American Family Wants to Go Mutual Holding Company Route

American Family Insurance plans to become a mutual holding company. The change would, in part, strengthen its ability to make acquisitions or pursue M&A transactions with other mutual insurance companies.

The Wisconsin-based insurer formally known as American Family Mutual Insurance Co. said its board of directors recently approved the mutual holding company plan, something designed to keep policyholder ownership but also provide what it billed as “more flexibility to pursue customer-driven initiatives.”

Translated, this would give American Family greater ability to invest or make acquisitions as it seeks to grow and adapt to evolving market conditions. The insurer said that a mutual holding company creates added ability to invest in or acquire non-insurance companies by way of an intermediate holding company.

“A mutual holding company structure would also better position American Family to consider future potential mergers and acquisitions with other mutual insurance companies,” the insurer said in its announcement.

Coverage, premium rates and claims handling under existing American Family Insurance policies, and also company/agent operations, would be unaffected by the change, American Family said. The mutual holding company would be legally domiciled in Wisconsin along with American Family Mutual Insurance Co. and some subsidiaries.

American Family filed the plan with the Wisconsin Office of the Commissioner of Insurance, which is subject to regulatory review and approval. Also, American Family policyholders must sign off on the idea.

Jack Salzwedel, American Family chairman, chief executive officer and president, said the switch would help the insurer become more flexible in its customer dealings and embrace of new technologies.

“This change would position American Family to meet customer needs in an age of automated cars, smarthomes and other advanced technologies that are already improving lives and changing the insurance industry,” Salzwedel said in prepared remarks.

Here’s how the change would work:

• American Family would still be a mutual company, but the insurer would gain a mutual holding company parent.
• With the switch, American Family Mutual Insurance Co. becomes a stock subsidiary, and the mutual holding company would control 100 percent of the stock.
• The board of directors and officers of the holding company would be the same as those with American Family Mutual Insurance Co. before the change.
• Board members, officers and other employees would not get additional compensation, stock or benefits because of the change, according to the announcement.
• American Family policyholders would exchange their membership rights for similar membership rights in the mutual holding company. Policyholders of some American Family group subsidiaries would also gain certain membership rights.
• As well, new subsidiaries created under the mutual holding company structure to offer new products would gain membership rights.

American Family noted that it has taken a number of steps in recent years to pursue new technologies and programs in a variety of ways. It co-sponsored a home automation business accelerator with Microsoft and started pilot programs in some states with Next and Ring to offer more home protection to enrolled American Family customers. Its subsidiary New Ventures also invests in emerging companies developing new technologies in areas including home automation. A mutual holding company would add more flexibility to invest in or acquire non-insurance companies, American Family said.

Among other mutual insurers that went the mutual holding company route: Liberty Mutual Group, which switched to the mutual holding company structure back in 2002. Since that point, it has become a major player, largely through acquisitions.

Source: American Family