A.M. Best Revises Outlook to Negative for Nationwide Group and Its Members

Business Wire, Jan 27, 2009

OLDWICK, N.J. -- A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating (FSR) of A (Superior) and issuer credit ratings (ICR) of "aa-" of Nationwide Group (Nationwide) and its four property/casualty pooled members and twenty-two reinsured affiliates. Concurrently, A.M. Best has revised the outlook to negative from stable and affirmed the debt ratings of "a" of the $1.5 billion in existing surplus notes of Nationwide Mutual Insurance Company (Nationwide Mutual). All companies are domiciled in Columbus, OH. (See below for a detailed list of the companies and ratings.)

The revised outlooks consider the historical impact of storm losses on the group's underwriting performance and the precipitous decline in risk-adjusted capitalization associated with the early 2009 privatization of Nationwide Financial Services, Inc. (NFS). A.M. Best expects management may be challenged to rebuild surplus based upon historical underwriting performance and reduced investment income given the current volatility in the financial markets.

Nationwide's ratings reflect its strong capitalization, favorable operating results attributable to its continually evolving risk management process, which includes strict underwriting discipline, increased rates and numerous operating efficiencies implemented by management. In addition, Nationwide benefits from a diversified product offering that includes standard and specialty personal, commercial and surplus lines of business. The ratings further recognize Nationwide's market presence, multiple distribution channels and decentralized operational structure that provides superior service to agents and policyholders.

The FSR of A (Superior) and ICRs of "aa-" have been affirmed with a revised outlook to negative from stable for Nationwide Group and its following property/casualty members:

* Farmland Mutual Insurance Company

* Nationwide Mutual Insurance Company

* Nationwide Mutual Fire Insurance Company

* Scottsdale Insurance Company

* ALLIED Property and Casualty Insurance Company

* AMCO Insurance Company

* Colonial County Mutual Insurance Company

* Depositors Insurance Company

* National Casualty Company

* Nationwide Affinity Insurance Company of America

* Nationwide Agribusiness Insurance Company

* Nationwide Assurance Company

* Nationwide General Insurance Company

* Nationwide Insurance Company of America

* Nationwide Lloyds

* Nationwide Property and Casualty Insurance Company

* Scottsdale Indemnity Company

* Scottsdale Surplus Lines Insurance Company

* Titan Indemnity Company

* Titan Insurance Company

* Victoria Automobile Insurance Company

* Victoria Fire & Casualty Company

* Victoria National Insurance Company

* Victoria Select Insurance Company

* Victoria Specialty Insurance Company

* Western Heritage Insurance Company

The following debt ratings have been affirmed with a revised outlook to negative from stable:

Nationwide Mutual Insurance Company--

-- "a" on $400 million variable rate surplus notes, due 2024

-- "a" on $400 million 8.25% surplus notes, due 2031

-- "a" on $300 million 7.875% surplus notes, due 2033

-- "a" on $400 million 6.6% surplus notes, due 2034

The principal methodologies used in determining these ratings, including any additional methodologies and factors, which may have been considered, can be found at www.ambest.com/ratings/methodology.> For Best's Debt Ratings, all other Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.> Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.