Nationwide posts strong first quarter results

 

FOR IMMEDIATE RELEASE
May 9, 2011

Media Contact:
Eric Hardgrove     (614)-249-6349
hardgre@nationwide.com

Columbus, OH - Nationwide—a leading provider of property & casualty insurance, financial services and retirement products—reported a 10 percent increase in net operating income for the first quarter of 2011, compared to the same period in 2010. Net operating income* of $476 million through March 31, 2011 was driven by lower claims in the company’s property & casualty business combined with continued asset growth in the financial service business and improved investment performance overall.

Total operating revenue in the quarter was $5.2 billion. Net income in the first quarter of 2011 was $512 million, up 29 percent from the same period in 2010. Results included $2.7 billion in property & casualty claims, life insurance benefits, credited interest, and other accident and health benefits paid to policyholders.

“We’re optimistic about our potential growth trajectory based on the first quarter performance combined with signs of an economic recovery that gained some traction,” said Chief Executive Officer Steve Rasmussen. “Our disciplined focus to deliver exceptional value for our members and business partners through great products and service is proving highly effective. We have the right products, the right people and the right partners in place for a highly successful year. At the same time, we have to be realistic about the impact of weather-related claims on our overall results as the year plays out.”

A table of financial highlights and further video commentary on results are available at www.nationwide.com.

Financial Services Business Highlights

Nationwide offers individual and employer-sponsored retirement savings, banking and insurance products through four operating brands: Nationwide Financial, Nationwide Retirement Solutions, Nationwide Funds Group and Nationwide Bank.

First quarter net operating income for the financial services business was up 12 percent to $128 million, compared to $114 million for the same period last year. Strong equity and credit markets combined with continued asset growth drove improved performance. Total customer assets managed or administered were $162.9 billion at March 31, 2011, compared to $150.9 billion a year ago at this time. Nationwide Funds Group, the company’s mutual fund division, exceeded $40 billion in assets under management for the first time. In addition, life insurance-in-force topped $208 billion.

Nationwide Bank continued to grow in the first quarter, with customer deposits reaching $3.1 billion, up from $2.8 billion at the end of 2010. In addition to strong deposits, loans increased to $1.3 billion, from $1.1 billion at the end of 2010, reflecting an increase in mortgage and auto loans.

For the quarter, insurance premiums and retirement savings deposits were $4.8 billion, up 13 percent compared to the same period in 2010. Variable annuity sales of $1.7 billion increased 63 percent compared to first quarter 2010.

“Our sales results reflect a continuing desire by advisors and individual investors for retirement savings products that include built-in guarantees from well-capitalized companies with strong brands,” said Chief Financial Officer Mark Thresher. “Sales momentum in core insurance and retirement savings products remains strong as we continue to gain market share in many product lines.”

Property and Casualty Business Highlights

Nationwide also provides personal and commercial property & casualty protection products through five operating brands: Nationwide Insurance, Allied Insurance, Scottsdale Insurance, Titan Insurance and Nationwide Agribusiness.

Net operating income for the property & casualty businesses was up 17 percent to $338 million in the first quarter, compared to the first quarter of 2010. Results were bolstered by lower claims and better investment results. Non-weather-related claims continue to trend lower, reflecting the positive impact of underwriting and risk management initiatives. Lower-than-expected payments on prior-year claims also benefited first quarter results. Direct written premiums were flat overall at $3.6 billion, as new business writings were up from a year ago across most major product lines, and overall retention continued to improve. Premiums from direct and affinity channels were also up significantly, growing more than 15 percent combined.

“The strength we’re seeing in new business writings over the past six months is a very positive sign for growth over the next several quarters,” Thresher said. “We expect recent product improvements that we’ve implemented in many states to continue to attract new customers, while marketing and distribution initiatives are increasing quote activity across all lines. However, operating performance in our property & casualty businesses in the second quarter will be challenged due to a surge in claims driven by severe spring weather across much of the country. We are well-positioned to pay these claims without an adverse impact on our overall capital position, which remains strong and stable.”

Investments and Capital

Net investment income was $849 million for the quarter, compared to $790 million in the same period of 2010.
This increase was driven by higher income from fixed maturity securities and better performance from alternative investments. The continued improvement in credit markets also resulted in lower investment impairments.

At March 31, 2011, general account investments topped $66.6 billion, up from $66.1 billion at December 31, 2010. Nationwide ended the first quarter with total assets of $151.6 billion, up from $148.7 billion at the end of 2010. Policyholder equity increased to $17.4 billion, up from $16.8 billion at the end of 2010.

Statutory surplus—a measure of financial strength and claims-paying ability evaluated by regulators and rating agencies—was more than $13.4 billion, more than three times the amount required by regulators to cover Nationwide’s obligations to its customers. During the quarter, A.M. Best affirmed Nationwide’s A+ financial strength rating.

Outlook
“While we are pleased with our first quarter performance, the recent outbreak of severe spring weather underscores that we are here first and foremost to help our members protect what is most important,” said Rasmussen. “Our leadership team is proud of our associates who make great sacrifices to help catastrophe victims rebuild. We remain committed to being there for our customers when they need us most with the best service in the industry.”

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 & Poor’s. 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}

_{*Nationwide analyzes operating performance using non-GAAP financial measures called “net operating income” and “net operating revenue”, 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 and net operating revenue exclude 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.}