A.M. Best Affirms Ratings of CNA Insurance; Assigns Issuer Credit Ratings.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength ratings of A (Excellent) and has assigned issuer credit ratings (ICR) of "a" to CNA Insurance Companies (CNA). Concurrently, A.M. Best has assigned an ICR of "bbb" to CNA Financial Corporation (CNAF) (NYSE: CNA) (both of Chicago, IL) and has affirmed all debt ratings of "bbb" on CNAF's existing senior unsecured securities. All ratings have a negative outlook. (See link below for a complete list of the ratings.)

The ratings reflect CNA's strong risk-adjusted capitalization, improved underwriting fundamentals and good business position as a top writer within the commercial lines segment of the U.S. property/casualty industry. The ratings also consider CNA's financial flexibility derived through capital support provided by its ultimate parent, Loews Corporation. CNA's operating platform demonstrates considerable geographic and product line scope, strong service capabilities and well-established agency relationships. In 2004 and through first quarter 2005, CNA's core property/casualty operations have demonstrated good overall underwriting results with combined ratios below 100 (excluding catastrophe losses). Furthermore, as of March 31, 2005, CNAF's debt-to-total capital is below 20%, and interest coverage measures returned back to positive levels in 2004.

Somewhat offsetting these strengths are CNA's unsatisfactory operating performance in aggregate prior to 2004 and the operational and financial risks of potential reserve development related to core property/casualty, non-core runoff and asbestos and environmental (A&E) loss reserves. Despite the improvement illustrated in CNA's operating results in 2004, its core property/casualty results were affected by the funding of prior year liabilities and bad debt expenses. Although CNA's risk-adjusted capitalization is supportive of its current ratings, it maintains elevated gross leverage measures primarily due to the high utilization of finite reinsurance prior to 2002 under aggregate stop loss covers on less profitable, older accident years. As a result of these covers, pretax interest expense related to funds withheld and other deposits have reduced operating margins considerably. Moreover, bad debt charges related to uncollectible insurance and reinsurance receivables also suppress improvements realized in operating results. These types of charges have declined as a result of management's aggressive actions but are still significant when compared to the net operating margins produced by CNA. A.M. Best is concerned with the deteriorating pricing environment of the U.S. commercial lines sector and anticipates that further price softening and increased competitive forces will challenge the long-term sustainability of underwriting results.

In 2004, CNA completed a comprehensive, multi-year organizational restructuring where it executed a re-capitalization plan, divested a significant portion of non-core assets including sizable portions of group and individual life businesses, exited historically unprofitable property/casualty business lines and continued expense reductions while vastly improving the technological infrastructure of the company. CNA now focuses its core operations on two key property/casualty businesses: Standard Lines and Specialty Lines. CNA has re-underwritten its entire core book of business, and property/casualty underwriting results demonstrated significant improvement during 2004 and through the first quarter of 2005. Additionally, CNA has enhanced its product offering and lowered the underlying risk on new and renewal business.

While the life/health operations are presently in runoff status, the recent affirmation of the Continental Assurance Company's rating primarily reflects its affiliation with its ultimate parent, CNAF, and its favorable capital position. A.M. Best will continue to examine the reserve adequacy and profitability of CNA's sizeable long-term care block of business, which is held at the group's lead property/casualty Continental Casualty Company. Additionally, while Continental Assurance Company presently maintains a more than adequate risk-adjusted capital position, it has paid substantial dividends to its immediate parent in recent years. A.M. Best will continue to monitor the company's future dividend requirements.

A.M. Best believes that CNA's more conservative assumptions in estimating loss reserves since the 2003 strengthening, more proactive approach to addressing issues as they arise and the enhancements of data capabilities and reporting tools suggest that results should be sustainable. However, the negative outlook reflects A.M. Best's view that any further material reserve charges incurred by CNA could result in the deterioration of its franchise value and balance sheet strength. Although A.M. Best is encouraged by CNA's operating progress, a removal of the negative outlook is contingent upon the company demonstrating continued operating profitability, liquidity and balance sheet strength that is commensurate with A (Excellent)-rated carriers.

For a complete list of CNA Insurance Companies and CNA Financial Corporation's financial strength, issuer credit and debt ratings, please visit http://www.ambest.com/press/062108cna.pdf.

For Best's Debt Ratings, all other Best's Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings.

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 http://www.ambest.com.