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Date Posted: Tue, July 23 2002, 9:25:09
Author: Rich Franzen
Subject:

Nationwide Insurance
In reply to: Brent D. Gardner, ChFC 's message, "Re: sponsored demutualization -- request for opinions" on Mon, July 22 2002, 19:12:10

>All the Whole Life I've sold this year is
>participating fom a true mutual company (albeit, a
>very small company that I can actually tour and
>inspect on demand). I hope they don't demutualize.
>That said, some of the behemoths might be more
>accountable if they were public rather than mutual.
>I'm wondereing how many ENRONS are amoung the
>insurance business? Although the business is heavily
>regulated, that doesn't mean they are risk free (we've
>had failures, and there will be more in the future).

In one sense, I think a mutual insurance company is like a gambling casino in Los Vegas. Yes, they can cheat -- but doing so is a sure sign of stupidity. They don't need to cheat to make money. The odds are already in their favor due to the very design of the business.

Things go bad when they stop acting like a mutual. If the managers start going for the quick buck instead of steady dependence on time value of money, they get into trouble.

Yet there is a weird entity which may be an exception (or just have been steadily lucky) -- Nationwide Insurance. I researched "it" a bit when I found out it was the sponsor for Provident Mutual's demutualization.

It's not an it. It is a they. Their official name says alot: "Nationwide Mutual Insurance Company and Affiliated Companies". Instead of wholly owning stock subsidiaries in the manner of NYLIC, MassMutual, and NWM, Nationwide's parent mutual maintains a majority ownership of a multitude of publicly traded companies. It is one of the publicly traded companies which is sponsoring Provident.

I really don't know how they manage their incestuous self. Nationwide issued a press release recently that, for the sake of efficiency, they were transferring assets from one of the stock companies to the mutual company. Are the public stockholders getting compensated fairly? I don't know. But it is very messy, to say the least.

Are there other life insurance mutuals that own publicly-traded businesses? I haven't heard of any, and my guess is Nationwide can exist in its present form due to unique Ohio insurance laws. Other companies which try to achieve a mutual:public structure have attempted (and sometimes succeeded) to form Mutual Holding Companies. Nationwide didn't need to bother. It seems to have just sold stock...

-- Rich
--- http://rocq.home.att.net

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Replies:

American Home Life - A mutual company since 1909 -- Brent D. Gardner, ChFC, Tue, July 23 2002, 18:07:40