A.M. Best Comments on CNA Financial Corporation’s Announcement of Capital Raise

OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has commented that all financial strength ratings, issuer credit ratings and debt ratings of CNA Financial Corporation (CNAF) (NYSE: CNA) (Chicago, IL) and its insurance subsidiaries are unchanged following the recently announced $1.25 billion cumulative senior perpetual preferred stock issuance to CNAF’s majority shareholder, Loews Corporation (Loews) (NYSE: L). These ratings reflect the financial flexibility derived through historical explicit support provided by Loews.

CNAF plans to use the majority of the proceeds from this offering to issue a $1.0 billion 10% 20-year surplus note to its lead property/casualty insurance subsidiary, Continental Casualty Company (Chicago, IL), to strengthen statutory surplus that experienced a notable decline after the significant investment losses reported through third quarter 2008. As a result of this transaction risk-adjusted capital remains supportive of the current ratings.

Although financial leverage is expected to increase, it remains in line with A.M. Best’s expectations at current rating levels, when incorporating a level of equity credit for the preferred stock. Despite the discontinuation of common stock dividends, coverage ratios are expected to decline due to the negative impact of realized investment losses and increased catastrophe losses on earnings in 2008. However, CNAF has enhanced its liquidity position throughout 2008 as evidenced by increased holdings in cash and liquid investments and the repayment of debt that is maturing in fourth quarter 2008.

For Best’s Debt Ratings, all other Best’s Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.