State Farm Mutual Automobile Insurance Co., the largest U.S. property-casualty insurer, said annual profit fell 94 percent on car insurance claims costs.
Net income dropped to $400 million from $6.2 billion in 2015, when results included one-time gains in the stock portfolio tied to pharmaceutical deals, the Bloomington, Illinois-based company said Tuesday in a statement. The underwriting loss from auto insurance widened to $7 billion from $4.4 billion.
State Farm is among property-casualty insurers pressured by rising costs on auto policies as smartphones distract drivers and repair costs climb. Travelers Cos. said last month it had begun to increase auto premiums because of higher expenses, following Allstate Corp. and Berkshire Hathaway Inc.'s Geico.
"Loss costs throughout the auto-insurance industry had been increasing at an unexpected pace," Berkshire Chairman Warren Buffett said in his annual letter to shareholders Saturday.
The results are the first for a full year under Chief Executive Officer Michael Tipsord, who was promoted in 2015 to replace Edward Rust. His compensation was $8.16 million for 2016, Dave Phillips, a spokesman for the company, said in an email.
Other units did better than auto insurance. There was a $1.6 billion underwriting gain from the segment that includes residential coverage. Life insurance, the banking unit and a mutual fund operation were also profitable.
The annual results compare with a 14 percent decrease at Allstate, which posted 2016 net income of $1.88 billion. State Farm, which is owned by policyholders and has no publicly traded debt, reports results once a year and uses state accounting rules for insurers. Publicly traded insurers must use U.S. generally accepted accounting principles, making comparisons inexact.
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