State Farm took a hit on the chin as it watched its net worth decrease last year by $10.4 billion, largely because of the $9.2 billion decline in the value of its property-casualty companies’ unaffiliated stock portfolio.

The insurer’s decline in net worth is the first in six years, the company said.

The national insurer’s net worth ended last year at $53.3 billion. Citing “general market conditions” for the decline, the insurer said its portfolio had a smaller percentage decline than the broader equity market.

In spite of the 2008 decline, the State Farm group’s net worth is 68% higher than it was at the end of 2002, after two years of significant decline.

State Farm reported an after-tax net loss of $542 million in 2008, compared with $5.46 billion of net income in 2007. The after-tax net loss in 2008 was driven by the property-casualty companies’ pretax operating loss, which was partially offset by income tax recoveries. The company said “extraordinary levels of catastrophe losses adversely impacted” its 2008 operating results.

“It is imperative in our business to achieve financial results that enable us to grow and maintain the necessary level of financial strength that ensures long-term sustainability. As a result, one should not attribute too much significance to short-term operating results without first considering the level of financial strength,” said Michael Tipsord, vice chairman, treasurer and chief financial officer at State Farm. “This concept is as relevant to 2007 when State Farm achieved record levels of profit as it is to 2008 when we experienced significant losses. The more important message is that the positive results from 2003 through 2007 enabled State Farm to endure a record level decline in net worth during 2008 and still end the year with over $53 billion in net worth.”

The average annual amount of net income for State Farm through the first nine years of this decade is $1.6 billion.