Nationwide's Diverse Business Mix Provides Capital Strength and Stability Through Q3 2011
FOR IMMEDIATE RELEASE
November 11, 2011
Joe Case (614) 249-6349
Columbus, OH – Nationwide today reported $431 million in net operating income1 through the end of the third quarter of 2011. This performance, which excludes non-operating results, comes during a year marked by continued severe weather and volatile economic conditions. The Columbus, Ohio-based insurance and financial services provider’s diverse portfolio of products and services allowed it to deliver an increase in overall policyholder equity since the end of 2010 while recording $2.2 billion in weather-related claims so far in 2011. Total operating revenue through the first three quarters was $15.6 billion, ahead of the same period in 2010.
“There is no denying that record weather claims and an unstable economy have made for a challenging 2011. As a privately held mutual company, Nationwide is able to take a long-term view rather than focus on quarterly results,” said Chief Executive Steve Rasmussen. “We have a broad portfolio of businesses, each with strong market positions, which is an important competitive advantage. This business diversity enables us to pay record weather-related claims while maintaining strong capital. While the markets and the weather have presented challenges, sales trends, customer retention and other business fundamentals continue to improve across our business portfolio. We will continue to leverage our member focus, product offerings and On Your Side promise to differentiate us from the competition and expand our mutual mission.”
In the first nine months of 2011, Nationwide paid more than $10.1 billion to its customers and business partners in the form of property & casualty claims, life insurance and other benefits. Nationwide ended the third quarter with total assets of $149.6 billion, compared to $148.7 billion at the end of last year.
Following the announcement of its intent to merge with Harleysville Mutual Insurance Company, rating agencies affirmed Nationwide’s financial strength while taking into consideration the adverse weather, the economic environment and the company’s business performance.
A table of financial highlights is available at www.nationwide.com/financials.
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.
Net operating income for the financial services business through the third quarter was $603 million, up from $400 million last year. One-time benefits related to customer acquisition costs and taxes favorably impacted current year results. Results also reflect continued strong sales and consistent net flows. Driven by variable annuity sales, overall sales totaled $14.3 billion through the third quarter, up 13 percent over 2010 same period results.
“Earnings for our financial services business lines continue to enjoy strong sales and net flows,” said Chief Financial Officer Mark Thresher. “Variable annuity sales were up 46 percent year-to-date. This was primarily driven by income-guarantee benefits that are highly attractive to investors seeking protection features in an otherwise volatile market. We remain committed to helping advisors help their clients as they prepare for and live in retirement.”
Financial services customer assets under management totaled $152.3 billion at the end of the third quarter, including $37.9 billion managed by Nationwide Funds Group, the company’s mutual fund division. Nationwide Bank continued its strong momentum, reporting total assets of $4.3 billion. Customer deposits increased to $3.2 billion, compared to $2.9 billion this time last year. Customer loans increased to $1.4 billion from $851 million this time last year.
Property & 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.
The property & casualty business reported a net operating loss of $209 million through the end of September, compared to a net operating income of $623 million through the same period in 2010. Severe weather losses of $2.2 billion, including $290 million related to Hurricane Irene, primarily drove operating losses. Weather-related losses were partially offset by improvements in claims processes, better underwriting and the impact of broader industry trends on several business lines.
Direct written premium (DWP) was up slightly at $11.2 billion, compared to $11.1 billion during the same period in 2010. Even with the harsh weather and the economy, business growth continues to trend positively. Highlights include a 13 percent year-to-date increase in DWP for Scottsdale Insurance. Main street commercial sales and agribusiness sales were also up through the third quarter. Performance for direct and affinity sales was also strong for the year, totaling $752 million, up a combined 14 percent over the same period in 2010.
“Despite the weather, business fundamentals in our property & casualty business continue to show improvement,” Thresher said. “Total direct written premium is up slightly over the prior year based on continuing improvement in new writings, retention and average premium. We continue to be encouraged by the growth trajectory we see in our direct and affinity channels as well as the positive growth we’re experiencing in our commercial lines.”
Investments and Capital
Net investment income was $2.4 billion through the third quarter of 2011, up from $2.2 billion in 2010. General account investments totaled $68.4 billion at the end of the third quarter, up from $66.1 billion at the end of 2010. A decline in interest rates resulted in an increase in the fair value of fixed maturity investments.
Nationwide’s overall policyholder equity increased modestly from the end of 2010 to $16.9 billion as of September 30, 2011. Statutory surplus, the primary measure of financial strength and claims-paying ability used by rating agencies and insurance regulators, was $12.4 billion as of Sept. 30, 2011 – more than three times the amount required by regulators to cover Nationwide’s obligations to its customers.
“Nationwide is well positioned for future growth,” Rasmussen said. “Our strategy is sound, our diverse business portfolio is a competitive advantage that enables balance in earnings, and our capital position remains strong. We’re also gaining momentum. Our business units are focused on growth following more than two years of a down market, and we are dedicated to helping our members protect what’s most important and build a secure financial future. I’m anticipating a strong finish to 2011, and I’m excited about the promise of growth that 2012 brings to our organization.”
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, pet, life insurance, farm, commercial insurance, administrative services, annuities, mortgages, mutual funds, pensions, long-term savings plans and specialty health 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 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.