American Family Insurance group’s customer focus, financial strength, grew during challenging year
Customer satisfaction and loyalty increased as group provided premium relief, rebuilt lives after major storms
American Family Insurance group today reported solid financial results for 2020.
American Family Insurance group today reported solid results for 2020, a year dominated by a global pandemic, economic hardship, political divide and calls for action to address longstanding social injustices. American Family innovated and partnered to help customers and communities withstand these historic challenges, while also responding to a record $1.8 billion in claims for catastrophic events that included a derecho in the Midwest, wildfires in western states and hurricanes in gulf states and along the east coast.
The American Family Insurance group achieved strong customer satisfaction and loyalty, while increasing policyholder equity (also referred to as members’ equity) to more than $10.6 billion to protect customers. The group also provided its customers $502 million in pandemic-related premium relief and contributed nearly $7 million to community partners providing COVID-19 assistance.
“It was a difficult year for many people, and we were laser-focused on helping them,” said Jack Salzwedel, American Family chair and CEO. “Agility, resiliency and care. Our employees and agency owners displayed – and continue to display – those qualities as they serve our customers and the communities where customers live, work and raise their families.”
“COVID-19 created a new world, and we responded by rapidly innovating so we could continue protecting our customers through exceptional service and value,” said Bill Westrate, American Family president and CEO-elect. “We also innovated as an employer and corporate citizen. We put the safety of our people and support of our customers first while using our financial strength, resources and voices to give back– and we’re not done.”
In February, American Family announced “Free to Dream,” a $105 million commitment over the next five years to continue its support and community partnerships to address social injustice and help close equity gaps.
Adapting for customers when they need us most
At the outset of the pandemic, people started driving significantly less and having fewer accidents. American Family became the first insurance company to respond and announce it was returning auto premium to customers. The first round, in April, returned $200 million, with additional rounds of premium relief increasing the total to more than $500 million. The relief continues into 2021.
“During a year when so many customers faced financial challenges, we knew it was important to take this action on their behalf,” Westrate said.
When the pandemic began, the group quickly shifted 95% of its employees to remote work while providing flexibility so they could handle the work and life responsibilities brought on by the pandemic. American Family agency owners also received technical support so they could continue serving their customers in a way that’s safe for everyone.
During 2020, customer satisfaction and loyalty increased for the group and satisfaction with American Family Insurance agency owners reached record highs.
“Customers have always turned to their agents for trusted support and expertise, but never as much as they did last year,” Westrate said. “American Family agency owners rose to the occasion to care for customers, reviewing coverage options, explaining premium relief, assisting with flexible payment options and doing so much more.”
Claim losses, premium relief contribute to underwriting loss
The group’s property-casualty lines – vehicle, homeowners and commercial – reported a 2020 net underwriting loss of $402 million. That compares to a net underwriting loss of $614 million in 2019.
The 2020 underwriting loss resulted primarily from two major ways the group supported customers: catastrophe claim losses of $1.8 billion, up $371 million from 2019, and the decision to provide $502 million in premium relief.
The group’s largest 2020 catastrophe occurred when a derecho struck the Midwest in August, ripping through several states with eastern Iowa most heavily impacted. The event produced an anticipated $300 million in damage for American Family group customers. The group also incurred $140 million for wildfire damage in several western states and $78 million in hurricane losses. Throughout the year, claims operations capitalized on innovative approaches and technology to ensure COVID safety for customers and claims professionals.
The group reported a combined ratio of 103.5 for all P&C lines, which means it anticipates paying out $1.04 in claims and expenses for every dollar earned in premium, down from 105.7 in 2019.
Growth, revenue and income increase
The American Family group ended 2020 with 12.6 million policies in force, an increase from 12.4 million at the end of 2019. Direct premium written for the group reached $11.8 billion, an increase of 6.0% from 2019.
Group revenue increased to $12.9 billion in 2020 from $12.2 billion in 2019. Group assets rose to $33.9 billion, an increase of $2.8 billion from 2019, and the amount of American Family Life Insurance Company insurance coverage in force increased to $103.6 billion from $100.5 billion last year.
The group achieved a net income of $403 million, a decrease from $456 million in 2019. Net income includes underwriting/operating results, investment income, realized gains (and losses) and taxes.
Strong capital markets drive increase in policyholder equity
The group added $839 million to policyholder equity in 2020, bringing total equity to $10.6 billion.
Policyholder equity is an important measure of financial strength, ensuring the group has the resources to help customers recover from severe weather and other unforeseen events. Policyholder equity has increased by $3.2 billion since 2015.
“This is the first time our policyholder equity has surpassed $10 billion, and the increase aligns with our group customer growth,” said Chief Financial Officer Dan Kelly. “Our financial strength enables us to be here for customers when they need us – such as after storms strike – while continuously innovating to provide efficient, industry-leading service every day.”
The increase in equity was driven in large part by strong performance in the capital markets, which exceeded the group’s underwriting loss and resulted in a profit from operations of $345 million. Capital market gains for the enterprise in 2020 were $1.1 billion pre-tax, compared with a gain of $1.4 billion in 2019. These gains were driven by increases in bond values due to decreasing interest rates, and an increase in the value of the enterprise stock portfolio.
“It was a challenging year, but also a remarkable year in how we cared for our customers, communities, agency owners and employees,” Salzwedel said. “Even when the pandemic is behind us, we will remain committed to innovate in our insurance operations and service to our customers and communities. We must have gratitude, optimism and belief as we move forward and build on the lessons of 2020.”
The American Family Insurance group of companies includes:
- American Family Insurance, based in Madison, Wisconsin, which offers multiline insurance products primarily through the company’s exclusive, independent contractor agents in 19 states.
- Homesite, a national direct property insurance company based in Boston.
- The General, a national direct non-standard auto insurance provider based in Nashville, Tennessee.
- Main Street America, based in Jacksonville, Florida, which offers multiline insurance products through a national network of independent agents.
- CONNECT, powered by American Family Insurance, based in De Pere, Wisconsin, which sells property and casualty lines through partners.
See our 2020 annual report on amfam.com.
About the American Family Insurance group
Based in Madison, Wisconsin, American Family Insurance has been serving customers since 1927. We inspire, protect and restore dreams through our insurance products, exceptional service from our agency owners and employees, community investment and creative partnerships to address societal challenges. We act on our belief in diversity and inclusion by constantly evolving to meet customer needs and preferences. American Family Insurance group is the nation’s 13th-largest property/casualty insurance group, ranking No. 254 on the Fortune 500 list. The group sells American Family-brand products, primarily through exclusive agency owners in 19 states. The American Family Insurance group also includes CONNECT, powered by American Family Insurance, The General, Homesite and Main Street America. Across these companies the group has more than 13,200 employees nationwide.