Dare To Dream

ranch package and coverage for older homes. American Family date — particularly in urban areas where expenses had increasedFinancial Services entered the auto leasing market in 1984, and dramatically. Mathwich and Planning and Development Directorhealth lines introduced a Medicare supplemental insurance Robbie Robinson proposed replacing the flat fee with a 10policy in 1985. percent commission on new and renewal business. Commissions in some places tripled, motivating agents to keep selling during Under Floyd Desch and Dale Mathwich, market- this difficult period.To protect rural agents — who in many casesing responded with equal creativity. As director of marketing, would see their commissions decrease under the 10 percent planMathwich initiated an aggressive step to keep sales up and agent — Mathwich set a $7 minimum commission, equal to the aver-incomes strong. In the past, American Family agents had received age rural agent commission under the previous plan.a flat commission — $10 for full auto coverage — generated byan initiation fee collected with the first premium. As a percent Despite its $4 million price tag, Desch and Koch approvedof premium, the flat fee made sense before hyperinflation. But the revision. The result: a 5.1 percent surge in policies in force inby 1980, American Family commissions were woefully out of 1981. “All of a sudden, our agents were making some real moneyBELOW: Business lines contributed to American Family’s success with the 1987 introduction of the heartland package to insureolder buildings. Dare to Dream | 145

ABOVE: As part of the agent profit program underwriter Tom rule barring district managers from appointing relatives as agents in their districts. The managers, however, could appoint relativesSpilde (left) reviewed the files of agent Ed Grzenia (right), of other managers.)while district manager Joe Tisserand looked on. To finally give rural agents a full line of products, Mathwichselling automobile insurance,” Mathwich said. The improved and Robinson worked with Farm/Ranch (then called generalcommissions helped agents maintain their income during the lines) Director Darrell Riley to expand the farmowners policy.competitively difficult years of the early 1980s. In the latter half of The company had introduced farm fire insurance in Wisconsinthe decade, the commission structure change contributed signifi- in 1957 but had expanded the line to only three additional statescantly to the company’s growth. by 1982. Mathwich, Robinson and Riley brought the popular farmowners policy to all 11 states by 1984. Also in 1981, the marketing division revised AmericanFamily’s district manager agreements. Suburban growth had been American Family further enhanced the careers of agents andstrong in the 1970s and it was expected to continue unabated district managers in the late 1970s and early 1980s with personalin the 1980s. Because American Family’s district manag- benefits, including disability insurance, errors and omissionsers had exclusive rights to designated counties, many of the coverage, a lifetime extended earnings program and increasedfastest-growing suburban markets were underserved by American limits on its group hospital and life policies.Family agents. Working with Minnesota North State DirectorHarvey Pierce, Wisconsin South State Director Jim Johnson and American Family’s underwriting division under Jim KloknerMarketing Administration Director Bill Kleinheinz, Mathwich pitched in with an old standby — a field underwriting programrevised the agreements. By eliminating exclusive territories for — that had a new twist. Instead of the “shotgun approach” thatnewly appointed managers, the company could place multiple previous field underwriting programs had aimed at the entiredistrict managers in large suburban counties. To unlock coun- field force, the agent profit program (APP) targeted the 40ties controlled by veteran managers, the committee developed percent of agents whose business produced losses for the company.a program to compensate them for turning over some of their Designed by underwriter John Bornick, APP did more than trainagents to new district managers. This helped new district manag- agents to be selective. Through APP, the underwriting divisioners get started and encouraged veteran managers to recruit new taught agents and their office staff to recognize opportunities toagents. As a result, the number of districts grew to 159 by 1987. sell additional coverages, increasing premiums and profits. (In 1983, after a few district managers had appointed their The Midland Region field-tested APP in 1982, which suitedrelatives to take over large agencies, Mathwich implemented a incoming Regional Vice President Harvey Pierce. He preached profit not for profit’s sake but for the financial strength it produced, enabling the company to hold premiums RIGHT: Succeeding Charlie Ambrosavage as director of sales promotion in January 1983, Dick Adler com- bined crazy antics with a keen understand- ing of what motivated agents.146 | More Than a Survivor

BROKERAGE HELPS MEET CUSTOMER NEEDSAmerican Family agents never know what The B&A team worked diligently with the prod- type of request they will get from custom- uct lines to identify American Family’s product ers for insurance. If American Family didn’t focus and recommend when the company wouldoffer the coverage needed for a particular situa- be better off partnering with other insurers throughtion, agents could always reach out to Brokerage & B&A Insurance Solutions. Licensed to sell insur-Alliances (B&A) for options. ance in 49 states, B&A Insurance Solutions offered options so agents could continue covering the Take, for example, a customer with a $10 needs of customers when their business expandedmillion-dollar home or the nonprofit that promises across state lines or they moved out of state.to give an automobile to anyone who sinks a hole-in-one during a fundraiser. There are carriers that In 2017, B&A had 92,200 policies in force andcover these and other extraordinary risks, but find- $148 million in written premium and premiuming them can be difficult. equivalents. In 1985, to help American Family live up to “As customers’ needs get more complex, ourits motto, “All your protection under one roof,” agents’ ability to provide specialized productthe marketing area launched American Family offerings will become more important than ever,”Brokerage, Inc. (AFBI). Conceived by Vice said Gisi. “Our products and services make it easierPresident Dale Mathwich, AFBI served agents and more convenient for customers to purchaseand policyholders by finding insurance carriers to the protection they need through their Americancover hard-to-place risks. To develop and manage Family agent … keeping all of their protectionAFBI, Mathwich chose Jerry Rekowski, a 10-year under one roof.”veteran with American Family in the commerciallines area. Rekowski hammered out the details of BELOW: Jerry Rekowski directed development of theAFBI’s operation and was the new company’s lonestaff member when it opened for business in March new Brokerage Department in the mid-80s. His1985. Within a year, Rekowski had seven employees strong performance led company leaders to selectserving 2,600 policies, representing a quarter of a him as the first vice president of the new commer-million dollars in premium. By 1995, annual premi- cial/farm-ranch division a decade later.ums grew to $11 million. During the following two decades, the brokeragearea transformed into B&A Insurance Solutions tomake it simpler to meet complex customer needs. When Greg Gisi succeeded Joe Zwettler asleader of the division in 2011, B&A InsuranceSolutions continued to grow significantly — bothin premium and policy count. Gisi was a 10-yearveteran of American Family when he joined thebrokerage area, coming from enterprise riskmanagement where he led efforts to consolidatereinsurance across the organization. Gisi and his B&A team remained committedto helping agents take care of unique customerneeds. That included providing access to a broaderset of products, including high-value homes, annu-ities and commercial lines products. Staff alsoprovided consultative support before, during andafter coverage was in place. Improved technologywith the B&A Smart App improved the applicationprocess, and B&A increased carrier options, includ-ing arranging for in-house underwriting authorityfor several of them. Dare to Dream | 147

ABOVE: Computerization contributed to cost-control efforts in ABOVE: By February, 1986, the company had 30 agents licensedthe early 1980s. Here, Mary Moravec (right) and Diane Noyes in Phoenix. Arizona State Director Dave Wunsch and agententered information into CLASS, the new comprehensive life Lynn Crawford presented the first Arizona life application toapplication servicing system. AFLIC Vice President John Reed and CEO Bob Koch.down and stay in business. “We stressed a philosophy with the believed in delegation,” Koch said. “Many times with tough deci-agents: For every dollar you make, you need to make the company sions, I would walk into Pete’s office and say, ‘Here’s the situation,a dollar,” Pierce said. APP went companywide in 1983. American and this is what I would recommend.’ He would always say, ‘GoFamily bolstered the program with direct-mail campaigns that ahead. I know you’ll do a good job.’”offered to increase selected policyholders’ health, auto and home-owners coverage. The combined effort reduced underwriting That confidence prevailed as Miller turned over the $1.2losses while adding millions of dollars in premium income — billion organization to Koch on Aug. 1, 1982. The Nationalbenefiting policyholders, the company and the field force. Association of Independent Insurers (NAII) also shared Miller’s confidence in Koch, electing him to serve out Miller’s term on the Tightening the corporate belt also contributed to American board of directors. To succeed him as president and chief operat-Family’s survival during this difficult period. An old-fashioned ing officer (COO) of American Family Group, Koch chose Floyd“checkbook awareness” policy made staff more conscious of the Desch, vice president of marketing. “Floyd had all the elements Icost of everything from travel to paper clips. Employees under- was looking for. He had a strong marketing background. He wasstood the importance of being good stewards of policyholders’ ethical, dedicated, loyal and highly intelligent,” Koch said. “Hemoney. Thanks to their efforts, American Family’s expense ratio was a real gentleman.”(operating expenses in relation to premium revenue) droppedfrom 35.7 percent in 1982 to 30 percent in 1985, saving millions STRATEGIC THINKINGof dollars. None of these savings came from layoffs; in fact, thenumber of full-time employees grew by 500 to 4,731. Vision and planning were among Koch’s leadership attributes. But Koch, like everyone around him, found less and less time In 1982, Pete Miller celebrated his 65th birthday and for these essential activities. Senior managers spent more timestepped down as chairman and CEO (remaining on the board putting out fires than sketching out future plans. This also leftas an outside director until age 70.) Like Herman Wittwer, Miller little energy for strategic thinking, leading to burnout andhad a hands-off management style that empowered people to uncertainty throughout the organization. To address the situ-do their jobs while holding them accountable for results. This ation, Koch named Underwriting Director Lou Olson as vicecontributed to a smooth transition following his retirement. “Pete148 | More Than a Survivor

ABOVE: In 1956, John Sreenan traveled to Chicago for the first Leading Career Agents Convention. He earned his way to 25 consec-utive LCA/All American Conventions, prompting Dale Mathwich to establish the 25-Year Hall of Fame. Pictured below (from left)are Sreenan, his wife, Millie, and Lila and Dale Mathwich at the Toronto All American Convention in 1981, Sreenan’s 25th.president of corporate research in 1980. As head of research, controlling expenses and adhering to profit-minded underwrit-Olson chaired the strategic planning team, which includedMiller as chairman, Koch as president, and the vice presidents of ing policies.The company’s determined attitude led to a dramaticoffice administration, management information systems, invest-ments, marketing and finance. Olson developed the blueprint for turnaround a full year before the beleaguered insurance industrythe corporate research division and moved forward on develop-ing a five-year strategic plan. (After Olson’s death in April 1982, began similar steps toward recovery. In 1983, American Familyhe was succeeded by Underwriting Director Alan Hunter.) cut its underwriting loss to $24 million, half the $50 million loss it In 1983, Hunter’s strategic planning committee presented afive-year plan that laid out six objectives: (1) Improve productiv- experienced in 1982. Investment income helped the company addity 5 percent each year (2) Reduce the expense ratio 0.5 percenteach year (3) Hold losses due to catastrophic storms to no more $70 million to surplus. The compa-than 12 percent of all claims (4) Increase the number of policiesin force 5 percent each year (5) Achieve a return on net worth of ny’s combined loss-expense ratio15 percent or the industry average and (6) Maintain a combinedloss-and-expense ratio of 100 percent or less. stood at 102 percent, compared Following its plan, American Family parted ways with the to the industry’s 111 percent. Theindustry in 1983, aggressively raising premiums where necessary, following year, catastrophic storms staggered the industry, forcing many companies to draw on their surplus. But a record $17 million profit from the life insurance company, combined with invest- ment income and profits from health lines and financial services, Alan Hunter Dare to Dream | 149

In 1984, cash-flow insurance offset auto and homeowners losses and enabled American Family companies attempted to recover to add $24 million to surplus.losses through large premium increases. Thetrend hit the liability market particularly In 1985, “cash-flow” companies, some with capacity ratioshard, where insurers tightened under- exceeding $3 to $1, were suffering. Once again, Americanwriting rules and increased rates from Family found itself positioned with a competitive advantage.500 percent to 2,000 percent. Suddenly, New business applications surged to a record 858,000 — a 25many bars and restaurants, daycare centers percent increase over 1984. With a capacity ratio of $1.96-to-$1,and school districts were unable to afford American Family was ready for the growth spurt. “We are one ofliability coverage–or even find a company the survivors of a period of cash-flow suicide,” President Deschwilling to provide it. This opened the door told the executive staff in March 1985.for American Family’s business coverage,which was the company’s fastest-growing Unfortunately, Desch did not survive to enjoy the successline in many states the following year. he helped engineer. Diagnosed with cancer just a few months earlier, he died on April 12, 1985. “Floyd Desch was a man who possessed the highest ethical standard in all his dealings. He was a gracious man, and throughout his life his first concern was for others,” Koch said of his friend in a memo to all employees. “We have lost a good friend, and we at American Family will miss him.” Days later, home office staff and field men and women from across American Family’s 11 states crowded into Bethel Lutheran Church in Madison, built on the site of the old Boyd Mansion, to pay their personal respects to one of American Family’s most respected leaders. A smooth transition followed Desch’s death, thanks to a reorganization plan that he, Koch and Vice President of Human Resources Norb Vanden Heuvel had developed. The plan created four executive vice president (EVP) positions reporting to the president. Previously, half the vice presidents reported to the president and half to the chairman. This new structure freed up the chairman’s time and gave him an opportunity to think more strategically. It also allowed Koch to serve as American Family’s visible repre- sentative to the community and industry — roles for which the knowledgeable and affable man was well suited. LEFT: American Family’s successful turnaround prompted the Capital Times to proclaim the company a “bright star” in the troubled insur- ance industry.150 | More Than a Survivor

FLOYD R. DESCHA GENTLEMAN AT THE HEAD OF THE AMERICAN FAMILY TABLEIn the summer of 1954, Floyd Desch, President 1982-1985 marketing vice president, Desch pushed his wife Eleanor and their three young the company to hire more women and children left Grinnell, Iowa, for their quickly earned him the respect and minorities in the home office and the new home in Spencer and Desch’s new loyalty of his agents — and the atten- field, and he established the district job as district manager with Farmers tion of Agency Director Gus Kinnamon. managers’ retirement plan. Mutual Automobile Insurance Company. He brought Desch to Madison as the The move was hard. Desch had sales training manager in 1956 to estab- Desch remained popular with the previously worked in the treasurer’s lish Farmers Mutual’s home-office sales field force by keeping their interests at office of Grinnell College and the extra schools and write the company’s first heart. Their trust helped the company money he made as a part-time agent sales tracks. in the mid-1970s when the IRS insisted for Farmers Mutual had helped him and that American Family agents were his family enjoy a good life. Ellie, his In 1958, Desch returned to the field employees for whom the company wife, loved the idyllic college town east as the Nebraska state director. A year should pay Social Security tax. The of Des Moines, and two of his children later, he succeeded E.A. Bergemann in field force lined up behind Desch, argu- were in grade school. But the prospect the position of Wisconsin West state ing successfully that agents were of management appealed to Desch, and director. American Family President independent contractors. When Bob after some soul searching, he accepted Pete Miller appointed Desch to the Koch named Desch president of the the district manager’s position. new post of marketing vice president American Family Insurance Group in Born in Des Moines, on Sept. 17, 1921, in 1970. A year later, when Kinnamon 1982, the agents applauded. Desch grew up in the heart of America’s retired, the agency function became farm belt during the Great Depression. part of Desch’s marketing division. As As an executive, Desch retained his After graduating from high school in gentle, supportive nature, preferring to 1939, he spent two years working for build up people rather than dress them the Central Life Insurance Company down. The approach earned Desch in Des Moines. In 1942, he left home deep-seated loyalty from almost every- for Burbank, California, and a job at one he knew. But his strength was also Lockheed Aircraft. Shortly thereafter, his weakness, according to some. At Desch joined the Air Force. His three- times too kind-hearted, Desch occa- year stint included two years as a B-24 sionally avoided confronting issues group communications officer over Italy head on. during World War II. After the war, the young vet married But he admired the aggressive, Eleanor Brustman and entered Grinnell hard-driving state directors and in turn College. Three years and two children worked hard to expand the company, later, Desch graduated with honors and both within its existing territory and by took a job at the college as assistant entering new states. to the treasurer and later as a cashier. Friendly yet respectful, Desch also found Desch died on April 12, 1985, follow- success as a part-time insurance agent. ing a battle with cancer. He was 64. The As a district manager, Desch’s will- day of his funeral, friends and colleagues ingness to listen and eagerness to help from across American Family’s 11-state territory filled Bethel Lutheran Church in Madison to capacity to pay their respects to one of the finest gentlemen to ever lead American Family. Dare to Dream | 151

had held and created two new executive vice president positions — field operations and finance. Mathwich chose Midland Regional Vice President Harvey Pierce to head field operations and Investments Vice President Paul King as treasurer and exec- utive vice president of finance. A few months after becom- ing the president of American Family, Mathwich gave the keynote address at the 33rd sales management conference in Oconomowoc, Wisconsin. Though he’d spoken to this group many times, this wasABOVE: Speaking at American Family’s 1986 sales management conference, newly elected pres- Mathwich’s first opportunity as president to present his dreamident Dale Mathwich focused on his goal of making the company strong, growing and friendly. for American Family’s future. “IThat theme became American Family’s motto and the framework for its strategic plan. wanted to present my concept of how the company would succeed under my leadership,” Mathwich recalled.Weeks before Desch died, Koch announced the appointment A firm believer in keeping things simple, Mathwich reducedof the new executive vice presidents; Bert Hutchison, corporate his ideas to three key concepts: Strong, growing and friendly.legal; Jim Klokner, operations; Dale Mathwich, administration, Each of these concepts represented a goal for American Familyand Clayton Nelson, marketing.Though the appointments didn’t under his direction. “I’m asking each of you to adopt these goals,”become official until June 1985, the newly promoted individuals Mathwich said. “Then, working together, we’ll move into anstepped in immediately to pick up the slack. exciting and rewarding future.” Mathwich’s simple but powerfulAt the board of directors’ request, Koch assumed the addi- vision struck a chord throughout American Family.The followingtional responsibilities of president until Desch’s successor couldbe named. However, just a couple of months into Mathwich’stenure as a new executive vice president, Koch pulled him aside In memory of its late president, Floydand told Mathwich privately that he was Koch’s choice to assumethe president’s role. But, he cautioned it would have to remain Desch, American Family established aconfidential between just the two of them because the board $100,000 memorial fund to support the Actuarialwanted Koch to serve as president for awhile. “It was an unusual Science Risk and Insurance Department at thesituation,” Mathwich recalled, “because for several months I University of Wisconsin-Madison School ofhad to interact with my peers and others in a business-as-usual Business. Through the years, additional contri-manner, knowing that I soon would be named president.” Kochfinally was able to announce that Mathwich would become presi- butions to what is now known as the Wisconsindent and COO effective April 1, 1986. “He has proven himself in School of Business raised the company’s supporteverything he’d done — as an agent, district manager, state direc- to more than $4 million, funding a professorshiptor and vice president of marketing,” Koch explained. and programs. Mathwich also reshuffled the senior management deck. Hedissolved the executive vice president of administration post he152 | More Than a Survivor

ABOVE: This advertisement was part of a series of billboards that gradually uncovered American Family’s name to Phoenix resi-dents, announcing the company’s entry into Arizona. The first billboard said, “It’s time we came in from the cold!” The secondone is shown, and the third showed the resting shoveler saying, “Thanks for the warm welcome.”year, the strategic planning team adopted “strong, growing andfriendly” as part of the corporation’s objectives, crafting the five-year strategic plan around these three concepts. American Family was poised to live up to Mathwich’s dream.In 1986, new applications surpassed 1 million for the first time.Premium income exceeded $1 billion, and assets totaled morethan $2 billion. American Family Life surpassed $10 billionof in-force life insurance. The following year, premium incomeincreased 20 percent to $1.5 billion, and policies in force grew to4.2 million. In 1988, American Family celebrated its third consec-utive million-application year; its third consecutive $100 millionoperating gain, and an excellent capacity ratio of $2.06 to $1.BEYOND THE TORNADO BELT ABOVE: Between 1978 and 1982, just 10 tornadoes struck Arizona.In 1983, American Family’s five-year strategic plan called for During that same period, the 11 states American Family servedan annual 5 percent increase in policies. Meeting such an ambi- averaged 137 twisters.tious goal required adding new territory. Mathwich, then vicepresident of marketing, and the planning and development team Drawing on his experience in Illinois and the company’s historypresented the strategic planning committee with an analysis of in Colorado, Mathwich laid out a plan for rapid growth. The16 western states, plus Kentucky and Tennessee. After Koch and strategy called for a state director and four district managersDesch added Texas and California to the mix, Mathwich and the focused in a single metropolitan area. Newly hired agents wouldmarketing division devised a plan for entering new territories. Dare to Dream | 153

work in a central office for their first 90 days, receiving help from adding agents and district managers, the plan called for profit-an on-site sales trainer to boost production. To gain an early ability in nine years.foothold, American Family would enter the new market with In March 1985, the strategic planning team approvedan aggressive advertising campaign and discounted rates typi- Mathwich’s plan and selected Arizona as American Family’scally priced 10 percent below major competitors. By gradually 12th operating state. Research showed that more than 160,000 people from the company’s exist- ing territory had moved to Arizona between 1975 and 1980. Beyond the 3,000 to 4,000 American Family policyholders this repre- sented, it also meant a ready-made market of people who were already familiar with American Family. The weather that attracted these Midwestern emigrants also attracted the company. Not only were there no blizzards, but the state suffered few hailstorms and tornadoes. After hearing the details, the board of directors approved the plan and the selection of Arizona as its newest expansion territory on May 14, 1985. To spearhead the effort, Mathwich chose Marketing Director Dave Wunsch as Arizona state director. Wunsch then selected four district managers — Dan DeSalvo, Tom Holmen, George Novak and Mike Campbell — to join him in Phoenix. Wunsch was fully on board with Mathwich’s plan for rapid expansion in the state, and an extremely compet-ROLLING UP Andersen wasn’t alone. More itive rate fueled his fire. ShortlyTHEIR SLEEVES policies meant more claims, forc- after American Family opened ing Adjuster Bob Vancil (right) its doors in Arizona on March 1,To keep up with the rush to put in long hours as well. 1986, the state’s established carri- of applications submit- American Family’s original plan ers filed a 15 percent increase ted by Phoenix agents, called for adding a second in auto rates. American FamilyJim Andersen (left), American adjuster during the first year. But followed suit. Because AmericanFamily’s lone underwriter in with claims far ahead of planning, Family lacked a claims history inArizona, put in 12-hour days. the company actually employed Arizona, however, the insuranceThree other underwriters eventu- seven Arizona adjusters by commissioner rejected the increaseally joined him, but it was some December of that first year. — leaving the company with antime before the long hours let up. auto rate 25 percent below the competition’s. “We had what we154 | More Than a Survivor

ABOVE: The Arizona management team reviewed floor plans for its new office. Pictured (from left) are District Managers DanDeSalvo and Mike Campbell, Sales Trainer Harold Young, District Manager Tom Holmen, State Director Dave Wunsch and DistrictManager George Novak.referred to as a smokin’ rate, and we wrote business like crazy,” “We started to slow Arizona’s growth,” Pierce, then Midlandsaid DeSalvo, who later became the company’s executive vice Region vice president, said. “The sales volume was exciting, butpresident of sales. So much business was coming through the the number of claims disturbed many in the home office. Theydoor that one agent exclaimed, “I had to literally lock my door focused on the losses and thought that in five years, we’d bebecause my staff couldn’t handle the number of apps coming in.” buried under claims. It scared a lot of people.” The low rates attracted more than policyholders.The prospect But those who had been involved in developing the plan —of easy sales drew agents, including a number of American Family Mathwich, Koch, Controller Brent Johnson and Finance Directorveterans from other states. In just nine months, the four district Dave Anderson — were not alarmed. Johnson was highly respectedmanagers had 49 full-time and 15 part-time agents — nearly three for his detailed knowledge of company finances. Pointing totimes more than planned. By the end of the year, Wunsch and Arizona’s fast-growing policy count, he emphasized that Americanhis team had 41,000 policyholders — four times the projections. Family’s plan was working. It was just ahead of schedule. “We hit our five-year policy count prematurely, so we’re going to hit our The company tried something different with Arizona, split- five-year losses prematurely,” he told Pierce and others.ting the management structure.The marketing division managedthe field force to maintain control of the expansion plan, while In the fall of 1987, Wunsch stepped down as state director tothe Midland Region continued to handle operating and service become a district manager in Phoenix. Gary Hunter, Colorado statefunctions. After a few months, the company consolidated every- director for 13 years, succeeded Wunsch. Hunter increased the focusthing under Midland, which was the way the company operated on strong underwriting to increase profitability, which Americanin other states. Family achieved in Arizona in 1991, three years ahead of schedule. Dare to Dream | 155

vice president of finance for the company, not related to Tom), Dale Mathwich and Bob Koch met for break- fast. The four men were not squeamish investors prone to panic selling, and they quickly ruled out that option. Other than rising inflation, the market and economy seemed sound. Rather than sell, they decided to sit tight — and perhaps even pick up a few bargains. They also decided to tell employees of the loss and of senior management’s response. With the marketABOVE: Key players in the company’s expansion into Arizona were Rod Christenson, marketing crash dominating the papers and newscasts, employeesdirector; Dave Wunsch, state sales director; Dave Anderson, finance director; Bob Bintzler, were sure to speculate aboutcontroller division; Brent Johnson, vice president/controller; and Dale Mathwich, vice presi- its effect on American Family.dent, marketing. The facts, bad as they were, were better than rumors. AfterBLACK MONDAY the meeting, Paul King wrote a candid memo telling employees of the company’s $57 millionAfter several years of price stability, the nation’s economy began loss. “That was one of the best things we could have done,” Tomto heat up in 1987. In late summer, the stock market started a King said. “People were relieved to hear from top management,1,000-point slide that ended in a 508-point plunge on Oct. 19, acknowledging the loss but telling them it was by no means crip-1987 — Black Monday. pling.” In fact, American Family’s capacity ratio stood at exactlyBecause of its strong capacity ratio, American Family could $2 to $1 — compared to $1.89 to $1 the day before — still amongafford an aggressive investment strategy. At the time of the crash, the healthiest in the industry. The market recovered by year’s end,the company had approximately $300 million of assets invested and with it American Family’s investments, which turned a netin the stock market. The remainder of American Family’s invest- profit in 1987.ments was divided amongbonds, mortgages and realestate, and cash equivalents.Despite the relatively largeexposure, Vice President In 1985, American Familyof Investments Tom revenues surpassed $1 billionKing refused to panic, for the first time. Noting the milestone,neither buying nor sell-ing. By the end of the Chairman Bob Koch said, “When I startedday, American Family in 1948, the company collected a little overhad lost $57 million. $7 million in premiums. Now, we collect almost $7 million every Monday.” Tuesday morn-ing, Tom King, PaulKing (the executive156 | More Than a Survivor

ABOVE: In the late 1980s, Jack Salzwedel, a young district sales When Gruenisen retired in 1983, government affairs came under Hutchison. As the political battles heated up and themanager, joined colleagues at the annual sales management stakes got higher, Hutchison and Assistant General Counselconference, shown here viewing various life sales promotion James Malinske expanded American Family’s advocacy staff toitems. He later would become Wisconsin East sales director make the company’s voice heard in state legislatures and the hallsbefore being selected to lead Personal Lines in 2000. of Congress.ADDRESSING GOVERNMENT During the early 1980s, most of the legislative activityAND CONSUMERS regarding insurance occurred at the state level because then — as now — insurance was regulated primarily by the states.The turmoil of the early 1980s increased public resentment of However, a record number of insurance company bankrupt-insurance carriers and attracted more government scrutiny. To cies caught the attention of Congress. Critics of the industrybetter respond to state and federal activity, American Family in charged that state regulators were underfunded and ill-equipped1983 split its law and government affairs division. Al Gruenisen, to police large, multi-state insurance carriers, prompting callscorporate secretary and vice president of the division, had been for federal solvency standards and igniting a four-year assaultinvolved in government relations since the 1960s and assumed on the McCarran-Ferguson Act, a federal law that had maderesponsibility for the new government affairs division. Bert the insurance industry exempt from most federal regulation.Hutchison, associate general counsel since 1969, became vicepresident of corporate legal. To gain support from American Ironically, as dozens of insurance companies declared bank-Family agents and employees, Gruenisen initiated a strong grass- ruptcy, consumer groups charged the industry with profiteering.roots program that kept them well informed with regard to legal Congress responded with the Tax Reform Act of 1986. While theand political issues and urged them to contact their lawmakers. act was lauded by many for lowering some tax rates and simpli- fying the tax code, the net impact on insurance carriers was a tax increase. Although insurers were largely playing defense with an aggressive Congress and state legislatures, the industry success- fully advanced several issues — making air bags mandatory, raising the legal drinking age to 21, strengthening drunken driving penalties and maintaining the 55 mph speed limit. In 1986, insurers led the fight to reform a legal system gone awry. Despite the low regard many Americans had for the insurance industry, polls showed they supported the industry’s bid for tort reform. Thirty-nine states enacted legal reforms that year, with more changes to follow. Despite the support of President Ronald Reagan and President George Bush, federal tort reform remained elusive. American Family participated in these and other politi- cal battles through its government affairs staff, its own political action committees and its support of the National Association of Independent Insurers and other trade groups. At the same time, the company was also working to address the growing problem of dissatisfied policyholders, who felt the sheer size of insurance companies and the complexity of insurance made the business too impersonal. Callers often found themselves passed from one person to another as employees attempted to answer complex questions and complaints. In 1983, American Family hired former Wisconsin Insurance Commissioner Ann Haney as director of its new consumer affairs department. Haney’s staff handled all customer complaints, Dare to Dream | 157

navigating the American Family from American Family. In the 1980s, Claims Vice President Jim maze on the policyholder’s behalf. Eldridge established a policy of contacting injured people within “We accept accountability for the 24 hours. “Establishing that initial contact is very important,” call and see it through to comple- Eldridge said. “They know we are handling the claim and will tion,” Haney said. “We save both be taking care of them.” Without this immediate contact, people the customer and American Family were previously left to wonder what, three or four phone calls.” After if anything, was being done with resolution, the consumer affairs their case, and perhaps convincingAnn Haney department coded each complaint some to seek out attorneys. with regard to type of insurance, Another customer-focused nature of complaint, location development from the 1980s was and outcome. This transformed Qwik Pay, which enabled agents to complaints into a management tool pay small physical damage claims that helped identify trends, analyze immediately — a 1980s version of policies and procedures and make Harvey Spriggs pulling $8 from corrections. Jim Eldridge his wallet to pay a farmer for a In 1987, Vanessa Mosley, a dented fender and later asking the life company underwriter who company to reimburse him. In the first year, agents paid 24,507 had previously worked at Allstate, claims totaling $3.8 million. “Agents found having the insured inVanessa Mosley assumed leadership of the consumer their office while working out the settlement was a more friendly affairs department. Under her lead- approach,” said Annette Zacher, who served as strategic researchership over three decades, consumer affairs developed consistent director for the company. “They could ask questions, discuss theirprocedures to comply with regulations in all operating states coverages and how the claim was settled, plus receive a draft, all atrelating to consumer complaint handling. Staff members listened the same time.”With just a few minor adjustments over the years,patiently to customer complaints, worked closely with key busi- the Qwik Pay program was still active as of 2017.ness units and used technology to help ensure the company A few years later, American Family brought the settlementprovided a timely response. of larger claims closer to its customers by building service centersAs a central tenet of its business, American Family has in areas with a concentration of American Family policyholders.always understood that quick claim response retains policy- Under the old system, claims adjusters served several widespreadholders. A quick response also impresses people covered by sales districts from a single site. In the Minneapolis/St. Paul area,other companies, occasionally leading them to seek insurance where the service-center approach was introduced in 1988, thatSTATES PROTECT POLICYHOLDERSThe business of insurance claims of policyholders of compa- financial health of companies in is primarily regulated by the nies that become insolvent. After a their state by analyzing detailed states. All states have estab- company is placed into liquidation, annual financial statements. Whenlished guaranty funds that require the fund assesses member insurers a company is found to be in poorproperty-casualty insurers doing to cover amounts needed to pay financial shape, regulators canbusiness in a state to contribute claims based upon their market take action to attempt to rehabili-funds for purposes of covering the share. State regulators monitor the tate the company or liquidate it.158 | More Than a Survivor

ABOVE: In 1986, American Family became one of the first insur- ABOVE: American Family Chairman Bob Koch displayed his 1989ance companies to adopt a windshield repair program, saving Distinguished Alumni Award from the University of Wisconsin.an estimated $47 million in the first eight years. Picturedhere, Larry Farino (left) and Toby Nechkash from Auto GlassSpecialists, Inc. of Madison, demonstrated the repair process.meant traveling back and forth across the entire metro region. all its stakeholders, Congress and the media. Through TalkingService centers dispersed adjusters, giving policyholders faster, Points, the NAII provided timely, concise information that itsmore reliable service while saving the adjusters time and the members disseminated throughout all of their communica-company money. tion efforts. Although American Family and many other insurance Koch completed his NAII work shortly before steppingcompanies continued to get high marks from their policyhold- down as chairman and CEO of the American Family Group oners, public sentiment turned against the industry as a whole Dec. 31, 1989, the group’s fourth consecutive million-applicationin the late 1980s. Hostility erupted into open rebellion when year. Following the tradition set by Pete Miller, Koch continuedCalifornia voters approved Proposition 103 on Nov. 4, 1988. on the board until his 70th birthday in 1995.Prop. 103, the “Voter Revolt Initiative,” rolled auto rates backto 1987 levels. Within three weeks, other states began debat- A gifted leader, Koch inspired the company’s agents anding similar measures. Following passage of Prop. 103, the employees to make the best use of their abilities, resulting inNational Association of Independent Insurers (NAII) asked phenomenal growth. When he became president of the Americanboard member Bob Koch to chair a special committee charged Family Group in 1977, American Family Mutual, with assetswith mapping out a plan for a communications outreach to the of $596 million and total revenue of $448 million, didn’t rankpublic that would go beyond the association’s traditional work among the top 20 property/casualty insurers. When Koch retired,with the media. The committee developed Talking Points, a the company, operating in just 12 states, had $3.3 billion in assets,program to help the entire industry speak with one voice to annual revenue exceeding $2 billion and was the 18th-largest property/casualty insurance carrier in the nation. Dare to Dream | 159



Yesterday’s home runs don’t win today’s ball games. — B ABE RUTH8 FOCUS ON THE FUTURE

CHAPTER 8 | FOCUS ON THE FUTUREHerman Wittwer founded Farmers Mutual to provide farmers with low-cost auto insurance. He also understood that quality was essential to retaining policyholders, so he set a high standard for prompt, courteous service. Every-application was to be processed into a policy and placed in the Farmers Mutual had more than 4,500 policyholders and 15mail on the day it arrived. Every letter, every telegram, every employees. To maintain its high level of service, the home officephone call that required a response was to receive one on the had to become more efficient. Wittwer organized the staff intosame day. To achieve this daunting goal, Wittwer and his part- nine departments — accounting, underwriting, policy writing,ner Richard Kalbskopf joined the staff each morning around a statistical, mailing, supplies and purchases, agency, stenographylarge wooden table to open and sort the mail. Each afternoon, and claims. Still, everyone met around the mail table at the begin-they met again at the table to stuff and stamp envelopes. The ning and end of the day.pace was hectic. Many evenings after supper, accountant HaroldFrank and his wife Maybelle returned to the office to post the Turning to office machines for additional help, Frankday’s entries in the ledger. Often, they found Wittwer still at his purchased a Burroughs bookkeeping machine in December 1929desk, tending to his rapidly growing company. and postponed hiring another accountant. A second device helped cut costs in 1932 when Farmers Mutual converted to a semi-an- The combination of low premiums and responsive service nual, semi-direct plan. Once a month, Farmers Mutual rented aappealed to many Wisconsin farmers. By December 1929, Hollerith punch-card machine, an early electro- mechanical tabulating machine which helped the company issue renewal certificates at the rate of 1,000 per hour. These automated annual renewals replaced the previous policies that had to be typed by the policy writing department at the rate of eight per hour. A few years later, the Wisconsin insurance department asked LEFT: From early on, employees from many departments pitched in to sort and answer the mail every morning. Herman Wittwer wanted a quick response to customer questions and issues.162 | Focus on the Future

insurers to provide detailed breakdowns of their premium reve- the new punch-card system included an alphabetical tabulator,nue, forcing Farmers Mutual to purchase its own Hollerith in a reproducer, an interpreter, a sorter and three keypunches. A1935 to keep up with the demand for information. year later, the United States entered World War II, and nine Farmers Mutual employees, including Kelliher, entered the armed Invented in the 1880s by Charles Hollerith, the punch-card forces. Many Farmers Mutual employees who stayed at homemachine stored basic information in the form of coded punches spent their mornings at the company and the afternoons at theon stiff paper cards. The punch holes allowed wire brushes to defense plants. The IBM system helped the short-staffed hometouch a metal cylinder, creating an electric current that told the office keep up.machine to add, subtract, print and so on. Because the machinecould store and process large volumes of data, it — and its future FATHER KNOWS BESTdescendant, the computer — became essential tools for successin the insurance industry. With paternal pride, Wittwer always took a personal interest in his employees. He looked after them both on and off the job, Farmers Mutual installed its first International BusinessMachines (IBM) system in 1941. Supervised by Bob Kelliher,BELOW: Bob Kelliher inspected one of Farmers Mutual’s new International Business Machines, installed in 1941. Dare to Dream | 163

Like their policyholders, Farmers Frank, Wittwer hired Bill Hoppe Mutual employees believed in as the company’s first personnelworking hard. With the exception of lunch, director. With Farmers Mutualstaff remained at their desks the entire swimming in new applicationsday. Only the receptionist received a coffee for insurance, increasing produc- tion was critical. Hoppe hiredbreak. Once the company moved to the Boyd efficiency experts to measure workMansion, however, other employees also flow and set performance levels. Helen Esserenjoyed brief morning and afternoon breaks. Employees wrote down every task they completed, and supervisors spent much of their time making sure staff met standards. The sound of bells became part of the compa-and, like a father, had high expectations. Employees responded ny’s culture with the constructionwith loyalty to Wittwer and dedication to his company. As his of an addition to Boyd Mansion incompany grew, management mirrored Wittwer’s deep concern 1947. For the next 21 years, chim-for employees. In 1934, Farmers Mutual provided company-paid ing bells ruled employees’ lives.life insurance. In 1947, it added health coverage, and two years They were to be at their desks andlater, a pension plan. Employees also enjoyed ample vacation working when the bell started theand sick time, paid holidays and company-paid recreation. But day and to stay there until anotherrules were strict and rigidly enforced. An indiscretion, even in bell designated a coffee break or the JoAnn Sprecherone’s private life, could result in a reprimand. Small infractions, end of the workday.including napping at a desk or “intentional waste,” could lead The addition and the frenzied hiring of new employeesto dismissal. strained Farmers Mutual’s family-like atmosphere. New employ-Following World War II, employment at Farmers Mutual ees came in every week, while others left. Some worked in thedoubled to 250 people. To relieve some of the burden on Harold main building, others in the addition. By 1951, 350 people worked at Farmers Mutual — many of them strangers to each other. But in December, they all moved to the new headquarters onBELOW: Using American Family’s first push-button phones, Maxine Jensen East Washington Avenue. Twice the size of the Wisconsin Avenue office, the new build-(left), Donna Gehrke (center), and Nancy Clapper handled hundreds of ing nevertheless brought people together undercalls a day at the home office switchboard in 1977. one roof.Thanks to the efforts of everyone from Wittwer to custodian Ray Sather, the company’s family atmosphere returned. Women, known as “the girls,” comprised nearly three-fourths of the home-office staff. From 1942 on, Personnel Assistant Helen Esser, the only woman with an office, hired all female employees. Although the women she hired didn’t report to her, Esser handled their personnel issues. So in 1955, when JoAnn Sprecher sought permission to return to work after having her first child, she had to see Esser. “No,” Esser said, “a mother should be home with her children.” Sprecher wasn’t satisfied and took up the issue with her boss, Controller Henry164 | Focus on the Future

A game of cards in “the Coke room” of the oldBoyd Mansion helped pass the time during lunchat Farmers Mutual. Dare to Dream | 165

Harvey. He agreed with Sprecher, giving her a four-week leave who became assistant personnel director under Pete Miller inof absence — the first such concession to working mothers at 1954 and personnel director in 1957. With a master’s degree inFarmers Mutual. personnel and marketing, Vanden Heuvel represented a new era in employee management. During his tenure, Vanden Heuvel Male applicants interviewed with Norb Vanden Heuvel,Norb Vanden Heuvel David Anderson Jim St. VincentBENEFITS SET US APARTIn 2017, only 20 percent of The Corporate Incentive “These programs align with American companies offered Program (CIP), created by CEO our values, providing our employ- their employees both a compa- Dave Anderson, encouraged ees time to spend with their loved ny-paid pension and a 401(k) employees to help achieve corpo- ones when it matters most,” said retirement plan. American Family rate goals. Each year, the company Jim St. Vincent, chief human was one of them. set measurable goals in key perfor- resources officer. This generous benefit policy mance areas, such as premium started in 1949, when Herman growth, customer retention and Flexibility and work/life Wittwer approved a pension plan satisfaction and combined ratio. balance became increasingly for his Farmers Mutual employ- Depending upon the extent important to employees across ees. When double-digit infla- to which goals were reached, generations so the company tion raged in the early 1970s, employees received a cash continued to offer flexible work Vice President of Personnel award. The agent bonus program schedule options. Depending on Norb Vanden Heuvel proposed reflected similar priorities. the job, an employee’s schedule a mutual fund to which employ- or location might allow for more ees could make voluntary contri- In 2017, the company’s short- or less flexibility. Managers had butions, with a company match term disability program offered increased latitude to reward their based on that year’s profitability. eight weeks of 100 percent pay teams in ways that work for them That new Investment & Thrift Plan for any FMLA approved absence, and provide meaningful incentives (I&T) proved immensely popular including maternity leave. A to their people. among employees, and over the parental leave program providing years, American Family kicked in mothers and fathers two weeks St. Vincent summed up the hundreds of millions of dollars. with 100 percent pay (per calen- company’s benefits philoso- In 2009, the plan was renamed dar year) to care for newborns, phy this way: “We recognize the American Family 401(k) Plan, adopted children or foster chil- the importance of offering an with a fixed matching formula up dren. Parental leave was also employee experience that moti- to 5 percent. available to employees caring for vates, attracts and inspires our aging parents. people to deliver results for our customers.”166 | Focus on the Future

introduced many innovations, including annual cost-of-living cards, each containing a single command, to tell the computerincreases in the 1960s and 1970s, merit pay in the 1980s, peer what to do. “You’d feed these cards into the machine and test theassessment, flexible hours and a host of new benefits. program by going through each step individually,” recalled Don Breitenbach, one of the company’s early system experts.CLICKING INTO THE COMPUTER ERA As senior managers grew more interested in the informa-As the volume of Farmers Mutual’s business grew, so did the tion computers could provide, Farmers Mutual established andemand for faster data processing. In 1959, with the company electronic data processing department, with George Riege ashandling 664,000 policies and $26.5 million in annual premi- director. Administratively, data processing moved from officeums, Kelliher recommended leasing IBM’s RAMAC 305, an administration to finance and back before President Pete Millerearly business computer, for $250,000 a year. Like the previous created the management information systems (MIS) divisionIBMs, RAMAC used punch cards to enter data. Unlike earlier in 1971. To head the new 55-employee unit, Miller tappedmachines, this primitive computer had “memory” in the form of Controller Breitenbach, promoting him to vice president of MIS.magnetic disks that held up to 10 million characters. Breitenbach, an unassuming and down-to-earth man, drove an old pickup and insisted on being treated like one of the gang. Yet, The promise of faster data processing convinced Farmers as the head of MIS, he wielded tremendous power, determiningMutual to lease the RAMAC system. But the by-product of which projects got priority and which waited.data processing — information — proved equally valuable. UsingRAMAC’s ability to sort and analyze data, Farmers Mutual refined TAKING THE PUNCHits underwriting classifications. RAMAC, however, couldn’t OUT OF PUNCH CARDShandle the more than 1,100 new categories it helped create. So in1963, Farmers Mutual installed two IBM 1400-series computers. Punch cards were the only way to enter information into theThe 1400’s principal advantage was programmability. Instead of computer until 1967, when American Family bought an Opticalrewiring RAMAC’s computer boards, programmers used punch Character Recognition (OCR) page reader, which “read” printedBELOW: Bob Kelliher (left), Hugh Wallace (center), and Irving Maurer welcomed the RAMAC 305, which Farmers Mutual first leasedin 1959 for $250,000. Dare to Dream | 167

information into the computer. When IBM learned of the switch, several of its top execu- tives visited American Family President Bob Koch to convince Five years later, the company him to stick with Big Blue. However, Koch stood firmly behind Breitenbach’s decision, even though it meant leaving the secu- installed its first CRT terminals, rity of IBM to become one of Amdahl’s first customers. Koch said while he supported the decision, “My hand shook a little as allowing people to type infor- I wrote the biggest check in the company’s history.” mation directly into the system. Online processing meant the end of punch cards and keypunch operators. Since all application and claims informa- Taking advantage of the new tech- tion was captured electronically, online processing also signaled the demise of the history card department, which kept hand- nology, health lines and American written claims histories on all policies. But these changes didn’t force anyone out the door. Constant growth at American Family Family Financial Services began created a continual demand for employees, and the company found positions for everyone who wanted to stay. working online in 1976 — but they COPS served American Family through the 1980s, but inDarnell Moore maintained paper files as a backup. 1991, a team lead by Darnell Moore, who was then vice president of claims, Information Services Vice President Rod Christenson Three years later, the company (Breitenbach’s successor), and Health Lines Operations Director Bob Powers began to work on a program called CONCEPT,introduced the Claims Online Processing System (COPS) to the claims online computer enhanced processing tool. The new system replaced CRTs with powerful personal computers thatall lines. The sudden surge in volume overwhelmed American processed claims on the desktop, reducing dependence on the mainframe, according to Claims Administration Director BobFamily’s two IBMs. “There were many days when you weresurrounded with all your files because the system was down, andyou couldn’t input the draft,” recalled Claims Vice PresidentDarnell Moore, then a branch claims manager in Schaumburg,Illinois. “You had to handwrite a draft, stick it in the file, andinput it later whenever the system came up.”In 1979, Breitenbach called IBM to see about an upgrade,but IBM had a backlog of orders. Unable to wait, Breitenbachturned to a relatively new computer company named AmdahlCorporation, which immediately delivered an Amdahl 470-V6to replace one of the IBMs.BELOW: Introduced in October 1974, the Family Album was American Family’s first publication designed solely for employees. Themonthly magazine carried news about the home, regional and branch offices. After the company intranet, Compass, debuted in1998, the print publication was discontinued.168 | Focus on the Future

ABOVE: The nucleus of the PLUS working committee — Bob Johnson set parameters would be referred to underwriters for personal attention, giving underwriters more(seated), Art Massmann (left), and Howard Boersma — tested the personal time to make the most difficult decisions.lines underwriting system. Technology also helped American Family further mitigate risk with the introduction in March 1997 of GIROS, the generic interactive report ordering system. GIROS enabled agents and employees to check an applicant’s driving record, claims history with other insurers, and credit reports. Agents were quick to welcome the new tool because it helped eliminate delays, cancellations or reclassifications that occurred when accidents or traffic violations were discov- ered after the fact. This “early warning system” saved the customer, agent and company alike time, money and frustration. Nearly 20 years after GIROS was first introduced, it remained in oper- ation into 2017 for the classic product lines. Emphasizing the need to drive down costs, in 1990 President Harvey Pierce asked Klokner, then executive vice president of administration, to reorganize the structure of the underwriting division. Klokner, one of the company’s first resi- dent underwriters, initially resisted any change.Kovich. Rather than attempt to implement a new claims system Three decades later, in 2017, Autoin one step, American Family introduced CONCEPT in stages, PLUS and Property PLUS werewith the first pieces put into place in early 1997. still in operation, complementing Advance, a complex multi-year program announced in 2009ELECTRONIC UNDERWRITING to implement systems needed to transform the company. Advance included the entire sales andWith claims processing successfully online, American Family policy-service process, new products with morebegan to consider other computer applications to increase sophisticated pricing, improved claims technol-productivity. In 1982, Breitenbach, Corporate Research Director ogy and business intelligence and more. InsteadAlan Hunter and Underwriting Vice President Jim Klokner of forcing customers to change from their existingheaded a committee to develop a computer-assisted underwrit- coverages to new Advance products, policyholdersing program. Two years later, the company’s Minnesota South could retain their “classic” product and pricing,sales state tested PLUS, the personal lines underwriting system. an option requiring the continued use of the olderUsing PLUS, agents entered application data directly to the PLUS system. The long-term plan assumed mostcomputer.They could pre-screen applicants by instantly ordering of the existing classic business would eventuallymotor vehicle division reports. And they could instantly order an migrate to the Advance system.applicant’s prior company’s claims history before binding cover-age, thus improving risk selection and accurate rating at the timeof sale. At the time, few other carriers offered their agents thisimproved technology. Only those applications that fell outside Dare to Dream | 169

As technology advanced, however, Klokner saw the opportunity marketing. “It didn’t do much,” recalled Dan DeSalvo, a formerfor cost savings. Through a process improvement team, he and veteran agent and manager who would later become executivePierce initiated a program in 1993 to bring underwriters out of vice president of sales. “It was limited in function and not widelythe field and back into regional headquarters and select branch accepted.” Acceptance grew as DEFACTO offered additionaloffices. As the underwriters returned from the field, American marketing-related programs. District managers were hookedFamily would again avoid layoffs by retaining them to work in up to the company beginning in 1987, and by 1989, most ofgrowing areas of the company. However, the decision would also American Family’s field force was wired to the home office.prove to negatively impact underwriting quality in later years. After a period of experimenting with other computer-drivenONLINE AGENTS systems, American Family began migrating back to IBM in 1993 with ACCESS, a powerful DOS-based system. AlthoughTo reduce paper flow between the home office and the field, ACCESS offered a number of useful features, the system alsoRod Christenson in the marketing division and John Stassi demanded users have a certain amount of computer knowl-in Information Services worked with Wang Laboratories on edge, which many of the company’s employees didn’t possess.a computer system to connect agents to the home office. The Frustrated by ACCESS, agents eventually asked the company toprogram, named DEFACTO (data entry from agent’s computer adopt a Windows-based, point-and-click system.to ours), went online in 1983 with primitive computers infive test sites, serving 15 agents. Although some agents found In early 1997, a small group of agents began testing theDEFACTO useful, others were disappointed by its emphasis on Agency Data System (ADS). Operating on Windows 95, ADSprocessing and transferring information rather than sales and proved easier to use than the cumbersome ACCESS. ADS also included features such as a contact management program, price-quoting capabilities and compatibility with mostBELOW: When 25-time-Hall-of-Fame-Agent Everette Pierre retired in 1997 after 40 years in Clintonville, Wisconsin, he opened thedoor for Sheila Link, one of many underwriters who became agents after the company began downsizing the division in 1993.Link (center) cut the ribbon held by District Manager Lisa Ritchie (right) and Office Manager Ronda Olson. Joining them weremembers of the Clintonville Chamber of Commerce.170 | Focus on the Future

ABOVE: When the company introduced DEFACTO, linking agents to the company, marketing staff gave five district managers ademonstration. They included (from left) Carl Amundson; Don Mahoney, marketing; Rod Christenson, marketing; Joe Tisserand;Roger Burrows and Bob Mallow, who was an agent in Wauwatosa, Wisconsin in 2017. Joe Sanks is seated. Tisserand never likedthe DEFACTO “experiment:” and said his agents “did not impeach me, but it was close.”off-the-shelf software. After the positive early testing, ADS was Vice President of Corporate Research Nancy Johnson completedintroduced to the entire field in 1998. the market research, a steering committee composed of eight vice presidents set high goals for the new system, called CASH ADS remained a primary agency tool for a decade and a half, (customer account service handling). The committee envisioneduntil the 2014 introduction of APEX, a single access point that a flexible, efficient, easy-to-use system that would consolidate allcould handle all sales and service activities. billing and money-processing systems for the 4 million policies- in-force at the time. Unfortunately, this seamless system provedSOLVING THE BILLING CHALLENGE easier to imagine than to implement.In the fall of 1985, Executive Vice President of Administration The project was in fact a huge challenge, given the complex-Dale Mathwich sat down with Vice President of MIS Don ity of the insurance business, the number of variables impactingBreitenbach and Controller/Vice President of Finance Brent a policyholder’s premiums, and the fact that insurance is aJohnson to consider a new billing system. At that point, the prepaid product. In addition, the astonishing pace of technolog-existing billing system, AmPlan, was 20 years old, and it lacked ical change further complicated matters, as project leaders madethe flexibility that customers and agents demanded. Johnson decisions based on technology that quickly became obsolete orappointed John Bornick, a profit administrator in personal lines failed to perform as promised.at American Family, as project administrator. After Bornick and From 1985 until early 1991, American Family struggled to find a solution that met its needs. Part of the problem was that Dare to Dream | 171

they were losing business because of customer billing problems. Pierce had enough of the problem-plagued payment system. He asked Executive Vice President of Finance Paul King to over- see implementation of a new customer billing system for property and auto by the end of 1998. King in turn hired Marketing Sales Development Director Tom Mooney as program management director, an appointment that turned into a 10-year commitment. Mooney led the implementationKICKING THE HABIT project for three years, and wouldIn 1978, an employee attitude survey eventually direct the billing depart- ignited a hot debate over smoking at American Family. Vehement nonsmok- ment until 2007. ers urged management to ban smoking in the workplace, while smokers defended “In 1997, the company’s bill- their right to light up. Vice President of Personnel Norb Vanden Heuvel struck a ing procedures were in trouble,” compromise, segregating the cafeteria into smoking and nonsmoking sections Mooney recalled, with each product Paul King and encouraging individual departments to do the same whenever practical. line having its own billing system The issue smoldered for eight years until new studies documented the health and rules, all of which lacked consistency. “Agents, customers and risks related to secondhand smoke. In 1986, smoking was completely banned mortgage companies were frustrated by our systems.” inside all American Family buildings. In 2009, the company extended the ban to To start, Mooney spent time listening to the complaints company grounds. voiced by both customers and agents, and then hired an outside consultant to carefully study the billing challenge and recommend potential solutions. During the course of the project, a number of people were enlisted to help solve the problem, including Traci Beyer, Steve Van Lysel, Randy Gundlach, Kari Black and Pam BELOW: The customer billing project sought input from the field and employees to improve the system. Agent Gary Holland, Hannibal, Missouri conferred with his teammates about one of the credit/debit card payment screens in 1998 testing ses- sions. Working with him were (from left) Trudy Shafer from the Bob Shafer Agency, Peoria, Illinois; Dee Lile, Midland money processing; and Pam Acker, Ohio underwriting services.billing operations were spread across the company in differentdivisions, and Bornick lacked authority to make changes. At that time, American Family was ready to introduce CASH,starting with casualty PLUS accounts in Iowa. Gradually, thecompany added casualty PLUS accounts in all remaining statesexcept Wisconsin. CASH was designed to let people customizepremium payments, allowing them to pay the full amount, theminimum amount due or any figure in between. However, CASHalso faced challenges. By 1997, the system remained only partiallyimplemented, with customers complaining they lacked paymentflexibility. Worse yet, many agents told President Harvey Pierce172 | Focus on the Future

THE EMPLOYEE ASSISTANCE PROGRAMIn 1979, Employee Development Yugo began American Family’s balance work and life issues. The Instructor Nancy Yugo learned employee assistance program program offered free confidential that a few companies were (EAP) as a pilot project with counseling assistance for personal starting to experiment with nearly 40 volunteer employees in and work-related issues, includ- programs to help workers find Madison, Wisconsin. ing legal and finance, fitness, and access community services. buying a house or car, stress or The idea struck a chord. With By 2017, American Family substance abuse. Vice President of Personnel contracted with Lifeworks, an Norb Vanden Heuvel’s support, online assistance program to help employees and their familiesPapierniak. Within the company, the Information Services divi- complained the company was too quick to send customers lapsesion proved an essential partner, and employees Byrne Chapman,Pete Frase, Mike Hilmershausen, Gary Beck and Gregg Knoche notices after they missed a payment. The team’s inquiry revealedwere among many who played key roles on the technical side ofthe billing challenge. notices went out just four days after a bill’s past-due date. Mooney’s One of the complaints Mooney and his team had to address team changed that policy so notices didn’t go out until seven dayswas how the company handled late notices. Agents had long after the past-due date, which reduced lapse notices by a third.BELOW: Tom Mooney, a marketing sales development director, Another priority for the project management team wasspent nearly a decade solving American Family’s customerbilling issues. finding a better way to help agents answer customer questions about their bills. In April 1998, the company launched the Agent Billing Inquiry (ABI) call centers at the Madison, Eden Prairie and St. Joseph regional offices, responding directly to agents’ questions about their customers’ bills. Meanwhile, other project teams were making steady progress adding payment options to the billing program so policyholders could make full Pam Stampen or minimum payments or pay in installments. Finally, on June 16, 2005, the company started taking calls directly from customers who had questions about their bills, a forerunner of 2017’s sophisticated 24/7 sales and service contact centers. In addition, the program known as My Account started that year as well, so customers could finally view their policies via the internet and make payments through a direct deposit from their bank or by using a credit or debit card. Another innova- tion, Automated Funds Transfer (AFT), allowed agents to easily transfer to the home office premium payments which were made or received in their offices. Pay-by-phone became another option Dare to Dream | 173

and electronic billing and payment offered the convenience of the number of women andpaying via the internet. With the introduction of the AFT, onlinebilling and pay-by-phone options, American Family hit a signif- minorities in the company ranks,icant milestone in 2006 when the organization received moreelectronic premium payments than paper, providing a big savings including management.for the company. In 1979, Ruth Kutz became When Mooney left the billing department in 2007,Corporate Planning Director Pam Stampen stepped in to keep the first female junior officer inthe momentum going. Over the next decade, despite some bumpsin the road for the American Family billing system, a series of the company, succeeding Artcontinuous improvements finally made it easier for agents,employees and customers to obtain instant, accurate billing infor- Babler as assistant treasurer. Kutz,mation and choose the payment option they preferred. a graduate of the Madison AreaTHE CHANGING FACE OFAMERICAN FAMILY Technical College and later the Mary O’Connor University of Wisconsin-Madison,Women have long comprised the majority of employees inAmerican Family’s home and regional offices. Many of these had initially joined the companywomen, such as Helen Esser and JoAnn Sprecher and ExecutiveSecretary Mary O’Connor, wielded considerable authority, as a stenographer in 1945. After abut none of them had found their way into senior manage-ment. Early in the 1970s, while Americans debated the Equal brief hiatus to start a family, KutzRights Amendment and the Equal Opportunity EmploymentAct, Marketing Vice President Floyd Desch convinced the returned to Farmers Mutual as acompany to initiate an affirmative-action program to increase money center specialist. For almost 20 years, she handled matters surrounding American Family’s investments. “Still, it was a shock when Pete Miller and Bob Koch asked me to become assistant trea- surer,” Kutz said. Ruth Kutz About this time, Vanden Heuvel was also contemplating changes in employee training, which at that point was conducted separately within each divi- sion. As computers eliminated some jobs and created others, demand for training grew. Vanden Heuvel recommended a centralized training department. Koch and Miller agreed, andSAYING YES TO FAMILY MEMBERSAlthough Farmers Mutual/ The State of Wisconsin forced one did not report to the other or American Family has further liberalization of the the same first-line supervisor. The long prided itself on company’s nepotism policy in the change created no significantits close family atmosphere, mid-1980s when the Department problems, and in 1990, Americanfor many years the company’s of Industry, Labor and Human Family dropped its prohibitionmanagement was wary of hiring Relations ruled that refusing on hiring parents and children ofclose relatives of any employee. to hire an employee’s spouse employees and district managers.As the company grew and oppor- amounted to discriminationtunities multiplied, American based on marital status. In the In the following decades,Family finally lifted the ban on shadow of this interpretation, in many of American Family’shiring siblings, provided one 1986 American Family changed employees and field force shareddidn’t report to the other or the its policy companywide to allow familial ties, often including twosame supervisor. hiring spouses — again as long as or three generations in a family working for the company.174 | Focus on the Future

ABOVE: Standing outside the Madison drive-in claim office in for the media center — then focused on developing them as trainers first and foremost. Shortly after Johnson established athe mid-70s were Julie Saint-Louis, District 10 underwriter; strategic plan for her new unit, Koch and Desch asked her toJim Johnson, Wisconsin West State Director; Hilton Weath- succeed Alan Hunter as vice president of corporate researchers, damage appraiser at the drive-in; and Joe Tisserand, dis- when he moved to vice president of underwriting. Johnsontrict manager. Tisserand and Weathers had gotten to know accepted, becoming American Family’s first female vice presi-one another when Tisserand was a Madison police officer dent on Nov. 1, 1983.and Weathers was a car body shop manager. At Tisserand’ssuggestion, Weathers joined American Family in April 1976. In addition to leading American Family’s extensive researchSaint-Louis worked in underwriting starting in 1974 after efforts and chairing the strategic planning team, Johnson alsograduating from St. Joseph College in Rensselaer, Indiana. introduced American Family to the quality improvement concept. The new approach brought together teams of people representing the various stages of a process to analyze how and why some- thing was done a certain way. “A step either adds value or cost to a process,” Johnson explained. “If there isn’t a good reason for doing something, then you stop doing it.”in 1981 American Family consolidated claims, underwriting andclerical training, along with employee development and mediaproduction under the new corporate training and developmentdepartment. (Because of their particular needs, marketing andinformation services continued their own independent train-ing programs.)To direct the new department, Vanden Heuvel selectedNancy Johnson, a product training specialist in the marketingdivision since 1977. With undergraduate and graduate degrees ineducation from the University of Wisconsin-Superior and severalyears of teaching experience, Johnson had the perfect background for the new position. Uniting the five distinct areas, however, proved a challenge. “The underwriting trainers saw them- selves as underwriters first, trainers second,” Johnson recalled. “The claims trainers saw themselves as ABOVE: The company reached another milestone in 1987 — its claims people first, trainers second.” 60th year — when Steven Miller was hired as an underwriter/ claims adjuster in the farm/ranch department, bringing the To forge the 26 people involved number of employees to 5,000. With steady growth, 5,600 employees worked at American Family just one year later. into a unified team, Johnson movedNancy Johnson them together in one area — except Dare to Dream | 175

Launched in 1989, the process improvement program to human resources first as anstreamlined scores of routines at American Family. Recognizingthe growing importance of the program, Johnson reorganized her employee development special-division in 1992, creating the improvement resources departmentunder Jim St. Vincent and the strategic research department ist, then manager. As director ofunder Annette Zacher, both of whom were strategic planningand research administrators. corporate training and develop- When Johnson left the corporate training and development ment, Chvala fleshed out Johnson’sdepartment in 1983, Vicki Chvala succeeded her as director.Chvala joined the company in 1979 as a part-timer in American blueprint for the department. SheStandard’s rating/change department. At first the restrictiveenvironment caught her off guard, making Chvala question developed a course catalog forher future with the company. “We couldn’t take unscheduledbreaks. We couldn’t receive personal calls at work unless it was training programs, implementedan emergency,” Chvala recalled. But the former teacher took aninterest in American Family’s training program and transferred an automated enrollment process,BELOW: In 1992, the company strengthened its research capa- founded the professional devel- Vicki Chvalabilities, creating an improvement resources department opment library, and launchedled by Jim St. Vincent, and a strategic research departmentunder Annette Zacher. St. Vincent was chief human resources computer-based training.officer in 2017. When Vanden Heuvel retired in 1988 after more than 30 years as vice president of human resources, Chvala succeeded him. While replacing a long-tenured executive is always difficult, doing so in this case was particularly hard because Chvala’s mentor was so widely respected. “In the human resources profession, Norb was looked upon very highly,” Chvala said. “He was always push- ing new, innovative ideas.” Nevertheless, Chvala initiated her own fundamental changes at American Family. “We began shifting away from a paternal- istic view of employees,” she said. “Today employees want more freedom to make their own choices and decisions.” To that end, Chvala eliminated many punitive employee decrees, replacing restrictions with guidelines. “When we rewrote em- BELOW: Darnell Moore joined ployee work rules manual, if my American Family as a St. Louis staff couldn’t tell claims representative in 1971. me why we had a He eventually became vice certain rule, we got president of the division and executive vice president. rid of it,” Chvala said. “That scared many people, because that was how they policed the company.” American Family ’s group hiring was another change imple- mented by Chvala. Beginning in 1989, the human resources depart- ment had asked176 | Focus on the Future

ABOVE: The management training unit of the new corporate training department included (from left) Teri Lawson, Nancy Yugo, LeeKessenich and Charlie Cook (not pictured).claims managers to project the number of claim representatives Moore believed that claims representatives were thethey would need in the coming six months. Human Resources company’s key frontline problem-solvers and public relationsthen hired enough people to meet those needs and trained them ambassadors, responsible for putting a human face on thetogether in an intense 90-day course called EXCEL. “It was a company.To improve this vital link to policyholders, Moore gavemore proactive process than we had in the past,” said Darnell adjusters and managers more authority to settle claims quickly.Moore, at that time claims vice president, who would later be “We want to empower people to perform their jobs rather thanpromoted to executive vice president. “We were able to have restrict them, which hinders customer service, harms productiv-people ready to move into the field immediately, rather than six ity and drives up costs,” Moore explained.months or a year later.” Under Moore’s leadership, American Family developed the Moore represented another change in American Family’s Customer Repair Program (CRP), renamed the Dreams Restoredevolving culture. After earning graduate degrees in sociology Program, which speeds up auto repairs by allowing pre-approvedand psychology from Northwest Missouri State University in shops to immediately order parts and begin fixing cars damaged1971, Moore, an African-American, joined American Family as a in an accident. Customers who use approved shops don’t have toclaims representative in St. Louis. In 1980 he advanced to branch spend time getting multiple estimates, and repairs are completedclaims manager in Schaumburg, Illinois, and he became regional more quickly. Besides improving service, the program also cutclaims manager for Illinois and Indiana in 1985. Five years later, costs by reducing the need for customer service centers.he moved to the Wisconsin Region in Madison. On Nov. 17,1990, Moore succeeded Jim Eldridge as vice president of claims, In addition, Moore’s division worked with Dick Haas, vicebecoming the company’s first African-American officer. president of office administration, to create the insurance indus- try’s first disaster response trailer, a satellite-linked mobile claims Dare to Dream | 177

ABOVE: American Family’s employee and agent ranks became increasingly ethnically diverse starting in the 1970s, with a continu-ing emphasis on increasing and welcoming diversity throughout the organization office that provided on-site service that to best understand and serve the needs of an increasingly diverse population, American Family must itself become more following catastrophes such as diverse. “The PEOPLE plan and programs that followed were a matter of corporate responsibility,” explained Harvey Pierce, the tornadoes and hailstorms. BELOW: Through the minority internship program, Karen Stewart To ensure that others followed (left), a senior majoring in accounting at the University of Mis- the lead of Moore, Chvala, Johnson souri-Columbia, worked with District Casualty Claim Manager Joelene Wentz in the St. Louis claims department. and Kutz, the company also initi- ated several programs designed to increase the number of women and minorities employed byDick Haas American Family. One of the most significantcompany programs designed to boost the number of female andminority employees was called PEOPLE, (partnership for equalopportunity producing leadership excellence), introduced in 1990.More than a cultural diversity awareness program, the PEOPLEplan set realistic goals based on U.S. Labor Department statis-tics for hiring and promoting women and minorities in AmericanFamily’s corporate offices.Implementing the PEOPLE plan was important becausethe company felt it was the right thing to do, but in anothersense, the PEOPLE plan was also a strategic business decision.Management recognized that ethnic minorities represented about20 percent of the U.S. population at the time. Leaders realized178 | Focus on the Future

DALE F. MATHWICHGROWING THE COMPANY, CARING ABOUT PEOPLEAn article in the August 1956 President 1986 - 1990 and Nicolay appointed him Illinois state issue of Nation’s Business Chairman and CEO 1990 - 1999 director in January 1970. Over the next caught Dale Mathwich’s eye. 10 years, Mathwich quadrupled theRanking the best careers for young exclusive representation, many agents number of American Family agents inexecutives, the magazine placed insur- left the company and poison pen letters Illinois and increased annual premiumsance above banking. circulated widely. Mathwich paid little from $2.7 million to $34.9 million. attention, focusing instead on building Mathwich, a banker by day and his agency. He married Lila Ann Pohl in Mathwich moved to Madison ininsurance agent by night, read the arti- 1958, bought a house and began rais- October 1979 as director of market-cle twice — then called Farmers Mutual ing a family. ing, later vice president. He modernizedDistrict Manager Frank Feivor. Mathwich the company’s commission structure,signed his exclusive agent agreement In 1960, Mathwich accepted a developed American Family’s plan forwith Farmers Mutual on Oct. 3, 1956, district manager position in Rockford, expansion into Arizona and establishedand soon started his own agency in Illinois. These were lean years for American Family Brokerage, Inc.New London, Wisconsin. Farmers Mutual and the Mathwichs. Frustrated by some of management’s Mathwich advanced to executive Born Aug. 8, 1934, Dale Mathwich decisions, Mathwich nearly quit. But vice president of administration in 1985grew up on a dairy farm east of Regional Vice President Joe Nicolay and president on April 1, 1986. ShortlyWausau, Wisconsin, where Reuben and convinced him to stay. “Dale was dili- thereafter, he introduced a new internalOlga Mathwich and their three chil- gent, sincere, hardworking,” Nicolay vision for the company: “Strong, grow-dren weathered the Great Depression said. “I knew the situation would ing and friendly,” which remained inby providing for themselves. Born with change and Dale would really take off.” place for two decades. Mathwich was aa club foot, young Mathwich couldn’t hands-on executive; no detail escapedrun like other kids. But it didn’t slow Mathwich dug in, steadily develop- his attention as he involved himself inhim down. He woke early every morn- ing American Family’s largest district every aspect of the company. He helpeding to do chores before school. In in Illinois, growing from three full-time engineer American Family’s remark-the summer, he picked rocks from agents to 14 in 1969. Mathwich’s deter- able growth spurt in the late 1980s.the fields, helped make hay and even mination was just what Illinois needed, Mathwich became chairman and CEOplayed a little baseball when he got the on Jan. 1, 1990, overseeing a period ofchance. His foot straightened out as he record growth and financial strength.grew with the help of special orthope-dic shoes. Active in the industry, Mathwich chaired the National Association After graduating from Birnamwood of Independent Insurers and theHigh School in 1952, Mathwich attended Insurance Institute for Highway Safetythe University of Wisconsin-Madison’s in 1995, helping manage significantagriculture program on a $65-per-se- changes in both organizations. Closermester scholarship that paid his tuition to home, he served as campaign chairthe first year. To cover living expenses, of the Dane County United Way inhe worked in an auto-repair shop and 1993, leading a $7.5 million fund drive,two summers in a canning company. and as United Way board chair inUnenthusiastic about his studies and 1994. He later also led a fundraisingtired of being poor, Mathwich left the campaign to build a new United Wayuniversity before his junior year to work headquarters.for a banker and insurance agent inBirnamwood. Mathwich believed his most import- ant legacies were his concern for the When Mathwich committed full livelihoods of employees and agents,time to Farmers Mutual in late 1956, his mentorship of future company lead-the company was suffering through ers and development of the Nationalone of the most contentious periods Headquarters (NHQ) and the Americanin its history. Angered over the shift to Center retail and office park. Dare to Dream | 179

ABOVE: Under American Family’s minority internship program, urged American Family to move downtown, but the largely built-out area offered too few options for parking and lackedfour students entering their last year of computer training room for future growth. Instead the company settled on landspent the summer of 1992 in American Family’s information in the Town of Burke, just northeast of Madison at the inter-services division. The group included (from left) Demetrius section of Interstate 90/94 and Highway 151. At Mathwich’sWilliams, Jan Basha, Phuong Dao and Dennis Law. urging, American Family bought more than 500 acres in late 1987, far more than the 130 acres it had originally sought. “I felt we should give future generations enough land to expand,” Mathwich explained. After Burke proposed placing a sanitary landfill nearby, Scharer and others began to worry about how the surroundingcompany’s fiercest diversity advocate. “We have a moral obliga-tion to provide equal opportunity in the workplace.” American Family worked to improve its employee diversity ina number of concrete ways: Under Chvala and Pierce, the companyimplemented a minority intern program, minority scholarshipprogram, diversity training, education programs for minorities andpeople with disabilities, and a minority pre-employment program.During his tenure, Pierce chaired quarterly meetings and requiredcompany leaders to demonstrate their progress in hiring womenand minorities as employees and agents. Strong recruitment anddiversity programs continued under his successors.BURSTING AT THE SEAMS: ABOVE: After a fierce windstorm swept through the MilwaukeeA NEW HEADQUARTERS area May 31, 1998, agent Marty Manley (left) was there forDespite rapid advances in labor-saving technology, American his customers. Even though it was a Sunday, he and familyFamily added several hundred employees to its home office members went to his office to take calls from customers. Hestaff in the mid-1980s. By 1986, the company had more than arranged for a local contractor to do emergency roof repairs2,000 employees in five buildings scattered across Madison’s east for all his affected customers within hours. Manley spokeside. And projections showed that figure more than doubling by here with policyholders Merle and Fred Hess as permanent2007. “We’re going to have a problem pretty soon,” Director of repairs on their roof began.Facilities Loren “Buzz” Buchanan told John Scharer, vice presi-dent of office administration. Chairman Bob Koch, President Dale Mathwich, and thestrategic planning committee agreed. Since the current EastWashington Avenue site was too cramped for further expan-sion, Scharer began touring the Madison area in search of anew location. Madison Mayor Paul Soglin and the city council180 | Focus on the Future

MAKING THE MONEY GROWWhen Herman Wittwer equity so it grows to meet second largest asset class in 2017. handled Farmers customer needs, as well as provid- Managed by Equity Investment Mutual’s investments, ing a diversifying source of Director Richard White, Americanhis strategy was simple: Buy returns to strengthen the compa- Family’s equity portfolio empha-high-quality bonds and hold them ny’s financial health. sized large, stable companiesto maturity. Many people scoffed that provide security and growth.at this conservative approach. But Graham’s team used a hybrid Public equities totaled $2.4when the 1929 stock market crash model, with some assets managed billion or 13 percent of assets.forced many of the more specu- by in-house portfolio teams while White also managed Americanlative insurers out of business, other assets were managed by Family’s pension and 401(k) plans,Farmers Mutual suffered only external managers. To deliver accounting for several hundredone bond default. The compa- high quality investment perfor- million dollars.ny’s conservative approach had mance with well-controlled risks,changed little by 1961 when Fred the division strengthened its trade Private markets totaling moreMorton joined Farmers Mutual as order and risk management capa- than $900 million or five percentits first vice president of invest- bilities. American Family’s invest- of assets were managed byments. More than 92 percent of ment team operated with an Director Dave Sebald. Privateits $36.8 million portfolio rested industry-leading infrastructure market investments aim to takein high-quality “A” bonds. Morton that improved efficiency through advantage of segments of theand Treasurer Hugh Wallace had extensive automation. capital markets that are notplaced less than seven percent easily accessible via publiclyin stocks, and one percent in Bonds remained the largest traded securities, providing addi-mortgages. asset class of American Family’s tional return opportunities and investments in 2017, account- diversification. By 2017, the American Family ing for $13.5 billion — nearly 74Insurance Group’s invested assets percent of invested assets. By the Commercial mortgage loansexceeded $18.3 billion. Chief middle of the second decade of provide another small, butInvestment Officer David Graham the new century, bond yields had aggressive, complement tocontinued to seek new oppor- reached a 35-year low; American American Family’s larger invest-tunities to diversify the portfo- Family’s investments targeted ments. Through a national additional bond classes that network of mortgage brokers David Graham offered attractive yields with familiar with American Family’s acceptable risk levels. goals, Portfolio Manager Jefflio’s risks and returns. The division CaPaul led a team providing loansstrived to meet its twin obliga- Further diversification within to fund shopping centers, officetions — protecting policyholder bonds included investments buildings and industrial sites. backed by consumer loans, While earning higher yields than commercial real estate loans, similar corporate bonds, these corporate bonds of companies mortgages had the additional in emerging markets and high benefit of being secured. yield corporate bonds. Dedicated in-house portfolio teams and best-in-class external manag- ers provided American Family with opportunities to earn addi- tional yield in a low- interest rate environment. Public equities — stocks — represented the company’s Dare to Dream | 181

acreage would be used. To ensure appropriate development, the To ensure the national headquarters met the needs of currentcompany bought additional parcels, ultimately owning 876 acres and future employees, Nancy Johnson, vice president of corpo-of land. Working with the design firm of Bowen, Williamson and rate research, headed a workplace committee comprised of 50Zimmerman as its master planner, American Family set aside 75 employees to provide input on the building’s design.The commit-acres of rolling prairie and woodland as a nature preserve. The tee first met in 1988 — even before an architect had been selectedcompany allotted 400 acres for development as an office park and — and continued to meet through completion of the building inthe remainder for the national headquarters and future expansion. 1992. “We began asking: ‘Who is American Family? What is our culture?’” Johnson said. “Then we asked what kind of a build- American Family’s plans initially angered the Madison ing a company like that should have.” The committee describedmayor and city council, Burke leaders and environmental groups American Family as strong, successful, dependable, conservative,concerned about urban sprawl. But after long, difficult negotia- friendly and honest. As for the building, members felt the designtions — and even some talk by the company of leaving Madison should be straightforward, modest, unassuming and significantaltogether — agreements were reached that satisfied all sides. To without being monumental.provide essential services to the new site, the City of Madisonannexed the property. And working with American Family, the Using the information from the workplace committee andcity streamlined its approval process for new construction in the the executive building committee, Madison architects Flad &planned office park, the American Center. Associates designed a complex based on the movement andBELOW: Massive pillars dominate the main entrance to the National Headquarters, designed to symbolize American Family’s finan-cial strength to meet its promises to policyholders.182 | Focus on the Future

Workers with heavy equipment created a beautiful pond near the NationalHeadquarters, one of its signature design elements. It featured water foun-tains in warmer months, and provided a pleasant experience for those choos-ing to use walking paths around its perimeter. Dare to Dream | 183

Construction continued year-round on the National Headquarters project, one factor in completing the project on time and under budget.184 | Focus on the Future

relationship of employees and their functions. The project was Mathwich and Wisconsin Secretary of Commerce Robert Trunzo cut the ribbon on the $80 million building Oct. 1, 1992.so vital and time consuming that Mathwich named Scharer vice The following day, information services began moving in. The first occupants found themselves in a large, empty building withpresident of national headquarters development in 1989. Working no cafeteria and few services. But as more divisions relocated to the headquarters, additional services followed. Finally, in thewith Real Estate Manager Jeff Weerts, Director of Planning and spring of 1993, the move was complete. American Family cele- brated with an open house on June 12 and 13. More than 7,000 Construction Paul Easton, and Bill people — including 200 retirees, nearly 4,000 employees and field staff, government, industry and community leaders and Batterman of Durant Engineers, scores of Madisonians drawn by music and the aroma of 6,500 hot dogs — attended the grand opening. Scharer spent the last three years of The move spawned many cultural shifts throughout his tenure directing the construc- American Family. One such change involved the company’s flex time policy. Since 1973, a large number of American Family tion of the national headquarters. employees had taken advantage of a summer work schedule that compressed the company’s work week into four and a half days, Groundbreaking occurred May 21, 1990, with construction managed by M.A. Mortenson, Inc., of Minneapolis. ScharerJohn Scharer worked with Mortenson and its subcontractors on an aggressivework-safety program that resulted in a record 400,000 injury-freehours during construction of the complex.BELOW: Chairman Dale Mathwich got some help from office administration employees as he placed a time capsule beneath thefloor of the NHQ atrium before the center stone was laid. Dare to Dream | 185

ABOVE: Cutting the ribbon to officially open American Family’s new National Headquarters were (from left) John Scharer, vicepresident, NHQ; President Harvey Pierce; Rick Phelps, Dane County Executive; CEO Dale Mathwich; Robert Trunzo, WisconsinSecretary of Commerce; and Paul Soglin, Mayor of Madison.giving them Friday afternoons off. Amid calls to extend these Because CEO Dale Mathwichsummer hours year round, Vanden Heuvel introduced flex time in insisted part of the American1977, making the company a leader in alternative work schedules. Center development remain prairie andFlex time allowed employees to set their own schedules, begin- woods, employees in many buildings canning anywhere between 7 a.m. and 9 a.m. and ending between spot deer, foxes and even coyotes from their3 p.m. and 5 p.m. The majority of American Family’s employees office windows.chose to start early, leaving the office nearly deserted by 4 p.m.Unfortunately, this made it difficult for employees and custom- adequate coverage between 8 a.m. and 5 p.m. In addition, sala-ers in Colorado and Arizona to get service after 3 p.m. Mountain ried employees — not subject to federal regulations concerningTime. The problem was particularly acute during the summer overtime — had the option of a five-day/four-day plan, allowingwhen the home office closed at noon on Friday. With American them to work slightly longer days in exchange for an additionalFamily’s plans to expand both east and west, the headquarters day off every two weeks.needed to extend its office hours. After testing alternative work schedules in its branch claimsoffices, Vicki Chvala took a new concept companywide in 1993.Her approach gave employees the same flexible start and stoptimes, but it also asked managers to ensure their areas had186 | Focus on the Future

ABOVE: By 2017, more than 8,000 people worked in the American Center business park, fulfilling former CEODale Mathwich’s dream of creating an upscale commercial work environment adjacent to the company’snational headquarters.LIVE, WORK AND cherry blossoms in Washington, still considering changing marketPLAY AT THE D.C., and decided I wanted some conditions. In the future, the parkAMERICAN CENTER beautiful crabapple trees that will incorporate retail amenities would blossom in the spring,” and multi-family housing to meetWhen American Family he said. His vision focused on the needs of those who want to built its national head- creating a thriving professional live, work and play in one location. quarters (NHQ) in the environment for thousands ofearly 1990s, CEO Dale Mathwich employees and customers, includ- The vision for the area main-envisioned it as the centerpiece of ing American Family’s. tains the natural features andThe American Center, an upscale walkability that current park busi-business park the company would By 2017, there were more than ness owners and employeesdevelop on more than 800 acres 8,000 people employed at busi- view as its best attributes. Goingit purchased on Madison’s north- nesses in The American Center, forward, sustainable buildingeast side. More than simply an including those at American materials and multi-modal trans-American Family investment, Family’s NHQ, University of portation options will be incorpo-Mathwich wanted to provide busi- Wisconsin (UW) Hospital and rated to further meet social andnesses with a long-term home in a Alliant Energy’s headquarters. The environmental trends.tasteful setting. hospital, which opened in 2015, helped extend the park beyond “The American Center’s future Mathwich was directly involved traditional office hours with a will continue to be important toin many details of the American 24/7 presence, presenting new us even after we sell all of theCenter development, insisting retail opportunities for future land because the office park is ouron strict building design stan- occupants. By 2017, the park was front door,” said LeeAnn Glover,dards. He designated 75 acres two-thirds developed. real estate and planning director.of the park as a wildlife area and “We’ll continue to foster relation-personally selected the types of In 2015, American Family’s ships with our tenants and prop-trees located along major streets. development team reimag- erty owners to provide value to“I always liked the look of the ined a 25-year vision for the American Family’s customers, American Center that aligned agents and employees for years with Mathwich’s foundation, while to come.” Dare to Dream | 187

The NHQ cafeteria provided an inviting, community atmo-sphere for employees, agents and visitors to enjoy a mealand conversation.188 | Focus on the Future

ABOVE: The brightly lit NHQ atrium created informal meeting spaces for employees and agents, as well as an attractive, welcom-ing environment for visitors. Dare to Dream | 189

ABOVE: Twenty-five years after its initial construction, the national headquarters for the American Family enterprise remained astunning architectural jewel on Madison’s east side. The sheer size of the new national headquarters created more freely. To enhance this environment, break rooms withits own unique issues. Because many employees were a long vending machines were scattered throughout the headquarters.walk from the cafeteria, management stretched the half-hour Also, for the first time, employees in all American Family’s officeslunch break to 45 minutes and tacked 15 minutes onto the end were allowed to take food and drink to their desk or into confer-of the day, pleasing some employees and disappointing others. ence rooms.Distances also led to the elimination of formal coffee breaks. Thetraditional midmorning and midafternoon trips to the cafeteria For some people at American Family, the sheer size of thesimply weren’t practical in the new complex. Besides, the nature new headquarters, which encompassed 830,000 square feet,of the work at the home office had changed dramatically over symbolized a challenge to the company’s family-like culture.the years. No longer did supervisors ride herd over employees, To compensate, interior architects PHH Environmentalistskeeping them at their desks until the bell rang.This shift in think- approached the complex as a “city,” clustering workstationsing began in the 1990s, when management began to encourage into “neighborhoods” to create open, productive relationshipsemployees to move about and to communicate with each other among employees. Nevertheless, some people initially consid- ered the immense complex with its 1,100 employees too large,190 | Focus on the Future

too impersonal. Others found it confusing and easy to get lost in. ADDING A MILLION BRICKSStill others felt the home office had lost its friendly familiarity.After a period of adjustment, however, most employees began to As the company continued to grow throughout the 1990s, moreenjoy their modern new work environment. employees streamed into the business, eventually creating a space crunch in the new headquarters. By 1997, the company Mathwich and other executives recognized that the large had grown to 7,030 employees and management projectedoffice environment made it more challenging to maintain the (correctly) that the number would exceed 8,500 in the next sixcompany’s family atmosphere. “There’s a point where you cannot years. The office administration division quickly began planningknow everybody, when you’re spread too far out and just don’t a major addition. Using fast-track construction, the 520,000see people enough,” Mathwich said. But like Herman Wittwer square foot C Building was built in just 18 months, expand-before him, Mathwich still made it a point to walk the halls and ing the massive office complex to 1,350,000 square feet. Thechat with employees. “I worked hard to keep us on a first name $73-million-dollar project was completed and dedicated in 2000.basis,” he said, because that has traditionally been an important “The best part of all,” said CEO Harvey Pierce, “is that it came inpart of our culture.” about $3 million under budget.” Dare to Dream | 191

As American Family continued to expand into moreurban markets, it emphasized community involvement.At the Chicago African Festival of Arts, attended by200,000 people, company brand ambassadors talkedwith visitors, generating leads and offering tote bags.

Turnaround or growth, it’s getting your people focused on the goal that is the primary job of leadership. — ANNE M. MULCAHY, former Chair and CEO, Xerox Corporation9 STRONG, GROWING AND FRIENDLY

CHAPTER 9 | STRONG, GROWING AND FRIENDLYW hen Dale Mathwich and Harvey Pierce took charge of American Family as chairman and president respectively on Jan. 1, 1990, prospects for the year were uncertain. Stiff competition coupled with public outrage over thecost of insurance prevented necessary rate increases, leading to a ABOVE: Once a farmers-only company, American Family built a$100 million underwriting loss on auto and homeowners’ busi-ness in 1989. A bull market and strong profits from American strong presence in urban markets across its operating territory.Family Life helped the group squeeze out a $63 million oper-ating gain — but without profits from its main lines, the gainseemed a hollow victory. Mathwich and Pierce needed a plan to return AmericanFamily to true profitability. Both men had spent much of theircareers in the field and understood the need for growth. But withmany years of management between them, they were well awareof the essential ingredient of continued success — profit. Profitpays the bills for future expansion and other corporate initiatives,helps build the policyholder surplus to cover catastrophic losses,and is the foundation for the security that insurance companiesprovide their customers. As attorney Herman Ekern had toldthe company’s charter members at its first policyholders’ meet-ing, “An insolvent insurance company is of no service to anyone.” Mathwich and Pierce approached their new roles in dramat-ically different manners. Like Bob Koch before him, Mathwichwas a detail person who involved himself in all aspects of thecompany. Pierce took a more global approach, setting directionbut leaving the details to others. Despite their different styles,the two men worked well together. And, just as Koch had done,Mathwich alone had selected his successor as president, withboard approval. “I liked the way Harvey thought, his rationale,his expertise,” Mathwich said. And he liked Pierce’s directness.“Harvey will give you his opinion whether you like it or not. He194 | Strong, Growing and Friendly