Best Assigns Ratings to Nationwide’s Shelf Registration

A.M. Best Co. announced that it has assigned indicative ratings of “a” senior debt, “a-” subordinated debt, “a-” preferred securities and “bbb+” preferred stock, to Nationwide Financial Services, Inc.’s recently filed $1.5 billion shelf registration.

The filing included $200 million of securities that remained available to NFS under a previous registration statement. Best said that the company’s “existing debt and financial strength ratings, which were affirmed on October 18, 2002, are unaffected.”

It expects the securities issued under the shelf registration to be used primarily “to invest in NFS’ life insurance subsidiaries and for general corporate purposes.” As a result “NFS’ debt to capital ratio (including capital and preferred securities) will likely remain in the 23%-26% range in the near to medium term.”

“The ratings recognize NFS’ favorable business profile, which is underpinned by balanced revenue streams, strong and diversified distribution, sound earnings capabilities and high overall investment quality. It also reflects the franchise value associated with being a 63%-owned subsidiary of Nationwide Mutual, a major U.S. insurance organization,” said the bulletin.

It did note, however that the positive rating factors “are somewhat offset by the insurance subsidiaries’ diminished risk-based capital positions relative to similarly rated peers. Additionally, like many U.S. life insurers, NFS faces a highly competitive market in several of its core products and is dealing with operational and investment challenges arising from the prolonged equity market downturn, low interest rate environment and the overall weakness in the U.S. economy.”

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