AM Best has upgraded the credit ratings of Chicago-based insurer CNA Financial Corporation (CNAF) and its property/casualty (P/C) subsidiaries, collectively known as CNA Insurance Companies (CNA), and the members of Western Surety Group (WSG).
CNAF’s Long-Term Issue Credit Ratings (Long-Term IRs) experienced an upgrade, and its Long-Term ICR was also upgraded to “a-” (Excellent) from “bbb+” (Good).
The outlook of these Credit Ratings (ratings) has been revised to stable from positive.
As the CNAF enterprise’s lead rating unit, CNA’s ratings are based on AM Best’s assessment of its very strong balance sheet, strong operating performance, favourable business profile, and appropriate ERM.
CNA’s consistently positive operating performance over the last five years is driven by its commercial casualty underwriting and investment metrics, which are better than its peers, the rating agency noted.
AM Best also views positively the supportive ownership by CNAF and the historical financial support from CNA’s diversified 92% ultimate parent, Loews Corporation.
The ratings of CNA – whose lead member is Continental Casualty Company – recognize the strongest level of risk-adjusted capitlisation, as measured by Best’s Capital Adequacy Ratio (BCAR), the group’s consistently profitable operating results and its position as a leading U.S. writer of commercial and specialty lines.
Additionally, CNA’s ratings reflect its favourable operating platform, which according to AM Best, demonstrates considerable geographic and product scope, strong service capabilities, and diversified distribution with established agency relationships.
Successful underwriting and expense management initiatives have made commercial insurance a significant source of profitability and internal capital generation.
The ratings also consider CNA’s ERM structure and the financial and organisational support from Loews Corporation.
Partially offsetting these positive factors are the intermittent adverse impacts of CNA’s discontinued long-term care block of business, which at times has served as a drag on CNA’s overall profitability and has exposed its surplus and risk-adjusted capitalisation to potential volatility.
The group’s credit profile could also be affected by moderate underwriting exposures to catastrophe losses from commercial property, reserve uncertainties in litigation-sensitive casualty lines, and cyber/other underwriting risks.
AM Best also stated that the ratings assigned to WSG reflect a strong balance sheet, as well as its strong operating performance, neutral business profile and appropriate ERM.
Additionally, WSG’s strong financial profile reflects its strongest risk-adjusted capitalisation, favourable loss reserves, and modest underwriting leverage. A strong market position in contract and miscellaneous surety bonds consistently reported profitable underwriting.
However, the company’s narrow product focus in a competitive surety market is a key weakness, potentially pressuring underwriting margins over the near term, AM Best warned.
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