Ct Healthmarket via BizWire
08-07-2003, 10:22 AM
OLDWICK, N.J.--(BUSINESS WIRE)--Aug. 7, 2003--A.M. Best Co. has
commented that the financial strength ratings of CNA Financial
Corporation's (Chicago, IL) insurance subsidiaries and its debt
ratings remain unchanged following the $308 million after-tax charge
taken by the primary insurance underwriting subsidiaries in the second
quarter of 2003. Because of the strength of its capitalization, the
charge does not have a material adverse effect on A.M. Best's view of
the group's financial strength. The ratings of the insurance
subsidiaries had already contemplated a sizable reserve deficiency.
Additional expenses were incurred for items such as higher interest
costs for certain reinsurance agreements and allowances for bad debt
associated with reinsurance recoverables.
Additionally, management has indicated that a review of prior
accident year reserves is continuing. Given the explicit support
provided to CNA Financial Corporation by its majority owner, Loews
Corporation, A.M. Best does not foresee a possible charge arising from
the reserve review as being likely to have a negative impact upon the
financial strength ratings of the insurance underwriting subsidiaries
or the ratings of the existing debt securities. A.M. Best believes
that the ongoing commitment of Loews Corporation will enable the group
to strengthen its reserves for both asbestos and environmental (A&E)
and non-A&E liabilities while maintaining appropriate balance sheet
strength through capital support. Although the group increased
reserves by $2.3 billion in 2001 in an effort to stem the tide of
adverse loss reserve development, this study is likely to be more
comprehensive as the data is more seasoned and the most recent
accident years appear to be more conservatively reserved.
The support provided by Loews Corporation was most recently
evidenced in 2002 by the $750 million preferred stock offering from
CNA Financial Corporation to Loews Corporation. CNA Financial
Corporation used the proceeds of approximately $750 million primarily
to repay debt coming due in 2003, with the balance being applied to
increase the statutory surplus of its insurance subsidiaries.
Moreover, as a leading writer of commercial insurance in the
United States, CNA continues to benefit from improved market
conditions. Combined with improvements in underwriting discipline,
operating efficiencies and a more conservative approach to initial
reserves on more recent accident years, these market conditions and
the elimination of the earnings drag from adverse loss reserve
development should enable the group to improve earnings and internal
capital generation in the near term.
A.M. Best Co., established in 1899, is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit A.M. Best's Web site at www.ambest.com.
commented that the financial strength ratings of CNA Financial
Corporation's (Chicago, IL) insurance subsidiaries and its debt
ratings remain unchanged following the $308 million after-tax charge
taken by the primary insurance underwriting subsidiaries in the second
quarter of 2003. Because of the strength of its capitalization, the
charge does not have a material adverse effect on A.M. Best's view of
the group's financial strength. The ratings of the insurance
subsidiaries had already contemplated a sizable reserve deficiency.
Additional expenses were incurred for items such as higher interest
costs for certain reinsurance agreements and allowances for bad debt
associated with reinsurance recoverables.
Additionally, management has indicated that a review of prior
accident year reserves is continuing. Given the explicit support
provided to CNA Financial Corporation by its majority owner, Loews
Corporation, A.M. Best does not foresee a possible charge arising from
the reserve review as being likely to have a negative impact upon the
financial strength ratings of the insurance underwriting subsidiaries
or the ratings of the existing debt securities. A.M. Best believes
that the ongoing commitment of Loews Corporation will enable the group
to strengthen its reserves for both asbestos and environmental (A&E)
and non-A&E liabilities while maintaining appropriate balance sheet
strength through capital support. Although the group increased
reserves by $2.3 billion in 2001 in an effort to stem the tide of
adverse loss reserve development, this study is likely to be more
comprehensive as the data is more seasoned and the most recent
accident years appear to be more conservatively reserved.
The support provided by Loews Corporation was most recently
evidenced in 2002 by the $750 million preferred stock offering from
CNA Financial Corporation to Loews Corporation. CNA Financial
Corporation used the proceeds of approximately $750 million primarily
to repay debt coming due in 2003, with the balance being applied to
increase the statutory surplus of its insurance subsidiaries.
Moreover, as a leading writer of commercial insurance in the
United States, CNA continues to benefit from improved market
conditions. Combined with improvements in underwriting discipline,
operating efficiencies and a more conservative approach to initial
reserves on more recent accident years, these market conditions and
the elimination of the earnings drag from adverse loss reserve
development should enable the group to improve earnings and internal
capital generation in the near term.
A.M. Best Co., established in 1899, is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit A.M. Best's Web site at www.ambest.com.
