Fitch Downgrades Nationwide Mutual's Surplus Notes to 'BBB'

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has downgraded Nationwide Mutual Insurance Company's (NMIC) outstanding surplus notes to 'BBB' from 'BBB+' and assigned a 'BBB' rating to the new $700 million 9.375% issuance of surplus notes due 2039. In addition, Fitch affirmed the Insurer Financial Strength (IFS) ratings on NMIC and its related intercompany pool members (collectively, Nationwide Mutual), as well as Nationwide Life Insurance Company (NWL) and Nationwide Life Insurance Company of America (NWLA), at 'A'. Fitch also affirmed Nationwide Financial Services, Inc.'s (NFS) senior unsecured debt at 'BBB'. A full list of rating actions follows at the end of the release. The Rating Outlook remains Negative.

Following the issuance, surplus notes represent 20% of consolidated statutory surplus. As a result of the added leverage, the notching between NMIC's IFS rating and its surplus note rating was widened by a single notch. Fitch uses a 15% maximum guideline for hybrid securities as a percentage of statutory capital in order to maintain standard notching.

The $700 million in surplus notes provide a beneficial increase in reported surplus but also add to ongoing expense obligations. When calculating consolidated debt-to-total capital, which includes debt at the downstream life holding company, surplus notes are given 75% equity credit. Pro forma June 30, 2009 consolidated equity-adjusted debt-to-total capital following the surplus note issuance was 20%.


The Negative Rating Outlook continues to reflect unrealized investment losses at both the property/casualty and life operations that if realized would place further stress on capitalization. It should be noted however that unrealized losses have improved during the first half of 2009. The unrealized losses are largely tied to non-government agency mortgage-backed securities, commercial mortgages and corporate bonds.

Fitch has downgraded the following ratings:

Nationwide Mutual Insurance Co.

--8.25% surplus notes due Dec. 1, 2031 to 'BBB' from 'BBB+';

--7.875% surplus notes due April 1, 2033 to 'BBB' from 'BBB+';

--6.6% surplus notes due April 15, 2034 to 'BBB' from 'BBB+';

--5.81% surplus notes due Dec. 15, 2024 to 'BBB' from 'BBB+'.

Fitch has assigned the following rating:

Nationwide Mutual Insurance Co.

--9.375% surplus notes due August 15, 2039 assigned 'BBB'.

Fitch has affirmed the following ratings with a Negative Outlook:

Nationwide Mutual Insurance Co.

--Issuer Default Rating (IDR) at 'A-'

Nationwide Mutual Insurance Co.

Nationwide Mutual Fire Insurance Co.

Scottsdale Insurance Co.

Farmland Mutual Insurance Co.

Colonial County Mutual Insurance Company

Nationwide Assurance Company

Nationwide General Insurance Company

Nationwide Lloyds

Nationwide Property & Casualty Insurance Company

Titan Indemnity Company

Titan Insurance Company

Victoria Automobile Insurance Company

Victoria Fire & Casualty Insurance Company

Victoria Select Insurance Company

Victoria Specialty insurance Company

Scottsdale Indemnity Company

Scottsdale Surplus Lines Insurance Company

Western heritage Insurance Company

Allied Property & Casualty Insurance Company

AMCO Insurance Company

Depositors Insurance Company

Nationwide Affinity Company

--IFS at 'A';

Nationwide Financial Services Inc.

--IDR at 'BBB+';

--Senior notes $300 million; 6.25%; due Nov. 15, 2011 at 'BBB';

--Senior notes $300 million; 5.9%; due July 1, 2012 at 'BBB';

--Senior notes $200 million; 5.625%; due Feb. 13, 2015 at 'BBB';

--Senior notes $200 million; 5.1%; due Oct. 1, 2015 at 'BBB';

--Trust preferred $100 million; 7.899%; due March 1, 2037 at 'BBB-'.

Nationwide Life Insurance Co.

--IFS at 'A';

--Short-term IDR at 'F1'

--Short-term IFS at 'F1'

--Commercial paper 'F1'.

Nationwide Life Insurance Co. of America

--IFS at 'A'.

Nationwide Life Global Funding I

--Program Rating at 'A'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.





Fitch Ratings

Douglas M. Pawlowski, CFA, +1-312-368-2054 (Chicago)

Bradley S. Ellis, CFA, +1-312-368-2089 (Chicago)

Tana M. Higman, +1-312-368-2085 (Chicago)

Brian Bertsch, +1-212-908-0549 (Media Relations, New York)

brian.bertsch@fitchratings.com



Source: Fitch Ratings