After a steep profit decline, Nationwide Financial Services Inc. is trying some new things in its efforts to increase the sales of its retirement and life insurance products through banks.
The stakes are high for the Columbus, Ohio, company, whose fourth-quarter profit fell 53%, to $74.2 million, from a year earlier, including losses of $21.3 million related to the planned sale of an interest in a life insurance distribution business and $66.2 million related to investments.
"The results weren't great, but part of it was because the market's not doing well," said Alan Rambaldini, an equity analyst at Morningstar Inc. in Chicago.
Nationwide is trying avoid further loss on its investments by changing its strategy in several ways, including the push to get more banks to sell its products.
The early indications show some headway.
Last year 12.5% of Nationwide's gross sales of $20.75 billion was through banks, versus 11.4% of $20.55 billion in 2006. "The banking channel is critical to our growth," said John L. Carter, the senior vice president of nonaffiliated sales at Nationwide.
The reason banks matter is that they often help consumers get ideas about how to invest and build their assets.
For example, if an investor goes to a local bank and says he wants to buy an annuity, he will likely end up sitting down with a financial specialist from the bank.
The specialist might then explain that an annuity is a contract with an insurance company in which the customer makes periodic payments in return for the guarantee of a series of repayments over a specified period.
In theory, the specialist would try to help figure out which kind of annuity, and from which company, is the best for each investor. But there are more companies offering annuities than one person could possibly mention during one sitting.
Life insurance companies "are all trying to sell more through the banks, and it's becoming an important distribution channel," said Brad Ellis, an analyst at Fitch Inc. "There's been some success, but it's much lower than the insurance companies would have liked."
Many banks that have advisers working for them sell their own annuities in competition with the life insurers.
Consumers, however, are not used to the idea of buying certain products, including life insurance, from a bank.
And insurance companies are regulated differently from banks, often on a local rather than a federal level. "It makes sense to be able to sell like that through a bank, but there are regulatory issues and there are conflicts of interest," Mr. Ellis said.
Nationwide is taking steps to solve such problems. One approach has been to work on a consultative rather than transactional basis with banks.
Dan Overbey, the national sales manager at First Horizon National Corp. of Memphis, , said representatives from Nationwide have visited First Horizon three to five times in the past year to provide training sessions and other support.
That is more often than Mr. Overbey had seen of Nationwide in the eight or so years that he has worked with Nationwide.
For example, Nationwide sent an economist to speak with a First Horizon client about the market.
The company has also provided on-site training for First Horizon employees on compliance issues.
A couple weeks ago Nationwide gave a presentation at First Horizon about how products including variable annuities within a retirement plan can help boost income over time.
That included a Nationwide-sponsored research paper, "Retirement Portfolio and Variable Annuity with Guaranteed Minimum Withdrawal Benefit," that Morningstar's investment advisory unit, Ibbotson Associates, released in January.
Mr. Overbey said First Horizon advisers now recommend Nationwide's annuities along with those from Hartford Financial Services Group, Fidelity Investments, Van Kampen, and Pacific Life.
Sales of Nationwide's variable annuities are up 35% year over year at First Horizon, Mr. Overbey said, without giving the dollar amount.
Sales are up "not because it's far and away the best product in the market, but it's what they do to roll up their sleeves and get inside our organization and understand what we're about," Mr. Overbey said. "They've really ingratiated themselves."
Nationwide is also using convenience as a selling point with banks. It has been making its services increasingly paperless, for instance, storing the documentation associated with its policies online.
"If we make the client agreements simpler and easier for the banking professional to execute, we'll grow our business faster than the firm that makes it a more cumbersome process," Mr. Carter said. "The banking professionals are providing strong services, but they're saying 'Make it simpler' " and 'Tell me what I need to know. Take work off my desk.' "
Nationwide has been reducing the number of questions that customers have to answer when filling out the paperwork for its products.
Mr. Rambaldini said "you'll be more likely to sell products that are easier for … [banks] to explain to the customer. It's one way to get them to choose to sell your product without, say, giving them a bigger commission that'll cut into your profits."
Nationwide has been targeting banks that have strong brands and operate nationally. At the same time it has been trying to reconnect with former clients by explaining to them how its business has been evolving.
"We're putting our resources toward the banks and the broker-dealers that are growing," Mr. Carter said. "We can't show up everywhere."
Hundreds of banks and hundreds of broker-dealers sell Nationwide products, he said. "The banks are starting to see. They want to grow life and retirement and pension offerings. We can make it easier for them."
