CNN.com - Nationwide to buy Provident for $1.56B

August 8, 2001 Posted: 1446 GMT

COLUMBUS, Ohio (Reuters) -- Nationwide Financial Services Inc., a major life insurance company, agreed Wednesday to buy Provident Mutual Life Insurance Co. for $1.56 billion in a move to expand Nationwide's sales force and variable life insurance business.

The acquisition, expected to boost Nationwide's earnings when it closes next spring, has been approved by the boards of both companies.

"We are very pleased to have reached this agreement with Provident Mutual, whose strong positions in the variable life insurance and retirement savings markets will enhance our business, both in terms of products and distribution," Nationwide Chairman and CEO Jerry Jurgensen said.

Nationwide reported revenue last year of almost $3.2 billion, and Provident should add another $537 million to that.

Variable life is a type of whole life insurance that allows investment of the policy's cash value in stocks, bonds or other types of assets. Whole life premiums typically are fixed.

Terms call for Provident's eligible policyholders to receive Nationwide Financial common stock, cash and policy credits with a total value of $1.56 billion.

The transaction involves Nationwide's purchase of Provident Mutual in a sponsored demutualization, the conversion of a mutually owned company to stockholder ownership. As a mutual company, Provident is owned by its policyholders and, unlike Nationwide, there is no publicly traded stock outstanding.

Nationwide (NFS: up $0.50 to $45.46, Research, Estimates) shares rose in trading on the New York Stock Exchange after the news. Over the past two weeks, the shares have climbed from a recent low of nearly $41. Year-to-date, the stock is off about 5.3 percent.

Late last month, Nationwide reported a 4 percent rise in second-quarter operating profits, as higher life insurance earnings offset lower individual annuity and institutional investment earnings, which were hit by weak stock markets.

Nationwide reported second-quarter operating earnings, excluding one-time items, of $114.9 million, or 89 cents per share, up from $110.9 million, or 86 cents per share, in the year-ago period.

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