Nationwide's balanced portfolio of businesses a key source of financial strength through 3rd quarter
FOR IMMEDIATE RELEASE
November 5, 2010
Joe Case (614) 249.6349
Columbus, OH - Nationwide’s diverse portfolio of businesses allowed the Columbus, Ohio-based insurance and financial services provider to report solid operating performance through the third quarter.
Today, the company reported that consolidated net operating income* through September 30 was up 39 percent to $975 million. That is compared to $702 million in the first three quarters of 2009. The increase was due to lower property and casualty claims and continued asset growth in financial service lines of business. Operating revenue was down slightly to $15.5 billion through September 30 compared to $15.8 billion through nine months in 2009.
“The results underscore the strength and stability of Nationwide,” said Nationwide chief executive officer Steve Rasmussen. “We owe our performance to a balanced offering of industry-leading insurance, retirement and banking products that allows us to pay claims and build capital, even in uncertain times.”
Nationwide has paid out nearly $9 billion to policyholders in the form of auto, home and life insurance claims payments as well as other benefits in the first nine months of 2010. Policyholder equity has increased to $17.3 billion, up from $15.1 billion at the end of 2009.
2010 net income of $569 million through the nine months ending September 30, 2010 compared to $541 million during the same period in 2009.
Financial Services Business Highlights
Nationwide 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 lines through the third quarter was $400 million, up 45 percent compared to the first nine months of 2009. The increase was driven largely by asset growth supporting savings and retirement products.
Core product sales were up 9 percent to $12.7 billion through September 2010 compared to $11.7 billion in 2009. Variable annuity sales were up 28 percent year-over-year to $3.6 billion, while sales of first-year fixed life insurance jumped almost 146 percent to $323 million. Separate account assets stood at $60.3 billion as of September 30. Net flows for variable annuities, retirement plans, and life insurance were $2 billion through the third quarter.
“We’re particularly pleased with strong sales growth of variable annuities and life insurance. We are also experiencing better retention across all our product lines – a clear indication of our product competitiveness and strong customer support,” said Nationwide chief financial officer Mark Thresher. “Lower tolerance for risk is one of the lingering effects of the downturn. We’re seeing this reflected in the market’s attraction to guarantees that are built into our variable annuity and life insurance products. Nationwide is well positioned over the long-term to meet this need with savings and investment solutions that offer the high levels of protection that investors are seeking as a result of the recession.”
Thresher added that Nationwide has gained market share in both variable annuities and life insurance with many key distribution partners and in the category as a whole.
Nationwide Bank net deposits were $481 million for the first nine months of 2010 and total customer deposits grew to $2.9 billion up from $2.4 billion at the end of 2009. Loans grew to $851 million through the third quarter, compared to $684 million at the end of 2009.
Property and Casualty Business Highlights
Nationwide also 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 and casualty business lines for the first nine months of 2010 was $630 million compared to $308 million through the same period in 2009. This improvement primarily reflects lower claims volume. Earned premiums were down about 5 percent to $10.8 billion through the third quarter due to the challenging economic climate along with the ongoing impact of risk management and underwriting initiatives.
“We’re benefiting from better claims and underwriting performance, but the entire property and casualty industry continues to face headwinds,” Thresher said. “The uneven pace of the economic recovery continues to put pressure on auto and homeowners policy sales. Relatively high unemployment and weak new car and home sales are directly impacting new business growth, and commercial markets also continue to be soft. In this environment, customer sensitivity to price is high. As a result, we’ll continue to focus on careful risk selection and product offerings that strengthen retention and better position all of our property and casualty lines for long-term growth.”
Investments and Capital
General account investments reflect an ongoing focus on high-quality fixed income securities, including corporate and municipal bonds. The company also continues to actively manage its exposure to commercial mortgage loans and non-agency residential mortgage-backed securities, which have declined to 17 percent of invested assets at September 30, 2010, compared to 19 percent at the end of 2009.
Nationwide’s total assets at the end of September were $146.1 billion including $67.6 billion in general account invested assets. At the end of 2009, total assets were $140.1 billion including general account invested assets of $63.9 billion.
Policyholder equity growth has been driven by earnings and declining interest rates, which has boosted fixed income investment values.
Statutory surplus—a measure of financial strength and claims-paying ability evaluated by regulators and rating agencies—ended September at $12.8 billion for the year-to-date, more than three times the amount required by regulators to cover Nationwide’s obligations to its customers.
“We feel very confident that Nationwide is an attractive option for consumers who are seeking stability and value from their insurance and financial institutions,” said Rasmussen. “We will continue to put a laser-like focus on insurance fundamentals like risk selection, geographic diversification and disciplined underwriting which are all critical to our ongoing success. We will also continue to balance investments in distribution, customer knowledge and superior claims service with an efficient cost structure to help us deliver our On Your Side promise with the competitive products and exceptional service that our customers expect.”
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
*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.