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American Family Insurance Group strengthens policyholder equity, achieves revenue growth

2013 highlights driven by strong operating results

Madison, Wis. (March 4, 2014) - The American Family Insurance Group turned in a strong financial performance in 2013, bolstered by solid operating results from its American Family agency-brand subsidiaries. The financials also include results from the first of the group's recent acquisitions, Permanent General Holdings Corp. (The General®).

American Family increased its policyholder equity to nearly $6.6 billion. Policyholder equity serves as financial protection for policyholders in the event of unusual catastrophic events or unexpected losses.

"I'm proud of the financial strength that allows us to protect and serve our customers," said Chairman and Chief Executive Officer Jack Salzwedel.

"Were investing in technology, products and programs that will better serve our customers for the long run, while at the same time maintaining the capacity to withstand unanticipated financial challenges."

American Family's 2013 results, which were released today at the company's annual policyholder meeting, cover all of the group's subsidiaries, including the American Family brand companies, which offer products through the company's exclusive agents; The General, a direct non-standard auto insurance company acquired on the last day of 2012; and AssureStart, a direct small business insurance distributor created last November.

American Family acquired direct property insurer Homesite Group Incorporated on Dec. 31, 2013. Homesite operating results will be incorporated into the group results starting in 2014.

"American Family is growing and diversifying to meet customer needs and preferences today and in the future," Salzwedel said. "For the customers who prefer the outstanding service of an insurance agent, we will continue to recruit and support the best agency force in the business. Our agents remain our heart and soul.

"But it's also important we reach different customers who prefer to handle their insurance matters directly, over the Internet or using the phone. Our recent acquisitions of The General, Homesite and AssureStart enhance these direct capabilities for us."

Increased policyholder equity builds financial strength

The American Family Group added $444.1 million to policyholder equity in 2013, following a $579.1 million increase in 2012.

The main contributor to the increase in policyholder equity in 2013 was net income of $378.8 million, which includes line operating results, investment income, realized gains and taxes. Net income increased 5.1 percent from the $360.5 million net income in 2012.

The property and commercial-farm ranch insurance lines both saw better-than-expected results.

American Family's property-casualty (P/C) underwriting loss of $97.4 million in 2013 was due primarily to auto insurance liability claims, yet that sum was an improvement from the $177.2 million underwriting loss in 2012. Direct premium written for the enterprise (including The General) increased 8.9 percent from 2012, reaching $6.3 billion in 2013.

Company assets rose to $19.5 billion, an increase of 8.6 percent. Life insurance in force rose to $89.6 billion from $88.3 billion.

Combined ratio improved from previous year

The combined ratio, which compares claims payments and expenses to premium, is a key measure in the insurance industry. American Family finished 2013 with a combined ratio of 101.7 for its core business of P/C insurance, which means the company paid out nearly $1.02 in claims and expenses in 2013 for every dollar of earned premium.

In 2012, American Family's combined ratio was 103.3.

Storms moderate in 2013

Catastrophe losses for American Family brand companies were lower in 2013 than in recent years. Anticipated P/C insurance catastrophe claim payments totaled $804.8 million, slightly less than planned and lower than the 2012 tally of $840.6 million. The company’s record for catastrophe claim payments is nearly $1.2 billion, for storms and other events occurring in 2011.

More than 30 percent of American Family's catastrophe claim payments came in the month of August, when a series of severe hail storms struck Colorado, the Dakotas, Minnesota and Wisconsin. Wildfires in June displaced residents in Colorado and inflicted about $40 million in anticipated claim payments.

While storm activity was less than expected in many months, a rare November tornado devastated portions of central Illinois and brought the month's anticipated claim payments to $54.5 million, or nearly six times the sum anticipated for November.

"Our goal is to be at the scene early and to be highly visible and accessible," President and Chief Operating Officer Dan Schultz said. "Whether they call 1-800-MYAMFAM, check in on their mobile device, go to their agent's office or visit a catastrophe mobile office, our customers can count on a compassionate, caring response that continues through the entire claims process."

The following chart shows the consolidated highlights of the group's 2013 GAAP financial report (in thousands, except for individual life insurance in force). More information on the company can be found in the company's 2013 Annual Report.

Category

2013

2012

2011

2010

2009

Assets

$19,490,300

$17,939,130

$17,148,612

$16,787,779

$16,250,813

Equity

$6,580,946

$6,136,828

$5,557,726

$5,431,728

$4,826,146

Revenue

$6,813,483

$6,238,062

$6,165,526

$6,321,474

$6,360,130

Life insurance in force

$89.6 billion

$88.3 billion

$87.0 billion

$86.5 billion

$85.4 billion

Based in Madison, Wis., the American Family Insurance Group provides multi-line insurance through its American Family agents, in addition to certain lines of insurance through its direct channel subsidiaries.

The American Family Insurance brand companies offer auto insurance, homeowners insurance, life insurance, health insurance, business and farm/ranch insurance in 19 states. The company employs 7,800 people and sells its products through 3,500 independent contractor exclusive agents. American Family insurance is the nation’s third-largest mutual property/casualty insurance company and ranks 393rd on the Fortune 500 list. Web: www.amfam.com; Facebook: www.facebook.com/amfam; Twitter: www.twitter.com/amfam; YouTube: www.youtube.com/amfam.

The General specializes in non-standard auto insurance, primarily selling its products over the Internet and through call centers. The company employs 800 people at its Nashville headquarters and other locations, and operates in 29 states.

Boston-based Homesite operates in 46 states, selling property insurance primarily through alliances with certain insurers and financial services companies, with a small amount of sales through its website and call centers. The company employs 700 people in Boston and other locations.

AssureStart, based in Seattle, sells certain commercial insurance policies using the Internet and call center, focusing on small businesses with few employees in certain low-risk business types. The startup company with 25 employees operates in four states, with plans to expand to all 50 states in the coming years.

News media contacts:

Steve Witmer
Media Relations
608) 242-4100, ext. 32121

Ken Muth
Media Relations
608) 242-4100, ext. 30680