A.M. Best Affirms Ratings of CNA and Its Subsidiaries.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of "a" of the CNA Insurance Companies (CNA). Concurrently, A.M. Best has affirmed the ICR of "bbb", the senior debt ratings and the shelf registration of CNA Financial Corporation (CNAF) (NYSE: CNA). The outlook for the above ratings is stable.

A.M. Best has also affirmed the FSR of A- (Excellent) and the ICR of "a-" of CNAF's life/health subsidiary, Continental Assurance Company (CAC). The outlook for this rating is stable. All companies are domiciled in Chicago, IL. (See link below for a detailed list of ratings.)

CNA's ratings reflect its favorable 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 positive rating factors are derived from the group's operating platform, which demonstrates considerable geographic and product line scope, strong service capabilities and a diversified distribution channel with well established agency relationships. CNA's policyholder retention remains strong while cross-sell initiatives designed at selling additional policies to existing insureds continue to support new business growth.

The rating also considers CNA's financial flexibility derived through historical capital support provided by its ultimate parent, Loews Corporation. CNAF's debt-to-total capital at 18.1% and interest coverage measures are appropriate at current rating levels.

Partially, offsetting these positive factors are the group's unsatisfactory operating performance in aggregate over the past five years due to variability in loss reserves, driven in part by asbestos and environmental (A&E) reserve charges, as well as development on their core property/casualty operations. Although the commutation of several finite reinsurance treaties added $110 million and $433 million to incurred losses for 2006 and 2005, respectively, the group's finite recoverable exposure is nearly eliminated, with just one finite treaty in-force at year-end 2006. Consequently, CNA's operating performance will continue to benefit from the reduction of pre-tax interest expense on funds withheld that have been a substantial earnings drag in prior years. However, A.M. Best expects that price softening and increased competitive forces in the U.S. commercial lines sector could pressure underwriting margins to a moderate degree.

The rating outlook for CNA reflects A.M. Best's view that with substantial re-underwriting initiatives completed and the repositioning of its book of business through portfolio optimization, CNA is better positioned than in past years to produce sustainable earnings. This is further supported by management's actions to reduce expenses and improve expense competitiveness. In addition, CNA has divested non-core assets, commuted prior year reinsurance treaties and vastly improved the technological infrastructure of the company, which has enhanced data collection and segmentation and reporting tools.

CAC's ratings reflect its more than adequate level of capital and surplus for its current level of insurance and investments risks. While an extraordinary dividend was paid to its parent in 2005, effectively reducing its capital and surplus by one-half, the favorable trend in operating results in recent years has resulted in a more than adequate risk-adjusted capitalization as measured by Best's Capital Adequacy Ratio (BCAR). Operating results in recent periods were primarily driven by unusually strong investment performance in the company's institutional markets line of business, along with reduced corporate expense and the elimination of new business strain as the life company manages in run-off.

A.M. Best does note, however, that CAC continues to have above average exposure to below investment grade bonds that has contributed to fluctuating investment results the last few years. This concern is somewhat offset by limited equity holdings and absence of mortgage loans or investment real estate. A.M. Best also notes that a substantial amount of CAC's remaining run-off liabilities have interest sensitive components, which the company will need to manage. A.M. Best will continue to monitor this, along with the company's higher-risk assets and capital and reserve adequacy, as CNAF manages the extended run-off of its life and health operations.

For a complete listing of CNA Insurance Companies' FSRs, ICRs and debt, please visit www.ambest.com/press/041806cna.pdf.

Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.