American Family Insurance’s 2023 results buried by weather and inflation woes
American Family Insurance’s 2023 results buried by weather and inflation woes | Insurance Business America
Insurance News
American Family Insurance’s 2023 results buried by weather and inflation woes
“We can’t control the weather,” CEO remarks
Insurance News
By
Kenneth Araullo
American Family Insurance Group has reported its financial outcomes for 2023 amid a challenging year marked by severe weather and inflationary pressures.
The insurance giant witnessed a significant surge in catastrophe claims, reaching a record $3.5 billion due to various severe weather events, from winter storms to tornadoes and hail across numerous states. This marks an increase from the $2.8 billion recorded in catastrophe claims in 2022.
American Family Insurance also faced an uphill battle with escalating claim costs, driven by a combination of market pressures, including inflation and rising costs for labor, replacement vehicles, auto parts, and building materials.
This resulted in a combined ratio of 110.8% for all property-casualty lines, a slight improvement from 111.4% in 2022. Nonetheless, the company reported a net underwriting loss of $1.7 billion for the year, compared to $1.5 billion in the previous year.
Efforts to manage expenses and streamline processes across operating companies have been pivotal in mitigating the impact of higher claim costs, according to chair and CEO Bill Westrate. This disciplined approach to expense management is also part of American Family Insurance’s strategy to restore profitability and enhance the value delivered to its customers.
“We’re controlling what’s most directly in our control,” Westrate said. “We can’t control the weather. We can’t control broad-based inflation in used vehicles, parts, construction materials and repairs. But we can control how we respond, and we have – through actions we’re taking to restore profitability, manage expenses and serve and support our customers.”
High retention despite the losses
The losses notwithstanding, the insurer highlighted commitment to customer satisfaction and retention, with figures remaining near historically high levels and policy growth continuing. By year-end, the company had 14 million policies in force, marking a 3.8% increase from 2022. Direct premium written surged to $17.3 billion, an 18.0% increase from the prior year, with new business production growing by 8.9%.
Revenue saw a significant jump to $17.1 billion in 2023, up from $14.4 billion in 2022, driven by premium earned growth and investment income. Group assets also experienced growth, reaching $38.0 billion from $36.1 billion in the previous year.
The life insurance segment of American Family Insurance reported a record operating gain, with life insurance policies in force and new policy growth reaching its highest level since 2017. The company’s life insurance operations contributed notably to its overall financial performance.
Despite the challenges, the insurer’s members’ equity remained strong, closing the year at $8 billion, slightly down from $8.2 billion in 2022. This resilience is attributed to the underwriting loss being largely offset by investment income and increased values of bonds and stocks.
Westrate further commented on the challenging conditions, emphasizing the dedication and commitment of the claims teams and agency owners in responding swiftly and carefully to meet customer needs in times of adversity.
“We know our customers depend on us, and employees and agency owners demonstrate every day they’re dedicated to living our vision – to be the most trusted and valued customer-driven insurance company,” Westrate said.
CFO and Treasurer Troy Van Beek underscored the financial strength of American Family Insurance, emphasizing the organization’s focus on delivering exceptional value to customers.
“We remain financially strong,” he said. “As an organization, we remain focused on providing great value to our customers, which includes being there for them in their greatest times of need.”
Beyond financial achievements, American Family Insurance Group has continued its commitment to community support, investing in organizations and businesses across the country to champion dreams and opportunities.
Through the American Family Insurance Dreams Foundation and the Free to Dream initiative, the company and its employees have made substantial charitable contributions and volunteered extensively, furthering their impact on the communities they serve.
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