JANUARY 11, 2013 12:00 AM (EST)
A.M. Best Affirms Ratings of Western Surety Company and Its Subsidiaries
Senior Financial Analyst
(908) 439-2200, ext. 5138
Managing Senior Financial Analyst
(908) 439-2200, ext. 5327
Senior Manager, Public Relations
(908) 439-2200, ext. 5378
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JANUARY 11, 2013 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 Western Surety Company (WSC) and its subsidiaries, Surety Bonding Company of America (SBCA) and Universal Surety of America (Universal Surety), collectively referred to as Western Surety (and previously known as CNA Surety Corporation Group [CNA Surety]) (headquartered in Chicago, IL). The outlook for all ratings is stable.
The ratings reflect Western Suretys excellent level of risk-adjusted capitalization, historically profitable underwriting and operating performance and leading market position in the contract and miscellaneous surety bond markets.
These positive rating factors are derived from Western Suretys clearly defined target markets, extensive distribution network, disciplined underwriting, credit risk management and strong servicing capabilities. In addition, Western Surety maintains a well-diversified surety and fidelity book of business with respect to products, geography and market segments, which enables the group to leverage its broad-based expertise to develop and expand its leadership position in the surety marketplace. Western Surety benefits from the financial flexibility of its indirect parent, CNA Financial Corporation (CNAF) [NYSE: CNA], which has relatively low financial leverage and solid coverage ratios.
Partially offsetting these positive rating factors is the sluggish construction market and the highly competitive environment in the surety market, which will pressure underwriting margins over the near term.
As of third quarter of 2012, Western Surety continued to report strong underwriting and operating results, which it received, in part, from favorable prior year loss reserve development. A.M. Best anticipates the group will achieve positive underwriting and operating performance for the remainder of 2012 and near term, despite the current weakness in the construction industry and the economy (on a lagged basis to a certain degree), the competitive environment in its markets and the likelihood of a reduced level of favorable prior year loss reserve development.
While the ratings for Western Surety are stable, future positive rating actions may result if it continues its strong underwriting and operating performance. However, negative rating actions could result if the underwriting and operating performance falls markedly short of A.M. Bests expectations.
The methodology used in determining these ratings is Bests Credit Rating Methodology, which provides a comprehensive explanation of A.M. Bests rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: Risk Management and the Rating Process for Insurance Companies; Catastrophe Analysis in A.M. Bests Ratings; Insurance Holding Company and Debt Ratings; Understanding BCAR for Property/Casualty Insurers; and Rating Members of Insurance Groups. Bests Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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