S&P Affirms American Family Fin Svcs Inc'A-1+' Rtg.

NEW YORK--(BUSINESS WIRE)--Nov. 2, 1999--

Standard & Poor's today affirmed its single-'A-1'-plus commercial paper rating on American Family Financial Services Inc., based on its explicit guarantee agreement with American Family Mutual Insurance Co.. (American Family).

Wisconsin-based

Major Rating Factors:

-- Extremely strong capitalization: Capitalization is extremely

strong, as indicated by Standard & Poor's capital adequacy ratio

of 260%; this continues to be a major rating strength.

-- Strong market position: American Family enjoys very strong name

recognition in the Midwest, and is one of the top three writers

in 8 of its 12 states. By writing a large volume of business

within a focused region of contiguous states, American Family has

been able to achieve economies of scale that have given the

company some pricing advantage. This in turn has contributed to

very strong growth -- net premiums written grew at a compound

annual rate of 8% to $3.3 billion in 1998 from $2.5 billion in

1994. However, the company's growth in new territories has

created some underwriting losses. Although the market has become

more competitive, the auto business continues to be profitable.

The company is addressing profitability concerns with homeowners'

business.

-- Low geographic spread of risk: A negative byproduct of American

Family's regional focus is geographic concentration: Seventy

percent of the company's business is written in its top five

states. Standard & Poor's believes this concentration exposes the

company to catastrophic and regulatory risk.

-- Operating performance: American Family's operating performance is

satisfactory, as indicated by Standard & Poor's adjusted earnings

adequacy ratio of 112%, but is low relative to peers. In

addition, while American Family's reinsurance provides the

company with reasonable protection against major catastrophic

events, high retention levels exposes it to smaller and more

frequent catastrophes, thereby increasing the volatility of

earnings.

Expectations:

-- Net premium growth of 7% to 9%

-- Return on revenue of 2% to 4%, compared with an average of 4.7%

for 1994-1997.

-- Capitalization should remain extremely strong, at in excess of

200%, Standard & Poor's said. -- CreditWire