Nationwide Financial reports first quarter results
Business performance remains fundamentally sound despite volatile markets and weakening economy
Individual life first year sales up 58 percent
FOR IMMEDIATE RELEASE
May 7, 2008
Mark Barnett (614) 249-8437
Erica Lewis (614) 249-0184
COLUMBUS, Ohio — Nationwide Financial Services, Inc. (NYSE: NFS), a leading provider of long-term savings and retirement products, today reported first quarter 2008 net income of $44.5 million, or $0.32 per diluted share, compared with first quarter 2007 net income of $208.3 million, or $1.42 per diluted share.
As a result of the continued challenging capital markets, the first quarter results contain non-operating realized investment losses of $87.9 million, or $0.64 per diluted share, compared to losses of $7.0 million, or $0.05 per diluted share, in the prior year quarter. Of the $87.9 million in the current quarter, $57.5 million was related to other-than-temporary impairments, $20.9 million was associated with the mark-to market of living benefit liabilities, net of economic hedges, and $9.5 million related to other miscellaneous items.
Additionally, first quarter 2007 net income included a $45.5 million gain, or $0.31 per diluted share, resulting from the sale of The 401(k) Company.
Nationwide Financial analyzes operating performance using a non-GAAP financial measure called “net operating earnings,” which the company believes enhances understanding and comparability of its performance by highlighting its results from continuing operations and the underlying profitability drivers. See Exhibit 3 for a description of non-GAAP financial measures included in this earnings announcement, a reconciliation of non-GAAP financial measures to GAAP financial measures, and the substantive reasons why the company believes presentation of these non-GAAP financial measures provides useful information to investors regarding its financial condition and results of operations. The table on the top of page 10 reconciles net operating earnings to net income, including the related diluted per share amounts for the periods indicated.
“Although adversity in the capital markets and a weakening economy combined to create a difficult first quarter operating environment, Nationwide Financial’s core business performance remained fundamentally sound,” said Jerry Jurgensen, chief executive officer. “Our performance in the quarter is further evidence that our efforts to refocus the company are working. By strengthening our business operations, exiting underperforming businesses and adding new capabilities such as banking and mutual funds, Nationwide Financial is well positioned to weather the challenges we’re facing in today’s business environment.
“At the same time, Nationwide Financial maintains a high-quality, well-diversified investment portfolio that is performing as expected. This, combined with our strong capital position, enables us to continue making necessary investments in our existing businesses while also exploring opportunities to further enhance our business model and competitive position,” Jurgensen added.
Highlights from the quarter:
First quarter 2008 net operating earnings were $131.5 million, or $0.95 per diluted share, compared to net operating earnings of $175.8 million, or $1.20 per diluted share, for the same period a year ago. First quarter 2008 results were negatively impacted by several items, including adverse mortality experience in the individual protection segment and losses on structured products and alternative investments stemming directly from the adverse capital market environment, all of which reduced net operating earnings by approximately $22.0 to $24.0 million, or $0.16-$0.18 per diluted share. This compares to the prior year quarter, which was positively impacted by several items including higher than planned income from prepayments, favorable mortality experience and greater net investment income on alternative investments, which combined increased net operating earnings by approximately $13.7 million, or $0.09 per diluted share.
Excluding the items discussed above from both periods, net operating earnings for the quarter were approximately $153.5- $155.5 million, or $1.11- $1.13 per diluted share, compared to approximately $162.1 million, or $1.11 per diluted share, in the prior year.