State Farm doubles profit, returns $5 billion dividend to policyholders

State Farm is declaring a one-time $5 billion cashback dividend to auto policyholders after the company ended 2025 with net income of $12.9 billion, more than double its $5.3 billion net income in 2024. 

The insurance company’s net worth for 2025 was $170 billion, compared to $145 billion at the end of 2024. 

State Farm auto insurance represented 63% of the property and casualty company’s combined net written premium, with earned premium at $71.3 billion. 

“Incurred claims and loss adjustment expenses were $52.6 billion, and all other underwriting expenses totaled $14.1 billion,” State Farm’s press release says. “The underwriting gain was $4.6 billion. Comparable 2024 figures were: earned premium, $67.5 billion; incurred claims and loss adjustment expenses, $56.2 billion; all other underwriting expenses, $14.0 billion; underwriting loss, $2.7 billion.”

State Farm says it will start making a one-time distribution to qualifying customers across more than 49 million vehicles.

“This dividend is possible due to State Farm Mutual’s financial strength and a stronger-than-expected underwriting performance, which has been reported industry-wide,” a press release says. “As a mutual company, State Farm is uniquely positioned to provide value directly to customers rather than shareholders.”

The payments average $100 per vehicle and will vary by state and premiums paid. 

“As a mutual company with a customer-first focus, State Farm Mutual is able to provide value directly to our customers while maintaining financial strength to keep our promises in the future,” said Jon Farney, State Farm president and CEO. “That translated this year to lower auto rates and cash back in the form of a $5 billion policyholder dividend.”

Downward-trending auto repair costs and collision frequency in 2025 have allowed State Farm to lower auto rates in 40 states in recent months. It says rates have been reduced by an average of 10%, with premium savings for consumers of $4.6 billion. 

The insurance company has received national attention for a series of lawsuits across multiple states, which claim it uses software to undervalue actual cash values. 

Fender Bender and CRASH Network also recently reported on surveys showing shops have seen State Farm reducing labor rates. 

In July, Fender Bender reported that 57% of 230 survey respondents said State Farm had reduced its labor rates offered to their shop without explanation. 

CRASH Network’s latest quarterly “Collision Industry Business Perspectives” survey found that 1 in 4 of 300 shop respondents said one insurance company is currently paying a lower labor rate than it was back in January. 

“State Farm was the most common insurer cited by survey respondents, and the labor rate decreases weren’t insignificant,” Yoswick said while sharing some of the survey findings with RDN earlier this month. 

State Farm went from $60 per hour to $55 per hour, and we are not a DRP for them,” one shop wrote of the 8.3% drop.

Without naming the insurance company, an open mic session at a Collision Industry Conference meeting last month sparked discussion about the systemic lowering of labor rates by a large insurer.

Allstate also announced earlier this month that it was reducing premiums for 7.8 million auto and homeowners insurance customers by an average of 17% after more than doubling its net income in 2025.

Allstate’s net income to common shareholders was $10.2 billion for 2025, compared to $4.6 billion in 2024. 

Allstate’s combined ratio for property-liability improved by 14 points to 72.9 for the fourth quarter, compared to 2024. The release states this was due to higher average earned premiums, the benefit of non-catastrophe reserve releases, and lower catastrophe losses. 

The auto insurance combined ratio lowered by 12.7 points to 80.8 in the fourth quarter, compared to the previous year. 

Doug Heller, Consumer Federation of America director of insurance, recently discussed insurance costs during the Automotive Insights Symposium held by the Federal Reserve Bank of Chicago. 

A number of insurance companies aggressively set prices as inflation climbed, he said. 

“A number of the big players really overshot in terms of their expectation of inflation,” Heller said. “They were building their insurance premiums as though that peak of inflation in ’22 and ’23 was going to last into ’24, ’25, and ’26.”

This gave many companies and shareholders big dividends and profits in 2024 and 2025. 

Without naming the company, he mentioned an insurer in Florida that had to give back $1 billion due to excessive rates. 

He later said that states that invest more resources in insurance regulatory oversight have a more stable pricing environment. 

“Because one of the problems that we see in less regulated states, insurance companies will come in and try to grab up market share with these low prices, and then they will feel the bite of claims, and that’s when they will start doing things like negotiating downward with repair shops and removing protections for consumers,” Heller said. “My experience is from the late 90s, when I started looking at this. Having a stable regulatory environment is much better than this sort of wild west approach that we see in some states. The insurance companies go up and down, they chase money when they want to invest, when investment times are good, but when the federal funds rate is really low, and there’s not much to do with your money on hand, then they don’t want as much business, so they jack up rates again.” 

Consumers can’t handle the volatility as easily as the companies can, he said.

Images

Featured image: Aerial view of State Farm’s Marina Heights corporate campus in Tempe, Arizona. (Credit: Wirestock/iStock)