State Farm Mutual Automobile Insurance Co., the largest U.S. home and auto insurer, said Friday that its profit fell 39% in 2005 after it paid record hurricane claims.
Net income declined to $3.24 billion from $5.31 billion in 2004, the company said.
Storm claims were $6.3 billion, prompting a $779-million underwriting loss at State Farm's property and casualty units.
The Bloomington, Ill.-based company, owned by its policyholders, turned a profit even after storms including Hurricane Katrina more than doubled the industry's annual record for catastrophe costs. Claims were lower than expected and may signal that competitors including Allstate Corp. will continue to be undercut, said Alan Devlin, an analyst at Atlantic Equities in London.
"State Farm will continue to be competitive with pricing," Devlin said. "If their results had been worse, it may have given Allstate more breathing room."
U.S. insurers paid $56.8 billion in claims for 2005 storms and other catastrophes, according to estimates by Insurance Services Office Inc. At Allstate, State Farm's leading competitor, profit fell 45% to $1.77 billion in 2005.