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Investing.com -- S&P Global Ratings has downgraded State Farm General Insurance Co. (SFGI) to ’A-’ from ’A+’ and removed the company from CreditWatch negative, assigning a stable outlook.
The rating agency announced Monday that the downgrade reflects SFGI’s ’bbb-’ stand-alone credit profile, with three notches of uplift due to its strategic importance to parent company State Farm Mutual Automobile Insurance Co.
While acknowledging SFGI’s solid market presence in California’s homeowners’ insurance market and strong brand recognition, S&P cited poor underwriting performance and concentrated exposure to a single state and monoline risk as key concerns.
The recent $400 million investment from the parent company in the form of a surplus note is expected to stabilize SFGI’s previously weakened capital position. However, S&P noted that significant exposure to natural catastrophe risk will continue to add volatility to both earnings and capital.
SFGI’s capital position has deteriorated significantly in recent years due to weak underwriting performance. The situation worsened in 2025 when California wildfires pushed capital levels near the regulatory authorized control level.
In May, SFGI received approval for emergency interim rate increases, which took effect June 1, 2025. Final approval of the full requested rate increase is still pending. S&P’s base-case scenario assumes these increases will be approved, though the agency cautioned that a lower-than-expected final approval could require SFGI to return a portion of policy premiums to policyholders with interest.
S&P continues to view SFGI as strategically important to State Farm Mutual’s diverse underwriting strategy in California, providing three notches of support to its stand-alone credit profile.
The stable outlook indicates S&P’s expectation that SFGI’s capital position will remain satisfactory, its operating performance will improve, and it will maintain its position as California’s largest homeowners’ insurance carrier.
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