Nationwide's 2009 Operating Results Rebound Strongly
Investment and capital actions further enhanced financial strength
FOR IMMEDIATE RELEASE
April 1, 2010
Nationwide's Media Hotline 614-249-6349
Columbus, Ohio – Nationwide – a leading provider of personal and commercial property and casualty insurance (“P&C”) and long-term retirement savings products – today reported combined net income of $716 million in 2009, a significant improvement over a $342 million loss reported in 2008. Total revenue in 2009 was $20.8 billion, a 4.9 percent increase over the prior year. The company ended 2009 with more than $140 billion in total assets, including $63.9 billion in general account investment assets.
Nationwide analyzes operating performance using a non-GAAP financial measure called “net operating income,” which the company believes enhances understanding and comparability of its performance by highlighting its results from continuing operations and the underlying profitability drivers. Net operating income excludes the impact of realized gains (losses) on sales of investments and hedging instruments, hedged items, other-than-temporary impairments, discontinued operations, and extraordinary items, all net of taxes.
Net operating income was $979 million in 2009 compared to $80 million in 2008, primarily reflecting improved underwriting results due to lower overall P&C claims experience. A substantial recovery in the equity and credit markets in the second half of 2009 also favorably impacted performance in both its P&C and financial services businesses.
Included in 2009 operating results were more than $12.8 billion in policyholder and contract holder benefits, including P&C claims, life insurance benefits, interest credited and other accident and health benefits.
“Nationwide’s financial performance rebounded significantly in spite of the economic turbulence prevalent throughout 2009,” said Chief Executive Officer Stephen S. Rasmussen. “Focusing on the customer and protecting what matters most to them are core to our purpose as a mutual insurance company and a key competitive advantage. Providing the best personalized experience for customers remains foundational to our strategy. It is a strategy that requires knowing our customers and delivering on what they need better than anyone else. It is a strategy that we believe will stand the test of time, and will allow us to successfully navigate even difficult business cycles.”
Nationwide ended 2009 with $15.1 billion in policyholders’ equity, significantly above the end of 2008 level of $12.9 billion. Statutory surplus – a measure of financial strength and claims-paying ability evaluated by major rating agencies and insurance regulators – increased 15 percent (1) during 2009, ending at $11.7 billion. Nationwide’s capital remained substantially in excess of levels required to be maintained by regulators and continues to support strong ratings from independent rating agencies.
Capital at the end of 2009 reflects the merger of Nationwide Mutual and Nationwide Financial Services, a publicly-traded, majority-owned affiliate, which was completed on January 1, 2009 for a purchase price of $2.4 billion.
During the year, Nationwide implemented a number of actions that further reduced its risk profile, enhanced liquidity and bolstered financial strength in the midst of the economic downturn. This included shifting the allocation of its investment portfolio toward higher credit quality fixed income securities, as well as the opportunistic issuance of surplus notes in August 2009.
“We believe a solid financial foundation is vital to ensuring we deliver on our promise to customers,” said Mark R. Thresher, Chief Financial Officer. “Historically, our strong risk management capabilities have helped Nationwide drive consistent results regardless of economic or market forces, and it’s one of the reasons we’ve been able to manage through this latest downturn. During the course of 2009, Nationwide carefully examined risk exposures and operating costs with the goal of preserving and protecting capital. As a result, we are confident in assuring customers and business partners that we remain financially sound, and are well-positioned for future growth.”
“A clear indicator of our financial strength and stability was bondholders’ confidence in investing in Nationwide’s surplus note offering late in 2009,” added Thresher. “The surplus note provides Nationwide with additional financial flexibility and capital to fund growth initiatives.”
Nationwide provides personal and commercial protection products through five operating brands: Nationwide Insurance, Allied Insurance, Scottsdale Insurance, Titan Insurance, and Nationwide Agribusiness.
Net operating income for property & casualty business lines was $534 million, a substantial increase from a loss of $311 million in 2008. The increase reflects improved underwriting performance due to lower catastrophe claims in 2009 and to favorable prior year loss development, partially offset by higher current year non-weather claims experience. Underwriting results reflect pretax catastrophe claims of $509 million in 2009, compared to $1.2 billion in 2008, including $650 million in claims related to hurricanes Gustav and Ike.
As part of an ongoing effort to manage its property risk profile, Nationwide continued lowering its exposure to residential and commercial real estate. In addition, the company implemented a number of underwriting and product pricing actions, intentionally withdrawing from selected geographic markets and eliminating or modifying certain product lines to manage risk.
Nationwide also provides individual and employer-sponsored investment and retirement savings vehicles through two operating brands: Nationwide Financial and Nationwide Bank.
Net operating income in the company’s financial services business was $514 million compared to $86 million in 2008. These results reflect a recovery in the credit and equity markets in the second half of 2009, which drove higher investment income and lower amortization of acquisition costs, driven predominantly by a favorable unlocking of deferred acquisition costs in the variable annuity line. Operating results also reflected lower expenses in 2009 compared to the prior year due to disciplined expense management.
Separate account assets, underlying variable insurance and retirement plan products, reached $57.4 billion at the end of 2009, up from $48.4 billion at the end of 2008. The increase reflects favorable market performance in the second half of 2009 and strong net flows, particularly in the retirement plan businesses. Additionally, Nationwide Bank customer deposits topped $2.4 billion in 2009, up 39 percent over the prior year, while customer loans grew 44 percent.
Nationwide Mutual Insurance Company, based in Columbus, Ohio, is one of the largest and strongest diversified insurance and financial services organizations in the U.S. and is rated A+ by both A.M. Best and Standard & Poors. The company provides customers a full range of insurance and financial services, including auto insurance, motorcycle, boat, homeowners, life insurance, farm, commercial insurance, administrative services, annuities, mortgages, mutual funds, pensions, long-term savings plans and health and productivity services. For more information, visit www.nationwide.com.
Nationwide, the Nationwide frame mark, and On Your Side are service marks of Nationwide Mutual Insurance Company
(1)The percentage increase in statutory surplus compares statutory surplus at December 31, 2009 with statutory surplus at January 1, 2009, subsequent to the acquisition of all of Nationwide Financial Services publicly traded common shares.