Press Release - JULY 11, 2019

AM Best Upgrades Issuer Credit Ratings of CNA Financial Corporation and Its Subsidiaries


CONTACTS:
 Lewis DeLosa
Financial Analyst
+1 908 439 2200, ext. 5529
lewis.delosa@ambest.com

Gregory Dickerson
Senior Financial Analyst
+1 908 439 2200, ext. 5161
gregory.dickerson@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

OLDWICK - JULY 11, 2019
AM Best has upgraded the Long-Term Issuer Credit Ratings (Long-Term ICR) to “a+” from “a” and affirmed the Financial Strength Rating (FSR) of A (Excellent) of the property/casualty (P/C) subsidiaries of CNA Financial Corporation (CNAF) [NYSE: CNA], collectively known as CNA Insurance Companies (CNA). Concurrently, AM Best has upgraded the Long-Term ICR to “bbb+” from “bbb” and all existing Long-Term Issue Credit Ratings (Long-Term IR) of CNAF. Additionally, AM Best has upgraded the Long-Term ICRs to “a+” from “a” and affirmed the FSR of A (Excellent) of Western Surety Company and its subsidiaries, Surety Bonding Company of America and Universal Surety of America, collectively referred to as Western Surety Group. The Long-Term ICR outlooks have been revised to stable from positive, while the outlook of the FSR remains stable. All above named companies are headquartered in Chicago, IL. (See below for a detailed listing of the companies and Credit Ratings [ratings].)

The ratings of CNA reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management (ERM). The ratings also acknowledge the historical financial support provided by CNA’s ultimate parent, Loews Corporation.

The Long-Term ICR upgrades reflect AM Best’s view that CNA’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is sufficient to absorb material potential deterioration in the group’s legacy long-term care (LTC) business, while remaining supportive of the current very strong balance sheet strength assessment.

The ratings of Western Surety Group reflect its balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, neutral business profile and appropriate ERM. The Long-Term ICR upgrades reflect the removal of ratings drag from the lead rating unit, CNA. Western Surety Group’s risk-adjusted capitalization and operating performance have continued to be in line with historical results.

CNA’s balance sheet strength is derived from its level of risk-adjusted capitalization, as measured by BCAR, which has been maintained consistently well in excess of levels required to support AM Best’s very strong balance sheet assessment. The investment portfolio is conservative and well-managed, and loss reserves have generally developed favorably. CNA also utilizes a prudent reinsurance program to help manage volatility.

CNA’s ratings also consider its consistent and profitable operating results, as well as its established position as a leading writer within the U.S. commercial lines segment. In addition, the ratings recognize CNA’s robust operating platform, which demonstrates considerable geographic and product line scope; strong service capabilities; diversified distribution channel with well-established agency relationships; its improved technological infrastructure, which has enhanced data collection and segment reporting tools; and its continued focus on ERM. Partially offsetting these positive rating factors is the adverse impact of CNA’s discontinued LTC business, which continues to pressure CNA’s statutory underwriting performance and exposes its surplus and risk-adjusted capitalization to significant potential volatility.

Western Surety Group’s balance sheet strength is derived from its strongest risk-adjusted capitalization, as measured by BCAR. In addition, the ratings reflect the group’s historically profitable underwriting and operating performance, and position as a market leader in the contract and miscellaneous surety bond markets. Partially offsetting these positive rating factors are Western Surety Group’s narrow product focus and exposure to high severity losses that result in potentially volatile operating results, as well as the highly competitive environment in the surety market, which will continue to put pressure on underwriting margins over the near term.

At March 31, 2019, CNAF’s adjusted debt-to-total capital measured 18.6%, which is well-within AM Best’s guidelines for its current rating level. In addition, CNAF has sound coverage ratios and solid liquidity, with holding company cash of $520 million at year-end 2018. Coupled with the availability of a $250 million credit facility, access to 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 in the near term to meet its corporate obligations.

The Long-Term ICRs have been upgraded to “a+’ from “a” and the FSR of A (Excellent) affirmed, with the Long-Term ICR outlooks revised to stable from positive and the FSR outlook maintained at stable, for the following P/C 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 following Long-Term IRs have been upgraded, with the outlooks revised to stable from positive:

CNA Financial Corporation—

— to “bbb+” from “bbb” on $400 million 5.75% senior unsecured notes, due 2021

— to “bbb+” from “bbb” on $250 million 7.25% senior unsecured debentures, due 2023

— to “bbb+” from “bbb” on $550 million 3.95% senior unsecured notes, due 2024

— to “bbb+” from “bbb” on $500 million 4.5% senior unsecured notes, due 2026

— to “bbb+” from “bbb” on $500 million 3.45% senior unsecured notes, due 2027

— to “bbb+” from “bbb” on $500 million 3.9% senior unsecured notes, due 2029

The following indicative Long-Term IRs on securities available under the shelf registration have been upgraded, with the outlooks revised to stable from positive:

CNA Financial Corporation—

— to “bbb+” from “bbb” on senior unsecured debt

— to “bbb” from “bbb-” on senior subordinated debt

— to “bbb-” from “bb+” on junior subordinated debt

— to “bbb-” from “bb+” on preferred stock

This press release relates to Credit Ratings that have been published on AM 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 see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry.


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