Moody's investor service of
) affirmed an insurance financial strength (IFS) rating of
Continental Casualty Company (CCC) and its intercompany pool
members (CNA Insurance Companies) at "A3." Both these are
CNA Financial Corporation
Concurrently, the credit rating agency reiterated the senior
unsecured debt rating of CNA Financial at "Baa2." All these
ratings carry a stable outlook. The stable outlook for CNA
Insurance companies was changed from positive outlook.
Moreover, multi-issuer or multi-seniority shelf registration of
CNA Financial was also assigned provisional ratings by Moody's
The ratings affirmation came following the steady financial and
operational profile of CNA Financial. Also, the company's
consolidated and profitable specialty commercial insurance
franchise, sturdy asset quality, and strong capital and liquidity
position aided the rating affirmations. However, weak earnings
performance, high underwriting combined ratios, volatility in
potential claim reserve related to casualty business, interest
rate volatility and other risks in CNA Financial's run-off
businesses remain drags on the positive strengths.
A downgrade to a stable outlook for financial strength ratings of
CNA Insurance Companies came on the back of its poor underwriting
performance in standard commercial lines. This in turn resulted
from standard commercial lines' commodity-like nature and its
price sensitivity. The continuous earnings drag from run-off
operations was also attributable to the weak results.
CNA Financial's Life and Group Operations add up $50-$100 million
annually to the company's total expenses. Moreover, these run-off
operations are exposed to interest rate and long-term
reserve-related risks as these operations have one-third share in
the company's total fixed maturity investment portfolio and also
in its policy reserves.
The rating agency might consider a rating upgrade if CNA
Financial exhibits rapid growth in core operating earnings of
commercial insurance segment; substantially demeans the risks
associated with its long-term care, earnings coverage remain
above 6x and steadily brings the financial leverage below
On the other hand, a decline in shareholders' equity for more
than 10% on a sustainable basis, lack of further capital support
) or other outside investors and consistently high financial
leverage of more than 35% in future or earnings coverage falling
below 3x will likely lead to ratings or outlook being downgraded
for CNA Financial.
ASPEN INS HLDGS (AHL): Free Stock Analysis
CNA FINL CORP (CNA): Free Stock Analysis
LOEWS CORP (L): Free Stock Analysis Report
MOODYS CORP (MCO): Free Stock Analysis Report
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Rating affirmations or upgrades from credit rating agencies play
an important part in retaining investor confidence in the stock
along with maintaining credit worthiness in the market.
Therefore, rating downgrades adversely affect the business, apart
from increasing the costs of future debt issuances. We believe
that strong ratings will help CNA Financial and its subsidiaries
retain investor confidence and help it write more businesses
Among other property and casualty insurers, A.M. Best Co.
affirmed FSR of A (Excellent) and ICR of "a" for Aspen American
Insurance Company and Aspen Specialty Insurance Company in Sep,
2013. Both these companies are wholly owned subsidiaries of
Aspen Insurance Holdings Ltd
). A stable outlook was assigned to all the ratings.
CNA Financial presently carries a Zacks Rank #1 (Strong Buy).