Nationwide to Sponsor Provident's Conversion.

Nationwide Financial Services Inc. and Provident Mutual Life Insurance Co. said they had entered an agreement in which Nationwide would buy the Berwyn, Pa., company through a sponsored demutualization.

Under the deal, rare in the past few years of industry consolidation, eligible members of Provident Mutual would receive shares of Nationwide Financial Services' common stock, cash and policy credits totaling about $1.56 billion. The acquisition would provide Provident Mutual, a midsize insurer, with more resources to grow and remain competitive, the companies said.

Both companies would gain improvements to their distribution systems: Nationwide would receive a career agency force of highly qualified financial planners that it currently lacks, and Provident would gain access to Nationwide's powerful independent distribution channels. Provident also stands to benefit from Nationwide's technology platform, service capabilities and strong ratings, said Robert W. Kloss, Provident's chairman, chief executive officer and president.

Upon close of the transaction, Nationwide would become the nation's third-largest provider of variable life insurance, the companies said. Provident Mutual's 768 career financial consultants, 1,100 independent agents, its retirement-savings sales force, and its affiliated broker-dealer, 1717 Capital Management Co., would provide it with new distribution and growth opportunities.

"As we looked to expand our distribution, we concluded probably two years ago that Provident was one of the best mutual companies available," said Joseph J. Gasper, Nationwide Financial's president and chief operating officer. "When you look at Nationwide, we serve every distribution system that's meaningful, except for a career agency force. This allows us to cover all the major bases--independent broker/dealers, banks and financial institutions, brokerage firms, career agents, payroll deduction and tax-qualified savings plans such as 401(k)s."

Nationwide Financial Services is about 81% owned by Nationwide Mutual Insurance Co. Nationwide Financial plans to issue more than 26 million shares, more than doubling its public float and reducing ownership by the mutual company to about 68%. Nationwide Life Insurance Co., the sixth-largest life insurer by premiums in the United States, is the major subsidiary of Nationwide Financial.

Provident Mutual specializes in asset-accumulation products, wealth preservation, life insurance, retirement and investment products to the affluent and business markets.

The boards of directors of both companies have approved the transaction. In coming months, the demutualization plan will need approval from the Pennsylvania Department of Insurance and Provident Mutual policyholders, and the department will hold a public hearing. The companies expect to close the deal in the second quarter of 2002.

Provident Mutual Life Insurance Co.

Lines: life insurance, annuities, mutual funds, equities

Chairman, President and Chief Executive Officer: Robert W. Kloss

Headquarters: Berwyn, Pa.

Nationwide Financial Services Inc.

Lines: life insurance, annuities, retirement plans, asset management

Chairman and CEO: Jerry Jurgensen

Headquarters: Columbus, Ohio 

Total revenue of combined company: $3.2 billion

Total income of combined company: $434.9 million