Nationwide first quarter results demonstrate continued momentum
Core businesses post solid performance
FOR IMMEDIATE RELEASE
May 5, 2010
Contact:
Joe Case (614) 249.6349
casej6@nationwide.com
Columbus, OH – Nationwide—a leading provider of personal and commercial property and casualty insurance and long-term retirement savings products—today reported first quarter 2010 net income of $396 million compared to a net loss of $106 million during the same quarter in 2009. Total revenue in the quarter was $5.1 billion, up three percent from the year-ago first quarter.
The first quarter 2010 results reflect a significant recovery in equity and credit market conditions compared to the year-ago quarter. First quarter 2009 results reflected higher impairments on investments, which drove higher losses in the year-ago quarter. An increase in net investment income in first quarter 2010 was offset by lower realized investment gains as prior period results included significant gains on variable annuity living benefit liabilities net of economic hedges.
Net operating income in the first quarter of 2010 was $423 million, up from $164 million reported during the same period in 2009.(1) Included in the 2010 first quarter operating results was more than $2.8 billion returned to policyholders through property & casualty claims, life insurance benefits, credited interest, and other accident and health benefits. Improved operating performance was driven primarily by a recovery in market conditions, better-than-expected claims experience, and slightly lower winter weather losses.
“Our first quarter performance clearly highlights continued momentum across our businesses, and reflects the strength and diversity of our insurance and financial services franchise,” said Steve Rasmussen, chief executive officer. “Nationwide’s mutual ownership structure allows us to more effectively align our business with meeting the needs of our policyholders. Our mutual structure, strong capital position, engaged workforce, and relentless focus on delivering a personalized customer experience make it an exciting time to be part of Nationwide. We’re working hard every day to make sure we are there for our customers when they need us most—today and well into the future.”
Property and Casualty Business Highlights
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 the property & casualty business lines for the first quarter was $292 million, up significantly from $46 million in the first quarter of 2009.
“The increase was attributed to lower overall claims, principally due to favorable experience on previous year’s reserves, as improved underwriting and claims practices resulted in payments emerging lower than previously estimated,” said chief financial officer Mark R. Thresher. “Current year losses were also lower due to less severe weather-related losses. An increase in investment income also contributed to better first quarter results due to substantially improved market conditions and to increased levels of fixed income investments.”
Earned premiums of $3.6 billion were modestly lower, reflecting consumer-driven actions in a challenging economic climate, and ongoing soft market conditions in commercial lines. However, Nationwide’s direct sales organization continued to experience increasing volumes of quotes and new policies, both on-line and through call centers.
“We’re making steady progress toward our goal to grow profitably, manage risk and control operating costs prudently across the organization, which further strengthens our ability to pay future claims,” Thresher added.
Financial Services Business Highlights
Nationwide also provides individual and employer-sponsored investment and retirement savings vehicles through three operating brands: Nationwide Financial, Nationwide Retirement Solutions and Nationwide Bank.
Net operating income for the financial services business was $114 million for the first quarter of 2010, compared to $80 million in the first quarter of 2009. The improved performance reflects a strong recovery in equity and credit markets that drove higher asset-based fees on variable products, including annuities, retirement plans, mutual funds, and variable life insurance. Higher life insurance benefits in first quarter 2010 partially offset these gains.
First quarter core product sales were $4.2 billion in 2010 compared to $4.0 billion in 2009. First quarter 2010 sales were led by significant growth in fixed individual life insurance premiums, which grew by 74 percent to $244 million, and by continued momentum in variable annuity sales, which increased 14 percent to $1.0 billion.
Separate account assets stood at $59.3 billion in the first quarter, up from $57.4 billion at the end of 2009. Net flows were $569 million for the quarter, excluding Nationwide Bank, and reflect improving retention especially in individual annuity products.
“The realignment of our distribution and marketing teams in our financial services businesses overall has clearly contributed to sales traction,” Thresher said. “We offer one of the most compelling variable annuity products in the market today and our life insurance sales have really gained momentum, including some encouraging results selling life insurance products to our base of property and casualty customers.”
Nationwide Bank net deposits were $256 million for the quarter and total customer deposits grew to $2.7 billion, a 42 percent increase from the year-ago first quarter. Loans grew 20 percent compared to the year-ago first quarter, to $694 million at the end of the first quarter of 2010.
“Nationwide Bank’s web-based, direct business model offers superior value for customers and provides exciting opportunities to provide banking services to our core base of property & casualty and retirement plan customers,” Thresher added.
Investments and Capital
Total assets at the end of the first quarter were $142.2 billion, including more than $64 billion in general account invested assets. That compares to total assets of $140.1 billion at the end of 2009. The increase was driven by growth in separate account assets due to continued strong market conditions and to positive net customer deposits into retirement plans and life insurance products. General account investments reflect a continued shift toward high-quality fixed income securities, and lower exposure to commercial mortgage loans.
Policyholders’ equity was $15.8 billion in the first quarter of 2010, up from $15.1 billion at the end of 2009, driven by current period earnings and unrealized appreciation on invested assets. Statutory surplus—a measure of financial strength and claims-paying ability evaluated by major rating agencies and insurance regulators—ended the quarter at $12.3 billion.
Key Business Highlights
Nationwide’s 2010 first quarter was highlighted by several key business successes.
• Nationwide established a new affinity relationship with the American Nursing Association and expanded its existing relationship with the United States Bowling Congress (USBC). The USBC added banking products, including credit cards and deposit accounts, to its existing suite of sponsored products, giving Nationwide Bank access to USBC’s 2.2 million member base.
• In February, the company launched the Nationwide YourLife Term II series of products, which provides affordable, hassle-free temporary life insurance. The buying experience has been improved with easy underwriting processes and an on-line integrated sales process. This product contributed to a more than 21% increase in term life insurance sales in the current quarter compared with a year ago.
• According to Variable Annuity Research and Data Service (VARDS), Nationwide improved its market share in variable annuity sales to 11th nationally in 2009, up from 13th, reflecting the continued popularity and competitiveness of its lifetime income features.
To support the company’s business demands, Nationwide is currently seeking to fill approximately 1,400 open positions across the country compared to 600 last year at this time. Of the current openings, 600 are based in Ohio. Several hundred others are service-based positions the company is seeking to fill in five locations across the country. At the end of 2009, Nationwide employed approximately 33,000 associates across the country.
A table of financial highlights is available at www.nationwide.com.
About Nationwide
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) 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, certain hedged items, other-than-temporary impairments, discontinued operations, and extraordinary items, all net of taxes. Certain prior period amounts have been reclassified to conform to current year presentation.
