by Melissa Gannon, TheStreet.com

The 25 most financially sound auto insurers have at least one thing in common: A dedication to conservative underwriting and investment practices that have positioned them well in the economic downturn.

TheStreet.com Ratings recently completed its quarterly review of the financial strength of auto insurance companies, identifying 25 widely available companies worthy of an "excellent" financial strength rating of A+, A, or A-. The companies on the list are those that had total annual premium volume in 2007 (the most recent full-year data available) of $100 million or more, indicating that they offer coverage in several states. To compare auto rates in your area, use BankingMyWay's insurance center.

TheStreet.com Ratings determines the financial strength of an insurance company through measuring a company's performance over time in many areas, including capitalization, profitability, reserve adequacy, liquidity and stability of operations. Insurers with the highest financial strength ratings are those with conservative underwriting practices that accurately price the risks they assume and set aside a sufficient amount of reserves to pay future claims while consistently earning profits to build capital.

High-rated companies may suffer problems during difficult economic times, but because of their historically sound practices, they have the capital built up to withstand tough times.

25 Strongest Auto Insurers Company Domicile State TheStreet.com Financial Strength Rating 2007 Annual Auto Premium ($Mil) UNITED SERVICES AUTOMOBILE ASN Texas A+ 3,256.0 USAA CASUALTY INS CO Texas A+ 2,121.9 INTERINS EXCH OF THE AUTOMOBILE CLUB Calif. A+ 1,841.8 MERCURY INS CO Calif. A 1,360.2 AUTO-OWNERS INS CO Mich. A 866.4 COUNTRY MUTUAL INS CO Ill. A 466.1 HOME-OWNERS INS CO Mich. A 437.7 KENTUCKY FARM BUREAU MUTUAL INS CO Ky. A 424.6 DAIRYLAND INS CO Wis. A 345.5 FRANKENMUTH MUTUAL INS CO Mich. A 129.0 ALLSTATE INS CO Ill. A- 7,649.6 CALIFORNIA STATE AUTO ASN INTER-INS Calif. A- 1,504.0 CINCINNATI INS CO Ohio A- 760.4 MERCURY CASUALTY CO Calif. A- 566.4 SOUTHERN FARM BUREAU CAS INS CO Miss. A- 566.4 TENNESSEE FARMERS MUTUAL INS CO Tenn. A- 501.5 OWNERS INS CO Ohio A- 476.1 GRANGE MUTUAL CAS CO Ohio A- 441.7 NORTH CAROLINA FARM BU MUTUAL INS CO N.C. A- 418.5 FARM BUREAU MUTUAL INS CO Iowa A- 374.1 AMERICAN NATIONAL PROPERTY & CAS CO Miss. A- 321.9 UNITED FARM FAMILY MUTUAL INS CO Ind. A- 266.2 STATE FARM CTY MUTUAL INS CO OF TX Texas A- 203.7 USAA GENERAL INDEMNITY CO Texas A- 192.6 COOPERATIVA D SEGUROS MULTIPLES D PR P.R. A- 133.1 A=Excellent; B=Good; C=Fair; D=Weak; E=Very Weak

The top two insurers on our list, United Services Automobile Association and USAA Casualty Insurance Co., are not household names, but reach a sizable amount of customers. While they only sell coverage to those in the military and their families, memberships are for life -- meaning the child of a current or former military person who joins can go on to cover spouses and children, and so forth. The club gets pretty big as evidenced by the $5.3 billion in premiums these two companies collected in 2007, plus the additional $193 million in premiums collected by USAA General Indemnity, further down on the list.

Third on the list, Interinsurance Exchange of the Automobile Club is actually more familiar than people might think. It underwrites the auto coverage for the American Automobile Association. The nationwide AAA often offers discounted coverage to its members, so it is definitely worth checking out the rates from this financially strong insurer.

 

The most familiar name on the list is Allstate Insurance Co., a unit of Allstate Corp. , with an A- financial strength rating. Although Allstate has taken its share of knocks during this financial crisis, the auto insurer is sound.

 

Most of the other companies on the list are regional insurers that may not offer coverage in all states, but there are definitely several choices for any individual state.

25 Largest Auto Insurers

Absent from the list of 25 strongest auto insurers are many household names. This doesn't mean those companies are not financially sound; they simply are not at the very top of our rankings for financial strength. The list of largest auto insurers includes those with annual premiums of $1 billion or more.

 

25 Largest Auto Insurers Company Domicile State TheStreet.com Financial Strength Rating 2007 Annual Auto Premium ($Mil) STATE FARM MUTUAL AUTOMOBILE INS CO Ill. B+ 27,367.7 ALLSTATE INS CO Ill. A- 7,649.6 GEICO GENERAL INS CO Md. B+ 4,810.6 ALLSTATE PROPERTY & CASUALTY INS CO Ill. B 3,851.1 GOVERNMENT EMPLOYEES INS CO Md. B+ 3,504.7 NATIONWIDE MUTUAL INS CO Ohio B 3,469.4 ALLSTATE INDEMNITY CO Ill. B 3,299.2 UNITED SERVICES AUTOMOBILE ASN Texas A+ 3,256.0 LIBERTY MUTUAL FIRE INS CO Wis. B- 3,155.5 AMERICAN FAMILY MUT INS CO Wis. B 3,014.9 GEICO INDEMNITY CO Md. B+ 2,859.0 FARMERS INS EXCHANGE Calif. C 2,349.1 USAA CASUALTY INS CO Texas A+ 2,121.9 STATE FARM FIRE & CAS CO Ill. B 1,937.7 INTERINS EXCH OF THE AUTOMOBILE CLUB Calif. A+ 1,841.8 MID-CENTURY INS CO Calif. C- 1,704.3 ERIE INS EXCHANGE Pa. B 1,675.2 PROGRESSIVE DIRECT INS CO Ohio C- 1,563.8 CALIFORNIA STATE AUTO ASN INTER-INS Calif. A- 1,504.0 ALLSTATE FIRE & CASUALTY INS CO Ill. C 1,486.9 COMMERCE INS CO Mass. B+ 1,377.6 MERCURY INS CO Calif. A 1,360.2 21ST CENTURY INS CO Calif. B- 1,244.5 NATIONWIDE MUTUAL FIRE INS CO Ohio B+ 1,206.4 SAFECO INS CO OF ILLINOIS Ill. B 1,194.8 FARMERS TEXAS COUNTY MUTUAL INS CO Texas C+ 1,176.6 PROGRESSIVE NORTHERN INS CO Wis. C+ 1,143.0 PROGRESSIVE COUNTY MUTUAL INS CO Texas C 1,046.1 A=Excellent; B=Good; C=Fair; D=Weak; E=Very Weak

 

By far, the largest auto insurer in the nation is State Farm Mutual Automobile Insurance Co. with $27 billion in annual premium. It has a financial strength rating of B+ which puts it (and any other insurer rated B+ or higher) on the list of those companies recommended by TheStreet.com for financial strength.

 

Three units of Berkshire-Hathaway's GEICO are among the largest. So are more Allstate units, three units of Progressive Corp. and two Nationwide units.

 

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