Google Stumbles as Slump in Ad Rates Deepens

SAN FRANCISCO — Google views the computing shift to smartphones and tablets as a golden opportunity, but the Internet search leader's second-quarter performance served as an unsettling reminder that it poses a nagging financial challenge, too.

The report released Thursday showed Google's average ad rate fell from the previous year for the seventh consecutive quarter. In an unexpected turn, the decline deepened for the first time in a year.

The average ad rate, or "cost per click," fell 6 percent during the three months ending in June. The magnitude of the declines had eased in each of the previous three quarters, raising hopes that the worse was over. Instead, things deteriorated from the 4 percent decline in ad rates during the first three months of the year.

The regression undercut Google's earnings and revenue. Both fell below analyst forecasts, spooking some investors. Google's shares fell $37.18, or 4 percent, to $873.50 in extended trading after the results came out.

Other unwelcomed developments also loomed over the quarter.

Excluding the costs of stock given to employees, Google's operating expenses climbed 27 percent from last year to $4.25 billion. That increase renewed concerns that Google is pouring too much money on far-flung projects, such as the development of driverless cars and balloons equipped with Internet-beaming antennas, instead of focusing on its main business of Internet search and advertising.

Motorola Mobility, a slumping cellphone maker that Google bought for $12.4 billion 14 months ago, also remains a headache. The subsidiary lost $342 million in the latest quarter, widening from $199 million a year earlier, when Google owned Motorola for only part of the reporting period. Motorola now has lost a total of $1.7 billion under Google's ownership, despite layoffs and divestitures that have whittled Motorola's workforce to 4,600 people, down from 20,300 at the same time last year.

Although he wouldn't forecast when Motorola might start making money, Google CEO Larry Page told analysts on a Thursday conference call that he is excited about the upcoming release of a new phone called Moto X. Page provided no further details about the phone, which he and other Google employees have been testing.

If Google backs the Moto X with an expensive marketing blitz, it would drive up the company's expenses again later this year.

Mobile ads, though, were the biggest issue on investors' minds.

Although the problem isn't as severe as at other companies, including computer makers such as Dell Inc. and Hewlett-Packard Co., Google is still having trouble navigating a technological transition driving more online activity on to smartphones and tablets. Those devices pose a financial challenge for Google Inc. because their smaller screen sizes fetch lower ad rates than the marketing pitches made on traditional desktop and laptop computers.

Google is in a far better position to prosper from mobile computing because it makes Android, the most widely used operating system on smartphones. The software also is gaining traction on tablets challenging Apple's pace-setting iPad. Google is expected to unveil the next generation of its Nexus tablets running on Android next week.

Android typically features Google's search engine and other services, such as maps and Gmail, giving the Mountain View, Calif., company more opportunities to show ads.

Now, Google is taking steps to persuade advertisers to pay higher prices to connect with consumers on mobile devices at times when they appear to be mulling a purchase or may be in a merchant's neighborhood.

Google is trying to drive up prices more quickly by changing the way it sells ads to prod more marketers into buying spots on mobile devices at the same time they plan campaigns aimed at PCs. About 6 million advertisers have already switched to Google's new pricing system. All marketers will be forced to adopt the new approach, known as "enhanced campaigns," by the end of the month.

In Thursday's conference call, Page described the switch to enhanced campaigns as the biggest change that Google has ever made to an online advertising platform launched more than a decade ago.

"I think we're still in the very, very early stages of that," Page said. "We changed a tremendous amount for how our teams operate, how our advertisers operate, how everyone buys those ads, what the users see, and we've done it pretty well."

Wedbush Securities analyst Shyam Patil said he believes Google is headed in the right direction in mobile advertising, despite the second-quarter slip in price.

"They are going to come up with the right solution, although now I am not sure if it is going to happen this year," he said. Patil also said he expects Google's stock to rebound quickly because too many investors believe the company's remains among the best bets in technology.

Google earned $3.2 billion, or $9.54 per share, in the second quarter up 16 percent from $2.8 billion, or $8.42 per share, a year earlier.

If not for the costs of employee stock compensation and charges tied to Motorola, Google said it would have earned $9.56 per share. That missed the average target of $10.80 per share among analysts surveyed by FactSet.

Revenue rose 19 percent to $14.1 billion, from $11.8 billion.

After subtracting Google's ad commissions, revenue stood at $11.1 billion — about $275 million below analyst projections.

DealBook: JPMorgan and Wells Fargo Feel First Chill of Rising Interest Rates

Leslye Davis/The New York TimesJPMorgan’s profit on mortgages fell 14 percent in the last quarter.

Even as two of the nation’s largest banks reported record profits on Friday, beneath the rosy earnings were signs that a sharp uptick in interest rates could spell trouble ahead for Wall Street and the broader housing market.

Kicking off bank earnings season, JPMorgan Chase and Wells Fargo handily beat analysts’ expectations. Profit at JPMorgan surged 31 percent, bolstered by gains in the bank’s trading and investment banking business. Wells Fargo, the biggest home lender in the country, posted a 19 percent increase in its second-quarter profit.

The gains were spread across the banks except for one important source: mortgage banking. The results showed that refinancing activity slowed, as did demand for mortgage loans.

The results could worsen. If rates continue to rise, fewer borrowers are likely to refinance or buy a house. And if the mortgage bond market weakens, banks will take a smaller gain when selling the mortgages.

While these concerns have loomed for months, the earnings on Friday offered the clearest picture yet of how the interest rate turmoil could affect the banks, whose fortunes hinge in part on their lending businesses.

“We’re trying to be clear with you that this would be a significant event,” Marianne Lake, JPMorgan’s chief financial officer, said on Friday, referring to the potential effect of rising rates on the industry. She cautioned analysts that the volumes of mortgage refinancing could plunge by an “estimated 30 percent to 40 percent” in the second half of this year.

The results from JPMorgan and Wells are a barometer for the housing market because the two banks together account for the majority of all mortgages in the United States. In recent years, the recovery in the market has fueled the earnings of both companies and has also played a significant role in the broader economic rebound.

Mark Lennihan/Associated PressJohn Stumpf, chief of Wells Fargo, noted that higher rates reflected a mending economy. “I’ll take that trade all day,” he said.

Until now, the banks have benefited from government policies intended to stimulate the economy in the wake of the financial crisis. As the Federal Reserve cut interest rates in recent years, for example, it spurred millions of borrowers to refinance their home loans to take advantage of the lower costs.

But the Fed has signaled in recent weeks that it could ease its stimulus as the economy continues to recover. The warning has prompted investors to drive up interest rates around the globe. Since Fed officials first hinted that they might retreat, the rate for a 30-year fixed mortgage has risen to 4.78 percent from a low of 3.54 percent.

The banks’ second-quarter results show the early results of the sudden surge. In the second quarter, Wells Fargo received $146 billion worth of quarterly home loan applications, down from $208 billion in the period a year earlier. Its mortgage originations totaled $112 billion, down from $131 billion.

At JPMorgan, mortgage originations rose 12 percent in the quarter, to $49 billion, but overall profit in mortgage banking fell by 14 percent, to $1.1 billion.

On Friday, JPMorgan executives said the slowdown could be even more extreme than previous forecasts have suggested. While both banks might be able to seize on the uptick in interest rates to create a bigger spread between the income they derive from lending and the ultimate cost of borrowing, those benefits proved elusive.

Net interest margin, a critical measure that reveals how much profit banks earn on their loans, fell at JPMorgan, settling in at 2.60 percent for the quarter, from 2.83 percent in the previous quarter. At Wells Fargo, it was 3.46 percent, down from 3.48 percent in the first quarter.

The results suggested that the surge in interest rates came too late in the second quarter to significantly affect the banks, but that the increase could cause deeper problems in the second half of the year.

Christopher Whalen, an investor and housing market analyst at Carrington Investment Services, said that the numbers that Wells and JPMorgan presented were a “very big deal.”

“Everybody in the mortgage industry is going to have to reassess their view of this year and next,” Mr. Whalen said.

Rising rates, though, might help other parts of the banks’ business. Within its fixed-income trading operations, for example, JPMorgan reported an 18 percent increase in revenue. Fees in JPMorgan’s investment banking unit surged 38 percent, to $1.7 billion.

Wells Fargo executives played down the significance of the rate change, noting that mortgage rates were still extremely low by historical standards. John Stumpf, the bank’s chief executive, pointed to the interest he paid for his own mortgages.

“If you were in the mortgage market before 2000, you know that these are unbelievably good rates,” Mr. Stumpf said. “My first mortgage was at 8.5 percent. My second one was at 11.5 percent, and I thought those were great rates at those times.”

Mr. Stumpf noted that the uptick in rates stemmed from the Fed’s indication that the economy was improving. Housing prices are rising and demand for homes has soared.

As the improvements continue, he said, a growth in loans for new home purchases will more than make up for any losses in refinancing.

“I’ll take that trade all day,” Mr. Stumpf said. “It’s good for America, it’s good for the economy and in the long term, it’s good for our business.”

Wells’s overall loan portfolio, which includes commercial and consumer lending, actually rose 3 percent to $802 billion in the second quarter. A bump in credit cards and commercial lending — and record origination of auto loans — further offset the home loan slowdown. The bank’s total average deposits reached $1 trillion, up 9 percent from a year ago.

But important drivers of the returns at Wells Fargo and JPMorgan did not stem from substantial growth in the underlying businesses. Instead, they came from reduced expenses.

Wells Fargo, for example, reduced a crucial expense — building a reserve for bad loans. This move reflected improvements in the quality of loans.

In the second quarter, JPMorgan also lifted its profits by reducing loan-loss reserves by $1.5 billion. The bank defended the practice, saying it pointed to the improving condition of its loans.

Yet Jamie Dimon, JPMorgan’s chief executive, conceded that fresh loan growth was still “soft.”

Nathaniel Popper contributed reporting.

2 Central Banks Promise to Keep Rates Low

The bid to reassure investors brought the two central banks into closer alignment with the Federal Reserve, which, under Chairman Ben S. Bernanke, has become more open about its intentions.

At the same time, they appeared eager to signal that they would not follow the Fed in preparing for a gradual withdrawal of economic stimulus.

Mario Draghi, the president of the European Central Bank, based in Frankurt, said at a news conference that crucial interest rates would “remain at present or lower levels for an extended period of time.” Until Thursday, the bank had steadfastly refused to pin itself down on future policy.

“It’s not six months,” Mr. Draghi said. “It’s not 12 months. It’s an extended period of time.”

Mr. Draghi also said that the central bank was signaling a “downward bias” in interest rate policy, meaning further cuts were possible or even likely.

Only hours earlier, Mark J. Carney, who became governor of the Bank of England on Monday, made a similar break with tradition. The British central bank said in a statement that any expectations that interest rates would rise soon from their current record low level were misguided.

With their promises of easy money stretching toward the horizon, the central bankers offered more certainty to investors at a time when tensions in Europe are rising again. So-called forward guidance is considered one of the tools available to central banks, but it was one the European Central Bank and the Bank of England had not used before.

European markets reacted positively to the announcements, with the FTSE 100 in London closing 3.1 percent higher and the Euro Stoxx 50, a benchmark of euro zone blue chips, climbing 3 percent. (Markets in the United States were closed for the Fourth of July holiday.) The euro fell sharply, a development that was probably not unwelcome at the European Central Bank, since a cheaper euro makes European products less expensive in foreign markets, feeding exports. The British pound also fell.

Mr. Draghi said it was a coincidence that his central bank and Bank of England introduced forward guidance on the same day. Both left their main interest rates at 0.5 percent and did not announce any other policy moves. It was a day for talk rather than action.

“Mr. Draghi did what he does best today: intervene verbally to great effect,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, said in a note.

Mr. Draghi’s statement on Thursday came almost a year after he defused the euro zone debt crisis with a promise to do “whatever it takes” to preserve the currency union.

But after months of relative calm, Europe has been rattled in recent days by a political crisis in Portugal, which has raised questions about whether the region’s governments will be able to withstand popular discontent with their policies of cutting budgets to bring public debt under control. Investors have responded by pushing up the risk premium they demand on bonds issued by Italy, Spain and other troubled euro zone countries. Market rates on Italian and Spanish bonds retreated on Thursday after Mr. Draghi’s comments.

The commitment to keep rates low helps amplify the effect of rates that are already nearly rock bottom, by reassuring investors that they can count on easy money for the foreseeable future.

But some analysts saw Mr. Draghi’s statement as a bluff — a tacit admission that the central bank has run out of other ways to stimulate the euro zone economy.

“A change of a few words in the way he phrases the E.C.B.’s policy stance is an insufficient policy response to alter the — very troubled — course of the euroland economy,” Carl B. Weinberg, chief economist at High Frequency Economics in Valhalla, N.Y., said in an e-mail.

Jack Ewing reported from Frankfurt, and Julia Werdigier from London.

China’s Credit Squeeze Relaxes as Interest Rates Drop

China’s central government made no official announcement on the situation, and it remained unclear whether policy makers had intervened, but short-term interest rates fell sharply Friday from the day before, when they had reached some of the highest levels in a decade.

Still, rates for Chinese institutions seeking interbank financing on Friday were substantially higher than they had been a few weeks ago.

Financial experts said they expected the higher interest rates to persist for some time because the Chinese government appeared to have abandoned its longstanding policy of responding to any hint of an economic slowdown by expanding credit. Analysts say the government is holding back because it is determined to rein in excess credit expansion and avert a financial crisis that could result from years of poor lending practices and overinvestment. There are also hints that a huge shadow banking operation in China could be masking more serious financial risk-taking.

“The government at the moment wants to signal, we’re working on reform; we’re not interested in short-term stimulus, like China did in the past,” said Louis Kuijs, the chief China economist at the Royal Bank of Scotland.

The government’s reluctance to increase bank liquidity is troubling investors because of concerns that China’s economy is weakening much faster than expected.

Economists in China cut their growth forecasts sharply in the last week, though projections remain robust at 7 percent. Prices of Chinese shares plunged on the Shanghai and Shenzhen stock markets, ending one of the worst weeks in four years.

Joe Zhang, a longtime banker and the author of “Inside China’s Shadow Banking: The Next Subprime Crisis?,” said the apparent decision by the central bank to discipline banks by allowing rates to rise this past week was necessary.

“Effectively, they’re telling commercial banks to go and sort out their problems,” Mr. Zhang said by telephone on Friday. “The banks have lent out too much money. And what happens over time? You go from prime to subprime to silly loans. This is what happened with the U.S. subprime crisis. Banks start lending to bad projects. We’ve been too reckless.”

Determined to shore up defenses in a financial system that now underlies the world’s second-largest economy after the United States, China’s top leaders are slowing the flow of the fuel that has helped foster many of the risks: credit from state-run banks.

For much of the last decade, when the economy has slowed, Beijing has pressed state-owned banks to lend more aggressively.

But when interbank lending tightened this month — after aggressive lending early in the year — the central bank refrained from adding liquidity to the market, which would have kept short-term interest rates low.

As credit markets began to freeze up and mistrust among banks spread, rumors circulated of defaults. Late Thursday, the Bank of China, one of the country’s biggest lenders, was forced to issue a statement on its Web site denying local news reports that it had defaulted on interbank payments.

By late Friday, the markets had settled somewhat. The overnight lending rate between banks had dropped to 8.49 percent, down from a record-high fixing of 13.44 percent on Thursday, but still much higher than last month’s levels of less than 4 percent.

The situation remains volatile. Another benchmark rate for bank-to-bank borrowing costs, the seven-day repurchase rate, opened Friday at 8.1 percent, briefly soared as high as 25 percent and closed at 5.5 percent.

“Persistent tight liquidity conditions in China’s financial sector could constrain the ability of some banks to meet upcoming obligations on maturing wealth management products on a timely basis,” the credit ratings agency Fitch Ratings said in a report. Wealth management products are instruments sold to investors through banks and trust funds but do not appear on the financial companies’ balance sheets.

Referring to wealth management products, Fitch went on: “Issuance of new products, and borrowing from the interbank market, are among the most common sources of repayment for maturing W.M.P.’s, and the recent interbank liquidity shortage complicates both.”

Neil Gough contributed reporting from Hong Kong.

DealBook: Singapore Censures 20 Banks Over Rates

Roslan Rahman/Agence France-Presse — Getty ImagesHotel guests look over Singapore’s financial district.

LONDON – Twenty of the world’s largest banks were censured by Singapore authorities on Friday over the attempted manipulation of local benchmark interest rates that is part of a larger rate-rigging scandal being investigated by global regulators.

The financial institutions, including Bank of America and JPMorgan Chase, were found to have insufficient risk management and internal controls, which allowed some of their traders to try to alter rates including the Singapore interbank offered rate, or Sibor.

The latest revelations follow a series of multimillion-dollar fines against UBS, Barclays and the Royal Bank of Scotland for the manipulation of the London interbank offered rate, or Libor, which underpins trillions of dollars of mortgages, business loans and other global financial products.

As part of its investigation, the Monetary Authority of Singapore said 133 traders at firms like Credit Suisse, Citigroup and ING tried to influence the local benchmark rate for their own financial gain over a five-year period starting in 2007.

Around three-quarters of the implicated traders have left the banks involved, while the other bankers face internal disciplinary procedures, according to a statement from the Singaporean financial regulator.

None of the 20 global banks were fined, but the financial institutions must hold a combined $9.7 billion in extra reserves with Monetary Authority of Singapore at zero percent interest for one year while they carry out internal changes.

UBS, ING and R.B.S. must each hold up to an additional $960 million with local authorities, while Bank of America will be forced to keep an extra $640 million with the regulator in Singapore. The amount of capital was dependent on the severity of the attempted manipulation.

Like other global regulators, the Singapore authorities also said they planned to make it a criminal offense to manipulate benchmark rates. Under current local legislation, the attempted manipulation does not constitute a criminal offense.

As the rate-rigging investigations enter their fifth year, regulators continue to look into allegations that traders at some of the world’s largest banks altered benchmark rates for financial gain.

While the Libor inquiries have centered initially on European banks, a number of American financial institutions also remain in the sights of regulators at the United States Commodity Futures Trading Commission and at the Financial Conduct Authority of Britain.

Fundamentally: When Interest Rates Rise, Stocks Needn’t Fall

Here’s the reality: In May, rates actually rose quite sharply, as 10-year Treasury yields jumped to 2.16 percent from 1.63 percent. Yet the Dow Jones industrial average still soared more than 400 points, to end the month at 15,115.57.

The stock market’s road did become choppy as rates rose. The Dow lost more than 200 points on Friday, for example, but the overall trend remained upward. It just goes to show that while there is a connection between interest rates and the stock market, it isn’t a simple one. When rates rise, said Jeffrey N. Kleintop, chief market strategist at LPL Financial, “it is not the size of the move itself, but the absolute level of yields reached that matters to the stock market.”

Even with the recent uptick, the 10-year yields are only about half of what they were five years ago, during the global recession. And a climb in rates from such a low level may be a tail wind — not a headwind — for stocks, Mr. Kleintop said.

For starters, he said, “it reflects an improving outlook for economic growth and less risk of deflation.” Both are welcome developments to equity investors. Moreover, “it results in losses for bonds,” he said, which may prompt investors to sell those bonds and move money into stocks.

Indeed, over the past month, the average bond fund that invests in long-term government debt has lost more than 6.5 percent of its value, according to Morningstar, the investment research firm. The typical blue-chip stock fund, meanwhile, has gained about 4 percent.

But this is not to say that rising interest rates wouldn’t hurt the stock market at all.

For instance, if rates were to climb enough to threaten the rebound in housing, stocks might start to sing a different tune, market strategists say. But the average 30-year fixed-rate mortgage is still at a historically low 3.81 percent, even though that rate is up since the end of April.

Similarly, climbing rates would threaten stocks if they signaled rising inflation, so that the Federal Reserve might have to curtail its efforts to stimulate the economy. But the most recent reading of the Consumer Price Index showed that prices were up only around 1.1 percent over the past 12 months. That’s down from the 1.6 percent pace of inflation at the start of the year.

So how much would rates have to climb before investors became seriously worried about stocks?

If history is any guide, the threshold is around 6 percent.

Doug Ramsey, chief investment officer at the Leuthold Group, has looked at stock valuations and bond yields going back to 1878. He has found that while there is a relationship between the two, big trouble for the stock market appears to kick in only when 10-year Treasuries are yielding 6 percent or higher.

Theories abound as to why 6 percent seems the magic number. James W. Paulsen, chief investment strategist at Wells Capital Management, argues that 6 percent is important because it reflects the overall economy’s nominal long-term growth rate. “I can see why you’d get a negative reaction if the cost of capital for the market was above the inherent, sustainable growth rate of the economy,” he said.

Mr. Ramsey offers a slightly different explanation. He said that for rising bond yields to hurt the stock market, they would have to be viewed by investors as real competition to stocks. Perhaps at 6 percent, he said, bond yields are high enough that “they are truly thought of as potential replacements or substitutes for long-term stock returns.”

TO be sure, some market watchers say what really matters isn’t the current move in long-term market rates, but what happens with the short-term rate that the Fed controls.

Recently, Ben S. Bernanke, the Fed chairman, hinted that the central bank might soon begin to taper its purchases of Treasury bonds as part of its efforts to stimulate the economy. He did not offer any clues, however, as to when the federal funds rate, now 0.25 percent, might be lifted.

John Stoltzfus, chief market strategist at Oppenheimer & Company, noted that whenever the Fed does raise short-term rates, “it could create a jostle in the stock market.” But Mr. Stoltzfus warned investors not to assume that Fed increases would immediately pull the plug on the bull market.

He notes that the last time the Fed started raising rates was in June 2004, when the funds rate was at 1 percent. The central bank proceeded to lift rates 17 times through the end of June 2006. During that stretch, the Standard & Poor’s 500-stock index rose 11.3 percent, while the Russell 2000 index of small-company stocks gained 22.5 percent. In the 12 months that followed — while the Fed held rates steady — stocks continued to post double-digit gains.

“What really counts here for investors is, are rising rates crimping the affordability of credit?” Mr. Stoltzfus said. With two-year Treasury notes yielding just 0.29 percent, he said, “I’d argue that we’re far from that point.”

Paul J. Lim is a senior editor at Money magazine. E-mail: fund@nytimes.com.

Indian Central Bank Cuts Rates

MUMBAI — The Indian central bank lowered its benchmark policy rates by 0.25 percentage point Tuesday for the second time this year in an effort to help revive economic growth.

The rate cut was overshadowed by a political crisis when a major ally in the governing coalition quit, raising fresh doubts about Prime Minister Manmohan Singh’s ability to push through changes and regain investors’ confidence.

In its midquarter policy review, the Reserve Bank of India lowered its benchmark rate to 7.5 percent, as expected, and reduced another important number, the reverse repo rate — the rate at which it borrows from banks — to 6.5 percent.

It also left the cash reserve ratio for banks unchanged at 4 percent, in line with expectations.

The Indian economy is on track to grow at its slowest pace in a decade, about 5 percent in the fiscal year ending this month, and had been expected to experience modest improvement in the coming year. A recent uptick in wholesale inflation, rising consumer inflation driven by food prices and a record current account deficit limit the central bank’s ability to stimulate the economy, despite pressure from a government that is facing elections in 2014.

“Even as the policy stance emphasizes addressing the growth risks, the headroom for further monetary easing remains quite limited,” the bank said in its statement.

That caution reinforced market expectations that the Reserve Bank of India, which left rates on hold for nine months before cutting them in January, will only lower them a further 0.25 or 0.5 percentage point in the fiscal year that begins in April.

After an initially muted reaction to the widely expected rate cut, Indian stocks and the rupee fell on news that a political party leader, Dravida Munnetra Kazhagam, would leave the governing coalition because of differences over the government’s stand on war crimes accusations in Sri Lanka. Bond yields rose slightly.

The withdrawal leaves Mr. Singh’s coalition at the mercy of smaller parties that are skeptical of changes like land-acquisition legislation aimed at increasing investment in infrastructure.

“As the coalition becomes more fractured and depends on outside support from parties that have a narrow agenda, the very act of policy making gets diluted,” said Abheek Barua, chief economist at HDFC Bank.

The current account deficit reached a record 5.4 percent in the quarter that ended in September and is expected to end the 2012-13 fiscal year at its highest level ever.

“Although capital inflows, mainly in the form of portfolio investment and debt flows provided adequate financing, the growing vulnerability of the external sector to abrupt shifts in sentiment remains a key concern,” the central bank said.

In the government’s budget announced at the end of February, Finance Minister P. Chidambaram said the fiscal deficit would fall to 5.2 percent of gross domestic product in the current fiscal year and 4.8 percent in the next year, targets intended to help stave off a sovereign credit rating downgrade to “junk” status.

Bucks Blog: The States With the Highest Car Insurance Rates

Associated Press Traffic headed out of New Orleans ahead of Hurricane Isaac last August.

If you want cheap car insurance rates, it’s best not to live in Louisiana. Or Michigan.

That’s according to a new analysis from Insure.com, an insurance rate comparison site.
The average annual premium in Louisiana is $2,700. Michigan is next with $2,500, followed by Georgia at $2,200. In the New York metropolitan region, Connecticut has the nation’s 11th highest average annual premium at $1,723, New Jersey is 12th at $1,697 and New York is 33rd at $1,369.

The report is based on additional analysis of data provided for Insure.com by Quadrant Information Services, which this year obtained rates for more than 750 models from six big insurers (Allstate, Farmers, Geico, Nationwide, Progressive and State Farm) in 10 ZIP codes per state. That analysis allowed Insure.com to report on the most and least expensive cars to insure, which Bucks reported on this year. Insure.com then averaged the rates for all vehicles in each state to create the state rankings. (The cars were all 2013 models.)

Rates are for a single, 40-year-old man with a clean driving record and good credit who commutes 12 miles to work daily. Policy limits were $100,000 for injury liability for one person, $300,000 for all injuries and $50,000 for property damage in an accident, and a $500 deductible on both collision and comprehensive coverage. The rate includes uninsured motorist coverage.

Ultimately, your own rates will vary based on your driving record, the type of car you drive and other factors, including those that have little to do with your driving history. But the comparative state rankings give an idea of how policies at the state level can affect rates over all, said Amy Danise, Insure.com’s editorial director.

In Louisiana, several factors help to drive up rates, she said. For instance, drivers injured in accidents there tend to file more bodily injury claims than do those in other states. Medical costs have been increasing, so insurers have to pay more for those claims. The state also has significant claims filed under “comprehensive” coverage, which covers damage from natural disasters, like hurricanes.

Michigan, meanwhile, is an “oddball” state when it comes to car insurance, she said, in that auto policies are required to offer unlimited medical coverage for injuries sustained in an accident. Insurers pay the first $500,000 in medical claims, and the Michigan Catastrophic Claims Association pays the rest. All policyholders pay a fee for the association. The fee is $175 per car.

“All of these costs get passed on, in one way or another,” Ms. Danise said.

Meanwhile, less urban states may benefit from overall lower rates because of less traffic congestion and lower accident rates. Maine ranks as the cheapest state, with an average premium of just over $900, followed closely by Iowa at about $1,000. “You don’t have all these cars next to each other crashing into each other,” she said.

So what if you don’t live in a state with lower premiums? You can strive to keep your own driving record as clean as possible, avoiding tickets and accidents that can raise your rates. And you can shop around. Quotes for the same driver can differ by company, she said. You can also choose a car that’s less expensive to insure. In Louisiana, for instance, the cheapest choice would be a Jeep Patriot Sport , while the most expensive would be a Mercedes-Benz S65 AMG sedan.

Do you live in a high-premium state? Do you take any special steps to help keep your premium affordable?

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