Strong growth, record storm claims highlight 2017 for American Family Insurance Group
Policyholder equity, which serves as protection for customers, increases by $292 million
During a record-high storm year, the insurance group ended the year with more than 10.5 million policies in force and achieved solid increases in policyholder equity, premium growth across operating companies, investment gains and customer satisfaction.
Bolstered by strong investment gains and policy growth, the American Family Insurance group of companies added $292 million to policyholder equity in 2017, despite an anticipated $1.5 billion in storm claims, the highest annual amount in the company’s 90-year history.“It was a busy year for American Family,” said Jack Salzwedel, chairman and chief executive officer of the Madison, Wisconsin-based insurer. “In 2017, we had an historic opportunity to work with our customers. Whether they had a claim, needed a new or an additional policy or had a service question, our agents and employees were there for them.”
American Family ended 2017 with 10.5 million policies in force, a 12-month increase of 3.2 percent, with policy growth across all companies and most lines of business. Customer satisfaction and retention remained strong.
American Family announced its 2017 results today at the company’s annual meeting. The results provide year-end information on the group’s operating companies, which include:
- The American Family brand companies, which offer multiline insurance products primarily through the company’s agents.
- Homesite, a direct homeowners insurance company based in Boston.
- The General, a direct non-standard auto insurance provider based in Nashville.
“For many reasons, 2017 was exceptional for American Family,” said Salzwedel. “In addition to helping hundreds of thousands of customers with claims, we supported communities across the nation through corporate philanthropy and further committed to our digital transformation with the acquisition of software analytics company Networked Insights.”
Policyholder equity continues to increase
Policyholder equity is an important measure of American Family’s financial strength and enables the company to help customers recover following unforeseen events. With the $292 million increase in policyholder equity in 2017, compared to a $397 million increase in 2016, the group’s total equity stands at $8.1 billion, which aligns well with continuing policy growth, said Dan Kelly, American Family chief financial officer.
“Investment income and capital gains were drivers of our policyholder equity increase, offsetting the underwriting losses caused by the weather and claim trends on the auto insurance side,” Kelly said. “Our continued increase in policyholder equity keeps us in a strong position to help customers, which was more important than ever in 2017.”
Storm and auto losses up
The group’s $1.5 billion in storm losses for 2017 is up from $883 million in 2016. While historically high, the 2017 storm losses were mitigated by $391 million anticipated to be recovered through reinsurance, which the company purchases annually to help protect its equity in the event of significant levels of storm losses. The group’s largest catastrophe in 2017, resulting in $362 million in incurred claim losses to date, was a June hailstorm that struck the upper Midwest, including the Twin Cities area in Minnesota and northern Wisconsin.For all property-casualty (P&C) insurance lines, the group reported a 2017 net underwriting loss of $554 million, which compares to a net underwriting loss of $56 million in 2016. The group reported a P&C combined ratio of 106.8, which means it paid nearly $1.07 in claims and expenses for every dollar earned in premium.
The combined ratio for auto was 112.6, reflecting a multi-year, industrywide trend of higher auto accidents and claim costs that continued in 2017. Higher speed limits, more miles driven, distracted driving and increased medical and auto repair costs all contribute to the trend.
Additional 2017 results for the group included:
- Net income for the year ended at $155.6 million, a decrease from $325.6 million in 2016, with most of the difference attributable to higher-than-average storm and non-storm claim activity. Net income includes underwriting/operating results, investment income, realized gains (and losses) and taxes.
- Direct premium written for the group increased 7 percent, reaching $8.8 billion.
- Group assets rose to $24.2 billion, an increase of $1.6 billion from 2016, while group revenue increased to $9.3 billion from $8.7 billion.
- Capital gains of $531 million were up from $247 million in 2016.
- The American Family Life Insurance Company’s policies in force increased from 831,326 in 2016 to 843,077 in 2017.
- The American Family Insurance Dreams Foundation distributed $6.5 million in grants, major gifts, hurricane relief, scholarships and matches of agent and employee charitable donations.
“We can’t control the weather, but our strong financial position allows us to take care of customers when storms strike.” said Salzwedel. “It also makes it possible for us to invest in communities, innovation and our agents and employees.”
About American Family Insurance
Madison, Wisconsin-based American Family Insurance is the nation’s thirteenth-largest property/casualty insurance group and ranks 315th on the Fortune 500 list. The company sells American Family-brand products, including auto, homeowners, life, business and farm/ranch insurance, primarily 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