KEY RATING DRIVERS
Fitch's rating rationale for the affirmation of CNA's ratings reflects the company's strong capitalization, stable earnings, and overall reserve quality. The ratings also reflect anticipated challenges in a competitive property/casualty market rate environment, the potential for adverse reserve development and deterioration in runoff operations.
CNA's financial leverage ratio improved to 17.7% as year-end 2013 compared to 19% at
Fitch notes that CNA's reported financial leverage will temporarily increase to approximately 22% but pro forma financial leverage is relatively unchanged as the new debt issuance will be the source of funds to repay
CNA reported a 97.9% GAAP calendar year combined ratio for full year 2013 an improvement over year end 2012's 105%. Excluding the impact of reserve development, CNA reported a GAAP accident year combined ratio of 99.7% for full year 2013 an improvement from prior year of 108.3%.
CNA's capital position remains solid with stated GAAP stockholders' equity of
CNA recently announced the sale of
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 to likely lessen the magnitude of potential downgrades should CNA's creditworthiness deteriorate, but considers CNA's ratings standalone.
Key rating triggers that could lead to an upgrade include:
--GAAP calendar year combined ratio for the ongoing property/casualty business of approximately 100% or better over several years;
--Strong improvement in total operating earnings that result in a return on equity of 9% and operating EBIT interest coverage at 9x or better;
--Overall flat to favorable GAAP loss reserve development;
--Achieving a Prism score of 'Very Strong' or higher for several consecutive years;
--Debt-to-total capital maintained below 25%.
Key rating triggers that could lead to a downgrade include:
--Charges related to investments or runoff operations which impede the company's ability to generate 5% annual growth in shareholders' equity before dividends and share repurchases(excluding FAS 115);
--Operating at GAAP calendar year combined ratio of approximately 105% or worse;
--Decline in total operating earnings that result in ROE below 6% and operating EBIT interest coverage at 6x or worse;
--Adverse GAAP reserve development in excess of 5% of prior year's equity;
--Achieving a Prism score of 'Adequate' or below;
--Debt-to-total capital maintained above 30%.
Fitch has assigned the following rating:
CNA Financial Corporation
Fitch has affirmed the following ratings with a Stable Outlook:
CNA Financial Corporation
--IDR at 'BBB+';
American Casualty Company of
National Fire Insurance Company of
--IFS at 'A'.
Additional information is available at 'www.fitchratings.com'.
The issuer did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure.
--Insurance Rating Methodology (
Insurance Rating Methodology
Source: Fitch Ratings
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