AM Best upgraded the credit ratings of Chicago-based insurance company CNA Financial Corporation (CNAF) and its property/casualty (P/C) subsidiaries (collectively, CNA Insurance Companies (CNA)) and members of the Western Surety Group (WSG).
The financial strength rating (FSR) was upgraded from A (excellent) to A+ (excellent), and the long-term issuer credit rating (long-term ICR) was upgraded from “a+” (excellent) to “aa-” (excellent).
China National Aviation Oil’s long-term issuance credit rating (Long Term IR) was upgraded, and its long-term ICR was also upgraded from “bbb+” (good) to “a-” (excellent).
The outlook on these credit ratings has been revised to stable from positive.
As the primary rating agency for CNAF companies, CNA’s ratings are based on AM Best’s assessment of its strong balance sheet, strong operating performance, sound business profile and appropriate ERM.
The rating agency noted that CNA’s consistently good operating performance over the past five years has been driven by its commercial casualty underwriting and investment metrics, which have outperformed its peers.
AM Best also views CNAF’s supportive ownership and financial support historically provided by Loews Corporation, CNA’s diversified 92% ultimate parent company, in a positive light.
The ratings from CNA, whose principal member is Continental Casualty, recognize the strongest risk-adjusted capitalization level, as measured by Best’s Capital Adequacy Ratio (BCAR), the group’s consistently profitable operating performance and its position as a leading underwriter of commercial and professional products in the United States.
Additionally, CNA’s ratings reflect its strong operating platform, which, according to AM Best, demonstrates considerable geographic and product reach, strong service capabilities and diversified distribution with established agency relationships.
Successful underwriting and expense management initiatives make commercial insurance an important source of profitability and internal capital generation.
The ratings also take into account CNA’s ERM structure and Loews Corporation’s financial and organizational support.
Partially offsetting these positives were intermittent headwinds from CNA’s discontinued long-term care segment, which at times weighed on CNA’s overall profitability and exposed its earnings and risk-adjusted capital to potential volatility.
The group’s credit profile may also be affected by modest underwriting exposure to commercial property catastrophe losses, uncertainty over reserves for litigation-sensitive casualty lines, and cyber/other underwriting exposure.
AM Best also said WSG’s ratings reflected its strong balance sheet, strong operating performance, neutral business profile and appropriate enterprise risk management.
Additionally, WSG’s strong financial profile reflects its strongest risk-adjusted capital, favorable loss reserves and modest underwriting leverage. Strong market positions for contractual and miscellaneous secured bonds consistently show underwriting profitability.
However, AM Best warned that the company’s narrow product focus in the competitive guarantee market was a key weakness that could put pressure on underwriting margins in the short term.
