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A.M. Best Revises Issuer Credit Rating Outlook to Positive for CNA Financial Corporation and Its Subsidiaries
[July 05, 2018]

A.M. Best Revises Issuer Credit Rating Outlook to Positive for CNA Financial Corporation and Its Subsidiaries


A.M. Best has revised the outlook to positive from stable for the Long-Term Issuer Credit Ratings (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICRs of "a" of the property/casualty (P/C) subsidiaries of CNA Financial Corporation (CNAF) [NYSE: CNA], collectively known as CNA Insurance Companies (CNA). Concurrently, A.M. Best has revised the outlook to positive from stable and affirmed the Long-Term ICR of "bbb" and all existing Long-Term Issue Credit Ratings (Long-Term IR) of CNAF. Additionally, A.M. Best has revised the outlook to positive from stable for the Long-Term ICR and affirmed the FSR of A (Excellent) and the Long-Term 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. The outlooks of the FSRs remain 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 A.M. 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 outlook revisions to positive reflect A.M. 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 strongly supportive of the current very strong assessment. If results in CNA's LTC business continue to stabilize over the next 24-36 months, while the group maintains strong risk-adjusted capitalization and solid underwriting results, it could lead to rating upgrades.

The ratings of Western Surety Group reflect its balance sheet strength, which A.M. Best categorizes as strongest, as well as its strong operating performance, neutral business profile and appropriate ERM. The ratings also reflect ratings drag from the lead rating unit, CNA. The positive outlooks reflect the expectation that if A.M. Best were to upgrade CNA's ratings over the next 24-36 months, it would likely also result in rating upgrades of Western Surety Group via the removal of ratings drag from CNA, assuming that Western Surety Group's risk-adjusted capitalization and operating performance continue to approximate levels that it historically has demonstrated.

CNA's balance sheet strength is derived from its level of risk-adjusted capitalization, as measured by BCAR, which have consistently been maintained well in excess of levels required to support A.M. Best's very strong balance sheet assessment. The investment portfolio is conservative and well-managed, and loss reserves have generally developed favorably.

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 robustoperating 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. Additionally, the current competitive environment in its P/C markets will likely pressure underwriting margins over the near term.



Western Surety Group's balance sheet strength is derived from its strong 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, 2018, CNAF's adjusted debt-to-total tangible capital measured 18.1%, which is well-within A.M. Best's guidelines for its current rating level. In addition, CNAF has sound coverage ratios and solid liquidity with holding company cash of $639 million at year-end 2017. Coupled with the availability of a $250 million credit facility, access to over $390 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 in the near term to meet its corporate obligations.


The FSR of A (Excellent) and the Long-Term ICRs of "a" have been affirmed, with the Long-Term ICR outlook revised to positive from stable 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 affirmed, with the outlook revised to positive from stable:

CNA Financial Corporation-

-- "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

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

-- "bbb" on $500 million 4.5% senior unsecured notes, due 2026

-- "bbb" on 500 million 3.45% senior unsecured notes, due 2027

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

CNA Financial Corporation-

-- "bbb" on senior unsecured debt

-- "bbb-" on senior subordinated debt

-- "bb+" on junior subordinated debt

-- "bb+" on preferred stock

This press release relates to Credit Ratings 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 see A.M. 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 A.M. Best press releases, please view Guide for Media - Proper Use of Best's Credit Ratings and A.M. Best Rating Action Press Releases.

A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.


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