OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) and issuer credit ratings (ICR) of “aa-” of the two life/health subsidiaries of Nationwide Financial Services, Inc. (NFS), Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company. Additionally, A.M. Best has affirmed the ICR of “a-”of NFS and the debt ratings on the group’s outstanding securities. The outlook for all ratings is negative. NFS is indirectly owned by Nationwide Mutual Insurance Company (Nationwide Mutual) and Nationwide Mutual Fire Insurance Company, market leaders in the property/casualty industry. All the above companies are headquartered in Columbus, OH. (Please see below for a detailed listing of the companies and debt ratings.)
The rating affirmations reflect NFS’ diversified business profile across multiple product lines, extensive brand recognition, leading market position within public sector retirement plans and its improving net flow within individual annuities and retirement plans. The company’s overall distribution platform includes affiliated and non-affiliated segments, with productive channels within each segment allowing for efficient product distribution. Furthermore, favorable equity market returns and organic earnings growth have improved NFS’ risk-adjusted and absolute capital levels, and its investment portfolio is currently in an unrealized gain position. A.M. Best notes that NFS’ financial leverage and interest coverage remains within guidelines for its current ratings and utilization of operating leverage remains minimal. NFS is viewed by A.M. Best as an integral part of Nationwide Mutual’s long-term strategy to serve the lifetime insurance and financial services needs of its customers.
Offsetting rating factors include the company’s continued significant exposure to commercial mortgage loans, in addition to its exposures in both residential and commercial mortgage-backed securities. A.M. Best notes that there has been continued improvement within NFS’ investment portfolio as evidenced by its net unrealized gain position and reduced levels of credit impairments. However, A.M. Best believes that NFS’ asset portfolio has the potential for additional losses due to its mortgage-related exposures. NFS also has experienced relatively flat sales in some of its core lines including private and public sector funds; although, it remains a leader on the public fund side. Top line revenue growth has benefited from strong variable annuity sales, though A.M. Best notes that competitive positioning in this marketplace remains highly correlated to the richness of benefits offered and is therefore somewhat volatile. A.M. Best believes the moderate growth prospects in certain core lines (such as private sector plans) add to the highly competitive environment for the company’s key product offerings.
The following debt ratings have been affirmed:
Nationwide Life Insurance Company—
-- AMB-1 on commercial paper
Nationwide Financial Services, Inc.—
-- “a-” on $300 million 6.25% senior unsecured notes, due 2011
-- “a-” on $300 million 5.90% senior unsecured notes, due 2012
-- “a-” on $200 million 5.625% senior unsecured notes, due 2015
-- “a-” on $200 million 5.10% senior unsecured notes, due 2015
-- “bbb” on $400 million 6.75% fixed to floating rate junior subordinated notes, due 2037
Nationwide Financial Services Capital Trust—
-- “bbb” on $100 million 7.899% capital securities, due 2037
Nationwide Life Global Funding I —
-- “aa-” program rating
-- “aa-” on all outstanding notes issued under the program
The principal methodology used in determining these ratings is Best’s Credit Rating Methodology --Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Life and Health Insurers”; “Rating Members of Insurance Groups”; and “A.M. Best’s Ratings & the Treatment of Debt.” Methodologies can be found at www.ambest.com/ratings/methodology.
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