A.M. Best Comments on Second Quarter Charge Taken by CNA Financial Corporation.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Aug. 7, 2003 A.M. Best Co. has commented that the financial strength ratings of CNA Financial CNA Financial Corporation (NYSE: CNA) is a financial corporation based in Chicago, Illinois, United States, and noted for its 600 foot tall red headquarters building there. Its principal subsidiary, Continental Casualty Company (CCC) was founded in 1897. 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 reserve deficiency A shortage in funds set aside as a reserve for a specific purpose. For example, during a recession a firm may find the reserve fund covering allowance for bad debts deficient when the amount of bad debts exceeds expectations. . Additional expenses were incurred for items such as higher interest costs for certain reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. 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 Stem The Tide An attempt to stop a prevailing trend. Sometimes referred to as "stop the bleeding." Notes: If a stock is continually falling, stemming the tide would be an attempt to halt the free fall and change its direction. See also: Reversal, Trend 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 Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. 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 United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , CNA (Certified NetWare Administrator) See Novell certification. continues to benefit from improved market conditions. Combined with improvements in underwriting discipline, operating efficiencies and a more conservative approach to initial reserves In amphibious operations, those supplies that normally are unloaded immediately following the assault waves; usually the supplies for the use of the beach organization, battalion landing teams, and other elements of regimental combat teams for the purpose of initiating and sustaining 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. |
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