State Farm’s Earnings Fall Sharply

State Farm Mutual Automobile Insurance Co. said its 1994 earnings fell by more than two-thirds on losses from last year’s Northridge earthquake.

The largest U.S. home and auto insurer said net income for the year fell 68% to $524.4 million from $1.66 billion in 1993.

State Farm joined other major insurers, such as Allstate Corp., which were hurt by the Jan. 17, 1994 temblor. The insured damage was estimated at $10.4 billion, which is expected to rank the quake as the second-costliest U.S. catastrophe.

State Farm’s $2.53 billion in quake costs “contributed heavily to the red ink in the financial results of our property and casualty insurers,” said John J. Killian, vice president and controller of State Farm, a mutual insurer owned by its policyholders.

In December, State Farm raised its estimate of quake costs by 26% to $2.53 billion, based on about 114,000 claims. It said the total is expected to stand.

The company’s 1994 results include a pretax investment gain of $2.27 billion, down from $2.37 billion in 1993. State Farm’s auto insurance premiums and membership fees rose 6.7% to $23.8 billion.

In 1994, the company’s underwriting loss widened to $1.81 billion, after policyholder dividends of $205.9 million, from a loss of $273.0 million after policyholder dividends of $211.8 million a year earlier.

The company said its life insurance profit rose to $200.3 million from $197.4 million.

The company insures 37 million cars and 13.7 million homes in the United States and Canada.

Allstate, the second-largest U.S. home and auto insurer, expects its pretax losses to total $1.3 billion. Northbrook, Ill.-based Allstate said its net income for 1994 fell to $483.8 million from $1.30 billion a year earlier.

The only U.S. catastrophe to cause more total insured damage than the quake was Hurricane Andrew, which cost insurers $16.5 billion in Florida and Louisiana in August, 1992.