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American Family Insurance pushes ahead with multiline transformation

➤ American Family Insurance Mutual Holding Co.'s deal for of Bold Penguin Inc. will add another distribution channel whose offerings compete with American Family's own products, but also enhances agents' sales opportunities.

➤ American Family Insurance Group CEO-elect William Westrate believes the insurance industry could provide a meaningful voice in regulatory areas of climate change and consumer privacy.

American Family's deal for Bold Penguin is the fruit of a startup investment from the American Family Ventures team made during Bold Penguin's seed round in August 2017. American Family's ambition to grow as a multiline insurer with diversified distribution has meant bringing on companies like Bold Penguin that can sell competitors' products.

CEO-elect William Westrate spoke with S&P Global Market Intelligence about its ambitious M&A strategy and other topics. The following is an edited transcript of that conversation.

S&P Global Market Intelligence: What is your acquisition strategy overall?

SNL Image

William Westrate, CEO-elect, American Family Insurance Group

Source: American Family Insurance Group

William Westrate: I would describe our philosophy around business development and M&A as strategic. We have not pursued M&A activities solely for the sake of growing the scale or increasing the size of the organization, but for enhancing our capabilities.

We look at how can we enhance the capabilities to better serve and create better value for our mutual owners and customers.

What made Bold Penguin a good fit?

We had three years of getting to know this company ... and for them to get to know us. We recognized this opportunity as a way to enhance both their and our business.

In making deals, American Family has not shied away from bringing on companies that will sell products from competitors. Bold Penguin has worked closely with Nationwide Mutual Group. Does that not work at competitive cross purposes?

We believe we can enhance the operating companies that are part of our enterprise while maintaining their ability to serve their customers and nurture their cultures.

We have experience with bringing organizations into the company, such as Homesite Group Inc., which serves partners or other insurance companies that are competitors. But we recognize the opportunity to serve more customers through those partnerships. Customers are making other choices, but we can serve them with the Homesite model. They may have chosen a different auto insurer, for instance, but we're going to serve them on the homeowners' side.

It's the same approach with Bold Penguin. They support other insurance carriers, and we think they can be a distribution opportunity for our products, but they are also an opportunity for our distribution channels — both our agency channel and our partnership channels — where we can offer our own underwritten products, or we can offer products of other carriers to make sure that customers' needs are met.

Are there any concerns to address for your exclusive agents?

There is a direct connection to Bold Penguin and their ability to effectively serve commercial lines customers. The products we offer today aren't necessarily able to support all the customer opportunities that they have.

We want them to be able to serve more businesses in their community and have more opportunities to grow their agencies [through access to Bold Penguin].

What are the regulatory issues American Family has its eye on with the change in presidential administration and control of Congress?

There are areas of focus that align well with the ways the insurance industry can participate and be part of solutions, around climate change in particular. Our industry can have a meaningful voice, and we certainly support it for our economy. I believe there is an opportunity for us to engage in that political discourse.

The focus on consumer privacy is something we take very seriously — protecting our customer information. But there are likely going to be increased regulations and policies around the use of customer data and information. We think as an industry we could have greater influence and be a valuable voice in policy setting.