Higher claims hurt insurer

American Family earnings decline

Higher claims for storm damage and automobile collisions cut into 2016 earnings for American Family Insurance group, but the Madison-based insurer posted increased revenue and beefed up its policyholder equity.

American Family, which insures more homes and passenger cars in Wisconsin than any other company, had net income of $325.6 million last year, down from $693.9 million in 2015.

However, revenue rose to $8.7 billion from $8 billion in 2015, and the company added almost $400 million to its policyholder equity for the second consecutive year. Policyholder equity is American Family’s cushion against unusual catastrophic events and unexpected losses, and is a key measure of an insurer’s financial strength.

The financial data was released Tuesday at the company’s annual meeting.

“Heading into 2016, our goal was to build upon the success we achieved in 2015. I’m proud to say we accomplished that for our customers,” Jack Salzwedel, chairman and chief executive officer of American Family, said in a statement. “We saw exceptional growth in group written premium, supported by a $397 million increase in policyholder equity for the second year in a row. These results strengthen our position to protect our policyholders while pursuing inno-

vations that will benefit them in the future.”

The American Family group incurred $879 million in storm claims, compared with $730 million in 2015. The three largest 2016 catastrophe responses, measured by claim losses to date, were: a July hailstorm in Colorado Springs, Colo., $58 million; a May hail and wind storm in metropolitan St. Louis, $34 million; and a September hail and wind storm in Madison and the surrounding area, $21 million.

Dan Kelly, American Family’s chief financial officer, said in an interview that losses on auto coverage were steeper than anticipated.

“We’re not alone in the industry on this,” he said.

Kelly said auto claims were up for a variety of reasons.

“Miles driven by customers were up as the result of things like cheaper gas and a better economy. Distracted driving is another thing that contributes to frequency of losses,” he said.

Kelly said the cost of auto repairs also has been increasing.

“You think about the cars that are out there and the safety technology that is out there, which is great,” Kelly said. “But when it gets damaged, it’s more expensive to repair those parts.”

American Family Insurance, which will celebrate its 90th anniversary this year, is the nation’s 13th-largest property/casualty insurance group. The company sells American Family-brand products, including auto, homeowners, life, business and farm/ranch insurance, through its exclusive agents in 19 states.

Its affiliates — The General, Homesite and Assure Start — offer options for consumers who want to manage their insurance directly over the Internet or by phone.