Ratings Recap: Nationwide, Southern Pioneer, Navigators, Allied World Re, Excess Re

Fitch Ratings has affirmed the ‘AA-‘ insurer financial strength (IFS) ratings on Nationwide Mutual Insurance Company (NMIC) and its related intercompany pool members (collectively, Nationwide Mutual), as well as Nationwide Life Insurance Company and Nationwide Life Insurance Company of America, which are wholly owned insurance operating subsidiaries of Nationwide Financial Services, Inc. (NFS), NMIC’s 67 percent owned downstream life insurance and annuity holding company. Fitch also affirmed the ratings on NMIC’s outstanding surplus notes at ‘A’ and the rating on NFS’s senior unsecured debt at ‘A-‘. A full list of ratings affected by today’s actions can be found below. The Rating Outlook is Stable. Fitch said its “ratings on Nationwide Mutual reflects a competitive position in personal lines insurance, diversification across both property casualty and life insurance, and a balance sheet that is consistent with the current rating category. Balanced against these strengths is NMIC’s proposed use of $2.2 billion in capital to repurchase the outstanding minority interest in NFS, a transaction that was announced on Mar. 10, 2008. Further concerns include a deteriorating trend in NMIC’s underwriting profitability, continued potential for asbestos-related exposure to negatively impact operating results and capital strength going forward, as well as the extent to which the earnings of NFS is leveraged to equity market performance.”

A.M. Best Co. has upgraded the financial strength rating (FSR) to ‘B++’ (Good) from ‘B+’ (Good) and issuer credit rating (ICR) to “bbb+” from “bbb-” of Southern Pioneer Property & Casualty Insurance Company of Jonesboro, Ark. with a stable outlook. Best said its “rating actions reflect Southern Pioneer’s solid risk-adjusted capitalization, historic underwriting and operating profitability and conservative liquidity and leverage measures. The ratings also reflect the company’s niche expertise in its chosen markets (garage liability, low value homeowners and collateral protection) utilizing multiple distribution sources and improved technology infrastructure, which should enable Southern Pioneer to more efficiently service its existing clients.”

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and issuer credit ratings (ICR) of “a+” of Navigators Insurance Group, which is comprised of Navigators Insurance Company and its wholly owned subsidiary, Navigators Specialty Insurance Company. Best also affirmed the ICR of “bbb+”, the debt rating of “bbb+” on $125 million senior unsecured notes and the debt ratings on the universal shelf registration of “bbb-” on preferred securities, “bbb” on subordinated notes and “bbb+” on senior unsecured notes of The Navigators Group Inc. The outlook for all ratings is stable. All companies are domiciled in New York, NY. Navigators, Inc. is the parent holding company of Navigators Group. “The ratings recognize Navigators Group’s leading position as a global provider of insurance to the marine energy sector, its solid level of capitalization and operating performance, as well as management’s conservative approach to underwriting and claims management,” said Best.

A.M. Best Co. has assigned a financial strength rating of ‘A’ (Excellent) and an issuer credit rating of “a” to Allied World Reinsurance Company and has assigned a stable outlook to both ratings. Best noted that Allied World Re’s ultimate parent is Bermuda-based Allied World Assurance Company Holdings, and that “Allied World Re will serve as the domestic reinsurance operating platform, which will complement the existing Bermuda-based reinsurance operating platform. The new company has capitalization of approximately $500 million and will initially focus on general casualty, professional and property lines of business.”

A.M. Best Co. has placed the financial strength rating of ‘A-‘ (Excellent) and issuer credit ratings of “a-” under review with negative implications for Philadelphia-based Excess Reinsurance Group. “The group is comprised of Excess Reinsurance Company (Delaware) and its wholly owned subsidiary, Guilderland Reinsurance Company (New York), both of which operate under a reinsurance pooling agreement,” Best explained. “These rating actions follow the approval by Excess Re’s Board of Directors of a definitive sales agreement, dated February 13, 2008.” Best said the negative implications “reflect the uncertainty regarding potential integration risks of future operations. The ratings will remain under review pending the close of the transaction, which is subject to shareholder and regulatory approval.”