The firm says State Farm's reserve strength can “sustain strong reserve releases” and “could also dampen pricing, which is a clear negative for the industry.”

This assumption is based on the fact that, according to figures from SNL, State Farm has close to 20 percent of the personal lines market and is the largest personal auto and homeowners insurer in the United States.

“Its pricing actions are a bell weather for the industry,” notes Stifel Nicolaus.

However, Robert P. Hartwig president and economist with the Insurance Information Institute, says while State Farm is the market leader in the U.S. personal-lines market, “its redundant reserve position can't necessarily be used to draw a conclusion about pricing trends.”

In an e-mail, Hartwig says the personal-lines market remains “highly price competitive in its own right, especially in private-passenger auto.”

He adds, “Given a projected auto combined ratio of approximately 100 to 101 in 2012, little changed from the prior several years, and rate increases in the 2.5 to 2.9 percent range so far in 2012 (approximately the rate of inflation), the auto market is best characterized as stable.

“On the homeowners side, the driving factor for virtually all insurers is near-record catastrophe losses in 2011 and high losses in several prior years,” Hartwig continues. “This pushed the homeowners combined ratio up to roughly 120 last year.

“All insurers are seeking to price their catastrophe-risk exposures appropriately while also dealing with higher reinsurance costs.”

A call to State Farm was not returned.