OREANDA-NEWS. Fitch Ratings has upgraded American Family Mutual Insurance Company and its subsidiaries' (American Family) Insurer Financial Strength (IFS) ratings to 'A+' from 'A'. The Rating Outlook is revised to Stable from Positive. A complete list of rating actions follows at the end of this release.

KEY RATING DRIVERS
Fitch's upgrade of American Family's ratings reflects the company's very strong capitalization, favorable reserve position, improved underwriting performance, and strong market position in the Midwest personal lines market. These positive factors are partially offset by an aggregate exposure to severe weather regional risk that influences profitability but not capital.

American Family maintains low financial leverage of approximately 9% as of year-end 2014 and has interest coverage based off of statutory net operating gain of approximately 9.3 times(x), though the majority of the debt is housed at the lead operating company thereby the entire asset position is available to service the debt as there are no constraints tied to statutory dividends. American Family's statutory operating leverage was 1.1x at year end 2014 in line with prior years. Fitch also adjusted American Family's operating leverage to exclude the life insurance subsidiary that is stacked underneath the property/casualty operations and operating leverage increases to 1.3x at year end 2014.

American Family reported a 2014 statutory combined ratio of 100.4%, improved from 100.8% prior year and a 103.0% average from 2010-2013. In particular, 2014 results benefitted from the integration of the Homesite Group, Inc. (Homesite), which represents 10% of overall premiums.

American Family acquired direct homeowners' insurance writer, Homesite in December 2013 and direct nonstandard auto insurance writer, The Permanent General Companies (The General), in December 2012. Fitch is monitoring the integration and risk profile of American Family of these acquisitions to the overall company profile. In particular, Fitch has concerns about the additional homeowners insurance exposure and the associated earnings volatility that is associated with this line of business from weather related claims.

American Family Life Insurance Co.'s (AFLIC) rating reflects its status as a 'core' insurer within the American Family group of companies based on Fitch's Group Rating Methodology, as Fitch believes AFLIC's traditional life insurance products are complementary to American Family's exclusive agent distribution system. As a result, AFLIC's rating receives upward lift to the American Family group rating level.

Midvale Indemnity Company's (Midvale) rating reflects its status as an 'important' insurer within the American Family group of companies. Midvale's inclusion within the American Family group IFS rating is based on its position within American Family's organizational structure and overall business strategy. This includes Midvale's 100% intercompany quota share reinsurance agreement with American Family. As a result, Midvale's rating receives upward lift to the American Family group rating level.

RATING SENSITIVITIES
The key rating triggers that could result in an upgrade include:
--Sustained improvement in the combined ratio approaching 95% or better without deterioration in other parameters.
--Maintaining a 'very strong' or better Prism score.

The key rating triggers that could result in a downgrade include:
--A material deterioration in operating performance, such as a sustained combined ratio approaching 105%.
--A sustained reduction in Prism score to the 'strong' category.

FULL LIST OF RATING ACTIONS

Fitch has upgraded the following ratings:

American Family Mutual Insurance Co.
American Family Insurance Company
American Standard Insurance Co. of Ohio
American Standard Insurance Co. of Wisconsin
American Family Life Insurance Co.
Midvale Indemnity Company
--IFS to 'A+' from 'A'.

The Rating Outlook is revised to Stable from Positive.