Standard & Poor's Assigns Single-'A' Rating to Nationwide Financial Services' $200 Million Trust-Preferred Securities

Strategic Insights -

Standard & Poor's, a leading credit rating agency, has assigned a single-'A' rating to Nationwide Financial Services, Inc.'s $200 million of 30-year trust originated preferred securities. This move comes as the company draws down the $1 billion shelf registration filed on May 15, 1998. The rating reflects Nationwide Life's strong brand presence in the retirement and savings market, a potent distribution system, and highly competitive products.

Key Takeaways:

  • Nationwide Financial Services is 81.5% owned by Nationwide Corp., a subsidiary of Nationwide Mutual, and is the holding company for Nationwide Life Insurance Co. and Nationwide Life & Annuity Insurance Co.
  • The company relies heavily on dividends from subsidiaries to pay interest and principal on its debt.
  • The single-'A' rating on the trust originated preferred securities reflects Nationwide Life's strong brand presence, distribution system, and competitive products.
  • Fee-based product growth has been exceptional, with Nationwide Life benefiting from solid sales growth and historically high market appreciation in equity investment funds.
  • The company maintains a superior capital position, adequate liquidity, and strong financial flexibility due to its recent initial public offering (IPO).
  • The negative outlook reflects the highly competitive nature of the market, particularly with large, low-cost mutual fund companies, and the potential impact of tax law changes on product competitiveness.
  • Standard & Poor's expects annuity sales to continue growing, driven by the strong equity market, and for risk-based capital to remain appropriate for the rating level.

Statistics:

  • $200 million: The amount of the 30-year trust originated preferred securities issued by Nationwide Financial Services.
  • $1 billion: The size of the shelf registration filed by Nationwide Financial Services on May 15, 1998.
  • 81.5%: Nationwide Financial's ownership by Nationwide Corp.
  • 30 years: The maturity period for the trust originated preferred securities.
  • 15 May 1998: The date Nationwide Financial Services filed the $1 billion shelf registration.

Sources:

  • Standard & Poor's CreditWire, 14 October 1998
  • Business Wire, 14 October 1998