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 OLDWICK, N.J., Aug. 30 /PRNewswire/ -- Effective immediately, the A.M. Best Company has downgraded the "A+" (Superior) Best's Rating of the CNA Insurance Companies (property/casualty) to "A" (Excellent). This rating action applies to the group's nine intercompany pool members, led by Continental Casualty Company.
 This rating action reflects the unexpected and substantial escalation in settlement amounts associated with CNA's ongoing asbestos- related litigation with Fibreboard Corp., which will effectively negate 1993 earnings that were necessary to bolster the group's statutory surplus, which declined 20 percent in 1992 following the establishment of $1.5 billion of Fibreboard reserves and maintain its superior financial strength rating. In addition, this rating action reflects CNA's reduced capitalization and poor operating performance in recent years driven largely by this extraordinary case.
 Best's rating decision follows the announcement made earlier today by CNA's parent, CNA Financial Corp. (NYSE: CNA), regarding its Continental Casualty subsidiary's $500 million addition to reserves set aside to fund asbestos-related claims. In connection with its ongoing litigation with Fibreboard, a former asbestos manufacturer, this latest reserve addition brings CNA's total reserves for this case to approximately $2.2 billion. Within today's announcement, CNA stated it had reached an agreement in principle for a global settlement to resolve all future asbestos-related bodily injury claims involving Fibreboard with the company, Pacific Indemnity Company, a subsidiary of Chubb Corp. (NYSE: CB), and a negotiating committee of asbestos claimant attorneys. The agreement calls for CNA and Chubb to contribute an aggregate of $1.525 billion to a trust fund for all future asbestos claimants (defined as those persons whose claims were neither in litigation nor settled prior to Aug. 27, 1993).
 Under a separate agreement between CNA and Chubb, the two insurers will share the total responsibility for present claims (approximating 150,000 claimants), splitting the total responsibility approximately 65 percent and 35 percent, respectively. Both insurers had underwritten liability coverage for Fibreboard in the late 1950s on occurrence-based policy forms that were open-ended and did not contain aggregate policy limit caps.
 "While this current agreement is subject to legal appeal, A.M. Best views today's unfavorable announcement as reducing the future uncertainty of CNA's exposure in the Fibreboard case that should minimize future hits to its earnings and capital base," said Eric M. Simpson, vice president of Best's property/casualty division. He added that, "Despite the rating reduction, the company is committed to maintaining a high-quality balance sheet -- including very strong loss reserves -- and will continue to maintain a leadership position within the commercial lines marketplace."
 The "A+" (Superior) Best's Ratings of Continental Assurance Company and Valley Forge Life Insurance Company are not affected by the rating action taken against CNA's property/casualty subsidiaries.
 Also effective immediately, A.M. Best has affirmed the Chubb Insurance Companies Best's Rating of "A++" (Superior). The rating affirmation applies to the group's five intercompany pool members, led by Federal Insurance Company, and four affiliates that are fully reinsured by the pool members.
 Following discussions with Chubb management, an evaluation of the group's capitalization and the recently announced agreement between Pacific Indemnity Company (a subsidiary), Fibreboard and other relevant parties, A.M. Best is satisfied that the uncertainty associated with Chubb's ongoing exposure to asbestos-related claims is greatly reduced and that the group's balance-sheet strength remains outstanding.
 Best's rating action follows the announcement made earlier today by Chubb Corp. regarding its $675 million addition to reserves set aside to fund asbestos-related claims in connection with Fibreboard. This latest reserve addition brings Chubb's total reserves for this case to approximately $1.25 billion. Chubb also stated that it will take an after-tax charge of $358 million against GAAP earnings in the third quarter associated with the Fibreboard reserve increase, offset somewhat by a non-recurring gain related to its commutation of an existing medical malpractice reinsurance arrangement. More importantly, though, the insurer indicated it will report a net profit for the first nine months and for the full year 1993. In terms of statutory capital, Best expects a modest reduction in Chubb's consolidated domestic surplus from $1.9 billion at June 30, 1993, to $1.7 billion at Sept. 30, 1993.
 "While this current agreement is subject to legal appeal, A.M. Best views today's unfavorable announcement as considerably reducing the future uncertainty of Chubb's exposure to the Fibreboard case and should minimize any future impacts on the group," said John H. Snyder, senior vice president of Best's property/casualty division. He added that, "Chubb's outstanding underwriting results driven by its highly profitable commercial specialty book enabled the insurer to absorb an extraordinary charge and still deliver positive earnings for the year."
 -0- 8/30/93
 /CONTACT: Rhonda J. Ruch of A.M. Best Company, 908-439-2200, X5684/

CO: A.M. Best Company; CNA Insurance Companies; Chubb Corp. ST: New Jersey IN: INS SU:

TW -- NY085 -- 7248 08/30/93 17:23 EDT
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Publication:PR Newswire
Date:Aug 30, 1993

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