Aug 23 - Fitch Ratings has affirmed the ratings on CNA Financial Corporation
(CNA) including the following:
--Issuer Default Rating (IDR) at 'BBB';
--Senior debt at 'BBB-'.
Fitch has also affirmed the 'A-' Insurer Financial Strength (IFS) ratings of
CNA's property/casualty insurance subsidiaries. The Rating Outlook has been
revised to Positive from Stable. A full rating list is shown below.
Fitch's rating rationale for the affirmation of CNA's ratings reflects the
company's improvements in capitalization and earnings, and CNA's established
position in the commercial lines property/casualty market. The ratings also
reflect anticipated challenges in a competitive property/casualty market rate
environment and the potential for additional adverse reserve development on
older accident years and in runoff operations.
The Positive Outlook reflects CNA's continued growth in capital, several years
of favorable reserve development, and improvement in GAAP underwriting
performance particularly compared to higher rated peers. CNA's GAAP
stockholders' equity was $12.2 billion at June 30, 2012 up 5.7% from year-end
2011 and 78% from year-end 2008. CNA's equity was severely impacted by the
investment market turmoil in 2008 and 2009 and as the markets have rebounded
CNA's capital position has also increased.
Fitch's rating rationale continues to recognize Loews' ownership of CNA, as the
company benefits from the financial flexibility of a strong majority owner and
is able to manage the company with a more long-term approach. Loews has
demonstrated its support of CNA over the years through various actions that have
improved CNA's capitalization. Fitch views Loews' continued commitment as a
critical factor in serving as a support floor for CNA's ratings, but notes that
current ratings are standalone therefore no support for Loews' ownership is
given at current rating levels.
CNA continues to post favorable reserve development, a trend that started with
year end 2008 results, and has taken several steps to simplify the financial
statements and bring stability to reserves. Fitch's Positive Outlook for CNA
incorporates these trends and therefore it is not anticipated that reserves will
develop unfavorably in excess of 5%-7% of the prior year's equity. Historically,
CNA has a legacy of adverse reserve development in the 2000's as the company
underpriced several lines of business in the soft markets.
CNA has historically underperformed other large commercial line peers by 5
percentage points or greater on a GAAP calendar year combined ratio. Recently,
this gap has narrowed and as of year end 2011 CNA out performed its peer group
by 4.7 percentage points. While 2011 full year results incorporate CNA's smaller
exposure to property risk than peers it also indicates that CNA has shown
sustainable momentum in GAAP profitability.
CNA's debt-to-total-capital ratio was 20.8% at June 30, 2012, virtually
unchanged from year-end 2011. GAAP earnings-based interest coverage was 7.3x as
of June 30, 2012 up from year end 2011's result of 6.0x and below the five-year
average of 8.8x. Fitch expects that over the next 12-18 months CNA's financial
leverage and earnings based interest coverage will approximate current levels.
Key rating triggers that could lead to an upgrade include:
--An ongoing calendar year combined ratio in line with large commercial
--Run-off and other operations at or near break even results
--Overall flat to favorable loss reserve development;
--Sustainable organic growth in capital;
--Debt-to-total capital maintained below 25%.
Key rating triggers that could lead to a downgrade include:
--Significant charges investments or runoff business;
--Significant deterioration in the company's overall capitalization;
--Failure to maintain its disciplined underwriting approach in the competitive
market and soft rate environment;
--Adverse reserve development in excess of 5%-7% of prior year's equity;
--Debt-to-total capital maintained above 30%.
Fitch affirms the following ratings and revises the Outlook to Positive from
CNA Financial Corporation
--IDR at 'BBB';
--Senior Debt at 'BBB-';
--$549 million 5.85% due Dec. 15, 2014 at 'BBB-';
--$350 million 6.5% due Aug. 15, 2016 at 'BBB-';
--$150 million 6.95% due Jan. 15, 2018 at 'BBB-';
--$350 million 7.35% due Nov. 15, 2019 at 'BBB-';
--$500 million 5.875% due Aug. 15, 2020 at 'BBB-';
--$400 million 5.75% due Aug. 15, 2021 at 'BBB-';
--$243 million 7.25% due Nov. 15, 2023 at 'BBB-'.
Continental Casualty Company Group
Continental Casualty Company
American Casualty Company of Reading, Pennsylvania
Columbia Casualty Company
National Fire Insurance Company of Hartford
The Continental Insurance Company
The Continental Insurance Company of New Jersey
Transportation Insurance Company
Valley Forge Insurance Company
Surety Bonding Company of America
Universal Surety of America
Western Surety Company
--IFS at 'A-'.
Fitch has withdrawn the following rating as it is no longer analytically
The Continental Corporation
Additional information is available at 'www.fitchratings.com'. The ratings above
were unsolicited and have been provided by Fitch as a service to investors. The
issuer did not participate in the rating process, or provide additional
information, beyond the issuer's available public disclosure.
Applicable Criteria and Related Research:
--Insurance Rating Methodology (Sept. 22, 2011).
Applicable Criteria and Related Research:
Insurance Rating Methodology