Nationwide Posts 3Q Net Loss of $852M on Weather, Investments

NU Online News Service, Nov. 11, 11:48 a.m. EST

More than $2 billion in weather-related losses and mark-to-market losses in investments drove a third-quarter net loss of $852 million at Nationwide.

The company turned a profit of $85 million during the 2010 third quarter.

About $400 million of the $2.2 billion in losses related to weather was from the third quarter, including $290 million from Hurricane Irene.

Chief Financial Officer Mark Thresher added that there were some “modest adjustments” to weather-related losses from prior quarters.

For the year, Nationwide has recorded a net loss of $632 million. It says it has paid more than $10.1 billion this year in claims.

The Columbus, Ohio-based multiline insurer posted a net realized loss on investments of about $1.26 billion related to market-to-market losses in its risk management programs, Thresher said in an interview.

“The weather losses are why we are in business and the investment-related losses are manageable as we take steps to protect statutory surplus,” Thresher added.

As of Sept. 30 statutory surplus was $12.4 billion, which Nationwide says is three-times the amount required by regulators to meet the insurer's obligations.

Underlying signs of growth remain, said Thresher. Direct and affinity sales are up 14 percent for the year compared to 2010.

Positive growth has also been seen in commercial lines.

Direct written premiums at Scottsdale Insurance, Nationwide's excess and surplus lines subsidiary, are up 13 percent year-to-date.

The increase can be attributed to “some rate increases and some new business.”

Sales of variable annuities are up 46 percent year-to-date in the company's financial services business. Overall sales in this business totaled $14.3 billion after the first nine months of the year, up 13 percent from the same period in 2010.

In a statement, Chief Executive Officer Steven Rasmussen said Nationwide's mutuality allows it to look long-term and its diversity enables the company to “pay record weather-related claims while maintaining strong capital.”

“While the markets and the weather have presented challenges, sales trends, customer retention and other business fundamentals continue to improve across our business portfolio,” he added.

Nationwide Mutual Insurance Co. recently said it will acquire Harleysville Mutual Insurance Co. in a deal valued at around $800 million.

Under the deal, which is expected to close early next year, Harleysville Mutual will merge with Nationwide Mutual while Harleysville Group, the publicly traded company, will become a newly formed subsidiary of Nationwide Mutual.

The companies' executives say they believe producers will benefit from the transaction.