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20 May 1998
MOODY'S MONITORING THE CREDIT IMPLICATIONS OF NATIONWIDE'S PROPOSED OFFER TO ACQUIRE ALLIED GROUP, INC. AND TO MERGE WITH ALLIED MUTUAL; RATING OUTLOOK BECOMES NEGATIVE
New York, May 20, 1998 -- Responding to yesterday's announcement by Nationwide Mutual Insurance Company to tender for all of the common stock of Allied Group, Inc. and to merge with Allied Mutual Insurance Company, Moody's Investors Service stated that it has changed the outlook for the ratings of Nationwide Mutual Insurance Company (insurance financial strength rating at Aa2) and certain of its affiliated companies to negative from stable. The rating agency believes that the proposed unsolicited offer suggests an evolving risk appetite that is not fully reflected in the company's current ratings. Moody's noted that no definitive merger agreement had been reached and neither the consummation of the tender offer nor the mutual merger is conditioned on the other. Nationwide Mutual has also offered to purchase from Allied Mutual all of the 6.75% Series Preferred Stock of Allied Group, Inc. for $65 million. The rating agency also stated that Nationwide's past efforts to negotiate a merger with the management of Allied Mutual have not been successful.
Moody's said that the proposed acquisition and merger appear to make strategic sense primarily because they offer Nationwide the opportunity to build upon its independent agency channel of distribution, which it began when it acquired the independent agency operations of TIG Holdings in 1997. In addition, Allied's premiums are derived principally from geographic regions in which Nationwide currently has little market share. The rating agency noted, however, that it believes the proposed transaction is an aggressive step for Nationwide and reflects the increasingly competitive marketplace for personal lines writers. Moreover, it reflects Nationwide's increased need for scale in its independent agency operations and for broader distribution of its mainstay products--auto and homeowners insurance. Moody's also believes that integration risk is substantial, and could be heightened because of the unsolicted nature of Nationwide's offer.
Moody's current Aa2 insurance financial strength ratings of the leading intercompany pool members within Nationwide Mutual Group are based on the group's strong market position in personal insurance lines, its solid balance sheet, and its conservative capital structure. Nationwide is the sixth-largest U.S. property and casualty insurer, with a business mix that is roughly 63% personal and 37% commercial. Offsetting these strengths is the group's modest profitability, constrained by weak results in commercial lines. Like many insurers, Nationwide is exposed to potentially large environmental and asbestos claims, as well as to natural catastrophes, which, in the aggregate, we believe represent material risks. Nationwide Mutual Group - a collection of property and casualty insurers - generated about 80% of the operating earnings in 1997 for the Nationwide Insurance Enterprise, a mutually owned family of companies engaged in three core businesses: Personal Property and Casualty Insurance, Long-term Savings, and Commercial Insurance Services.
Moody's currently maintains the following ratings on Nationwide and its subsidiaries:
Nationwide CSN Trust -- Ratings on trust notes of A1 and ratings on trust certificates of A2;
Nationwide Mutual Insurance Company's -- Insurance financial strength rating of Aa2; A1 subordinated debt rating on the company's surplus notes;
Colonial Insurance Company of California -- Insurance financial strength rating of Aa2;
Farmland Mutual Insurance Company -- Insurance financial strength rating of Aa2;
Nationwide Agribusiness Insurance Company -- Insurance financial strength rating of Aa2;
Nationwide Mutual Fire Insurance Company -- Insurance financial strength rating of Aa2;
Nationwide Property and Casualty Insurance Company -- Insurance financial strength rating of Aa2;
Employers Insurance of Wausau a Mutual Company -- Insurance financial strength rating of Aa2;
Wausau Business Insurance Company -- Insurance financial strength rating of Aa2;
Wausau General Insurance Company -- Insurance financial strength rating of Aa2;
Wausau Underwriters Insurance Company -- Insurance financial strength rating of Aa2;
Nationwide General Insurance Company -- Insurance financial strength rating of Aa2;
Scottsdale Insurance Company -- Insurance financial strength rating of Aa2;
Nationwide Life Insurance Company -- Insurance financial strength rating of Aa2 and Prime-1 rating for the company's commercial paper program;
Nationwide Life and Annuity Insurance Company -- Insurance financial strength rating of Aa2;
Nationwide Financial Services, Inc. -- A1senior debt rating and A2 junior subordinated debt rating; and
Nationwide Financial Services Capital Trust -- "a1" preferred stock rating.
Nationwide Mutual Group, located in Columbus, Ohio, is one of the largest writers of personal and commercial lines insurance in the USA.
No Related Data.
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