Nationwide’s size and market presence may count against it in the short term, according to A.M. Best. The insurer has been saddled with a negative outlook issued by the ratings agency, in part, over concerns about the insurer’s exposure to natural disasters around the United States. That exposure is connected partially to the insurer’s large market presence, the ratings agency explained.

“Nationwide’s management continues to face challenges in the near term to generate the positive underwriting results necessary to further strengthen the group’s capital position,” A.M. Best said. “In addition, Nationwide faces inherent exposure to natural disasters due to its expansive market presence throughout the country.”

A.M. Best negative outlook is revised downward from stable. At the same time, the ratings agency affirmed Nationwide’s A+ (Superior) financial strength rating, as well as its “aa-” long-term issuer credit ratings.

The update applies to Nationwide Group’s 33 reinsured affiliates and four participating property/casualty pool members.

A.M. Best’s decision involves some complexity. While the negative outlook is there, A.M. Best also points out that Nationwide has a “strong level of risk-adjusted capitalization, which continues to be supportive of its ratings.” The insurer also gains marks for having diverse products in both personal and commercial lines, plus many integrated distribution channels and a wide geographic spread of risks. Nationwide additionally still has a market leadership position across the United States, A.M. Best noted.

But A.M. Best said that large market presence makes Nationwide vulnerable.

“This exposure is evident with localized severe weather and net catastrophe losses having a noted impact on the group’s overall results,” A.M. Best said.

That said, A.M. Best downplayed concerns over how the insurer will handle catastrophe losses from Hurricanes Harvey and Irma.

“Losses from Hurricanes Harvey will be within Nationwide’s risk tolerances, as well as within A.M. Best’s expectations, as A.M. Best looks across the losses relative to the broader peer group,” it explained.

A.M. Best also revised the outlooks to negative from stable and affirmed the long-term issuer credit ratings of “a” for five surplus notes worth $2.2 billion and issued by Nationwide Mutual Insurance Company. A.M. Best also affirmed the FSR of B+ (Good) and the long-term issuer credit rating of “bbb-” for Nationwide Indemnity Company, the group’s run-off entity for asbestos and environmental claims. The outlook for these credit ratings is stable.

Additionally, A.M. Best affirmed various ratings for its financial services and life insurance arms.

Source: A.M. Best

Topics Trends Natural Disasters AM Best