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. Visit www.ambest.com
for more information.
Copyright © 2019 by AM Best Rating Services,
Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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version on businesswire.com: https://www.businesswire.com/news/home/20190711005773/en/
Lewis DeLosa Financial Analyst +1 908 439 2200, ext. 5529
lewis.delosa@ambest.com
Christopher Sharkey Manager, Public Relations +1 908 439
2200, ext. 5159 christopher.sharkey@ambest.com
Gregory Dickerson Senior Financial Analyst +1
908 439 2200, ext. 5161 gregory.dickerson@ambest.com
Jim Peavy Director, Public Relations +1 908 439
2200, ext. 5644 james.peavy@ambest.com
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