A.M. Best Affirms Credit Ratings of State Farm Mutual Automobile Insurance Company and Its Subsidiaries

A.M. Best has affirmed the Financial Strength Rating (FSR) of A++
(Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of
“aa+” of State Farm Mutual Automobile Insurance Company (State
Farm Mutual) and its affiliates, State Farm Fire and Casualty Company and
State Farm County Mutual Insurance Company of Texas (Richardson, TX).
In addition, A.M. Best has affirmed the FSR of A (Excellent) and the
Long-Term ICR of “a+” of State Farm General Insurance Company. A.M.
Best also has affirmed the FSR of A- (Excellent) and the Long-Term ICR
of “a-” of State Farm Indemnity Company. Additionally,
A.M. Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR
of “a-” of State Farm Lloyds (Richardson, TX). A.M. Best also has
affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” of Dover
Bay Specialty Insurance Company. In addition, A.M. Best has affirmed
the FSR of A- (Excellent) and the Long-Term ICR of “a-” of HiRoad
Assurance Company. Concurrently, A.M. Best has affirmed the FSR of
A++ (Superior) and the Long-Term ICRs of “aa+” of State Farm Life
Insurance Company and State Farm Life and Accident Assurance
Company (together referred to as State Farm Life). All companies are
headquartered in Bloomington, IL, except where specified. The outlook of
these Credit Ratings (ratings) is stable.

The ratings of State Farm Mutual reflect its balance sheet strength,
which A.M. Best categorizes as strongest, as well as its strong
operating performance, very favorable business profile and appropriate
enterprise risk management (ERM).

Additionally, the ratings of State Farm Mutual reflect its cumulative
net income despite higher automobile personal injury claims costs and
more severe catastrophic weather-related events in recent years. State
Farm Mutual, its subsidiary and affiliated property/casualty and life
insurance companies comprise the largest personal lines insurance
organization in the United States based on direct premiums written and
the second largest in terms of policyholders’ surplus. The State Farm
group is the leading provider of homeowners’ and private passenger
automobile insurance in the United States. The organization’s personal
lines products are complemented by other lines of business such as
commercial multi-peril, commercial auto liability, workers’ compensation
and several other lines.

Banking and other financial services are offered through affiliates to
further enhance the sale of personal lines products. The State Farm
group’s main distribution channel is its exclusive independent agency
force, which along with mass advertising, has contributed to high
customer retention rates and below average expense ratios. The ratings
of the subsidiaries and affiliates of State Farm Mutual also benefit
from shared services, common management, cross selling of products and
services, common distribution and brand name recognition.

These positive rating aspects are offset in part by the State Farm
group’s underwriting variability, above average exposure to equity
market volatility and susceptibility to frequent and severe catastrophe
activity. However, these concerns are mitigated partially by actions
that management continues to implement to consolidate underwriting and
claims handling, manage property exposure in high risk areas, increase
rates where appropriate, upgrade and modernize systems, enhance its
exclusive independent agency force and expand production by providing
additional customer access points.

The ratings of State Farm General Insurance Company reflect its balance
sheet strength, which A.M. Best categorizes as strongest, as well as its
adequate operating performance, neutral business profile and appropriate
ERM. The ratings also reflect lift, as defined within Best’s Credit
Rating Methodology (BCRM), from its parent, State Farm Mutual.

The ratings of State Farm Indemnity Company reflect its balance sheet
strength, which A.M. Best categorizes as strongest, as well as its
marginal operating performance, neutral business profile and appropriate
ERM.

The ratings of State Farm Lloyds reflect its balance sheet strength,
which A.M. Best categorizes as very strong, as well as its adequate
operating performance, neutral business profile and appropriate ERM.

The ratings of Dover Bay Specialty Insurance Company reflect its balance
sheet strength, which A.M. Best categorizes as very strong, as well as
its adequate operating performance, neutral business profile and
appropriate ERM.

The ratings of HiRoad Assurance Company reflect its balance sheet
strength, which A.M. Best categorizes as adequate, as well as its
adequate operating performance, limited business profile and appropriate
ERM. The ratings also reflect lift, as defined within BCRM, from its
parent, State Farm Mutual.

The ratings of State Farm Life reflect its balance sheet strength, which
A.M. Best categorizes as strongest, as well as its strong operating
performance, favorable business profile and appropriate ERM. The ratings
also reflect lift, as defined within BCRM, from its parent, State Farm
Mutual.

Additionally, the ratings of State Farm Life also benefit from strong
brand-name recognition, sustained competitive advantages derived from an
affiliated exclusive agency field force, and a diverse product portfolio
of individual ordinary life and fixed annuity products. Further, State
Farm Life finances its statutorily required excess reserves (Regulation
XXX) related to term life insurance rather than externally through
either domestic captives or offshore reinsurers. The amount of these
excess reserves is sizeable and is viewed favorably by A.M. Best, as it
qualitatively enhances the group’s strong risk-adjusted capitalization
ratios. Partially offsetting rating factors are ongoing spread
compression within its annuity block, losses within its supplementary
contracts line of business and exposure to life business with
significant minimum guarantee rates.

This press release relates to Credit Ratings that have been published
on A.M. Best’s website. For all rating information relating to the
release and pertinent disclosures, including details of the office
responsible for issuing each of the individual ratings referenced in
this release, please see A.M. Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view Understanding
Best’s Credit Ratings. For information on the proper media
use of Best’s Credit Ratings and A.M. Best press releases, please view Guide
for Media – Proper Use of Best’s Credit Ratings and A.M. Best Rating
Action Press Releases.

A.M. Best is the world’s oldest and most authoritative insurance
rating and information source. For more information, visit www.ambest.com.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.

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