The best Nationwide agents are growing theiragencies in commercial and financial services, recognizing thatdirect-channel preference means there are fewerpersonal-lines customers, Nationwide's CFO Mark Thresher tellsPC360.

He says Nationwide has seen continued growth in its directchannel. Sometimes, the direct channel acts as a lead for agents,he notes. "We still have a fairly high percentage of customers whostart on the Internet that actually either bind in our call centeror bind with a local agent, so the agents are benefitting from itin that sense."

But he adds that the company's best agents are adapting to themarketplace. "I think they also realize that the future for agentsis in financial services and commercial," Thresher says. "Customersare deciding to go direct for personal lines, and that's theirchoice. So our best agents are growing their agencies in commercialand financial services, and still serving the customers who want anagent in personal lines—there just are fewer of those today."

Weather losses hurt P&C Q1 results

For the 2014 first quarter, Nationwide saw net income fall to$140 million compared to $484 million in 2013's first quarter, withproperty and casualty results taking a hit from weather losses inJanuary, Thresher says.

"Clearly for us this year, January was probably as high ofweather losses as we've had historically."

P&C losses and loss expense climbed to $2.9 billion comparedto $2.6 billion in 2013's first quarter. Consequently, P&C 2014Q1 operating income fell to $140 million compared to $484 millionthe year before. "It's really weather year-over-year," Threshersays. "Last year was probably a more normal first quarter ofweather-related losses, maybe even a pretty good one compared tosome historical ones."

Thresher does not feel Nationwide is overexposed to weatherlosses in any one region. Rather, he says the prolonged freeze thiswinter simply impacted such a wide portion of the U.S. He notesthat even Atlanta and areas south of there were affected. "If youlook at the winter freeze, it was just so widespread and lasted solong. That was unusual," Thresher says. "We're really prettycomfortable with our geographic spread of business and we managethat carefully."

He adds, "Even if we look at April weather storms andtornadoes—we'll have our share of losses, but nothing overlysignificant there."

Nationwide also reports net realized investment losses, net ofother-than-temporary impairment losses, of $326 million compared toa gain of $80 million in Q1 2013. Explaining this figure, Threshersays, "It's actually losses on some of our risk-management programswhere we're hedging against movements in interest rates. And we'reactually trying to protect statutory capital from a rise ininterest rates in our variable-annuity business, and so when ratesdropped this quarter we actually have a loss on the hedge. But wehave offsetting movements on statutory liabilities that maintaincapital that way."

He notes that the company saw the opposite impact in Q4, whenrates went up "we saw gains in those programs that offset othermovements in statutory. So it's not really losses on sales ofsecurities or impaired securities, it's just part of ourrisk-management programs."

In general, Thresher says he's "very pleased with the results inthe first quarter," stating that they represented a good recoveryafter a "tough January" with the weather losses. Overall, he sayshe sees "strong momentum across the board from a salesstandpoint."

He says the strongest growth was seen in the company'sfinancial-services business, which was up 12% year-over-year.

In P&C, he says the company grew most in standardcommercial, in Scottsdale's excess and surplus lines business andin Nationwide Agribusiness.