin Ave., (PO Box 509-692-9352 98, Chelan, WA 98816) dulce.faria-negrete@ www.countryfinancial.com countryfinancial. com 18
Linda Sasseen, Agent, State
509-662-2251 Farm Insurance 509-664-3291 234 S. Mission St., Wenatchee finda@findasasseen. (P.O. Box 3143, Wenatchee, net WA 98807) www.statefarm.com 19
Montgomery Insurance Agency
509-663-0169 31 N. Chelan Ase., Wenatchee 509-665-8537 (P.O. Box 1925, Wenatchee, WA 98807) 20
Dorsey & Sutor Insurance Inc.
509-884-1234 304 Grant Road Suite 3. East 509-884-9664 Wenatchee (P.O. Box 7296, East Wenatchee, WA 98802) 21
Tom Clark--State Farm
509-884-1441 Insurance 509-884-7143 478 Grant Road, East tom.clark.c611@ Wenatchee, WA 98802 statefarm.com www.statefarm.com 22
Farmers Insurance
509-663-4698 819 N. Miller, Suite 1-B, 509-662-6759 Wenatchee, WA 98801 www.farmersinsurance.com 23
Ness Insurance Agency Inc.
509-662-1100 766 S. Mission, Wenatchee 509-662-8274 (P.O. Box 3083, Wenatchee, lv2insr@nwimet WA 98807-3083) 24
Thrivent Financial
509-884-0444 636 Valley Mall Parkway, No. conrad.melius@ 210, East Wenatchee, thrivent.com WA 98802 25
Bruce G. Cheadle--State Farm
509-782-1659 Insurance and Financial 509-782-3428 Services 301 Aplets Way, Cashmere, WA 98815 www.statefarm.com 26
Ernie Hobbs--State Farm
509-662-9574 Insurance Agency 509-662-8199 129 Methow St., Wenatchee ernie@erniehobbs.net (P.O. Box 2626, Wenatchee, WA 98807) www.erniehobbs.net 27
Smithson Insurance Services
509-884-5195 720 Valley Mall Parkway, East 509-884-3902 Wenatchee, WA 98802 ksmithson@verizon. net 2010 Premium
volume Top executive Year established # of agents Parent company, Rank # of employees headquarters 1 Katrina
Borth, $64 billion market manager 1880 34 agents Munich Re, Munich, 40 employees Germany 2
David W. Parsons, $1.1
billion (life CLU, ChFC, insurance); $70.1 managing director million investment 7 agents assets under 2 employees management 1981 Northwestern
Mutual Financial
Network; Milwaukee,
Wisc. 3
Brenda Pickering, $80
million agent; Joe 1904 Gluzinski, agent AAA Insurance, 1745 2 agents 114th Ave. S.E., 2 employees Bellevue 4
Dave Street, V P $22
million 5 agents 1937 8 employees Martin-Morris Agency, Quincy 5
Mike Reed, $13
million president 1917 11 agents Cashmere Valley 12 employees Bank 6
Paul Wendlandt $4.8
million 1 agent 2002 1 employee Independent broker 7
John White $4 million 4 agents 1968 5 employees State Farm, Bloomington,
Ill. 8
Kale J. Hill $2 million 2 agents 1991 2 employees Farmers Insurance, Los Angeles, Calif. 9
Jason Ellard No
response 1 agent 2003 1 employee Allstate Insurance 10
Thomas L, McNair, $60 million CLU, ChFe; 1982 Benjamin McNair Metropolitan Life 3 employees Ins Co., NY, NY 11
Brad Huddle, No
response agency owner 1981 3 agents Allstate, 4 employees Worthbrook, IL 12
Jeffrey Round, 19,000,000 president 1917 23 agents Libke Insurance 26 employees Associates, Wenatchee 13
Kim McGregor, No
response area manager no response 3 agents Country Financial, 1 employees Bloomington, Ill. 14
Kim McGregor, No
response area manager no response 2 agents Country Financial, 2 employees Bloomington, Ill. 15
Kim McGregor, No
response area manager no response 1 agent Country Financial, 1 employee Bloomington, Ill. 16
Kim McGregor, No
response area manager no response 1 agent Country Financial, 1 employee Bloomington, Ill. 17
Kim McGregor, No
response area manager no response 1 agent Country Financial, 1 employee Bloomington, Ill. 18
Linda Sasseen, No
response owner/agent 1990 5 agents State Farm Insurance, 5 employees Bloomington, Ill. 19
Mike and Leisa No
response Montgomery 1989 4 agents Montgomery Insurance, 4 employees Wenatchee 20
Don Dorsey No
response 4 agents 1982 (1943 in 3 employees Waterville) Dorsey &
Sutor, East Wenatchee 21
Tom Clark No
response 4 agents 1992 2 employees State Farm Insurance, Bloomington,
Ill. 22
Kriss Carpenter, No
response district manager No response 3 agents Farmers Insurance, 5 employees Los Angeles, Calif. 23
Walter Ness No
response 3 agents 1974 1 employee Ness Insurance Agency, Wenatchee 24
Conrad Melius No
response 2 agents 1989 2 employees Thrivent Financial, Appleton, Wis. 25
Bruce Cheadle No
response 2 agents 1995 State Farm
Insurance, Bloomington, Ill. 26
Ernie Hobbs No
response 1 agent 1972 3 employees State Farm Insurance, Dupont, WA
(Pacific Northwest
zone); Bloomington, Ill. 27
Kathy Z. Smithson, No
response LUTCF 1981 1 agent Smithson Insurance 2 employees Services, East Wenatchee Types of insurance and other Rank services offered 1
Offices include Kennewick, Yakima, Wenatchee. Medicare supplements, Medicare Advantage Option I and Option II with prescription drug plans; two Medicare approved prescription drug plans; long-term care, cancer policies, life insurance, critical illness. 2
Life insurance, disability insurance, annuities, long-term care. investments, personal, business and estate planning and analysis, retirement plans, employee benefits. 3
Auto, home, boat, RV, motorcycle, life, annuities. 4
Auto, home, umbrella, watercraft, business owners, farm/orchard, package policies, individual & group benefits, non-profit programs, city & school districts division. 5
All lines of insurance. 6
Group and individual health insurance, group life and dental, group disability, individual medical, dental, disability, life, long-term care, annuities, mutual funds, retirenlent plans 7
Auto, home, boat, business, life, long-term care, bonds, annuities, IRA, Medicare supplement, Medicare Part D, State Farm, bank (vehicle, RV, boat loans), CDs, money market, Visa cards. 8
All lines of insurance for individuals and small businesses. 9
Auto, home, life, business, retirement, RV., boat, mortgage, ATV. 10
individual and group life, disability, long-term care and medical insurance plans. Annuities: retirement and estate planning and analysis. 11
Auto, home life, renters, condo, business, boats, motorcycle. 12
Auto, home, business, farm, life, health, bonds, boat & motorcycles, annuities, long-term care. Offices in Wenatchee, Chelan, Twisp, Ellensburg, Pasco and Omak 13
Auto insurance, Home insurance Life insurance, Farm ranch and crop insurance, Disability income insurance, Annuities, Mutual funds, Managed accounts, Trusts, Retirement, Education funding, Business retirement services 14
Auto insurance, Home insurance Life insurance, Farm ranch and crop insurance, Disability income insurance, Annuities, Mutual funds, Managed accounts, Trusts, Retirement, Education funding, Business retirement services 15
Auto insurance, Home insurance Life insurance, Farm ranch and crop insurance, Disability income insurance, Annuities, Mutual funds, Managed accounts, Trusts, Retirement, Education funding, Business retirement services 16
Auto insurance, Home insurance Life insurance, Farm ranch and crop insurance, Disability income insurance, Annuities, Mutual funds, Managed accounts, Trusts, Retirement, Education funding, Business retirement services 17
Auto insurance, Home insurance Life insurance, Farm ranch and crop insurance, Disability income insurance, Annuities, Mutual funds, Managed accounts, Trusts, Retirement, Education funding, Business retirement services 18
Auto, horse, life, health, business, bonds, bank products, mortgage loans, consumer loans, certificates of deposit, savings accounts. 19
Auto, motorcycles, RVs, boats, snowmobiles, homes, mobile homes, SR-22 filings, broadform policies, Mexico insurance, Spanish-speaking
representatives 20
Personal lines: home, mobile home, auto, motorcycle, boat, snowmobile, motorhome, travel trailer. Commercial lines. farm, business, contractors, crop. 21 Auto,
boats; home, renters, rental homes, apartments, condominiums; mercantile/ service businesses; business offices; farm/ranch; life, disability, long term care, health. Bonds, mutual funds, retirement accounts and annuities. 22
Auto, home, life, commercial, financial services. 23
Life, health, disability, annuities, long-term care, medicare supplements, group employee benefits, pension planning, investments. 24
Life, annuity, long-term care, Medicare supplement, disability. 25
Auto, fire, life, health, disability, long-term care, retirement accounts, banking products. 26 Auto,
home, life, disability income, hospital income, long-term care coverage, short-term medical. Full line of banking products. Retirement planning. 27
Group and individual medical, life, annuities, long term care, disability income, Medicare supplements, dental plans and prescription drug programs.
|
|
UNITED STATES : The State Farm Mutual Automobile Insurance Company funds
Cen-Clear Child Services to offer Fire Safety Training
TendersInfo News
07 December 2010
|
[What follows is
the full text of the article.] Cen-Clear Child
Services, Inc. has been granted funding worth $1,575 by The State Farm Mutual
Automobile Insurance Company to provide fire safety training and to purchase
smoke alarms for families served by the agency as declared by Gene Kephart,
executive director of CCS. Cen-Clear Child
Services (CCS), headquartered in Philipsburg, PA, is dedicated to providing
services to children and families from locations in Blair, Cambria, Cameron,
Centre, Clearfield, Elk, Huntingdon, and Jefferson Counties as well as some
select programs in adjoining counties The grant from
State Farm, an ongoing funding partner for this program, will be utilised in
combination with Project Fire F.L.I.E.S. (Fundamental Lessons In Every Site),
the agency s fire safety instruction program. CCS enhanced and executed this
program in conjunction with local volunteer fire companies. Cen-Clear
provides many meaningful programs to our area, I am so grateful to bring
State Farm s support to their fire safety program, said Philipsburg State
Farm Agent Clayton Hetrick. Project Fire F.L.I.E.S. not only protects
families homes but ultimately saves lives I can t think of a better way to be
a good neighbor. According to
Kephart, We are extremely grateful for the support we have received from the
State Farm Mutual Automobile Insurance Company. We believe our fire
prevention program helps to save lives, and the grant from State Farm makes
the program all the more effective because we can place additional fire
safety and emergency devices in family homes. Copyright 2010
Euclid Infotech Pvt. Ltd., distributed by Contify.com
|
|
Top 50 Property & Casualty Insurance Cos
Mississippi Business Journal
01 November 2010
|
[What follows is
the full text of the article.] TOP 50 PROPERTY
& CASUALTY INSURANCE COS.
Premiums Market Company
Written Share Mississippi Farm
Bureau Casualty Insurance Company
357,421,512 8.70% State Farm
Mutual Automobile Insurance Company
338,821,121 8.24% State Farm Fire
and Casualty Company
263,609,908 6.41% Progressive Gulf
Insurance Company
139,661,861 3.40% Allstate
Insurance Company
111,097,542 2.70% Allstate
Property and Casualty Insurance Company
103,595,512 2.52% Nationwide
Property and Casualty Insurance Company 70,613,871 1.72% Alfa Insurance
Corporation
66,997,121 1.63% United Services
Automobile Association
56,879,289 1.38% Shelter Mutual
Insurance Company 55,539,670 1.35% Nationwide
Mutual Insurance Company
51,283,662 1.25% Lexington
Insurance Company
46,270,974 1.13% Zurich American
Insurance Company
46,039,697 1.12% National Union Fire
Insurance Company of Pittsburgh,
Pa.
43,233,556 1.05% Nationwide
Mutual Fire Insurance Company
42,274,451 1.03% SAFECO Insurance
Company of America
37,957,649 0.92% Continental
Casualty Company
37,355,642 0.91% Mountain Laurel
Assurance Company
36,590,846 0.89% Federal
Insurance Company
36,570,507 0.89% Bridgefield
Casualty Insurance Company 34,327,539 0.84% SAFECO Insurance
Company of Illinois
32,160,045 0.78% Foremost
Insurance Company Grand Rapids, Michigan
30,835,020 0.75% American
Agri-Business Insurance Company 30,119,651 0.73% Travelers
Property Casualty Company of America
30,110,323 0.73% GEICO General
Insurance Company
29,300,835 0.71% Brierfield
Insurance Company 28,793,050 0.70% Safeway
Insurance Company
28,081,531 0.68% ACE American
Insurance Company
27,211,906 0.66% State Auto
Property and Casualty Insurance Company 26,741,747 0.65% Medical
Assurance Company of Mississippi
25,027,654 0.61% Travelers
Indemnity Company, The
23,655,786 0.58% Direct General
Insurance Company of Mississippi 22,857,219 0.56% Economy Premier
Assurance Company
22,587,744 0.55% Liberty Mutual
Fire Insurance Company
22,425,341 0.55% Union Insurance
Company
21,361,844 0.52% GEICO Indemnity
Company
20,966,163 0.51% American Family
Home Insurance Company
20,832,174 0.51% Insurance
Company of the State of Pennsylvania,
The
20,326,113 0.49% USAA Casualty
Insurance Company
20,126,244 0.49% Fireman's Fund
Insurance Company
20,039,762 0.49% Travelers
Casualty and Surety Company of America
19,302,294 0.47% St. Paul Fire
and Marine Insurance Company
19,767,036 0.46% Farmers
Insurance Exchange
17,999,940 0.44% American Bankers
Insurance Company of Florida
17,917,973 0.44% Employers Mutual
Casualty Company
17,629,755 0.43% QBE Insurance
Corporation
17,598,626 0.43% New Hampshire
Insurance Company
17,014,143 0.41% Automobile
Insurance Company of Hartford, Connecticut,
The
16,595,305 0.40% Government
Employees Insurance Company
16,423,836 0.40% Canal Insurance
Company
15,635,986 0.38% Losses Company
Paid Mississippi Farm
Bureau Casualty Insurance Company
222,572,272 State Farm
Mutual Automobile Insurance Company 225,329,320 State Farm Fire
and Casualty Company
166,426,747 Progressive Gulf
Insurance Company
81,196,414 Allstate
Insurance Company
59,634,979 Allstate
Property and Casualty Insurance Company
52,372,994 Nationwide
Property and Casualty Insurance Company
36,184,098 Alfa Insurance
Corporation
38,050,346 United Services
Automobile Association
31,261,222 Shelter Mutual
Insurance Company
28,061,453 Nationwide
Mutual Insurance Company
27,539,815 Lexington
Insurance Company
50,347,314 Zurich American
Insurance Company
25,155,917 National Union
Fire Insurance Company of Pittsburgh,
Pa.
20,762,012 Nationwide
Mutual Fire Insurance Company
23,593,970 SAFECO Insurance
Company of America 16,886,707 Continental
Casualty Company
23,236,647 Mountain Laurel
Assurance Company
20,578,216 Federal
Insurance Company
13,553,753 Bridgefield
Casualty Insurance Company
16,444,005 SAFECO Insurance
Company of Illinois
16,277,422 Foremost
Insurance Company Grand Rapids, Michigan
16,771,681 American
Agri-Business Insurance Company
28,901,898 Travelers
Property Casualty Company of America
12,165,307 GEICO General
Insurance Company
17,624,574 Brierfield
Insurance Company
6,395,823 Safeway
Insurance Company
15,341,106 ACE American
Insurance Company
4,866,980 State Auto
Property and Casualty Insurance Company
11,861,931 Medical
Assurance Company of Mississippi
16,190,867 Travelers
Indemnity Company, The
9,150,746 Direct General
Insurance Company of Mississippi
14,736,477 Economy Premier
Assurance Company
11,353,972 Liberty Mutual
Fire Insurance Company
9,097,465 Union Insurance
Company
10,460,558 GEICO Indemnity
Company
11,106,585 American Family
Home Insurance Company
10,918,676 Insurance
Company of the State of Pennsylvania,
The 8,654,104 USAA Casualty
Insurance Company
10,836,128 Fireman's Fund
Insurance Company
910,646 Travelers
Casualty and Surety Company of America
1,855,524 St. Paul Fire and
Marine Insurance Company
8,124,625 Farmers
Insurance Exchange
10,271,519 American Bankers
Insurance Company of Florida
6,280,482 Employers Mutual
Casualty Company 7,921,694 QBE Insurance
Corporation
7,577,163 New Hampshire
Insurance Company
8,428,008 Automobile
Insurance Company of Hartford, Connecticut,
The
7,645,942 Government Employees
Insurance Company 9,469,653 Canal Insurance
Company
20,444,977
Premiums Company
Earned Mississippi Farm
Bureau Casualty Insurance Company
358,550,040 State Farm
Mutual Automobile Insurance Company
338,817,179 State Farm Fire
and Casualty Company
263,970,545 Progressive Gulf
Insurance Company
144,455,523 Allstate
Insurance Company
111,749,583 Allstate
Property and Casualty Insurance Company
99,063,986 Nationwide
Property and Casualty Insurance Company
68,262,898 Alfa Insurance
Corporation
66,767,667 United Services
Automobile Association
55,889,461 Shelter Mutual
Insurance Company
55,022,325 Nationwide Mutual
Insurance Company
52,539,870 Lexington
Insurance Company
46,936,801 Zurich American
Insurance Company
45,700,006 National Union
Fire Insurance Company of Pittsburgh,
Pa. 48,736,237 Nationwide
Mutual Fire Insurance Company
43,260,809 SAFECO Insurance
Company of America
35,318,879 Continental
Casualty Company
37,172,801 Mountain Laurel
Assurance Company 36,208,401 Federal
Insurance Company
37,463,338 Bridgefield
Casualty Insurance Company
34,327,539 SAFECO Insurance
Company of Illinois
32,636,837 Foremost
Insurance Company Grand Rapids, Michigan 29,542,107 American
Agri-Business Insurance Company
31,011,685 Travelers
Property Casualty Company of America
34,108,717 GEICO General
Insurance Company
28,541,305 Brierfield
Insurance Company
28,922,933 Safeway
Insurance Company
27,901,894 ACE American
Insurance Company
27,685,027 State Auto
Property and Casualty Insurance Company 26,291,735 Medical
Assurance Company of Mississippi
25,027,654 Travelers
Indemnity Company, The
24,403,880 Direct General
Insurance Company of Mississippi
22,973,630 Economy Premier
Assurance Company
24,007,784 Liberty Mutual
Fire Insurance Company
22,695,475 Union Insurance
Company
22,097,091 GEICO Indemnity
Company
20,917,608 American Family
Home Insurance Company
20,648,839 Insurance
Company of the State of Pennsylvania,
The
21,506,185 USAA Casualty
Insurance Company
19,834,662 Fireman's Fund
Insurance Company 19,804,030 Travelers
Casualty and Surety Company of America
19,601,684 St. Paul Fire
and Marine Insurance Company
20,045,984 Farmers
Insurance Exchange
19,468,752 American Bankers
Insurance Company of Florida
19,468,681 Employers Mutual
Casualty Company
18,225,454 QBE Insurance
Corporation
16,537,694 New Hampshire
Insurance Company 20,298,811 Automobile
Insurance Company of Hartford, Connecticut,
The
17,674,388 Government
Employees Insurance Company
16,079,854 Canal Insurance
Company
17,933,468 Losses Company
Incurred Mississippi Farm
Bureau Casualty Insurance Company
224,525,818 State Farm
Mutual Automobile Insurance Company 236,122,445 State Farm Fire
and Casualty Company
123,862,454 Progressive Gulf
Insurance Company
80,581,714 Allstate
Insurance Company
43,442,666 Allstate
Property and Casualty Insurance Company
54,770,362 Nationwide
Property and Casualty Insurance Company
42,953,042 Alfa Insurance
Corporation
41,002,063 United Services
Automobile Association
28,377,604 Shelter Mutual
Insurance Company
28,737,486 Nationwide
Mutual Insurance Company
30,176,090 Lexington
Insurance Company
25,742,810 Zurich American
Insurance Company
8,778,382 National Union
Fire Insurance Company of Pittsburgh,
Pa.
16,399,329 Nationwide
Mutual Fire Insurance Company
17,268,972 SAFECO Insurance
Company of America 15,180,973 Continental
Casualty Company
-2,771,516 Mountain Laurel
Assurance Company
22,449,113 Federal
Insurance Company
15,172,120 Bridgefield
Casualty Insurance Company
17,354,334 SAFECO Insurance
Company of Illinois
14,729,246 Foremost
Insurance Company Grand Rapids, Michigan
17,847,845 American
Agri-Business Insurance Company
52,365,479 Travelers Property
Casualty Company of America
883,064 GEICO General
Insurance Company
18,378,664 Brierfield
Insurance Company
5,350,165 Safeway
Insurance Company 15,525,397 ACE American
Insurance Company
4,939,810 State Auto
Property and Casualty Insurance Company
13,726,717 Medical
Assurance Company of Mississippi
5,173,055 Travelers
Indemnity Company, The
8,030,830 Direct General
Insurance Company of Mississippi
13,102,665 Economy Premier
Assurance Company
8,801,170 Liberty Mutual
Fire Insurance Company 8,646,744 Union Insurance
Company
8,750,700 GEICO Indemnity
Company
12,159,509 American Family
Home Insurance Company
5,023,499 Insurance
Company of the State of Pennsylvania, The 11,038,629 USAA Casualty
Insurance Company
11,020,975 Fireman's Fund
Insurance Company
9,863,220 Travelers
Casualty and Surety Company of America 1,891,170 St. Paul Fire
and Marine Insurance Company
2,254,811 Farmers
Insurance Exchange
3,904,569 American Bankers
Insurance Company of Florida
6,189,084 Employers Mutual
Casualty Company
5,440,050 QBE Insurance
Corporation
8,406,577 New Hampshire
Insurance Company
13,787,227 Automobile
Insurance Company of Hartford, Connecticut,
The 729,631 Government
Employees Insurance Company
9,619,010 Canal Insurance
Company
15,944,252
Direct Defense
and Cost
Containment
Expense Company
Incurred Mississippi Farm
Bureau Casualty Insurance Company 5,528,497 State Farm
Mutual Automobile Insurance Company
7,178,464 State Farm Fire
and Casualty Company
9,990,219 Progressive Gulf
Insurance Company 1,614,017 Allstate
Insurance Company
937,534 Allstate
Property and Casualty Insurance Company
1,773,345 Nationwide
Property and Casualty Insurance Company 1,605,418 Alfa Insurance
Corporation
608,466 United Services
Automobile Association
360,522 Shelter Mutual
Insurance Company
1,080,856 Nationwide
Mutual Insurance Company
1,213,070 Lexington
Insurance Company
1,884,247 Zurich American
Insurance Company
3,053,571 National Union
Fire Insurance Company of Pittsburgh,
Pa. 2,264,347 Nationwide
Mutual Fire Insurance Company
503,602 SAFECO Insurance
Company of America
367,745 Continental
Casualty Company
2,791,546 Mountain Laurel
Assurance Company 397,607 Federal
Insurance Company
-2,461,921 Bridgefield
Casualty Insurance Company
-2,566,107 SAFECO Insurance
Company of Illinois
582,316 Foremost
Insurance Company Grand Rapids, Michigan
142,228 American
Agri-Business Insurance Company 4,430 Travelers
Property Casualty Company of America
39,218 GEICO General
Insurance Company
598,571 Brierfield
Insurance Company
435,774 Safeway
Insurance Company
593,391 ACE American
Insurance Company
926,677 State Auto Property
and Casualty Insurance Company
1,725,920 Medical
Assurance Company of Mississippi
10,187,100 Travelers
Indemnity Company, The
1,945,569 Direct General
Insurance Company of Mississippi
297,385 Economy Premier
Assurance Company
462,869 Liberty Mutual
Fire Insurance Company
906,941 Union Insurance
Company
1,293,262 GEICO Indemnity
Company
319,082 American Family
Home Insurance Company
-342,342 Insurance
Company of the State of Pennsylvania,
The
879,131 USAA Casualty Insurance
Company 529,643 Fireman's Fund
Insurance Company
169,971 Travelers
Casualty and Surety Company of America
1,549,339 St. Paul Fire
and Marine Insurance Company
2,093,808 Farmers
Insurance Exchange
158,563 American Bankers
Insurance Company of Florida
-250 Employers Mutual
Casualty Company
1,010,549 QBE Insurance
Corporation
1,059,984 New Hampshire
Insurance Company
1,858,189 Automobile
Insurance Company of Hartford, Connecticut,
The
207,221 Government Employees
Insurance Company
281,727 Canal Insurance
Company
1,779,742
Loss Loss
Ratio Ratio
w/o LAE with LAE Company
* ** Mississippi Farm
Bureau Casualty Insurance Company
62.60% 64.20% State Farm
Mutual Automobile Insurance Company
69.70% 71.80% State Farm Fire
and Casualty Company
46.90% 50.70% Progressive Gulf
Insurance Company
55.80% 56.90% Allstate
Insurance Company
38.90% 39.70% Allstate
Property and Casualty Insurance Company
55.30% 57.10% Nationwide
Property and Casualty Insurance Company 62.90% 65.30% Alfa Insurance
Corporation
61.40% 62.30% United Services
Automobile Association
50.80% 51.40% Shelter Mutual
Insurance Company
52.20% 54.20% Nationwide
Mutual Insurance Company
57.40% 59.70% Lexington
Insurance Company
54.80% 58.90% Zurich American
Insurance Company
19.20% 25.90% National Union
Fire Insurance Company of Pittsburgh, Pa.
33.60% 38.30% Nationwide
Mutual Fire Insurance Company
39.90% 41.10% SAFECO Insurance
Company of America
43.00% 44.00% Continental
Casualty Company
-7.50% 0.10% Mountain Laurel
Assurance Company
62.00% 63.10% Federal
Insurance Company
40.50% 33.90% Bridgefield
Casualty Insurance Company
50.60% 58.00% SAFECO Insurance
Company of Illinois
45.10% 46.90% Foremost
Insurance Company Grand Rapids, Michigan
60.40% 60.90% American
Agri-Business Insurance Company
168.90% 168.90% Travelers
Property Casualty Company of America
2.60% 2.70% GEICO General
Insurance Company
64.40% 66.50% Brierfield
Insurance Company
18.50% 20.00% Safeway
Insurance Company
55.60% 57.80% ACE American
Insurance Company
17.80% 21.20% State Auto
Property and Casualty Insurance Company
52.20% 58.80% Medical Assurance
Company of Mississippi
20.70% 61.40% Travelers
Indemnity Company, The
32.90% 40.90% Direct General
Insurance Company of Mississippi
57.00% 58.30% Economy Premier
Assurance Company
36.70% 38.60% Liberty Mutual
Fire Insurance Company
38.10% 42.10% Union Insurance
Company
39.60% 45.50% GEICO Indemnity
Company
58.10% 59.70% American Family
Home Insurance Company
24.30% 22.70% Insurance
Company of the State of Pennsylvania,
The
51.30% 55.40% USAA Casualty
Insurance Company
55.60% 58.20% Fireman's Fund
Insurance Company
49.80% 50.70% Travelers
Casualty and Surety Company of America
9.60% 17.60% St. Paul Fire
and Marine Insurance Company
11.20% 21.70% Farmers
Insurance Exchange
20.10% 20.90% American Bankers
Insurance Company of Florida
31.80% 31.80% Employers Mutual
Casualty Company
29.80% 35.40% QBE Insurance
Corporation
50.80% 57.20% New Hampshire
Insurance Company
67.90% 77.10% Automobile
Insurance Company of Hartford, Connecticut,
The
4.10% 5.30% Government
Employees Insurance Company
59.80% 61.60% Canal Insurance
Company
88.90% 98.80% * Loss Ratio w/o
LAE is direct losses incurred compared to direct premiums earned ** Loss Ratio with
LAE is direct losses incurred plus direct defense
and cost containment expense incurred (loss adjustment
expense) compared to direct premiums earned Information for
this List was provided by the Mississippi Department of Insurance and
is a compilation of total business filings in the state for the
year ended Dec. 31, 2009. For a complete listing of all P&C
company filings, visit www.mid.state.ms.us, or call (601) 359-3569. Please
direct MBJ list questions or comments to Stephen McDill at
research@msbusiness.com. This list is ranked by premiums written.
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CSA creates challenges, opportunities for specialty agents, trucking
insurers: increased federal 'interventions' could prompt midterm policy
cancellations
National
Underwriter Property & Casualty Insurance
20 September 2010
By Solafane, Susanne
|
[What follows is
the full text of the article.] WITH THE
DELIVERY OF WARNING LETTERS TO MOTOR carriers from the Federal Motor Carrier Safety
Administration still months away, transportation insurers are struggling to
determine how to react to potential changes in exposure from the new
oversight system, according to a coverage expert. Tommy Ruke,
president of Insurance Business Consultants in Fort Myer, Fla., described
scenarios that could prompt midterm policy cancellations as the FMCSA's CSA
initiative moves forward. (See pages 12 and 14 for details of the
initiative.) While insurance
regulations specific to cancellations vary from state to state, Mr. Ruke--an
instructor for courses on the basics of trucking insurance coverage and
regulatory issues for the King of Prussia, Pa. based American Association of
Managing General Agents and other associations--said that, in general, an
insurer cannot cancel a policy after 60 days. The 60-day time
period is generally thought to be sufficient for the insurer to complete
inspections, do its underwriting and verify that all the information it
obtained is correct, he explained. "Once
you're beyond that grace period, you cannot cancel the policy except for
certain things," he said, noting that while non-payment is the most
common exception, "the second one is material change in exposures,"
adding that lawyers who speak for his educational programs envision several
ways in which that second exception could be triggered as motor carriers
start getting monthly safety ratings under CSA. If an insurer
wrote a policy for a motor carrier with a "satisfactory" rating
under FMCSA's previous evaluation system (the SAFER system, or SafeStat),
"or the motor carrier went in with a rating at a certain level and had
no intervention, and during the [policy term] gets an intervention, then the
lawyers are saying that that could easily be a material change in exposure,"
he reported. "When there
is a letter coming from the federal government to your motor carrier that
says you are deficient in these safety areas, and the motor carrier doesn't
do anything about it, how is that going to float with a jury?" he
wondered, assessing the risks for an insurer that stays on the policy. Asked whether
insurers could look to shorten policy terms to be more reactive, rather than
canceling annual policies midterm, Mr. Ruke said such actions would be
problematic because most policies written for for-hire truckers have MCS-90
endorsements, which operate essentially like a surety bond to protect the
public, adding that an insurer has to give 36-days notice to get off of a
risk with an MCS-90 on it. How about
inserting policy language that would remove coverage when a driver or a motor
carrier has a predefined level of exposure, such as deficient scores in
several Behavior Analysis and Safety Improvement Categories (BASICs) of the
CSA system, or "unfit" or "marginal" safety fitness
determinations? "Any
insurers that would do [that], or put in drivers exclusions, have their heads
in the sand, because under federal regulations, even if there is no coverage
[under a policy], the insurer has still got to repair the damage to the
public," he said, explaining what the MCS-90 guarantees. In addition, he
described what would happen if an insurer's underwriting files had
documentation branding a driver or trucking firm with poor ratings as an
unacceptable risk. Then the insurer "becomes the expert witness for the
plaintiff. So that's not going to happen," he said. Instead, Mr.
Ruke has suggested to the AAMGA that insurers get written commitments from
motor carriers they insure--as a part of the application process--"to
hire drivers with certain qualities that are spelled out, and to abide by and
adhere to all the FMCSA regulations." He said this
language is consistent with statements motor carriers sign off on when they
get their DOT numbers, reporting that some insurance carriers are already
putting this in their applications, while others are looking into it. "If [the
motor carriers] are not adhering to FMCSA regulations and rules, then you've
got material change in exposure, and I think that will hold up with states
... better when it's written [on the application] than when it's not,"
he said. LAWYER'S
PERSPECTIVE Robert Moseley,
an attorney heading the transportation industry group of Smith Moore
Leatherwood in Greenville, N.C., said that midterm cancellations are "certainly
a possibility, but that's not been the history," suggesting that
insurance carriers could have done something similar in the past but did not. "Even now,
motor carriers are rated 'conditional,' and their policies are not
cancelled," he noted. Like Mr. Ruke,
he voiced concerns about motor-carrier safety information from CSA becoming
available to plaintiffs attorneys. "For years,
we've been moving more and more toward trying the trucking company, and less
toward trying the accident. Whenever we have a trucking company that is sued,
the way it's presented is there's an accident, and now we're going to look at
all the things the trucking company did wrong, could have done differently,
technology they could have bought," he reported. "Judges are
letting the doors swing too widely open [by] allowing tangential
information" into courtrooms, he added. He gave the example of evidence
showing that a trucking company's drug and alcohol testing processes are
inadequate being admitted in a case relating to an accident where a driver
did not test positive for either substance. The trucking
company winds up having its company history "exposed and micro-analyzed
in a way that's just not practical," he said. "People don't run
their businesses that way." In court, plaintiffs
lawyers suggest that motor carriers should have gotten certain records or
reports, but lawyers get those by sending subpoenas to people, he observed. A
trucking company that is trying to decide whether to hire a driver can't
compel people to give them documents, he said. Mr. Moseley
noted, however, that the FMCSA launched a new Pre-Screening Employment
Program, PSP, in May, allowing motor carriers--with a driver's permission--to
electronically access the driver's roadside inspection and crash records
prior to hiring. The PSP is
separate from CSA, which limits motor-carrier access to information about
driver safety violations to those that impact carrier safety ratings (24
months worth of data captured while a driver was working for the trucking
firm). While some CSA
information is also available to the public, Mr. Moseley said insurance
companies, in general, "are very slow to take advantage" of
available resources. He added that inspection data available in the past has
been flawed. OPPORTUNITIES
FOR AGENTS Bob Hart, a risk
control specialist for Northland Insurance in St. Paul, Minn., said that, as
was the case under SafeStat, motor carrier information other than accident
data will be open to the public, but the names of drivers responsible for
violations impacting motor-carrier scores will only be available to the motor
carriers. Even where data
is not public, however, the motor carrier can allow third parties to have
access to their safety data and ratings, he said, noting that he is already
seeing trucking firms hiring safety consultants--"in some cases it may
even be insurance agents"--and signing over access to driver data to
these third parties. "Some of
our risk control folks have been asked whether they would like to be that
third-party person," he reported. "At this point, there are too
many unanswered legal questions, so we're not going to be getting access to
that data," he said. Deane Sager, a
Northland trucking industry specialist, noted that there are privacy issues
involved with specific driver information. As for potential
changes in insurers' underwriting practices that would incorporate CSA
information, neither of the Northland specialists, who are not underwriters,
could foresee any significant ones on the horizon. "That's largely due to
the fact that the process of obtaining information from loss control and from
loss runs is pretty good now," Mr. Sager said. Mr. Hart agreed.
While some insurers put more emphasis on data available from government
programs, "I think we've always used it as a tool," he said.
"It is part of the process, but our underwriting process is already so
strong that it's not a critical part," he said. (Editor's Note:
In a ranking of commercial auto carriers based on 2009 direct loss ratios,
Northland Insurance ranked among the five best, with its 38.6 loss ratio
coming in 16 points better than the industry average. See accompanying
chart.) Like Mr.
Moseley, Mr. Hart also said there were discrepancies in the government data
under SafeStat. Under CSA, the amount and quality of data "is going to
be so far advanced that it will become a better tool," he added. "But still
[it's just] a tool," Mr. Sager said, adding that he believes CSA 2010
will create opportunities for insurers and agents. Northland's loss control
team, for example, through webinars and customer visits, is helping to
educate trucking firms about what to expect as the program moves forward. "Whenever
there are problems within their scores, those are what we would
work--consulting with the customer--to address," Mr. Hart added, also
recommending that insurance agents take the opportunity to have conversations
with their trucking company customers to make sure they're taking this
seriously. Agents should
make sure customers are asking for help and "not just waiting until they
get that first warning letter or until they get information that says they're
'unfit.'" "They
really need to take action now, and for those [trucking] companies that are
smaller, and in our case, that risk control might not visit, the only line of
defense really is that retail agent knocking on that customer's door,"
he added. Mr. Sager said
an abundance of information about CSA 2010 coming from trucking industry
associations makes it unlikely that even the smallest truckers are unfamiliar
with it. Still, the warning letters will catch some firms by surprise, simply
because they didn't believe the program would affect them, after having never
been contacted or audited under the previous government system. "It's an
opportunity for agents [who] are always looking for a way to add value to
their service," Mr. Sager said. Joe Hutelmyer,
president of AmWINS Transportation Underwriters in Burlington, N.C., stressed
the need for insurers and agents to be more proactive in helping customers
maintain good ratings. Once a motor
carrier gets into the marginal category, it will be flagged for inspection
more often, which will mean there's more chance that some negative event will
affect its BASIC rating adversely. "Then it's going
to be like a snowball effect. It's going to be harder to get out of it,"
he said. "The first
thing agents should be doing is talking to all their trucking clients and
making sure they know where their numbers are," he suggested. "These
ratings are going to change monthly," said Mr. Ruke, who trains retail
agents as well as MGAs and wholesalers. "So what I'm telling retail
agents is if they're serious about writing trucking, they need to be prepared
to go in monthly to check if their insureds have had an intervention. And if
they have, find out what it was for and what they're doing to correct
it," he added, stressing the potential legal ramifications for insurers. LARGER FIRMS,
FEWER DRIVERS Mr. Hutelmyer
said the trucking industry itself may change going forward because many small
trucking companies, which can't afford to stay on top of their numbers, may
end up with "unfit" ratings. "We're
going to see a shift back to the larger carriers employing individual
owner-operators as permanently leased operators. But we won't see the small
firms like Joe Smith Trucking Company. [Instead] they'll be an owner-operator
for Yellow Freight or J.B. Hunt," he said, adding that his own firm will
have to readjust to the change after repositioning itself away from competitive
fleet business in recent years. The experts all
predicted there will be driver shortages in years to come, with Mr. Moseley
pointing to a lack of new entrants into the field and Mr. Ruke citing
economic issues that plagued older drivers. Mr. Moseley said
high-school graduates who might have considered driving cannot obtain
commercial drivers licenses until they are 21 years old, suggesting that they
find alternative careers in the intervening three years. "Even if you
are 21, the insurers won't insure drivers generally until they have two years
experience," he said. "We've lost
a whole generation of drivers," according to Mr. Ruke, referring to
experienced drivers who were in their late-50s when the economy went south.
"They lost their jobs or had their trucks repossessed," he said. "Four or
five years later, at age 61 or 62, they're not going to start back up,"
he said, predicting that trucking companies will have to make up for lack of
experience mechanically--by using technology such as on-board electronic
recorders to track hours of service, lane deviation equipment and collision
avoidance systems. Insurers could
start checking for such technology as part of their underwriting
criteria--"even for smaller risks," he agreed, noting that only
self-insureds make use of such equipment today. There was
general consensus among truck insurance experts that CSA will also reduce the
driver population, even though FMCSA will not be developing safety fitness
ratings for drivers. What is likely
to happen is that the largest trucking companies will take a closer look and
get better information on drivers before bringing them on board, Mr. Sager
predicted. For awhile, drivers who no longer qualify for the best motor
carriers will find work with smaller carriers that tend to make less
sophisticated hiring decisions, he said. As CSA
continues, however, the hope is that "the really bad apples will
eventually not have a place to run to," he added, stressing that CSA's
impact will be to reduce the population of poor drivers. Mr. Ruke
suggested that insurers and shippers will play a role in reducing the number
of poor quality trucking firms. When information about these truckers is
publicly available, it finds its way into court cases holding shippers liable
for accidents, and insurance prices rise, he noted. "If it
costs them too much, or they can't buy insurance, then they're going to be
put out of business," he said. Commercial
Auto--Top 50 Writers ($000) DIRECT RESULTS Company Group 1 Travelers Property Casualty Travelers Group Company 2 Zurich American Ins Co Zurich Insurance Group 3 United Financial Casualty Co Progressive Group 4 Great West Casualty Co Old Republic Group 5 State Farm Mutual Auto Ins Co State Farm Group 6 Cincinnati Insurance Co Cincinnati Financial Group 7 Auto Owners Ins Co Auto Owners Group 8 Nationwide Mutual Insurance Co Nationwide Corp Group 9 Northland Insurance Company Travelers Group 10 Empire Fire
& Marine Zurich
Insurance Group Insurance Co 11 Philadelphia
Indemnity Phila Cons Hldg
Group Insurance Co 12 National
Union Fire Ins Co American Intl
Group of Pitts 13 Charter Oak
Fire Insurance Co Travelers Group 14 Ace American
Ins Co Ace Ltd Group 15 Liberty
Mutual Fire Insurance Liberty Mutual
Ins Group 16 Erie
Insurance Exchange Erie
Insurance Group 17 Allstate
Insurance Company Allstate
Insurance Group 18 Progressive
Express Progressive Group Insurance Co 19 Westfield
Insurance Company Westfield Group 20 National
Interstate American
Financial Group Insurance Co 21 Universal
Underwriters Zurich Insurance
Group Insurance Co 22 St Paul Fire
& Marine Travelers Group Insurance Co 23 National
Casualty Company Nationwide Corp
Group 24 State
National Insurance State Natl
Group Co Inc 25 Sentry Select
Ins Co Sentry Insurance
Group 26 Hartford Fire
Insurance Co Hartford F&C
Group 27 Employers
Mutual Casualty Emc Inse Co
Group Company 28 Netherlands
Insurance Co The Lbty Mutual Ins
Group 29 Owners
Insurance Co Auto Owners
Group 30 Federal
Insurance Company Chubb &
Son Inc Group 31 Progressive
County Mutual Progressive Group Ins Co 32 Acuity A Mut
Ins Co N/A 33 Travelers
Indemnity Co of CT Travelers Group 34 Truck
Insurance Exchange Zurich Insurance
Group 35 Travelers
Indemnity Company Travelers Group 36 Arch Ins
Co Arch Capital
Group 37 Great
American Assur Co American
Financial Group 38 Lancer
Insurance Co Lancer
Financial Group 39 New Hampshire
Insurance American Intl Group Company 40 American
Alternative Insurance Munich Re Group Corp 41 National
Continental Progressive
Group Insurance Co 42 Federated
Mutual Insurance Co Federated Mutual
Group 43 Continental
Western Wr Berkley Corp
Group Insurance Co 44 Selective Way
Insurance Co Selective Insurance
Group 45 AIU Insurance
Company American Intl Group 46 American
Transit Insurance N/A Company 47 American States
Insurance Lbty Mutual Ins Group Company 48 Insurance Co
of The State American Intl Group of PA 49 Canal
Insurance Co Canal Group 50 Carolina
Casualty Insurance Co Wr Berkley Corp
Group TOP 50 P&C INDUSTRY AGGREGATE
Commercial Auto
Written Premiums Company 2009 2008 Growth 1 Travelers Property Casualty 557,568 599,077 -6.9% Company 2 Zurich American Ins Co 538,221 477,642 12.7% 3 United Financial Casualty Co 529,006 605,368 -12.6% 4 Great West Casualty Co 509,781 557,648 -8.6% 5 State Farm Mutual Auto Ins Co 423,868 443,945 -4.5% 6 Cincinnati Insurance Co 387,879 404,551 -4.1% 7 Auto Owners Ins Co 361,269 410,239 -11.9% 8 Nationwide Mutual Insurance Co 344,358 402,506
-14.4% 9 Northland Insurance Company 339,161 355,105 -4.5% 10 Empire Fire
& Marine
338,336 483,084 -30.0% Insurance Co 11 Philadelphia
Indemnity 315,659 294,709 7.1% Insurance Co 12 National
Union Fire Ins Co 309,586 346,856 -10.7% of Pitts 13 Charter Oak
Fire Insurance Co 245,788 225,071 9.2% 14 Ace American
Ins Co 245,122 240,306 2.0% 15 Liberty
Mutual Fire Insurance
243,242 335,192 -27.4% 16 Erie
Insurance Exchange
240,448 250,530 -4.0% 17 Allstate
Insurance Company 230,772 264,910 -12.9% 18 Progressive
Express 221,886 252,885 -12.3% Insurance Co 19 Westfield
Insurance Company 212,291 204,458 3.8% 20 National
Interstate 206,179 230,876 -10.7% Insurance Co 21 Universal
Underwriters 203,993 268,555 -24.0% Insurance Co 22 St Paul Fire
& Marine 200,468 219,827 -8.8% Insurance Co 23 National
Casualty Company 200,285 202,951 -1.3% 24 State
National Insurance
197,021 140,418 40.3% Co Inc 25 Sentry Select
Ins Co 190,520 254,890 -25.3% 26 Hartford Fire
Insurance Co 183,853 211,139 -12.9% 27 Employers
Mutual Casualty 180,815 192,527 -6.1% Company 28 Netherlands
Insurance Co The 173,324 172,390 0.5% 29 Owners
Insurance Co
161,094 155,951 3.3% 30 Federal
Insurance Company
159,761 183,256 -12.8% 31 Progressive
County Mutual 158,283 175,727 -9.9% Ins Co 32 Acuity A Mut
Ins Co 152,104 163,522 -7.0% 33 Travelers
Indemnity Co of CT 149,521 145,581 2.7% 34 Truck
Insurance Exchange
149,049 152,134 -2.0% 35 Travelers
Indemnity Company 145,644 150,654 -3.3% 36 Arch Ins
Co 145,175 133,051 9.1% 37 Great
American Assur Co
144,441 154,264 -6.4% 38 Lancer
Insurance Co
144,386 164,131 -12.0% 39 New Hampshire
Insurance 142,456 209,903 -32.1% Company 40 American
Alternative Insurance 142,089 133,023 6.8% Corp 41 National
Continental 136,121 150,418 -9.5% Insurance Co 42 Federated Mutual
Insurance Co 136,076 158,617 -14.2% 43 Continental
Western 134,247 168,681 -20.4% Insurance Co 44 Selective Way
Insurance Co 133,895 137,336 -2.5% 45 AIU Insurance
Company 133,496 141,873 -5.9% 46 American
Transit Insurance 131,490 150,402 -12.6% Company 47 American
States Insurance 130,610 183,310 -28.7% Company 48 Insurance Co
of The State 128,074 133,779 -4.3% of PA 49 Canal
Insurance Co
125,588 163,851 -23.4% 50 Carolina
Casualty Insurance Co 123,509 216,194 -42.9% TOP 50 11,437,807 12,573,313 -9.0% P&C INDUSTRY AGGREGATE 24,612,005 27,051,450 -9.0%
Commercial Auto Pure
Loss Ratio
(Better/ Company 2009 2008
Worse) 1 Travelers Property Casualty 46.1 32.8 13.3 Company 2 Zurich American Ins Co 48.9 63.5
(14.7) 3 United Financial Casualty Co 49.9
60.0 (10.1) 4 Great West Casualty Co 57.1 64.8 (7.7) 5 State Farm Mutual Auto Ins Co 57.2
61.5 (4.3) 6 Cincinnati Insurance Co 54.5 60.7 (6.2) 7 Auto Owners Ins Co 63.0 51.1 11.9 8 Nationwide Mutual Insurance Co 45.6
55.6 (9.9) 9 Northland Insurance Company 38.6 59.9
(21.3) 10 Empire Fire
& Marine 38.6 39.7 (1.1) Insurance Co 11 Philadelphia
Indemnity 77.0 36.0 41.0 Insurance Co 12 National
Union Fire Ins Co 50.4 62.4
(12.0) of Pitts 13 Charter Oak
Fire Insurance Co 53.4 54.8 (1.5) 14 Ace American
Ins Co 56.2 36.8 19.4 15 Liberty
Mutual Fire Insurance 41.6 63.7
(22.1) 16 Erie
Insurance Exchange 43.2 48.1 (4.9) 17 Allstate
Insurance Company 41.3 45.1 (3.8) 18 Progressive
Express 67.5 68.2 (0.7) Insurance Co 19 Westfield
Insurance Company 53.5 58.6
(5.1) 20 National
Interstate 51.1 71.4
(20.3) Insurance Co 21 Universal
Underwriters 32.0 76.3
(44.3) Insurance Co 22 St Paul Fire
& Marine 53.1 53.7 (0.6) Insurance Co 23 National
Casualty Company 62.8 64.3 (1.5) 24 State
National Insurance 61.4 69.4 (7.9) Co Inc 25 Sentry Select
Ins Co 99.7 74.1 25.6 26 Hartford Fire
Insurance Co 58.2 45.9
12.3 27 Employers
Mutual Casualty 51.4 62.4
(11.0) Company 28 Netherlands
Insurance Co The 63.9 55.4 8.5 29 Owners
Insurance Co 62.6 54.0 8.7 30 Federal
Insurance Company 47.1 37.4
9.7 31 Progressive
County Mutual 53.3 60.5 (7.2) Ins Co 32 Acuity A Mut
Ins Co 49.4 56.4 (7.0) 33 Travelers
Indemnity Co of CT 32.4 27.0 5.5 34 Truck
Insurance Exchange 43.8 36.1 7.7 35 Travelers
Indemnity Company 42.9 46.8 (3.9) 36 Arch Ins
Co 52.1 57.3 (5.2) 37 Great
American Assur Co 55.0 47.9 7.0 38 Lancer
Insurance Co 26.4 24.8
1.6 39 New Hampshire
Insurance 59.5 66.1 (6.6) Company 40 American
Alternative Insurance 48.6 40.3 8.3 Corp 41 National
Continental 71.2 72.0 (0.8) Insurance Co 42 Federated
Mutual Insurance Co 28.9 42.2
(13.4) 43 Continental
Western 49.0 49.7 (0.7) Insurance Co 44 Selective Way
Insurance Co 60.7 63.6 (2.9) 45 AIU Insurance
Company 30.2 45.3
(15.1) 46 American Transit
Insurance 69.1 67.1 2.0 Company 47 American
States Insurance 44.8 64.3
(19.5) Company 48 Insurance Co
of The State 64.3 76.7
(12.4) of PA 49 Canal
Insurance Co 78.8 66.0 12.8 50 Carolina
Casualty Insurance Co 89.7 60.3 29.5 TOP 50 53.0 55.3 (2.3) P&C INDUSTRY AGGREGATE 53.1 54.8 (1.7) ESTATE FARM MUTUAL
LOST ITS NO. 1 RANKING among commercial auto writers to Progressive's
United Financial Casualty in 2007, but Travelers Property
Casualty took the top spot in 2009
|
|
Standard & Poor’s
|
United
States of America Long-Term Rating Lowered To 'AA+' Due To Political Risks,
Rising Debt Burden; Outlook Negative |
|
Publication
date: 05-Aug-2011 20:13:14 EST |
- We have lowered our long-term sovereign credit rating on the
United States of America to 'AA+' from 'AAA' and affirmed the 'A-1+'
short-term rating.
·
We have also removed both the short- and long-term ratings
from CreditWatch negative.
·
The downgrade reflects our opinion that the fiscal
consolidation plan that Congress and the Administration recently agreed to
falls short of what, in our view, would be necessary to stabilize the
government's medium-term debt dynamics.
·
More broadly, the downgrade reflects our view that the
effectiveness, stability, and predictability of American policymaking and
political institutions have weakened at a time of ongoing fiscal and economic
challenges to a degree more than we envisioned when we assigned a negative
outlook to the rating on April 18, 2011.
·
Since then, we have changed our view of the difficulties in
bridging the gulf between the political parties over fiscal policy, which makes
us pessimistic about the capacity of Congress and the Administration to be able
to leverage their agreement this week into a broader fiscal consolidation plan
that stabilizes the government's debt dynamics any time soon.
·
The outlook on the long-term rating is negative. We could
lower the long-term rating to 'AA' within the next two years if we see that
less reduction in spending than agreed to, higher interest rates, or new fiscal
pressures during the period result in a higher general government debt
trajectory than we currently assume in our base case.
TORONTO (Standard &
Poor's) Aug. 5, 2011--Standard & Poor's Ratings Services said today that it
lowered its long-term sovereign credit rating on the United States of America
to 'AA+' from 'AAA'. Standard & Poor's also said that the outlook on the
long-term rating is negative. At the same time, Standard & Poor's affirmed
its 'A-1+' short-term rating on the U.S. In addition, Standard & Poor's
removed both ratings from CreditWatch, where they were placed on July 14, 2011,
with negative implications.
The transfer and convertibility (T&C) assessment of the U.S.--our
assessment of the likelihood of official interference in the ability of
U.S.-based public- and private-sector issuers to secure foreign exchange for
debt service--remains
'AAA'.
We lowered our long-term
rating on the U.S. because we believe that the prolonged controversy over
raising the statutory debt ceiling and the related fiscal policy debate
indicate that further near-term progress containing the growth in public
spending, especially on entitlements, or on reaching an agreement on raising
revenues is less likely than we previously assumed and will remain a
contentious and fitful process. We also believe that the fiscal consolidation
plan that Congress and the Administration agreed to this week falls short of
the amount that we believe is necessary to stabilize the general government
debt burden by the middle of the decade.
Our lowering of the
rating was prompted by our view on the rising public debt burden and our
perception of greater policymaking uncertainty, consistent with our criteria
(see "Sovereign Government Rating Methodology and
Assumptions ," June 30, 2011, especially Paragraphs 36-41).
Nevertheless, we view the U.S. federal government's other economic, external,
and monetary credit attributes, which form the basis for the sovereign rating,
as broadly unchanged.
We have taken the ratings
off CreditWatch because the Aug. 2 passage of the Budget Control Act Amendment
of 2011 has removed any perceived immediate threat of payment default posed by
delays to raising the government's debt ceiling. In addition, we believe that
the act provides sufficient clarity to allow us to evaluate the likely course
of U.S. fiscal policy for the next few years.
The political brinksmanship of recent months highlights what we see as
America's governance and policymaking becoming less stable, less effective, and
less predictable than what we previously believed. The statutory debt ceiling
and the threat of default have become political bargaining chips in the debate
over fiscal policy. Despite this year's wide-ranging debate, in our view, the
differences between political parties have proven to be extraordinarily
difficult to bridge, and, as we see it, the resulting agreement fell well short
of the comprehensive fiscal consolidation program that some proponents had
envisaged until quite recently. Republicans and Democrats have only been able
to agree to relatively modest savings on discretionary spending while
delegating to the Select Committee decisions on more comprehensive measures. It
appears that for now, new revenues have dropped down on the menu of policy
options. In addition, the plan envisions only minor policy changes on Medicare
and little change in other entitlements,
the containment of which
we and most other independent observers regard as key to long-term fiscal
sustainability.
Our opinion is that
elected officials remain wary of tackling the structural issues required to
effectively address the rising U.S. public debt burden in a manner consistent
with a 'AAA' rating and with 'AAA' rated sovereign peers (see Sovereign Government Rating Methodology and
Assumptions," June 30, 2011, especially Paragraphs 36-41). In our
view, the difficulty in framing a consensus on fiscal policy weakens the
government's ability to manage public finances and diverts attention from the
debate over how to achieve more balanced and dynamic economic growth in an era
of fiscal stringency and private-sector deleveraging (ibid). A new political
consensus might (or might not) emerge after the 2012 elections, but we believe
that by then, the government debt burden will likely be higher, the needed
medium-term fiscal adjustment potentially greater, and the inflection point on
the U.S. population's demographics and other age-related spending drivers
closer at hand (see "Global Aging 2011: In The U.S., Going Gray Will Likely
Cost Even More Green, Now," June 21, 2011).
Standard & Poor's
takes no position on the mix of spending and revenue measures that Congress and
the Administration might conclude is appropriate for putting the U.S.'s
finances on a sustainable footing.
The act calls for as much
as $2.4 trillion of reductions in expenditure growth over the 10 years through
2021. These cuts will be implemented in two steps: the $917 billion agreed to
initially, followed by an additional $1.5 trillion that the newly formed
Congressional Joint Select Committee on Deficit Reduction is supposed to
recommend by November 2011. The act contains no measures to raise taxes or
otherwise enhance revenues, though the committee could recommend them.
The act further provides
that if Congress does not enact the committee's recommendations, cuts of $1.2
trillion will be implemented over the same time period. The reductions would
mainly affect outlays for civilian discretionary spending, defense, and
Medicare. We understand that this fall-back mechanism is designed to encourage
Congress to embrace a more balanced mix of expenditure savings, as the
committee might recommend.
We note that in a letter
to Congress on Aug. 1, 2011, the Congressional Budget Office (CBO) estimated total
budgetary savings under the act to be at least $2.1 trillion over the next 10
years relative to its baseline assumptions. In updating our own fiscal
projections, with certain modifications outlined below, we have relied on the
CBO's latest "Alternate Fiscal Scenario" of June 2011, updated to
include the CBO assumptions contained in its Aug. 1 letter to Congress. In
general, the CBO's "Alternate Fiscal Scenario" assumes a continuation
of recent Congressional action overriding existing law.
We view the act's
measures as a step toward fiscal consolidation. However, this is within the
framework of a legislative mechanism that leaves open the details of what is
finally agreed to until the end of 2011, and Congress and the Administration
could modify any agreement in the future. Even assuming that at least $2.1
trillion of the spending reductions the act envisages are implemented, we
maintain our view that the U.S. net general government debt burden (all levels
of government combined, excluding liquid financial assets) will likely continue
to grow. Under our revised base case fiscal scenario--which we consider to be
consistent with a 'AA+' long-term rating and a negative outlook--we now project
that net general government debt would rise from an estimated 74% of GDP by the
end of 2011 to 79% in 2015 and 85% by 2021. Even the projected 2015 ratio of
sovereign indebtedness is high in relation to those of peer credits and, as
noted, would continue to rise under the act's revised policy settings.
Compared with previous
projections, our revised base case scenario now assumes that the 2001 and 2003
tax cuts, due to expire by the end of 2012, remain in place. We have changed
our assumption on this because the majority of Republicans in Congress continue
to resist any measure that would raise revenues, a position we believe Congress
reinforced by passing the act. Key macroeconomic assumptions in the base case
scenario include trend real GDP growth of 3% and consumer price inflation near
2% annually over the decade.
Our revised upside
scenario--which, other things being equal, we view as consistent with the
outlook on the 'AA+' long-term rating being revised to stable--retains these
same macroeconomic assumptions. In addition, it incorporates $950 billion of
new revenues on the assumption that the 2001 and 2003 tax cuts for high earners
lapse from 2013 onwards, as the Administration is advocating. In this scenario,
we project that the net general government debt would rise from an estimated
74% of GDP by the end of 2011 to 77% in 2015 and to 78% by 2021.
Our revised downside
scenario--which, other things being equal, we view as being consistent with a
possible further downgrade to a 'AA' long-term rating--features less-favorable
macroeconomic assumptions, as outlined below and also assumes that the second
round of spending cuts (at least $1.2 trillion) that the act calls for does not
occur. This scenario also assumes somewhat higher nominal interest rates for
U.S. Treasuries. We still believe that the role of the U.S. dollar as the key
reserve currency confers a government funding advantage, one that could change
only slowly over time, and that Fed policy might lean toward continued loose
monetary policy at a time of fiscal tightening. Nonetheless, it is possible
that interest rates could rise if investors re-price relative risks. As a
result, our alternate scenario factors in a 50 basis point (bp)-75 bp rise in
10-year bond yields relative to the base and upside cases from 2013 onwards. In
this scenario, we project the net public debt burden would rise from 74% of GDP
in 2011 to 90% in 2015 and to 101% by 2021.
Our revised scenarios
also take into account the significant negative revisions to historical GDP
data that the Bureau of Economic Analysis announced on July 29. From our
perspective, the effect of these revisions underscores two related points when
evaluating the likely debt trajectory of the U.S. government. First, the
revisions show that the recent recession was deeper than previously assumed, so
the GDP this year is lower than previously thought in both nominal and real
terms. Consequently, the debt burden is slightly higher. Second, the revised
data highlight the sub-par path of the current economic recovery when compared
with rebounds following previous post-war recessions. We believe the sluggish
pace of the current economic recovery could be consistent with the experiences
of countries that have had financial crises in which the slow process of debt
deleveraging in the private sector leads to a persistent drag on demand. As a
result, our downside case scenario assumes relatively modest real trend GDP
growth of 2.5% and inflation of near 1.5% annually going forward.
When comparing the U.S.
to sovereigns with 'AAA' long-term ratings that we view as relevant peers--Canada,
France, Germany, and the U.K.--we also observe, based on our base case
scenarios for each, that the trajectory of the U.S.'s net public debt is
diverging from the others. Including the U.S., we estimate that these five
sovereigns will have net general government debt to GDP ratios this year
ranging from 34% (Canada) to 80% (the U.K.), with the U.S. debt burden at 74%.
By 2015, we project that their net public debt to GDP ratios will range between
30% (lowest, Canada) and 83% (highest, France), with the U.S. debt burden at
79%. However, in contrast with the U.S., we project that the net public debt
burdens of these other sovereigns will begin to decline, either before or by
2015.
Standard & Poor's
transfer T&C assessment of the U.S. remains 'AAA'. Our T&C assessment
reflects our view of the likelihood of the sovereign restricting other public
and private issuers' access to foreign exchange needed to meet debt service.
Although in our view the credit standing of the U.S. government has deteriorated
modestly, we see little indication that official interference of this kind is
entering onto the policy agenda of either Congress or the Administration.
Consequently, we continue to view this risk as being highly remote.
The outlook on the
long-term rating is negative. As our downside alternate fiscal scenario
illustrates, a higher public debt trajectory than we currently assume could
lead us to lower the long-term rating again. On the other hand, as our upside
scenario highlights, if the recommendations of the Congressional Joint Select
Committee on Deficit Reduction--independently or coupled with other
initiatives, such as the lapsing of the 2001 and 2003 tax cuts for high
earners--lead to fiscal consolidation measures beyond the minimum mandated, and
we believe they are likely to slow the deterioration of the government's debt
dynamics, the long-term rating could stabilize at 'AA+'.
On Monday, we will issue separate releases concerning affected ratings
in the funds, government-related entities, financial institutions, insurance,
public finance, and structured finance sectors.
FOREIGN EXCHANGE RATES
|
Currency |
Unit
|
Indian Rupees |
|
US Dollar |
1 |
Rs.54.16 |
|
|
1 |
Rs.81.74 |
|
Euro |
1 |
Rs.70.50 |
INFORMATION DETAILS
|
Report Prepared by
: |
SDA |
RATING EXPLANATIONS
|
RATING |
STATUS |
PROPOSED CREDIT LINE |
|
|
>86 |
Aaa |
Possesses an extremely sound financial base with the strongest
capability for timely payment of interest and principal sums |
Unlimited |
|
71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit
transaction. It has above average (strong) capability for payment of interest
and principal sums |
Large |
|
56-70 |
A |
Financial & operational base are regarded healthy. General unfavourable
factors will not cause fatal effect. Satisfactory capability for payment of
interest and principal sums |
Fairly Large |
|
41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
|
26-40 |
B |
Capability to overcome financial difficulties seems comparatively
below average. |
Small |
|
11-25 |
Ca |
Adverse factors are apparent. Repayment of interest and principal sums
in default or expected to be in default upon maturity |
Limited with full
security |
|
<10 |
C |
Absolute credit risk exists. Caution needed to be exercised |
Credit not
recommended |
|
-- |
NB |
New Business |
-- |
This score serves as a reference to assess
SC’s credit risk and to set the amount of credit to be extended. It is
calculated from a composite of weighted scores obtained from each of the major
sections of this report. The assessed factors and their relative weights (as
indicated through %) are as follows:
Financial
condition (40%) Ownership
background (20%) Payment
record (10%)
Credit history
(10%) Market trend (10%) Operational size
(10%)
This report is issued at your request without any
risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL)
or its officials.