DECEMBER 16, 2008 12:00 AM (EST)

A.M. Best Affirms Ratings of CNA Surety Corporation and Its Subsidiaries

Sharon Pereira
(908) 439-2200, ext. 5520

Michael Lagomarsino, CFA
(908) 439-2200, ext. 5810

Public Relations
Jim Peavy
(908) 439-2200, ext. 5644

Rachelle Morrow
(908) 439-2200, ext. 5378


OLDWICK, N.J. - DECEMBER 16, 2008 12:00 AM (EST)
A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of "a" of CNA Surety Corporation Group (CNA Surety) (Chicago, IL) and its members. A.M. Best also has affirmed the ICR of "bbb" of CNA Surety Corporation (headquartered in Chicago, IL) [NYSE: SUR]. The outlook for all ratings is stable. (See below for a detailed listing of the companies and ratings.)

These ratings reflect CNA Surety's solid risk-adjusted capitalization, historically profitable operating results and leading market position in the contract and miscellaneous surety bond markets. These positive rating factors are derived from CNA Surety's well-defined market focus, extensive distribution network, underwriting discipline and strong servicing capabilities. In addition, CNA Surety maintains a well diversified surety and fidelity book of business with respect to products, geography and market segments, enabling the group to leverage its broad-based expertise to develop and expand its leadership position in the surety marketplace.

The ratings also recognize management's corrective actions in recent years to improve operating results, including implementing significant rate increases, reducing its aggregate exposures to large commercial accounts and continued productivity improvements and operating efficiencies. These initiatives, in conjunction with more favorable corporate default rates, have resulted in improved operating results in more recent years. While A.M. Best expects CNA Surety will continue to generate favorable earnings over the near term, margins may be pressured by growing competition and the negative impact of the current economic recession on contractors as well as increasing corporate default rates.

Partially offsetting these positive rating factors are the variability in operating results during the earlier portion of the prior five-year period due to adverse loss reserve development, severity and frequency of losses, and higher corporate defaults. A further negative impact during this period was an increase in the retention levels and costs associated with more restrictive reinsurance treaties. However, in recent years, net reinsurance retention levels have decreased, reinsurance costs have moderated and terms and conditions have become less restrictive.

The FSR of A (Excellent) and ICRs of "a" have been affirmed for CNA Surety Corporation Group and its following members:

- Western Surety Company

- Surety Bonding Company of America

- Universal Surety of America

The ICR of "bbb" has been affirmed for CNA Surety Corporation .

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.

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