Nationwide Gets A Career Shop With Provident's Sponsored Demutualization

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.