Making contacts: Nationwide's varied mix of products leads to greater customer satisfaction and retention. (Cover Story).

"Nationwide is on your side"--both sides to be exact. A leading insurer in both the property/casualty and life industries, Nationwide cites its multiline status and diverse products as the key to its success.

"Diversification allows us to not have all of our eggs in one basket, and we see opportunities down the road to create synergies between the two lines at the consumer level;' said WG. (Jerry) Jurgensen, chief executive officer of Nationwide. He believes the company is well positioned to meet the growing needs of its customers. "We believe the deeper the relationship we have with customers, the better they know us, and the more problems we're helping them with, the better and stronger the relationship will be over time."

Over the past few years, the company has made a major push to strengthen and broaden its distribution channels. The result is greater sales capabilities which, combined with a broad product mix, is enabling the company to better position itself in the markets it wants to be in, said Karen Knoller, an A.M. Best Co. financial analyst. Nationwide now offers products through multiple distribution channels in all 50 states, in addition to the District of Columbia, the Virgin Islands, Asia, Europe and Latin America.

Ranked by net premiums written, Columbus, Ohio-based Nationwide is the seventh-largest property/casualty writer in the United States. By admitted assets, it is the 10th-largest life insurer according to AM. Best Co. data.

Nationwide helped pave the way for multiline selling across the industry In 1926, the company, which was incorporated as the Farm Bureau Mutual Automobile Insurance Co., began selling auto insurance to members of the Ohio Farm Bureau Federation, a consumer group organized by a group of farmers. Two years later, the Farm Bureau Mutual expanded into other states with the help of locally based sponsoring organizations, leading to its eventual national expansion. In 1936, the company entered into life insurance, despite the industry-wide belief that agents weren't qualified to sell both life and casualty insurance because of the difference in the products. And during the mid1950s, the company took yet another chance by adding mutual fund shares to its already diverse book of business.

Nationwide expanded its products offering even further during the 1970s with the addition of its Best of America variable annuity products through agents and investment dealers. These products allow customers not only to enjoy tax and other advantages of an annuity but also to benefit from an open architecture investment platform where they can select from a number of money managers and choose their own asset allocation.

Today, Nationwide reports more than $117 billion in statutory assets in its insurance operations, which is part of the company's three core businesses--domestic property and casualty insurance, life insurance and retirement savings, and asset management. About 55% of its property/casualty book of business is comprised of auto sales, with 15% in homeowners policies and the remainder in commercial products, according to recent A.M. Best data. On the life side, Nationwide Financial Services Inc., a 63%-owned subsidiary of Nationwide Group, offers domestic life and savings products, which include group and individual annuities and ordinary life products.

"The product breadth into the household can be directly correlated into loyalty of household to service providers," said Jurgensen, adding that retention is a major goal of companies engaged in financial services at the retail level. "Everyone realizes keeping and cross-selling existing relationships is more financially attractive than constantly trying to find new customers."

Analysts also believe Nationwide has a competitive advantage due to its diversified product offerings and ability to reach its customers through various methods. "Offering multiple products through several distribution channels has allowed the company to not only diversify its earnings stream, but also maintain a very sound and strong customer retention," said Tony Diodato, an A.M. Best Co. financial analyst.

In addition, Nationwide's recent acquisition of Berwyn, Pa.-based Provident Mutual Life Insurance Co. was a notable move on the life side and is expected to strengthen its position in the U.S. insurance market, said A.M. Best's Knoller. Through a sponsored demutualization in 2002, Provident Mutual converted from a mutual insurer into a stock insurance company and became a wholly owned subsidiary of Nationwide. The acquisition was a beneficial move for both parties in that it bolsters Nationwide's distribution and adds additional mass to some of their product lines, while Provident's career agents get access to Nationwide's products, Knoller added.

The road to success as a multiline insurer has not always been easy. "There are always challenges inherent in complexity, and the more and different things you as a company are involved in, the more complex the organization becomes," said Jurgensen. "And the more products you sell, the more complex you are, and the more complex you are, the harder you are to manage." In addition, actuarial issue differences between the two businesses sometimes pose difficulties. For example, auto insurance is a much shorter tail business, while life is much longer, he added.

"Like many companies, Nationwide Financial Services is facing a highly competitive market in several core products and dealing with operational and investment challenges including the prolonged downturn in equity markets, low interest rates and overall U.S. economic weakness," said Knoller, adding that this has affected its performance in recent years and could remain an issue over the foreseeable future. "Longer term, though, we expect the company's balanced portfolio and sound business fundamentals to produce frvorable results," she said.

In a time when many companies are selling off a portion of their businesses to concentrate on just one line, Jurgensen said he never contemplated such a decision during his three-year tenure with the company "More often the issue of focus comes when a company is confronted with having a very strong market position in one business but not as strong in another, so they decide they should concentrate resources and activities in the stronger business." He believes one of the reasons Nationwide continues to remain a top 10 company in both property/casualty and life insurance is it has a very strong market position in both lines. "As a result, there's no reason to focus on one vs. the other," he said.

Adding good people to the mix is another essential element that helps create a successful multiline company Jurgensen said. In addition, he believes a strong commitment to providing quality customer service is an important value. "There isn't anything inherently unique about policies, such as price and product, but the differentiating factors come with service around a policy and making sure we continually pay close attention to policyholders' situations to ensure they receive the right coverage and deductibles," said Jurgensen. He said the company remains "up-to-speed" on what's happening in policyholders' life and risk profiles, in addition to making sure policies are appropriately priced and placed.

Creating a timely, efficient claims process for policyholders is another goal Nationwide has consistently met over the years. "Nationwide is working very hard to be a company that handles claims events absolutely as well as we can because we realize the trauma that exists in people's lives when they have a claim. We're trying to get them through that situation as fairly quickly and efficiently as possible," said Jurgensen. The company's promise of its brand--"we're on your side"--manifests itself in claims, he added.

In addition, a solid management team goes hand-in-hand with Nationwide's success as a multiline insurer. "Mr. Jurgensen brings a different approach to the company with his banking background, one of the major areas in his perspective on capital allocation," said A.M. Best's Diodato. Jurgensen was elected chief executive officer of Nationwide in July 2000, after working for Bank One Corp., First Chicago NBD Corp., Norwest Corp. and Norwest Investment Services.

The growth of technology is also lending itself well to Nationwide's success--not just as a multiline insurer but as a financial services provider, said Jurgensen. Customer choice is enabled by technology, which allows policyholders and consumers to make choices about how they want to deal with their financial product providers.

Jurgensen believes the company's success selling a diverse portfolio of products for the past 60 years will continue to strengthen and grow. "We're primarily--not exclusively--engaged in three lines of business, and we will continue to be interested in each area and look for new ways to profitably grow each business in the future."

RELATED ARTICLE: Nationwide

Headquarters: Columbus, Ohio 

A.M. Best Rating: Mast Nationwide subsidiaries are rated A or A+. *

A.M. Best Co. Nos.: 70350; 05987

Chief Executive Officer: W.G. Jurgensen

Incorporation: The Ohio Farm Bureau Federation incorporated the Farm Bureau Mutual Automobile Insurance Co. on Dec. 17, 1925.

Core Businesses: Domestic property and casualty insurance, life insurance and retirement savings, and asset management.

Corporate Financials In Statutory Numbers (2OO2) **:

* Total operating revenue: $29.4 billion

* Total assets: $117.9 billion

* Net income: $252.3 million

Stock: NYSE: NFS ***

Web Site: www.nationwide.com

* Note: A.M. Best rating as of June 12, 2003

** Source: Nationwide 2002 Annual Report

*** Not all parts of Nationwide are public.