Share Monger

December 1 1998 by Sarah Phillips Pellet


With the stunning merger announcement of Travelers Insurance and Citibank and with financial services’ marketing opportunities opening up overseas, today’s insurance market is clearly in a period of revolution. And Dimon McFerson, CEO of Columbus, OH-based Nationwide Insurance Enterprise, plans to be a part of it.

“The consolidation phase is going to hit the insurance industry in time-perhaps as aggressively as is currently being experienced in banking,” he predicts. When it does, McFerson, who recently shook up the staid insurance industry with a hostile $1.5 billion takeover bid for fellow insurer Allied Group., wants Nationwide to be ready.

Literally a grassroots effort, Nationwide was founded by a group of farmers, who formed the Ohio Farm Bureau Federation in 1925 with 20 part-time volunteer agents selling only auto insurance. Today, the company has $93 billion in assets and sells auto, homeowners, life, health, and commercial insurance, as well as annuities, mutual funds, and deferred compensation programs. And a name change, Nationwide Insurance Enterprise, communicates the broadened offerings.

Nationwide Life, the 13th-largest life insurer, has the bulk of the Enterprise assets nearly $69 billion. Last year, banking that the wave of the future is in financial services, McFerson put some of the life company’s assets into play to create a publicly traded entity. “We unleashed some of the inherent value that had built up inside Nationwide Mutual and took to market our mutual fund business and our life package as Nationwide Financial Services (NFS),” he explains. Financing the venture meant selling 23.6 million shares-representing 18.6 percent of Nationwide’s ownership-in an IPO offering that generated $524 million. NFS then strengthened its foothold by raising an additional $393 million in companion offerings of long-term debt and capital securities. Today, the subsidiary has more than $2.4 billion in capital, with a ratio of debt-to-total-capital of less than 16.4 percent.

“McFerson has done a great job transitioning NFS from the mutual company,” asserts Sam Liss, managing director at Credite Suisse First Boston. “They [NFS] have the broadest market share in the variable annuity market today and have been able to diversify distribution channels effectively.”

Capturing market share through targeted acquisitions is another piece of McFerson’s expansion plan. A few years ago, he constructed a mergers & acquisitions group to demonstrate to the New York investment houses that Nationwide is serious about being a player in that arena. This year, he rounded out Nationwide’s property/casualty business by acquiring Countrywide Insurance Company, a move that boosted premium revenue by 290 million and brought Nationwide’s geographic reach across the Midwest to the West Coast.

His recent bid for Allied, which has a reputation for tapping alternate sales channels such as direct mail and independent agents, suggests a push toward opening up new distribution channels. “We are moving to more options and multiple distribution,” asserts McFerson, who also plans to open up direct marketing opportunities via the Internet.

The international front may be next, he says, reporting plans to “go in where we’re strong, with financial services, multiple distribution channels, partnering and networking with some organizations that we have some affinity with.”

In the meantime, McFerson is turning his change-maker skills on downtown Columbus, putting Nationwide’s resources to bear in financing 90 percent of a sports complex. “I think CEOs and corporate leaders need to give something back to the community as much as they possibly can,” he says.