|[August 10, 2012]
Financial Services and Commercial Lines Drive Nationwide 2012 First Half Results
COLUMBUS, Ohio --(Business Wire)--
Nationwide today reported first half 2012 net operating income of $373
million, compared to $367 million during the same period in 20111.
During both periods, financial services earnings offset a high level of
severe weather-related events in the company's property & casualty
business. Sales through June 30, 2012 reflect double-digit growth in
commercial property & casualty lines and continued sales momentum in
life insurance, fixed and immediate annuities and mutual fund lines.
Nationwide - a mutual company - paid more than $6.5 billion to members
and business partners in the form of claims, life insurance benefits and
other payments during the first half of 2012. Total operating revenue
for the half was $10.8 billion. Total policyholder equity increased to
$18.1 billion, compared to $16.2 billion at the end of 2011.
"Our diverse business mix is an enduring advantage that enables
Nationwide to serve the needs of our members," said Steve Rasmussen,
Chief Executive Officer for Nationwide. "This broad mix of business
lines across a national footprint gives us an edge that more narrowly
focused competitors can't match. In addition, our risk management and
product development expertise enables us to address our customers'
unique needs while providing the financial stability that helps our
members and business partners protect what's most important."
During the quarter, Nationwide completed its merger with
Pennsylvania-based Harleysville Mutual Insurance Company, strengthening
the company's position as a premiere provider of commercial lines
protection sold primarily through independent agents. The merger, which
included the purchase of the publicly-traded shares of Harleysville
Group, Inc. for approximately $830 million, was completed on May 1, 2012
with Harleysville Group becoming a wholly owned subsidiary of
Nationwide. Nationwide's financial results through June 2012 include the
impact of the merger and the two months of Harleysville's operations
following the close of the transaction.
"Even with the completion of a major acquisition during the quarter our
capital position remains strong," said Chief Financial Officer Mark
Thresher. "Despite a very challenging operating environment, Nationwide
posted strong earnings and continued top line growth for the first half,
especially in commercial property & casualty lines. Our property &
casualty business reported positive results, despite another period of
unusually severe weather. New business writings and customer retention
overall have improved compared to last year, and total policies in force
have risen since the end of 2011. In addition, we continued to increase
customer assets in our financial services businesses."
In July, Standard & Poor's reaffirmed Nationwide's A+ rating and stable
outlook based on the company's strong capital position, risk management
program and diversified earnings.2
A table of financial highlights is available at www.nationwide.com.
Financial Services Business Highlights
Nationwide offers life insurance, individual- and employer-sponsored
retirement savings and banking products through four operating brands:
Nationwide Financial, Nationwide Retirement Solutions, Nationwide Funds
Group and Nationwide Bank.
First half net operating income for Nationwide's financial services
business was $259 million compared to $410 million reported during the
first six months of 2011. The year-over-year change is largely the
result of a netcharge related to customer acquisition costs during the
first half of 2012, which compares to several one-time benefits during
the same period in 2011, primarily related to customer acquisition costs
and taxes. Total customer assets grew to $167.5 billion, compared to
$160.4 billion at the end of 2011. Asset fees and other policy charges
were higher in the first half as market growth and net flows drove
higher average customer asset values.
Year-to-date sales for the half totaled more than $9.1 billion, down 5
percent compared to the first half of 2011. Variable annuity sales fell
$1.2 billion in the comparable period to $2.4 billion, the result of
modifications made earlier this year to certain living benefit guarantee
features of the product. Declines in variable annuity sales were
partially offset by increases in the sale of fixed and immediate
annuities, life insurance and mutual funds.
"Based on historically low interest rates and our ongoing risk
management focus, Nationwide is being very thoughtful about how we
manage our product portfolio. Changes made in June to our variable
annuity living benefit guarantees are just one example of our ongoing
effort to strike a careful balance between customer value risk and
profitability. Our distribution partners and customers can be confident
that we are committed to this business for the long-term and that we
have the capital strength to stand behind our promises to customers,"
said Kirt Walker, President and Chief Operating Officer of Nationwide
Financial. "Excluding sales of variable annuities with living benefits,
financial services sales were up 10 percent for the half."
Nationwide Funds Group continued to grow, reporting $43.2 billion in
assets under management. Nationwide Bank also continued its positive
momentum, with customer deposits reaching $3.7 billion while customer
loans were $1.5 billion.
Property and Casualty Business Highlights
Nationwide provides personal and commercial property & casualty
protection products through six operating brands: Nationwide Insurance,
Allied Insurance, Harleysville Insurance, Scottsdale Insurance, Titan
Insurance and Nationwide Agribusiness.
First half property & casualty net operating income was $75 million,
compared to a net operating loss of $61 million during the same period
in 2011. Weather-related claims totaled more than $850 million for the
half, including more than 33,000 claims resulting from the late June
wind storm known as a "derecho" that swept through the Midwest and
Mid-Atlantic States. Weather-related claims during the same period in
2011 totaled more than $1.5 billion.
Year-over-year direct written premiums for the half were up more than 7
percent to $7.9 billion, including almost $200 million from Harleysville
from the date of its acquisition on May 1 through June 30, 2012. The
results reflect an overall increase in new business writings and
improving retention. While home and auto policy sales remain flat,
commercial lines - including agribusiness, farm owners, main street
commercial and excess & surplus lines - grew a combined 19 percent in
the first half due to hardening market conditions, exposure growth, the
addition of Harleysville and broader distribution as the company
continued to add new independent agency and brokerage partnerships.
"While weather losses through mid-year were lower than 2011's
record-setting levels, they were still very significant," Thresher said.
"Overall, property & casualty lines were also pressured by higher
severity in non-weather claims and lower investment income. Top line
sales growth continued with our commercial lines business continuing to
show strong momentum. Additionally, we saw our business customers add
coverage in step with slowly improving economic conditions."
Investments and Capital
As of June 30, 2012, general account investments totaled $73.2 billion,
including nearly $4.1 billion acquired in the Harleysville transaction.
Net investment income was $1.6 billion during the first half of 2012,
down from $1.7 billion in the first six months of 2011. The decrease was
driven by lower yields on fixed income securities and lower alternative
Statutory surplus-a measure of financial strength and claims-paying
ability evaluated by regulators and rating agencies-was $13.7 billion,
more than three times the amount required by regulators to cover the
company's obligations to its customers. Net income for the half was $386
million, up from $169 million during the same period in 2011, due to
positive results in the company's risk management program.
"Our members can rest assured that Nationwide continues to maintain a
strong and stable footing and is poised for long-term growth," Rasmussen
said. "With the completion of the Harleysville merger, new advertising
and a focus on providing great customer service through world-class
associates and producers, Nationwide is in a great position to
accelerate growth while protecting our members and expanding our On
Your Side promise."
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
2Standard & Poor's A+ ranking is 5th strongest of
22. These ratings and rankings reflect Rating Agency assessment of the
financial strength and claims-paying ability of Nationwide Life
Insurance Company and are subject to change at any time. They are not
intended to reflect the investment experience or financial strength of
any variable account, which is subject to market risk. Because the dates
are only updated when there's a change in the rating, the dates above
reflect the most recent ratings we have received.
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