Moody’s Ratings has assigned A2 insurance financial strength ratings to Nationwide Insurance Company of America, National Casualty Company, and Scottsdale Surplus Lines Insurance Company, all with a stable outlook.
These companies are members of the property and casualty (P&C) insurance business owned by Nationwide Mutual Insurance Company (NMIC).
Nationwide Insurance Company of America and National Casualty Company are members of the NMIC intercompany reinsurance pool, while Scottsdale Surplus Lines Insurance Company cedes 100% of its business to Scottsdale Insurance Company, another member of the NMIC pool.
Moody’s expects NMIC to provide support to its pooled and reinsured P&C companies if needed during a stress scenario.
The ratings reflect the strong market position of NMIC and its P&C affiliates (collectively, Nationwide P&C), which rank among the 10 largest U.S. P&C insurers by 2023 direct premiums written. Contributing factors also include the group’s diverse product offerings, extensive geographic reach, and its mutual ownership, which helps align the interests of policyholders/owners and company managers.
Nationwide P&C also benefits from the stable earnings of its affiliated life insurance and annuity business, Nationwide Financial Services (NFS), as well as the large capital base of Nationwide Enterprise, which includes both Nationwide P&C and NFS.
However, these strengths are offset by Nationwide P&C’s weak profitability in recent years along with its exposure to catastrophe losses in property lines and adverse reserve development in casualty lines. To address these challenges, Nationwide P&C is raising rates, tightening underwriting standards, and reallocating resources from standard lines to specialty lines.
Moody’s notes that a ratings upgrade for Nationwide P&C could result from better profitability, reflected in combined ratios at or below 100%, a return on capital in the mid-to-high single digits, gross underwriting leverage below 3x, favorable loss development, and continued strong performance by NFS.
Conversely, a downgrade could occur if combined ratios exceed 105%, gross underwriting leverage surpasses 4x, policyholders’ surplus drops by 10% or more within a year, NFS’s credit profile weakens, or if financial leverage rises above 30% or interest coverage falls below 4x.
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