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March 06--American Family Insurance in 2012 saw its net income rise by 22 percent despite what it called "extraordinary" catastrophe-related activity from storms and wildfires in the first half of the year that pushed property/casualty insurance underwriting losses of $177.2 million.
The Madison-based insurer of autos, homes, health, farms and businesses last year also added $579.1 million to its policyholder equity, which saw a sharp drop in the 2008 global financial crisis. This extra layer of financial protection for policyholders has grown by $2 billion since then to reach a record total of $6.1 billion in 2012, according to an annual report released by the company Tuesday.
Net income in 2012 was $360.5 million, up 22.1 percent from $295.2 million in 2011, when it saw an almost 40 percent decline. The big loss in 2011 was due to a record $1.2 billion in damage claims from Midwestern wind and hail storms throughout that year.
In 2012, by contrast, most of the damage was contained to the first half of the year, as American Family customers in several states collected catastrophe claim payments totaling nearly $700 million. Damage came from massive hailstorms in the St. Louis area in April and from wildfires and hailstorms in Colorado in June, the company said.
But in the second half of the year, the skies calmed considerably in the 19 states that American Family covers, allowing the final catastrophe-loss tally to level off at $840.6 million. (American Family doesn't insure in states that were affected by Superstorm Sandy in October.)
In addition, strong investment returns and improved operating results, including $303.2 million in after-tax capital gains, contributed to the net income and policyholder equity gains.
Net premium income from property/casualty policies rose 5.2 percent to $5.4 billion in 2012.
American Family finished 2012 with a combined ratio of 103.3 for its core business of property and casualty insurance. That means it paid out $1.03 in claims and expenses last year for every dollar of premium payments it received. In 2011, it paid out $1.06.
Last year also marked the first two acquisitions in American Family's history, with the $239 million purchase of high-risk auto insurer PGC Holdings and the purchase of Illinois-based Lumbermens Casualty Insurance Co. for $14.7 million.
American Family assets last year totaled $17.9 billion, a 4.6 percent increase from 2011. Life insurance in force rose to $88.3 billion, from $87 billion in 2011.
The company has 7,474 employees -- down from 7,893 in March 2012 -- and 3,499 independent contractor agents, up from 3,457 in 2012.
(c)2013 The Wisconsin State Journal (Madison, Wis.)
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