Nationwide’s plan to cut loose 2,000 captive agents means the mutual will be selling its annuities through independents along with other institutional channels.
Nationwide said this week it plans to set free its captive agents and sell through independent agents by July 1, 2020. Based in Columbus, Ohio, Nationwide already distributes products through 10,000 independent agents.
Untethering 2,000 captive agents is expected to improve Nationwide’s earnings as the company will no longer carry the fixed costs associated with a captive distribution channel, analysts said.
“Nationwide doesn’t feel like the expense of owning the distribution channel is worthwhile anymore,” said Meyer Shields, an analyst with Keefe Bruyette and Woods.
Is Independence the Answer?
Nationwide has recently made big gains in fixed indexed annuity sales. Nationwide was the No. 3 seller of indexed annuities last year with sales of $4.6 billion, an increase of 70 percent from 2016, according to Wink.
"It will be interesting to see how this will affect the company's product development, and what it will mean for policyholder dividends," said Sheryl J. Moore, CEO of Moore Market Intelligence.
Whether the 2,000 agents cut loose choose independence remains to be seen as many of them might well prefer to join another insurer with a captive agent force such as Northwestern Mutual or MassMutual.
“It would be foolhardy to assume that these agents would transition to independent agents, given Nationwide’s decision,” Moore said. “I think it would be more likely that these agents would make the decision to become captive agents underneath another company that distributes through a captive agency distribution model."
But Mark Berven, president and COO of Nationwide Property & Casualty, said customer preferences and a desire among agents for more flexibility made it "an opportune time to move to a fully independent model."
"It will create a win-win for our distribution partners, and ultimately, our members," he said.
Roughly $10 billion of property-casualty premium written by captive Nationwide agents will move to the independent agency channel, Shields said.
Not all of the $10 billion will go to competing insurers as independent agents continue to sell Nationwide’s policies.
A Cost-Saving Measure
Turning captive agents into independents means the company is no longer on the hook to pay salaries, health and dental insurance, office space and other costs, analysts said.
“It should improve earnings because it makes it less expensive for Nationwide to run,” Shields said.
In 2016, MetLife sold its retail advisor force of about 4,000 advisors to MassMutual.
While Nationwide should see cost savings, the captive agents entering the independent channel will have more freedom to sell products from different insurers, including Nationwide.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected]
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