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A.M. Best Affirms Ratings of Nationwide Mutual Insurance Company and Its Key Operating Subsidiaries
[July 07, 2016]

A.M. Best Affirms Ratings of Nationwide Mutual Insurance Company and Its Key Operating Subsidiaries


A.M. Best has affirmed the financial strength rating (FSR) of A+ (Superior) and the issuer credit ratings (ICR) of "aa-" of the four participating property/casualty pool members and 31 reinsured affiliates of Nationwide Group (Nationwide). A.M. Best also has affirmed the FSR of B+ (Good) and the ICR of "bbb-" of Nationwide Indemnity Company (NIC (News - Alert)), the group's run-off entity for asbestos and environmental claims. Additionally, A.M. Best has affirmed the issue ratings of "a" of five surplus notes totaling $2.2 billion issued by Nationwide Mutual Insurance Company (Nationwide Mutual).

Concurrently, A.M. Best has affirmed the FSR of A+ (Superior) and the ICR of "aa-" of the two key life/health subsidiaries of Nationwide Financial Services Inc. (NFS): Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company (Nationwide Life). Additionally, A.M. Best has affirmed the ICR of "a-" of NFS and all of its issue ratings. The outlook for each of these ratings is stable. NFS is indirectly owned by Nationwide Mutual and Nationwide Mutual Fire Insurance Company. All companies are headquartered in Columbus, OH.

Additionally, A.M. Best also has affirmed the FSR of A- (Excellent) and ICR of "a-" of Harleysville Life Insurance Company (HLIC) (Harleysville, PA). The outlook for each rating is stable with all new business written at Nationwide Life. (See link below for a detailed listing of all the companies and ratings.)

Nationwide's ratings and outlook reflect its strong level of risk-adjusted capitalization, which continues to be supportive of its ratings. Nationwide also features a superior business profile with diversified product offerings across personal and commercial lines, multiple integrated distribution channels and a wide geographic spread of risks with a market leadership position and presence across the country. The group has reported several years of varying underwriting performance in its core lines of business, impacted by weather-related events, as well as some deterioration in profitability in the automotive lines. Nationwide continues to implement strategies to improve its performance, while continuing to emphasize its multi-channel distribution sources and branding initiatives. Solid investment income is a significant component in overall earnings.

While A.M. Best notes these efforts, Nationwide's management continues to face challenges in the near term to generate the positive underwriting results necessary to continue to futher strengthen the group's capital position.



Regarding future rating movement, if trends in underwriting performance continue to be unprofitable in the near term, leading to notable decline in risk-adjusted capitalization, downward rating pressure will be considered. Conversely, an established and continuing trend in underwriting profitability could eventually lead to consideration of a positive outlook.

The ratings of NIC reflect its role as a receptacle for asbestos and environmental reserves, as well as the support it receives from its parent, Nationwide Mutual. Regarding future rating movement, downward rating pressure could result if significant adverse development on indemnity losses negatively impacts risk-adjusted capitalization, or if the level of parental support from Nationwide Mutual diminishes.


The affirmation of Nationwide Life's ratings reflects its strategic value to the Nationwide enterprise and strong presence in the life, annuity and retirement marketplaces, in addition to its diverse product offerings through multiple distribution channels. The product and distribution channel diversity have contributed to good top-line sales and revenue growth in most core lines, particularly in fixed indexed annuities and variable annuities without living benefits, which is the result of management's business strategy to reduce its overall equity market earnings sensitivity. The affirmation also reflects positive earnings trends in recent years due to business growth, higher persistency and favorable equity market performance. The continued profitability and absence of material dividends paid by the group has enabled Nationwide Life to maintain a more-than-adequate level of risk-adjusted capitalization.

These strengths are partially offset by a significant portion of liabilities that have high equity market and interest rate sensitivity, in addition to challenges related to managing its private sector retirement line of business. A.M. Best notes that Nationwide Life has faced challenges in its private sector retirement business, including modest sales growth, negative net flows and high, albeit improving, lapse rates. While Nationwide Life holds prominent positions in its target markets, they remain highly competitive. Finally, A.M. Best is concerned that the new Department of Labor (DOL) fiduciary rule may have a material impact on the sales of Nationwide Life's variable and fixed indexed annuity products over the next 12 to 24 months. Additionally, like other annuity writers, the new fiduciary rule is expected to increase compliance and marketing costs.

A positive rating action for the companies that comprise the Nationwide Life Group could occur if A.M. Best upgrades the ultimate parent, Nationwide Mutual. Factors that may lead to negative rating movement include a material decline in absolute and risk-adjusted capitalization due to operating and investment losses, a significant increase in sales of less creditworthy products, or a rating downgrade by A.M. Best of Nationwide Mutual.

For a complete listing of the Nationwide Group and its property/casualty and life/health subsidiaries' FSRs, ICRs and issue ratings, please visit Nationwide Group.

This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best's Ratings & Criteria Center.

A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2016 by A.M. Best Rating Services, Inc. ALL RIGHTS RESERVED.


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