DECEMBER 16, 2014 12:19 PM (EST)

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

Brian O’Larte
Senior Financial Analyst
(908) 439-2200, ext. 5138

Jennifer Marshall
Assistant Vice President
(908) 439-2200, ext. 5327

Christopher Sharkey
Manager, Public Relations
(908) 439-2200, ext. 5159

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


OLDWICK - DECEMBER 16, 2014 12:19 PM (EST)
A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of "a" of the property/casualty subsidiaries of CNA Financial Corporation (CNAF) [NYSE: CNA], also known as CNA Insurance Companies (CNA). Concurrently, A.M. Best has affirmed the ICR of "bbb" and all debt ratings of CNAF and CNA Financial Capital I, II and III. The outlook for all ratings is stable. All above named companies are headquartered in Chicago, IL. (See below for a detailed listing of the companies and ratings.)

Additionally, A.M. Best has affirmed the FSR of A (Excellent) and ICRs of "a" of Western Surety Company and its subsidiaries, Surety Bonding Company of America and Universal Surety of America, collectively referred to as Western Surety Group (headquartered in Chicago, IL). The outlook for all ratings is stable.

The rating actions reflect CNA's excellent level of risk-adjusted capitalization, consistent and profitable operating results and established position as a leading writer within the commercial lines segment of the U.S. property/casualty industry. In addition, the ratings recognize initiatives undertaken by CNA's management to improve underwriting performance in its core segments; its improved technological infrastructure, which has enhanced data collection and segment reporting tools; and its continued focus on enterprise risk management. Additionally, the ratings acknowledge the historical financial support provided by CNA's ultimate parent, Loews Corporation (Loews).

Partially offsetting these positive rating factors are the adverse impact of CNA's discontinued long-term care program and other long-term liabilities on underwriting performance and the current competitive environment in its property/casualty markets, which will likely pressure underwriting margins over the near term.

Over the past five years, CNA's specialty lines segment (CNA Specialty) has achieved solid underwriting results, while its standard commercial lines segment's (CNA Commercial) performance has shown improvement, but continues to trail commercial casualty composite averages. As a result, CNA's aggregate property/casualty underwriting margins have underperformed when measured against its peer composite. The group's current operational focus is to improve profitability by increasing rates and shifting to targeted, higher margin customers and industry segments.

CNA's liquidity is solid. While the company has made significant progress in reducing its investment risk in recent years, it maintains an above average exposure to long dated maturities, which are largely held to support liabilities from its run-off long-term care operations.

Western Surety Group's rating reflect historically profitable underwriting and operating performance, strong level of risk-adjusted capitalization and the group's position as a market leader in the contract and miscellaneous surety bond markets.

These positive rating factors are derived from Western Surety Group's 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; this 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, CNAF.

Partially offsetting these positive rating factors are the relatively weak but improving construction market and the highly competitive environment in the surety market, which will continue to put pressure on underwriting margins over the near term.

As of the third quarter of 2014, Western Surety Group continued to report strong underwriting and operating results, derived, in part, from significant favorable prior year loss reserve development. A.M. Best anticipates the group will maintain its consistent and profitable underwriting and operating performance for the remainder of 2014 and near term, despite the relatively weak economy in the construction industry, the broader economy, and the competitive environment in its markets.

CNAF's adjusted debt to-total capital of 20.2% and its adjusted debt-to-tangible capital of 20.4% at third quarter of 2014 were within A.M. Best's expectation for its current rating level. A.M. Best's current methodology for calculating financial leverage excludes accumulated other comprehensive income, which is primarily driven by an increase in stockholder equity.

CNAF's cash and equivalents were approximately $1.05 billion as of Sept. 30, 2014. Combined with the availability of a $250 million credit facility, access to over $325 million of additional liquidity from Continental Casualty Company's membership with the Federal Home Loan Bank of Chicago and operating company dividend capacity, the holding company has ample liquidity near term to meet its corporate obligations. CNAF maintains a strong interest coverage ratio that is well within A.M. Best's guidelines for its ratings.

While the ratings for the group are stable, future positive rating actions may result if it outperforms its projections. However, negative rating actions could result if its operating performance falls markedly short of A.M. Best's expectations.

The FSR of A (Excellent) and ICRs of "a" have been affirmed for the following property/casualty members of the CNA Insurance Companies:

  • American Casualty Company of Reading, Pennsylvania

  • Columbia Casualty Company

  • Continental Casualty Company

  • The Continental Insurance Company of New Jersey

  • The Continental Insurance Company

  • National Fire Insurance Company of Hartford

  • North Rock Insurance Company Limited

  • Transportation Insurance Company

  • Valley Forge Insurance Company

The FSR of A (Excellent) and ICRs of "a" have been affirmed for the following property/casualty members of the Western Surety Group:

  • Western Surety Company

  • Surety Bonding Company of America

  • Universal Surety of America

The following debt ratings have been affirmed:

CNA Financial Corporation—

— "bbb" on $350 million 6.5% senior unsecured notes, due 2016

— "bbb" on $150 million 6.95% senior unsecured notes, due 2018

— "bbb" on $350 million 7.35% senior unsecured notes, due 2019

— "bbb" on $500 million 5.875% senior unsecured notes, due 2020

— "bbb" on $400 million 5.75% senior unsecured notes, due 2021

— "bbb" on $250 million 7.25% senior unsecured debentures, due 2023 (of which $243 million was outstanding as of Sept. 30, 2014)

— "bbb" on $550 million 3.95% senior unsecured notes, due 2024

The following indicative debt ratings on securities available under the shelf registration have been affirmed:

CNA Financial Corporation—

— "bbb" on senior unsecured debt

— "bbb-" on senior subordinated debt

— "bb+" on junior subordinated debt

— "bb+" on preferred stock

CNA Financial Capital I, II and III—

— "bb+" on preferred securities

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at

Key insurance criteria reports utilized:

  • Analyzing Insurance Holding Company Liquidity

  • Rating Surety Companies

  • Catastrophe Analysis in A.M. Best Ratings

  • Equity Credit for Hybrid Securities

  • Evaluating Non-Insurance Ultimate Parents

  • Insurance Holding Company and Debt Ratings

  • Rating Members of Insurance Groups

  • The Treatment of Terrorism Risk in the Rating Evaluation

  • Risk Management and the Rating Process for Insurance Companies

  • Understanding BCAR for Property/Casualty Insurers

  • Understanding Universal BCAR

This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best's Ratings & Criteria Center.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.

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