BLOOMINGTON, Ill. - State Farm Insurance Co. posted a $5.3 billion profit in 2004, up nearly 90 percent from the year before despite four hurricanes that pounded Florida and other southern states last year.

The nation's largest insurer on Friday credited underwriting earnings that rose despite $2.9 billion in hurricane claims, along with improved returns from stocks and other investments.

State Farm logged a second straight year of profits after two years of losses that reached $5 billion in 2001, the worst in its more than 80-year history. Analysts said boosting premiums helped reverse the earnings slide, along with an upturn in investment markets.

"The industry overall had a very strong year in 2004. State Farm's numbers have been better than most," said Ken Tappen, an analyst with A.M. Best.

Overall, State Farm's claims dipped about 5 percent last year even though payouts for hurricanes and other disasters were up 13 percent, spokesman Dick Luedke said. The net decline helped the company post an underwriting gain of about $2 billion, compared with a loss of $281 million in 2003.

Luedke also said the company saved nearly $630 million on hurricane claims through a special fund in Florida that protects insurers against weather-related losses. Insurers pay into the fund, then draw from it as needed.

The privately held company reported revenues rose nearly 5 percent to $58.8 billion from $56.1 billion in 2003. The insurer's net worth increased nearly 15 percent to $46.3 billion from $40.3 billion.

State Farm continued streamlining efforts in 2004, trimming its costs for every dollar in premiums by about 4 percent, Luedke said. Employment fell to about 69,000 from about 72,000 at the end of 2003.

Average auto and homeowner rates declined last year after increases in 2002 and 2003. But Luedke said rates vary because technology has helped the company better research prospective policyholders, so high-risk customers pay more and low-risk customers less. Revenue from premiums rose 4 percent to $51 billion from $48.9 billion.

State Farm plans rate decreases early this year in 16 states, which analysts say will likely be an industry trend in 2005.

"That's the big question. But overall we're probably entering the beginning of a softening cycle," said Rich Attanasio, an analyst with A.M. Best.

Analysts say recent rate increases put premiums in line with potential losses, rather than counting on investments to prop up revenue.

"Part of the problem was that insurers did not price premiums according to the types of disasters we were encountering," said Loretta Worters, spokeswoman for the Insurance Information Institute.

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