American Family Insurance reports financial improvements in 2009

Madison, Wis. (March 2, 2010) — The American Family Insurance Group increased its policyholder equity by more than $660 million in 2009, due to improved financial investments and the company's first insurance gain from operations since 2005.

"American Family achieved multiple wins for our customers in 2009," said David Anderson, chairman and chief executive officer. "We built our financial strength and stability to take care of our customers when they need us, which is the essence of what we do and why we exist as a mutual insurance company.

"We also improved customer satisfaction while strengthening the efficiency of our operations, continuing our focus on delivering the best customer value in the industry."

Building policyholder equity

Policyholder equity serves as financial protection for policyholders in the event of unusual catastrophic events or unexpected losses. It is an additional layer of financial protection above and beyond the reserves set aside for anticipated claim payments.

In 2009, American Family added $663.2 million to policyholder equity, increasing the current total to $4.8 billion. Contributing factors included improvement in net income and a $439.6 million gain in the company's stocks and bonds portfolio, which is net of the tax impact on unrealized gains.

In stark contrast, policyholder equity for American Family fell $871.3 million in 2008, due in part to near-record catastrophe losses. Despite operating losses in 2007 and 2006, American Family added $145.0 million and $52.3 million, respectively, to policyholder equity in those years. The company increased policyholder equity by $623.3 million in 2005.

"While the economic recession and severe weather definitely provided its share of challenges, American Family was able to build on our strong financial position in 2009 — and credit for that goes to our agents and employees," said Jack Salzwedel, president and chief operating officer. "They showed even stronger commitment to make sure what we do is as efficient and focused on the customer as possible."

Economy hampers insurance industry

Property and casualty (P/C) insurance companies rely heavily upon auto and home sales to fuel growth. With new home and car sales remaining sluggish in 2009, American Family's P/C premiums earned dropped to $5.5 billion, a decrease of 6.2 percent from 2008, which is slightly more than the industry as a whole. Industry-wide measures for the first three quarters of 2009 (the most recent figures available) show a 5.0 percent decline in P/C net written premium, compared to the same period in 2008.

While revenues decreased, claim losses and expenses fell at a greater rate, resulting in a gain from operations of $197.9 million. The operating gain ended a string of three years of operating losses (a total of $611.5 million for the years 2006-08), preceded by a record gain from operations of $889.1 million in 2005.

After adding realized capital gains and tax expenses (or benefits) to the operating gain, the company's net income was $256.9 million for 2009, a reversal from the $297.9 million net loss in 2008.

Company assets rose to $16.3 billion, an increase of 4.8 percent. Life insurance in force rose to $85.4 billion from $84.0 billion.

Weather results a mixed bag

Storm and catastrophe losses for 2009 reached $678.1 million, which was higher than company projections but far short of amounts in 2006 and 2008, when American Family paid out more than $1 billion in storm claims both years.

June and July were the most severe months for storm and catastrophe losses in 2009, racking up more than $429.3 million. Most notable were wind and hail storms in Colorado, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wisconsin.

"Our customer satisfaction scores continued to trend upward in 2009," Salzwedel said. "Across our company, we are focusing on our customers in everything that we do, and in particular when our customers face times of adversity and need us most."

Ongoing innovation

American Family has taken a fresh look at its entire insurance operations and is making changes to reflect customer preferences.

"Our customers tell us one of our fundamental strengths is the exceptional service and advice provided by our agents, and that will not change," said Anderson. "At the same time, however, other customers prefer to do business with us online or through a call center, and we're introducing new options for purchasing and servicing insurance in 2010."

The company increased and improved self-service options on its Web site,, including the addition of online renters insurance estimates, introduction of online auto insurance purchasing in Georgia and improved online functionality that allows customers to securely review their accounts, pay their insurance bills and check the progress of their claims.

American Family also is investing in technology systems that will greatly enhance customer experiences, such as greater accessibility to insurance quotes and other information via mobile communications devices, and regular updates on Facebook and Twitter.

Here are the consolidated highlights of the group's 2009 GAAP financial report (in thousands, except for individual life insurance in force):

























Life insurance in force

$85.4 billion

$84.0 billion

$81.2 billion

$75.9 billion

$71.0 billion

Based in Madison, Wis., American Family Insurance offers auto insurance, homeowners insurance, life insurance, health insurance, business and farm/ranch insurance in 19 states. The company employs 7,745 people and sells its products through 3,822 independent contractor exclusive agents. American Family Insurance is the nation's third-largest mutual property/casualty insurance company and ranks 388th on the Fortune 500 list. Web:; Facebook:; Twitter:

Introduced in 2007 in association with DriveCam Inc., American Family's Teen Safe Driver Program provides teens and their parents an in-vehicle video and audio unit that captures risky driving behaviors. Parents log in to to view the driving report card, video events and coaching tips, including objective, third-party assessment of the teen driver's driving performance compared with other teens.