FEBRUARY 08, 2010 12:00 AM (EST)

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

W. Dolson Smith, CFA
(908) 439-2200, ext. 5379

Michael J . 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. - FEBRUARY 08, 2010 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. Concurrently, A.M. Best has affirmed the ICR of "bbb" of its immediate parent, 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 the group's clearly defined target markets, extensive distribution network, disciplined underwriting and credit risk management 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. CNA Surety benefits from the financial flexibility of CNA Surety Corporation, which has low financial leverage and strong coverage ratios, as well as its majority owner, CNA Financial Corporation [NYSE:CNA].

Partially offsetting these positive rating factors is the variability in CNA Surety's operating results during the prior soft market cycle 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, the group's loss reserve development has been favorable (particularly in 2008 and 2009) and net reinsurance retention levels have decreased, reinsurance costs have moderated, and terms and conditions have become less restrictive.

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 weak economy on contractors as well as increasing corporate default rates.

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.

For Best's Credit Ratings, an overview of the rating process and rating methodologies, please visit Best's Ratings & Analysis.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at Best's Credit Rating Methodologies.

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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