The American Family Insurance group of companies added $955 million to policyholder equity in 2018. This brings the group’s total equity to $9 billion, thanks largely to its continued national expansion in the form of a merger with Florida- based mutual insurance company Main Street America, completed Oct. 31.
Policyholder equity is an important measure of financial strength, ensuring the company has the resources to help customers recover from severe weather and other unforeseen events.
“Our increase in policyholder equity aligns with the outstanding growth we achieved during the year, resulting in an increase of nearly 700,000 policies and revenue of $10.3 billion,” said Chief Financial Officer Dan Kelly. “It allows us to be there for customers when they need us and pursue improvements that benefit them.”
Adding Main Street America to the American Family group of companies also expands the group’s national reach, product offerings and distribution channels, while decreasing the impact of regional storms.
American Family was not immune to drops in the financial markets as it experienced realized and unrealized losses of more than $500 million. Insurance operations were negatively affected by storm losses and auto insurance underwriting losses caused by more claims and higher loss costs. The group still achieved a net income of $295.2 million, an increase from $155.6 million in 2017. Net income includes underwriting/operating results, investment income, realized gains (and losses) and taxes.
Enterprise growth continued
American Family ended 2018 with 11.2 million policies in force, a 12-month increase of 6.6 percent, with 620,000 of those new policies coming from Main Street America. Affiliate companies The General and Homesite also had strong policy growth, and direct premium written for the group increased 8.6 percent, reaching $9.6 billion. Group revenue increased to $10.3 billion in 2018 from $9.5 billion in 2017.
American Family announced its 2018 results today at the company’s annual member meeting. The results provide year-end information on the group’s operating companies, which include:
- The American Family brand, which offers multiline insurance products primarily through the company’s exclusive, independent contractor agents in 19 states.
- Homesite, a national direct homeowners insurance company based in Boston.
- The General, a national direct non-standard auto insurance provider based in Nashville.
- Main Street America Group, based in Jacksonville, Florida, which offers multiline insurance products through a national network of independent agents.
“In 2018, we felt the effects of being a true national enterprise,” said Chair and Chief Executive Officer Jack Salzwedel. “The group continued strong growth as customers placed their trust in American Family agents, our direct-channel affiliates expanded, and we welcomed policyholders and a new distribution channel through our merger with Main Street America.
“We collaborated across our companies to develop our people and create technology, resulting in stronger customer service and efficiency. And, we helped customers recover from tragic and historic disasters, while partnering with nonprofits to meet community needs.”
Storm and auto losses
The group’s $1.4 billion in storm losses for 2018 was down $91 million from a record high in 2017. While historically high, the 2018 storm losses are mitigated by $206 million in anticipated recovery through reinsurance, which the company purchases annually to help protect policyholder equity in the event of significant storm losses.
Significant events included November wildfires in California which resulted in $175 million in incurred losses, and mid-June hailstorms that struck metro Denver, resulting in $171 million in incurred losses.
For all property-casualty (P&C) insurance lines, the group reported a net underwriting loss of
$355 million in 2018, which compares to a net underwriting loss of $553 million in 2017. The 2018 underwriting loss is primarily due to the auto and commercial lines, with homeowners posting an underwriting gain. The group reported a combined ratio of 104, which means it will pay $1.04 in claims and expenses for every dollar earned in premium, an improvement from 107 in 2017.
The combined ratio for auto was 107, reflecting a multi-year, industrywide trend of more auto accidents and increased loss costs. Higher speed limits, more miles driven, distracted driving and increased medical and auto repair costs all contribute to the trend.
Capital market losses up
Capital market losses in 2018 were $522 million, compared with a gain of $531 million in 2017.
These losses were driven by pre-tax decreases in bond values due to increasing interest rates, and a decrease in the value of the enterprise stock portfolio.
“Even with our conservative investment strategy, volatility in the stock market affected us, just as it affected individual’s portfolios,” Kelly said.
Additional 2018 results and activities for the group included:
- Group assets rose to $27.5 billion, an increase of $3.3 billion from 2017.
- The amount of American Family Life Insurance Company insurance coverage in force increased from $97.2 billion in 2017 to $98.9 billion in 2018.
- The American Family Insurance Dreams Foundation distributed $8.3 million in grants, major gifts, disaster relief, scholarships and matches of agent and employee charitable donations.
About American Family Insurance
Madison, Wisconsin-based American Family Insurance group is the nation's 13th-largest property/casualty insurance group and ranks No. 311 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 and Homesite) also provide options for consumers who want to manage their insurance matters directly over the internet or by phone. Affiliate Main Street America sells insurance products through independent agents. Web www.amfam.com; ebook.com/amfam; Twitter www.twitter.com/amfam.