S&P revises American Family's outlook to positive, citing improved performance

By Isha Marathe

June 30 - (The Insurer) - S&P Global has revised its outlook on AmFam to positive from stable, affirmed its BBB-minus issuer credit ratings on AmFam Holdings and its A-minus financial strength rating and issuer credit ratings on American Family Mutual Insurance Co.

American Family Mutual Insurance Co reported a significant improvement in P&C operating performance in 2024 and the first quarter of 2025, reflecting both rate and non-rate actions taken by the company, S&P said.

"The rating actions reflect our view that AmFam has implemented significant and sustainable strategic actions that will contribute to underwriting profit over the two-year forecast horizon (assuming normalised catastrophes) while also maintaining very strong capital," the agency said.

Starting in 2022, AmFam began to reduce costs through headcount reduction and the centralisation of certain technologies to drive economies of scale and capture operational efficiencies, which led to a 2024 expense ratio of 27.1%, down 5.2 percentage points from year-end 2021.

S&P expects the company to continue its expense savings over the 24-month forecast period, though at more modest levels than before.

AmFam also continues to enhance its focus on risk selection, targeting underwriting actions in personal lines, as well as the exit of less profitable books of business, such as commercial habitational, agri-business and a smaller reciprocal homeowners business.

Additionally, the sale of The General non-standard auto business further reflected the focus on core lines of business, S&P said.

"While these actions have reduced its policies-in-force, its direct premium written has continued to grow, reflecting strong rate increases," S&P said.

The rating agency found that policies-in-force declined 3% in 2024 (excluding the sale of The General), but direct premiums written grew 14%, representing a 17% increase in dollars per policy-in-force, indicating substantial improvement in rate adequacy.

These actions culminated in a 13.9-point improvement in the adjusted combined ratio to 97.3% at year-end 2024, from 111.2% at year-end 2023, S&P estimated.

While S&P expects elevated quarterly combined ratios in the second and third quarters of 2025 because of the seasonality of weather events, AmFam's tightening of terms and conditions, including the refinement of wind and hail deductibles and roof payment schedules, should lead to an underwriting profit.