Best s Rating Report

Transcription

1 NATIONWIDE MUTUAL INSURANCE COMPANY Columbus, Ohio A+ Ultimate Parent: Nationwide Mutual Insurance Company NATIONWIDE MUTUAL INSURANCE COMPANY One West Nationwide Blvd, Columbus, OH Mailing Address: One West Nationwide Blvd,, , Columbus, OH Web: Tel: Fax: AMB#: NAIC#: Ultimate Parent#: FEIN#: BEST S CREDIT RATING Best s Financial Strength Rating: A+ Outlook: Negative Best s Financial Size Category: XV The company s rating reflects its pooling arrangement with other pool members of the RATING RATIONALE Rating nale: The ratings reflect Nationwide Group s (Nationwide) solid risk-adjusted capitalization, overall favorable operating results, and extensive business profile featuring significant national market presence and brand-name recognition. These positive rating facrs are the result of Nationwide s capital management strategies, its multi-variant pricing model, strict underwriting guidelines, and diversified product mix distributed through multiple channels. The aforementioned rating facrs are partially offset by the group s unprofitable underwriting performance in recent years, largely due the impact of severe weather-related and catastrophic events, despite their mitigation by a comprehensive reinsurance program and wide geographic diversification. In addition, Nationwide s underwriting expense ratio generally exceeds that of other personal lines carriers, primarily due a somewhat elevated level of commission expense. The group carries asbess Printed November 15, Page 1 of 12

2 and environmental (A&E) reserves that unfavorably influenced older years loss reserve development. The group also remains susceptible competitive personal lines market conditions and regulary and legal decisions that could impact profitability. Despite underwriting losses in recent years, the group s surplus and capitalization have shown consistent growth. However, management continues face challenges in the near term generate positive underwriting results that will further strengthen its capital position. Nationwide utilizes multiple distribution channels that include exclusive and independent agents, direct sales via telephone and the Internet, as well as directly marketing affinity groups. Management s business acquisition strategy has enabled the group increase its operating scale, provide solid platforms for running its agency distribution network and increase geographic and product diversification. Regarding future rating movement, if trends in underwriting performance continue be unprofitable in the near term, leading a notable decline in risk-adjusted capitalization, further downward rating pressure would be considered. Conversely, an established improving trend in underwriting profitability could eventually lead consideration of a stable outlook. FIVE-YEAR RATING HISTORY Date Best s FSR Date Best s FSR 10/02/17 A+ 04/02/14 A+ 07/07/16 A+ 05/22/13 A+ 03/19/15 A+ KEY FINANCIAL INDICATORS ($000) Statury Data Direct Premiums Written Net Premiums Written Pre-tax Operating Income Net Income Total Admitted Assets Policyholders Surplus ,581,373 12,492, ,650 29,551,793 11,343, ,596,738 14,630, , ,835 32,675,758 11,792, ,331,544 14,962, , ,375 34,711,195 12,137, ,885,382 15,510, , ,128 35,923,712 12,315, ,669,671 16,174, , ,581 37,185,213 12,690,338 Profitability Leverage Liquidity Inv. Yield (%) Pre-tax ROR (%) NA Inv Lev NPW PHS Net Lev. Overall Liq. (%) Oper. Cash flow (%) Yr (*) Within several financial tables of this report, this company is compared against the Private Passenger Standard Au & Homeowners Composite. (*) Data reflected within all tables of this report has been compiled from the company-filed statury statement. CORPORATE OVERVIEW Nationwide Mutual Insurance Company (NMIC), Nationwide Mutual Fire Insurance Company (Nationwide Mutual Fire) and Farmland Mutual Insurance Company are affiliated property/casualty insurers. NMIC fully owns the following groups of companies and their respective property/casualty subsidiaries: ALLIED Group, Inc. (five subsidiaries), Scottsdale Insurance Company (five subsidiaries) and THI Holdings Delaware, Inc. (seven subsidiaries). NMIC also owns fourteen other individual property/casualty subsidiaries, including Atlantic Floridian Insurance Company, Crestbrook Insurance Company, Nationwide Indemnity Company and Nationwide Insurance Company of Florida. NMIC and Nationwide Mutual Fire respectively own 95.2% and 4.8% of Nationwide Corporation, parent of Nationwide Financial Services, Inc. (NFS). NFS is the holding company for Nationwide Life Insurance Company (NLIC) and other companies that comprise the life insurance and retirement savings operations of the Nationwide group of companies (Nationwide). This group also includes Nationwide Life Insurance Company of America (NLICA) and its subsidiaries, including the affiliated distribution network (Nationwide Financial Network [NFN]). CORPORATE STRUCTURE AMB# COMPANY NAME DOMICILE % OWN Nationwide Mutual Ins Co OH Allied Holdings (DE), Inc. DE ALLIED Group, Inc IA ALLIED Property & Cas Ins Co IA Nationwide Advantage Mortgage IA AMCO Insurance Company IA Nationwide Advantage Mortgage IA Turks and Caicos Islands AGMC Reinsurance, Ltd Deposirs Insurance Company IA Nationwide Advantage Mortgage IA Nationwide Insurance Co of Am OH Harleysville Group Inc DE Harleysville Insurance Company PA Harleysville Insurance Co NY PA Harleysville Ins Co of NJ NJ Harleysville Lake States Ins MI Harleysville Preferred Ins Co PA Harleysville Worcester Ins Co PA Allied Ins Co of America OH Crestbrook Insurance Company OH Harleysville Life Ins Co PA Lone Star General Agency Inc TX Colonial County Mutual Ins Co TX National Casualty Company OH Natl Cas Co of America Ltd United Kingdom Nationwide Affinity Ins Co Am OH Nationwide Agribusiness Ins Co IA Nationwide Assurance Company OH Nationwide Corporation OH Printed November 15, Page 2 of 12

3 Nationwide Financial Services DE Nationwide Life Ins Co OH Eagle Captive Reinsurance LLC OH Jefferson National Financial DE Jefferson National Life Ins Co TX Jefferson National Life Ins NY NY Nationwide Life & Annuity Ins OH Olentangy Reinsurance LLC VT Nationwide General Ins Co OH Nationwide Indemnity Company OH Nationwide Insurance Co of FL OH Nationwide Lloyds TX Nationwide Prop & Cas Ins Co OH Scottsdale Indemnity Company OH Scottsdale Insurance Company OH Freedom Specialty Insurance Co OH Scottsdale Surplus Lines Ins AZ Veterinary Pet Insurance Co OH Western Heritage Insurance Co AZ THI Holdings (Delaware) Inc DE Titan Indemnity Company TX Titan Insurance Company MI Vicria Fire & Casualty Co OH Vicria Aumobile Ins Co OH Vicria National Ins Co OH Vicria Select Insurance Co OH Vicria Specialty Ins Co OH Farmland Mutual Insurance Co IA Nationwide Mutual Fire Ins Co OH BUSINESS PROFILE Nationwide is one of the largest multi-line insurers and financial services organizations in the U.S., with statury assets of nearly $53.0 billion. Its combined operations are serviced by 33,000 employees and by more than 60,000 agents and producers. Through its various affiliates, Nationwide is engaged in two core businesses: Property/Casualty Insurance and Life & Retirement Savings. The Property/Casualty Insurance segment, led by Nationwide Mutual Insurance Company (NMIC), generates approximately 80% of Nationwide s net premiums written. NMIC provides personal and main-street commercial insurance primarily through a national network of exclusive agencies. In addition, Nationwide distributes through direct response and independent agency channels, which were enhanced by the acquisition of the ALLIED group of companies and Nationwide Insurance Company of America. THI Holdings Delaware, Inc. (THI), which is led by Vicria Fire & Casualty Company, includes seven operating companies and specializes in writing non-standard aumobile business. On January 1, 2017, National General Holdings Corp. entered in a renewal rights transaction with THI for its personal and commercial non-standard vehicle in-force policies. The group s commercial segment includes the Scottsdale companies and Farmland Mutual Insurance Company. Western Heritage Insurance Company, which was acquired along with ALLIED Group, Inc., provides a wide range of commercial insurance products and services. The Scottsdale companies and Western Heritage Insurance Company write property/casualty and specialty classes of insurance on an excess and surplus lines basis. The Harleysville companies write mainly commercial multi-peril and au lines in northeastern states. The specific lines of commercial business for the group s commercial segment include contract property and casualty, professional, transportation and brokerage lines. These lines account for approximately 9% of the group s net premiums written. Nationwide s primary property/casualty lines of business include private passenger aumobile liability and physical damage, homeowners and main-street commercial business. NMIC predominantly writes standard personal aumobile and main-street commercial coverages. Nationwide Mutual Fire specializes in providing homeowners insurance. Nationwide Property and Casualty Insurance Company provides alternative-priced personal aumobile products Nationwide s agents. Nationwide General Insurance Company specializes in providing au insurance for select mid-size employer groups and professional organizations. Nationwide Assurance and its affiliate, Colonial County Mutual Insurance Company, specialize in nonstandard au and morcycle coverages. The ALLIED companies specialize in personal and main-street commercial insurance products primarily written through independent agents in the western U.S. Thirteen service centers are maintained throughout the country issue and service policies, collect premiums and pay claims in their respective terriries. The main rating unit, Nationwide Group, consists of four members of the intercompany reinsurance pool: Nationwide Mutual Insurance Company, 72.0%; Nationwide Mutual Fire Insurance Company, 23.0%; Scottsdale Insurance Company, 4.0%; and Farmland Mutual Insurance Company, 1.0%. The pooling agreement also includes thirty-two affiliates, thirty of which reinsure with either a pool member or another affiliate and qualify for a reinsurance affiliation code. One subsidiary company, Nationwide Indemnity Company, since 1998 has primarily served as the runoff entity for Nationwide s discontinued operations, mainly those with exposure asbess and environmental (A&E) claims. As part of its plans significantly grow its property/casualty revenues, Nationwide continues leverage its multi-channel presence respond changing cusmer preferences. The group utilizes multiple access points attract new cusmers with acquisitions, such as the ALLIED companies and Nationwide Insurance Company of America. While offering new outlets cusmers, the group expects its exclusive and independent agents remain a key part of its growth strategy. Additional growth is planned by expanding existing distribution channels, comprised of exclusive and independent agents, in areas where Nationwide has little or no presence supplemented by using multiple access points, such as direct response, the Internet, and greater employer and affinity group endorsements of Nationwide products. In furtherance of this strategy, in January 2009, the group completed the privatization of Nationwide Financial Services, Inc. (NFS), the intermediate parent holding company of its life insurance subsidiaries. The increased Printed November 15, Page 3 of 12

4 cultural alignment brought about by the privatization is expected strengthen the group s competitive position, facilitate a more integrated, focused cusmer-centric view and enhance delivery of Nationwide s On Your Side promise. In 2014 the organization began the process of re-branding all companies previously mentioned herein as Nationwide further enforce the concept of membership. The Life & Retirement Savings segment, led by NFS and its subsidiaries, Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company, provides long-term savings and retirement products, including variable annuities, fixed annuities and life insurance as well as pension products and administrative services. These products are distributed through financial planners, financial institutions, pension plan administrars, sckbrokers and Nationwide s exclusive sales representatives and agency force. Scope of Operations: Nationwide Group and its subsidiary companies provide a wide and comprehensive variety of personal lines and small commercial lines products, available through multiple distribution channels in all fifty states. TOTAL PREMIUM COMPOSITION & GROWTH ANALYSIS Reinsurance Reinsurance DPW Prem Assumed Prem Ceded ($000) (% Chg) ($000) (% Chg) ($000) (% Chg) ,581, ,670, ,759, ,596, ,671, ,637, ,331, ,916, ,285, ,885, ,038, ,412, ,669, ,029, ,524, Yr CAGR NPW NPE ($000) (% Chg) ($000) (% Chg) ,492, ,405, ,630, ,847, ,962, ,641, ,510, ,240, ,174, ,930, Yr CAGR Terriry: The company is licensed in the District of Columbia, Guam, U.S. Virgin Islands and all states BY-LINE BUSINESS ($000) Reinsurance Reinsurance DPW Prem Assumed Prem Ceded Product Line ($000) (%) ($000) (%) ($000) (%) Priv Pass Au Liab 903, ,651, , Au Physical 698, ,925, , Homeowners 135, ,183, , Com l MultiPeril 309, ,321, , Oth Liab Occur 183, ,271, , Comm l Au Liab 171, ,372, , Inland Marine 73, , , Workers Comp 57, , , Farmowners 5, , , Oth Liab CM 3, , , Allied Lines 57, , , All Other 71, , , Total 2,669, ,029, ,524, Business NPW Retention Product Line ($000) (%) (%) Priv Pass Au Liab 3,711, Au Physical 2,945, Homeowners 2,665, Com l MultiPeril 2,067, Oth Liab Occur 1,117, Comm l Au Liab 1,108, Inland Marine 599, Workers Comp 397, Farmowners 389, Oth Liab CM 368, Allied Lines 273, All Other 530, Total 16,174, BY-LINE RESERVES ($000) Product Line Priv Pass Au Liab 3,135,806 2,795,750 2,642,198 2,609,490 2,610,602 Au Physical 119,534 80,645 89,337 82,976 55,192 Homeowners 618, , , , ,588 Com l MultiPeril 2,272,141 2,178,690 2,013,943 1,924,915 1,205,611 Oth Liab Occur 2,125,159 1,962,953 1,788,331 1,660,548 1,483,006 Comm l Au Liab 1,602,057 1,524,727 1,394,928 1,212, ,519 Inland Marine 59,639 24,175 35,920 36,951 29,345 Workers Comp 1,038,892 1,058,010 1,026,156 1,000, ,406 Farmowners 112, ,805 93,658 79,987 80,794 Oth Liab CM 407, , , , ,300 Allied Lines 78,133 60,724 62,208 50,692 49,234 All Other 346, , , , ,407 Total 11,917,119 11,052,020 10,249,545 9,678,250 7,986,005 Printed November 15, Page 4 of 12

5 Market Share/MarketPresence: Nationwide Group and its subsidiary companies maintain leading market positions in nearly all product lines. The group is the largest writer of farm policies and pet insurance nationally. The group also ranks as the 8th largest au insurer, 7th largest homeowners insurer, and the 2nd largest E&S insurer nationally. GEOGRAPHIC BREAKDOWN BY DIRECT PREMIUM WRITINGS ($000) North Carolina 407, , , , ,393 Pennsylvania 299, , , , ,446 Ohio 258, , , , ,132 Virginia 222, , , , ,734 California 199, , , , ,815 Maryland 144, , , , ,909 New York 112, , , , ,250 Georgia 112, ,368 51,519 30,614 25,714 West Virginia 109, , , , ,915 Delaware 69,198 81,388 93, , ,711 All Other 734, , ,731 1,129,465 1,174,353 Total 2,669,671 2,885,382 3,331,544 3,596,738 3,581,373 RISK MANAGEMENT Nationwide Group maintains a comprehensive and continually developing ERM program, with a dedicated Chief Risk Officer and extensive staff. Risk management teams are independent and embedded in business units, and risk management leaders are also members of business unit management teams. The group sees value in the process in its Risk Transfer Framework, in pricing / product design, and by internally assessing required and available economic capital through its Risk Adjusted Return on Capital (RAROC) program. Risk are formally delegated committees, and the Board of Direcrs manages the intersections of oversight responsibilities. The Board is also ultimately responsible for all risk management oversight, and for any risks not specifically delegated these committees. Stress Tests Performed: Nationwide Group s risk adjusted capital is stressed a 100 year probable maximum loss for a hurricane event ensure capital stability. Additional stress tests are run consider various terrorism and deficit in earnings scenarios. Catastrophe Exposure and Management: Nationwide underwrites and monirs its hurricane risk in a number of ways. Corporate underwriting guidelines are used in all coastal states, and state specific adjustments applied where permitted. Additionally, risk assessment ols may be employed in certain geographies for specific lines of business during the underwriting process. Hurricane modeling is performed semi-annually by a team of experienced catastrophe modeling professionals in the group s Product and Pricing Risk Management Department. Additional modeling, including for other perils such as rnado/hail, earthquake and winter freeze, is performed throughout the year as required, for purposes such as concentration and exposure management, pricing applications, strategic analysis, and relativity modeling. In all cases, coastal exposure levels are managed and monired monthly ensure compliance with established target levels. Policy provision management, including the use of minimum wind/hurricane deductibles where permitted, are also employed extensively. OPERATING PERFORMANCE Operating Results: Nationwide s earnings fluctuated over the past five years due underwriting losses, interest rate fluctuations and the variability of its affiliated investments. The group s average five-year pre-tax operating and tal returns on revenue lagged the composite. Total returns have been somewhat influenced by variability in unrealized capital gains/losses on the group s common sck portfolio and its affiliated investments, primarily NFS. Operating results reflect management s adherence strict underwriting principles and increased rates, primarily on its personal lines book of business. Consequently, earnings in the group s core lines of business improved as rate increases developed through earned premiums. Management also implemented underwriting and agency management strategies that included re-underwriting initiatives, risk segmentation and technological enhancements that were designed sustain positive underwriting results. In addition, the group continued expand its cusmer access points, diversify its spread of risk throughout the U.S. and re-focused on its core competencies. However, earnings were impacted by the additional, albeit declining level of, A&E reserving performed in each of the past five years, and more notably by the significant underwriting losses suffered from au lines and the frequent and severe weather-related losses over the same time. The group s diversified fixed-income portfolio produced average five-year pre-tax investment yields and tal investment returns that were comparable the composite and a robust stream of investment income that has offset underwriting losses in three of the past five years. In addition, realized capital gains have minimally supported operating earnings over the past five years. Nationwide s common scks and sizable affiliated holdings have somewhat limited its average return on invested assets. Printed November 15, Page 5 of 12

6 PROFITABILITY ANALYSIS ($000) multiple distribution network and geographic diversification strategy throughout the United States. Furthermore, the group has acquired small- Company medium-size insurance organizations which have enhanced the group s Pre-tax After-tax product distribution network. The increased cultural alignment brought about Operating Operating Net Total by the privatization of NFS in January 2009 has strengthened the group s Income Income Income Return competitive position, facilitated a more integrated, focused cusmer-centric ,512 21, ,904 view and enhanced delivery of Nationwide s On Your Side promise. The , , , ,463 group s underwriting results will continue be influenced by weather-related , , , ,084 events, competitive market and economic conditions and legislative decisions , , , , , , , ,662 UNDERWRITING EXPERIENCE 5-Yr Total 894,067 1,324,588 1,109,406 1,350,263 Net Undrw Loss s Expense s Ind Income Pure Company Industry Composite ($000) Loss LAE Loss & Net Other Total Div. LAE Comm. Exp. Exp. Pol. Pre-tax Return Operating Pre-tax Return Operating , ROR (%) on PHS (%) (%) ROR (%) on PHS (%) (%) , , , ,125, Yr Total/Avg -3,736, Yr Avg BY-LINE LOSS RATIO Underwriting Results: Nationwide s underwriting performance continues Product Line Yr Avg be impacted by competitive market conditions, escalating loss costs, Priv Pass Au Liab significant weather-related losses and asbess and environmental (A&E) Au Physical reserve changes that caused its average five-year combined ratio lag the Homeowners composite. Underwriting performance has lagged each year since 2012 due Com l MultiPeril significant frequent and severe weather-related losses, particularly rnadoes, Oth Liab Occur concentrated hail events, and Supersrm Sandy. Recently more variability has Comm l Au Liab been noted due increasing frequency and severity in the au lines. Inland Marine The group s operating expenses reflect its decentralized operating structure Workers Comp while loss and loss adjustment expenses are closely controlled. Core Farmowners underwriting results were impacted by increased aumobile loss costs which, Oth Liab CM several times during this period, outpaced premium rate increases. However, Allied Lines the group steadily increased aumobile rates and tightened underwriting All Other guidelines, which tempered the loss experience. Commercial business has Total also been subject rate increases, re-underwriting initiatives and refined risk segmentation. These actions, as well as management s efforts focus on Nationwide s core personal and main-street commercial lines of business, have led some improvement in the group s underwriting results. However, the additional reserving of A&E claims continued impact the group s underwriting results. These reserves are recorded on Nationwide Indemnity Company which allows management better monir this aspect of the group s loss reserve development. Also, the group s Florida hurricane exposure, while significantly reduced via recent years ongoing non-renewal initiatives, is confined Nationwide Insurance Company of Florida (NICOF). Due its decentralized organizational structure, the group has been able focus on specific target markets and establish solid platforms for running its Printed November 15, Page 6 of 12

7 DIRECT LOSS RATIO BY STATE Yr Avg North Carolina Pennsylvania Ohio Virginia California Maryland New York Georgia West Virginia Delaware All Other Total Investment Results: Nationwide s invested asset base generates a reliable stream of investment income that helped offset the tal underwriting losses reported in two of the past five years. Pre-tax investment yields and tal investment returns were impacted by the group s substantial holdings of fixed income securities and the level of affiliated investments and slightly lagged the composite average of the past five years. The group s investment portfolio primarily consists of high-quality bonds followed by affiliated investments and real estate and mortgages. Affiliated investments represent approximately 20% of invested assets, primarily due the group s ownership of Nationwide Financial Services, Inc. (NFS), the intermediate holding company of its life insurance subsidiaries. Investment income has been significant but variable since 2012 due fluid financial market conditions. INVESTMENT GAINS ($000) Company Net Realized Unrealized Inv Capital Capital Year Income Gains Gains ,794-20, , ,656 11,101 28, ,291,828-68, , , ,066-38, ,009-5, ,243 5-Yr Total 4,095, , ,858 Company Industry Composite Pre-tax Invest Inv Inc Inv Return on Total Inv Inc Inv Growth Yield Inv Assets Return Growth Yield Year (%) (%) (%) (%) (%) (%) Yr Avg BALANCE SHEET STRENGTH Capitalization: Nationwide Group s risk-adjusted capitalization, as evidenced by its Best s Capital Adequacy (BCAR) comfortably supports the current rating. This capital position reflects the equity embedded in Nationwide s unearned premium and loss reserves offset slightly by its moderate underwriting and investment leverage positions. Comprehensive reinsurance coverage and a surplus note program help maintain Nationwide s net, after-tax probable maximum loss (PML) expected arise from a 100-year hurricane event less than 10% of reported policyholders surplus. In prior years, the group s surplus was adversely impacted by realized and unrealized capital losses on both affiliated and unaffiliated equity holdings; however, improved operating performance and capital gains produced increases in surplus in four of the past five years. Slight decline in surplus was noted in 2012 mainly due weather related losses. Surplus grew slightly in 2013 due improvement in operating performance, in 2014 due mainly investment income and unrealized investment gains, and in 2015 due mainly investment income. Surplus growth in 2016 was impacted mainly by additional unrealized gains. Nationwide Mutual currently has five surplus notes outstanding with an aggregate value of $2.2 billion, the proceeds of which were used fund new business growth and for other general business purposes. Nationwide Mutual may consider issuing additional notes and/or establish other contingent note programs in support of the group s ongoing insurance operations. Current BCAR: Printed November 15, Page 7 of 12

8 CAPITAL GENERATION ANALYSIS ($000) Source of Surplus Growth Pre-tax Realized Unrealized Operating Capital Income Capital Year Income Gains Taxes Gains ,861-42, , ,757 11,101-8,976 28, ,792-68, , , , , ,604-38, ,635-5, , ,243 5-Yr Total 894, , , ,858 Source of Surplus Growth Net Change % Chg Contrib. Other in in Year Capital Changes PHS PHS , ,577 49, , , , , , , , , , , Yr Total -8,389 53,760 1,395, QUALITY OF SURPLUS ($000) Surplus Other Contributed Unassigned Year Notes Debt Capital Surplus ,142,621 9,201, ,164,869 9,627, ,190,559 9,947, ,191,085 10,124, ,191,611 10,498,727 Year-End Conditional Adjusted Year PHS Reserves PHS ,343,998 31,951 11,375, ,792,529 41,027 11,833, ,137,989 33,846 12,171, ,315,875 24,210 12,340, ,690,338 24,009 12,714,346 LEVERAGE ANALYSIS Company Industry Composite Res. Res. NPW PHS PHS Net Lev. Gross Lev. NPW PHS PHS Net Lev. Gross Lev CEDED REINSURANCE ANALYSIS ($000) Company Bus. Reins. Ceded Ret. Recov. Reins. (%) PHS (%) PHS (%) Industry Composite Bus. Reins. Ceded Ret. Recov. Reins. (%) PHS (%) PHS (%) Ceded Reins. Total ,411, ,388, ,316, ,262, ,190, REINSURANCE RECOVERABLES ($000) Paid & Unpaid Losses IBNR Unearned Premiums Other Recov* Total Reins Recov US Affiliates... 2,184,273 1,627,208 1,725,976 42,123 5,579,580 US Insurers ,533 24,971 14, ,132 Pools/Associations ,888 73,469 31, ,864 Other Non-US... 28,126 16,922 4,243 49,291 Total (ex US Affils) , ,362 50, ,287 Grand Total... 2,868,820 1,742,570 1,776,331 42,146 6,429,867 * Includes Commissions less Funds Withheld Loss Reserves: Nationwide s hisrical loss and LAE reserve development was somewhat disrted due the inclusion of both ongoing and discontinued business. NIC s runoff A&E operations and NICOF s largely unfavorable loss maturation adversely affected the overall group s loss development; however, their impact has declined in recent years. Ongoing operations resulted in the reporting of some adverse development in recent years. According A.M. Best s estimates, Nationwide Group ranks among the p five insurers in the nation in commercial lines that are exposed ongoing A&E claims emergence. Much of Nationwide s potential A&E liability exposure stems from policies assumed through various reinsurance agreements and from a former affiliate. On December 31, 1998, Nationwide Indemnity assumed loss and loss adjustment expense (LAE) reserves taling $2 billion as a result of two loss portfolio transfers. First, the company assumed from the Wausau Companies, liability for all losses and LAE related its discontinued operations taling nearly $1.4 billion, including A&E reserves of approximately $646 million. In addition, the company assumed from Nationwide Mutual Insurance Company liability for all losses and LAE related business Nationwide Mutual assumed from National Casualty Company, an affiliate, and certain other assumed contracts as defined in the reinsurance contract. The tal amount transferred, which is primarily reserves for A&E claims, was approximately $676 million. Assumption of these two portfolios established Nationwide Indemnity as the runoff entity for Nationwide s discontinued operations. Management continues closely monir its A&E loss development; however, in light of the ongoing volatility and litigation surrounding A&E claims, the potential for further adverse development remains. Printed November 15, Page 8 of 12

9 LOSS & ALAE RESERVE DEVELOP.: CALENDAR YEAR ($000) Calendar Year Orig. Loss Reserves Developed Reserves Thru Latest Year End Develop. Orig. (%) Develop. PHS (%) Develop. NPE (%) Unpaid Year End Unpaid Res. Develop. (%) ,235,445 8,931, ,379, ,295,231 9,172, ,800, ,325,974 9,558, ,624, ,893,830 10,279, ,147, ,688,314 10,991, ,703, ,594,133 11,594, ,594, LOSS & ALAE RESERVE DEVELOP.: ACCIDENT YEAR ($000) Accident Year Orig. Loss Reserves Developed Reserves Thru Latest Year End Develop. Orig. (%) Unpaid Year End Acc. Yr Loss Acc. Yr ,682,281 3,759, , ,753,358 3,779, , ,741,843 3,954, , ,125,070 4,361, ,523, ,503,406 4,603, ,555, ,890,466 4,890,466 4,890, ASBESTOS & ENVIRONMENTAL (A&E) RESERVE ANALYSIS Company Industry Composite Year Net A&E Reserve ($000) Reserve Retention (%) Net IBNR Mix (%) Survival (3 yr) Impact (1 yr) Impact (3 yr) Survival (3 yr) Impact (1 yr) Impact (3 yr) , XX 0.0 XX XX 0.3 XX , XX 0.0 XX XX 0.3 XX , , , Liquidity: All of Nationwide s measures of liquidity (the quick, current and overall ratios) lagged the composite average over the past five years. However, liquidity was enhanced by the positive operating cash flows reported in each of the last five years. The group s invested assets are predominantly held in the form of fixed-income securities that provide an adequate rate of return and with maturities that closely match the expected payout of losses and expenses. In addition, Nationwide Mutual could potentially issue additional surplus notes and/or establish contingent note programs, should the need arise. LIQUIDITY ANALYSIS Company Industry Composite Gross Gross Quick Current Overall Agents Bal. Quick Current Overall Agents Bal. Liq. (%) Liq. (%) Liq. (%) PHS (%) Liq. (%) Liq. (%) Liq. (%) PHS (%) CASH FLOW ANALYSIS ($000) Company Industry Composite Underw Oper Net Underw Oper Underw Oper Cash Cash Cash Cash Cash Cash Cash Year Flow Flow Flow Flow (%) Flow (%) Flow (%) Flow (%) ,957, , , , , , , ,047 9, ,976 1,408, , , , , Yr Total -2,432,339 2,051,696 27,468 Investments: Nationwide s current holdings of other investments, real estate and common sck result in non-affiliated investment leverage that is comparable the composite. This includes non-traditional investment formats as indicated on Schedule BA. However, primarily due the group s ownership of Nationwide Financial Services, Inc. (NFS), the intermediate holding company of its life insurance subsidiaries, its hisrically elevated level of affiliated investment leverage remains at approximately 49% of policyholders surplus. INVESTMENT LEVERAGE ANALYSIS (% OF PHS) Industry Company Composite Class Real Other Non-Affil. Class 3-6 Bonds Estate/ Mtg. Invested Assets Common Scks Inv. Lev. Affil. Inv. 3-6 Bonds Common Scks Printed November 15, Page 9 of 12

10 INVESTMENTS - SECURITIES Current Year Distribution of Bonds By Maturity Years Yrs-Avg Maturity Government Gov t Agencies & Muni Industrial & Misc Hybrid Securities Total Bonds (000) 13,448,898 12,596,065 11,459,137 11,085,768 8,327,756 US Government Foreign Government Foreign - All Other State/Special Revenue - US Industrial & Misc - US Private Issues Public Issues Bond Quality (%) Class Class Class Class Class Class INVESTMENTS - EQUITIES Scks (000) 8,177,132 8,606,235 8,424,743 7,956,008 7,861,556 Unaffiliated Common Affiliated Common Unaffiliated Preferred Affiliated Preferred INVESTMENTS - MORTGAGE LOANS & REAL ESTATE Mortgage Loans & Real Estate (000) 1,637,173 1,428,462 1,315,903 1,093,989 1,162,844 Mortgage Loans Property Occupied by Co Property Held for Inc INVESTMENTS - OTHER INVESTED ASSETS Other Inv Assets (000) 3,995,280 3,860,443 4,192,979 4,078,612 3,958,978 Cash Short-Term Schedule BA Assets All Other HISTORY This company, incorporated on December 16, 1925, under the laws of Ohio, began business on April 14, 1926, under the sponsorship of The Ohio Farm Bureau Federation provide aumobile insurance for Farm Bureau members at cost. Operations were conducted under the title Farm Bureau Mutual Aumobile Insurance Company until September 1, On that date, the present corporate title was adopted. MANAGEMENT Officers: Chairman, Timothy J. Corcoran; Chief Executive Officer, Stephen S. Rasmussen; Presidents and Chief Operating Officers, Mark A. Berven (Property & Casualty), Mark A. Pizzi (Nationwide Direct & Member Solutions), Kirt A. Walker (Nationwide Financial); Executive Vice President and Chief Financial Officer, Mark R. Thresher; Executive Vice President and Chief Information Officer, Michael C. Keller; Executive Vice President and Chief Marketing Officer, Terrance Willams; Executive Vice President and Chief Administrative Officer, Gale V. King; Executive Vice President and Chief Legal Officer, Mark S. Howard; Senior Vice President and Chief Investment Officer, Harry H. Hallowell; Senior Vice President and Treasurer, David LaPaul; Senior Vice Presidents, Tina Ambrozy, David G. Arango, David A. Bano, James D. Benson, Pamela A. Biesecker, Shelley Brazeau Temple, John L. Carter, Thomas E. Clark, Gary A. Douglas, Timothy G. Frommeyer, Peter A. Gola, Susan J. Gueli, Eric S. Henderson, Terri L. Hill, Gregory S. Jordan, James Korcykoski, Michael P. Leach, Brad R. Liggett, Michael W. Mahaffey, Sandra L. Rich, Jeff M. Rommel, Amy T. Shore, Eric E. Smith, Michael S. Spangler, Guruprasad C. Vasudeva, Andrew Walker; Vice President and Secretary, Robert W. Horner, III. Direcrs: James B. Bachmann, Craig R. Adams, Timothy J. Corcoran, Yvonne M. Curl, Jacquelin M. Fernandez, Stephen F. Hirsch, Daniel T. Kelley, M. Diane Koken, Lydia M. Marshall, Terry W. McClure, Barry J. Nalebuff, Brent R. Porteus, Suku Radia, Stephen S. Rasmussen, Michael J. Toelle, Sparky Weilnau, Jeffrey W. Zellers. REGULATORY An examination of the financial condition is being made as of December 31, 2016, by the insurance department of Ohio. The 2016 annual independent Printed November 15, Page 10 of 12

11 audit of the company was conducted by KPMG, LLP. The annual statement of actuarial opinion is provided by G. Chrispher Nyce, FCAS, MAAA, KPMG, LLP. REINSURANCE Nationwide Group maintains various reinsurance agreements with both affiliates and non-affiliates. Reinsurance agreements with non-affiliates are designed protect the group from potential losses in excess of what management concludes are reasonable retentions of risk. Nationwide s comprehensive reinsurance program provides excess coverage for individual property and casualty losses and for property catastrophe loss. The group also maintains various quota share agreements and purchases facultative reinsurance for its largest risks. Nationwide s national property catastrophe treaty provides coverage attaching at $1.05 billion and exhausting at $3.65 billion per occurrence. Included in this coverage is a one multi-peril catastrophe bond with a net $225 million limit. Tower features eight layers of coverage with varying levels of co-participation. Affiliated agreements include the participation in the Nationwide pooling agreement by seventeen affiliated companies, numerous quota share reinsurance agreements between affiliates and the aforementioned property catastrophe agreement between NICOF and Nationwide Mutual. BALANCE SHEET ADMITTED ASSETS ($000) YE 2016 YE % 15% Bonds... 13,448,898 12,596, Preferred sck Common sck... 18, , Cash and short-term invest , , Real estate, investment... 31,424 76, Derivatives... 2, Other non-affil inv asset... 2,748,081 2,619, Investments in affiliates... 9,987,040 9,842, Real estate, offices , , Total invested assets... 27,258,482 26,491, Premium balances... 5,653,603 5,308, Accrued interest , , All other assets... 4,141,099 3,991, Total assets... 37,185,213 35,923, LIABILITIES & SURPLUS ($000) YE 2016 YE % 15% Loss & LAE reserves... 11,917,119 11,052, Unearned premiums... 6,541,079 6,297, Conditional reserve funds... 24,009 24, Derivatives... 54,811 75, All other liabilities... 5,957,858 6,158, Total liabilities... 24,494,875 23,607, Surplus notes... 2,191,611 2,191, Unassigned surplus... 10,498,727 10,124, Total policyholders surplus... 12,690,338 12,315, Total liabilities & surplus... 37,185,213 35,923, SUMMARY OF 2016 OPERATIONS ($000) Funds Provided from Statement of Income 2016 Operations 2016 Premiums earned... 15,930,827 Premiums collected... 15,980,116 Benefit & loss-related pmts Losses incurred... 10,398,633 9,501,858 LAE incurred... 1,500,482 Undrw expenses incurred LAE & undrw expenses paid 5,145,858 6,670,152 Div policyholders... 10,919 Div policyholders... 11,518 Net underwriting income -1,125,065 Undrw cash flow ,412 Net investment income ,009 Investment income ,273 Other income/expense ,421 Other income/expense... 95,311 Pre-tax cash operations Pre-tax oper income , ,173 Realized capital gains... -5,174 Income taxes incurred ,228 Income taxes pd (recov) ,709 Net income ,581 Net oper cash flow ,882 Printed November 15, Page 11 of 12

12 Why is this Best s Rating Report important you? The A.M. Best Company is the oldest, most experienced rating agency in the world and has been reporting on the financial condition of insurance companies since contract or any other financial obligation issued by an insurer, nor does it address the suitability of any particular policy or contract for a specific purpose or purchaser. A Best's Financial Strength Rating (FSR) is an independent opinion of an insurer's financial strength and ability meet its ongoing insurance policy and contract obligations. An FSR is not assigned specific insurance policies or contracts and does not address any other risk, including, but not limited, an insurer's claims-payment policies or procedures; the ability of the insurer dispute or deny claims payment on grounds of misrepresentation or fraud; or any specific liability contractually borne by the policy or contract holder. An FSR is not a recommendation purchase, hold or terminate any insurance policy, The company information appearing in this pamphlet is an extract from the complete AMB Credit Report. You may obtain the complete report by contacting Cusmer Service at +1(908) or cusmer_service@ambest.com. Please reference the company's identification number (AMB#) listed on this rating report. For the latest Best's Financial Strength Ratings along with their definitions and A.M. Best's Terms of Use, please visit Copyright 2017 A.M. Best Company, Inc. and/or its affiliates. All rights reserved. No part of this report may be reproduced, distributed, or sred in a database or retrieval system, or transmitted in any form or by any means without the prior written permission of the A.M. Best Company. While the data in this report was obtained from sources believed be reliable, its accuracy is not guaranteed. Printed November 15, Page 12 of 12