Seeking flexibility to meet future customer needs, American Family Insurance files plan to change corporate structure
Policyholder ownership remains intact with creation of a parent mutual holding company
Focused on its heritage and customers’ future, American Family has filed a plan to form a mutual holding company. The change would preserve policyholder ownership and increase flexibility to pursue customer-driven initiatives.
“This proposed new structure is about the future and our customers. It upholds the concept of mutual company ownership by our policyholders, while adding flexibility to continue our evolution as a proactive partner with our customers.”
American Family Mutual Insurance Company has filed a future-looking plan to create a mutual holding company that would provide more flexibility to pursue customer-driven initiatives while preserving the company’s founding principle of policyholder ownership.
The plan was recently approved by the company’s board of directors and filed with the Wisconsin Office of the Commissioner of Insurance (OCI). The plan is subject to OCI review and approval, as well as approval of existing policyholders of American Family Mutual Insurance Company.
“This proposed new structure is about the future and our customers,” said Jack Salzwedel, American Family chairman, chief executive officer and president. “It upholds the concept of mutual company ownership by our policyholders, while adding flexibility to continue our evolution as a proactive partner with our customers.”
He added, “This change would position American Family to meet customer needs in an age of automated cars, smart homes and other advanced technologies that are already improving lives and changing the insurance industry.”
Coverage, premium rates and claims handling under existing American Family insurance policies would be unaffected by the change to a mutual holding company. Company and agent operations would also be unaffected.
Change reinforces mutual insurance company concept
American Family operates as a mutual company, meaning it is owned by its policyholders – not by shareholders. Operating under the mutual company structure, American Family can view decisions from the lens of what’s best for the customer rather than balancing customer and shareholder needs.
Under the proposed restructure, American Family would continue to operate under the principles and culture of a mutual company. A mutual holding company would be the group’s new parent company, with American Family Mutual Insurance Company (AFMIC) becoming a stock subsidiary with 100 percent of the stock ultimately controlled by the mutual holding company.
Policyholders of American Family Mutual Insurance Company would exchange their membership rights for similar membership rights in the mutual holding company. Certain membership rights, as permitted by law, would also be extended to policyholders of certain other American Family group subsidiaries.
“Through the years, American Family has established new subsidiaries to facilitate expansion into new states and offer new products through our American Family agents,” said David Holman, American Family chief strategy officer and corporate secretary. “Policyholders of certain subsidiaries don’t have membership rights now, but would have these rights under the new structure.”
In addition, a mutual holding company structure would allow American Family to extend membership rights to policyholders of new subsidiaries it could create to offer new products in the future.
“Simply put, this change would help ensure our mutual company tradition for generations to come,” Holman said.
The mutual holding company would be legally domiciled in Wisconsin, joining American Family Mutual Insurance Company and other subsidiaries, including several that are being re-domiciled to Wisconsin for efficiency and tax reasons.
The board of directors and officers of the holding company would be the same as the board of directors and officers of American Family Mutual Insurance Company prior to the change. Also, American Family board members, officers and other employees would not receive any additional compensation, stock or benefits as a result of this change.
Staying the course on innovation and proactive protection
In recent years, American Family has taken actions to research, invest in and offer technologies and programs designed to proactively protect its customers. It co-sponsored a home automation business accelerator with Microsoft and started pilot programs in certain states with Nest and Ring to provide additional home protection to enrolled American Family customers.
One of American Family’s subsidiaries, New Ventures, LLC, also invests in emerging companies that are developing technologies, concepts and business models that can produce customer benefits and financial returns. Examples include startups in the areas of connectivity, such as home automation, to better understand and prevent accidents; and data and analytics that can improve business efficiency and pricing.
A mutual holding company would create additional flexibility to invest in or acquire non-insurance companies, using an intermediate holding company that would facilitate those transactions. A mutual holding company structure would also better position American Family to consider future potential mergers and acquisitions with other mutual insurance companies.
“Providing proactive protection to our customers is a path we want to stay on – it’s a path we believe our customers want us to stay on,” Salzwedel said.
Several steps required for approval
Under Wisconsin law, conversion to a mutual holding company is subject to a public administrative hearing and prior approval from the insurance commissioner’s office. Following those steps, the company would seek approval from eligible policyholders who would vote by proxy, mailed to them with an information booklet that thoroughly explains the conversion plan, or in person at a special policyholder meeting.
Dates for the administrative hearing, proxy mailing and policyholder meeting are still to be determined. The company hopes to complete the process by the end of 2016.
About American Family Insurance
Madison, Wis. - based American Family Insurance is the nation's thirteenth-largest mutual property/casualty insurance group and ranks 332nd on the Fortune 500 list. The company sells American Family-brand products, including auto, homeowners, life, business and farm/ranch insurance, through its exclusive agents in 19 states. American Family affiliates (The General, Homesite and AssureStart) also provide options for consumers who want to manage their insurance matters directly over the Internet or by phone. Web www.amfam.com; Facebook www.facebook.com/amfam; Twitter www.twitter.com/amfam; Google+ plus.google.com/+amfam/