A.M. Best Assigns Ratings to Nationwide Financial's Funding Agreement-Backed Securities Programs; Affirms Financial Strength and Debt Ratings.

OLDWICK, N.J. -- A.M. Best Co. has assigned a rating of "aa-" to the two funding agreement-backed securities (FABS) programs established by Nationwide Life Insurance Company (Nationwide Life). A.M. Best has also assigned an issuer credit rating (ICR) of "aa-" to Nationwide Life, the lead subsidiary of the Nationwide Financial Services, Inc. group (NFS) (NYSE: NFS). Additionally, A.M. Best has assigned a debt rating of "aa-" to the outstanding notes issued under NFS' Global Medium-Term Notes (GMTN) and European Medium-Term Notes (EMTN) programs. The outlook for the above ratings is stable.

Concurrently, A.M. Best has affirmed the financial strength rating of A+ (Superior) of Nationwide Life and its affiliate, Nationwide Life and Annuity Insurance Company, as well as the ratings on the group's outstanding debt securities. The rating outlook has been revised to stable from negative. Furthermore, A.M. Best has upgraded the financial strength ratings to A+ (Superior) from A (Excellent) of Nationwide Life Insurance Company of America (Berwyn, PA) and Nationwide Life and Annuity Company of America (Newark, DE). The rating outlook remains stable. All companies are located in Columbus, OH, unless otherwise specified.

The ratings recognize NFS' favorable business profile, which is underpinned by balanced revenue streams, its strong and diversified distribution, sound earnings capabilities and high overall investment quality. NFS enjoys a solid position as a provider of annuities, life insurance and retirement plans to retail and institutional markets. The company's ongoing initiatives to enhance the productivity of its distributors, revamp the new business process for life policies and expand product breadth have enabled it to successfully address consumer needs and effectively manage risk.

A.M. Best believes the stable corporate credit environment and equity market rebound, combined with strategies NFS has implemented to augment profitability, enhance efficiency and reduce potential earnings volatility, have facilitated capital growth for the life operations. A.M. Best currently views NFS' capitalization as sufficient for its ratings. In addition, the ratings reflect NFS' moderate financial leverage, solid interest coverage and the franchise value associated with being a 63%-owned subsidiary of Nationwide Mutual Insurance Company, a market leader in the property/casualty industry. A.M. Best affirmed the ratings of Nationwide Group on December 6, 2004.

In the near to medium term, NFS' total debt-to-capital ratio (including capital and preferred securities) will likely remain in the 24%-27% range, which is within the acceptable parameters for its present ratings. In addition, A.M. Best views NFS' level of intangibles to equity as somewhat high relative to similarly-rated peers. NFS faces a highly competitive market in several of its core products, as do all U.S. life insurers. A.M. Best believes the group will be challenged to capture a considerable share of retirement assets as the baby-boomer generation nears retirement.

Through its $5 billion GMTN program--established in 2001--NFS has issued various series of notes to institutional investors on an opportunistic basis. The issuer of the notes is a Delaware statutory trust, Nationwide Life Global Funding I (NLGF); the principal asset being a series of funding agreements between Nationwide Life and NLGF. NFS has also utilized its EMTN program, Nationwide Financial Funding, LLC (NFF), a Cayman Islands limited liability company. With less than $1 billion in notes outstanding, NFF has essentially been inactive since mid-2001.

Based on A.M. Best's analysis of the FABS structures utilized by NFS, the programs and notes will carry the Nationwide Life ICR of "aa-". This recognizes that each series of notes is secured by a first priority perfected security interest in the underlying funding agreements, which are unsecured obligations of Nationwide Life's general account. Moreover, under Ohio law, the claims under each funding agreements would rank pari passu with the claims of policyholders of Nationwide Life. Therefore, in assigning the above ICR, A.M. Best believes that all investors in NFS' FABS are exposed to the inherent credit, liquidity and business risks of the sponsoring insurance company, Nationwide Life.

For a complete listing of Nationwide Financial Services, Inc.'s debt and financial strength ratings and issuances under its FABS programs, please visit http://www.ambest.com/press/011405nationwide.pdf.

For additional insight, please refer to A.M. Best's methodology, Rating Funding Agreement-Backed Securities at http://www.ambest.com/ratings/methodology.html.

For Best's Debt Ratings, all other Best's Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com.