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EXHIBIT 99.1 [NATIONWIDE LETTERHEAD]
INVESTOR CONTACT:
-----------------
Kevin G. O'Brien
Investor Relations Officer
614-677-5331
MEDIA CONTACT:
--------------
Bryan Haviland
Director, Public Relations
614-677-7767
OCTOBER 24, 2000
NATIONWIDE FINANCIAL REPORTS 19% INCREASE
IN THIRD QUARTER OPERATING EARNINGS
THIRD QUARTER RESULTS IN RECORD EARNINGS AND RETURN ON EQUITY
COLUMBUS, OHIO-- Nationwide Financial Services, Inc. (NYSE: NFS), a leading
provider of personalized long-term savings and retirement products, today
reported strong growth in earnings, sales, and assets for the third quarter of
2000. Highlights include the following:
o Net operating income, which excludes after-tax net realized
investment gains/losses, increased 19 percent to $118.6
million or $0.92 per diluted share for the quarter. Net income
for the quarter was $116.7 million or $0.91 per diluted share.
Net operating income for the third quarter of 1999 was $99.3
million or $0.77 per diluted share and net income was $103.3
million or $0.80 per diluted share.
o Operating revenues of $804.2 million for the third quarter
increased by 13 percent compared to $710.2 million reported a
year ago.
o The variable annuity surrender rate, adjusted for internal
exchange and transfer activity, was 12.8 percent compared to
12.6 percent for the second quarter. The slight increase in
the rate is attributed to case withdrawals in the public
sector business.
o Operating return on equity reached a record level of 17.3
percent, a marked improvement from 16.7 percent for the third
quarter last year.
o Core sales, including life and annuity premiums, sales of
mutual funds, and deposits in administered asset products,
reached $4.5 billion for the quarter, a 12 percent increase
from the third quarter of 1999.
o Customer funds managed and administered totaled $115.8 billion
at quarter end, an increase of 18 percent compared to the year
ago quarter.
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NFS REPORTS THIRD QUARTER EARNINGS -- 2
"The strength of our third quarter results is a testimony to our diversification
strategy, especially considering the tumultuous state of the stock market," said
W.G. "Jerry" Jurgensen, chief executive officer. "Our strategies of maintaining
multiple distribution channels and broad product offerings, allow us to grow
earnings and continue to provide value to our shareholders in a variety of
market conditions."
INDIVIDUAL ANNUITY, VARIABLE LIFE, AND 401(k) SALES MAINTAIN STRONG GROWTH
Individual annuity sales reached $1.8 billion for the third quarter, a 13
percent increase over the prior year. Individual annuity sales growth was led by
America's FUTURE Annuity, our flagship low fee variable annuity product, which
had increased sales of 27 percent over the prior year.
"The enhancements made earlier this year to the mutual fund offerings and
optional features of America's FUTURE Annuity have had a significant impact on
our sales results," said Joseph J. Gasper, president and chief operating
officer. "America's FUTURE Annuity continues to be the best value in the
variable annuity market today, offering premier money management and high
quality protection features at very attractive fee levels."
Life insurance sales were $367.9 million for the third quarter, an increase of
18 percent over the prior year total of $311.0 million. Premiums from corporate
owned life insurance policies were $222.9 million in the quarter, up 53 percent
from $145.7 million in the year ago quarter. Individual variable life insurance
premiums were up strongly, increasing 45 percent to $155.8 million compared to
$107.8 million in third quarter 1999. Although sales through independent broker
dealers still represent over two thirds of production, distribution of variable
life products through both financial institutions and national and regional
brokerage firms continue to gain momentum and boost sales growth.
"We remain very bullish on the prospects of the variable life market -- we
believe variable life is just beginning its steep growth phase within what we
believe will be a long product life cycle," Gasper added. "We are well
positioned to grow our market share by continuing to expand distribution,
providing strong sales support and focusing on streamlining the underwriting and
policy issuance process."
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NFS REPORTS THIRD QUARTER EARNINGS -- 3
Sales of 401(k) pension plans, including both those sold in a group annuity and
trust structure, increased by 18 percent in the quarter when compared to the
prior year. Through September 30, 2000, 3,081 new 401(k) plans have been
written, an average of 342 new plans a month. Public sector pension plan sales
of $427.7 million were down from $551.0 million a year ago as the impact of the
loss of some large cases impacted premium flows in the quarter.
Sales of retail mutual funds and deposits into administration-only pension
accounts, excluding 401(k) trust products, were $820.9 million for the quarter,
an increase of 27 percent from $645.3 million reported a year ago. The growth in
sales can be attributed to an increase in new deposits into stable value funds.
SEGMENT RESULTS
STRONG ASSET GROWTH DRIVES VARIABLE ANNUITY EARNINGS TO RECORD LEVELS - Variable
annuity earnings rose 19 percent in the third quarter to a record $86.5 million
compared to $72.6 million in 1999. Strong revenue growth from increased policy
charges was partially offset by increased amortization of deferred acquisition
costs. Variable annuity assets totaled $64.0 billion at quarter end, up 23
percent, compared to $52.1 billion in the prior year. Improved sales of
individual variable annuities and a stabilization of surrenders has helped drive
assets higher. Return on assets for the quarter was 54 basis points compared to
53 basis points in the second quarter of 2000.
FIXED ANNUITY EARNINGS SHOW MARKED IMPROVEMENT - Fixed annuity earnings of $49.3
million for the quarter increased 12 percent when compared to $44.0 million in
the prior year. Increased spread income from higher fixed annuity reserves was
partially offset by increased general expense and amortization of deferred
acquisition costs. Fixed account reserves ended the quarter at $16.6 billion, an
increase of 3 percent compared to $16.2 billion in the prior year. The issuance
of $484.2 million of funding agreements and a 16 percent increase in sales of
individual fixed annuities were the key contributors to fixed reserve growth.
LIFE INSURANCE EARNINGS SURGE TO NEW LEVELS - Total life insurance earnings were
$39.1 million for the quarter, up 23 percent from $31.8 million in the prior
year. Earnings from variable life products reached $20.9 million for the third
quarter, up 46 percent compared to $14.3 million in the third quarter of 1999.
Reserves supporting variable life products now total $4.5 billion, up 61 percent
from a year ago.
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NFS REPORTS THIRD QUARTER EARNINGS -- 4
INVESTMENT IN MONEY MANAGEMENT BUSINESS REFLECTED IN ASSETS MANAGED AND
ADMINISTERED EARNINGS - Earnings from the assets managed and administered
segment were $0.5 million in the quarter, down from $6.7 million a year ago.
Higher expense levels in the quarter reflect the additional investments made to
expand the product portfolio and retail and institutional distribution
capabilities of Villanova Capital. Total assets in this segment now stand at
$39.7 billion, up 16 percent, compared to $34.3 billion a year ago.
BALANCE SHEET
Total assets at September 30, 2000 grew to $98.2 billion, up from $93.1 billion
at year-end 1999. Included in total assets were $71.7 billion in assets
underlying variable annuities and variable life products held in separate
accounts, up $4.6 billion since year-end 1999.
Shareholders' equity was $2.8 billion, or $21.90 per share, at September 30,
2000 compared to $2.5 billion or $19.35 per share at year-end 1999. Excluding
the impact of unrealized appreciation/depreciation on available-for-sale
securities, book value was $21.66 per share at September 30, versus $19.47 per
share at year-end 1999.
DISCLOSURE POLICY
In connection with the recent adoption of new SEC rules on corporate disclosure,
Nationwide Financial is changing its procedures for communicating and updating
its expectations and forecasts for future results. Following the publication of
its quarterly earnings release, Nationwide Financial will continue its current
practice of having corporate representatives meet during the quarter with
investors, the media, investment analysts and others. At these meetings the
company may reiterate the expectations and forecasts published in the earnings
release. At the same time, the company will keep its earnings release publicly
available on its web site. Toward the end of each quarter, Nationwide Financial
will have a "quiet period" when it no longer publishes or updates its current
expectations and forecasts and company representatives will not comment
concerning the company's financial results or expectations. The quiet period
will extend until the day when Nationwide Financial's next earnings release is
published. For the fourth quarter, the quiet period will be January 3, 2001
through January 24, 2001.
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NFS REPORTS THIRD QUARTER EARNINGS -- 5
BUSINESS OUTLOOK
As part of Nationwide Financial's new disclosure procedures, the Company has
incorporated this business outlook section as a permanent part of its earnings
release. The business outlook is intended to provide investors and analysts with
management's expectations and forecasts regarding key drivers to our business.
As such, the following statements are based on current business conditions and
are forward-looking:
o Operating earnings per share is expected to be within a range
of $3.48 to $3.53 for the full year 2000.
o Revenue growth is expected to be within a range of 13 to 15
percent for the full year 2000.
o Return on equity is expected to be within a range of 16 to 17
percent for the full year 2000.
o The equity markets, as measured by the S&P 500, and the
related performance of our separate account assets is expected
to achieve an annualized return of 7 to 8 percent for the
balance of the year.
o Consistent with the realization of certain tax minimization
strategies in the current quarter, the effective tax rate for
fourth quarter is expected to be approximately 29 percent.
The ability of the Company to meet the indicated expectations and forecasts is
subject to the factors described in the forward looking information section
below. Prior to the start of the quiet period, investors can continue to rely on
the earnings release and web site as still being Nationwide Financial's current
expectations on matters covered, unless the company publishes a notice stating
otherwise.
EARNINGS CONFERENCE CALL
Management of Nationwide Financial will host a conference call on October 25,
2000 at 10:00 am ET to discuss third quarter 2000 earnings. To listen to the
call, dial 1-719-457-2641 and enter conference code 892162. The call will also
be broadcast live over the internet with a link available on the Company's web
site. For those unable to listen to the call live, an audio archive and
transcript will be available on the Company's web site within 48 hours.
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NFS REPORTS THIRD QUARTER EARNINGS -- 6
Columbus-based Nationwide Financial is the holding company for the retirement
savings operations of Nationwide which owns 81.5 percent of the outstanding
common shares of NFS. The major operating subsidiary of NFS is Nationwide Life
Insurance Company, the country's 10th largest life insurer. To obtain investor
materials, including the Company's 1999 annual report, Form10-K, and other
corporate announcements, please call our toll-free investor information line at
(877) NFS-NYSE or visit our web site at WWW.NATIONWIDEFINANCIAL.COM.
FORWARD LOOKING INFORMATION
The information included herein contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 with
respect to the results of operations and businesses of the Company. These
forward-looking statements involve certain risks and uncertainties. Factors that
may cause actual results to differ materially from those contemplated or
projected, forecast, estimated or budgeted in such forward looking statements
include, among others, the following possibilities: (i) Nationwide Corporation's
control of the Company through its beneficial ownership of approximately 97.8
percent of the combined voting power of all the outstanding common stock and
approximately 81.5 percent of the economic interest in the Company; (ii) the
Company's primary reliance, as a holding company, on dividends from its
subsidiaries to meet debt payment obligations and the applicable regulatory
restrictions on the ability of the Company's subsidiaries to pay such dividends;
(iii) the potential impact on the Company's reported net income that could
result from the adoption of certain accounting standards issued by the FASB;
(iv) tax law changes impacting the tax treatment of life insurance and
investment products; (v) heightened competition, including specifically the
intensification of price competition, the entry of new competitors and the
development of new products by new and existing competitors; (vi) adverse state
and federal legislation and regulation, including limitations on premium levels,
increases in minimum capital and reserves, and other financial viability
requirements; (vii) failure to expand distribution channels in order to obtain
new customers or failure to retain existing customers; (viii) inability to carry
out marketing and sales plans, including, among others, changes to certain
products and acceptance of the revised products in the market; (ix) changes in
interest rates and the stock markets causing a reduction of investment income or
asset fees, reduction in the value of the Company's investment portfolio or a
reduction in the demand for the Company's products; (x) general economic and
business conditions which are less favorable than expected; (xi) unanticipated
changes in industry trends and ratings assigned by nationally recognized
statistical rating organizations or A.M. Best Company, Inc., and (xii)
inaccuracies in assumptions regarding future persistency, mortality, morbidity
and interest rates used in calculating reserve amounts.
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EXHIBIT 1 TO THIRD QUARTER EARNINGS ANNOUNCEMENT
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<TABLE>
NATIONWIDE FINANCIAL SERVICES, INC.
FINANCIAL HIGHLIGHTS
<CAPTION>
QUARTERS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
($ in millions) 2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
GAAP REVENUES BY SEGMENT
Variable annuity $ 195.1 $ 159.4 $ 571.4 $ 458.0
Fixed annuity 325.7 292.1 975.5 866.0
Life insurance 187.5 162.5 549.7 466.9
Assets managed and administered 48.9 42.5 140.8 114.0
Corporate and other 47.0 53.7 153.6 148.2
--------- --------- --------- ---------
TOTAL OPERATING REVENUES 804.2 710.2 2,391.0 2,053.1
Net realized investment gains (losses) (2.9) 6.2 (16.3) (7.1)
--------- --------- --------- ---------
TOTAL REVENUES $ 801.3 $ 716.4 $ 2,374.7 $ 2,046.0
========= ========= ========= =========
TOTAL SALES
Individual annuity deposits $ 1,604.3 $ 1,203.7 $ 5,013.8 $ 3,704.6
Group annuity deposits 1,228.6 1,276.5 4,433.4 3,864.2
--------- --------- --------- ---------
Subtotal variable annuity deposits 2,832.9 2,480.2 9,447.2 7,568.8
Individual annuity deposits 678.3 582.7 1,988.7 1,636.8
Group annuity deposits 107.5 175.5 383.4 488.3
--------- --------- --------- ---------
Subtotal fixed annuity deposits 785.8 758.2 2,372.1 2,125.1
Life insurance premiums (excluding BOLI) 367.9 311.0 1,075.2 763.4
--------- --------- --------- ---------
TOTAL CORE PREMIUMS AND DEPOSITS $ 3,986.6 $ 3,549.4 $12,894.5 $10,457.3
Non-insurance sales 1,006.3 671.3 1,555.7 1,439.1
Internal exchanges (451.3) (169.7) (1,344.8) (425.3)
--------- --------- --------- ---------
TOTAL CORE SALES $ 4,541.6 $ 4,051.0 $13,105.4 $11,471.1
Bank owned life insurance (BOLI) -- -- 328.7 86.7
Institutional products 484.2 316.9 808.7 316.9
Corporate and other 103.8 92.1 239.7 282.2
--------- --------- --------- ---------
TOTAL SALES $ 5,129.6 $ 4,460.0 $14,482.5 $12,156.9
========= ========= ========= =========
NET OPERATING INCOME(1)
Pre-tax operating results:
Variable annuity $ 86.5 $ 72.6 $ 253.3 $ 207.8
Fixed annuity 49.3 44.0 141.7 132.8
Life insurance 39.1 31.8 108.9 90.1
Assets managed and administered 0.5 6.7 6.1 19.4
Corporate and other (8.3) (5.8) (22.8) (18.7)
--------- --------- --------- ---------
Pretax operating income 167.1 149.3 487.2 431.4
Federal income taxes (48.5) (50.0) (150.9) (144.4)
--------- --------- --------- ---------
NET OPERATING INCOME 118.6 99.3 336.3 287.0
After-tax net realized investment gains (losses) (1.9) 4.0 (10.6) (4.5)
--------- --------- --------- ---------
NET INCOME $ 116.7 $ 103.3 $ 325.7 $ 282.5
========= ========= ========= =========
</TABLE>
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EXHIBIT 2 TO THIRD QUARTER EARNINGS ANNOUNCEMENT
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<TABLE>
NATIONWIDE FINANCIAL SERVICES, INC.
FINANCIAL HIGHLIGHTS
<CAPTION>
SEPTEMBER 30 DECEMBER 31
($ in millions, except per share data) 2000 1999
---------- ----------
<S> <C> <C>
CUSTOMER FUNDS MANAGED AND ADMINISTERED
Variable annuity $ 64,043.4 $ 61,224.0
Fixed annuity 16,612.9 16,591.9
Life insurance 7,108.6 5,913.8
Corporate and other 4,618.4 4,977.7
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TOTAL INSURANCE RESERVES $ 92,383.3 $ 88,707.4
Retail mutual funds 3,177.0 3,346.0
Stable value funds 9,789.0 9,484.0
Net assets administered 10,482.6 9,610.0
---------- ----------
TOTAL CUSTOMER FUNDS MANAGED AND ADMINISTERED $115,831.9 $111,147.4
========== ==========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
2000 1999
------------ -----------
<S> <C> <C>
BOOK VALUE PER SHARE
With available-for-sale securities at fair value $21.90 $19.35
With available-for-sale securities at cost $21.66 $19.47
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</TABLE>
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EXHIBIT 3 TO THIRD QUARTER EARNINGS ANNOUNCEMENT
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<TABLE>
NATIONWIDE FINANCIAL SERVICES, INC.
CONSOLIDATED INCOME STATEMENTS
<CAPTION>
QUARTERS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
($ in millions, except per share data) 2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES
Investment product and universal life
Product policy charges $ 285.1 $ 231.5 $ 824.1 $ 655.9
Traditional life insurance premiums 51.7 51.5 180.7 153.9
Net investment income 416.7 382.3 1,239.1 1,122.4
Other income 50.7 44.9 147.1 120.9
--------- --------- --------- ---------
TOTAL OPERATING REVENUES 804.2 710.2 2,391.0 2,053.1
--------- --------- --------- ---------
BENEFITS AND EXPENSES
Interest credited 292.4 272.4 878.1 803.6
Other benefits and claims 56.2 51.4 185.2 146.2
Policyholder dividends 8.3 8.7 31.8 30.5
Amortization of deferred policy
acquisition costs 91.0 68.5 263.0 196.1
Other operating expenses 177.4 148.1 510.3 409.9
Interest expense 11.8 11.8 35.4 35.4
--------- --------- --------- ---------
TOTAL BENEFITS AND EXPENSES 637.1 560.9 1,903.8 1,621.7
--------- --------- --------- ---------
INCOME BEFORE FEDERAL INCOME TAX EXPENSE 167.1 149.3 487.2 431.4
Federal income tax expense 48.5 50.0 150.9 144.4
--------- --------- --------- ---------
NET OPERATING INCOME 118.6 99.3 336.3 287.0
After-tax realized investment gains (losses) (1.9) 4.0 (10.6) (4.5)
--------- --------- --------- ---------
NET INCOME $ 116.7 $ 103.3 $ 325.7 $ 282.5
========= ========= ========= =========
DILUTED EARNINGS PER SHARE(1)
Net operating income $ 0.92 $ 0.77 $ 2.61 $ 2.23
After-tax net realized investment gains (losses) (0.01) 0.03 (0.08) (0.03)
--------- --------- --------- ---------
Net income $ 0.91 $ 0.80 $ 2.53 $ 2.20
========= ========= ========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 128.7 128.5 128.7 128.5
========= ========= ========= =========
Diluted 129.0 128.6 128.8 128.6
========= ========= ========= =========
</TABLE>
(1)Net operating income excludes after-tax net realized investment gains and
losses.
<PAGE> 10
EXHIBIT 4 TO THIRD QUARTER EARNINGS ANNOUNCEMENT
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<TABLE>
NATIONWIDE FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
($ in millions) 2000 1999
------------- ------------
<S> <C> <C>
ASSETS
Investments:
Fixed maturity securities, at fair value $14,857.3 $15,296.5
Equity securities, at fair value 132.5 96.4
Mortgage loans on real estate, net 6,113.0 5,786.3
Real estate, net 285.6 254.8
Policy loans 578.7 519.6
Other long-term investments 99.5 73.8
Short-term investments 752.5 560.5
--------- ---------
TOTAL INVESTMENTS 22,819.1 22,587.9
Cash and cash equivalents 27.6 22.5
Accrued investment income 248.7 238.7
Deferred policy acquisition costs 2,818.5 2,555.8
Other assets 618.1 493.8
Assets held in separate accounts 71,710.4 67,155.3
--------- ---------
TOTAL ASSETS $98,242.4 $93,054.0
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Future policy benefits and claims $21,864.8 $21,868.3
Other liabilities 1,250.0 944.9
Senior debt 298.4 298.4
Liabilities related to separate accounts 71,710.4 67,155.3
--------- ---------
TOTAL LIABILITIES 95,123.6 90,266.9
--------- ---------
Company-obligated mandatorily-redeemable capital
and preferred securities of subsidiary trusts 300.0 300.0
--------- ---------
Shareholders' equity:
Class A common shares 0.2 0.2
Class B common shares 1.0 1.0
Additional paid-in capital 640.4 634.9
Retained earnings 2,151.5 1,867.4
Accumulated other comprehensive income 30.8 (15.5)
Other (5.1) (0.9)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 2,818.8 2,487.1
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $98,242.4 $93,054.0
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</TABLE>
