American Family reports strong gains in 2003

Insurance group adds to policyholder equity

Madison, Wis. (March 2, 2004) - American Family Insurance Group posted strong revenue growth and excellent financial results during 2003 thanks to improved profitability in its insurance lines, moderate storm losses and a rejuvenated stock market, the Madison-based insurer announced today at its annual policyholder meeting.

American Family’s gain from operations – which is group revenues less total losses and expenses – was $321.7 million in 2003. That compares favorably to a $169.5 million operating gain in 2002.

Policyholder equity – which serves as financial protection for policyholders in the event of unusual catastrophic or unexpected losses – rose by $472.3 million to $3.6 billion, its highest level since 2000 and consistent with the company’s policy growth.

“Building and maintaining an appropriate level of equity is part of what makes us a strong, stable company,” said Harvey R. Pierce, chairman and chief executive officer. “Our growing equity lets customers know they can count on us to keep our promise to be there when they experience a loss.”

Group revenues exceeded $6 billion, an increase of 14.3 percent from 2002. Company assets rose to more than $12.2 billion, an increase of 11.2 percent. Net income rose to $155.4 million, a gain of 167 percent. Life insurance in force rose to $64.5 billion from $61.3 billion.

Losses from storms and other catastrophes came in at $353.7 million in 2003, higher than the $309.3 million in similar losses in 2002 but below company projections. American Family paid a record $834.9 million in storm and catastrophe losses in 2001.

“Our company experienced an outstanding year on several fronts,” said David R. Anderson, president and chief operating officer. “First, our customer retention remained very strong, which indicates our policyholders find great value in our products and the exceptional service they receive from our agents and employees.

“Second, we achieved a good balance between profit and growth, as well as a balanced success among the product lines.”

Anderson pointed to continued improvement in the profitability of the homeowners and health lines of insurance, as well as American Family’s excellent expense ratio compared to other insurance companies. An expense ratio measures what percent of incoming premiums are used to pay a company’s operating expenses.

“In 2003, American Family continued doing well in areas we excelled in during 2002, and we addressed the areas that needed attention,” Anderson said. “We took on some additional costs associated with growth, but we also adjusted rates in certain insurance lines and states to keep pace with loss trends.”

The improvement in operating results and strong investment gains were the primary drivers behind the $472 million increase in equity.

“At this time of year, we reflect on where we’ve been as a company and where we’re headed,” Pierce said. “American Family is well positioned to continue to grow and provide value to our customers.”

Here are the consolidated highlights of the group’s 2003 GAAP financial report (in thousands, except for individual life insurance in force):

Category 2003 2002 2001
Assets $12,238,586 $11,005,679 $10,274,603
Equity $3,612,189 $3,139,923 $3,297,956
Revenue $6,064,463 $5,307,134 $4,713,986
Life Insurance in force $64.5 billion $61.3 billion $56.9 billion

American Family offers auto, homeowners, life, health, commercial and farm/ranch insurance, investment products and consumer loans in 17 states. The company employs 8,240 people and sells its products through 3,969 independent contractor exclusive agents.

American Family was founded in 1927 and is the nation’s third-largest mutual property/casualty insurance company and 16th-largest property/casualty insurance company group. The group ranks 313th on the Fortune 500 list.

Contact

Ken Muth
Media Relations Director
Tel: (608) 242-4100, ext. 30680
E-mail: mediarelations@amfam.com