Chicago-based Fitch has assigned an “A+” rating to the $400-million surplus note offering by Nationwide Mutual Insurance Company (Nationwide Mutual). Fitch also carries a “AA” rating on the insurer financial strength of Nationwide Mutual and related pool members, Nationwide Mutual Fire Insurance Co., Scottsdale Insurance Co., and Farmland Mutual Insurance Co. The rating outlook on both the insurer financial strength and surplus notes rating has been changed to Negative from Stable.
Proceeds from the surplus note issuance will be used to make capital contributions to, and investments in, Nationwide’s subsidiaries as well as other capital expenditures. The new surplus notes, added to the $500 million in surplus notes already outstanding, bring the ratio of surplus notes-to-total statutory capital near Fitch’s 15 percent ceiling. The additional leverage is a factor in the Rating Outlook.
The rating is supported by Nationwide Mutual’s solid personal lines franchise, name-brand recognition, and large and high-quality distribution channels. The change in Rating Outlook to Negative was driven by concerns over the increased leverage, progress in turning around poor operating results, and deterioration in surplus. Failure to make progress in operating results would place downward pressure on the ratings.
Nationwide Mutual Insurance Company held total assets of $17.7 billion, and policyholders’ surplus of $5.7 billion as of Sept. 30, 2001.
Operating results for the nine months ended Sept. 30, 2001, showed a loss of $250 million, which was slightly worse than $229 million in the comparable period in 2000. The favorable news included an 8 percent increase in net written premium during the first nine months of 2001 relative to the same period in 2000, and an improved combined ratio of 108.2 percent, down from 109.8 percent over the same period. The combined ratio, while trending in the right direction, remains behind management’s expectations of 107 percent.
Topics Excess Surplus
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