Weather Losses Drive $292M 2Q Net Loss for Nationwide

NU Online News Service, Aug. 12, 12:15 p.m. EDT

Nationwide Insurance reports a 2011 second-quarter net loss of $292 million, driven almost exclusively by weather-related losses that were among the highest the company has ever experienced in the first half of a year.

The company says it had $1.5 billion in weather-related claims over the 2011 first half.

In the 2010 second quarter, Nationwide reported net income of $88 million.

Nationwide took a 2011 second-quarter operating loss of $77 million, compared to operating income of $327 million in the 2010 second quarter. Property and casualty operations suffered a $391 million operating loss in the quarter—due to the weather losses—while financial services saw operating income of $315 million.

Chief Financial Officer Mark Thresher tells NU Online News Service that the company is taking a look at where the weather losses occurred and at the company's concentration of risk to determine if Nationwide should diversify to other regions. But he says there have been no decisions made on pricing or risk concentration as of yet. He emphasizes that the second quarter was unusual with respect to the weather events that caused high losses.

He notes that second-quarter investments were solid and that non-weather-related claims experience improved, and he says the company is pleased with first-half results given the high weather losses in the second quarter.

For the first half, Nationwide reports net income of $219 million compared to $483 million a year ago, and operating income of $398 million compared to $759 million for the 2010 first half.

P&C direct written premiums were essentially flat in the second quarter and first half at $3.77 billion and $7.36 billion, respectively, compared to $3.75 billion and $7.36 billion for the same time periods a year ago.

Nationwide says it saw a 10 percent increase in direct channel premiums and 20 percent growth in affinity channel premiums. Additionally, premiums in the company's commercial business—which consists of small “Main Street” risks—grew 4 percent compared to the 2010 first half. Thresher also says Scottsdale Insurance, Nationwide's excess and surplus lines business, is growing well.

He says lines that are still lagging with respect to written premiums are standard auto and homeowners. Premiums written were impacted by the company's completion of nonrenewals in certain areas, and he says Nationwide's standard auto agency business is “building momentum, but not growing ahead of last year.”

In a statement accompanying the company's results, Thresher says, “Personal-lines results continue to be challenged due to the severe spring storm season and the uneven economic recovery. Yet, we are encouraged by improving trends with regard to new business and retention levels.”

He tells NU Online News Service that the economy is still “sluggish and slow,” but that the improvements seen in Nationwide's commercial business “tells me that Main Street busiensses may be starting to do better.”