Fitch Affirms CNA's Ratings; Outlook Stable

CHICAGO--(BUSINESS WIRE)--Fitch Ratings has affirmed the following ratings on CNA Financial Corporation (CNA):

--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 is Stable. A full list of ratings appears at the end of this press release.

Fitch's rating rationale for the affirmation of CNA's ratings reflects the financial and implicit support received from CNA's parent company, Loews Corporation (Loews; approximately 90% ownership of CNA; IDR 'A+' by Fitch), 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.

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 current ratings.

CNA's capital position continues to improve with GAAP stockholders' equity of $11.6 billion at December 31, 2011, up 5.5% since year-end 2010. CNA's equity accounts were severely impacted by the investment market turmoil in 2008 and 2009 and as the markets have rebounded CNA's capital position has also increased. In fact, the majority of the growth in equity has been from a rebound in investments and to a lesser extent from profitable operations.

CNA's debt-to-total-capital ratio was 18.4% at Dec. 31, 2011, down slightly from 18.7% at Dec. 31, 2010. CNA reported a full year 2011 calendar year combined ratio of 98.4% from ongoing operations compared to 94.8% prior year. GAAP earnings-based interest coverage was 6.0x as of Dec. 31, 2011 down slightly from year end 2010's result of 7.5x and below a 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 a downgrade include:

--Significant charges for reserves, investments, or runoff business;

--Significant deterioration in the company's overall capitalization;

--A lack of support demonstrated by Loews;

--Failure to maintain its disciplined underwriting approach in the competitive market and soft rate environment;

--Debt-to-total capital maintained above 25%, and

--Future earnings that are significantly below industry levels.

Key rating triggers that could lead to an upgrade include:

--An ongoing calendar year combined ratio in line with large commercial insurance peers;

--Run-off and other operations at or near break even results;

--Overall flat to favorable loss reserve development;

--Sustainable organic growth in capital, and

--Debt-to-total capital maintained below 20%.

Fitch affirms the following ratings with a Stable Outlook:

CNA Financial Corporation

--IIDR 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-'.

The Continental Corporation

--IDR at 'BBB';

--$70 million 8.375% due Aug.15, 2012 at 'BBB-'.

Continental Casualty Company Group

Members:

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-'.

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

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=651018

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