Nationwide’s profits up 45 percent in first half of 2010
August 5, 2010 by Karen Mracek
By KAREN MRACEK • firstname.lastname@example.org • August 3, 2010
Nationwide Mutual Insurance Co. reported a drop in second-quarter profits, due mostly to investment losses this year compared with a year ago.
The Columbus, Ohio, insurance and financial services company reported a net income of $88 million for the three months ended June 30, compared with a net income of $438 million in the same quarter a year ago.
The net income includes $262 million in realized investment losses.
Nationwide, which employs about 4,000 employees in Des Moines, is the parent company of Allied Insurance and Nationwide Agribusiness, both of which are headquartered here.
“It’s a pretty tough economy right now for the property casualty business,” said Mark Thresher, chief financial officer of Nationwide, “and its a pretty volatile equity and interest rate environment affecting our financial services business.”
Like other financial companies reporting second quarter results this week, Nationwide stressed the importance of looking at the first six month’s results. The company reported a 45.5 percent jump in net income for the first half of the year.
“We are trying to focus on the things we can control and work through the external factors,” Thresher said.
Operating earnings, which don’t include investment gains and losses, were up 35 percent in the second quarter over the previous year, to $316 million
By unit, operating income was up 17 percent to $167 million in the property casualty insurance unit, and more than double to $148 million in the financial services division.
“While I am pleased with our progress so far this year, there are still several challenges on the horizon that could directly impact business results,” said CEO Steve Rasmussen. “The pace and extent of the economic recovery, market volatility, and the potential threat of hurricanes will impact our performance. We will continue to execute against our strategy of offering ever-improving value for our customers over the long term.”
Net operating income for the property and casualty business lines for the first half of 2010 was $459 million, up 144 percent, helped by better than expected claims experience.
“A continued pattern of severe winter and spring storm losses in the first half of 2010 was more than offset by lower non-weather home and auto claims,” said Thresher, who said the company also benefited from underwriting improvements.
However, demand for property casualty insurance products remains “pretty soft” and continues to be a competitive market, he said.
As for the financial services side, net operating income was up 65 percent to $262 million. “Sales momentum continued in fixed life insurance and variable annuities, reflecting very competitive offerings and strong customer demand for guarantees,” Thresher said.
Core product sales were $8.5 billion in the first six months of 2010, up 4.6 percent from a year ago. Variable annuity sales grew 20 percent in the first half of 2010, to $2.3 billion.
Nationwide, a mutual insurance company, integrated its formerly publicly traded financial services company, Nationwide Financial Services, into the company last year. Its shares are no longer publicly traded.