Why American Family Insurance is becoming a big name in Milwaukee

In jeopardy after U.S. Bank ended years of sponsorship, Milwaukee’s annual July 3 lakefront fireworks display needed someone to step in — and fast.

Longtime Milwaukee money manager and philanthropist Ted Kellner went to Jack Salzwedel, the chief executive of Madison-based American Family Insurance, and explained that losing the fireworks would be a big blow to the city. Kellner, who had been a member of American Family’s board of directors, suggested Kellner’s T&M Partners and American Family split the cost.

“As we got into it we realized it’s a lot more than just writing a check. It was about logistics,” Salzwedel said. “So we approached the Brewers, who were in the middle of spring training. I actually was able to talk with Mark (Brewers principal owner Mark Attanansio), and when Mark heard about it, he was like, 'Yeah, we’ll be part of that.'”

And just like that, American Family, drawn into another Milwaukee sponsorship opportunity, worked with Kellner and the Milwaukee Brewers to save the fireworks.

If it seems like Madison’s American Family Insurance has been paying more attention to the big city down Interstate 94, that’s because it has.

In less than 2½ years, American Family Insurance has:

• Agreed to sponsor the new American Family Insurance Amphitheater at Summerfest.
• Signed a 15-year deal to become naming rights sponsor for Miller Park, beginning in 2021.
• Started planning for a high-tech industry innovation hub of at least 125,000 square feet in metro Milwaukee.
• Helped rescue the financially orphaned July 3 lakefront fireworks display for this summer.

Although the insurer isn't disclosing financial details, that’s a whole lot of love for Milwaukee from 91-year-old American Family, which, with more than $10 billion in annual revenue, is one of Wisconsin's largest companies.

But Salzwedel said in the end, it all makes good business sense. What American Family is doing in Milwaukee is part of a plan that “sets the stage for the next 90 years” of the company, he said.

“It’s not an either-or, Madison or Milwaukee — it’s an and. We think they complement each other very well,” Salzwedel said. “We’re really excited about our partnership and what we see on the horizon in Milwaukee.”

While American Family is being a standout corporate citizen, the company also is looking out for itself, said Tim Sheehy, president of the Milwaukee Metropolitan Chamber of Commerce.

“No company expends resources without a good idea of the return on investment,” Sheehy said. “And so the investment in Summerfest at the amphitheater, Miller Park and the fireworks display are investments that benefit Milwaukee greatly but also benefit American Family as it grows both its brand and its recruitability as a company to work for.”

In essence, American Family's focus on Milwaukee fits with the company's overall effort to adapt to changes in the industry and maintain its financial strength.

At the beginning of this decade, leaders at American Family Insurance began taking a hard look at the insurer's traditional business model — exclusive agents selling auto and homeowner policies in 19 states. The exclusive agent approach was and is successful, but technology was changing how some people buy insurance, and competitors were cutting into market share via other channels.

The company also seemed too reliant on auto insurance and was concentrated in states where weather calamities like tornadoes could cause a wave of claims and a huge hit to earnings.

“We started looking real deeply at our business model and at where the world was headed,” Salzwedel said.

Where the world was headed was toward cost-effective ways of selling insurance, including directly to consumers over the internet. It was headed toward being able to appeal to a wider range of consumers. It was headed toward recruiting a more diverse workforce, and toward increasing its mix of products.

Ultimately, the world was headed toward a place where brand recognition, geography, innovation, products and distribution channels needed to grow, along with the pool of people who make it all work.

A series of acquisitions of insurance companies over the last few years have added products and new geographies and widened brand recognition for American Family in the U.S.

“At one point our auto revenue was about 70% of the company,” Salzwedel said. “Right now it sits at about 47% or 48% percent. So we have much more commercial lines, we have more property (coverage).”

While American Family’s exclusive agents continue to be the primary way products are sold, direct sales and sales by independent agents through its subsidiaries are expanding. That gives the company more balance in its distribution channels and geography.

With its acquisitions, American Family now does business in all 50 states, and its exposure to claims-making weather events is less concentrated.

The renaming of Miller Park to whatever American Family calls it — no name has been set yet — will help with national brand recognition.

"Sports marketing in the insurance space is definitely one way to reach customers, create awareness, align brands," Salzwedel said.

The sponsorship of the new Summerfest amphitheater will promote the company name more in Wisconsin, where American Family still is the No. 1 insurer of homes and autos but has been slipping a little in market share.

American Family, which now has technology hubs in several major U.S. cities, also wants one in a metro area closer to home to assist in the company’s growth, and has found a willing partner in Milwaukee.

“It’s clear that they have embraced Milwaukee and all of southeastern Wisconsin as part of their business plan,” said Milwaukee Mayor Tom Barrett. “But also in their community outreach. It has been a significant increase in their community involvement.”

A pivotal piece of what Salzwedel considers a “reimagining” of American Family was the 2014 opening of a data science and analytics lab in Madison near the University of Wisconsin campus. There, employees could concentrate on emerging technology and things like predicting storm and policyholder risk. Last year, American Family advanced that effort further with the opening of its Spark building on Madison’s east side. The nine-story Spark office includes community meeting space and a tech hub.

American Family is planning a similar tech hub — in new or renovated space — in Milwaukee within a couple of years, staffed by employees from Milwaukee. The building likely will include functions such as claims and business development in addition to data and technology work. The company has narrowed potential sites for the tech hub to eight from about 60 and expects to have a decision on the location by early summer.

“Although we’ve got a lot of employees and a lot of great work going on in Madison, we don’t have the access to racial and ethnic diversity that a community like Milwaukee gives us,” Salzwedel said. “Milwaukee is close. It’s 60 miles down the road. It’s got more diverse talent.”

Salzwedel said with development occurring in Milwaukee, the city is “at that inflection point that we really like.”

“We think we can be a part of that upswing. And so we're excited about Summerfest branding, we’re excited about the stadium branding, but also excited about bringing more jobs to downtown and the work that we think we can do in terms of it being a technology hub for us,” he said.

Barrett said city officials have met with American Family not only about potential sites for the tech hub, but about developing a Milwaukee workforce for the insurer.

“We know the territory and we want to work with them because we think they really can bring a lot to the table,” Barrett said.

Paul Gores can be reached at paul.gores@jrn.com. Follow him on Twitter @pgores