State Farm is the leading auto and homeowners insurance provider in the U.S. In 2023, it held a market share of 18.9% for its auto insurance segment and an 18% market share for homeowners insurance. The company also provides other types of insurance coverage, like life insurance, health insurance, and small-business insurance.
In addition to insurance products, State Farm offers several types of investments. To open one, you need to work with a State Farm agent. State Farm investment products include retirement accounts and education savings accounts, like 529 plans, brokerage accounts, and mutual funds. Although State Farm has investment products, it's not possible to invest in State Farm itself because it is a mutual insurance company that's owned by its policyholders.
Is State Farm publicly traded?
No, State Farm is not publicly traded on the stock market. Technically, State Farm is a collection of companies, the largest of which is State Farm Mutual Automobile Insurance Co.
State Farm companies are mutual insurance companies, meaning they're owned by policyholders rather than shareholders. A mutual insurance company's purpose is to provide insurance for policyholders. Any profits are either reinvested in the company or distributed as dividends to shareholders. Other examples of mutual insurance companies include Liberty Mutual, Nationwide, and New York Life Insurance.
When will State Farm IPO?
State Farm is unlikely to have an initial public offering (IPO) any time soon. It's been a mutual insurance company since its founding in 1922 and has never publicly discussed plans for an IPO.
In the unlikely event that State Farm would IPO, it would have to undergo a process called demutualization, where it converts from being owned by policyholders to shareholder ownership.
Shareholder
Is State Farm profitable?
Yes, State Farm is profitable overall. State Farm added one million new policies and accounts in 2024, which likely contributed to its $5.3 billion net income in 2024, a stark difference from a $6.3 billion net loss in 2023.
Alternatives to State Farm
While you can't buy State Farm stock because it's not a publicly traded company, you can buy stock in similar companies. Here are three possibilities:
1. Progressive
An important metric for insurance companies is their combined ratio, which is the amount of losses incurred from expenses and claims paid out divided by the amount of premiums collected. A combined ratio exceeding 100% means an insurer is paying out more than it's raking in through premiums.
Progressive has one of the lowest combined ratios among insurers. Its net combined ratio for 2023 was 94.9%, meaning that for every $100 collected through premiums, it paid out $94.90. By comparison, the 2023 industrywide combined ratio for property and casualty insurers was 101.6%, indicating underwriting losses.
The insurer has a strong track record of increasing its premiums written. In 2023, its net premiums written increased to $61.6 billion, a 20% year-over-year increase of 20%. Progressive also pays a small dividend. As of mid-2024, its annual yield was around 0.2%.
2. Chubb
Warren Buffett has lamented in the past that neither Progressive nor its rival, GEICO, which Buffett's Berkshire Hathaway (BRK.A +0.96%)(BRK.B +1.41%) owns, can beat State Farm in terms of market share. Of course, since State Farm is a mutual company, not even the Oracle of Omaha can invest.
One insurance stock Berkshire has been loading up on, though, is Chubb (CB +0.57%), a leading global provider of various commercial and personal insurance products. In May 2024, Berkshire Hathaway had amassed a $6.72 billion stake in Chubb, a position it began building in mid-2023 after requesting and receiving confidentiality from the U.S. Securities and Exchange Commission.
The position isn't too surprising, given Buffett's affinity for insurance stocks. The company trades for around 11 times trailing earnings, suggesting it's a good value play, and its low 86.5% combined ratio shows its underwriting strength. Chubb is also a reliable dividend payer, with an annual yield of about 1.3% based on its stock price as of mid-2024.
3. Prudential
Unlike State Farm, whose bread and butter is property and casualty insurance, Prudential is a leading life insurance provider. In 2023, it held the fourth-largest market share for life insurance by premium and was the fourth-largest life insurance company by market share.
Although State Farm also offers life insurance policies, its market share is only about half of Prudential's. Prudential is also a leading provider of investment products, including workplace retirement accounts like 401(k)s.
Prudential is a strong dividend stock. Its annual yield is around 4.6%, more than three times the yield of the S&P 500 index.
The company increased its pre-tax adjusted operating income in the first quarter of 2024 by 16% over the first quarter of 2023, posting strong growth in its retirement business and benefiting from higher interest rates. The company has also taken cost-saving steps, like shuttering Assurance IQ, an insurance tech start-up it acquired in 2019 for $2.35 billion. Prudential also focuses on growing its international markets, particularly in Africa and Asia.
How to buy stocks similar to State Farm
- Open your brokerage account: Log in to your brokerage account where you handle your investments.
- Search for the stock: Enter the ticker or company name into the search bar to bring up the stock's trading page.
- Decide how many shares to buy: Consider your investment goals and how much of your portfolio you want to allocate to this stock.
- Select order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you're willing to pay.
- Submit your order: Confirm the details and submit your buy order.
- Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.
ETFs with exposure to State Farm
Since it isn't publicly traded, you won't find exchange-traded funds (ETFs) that include State Farm in their holdings. However, plenty of ETFs offer exposure to similar insurance stocks. Here are three examples:
Exchange-Traded Fund (ETF)
- iShares U.S. Insurance ETF (NYSEMKT:IAK): The fund tracks an index of 55 insurance stocks in the U.S., including companies that provide life insurance, property and casualty insurance, and full line insurance. Its ETF expense ratio is 0.40%, meaning if you invested $1,000, you'd pay $4 in fees.
- Invesco KBW Property Casualty & Insurance ETF (NYSEMKT:KBWP): There's significant overlap between the Invesco KBW Property Casualty & Insurance ETF and the iShares U.S. Insurance ETF. The top three holdings of both are Progressive, Chubb, and American International Group (AIG). However, the Invesco fund's 24 holdings are exclusively property and casualty insurers, while the iShares fund invests in a wider mix of insurance stocks. The fund's expense ratio is 0.35%, which amounts to $3.50 in fees on a $1,000 investment.
- Vanguard Financials ETF (NYSEMKT:VFH): If you want to invest in a broader umbrella of financial stocks, consider the Vanguard Financials ETF. With 410 holdings, the fund's largest concentrations are in diversified banking and payment processing companies, but insurance businesses account for about 25% of its holdings. The fund's expense ratio is 0.1%, meaning you'll pay $1 in fees on a $1,000 investment.
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The bottom line on State Farm
State Farm isn't publicly traded and is unlikely to make a stock market debut in the foreseeable future. You can invest in other publicly traded insurance companies using your brokerage account, though. If you buy a State Farm insurance policy, you'll technically become an owner in the company. You can also check out State Farm investment products if you're willing to work with an agent.
Investing in State Farm FAQ
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