Fitch Affirms and Withdraws Nationwide Mutual Insurance Group’s Ratings [Professional Services Close – Up]

Fitch Ratings has affirmed and withdrawn the Insurer Financial Strength ratings of Nationwide Mutual Insurance Company and its related intercompany pool members, and Nationwide Life Insurance Company, at 'A'.

Fitch has also affirmed and withdrawn the following ratings of Nationwide Financial Services, Inc.:

--Issuer Default Rating at 'BBB+';

--Senior unsecured notes at 'BBB';

--Trust preferred securities at 'BB+'.

At the time of the ratings withdrawal the Rating Outlook was Stable for the affirmed ratings. A full list of rating actions is provided at the end of this release.

Fitch has decided to discontinue the ratings, which are uncompensated.

Key Rating Drivers

The affirmation reflects Nationwide's strong competitive position in personal lines insurance, and a more moderate position in commercial lines insurance. The affirmation also reflects business diversification benefits provided by Nationwide Mutual's wholly owned Financial Services segment, which offers a variety of individual protection and asset accumulation products, as well as group products and services.

Similar to other personal lines carriers, underwriting performance was materially affected by catastrophes in recent years. However, the statutory combined ratio improved to 100.8 percent for the first six months of 2013, compared with 107.5 percent for the full year 2012.

Based on GAAP financial statements the property/casualty segment reported a net operating gain of $344 million for the first six months of 2013, compared with $75 million for the first six months of 2012. NFS contributed net operating income of $367 million for the first six months of 2013, up 42 percent from the prior year period.

Nationwide's statutory surplus increased almost 3 percent to $14.2 billion at June 30. Fitch views the company's capitalization as worse than many peers as the quality of capital is diminished by a high percentage of surplus notes. Unstacked operating leverage (excluding the carrying value of NFS from policyholders' surplus) is relatively high at 1.6x. The score for P/C operations on Fitch's capital model was 'strong' at year-end 2012.

Fitch estimates that Nationwide's debt-to-capital, including operating leverage and undisclosed FAS 115 unrealized bond gains, was approximately 21 percent at June 30.

Fitch has affirmed and withdrawn the following ratings:

Nationwide Mutual Insurance Co.

--IDR at 'A-';

--8.25 percent surplus notes due Dec. 1, 2031 at 'BBB';

--7.875 percent surplus notes due April 1, 2033 at 'BBB';

--6.60 percent surplus notes due April 15, 2034 at 'BBB';

--5.81 percent surplus notes due Dec. 15, 2024 at 'BBB';

--9.375 percent surplus notes due Aug. 15, 2039 at 'BBB'.

Nationwide Financial Services Inc.

--IDR at 'BBB+';

--5.625 percent Senior notes due Feb. 13, 2015 at 'BBB';

--5.10 percent Senior notes due Oct. 1, 2015 at 'BBB';

--5.375 percent Senior notes due March 25, 2021 at 'BBB';

--7.899 percent Trust preferred due March 1, 2037 at 'BB+'.

Nationwide Mutual Insurance Co.

Nationwide Mutual Fire Insurance Co.

Crestbrook Insurance Co.

National Casualty Co.

Nationwide Agribusiness Insurance Co.

Nationwide Insurance Company of America

Scottsdale Insurance Co.

Farmland Mutual Insurance Co.

Colonial County Mutual Insurance Company

Nationwide Assurance Company

Nationwide General Insurance Company

Nationwide Lloyds

Nationwide Property and Casualty Insurance Company

Titan Indemnity Company

Titan Insurance Company

Victoria Automobile Insurance Company

Victoria Fire and Casualty Company

Victoria Select Insurance Company

Victoria Specialty insurance Company

Scottsdale Indemnity Company

Scottsdale Surplus Lines Insurance Company

Western Heritage Insurance Company

Allied Property and Casualty Insurance Company

AMCO Insurance Company

Depositors Insurance Company

Nationwide Affinity Company

--IFS at 'A'.

Nationwide Life Insurance Co.

--IFS at 'A';

--Short-term IDR at 'F1';

--Short-term IFS at 'F1';

--Commercial paper at 'F1'.

Nationwide Life Global Funding I

--Program rating at 'A'.

Additional information is available at 'fitchratings.com'.

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