Nationwide's Net Operating Income Climbs 43 Percent to $741 Million for 2012

Nationwide's Net Operating Income Climbs 43 Percent to $741 Million for 2012

COLUMBUS, Ohio--(BUSINESS WIRE)-- Nationwide today reported net operating income of $741 million in 2012, compared to $517 million in 2011, an increase of more than 43 percent.¹ Improved operating results in 2012 reflect a strong rebound in property & casualty business performance, attributed to a combination of lower weather-related claims and higher operating revenue. The company's financial services business also continues to be a major contributor to operating results as customer assets rose in 2012.

"During 2012, Nationwide was able to meet the challenges brought on by an uncertain economic environment and continued severe weather that was underscored with events like Superstorm Sandy," said Steve Rasmussen, Chief Executive Officer for Nationwide. "Despite these challenges, Nationwide remains focused on serving our members, providing unmatched customer service and expanding our strong, long-lasting relationships with our business partners."

Total operating revenue for 2012 was $22.4 billion, an increase of $1.7 billion compared to 2011, representing one of the largest single-year increases in recent history.¹ Core to its mission, Nationwide paid more than $13.7 billion in property & casualty, life insurance and other benefits to customers in 2012.

"P&C direct written premiums grew across all major product lines in 2012, particularly in our commercial lines," said Mark Thresher, Nationwide's Chief Financial Officer. "In total, property & casualty premiums rose more than 10 percent to $16.2 billion, including nearly $800 million in premiums from Harleysville Insurance, which was acquired on May 1, 2012. In our financial services business, sales topped $18 billion for the year, down modestly from last year due to some planned risk management actions taken during 2012 in our variable annuity product line."

Despite weather-related claims from Superstorm Sandy, Nationwide still reported net operating income of $18 million in the fourth quarter, compared to $142 million during the same period in 2011. Fourth quarter 2012 results include more than $400 million in claims and associated costs related to Sandy, which struck New Jersey, New York and other Eastern seaboard states on Oct. 29.

A table of financial highlights is available here.

Property & Casualty Business Highlights

Nationwide provides personal and commercial P&C protection products through six operating brands: Nationwide Insurance, Allied Insurance, Harleysville Insurance, Scottsdale Insurance, Titan Insurance and Nationwide Agribusiness. Nationwide's P&C segment performance includes Harleysville's operating results since its May 1, 2012 acquisition date.

P&C net operating income for the year was $117 million, compared to a net operating loss of $213 million in 2011. Strong commercial lines premium growth and lower weather-related claims drove improved results. Weather-related claims totaled $1.5 billion for 2012. While weather claims were more than expected, they were less than the record $2.3 billion reported in 2011.

Direct written premium grew from $14.7 billion in 2011 to $16.2 billion in 2012, reflecting growth in all major product lines and businesses. Improvements in retention, as well as a combination of growth in insured values and rate adjustments, also contributed to premium growth. Nationwide experienced particularly strong growth in its main street commercial, agribusiness, specialty commercial lines and our direct personal lines operation.

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.

Financial services net operating income for 2012 was $606 million, down slightly from $681 million reported in 2011. The modest decline is largely attributed to a net benefit related to customer acquisition costs in 2011 that helped prior year earnings.

Total financial services sales declined 7 percent in 2012. However, excluding sales of variable annuities with living benefit guarantees, overall financial services sales were up 14.5 percent over 2011. Sales of variable annuities with living benefit guarantees were down across the industry as companies adjusted to the historically low interest rate environment. Nationwide made similar adjustments to its variable annuity product in order to improve the company's risk profile while maintaining its long-term commitment to the business. The company saw broad growth across its other product lines including fixed and immediate annuities, life insurance, retirement plans and mutual funds.

Total customer assets were $165.8 billion as of Dec. 31, 2012, compared to $160.4 billion at the end of 2011. Asset fees and other policy charges were higher for the year as equity market performance and net flows drove higher customer asset values.

Nationwide Funds Group, our retail and insurance mutual fund operation, continued to grow, reporting $45.0 billion in assets under management, up from $40.9 billion in 2011. Nationwide Bank continued its positive momentum; customer deposits reached $3.8 billion, up from $3.4 billion last year. Customer loans were $2.0 billion compared to $1.5 billion in 2011.

Investments and Capital

As of Dec. 31, 2012, general account investments totaled $75.4 billion, including $4.1 billion acquired in the Harleysville transaction. Net investment income was $3.1 billion in 2012, the same amount reported in 2011.

Net income was $940 million in 2012, up from a net loss of $677 million at the end of 2011. The increase is attributed to our strong current year operating results and last year's non-operating losses in the company's risk and capital management programs. Nationwide's risk and capital management programs are designed to protect the company's long-term economic results and statutory capital, and are functioning as intended.

Statutory surplus — a measure of financial strength and claims-paying ability evaluated by regulators and rating agencies — was $13.8 billion, more than three times the amount required by regulators to cover the company's obligations to its customers. Total policyholder equity increased to $19.3 billion, compared to $16.2 billion at the end of 2011.

"We have made great strides in 2012, including the merger with Harleysville Insurance and the launch of our new and exciting 'Join the Nation' advertising campaign," Rasmussen said. "Overall, we feel very confident that our diverse product portfolio continues to position us for growth while our strength and stability help us protect the financial security of our members."

About Nationwide

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

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¹Nationwide 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.

Nationwide
Joe Case, 614-249-6349
casej6@nationwide.com

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