Fitch Assigns 'A' to Nationwide Financial Service's Senior Debt

Business Wire, Feb 11, 2003

Business Editors

CHICAGO--(BUSINESS WIRE)--Feb. 11, 2003

Fitch Ratings has assigned a senior debt rating of 'A' to the $200 million debt issuance of Nationwide Financial Services (NFS). The Rating Outlook is Stable.

The $200 million debt issuance is from NFS's $1.5 billion shelf registration, and proceeds will be used to bolster the surplus position of Nationwide Life Insurance Company (NLIC). The debt carries an interest rate of 5.625%, pays interest semi-annually, and matures in 2015.

Subsequent to this issue, Fitch estimates NFS's pro forma debt-to-total capitalization at just under 23%, using year-end 2002 figures and eliminating unrealized gains on available for sale securities from stockholders' equity. Pro forma interest and preferred dividend coverage for full-year 2002 was 3.7 times (x), which is low compared to historic norms. A $226 million after-tax charge taken during the third quarter of 2002, effectively accelerating the amortization of deferred acquisition costs (DAC), was primarily responsible for the low coverage ratio.

Fitch expects NFS to maintain its debt-to-total capitalization at 25% or lower, and its operating earnings-based interest and preferred dividend coverage at greater than 6x. Fitch gives NFS one-half equity credit for its preferred securities in the leverage ratio based on the duration of the securities and the company's ability to defer interest payments.

NFS is a major stock life insurance company with operations in individual annuity, pension and individual life insurance, and is approximately two-thirds owned by Nationwide Mutual. Nationwide Mutual is one of the largest property/casualty companies in the United States, and carries a solid personal lines franchise with name-brand recognition and a large and high-quality distribution channels.

Entity/Issue/Type                    Action       Rating/Outlook

Nationwide Financial Services Inc.

-- Senior notes                      Assigned      'A'/Stable;
-- Trust preferred                                 'A-'/Stable.

Nationwide Life Insurance Co.

-- Commercial paper                                'F1'.