Nationwide’s Core Performance Drives $1B In Net Operating Income

Retirement plans, commercial lines and standard auto lead top-line growth

COLUMBUS, Ohio--(BUSINESS WIRE)-- Nationwide—one of the largest and strongest diversified insurance and financial services organizations in the U.S.—today reported total operating revenue of $19.5 billion for the first three quarters of 2015¹, up 3 percent over the same period in 2014. Total sales of $31 billion across all product lines through the third quarter were up $1.5 billion over the same period in 2014, and helped offset recent market volatility. Increased premiums and growth of customer assets under management contributed to the company’s trajectory.

Through Sept. 30, 2015, the company paid more than $12 billion in claims and other benefits to members and business partners with $4.2 billion in payouts during the third quarter.

Net operating income of $1.03 billion¹ for the first three quarters was driven by continued strong business performance across financial services, commercial lines and personal lines.

The quarter marked the one-year anniversary of Nationwide’s multi-year plan to convert all of its product lines under a single brand and included two recent announcements. In August, Crestbrook Insurance converted to Nationwide Private Client (a product line serving the personal lines needs of high-net-worth clients) and Freedom Specialty (a specialty liability insurer for commercial and financial institutions) converted to the Nationwide brand in early October. The brand conversion will continue into 2016 for several brands, including Allied Insurance, Scottsdale Insurance, Harleysville Insurance and Veterinary Pet Insurance (VPI).

“We’re pleased with our financial results, the progress of our plans to align under the Nationwide brand, and our ability to serve the needs of our members,” said Nationwide Chief Executive Officer Steve Rasmussen. “As we look to the fourth quarter and beyond, we are focused on accelerating efforts that will help us deliver even more value for our members and business partners.”

According to Chief Financial Officer Mark Thresher, “Our strong capital position and diverse product offerings enabled us to deliver solid results despite the challenges of the global economy, market volatility and continued low interest rates during the quarter. We remain optimistic about meeting our financial goals because we’re able to endure these kinds of market fluctuations. We expect to see continued steady performance as we have throughout the year, across both our financial services and property and casualty businesses.”

A table of financial highlights is available at www.nationwide.com/financials.

Financial Services Business Highlights

Nationwide increased financial services product sales to $16.3 billion for the first three quarters of 2015, up 6 percent over the same period in 2014.

Nationwide grew retirement plan sales by 8 percent over the same period in 2014 to $7.8 billion. In September, Nationwide—the largest provider of public-sector retirement plans in the United States²—announced that it reinstated its long-held relationship with the state of California to administer the California Savings Plus Program for more than 192,000 participants. Currently, Nationwide’s retirement plans business serves more than 2.1 million participants across nearly 39,000 plans.

First year individual life insurance sales were 25 percent higher than the same period last year due to continued interest in the company’s suite of indexed universal life (IUL) products.

Total sales of annuity products increased 4 percent to $5.9 billion over the same period in 2014. During the quarter, Nationwide increased payouts for two of its variable annuity lifetime income riders and introduced Destination Freedom+^SM, a new low-cost, investment-focused variable annuity product that offers clients the flexibility to choose from more than 130 funds.

Mutual fund assets under management totaled $57.1 billion as of Sept. 30, 2015. Bank deposits ended the quarter at $4.9 billion, and consumer loans totaled $4.0 billion.

Nationwide’s financial services lines generated $818 million in net operating income through the first three quarters of 2015. Year-to-date results include one-time benefits related to updates to variable annuity reserve estimates and customer acquisition costs.

Property & Casualty Business Highlights

Total direct written premium (DWP) grew 4 percent to $14.6 billion over the same period last year driven by growth across all major product lines.

Commercial Lines

As the No. 1 total small business insurer in the U.S.³, Nationwide delivered consistent results across all commercial lines segments. Total direct written premium for commercial lines grew to $5.9 billion, up 6 percent over the same period in 2014. Standard commercial insurance led the segment with more than $2.7 billion in premium driven by increased renewal premiums. Nationwide further strengthened its market share in farmowners insurance, as the No. 1 writer of farms and ranches in the U.S.⁴ Farmowners insurance and commercial agribusiness continued to demonstrate consistent results with increases of 11 percent and 10 percent in direct written premium, respectively.

Personal Lines

Direct written premium in personal lines totaled $8.6 billion for the first nine months of 2015, up 3 percent over the same period in 2014, driven by increased policy sales from expanded distribution.

Standard auto led total sales growth, bringing in more than $5 billion in premium, up 3 percent as compared to the same period in 2014. Growth was driven by expanded distribution and increased customer retention. The direct channel increased direct written premium 11 percent over the same period in 2014, with growth driven by standard auto, homeowners and pet insurance. Pet insurance sales—primarily sold through the direct channel—continued strong growth through the third quarter, with 8 percent growth over the same period in 2014.

Nationwide’s P&C business reported $273 million in net operating income for the first nine months of the year while paying $9.7 billion in property and casualty claims. P&C net operating income reflects consistent performance across commercial and personal lines.

Investments and Capital

As of Sept. 30, 2015, general account investments totaled $85.3 billion. Net investment income was $2.4 billion for the first nine months of 2015. Total assets were $192.3 billion.

Nationwide reported net income of $1.05 billion through the third quarter. These earnings also included the impact of $62 million in after-tax reserve strengthening through the third quarter, associated with asbestos exposures. Nationwide continued to strengthen its capital position with increases in both statutory surplus and policyholder equity during the first nine months of the year. Statutory surplus—a measure of financial strength and claims-paying ability evaluated by regulators and rating agencies—was $14.9 billion, which is more than three times the amount required by regulators to cover its obligations to customers. Total policyholders’ equity increased to $20.7 billion.

“As we continue to transform and position Nationwide for growth in the years to come, I want to acknowledge the dedication, hard work and enthusiasm of our associates across the country,” Rasmussen said. “We can’t achieve our goals without the best people making it happen. It’s one of the reasons we decided to raise our minimum wage to $15 an hour, and we believe it’s reflected in being named as a Gallup Great Place to Work for a fourth consecutive year and a ‘100 Best Places to Work For’ by Fortune magazine. I’m proud of the collective effort and dedication of our associates to helping protect what’s most important to our members and business partners.”

About Nationwide

Nationwide, a Fortune 100 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 a full range of insurance and financial services, including auto, commercial, homeowners, farm and life insurance; public and private sector retirement plans, annuities and mutual funds; banking and mortgages; pet, motorcycle and boat insurance. For more information, visit www.nationwide.com.

Nationwide, Nationwide Financial, On Your Side, and the Nationwide N and Eagle 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 available-for-sale securities, certain hedging activities, other-than-temporary impairments, discontinued operations and extraordinary items, all net of taxes.

² Nationwide ranks first in total number of 457 plans administered, PLANSPONSOR 2015 Recordkeeping Survey.

³ Conning, 2014. Conning Strategic Study: The Small Business Sector for Property-Casualty Insurance: Market Shift Coming.

⁴ A.M. Best, 2014 direct written premium.

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Nationwide
Joe Case, 614-249-6349
[email protected]

Source: Nationwide