Nationwide Gets A Career Shop With Providents Sponsored Demutualization

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New York

“Its all about diversification, collaboration and distribution.”

That is how Nationwide Financial President and Chief Operating Officer Joseph J. Gasper describes the recently completed “sponsored demutualization” of Provident Mutual Life Insurance Company and the companys subsequent acquisition by Nationwide.

Judging by what Gasper and Gary D. McMahon said in an interview here, the $1.12 billion transaction is also about guts, corporate growth and giving people–especially producers–what they want.

McMahon is a former general agent of Massachusetts Mutual Life Insurance Company who was tapped to serve as president of Nationwide Provident, the new Nationwide subsidiary created by the acquisition.

The two executives were in New York to attend the annual meeting of the National Association for Variable Annuities. At the meeting, NAVA inducted Gasper into its NAVA Hall of Fame, in honor of his “outstanding leadership in the VA field.”

In Nationwides new corporate order, producers can get what they want, insists Gasper. How so? “Well sell insurance any way people want to buy it. Well tailor-make products for any distribution channel we have. And if we cant manufacture a requested product, well go get it for the agent.”

The company has over 300 commission structures, he adds, so Nationwide just asks producers what they want and how they want to be paid.

That has been Nationwides multi-channel distribution model all along. But now, as a result of the acquisition, the Columbus, Ohio, financial company is casting this net even wider.

“Now we have a career agency shop,” explains Gasper. That comes courtesy of Nationwide Provident, which has traditionally distributed through career agents and personal producing general agents.

The Nationwide Provident agents will have access to any Nationwide product they want, whether from Nationwide Financial (which builds products for wirehouses, regional firms, planners, banks and property-casualty agency distribution) or from Nationwide Provident (via four life insurers, two from the old Provident Mutual and two from Nationwide).

Similarly, Nationwide Financial agents will have access to any product they want, whether from the new Nationwide Provident unit or Nationwide Financial.

Agents can also ask for products that dont even exist, Gasper and McMahon say. “We recently rolled out a new universal life policy, because agents asked for it,” points out McMahon.

Things will probably change for Provident producers, who came to Nationwide along with the transaction, contends Gasper. “We bring financial backing, infrastructure, new products, name recognition and branding,” he explains. This means, for example, that if a Provident career agent has a small business owner client who needs a 401(k), this producer can turn to Nationwide, since Nationwide has substantial 401(k) administration capabilities.

Do career agents want all that firepower? “Every day, I get calls for agents asking, when can I start?” answers McMahon.

That kind of attitude fits in with the times, Gasper says. In todays business world, “your competitor is your ally.”

Already, McMahon notes, the new Nationwide Provident has signed up three new career agencies. Signing up shops is apparently part of the game plan. The goal the two executives have set is to expand to 40 or 50 career agencies, up from the 25+ that are currently on board. This would mean Nationwide Provident would then have roughly 1,000 career agents.

“We want market penetration,” says McMahon.

All this talk of growth is a far cry from what some critics had predicted for the sponsored demutualization effort.

“Last year, when we first announced our plans to do this sponsored demutualization, people had their doubts that we would be able to do it,” recalls Gasper.

Thats partially because a sponsored demutualization takes a long time–this one took 13 monthsand “its a very unusual transaction, because youre essentially buying the company from the policyholders,” Gasper says. In this case, Provident did its own demutualization, with Nationwide assisting but not as an owner. When the demutualization was completed, Nationwide bought Provident.

“Its not like buying a stock company,” Gasper says. “There were a lot of regulations and hoops to go through. We had meetings with the Pennsylvania Insurance Department (Provident Mutual was based in Berwyn, Pa.). There were public hearings. And several bankers were involved.”

The process ultimately drew in other suitors. In all, “there were 14 or more companies that put in competitive bids,” Gasper recalls.

The deal closed Oct. 1, 2002, following approval by the Pennsylvania department.

When Provident Mutual policyholders voted on the acquisition proposal, 85% were in favor.

Now, says Gasper, insurance people tell him they are impressed. “Theyre impressed we said wed do a sponsored demutualization, and then did it.”

Who set the ball in motion? “This was a Nationwide Financial strategy,” says Gasper. “We looked at all the mutual companies that were in our strike zone, in terms of revenues, ROI and career agency operations. Then we contacted Provident Mutual.”

The insurers career agents were, to Nationwide, a plum. Gasper cites their high-net-worth clientele, their experience and professionalism.


Reproduced from National Underwriter Life & Health/Financial Services Edition, November 11, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.