Best Affirms Nationwide Group ‘A+’ Ratings, Changes Outlook to Negative

January 29, 2009

A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating (FSR) of ‘A+’ (Superior) and issuer credit ratings (ICR) of “aa-” of Nationwide Group and its four P/C pooled members and twenty-two reinsured affiliates. Best has also revised the outlook to negative from stable and affirmed the debt ratings of “a” of the $1.5 billion in existing surplus notes of Nationwide Mutual Insurance Company. All companies are domiciled in Columbus, Ohio.

Best said the “revised outlooks consider the historical impact of storm losses on the group’s underwriting performance and the precipitous decline in risk-adjusted capitalization associated with the early 2009 privatization of Nationwide Financial Services, Inc. (NFS).” Best also issued a separate ratings report on NFS (See “ratings” article).

As a result, Best indicated that it expects “management may be challenged to rebuild surplus based upon historical underwriting performance and reduced investment income given the current volatility in the financial markets.”

Nationwide’s ratings reflect its “strong capitalization, favorable operating results attributable to its continually evolving risk management process, which includes strict underwriting discipline, increased rates and numerous operating efficiencies implemented by management,” Best continued. “In addition, Nationwide benefits from a diversified product offering that includes standard and specialty personal, commercial and surplus lines of business. The ratings further recognize Nationwide’s market presence, multiple distribution channels and decentralized operational structure that provides superior service to agents and policyholders.”

Best listed the ratings as follows:

The FSR of ‘A+’ (Superior) and ICRs of “aa-” have been affirmed with a revised outlook to negative from stable for Nationwide Group and its following property/casualty members:
Farmland Mutual Insurance Company
Nationwide Mutual Insurance Company
Nationwide Mutual Fire Insurance Company
Scottsdale Insurance Company
ALLIED Property and Casualty Insurance Company
AMCO Insurance Company
Colonial County Mutual Insurance Company
Depositors Insurance Company
National Casualty Company
Nationwide Affinity Insurance Company of America
Nationwide Agribusiness Insurance Company
Nationwide Assurance Company
Nationwide General Insurance Company
Nationwide Insurance Company of America
Nationwide Lloyds
Nationwide Property and Casualty Insurance Company
Scottsdale Indemnity Company
Scottsdale Surplus Lines Insurance Company
Titan Indemnity Company
Titan Insurance Company
Victoria Automobile Insurance Company
Victoria Fire & Casualty Company
Victoria National Insurance Company
Victoria Select Insurance Company
Victoria Specialty Insurance Company
Western Heritage Insurance Company

In addition Best noted that the following debt ratings have been affirmed with a revised outlook to negative from stable:
Nationwide Mutual Insurance Company—
— “a” on $400 million variable rate surplus notes, due 2024
— “a” on $400 million 8.25 percent surplus notes, due 2031
— “a” on $300 million 7.875 percent surplus notes, due 2033
— “a” on $400 million 6.6 percent surplus notes, due 2034

Source: A.M. Best –

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