MOODY'S REVIEWS RATINGS OF CNA FINANCIAL AND SUBSIDIARIES FOR POSSIBLE DOWNGRADE
Rating Review Prompted by Developments Reported in CNA Financial Corporation's Results for the Second Quarter of 2003
New York, August 07, 2003 -- Moody's Investors Service has placed the ratings of CNA Financial Corporation
(senior debt at Baa2) on review for possible downgrade. The rating
review also encompasses the ratings of CNA's principal property
and casualty insurance subsidiaries (insurance financial strength at A3)
and life insurance subsidiaries (insurance financial strength at A2),
as well as the Baa3 senior debt rating of the Continental Corporation.
A complete listing of affected ratings is found below.
According to Moody's, the rating action follows CNA's announcement
this morning of both a $308 million after-tax charge principally
related to unfavorable prior year reserve development in the property
and casualty operations and of plans to complete a comprehensive reserve
review (covering both asbestos and environmental exposures and core reserves)
during the third quarter. As discussed in Moody's insurance credit
report on CNA, the possibility for significant adverse reserve development
has been a factor in the existing CNA ratings. However, the
magnitude of the reserve deficiency indicated in today's disclosure,
and the possibility that reserves might still be deficient following the
charge, precipitated the ratings review.
Moody's said that its review would focus on the following issues:
1) The level of additional reserve strengthening, if any,
which could result from the conclusion of the company's third quarter
reserve review and whether such reserve strengthening will be sufficient
to restore reserve levels to full adequacy with a high degree of certainty.
2) The need, if any, for additional capital and the source
and form which this capital may take (i.e. intercompany
contributions, loans etc.).
3) The degree of capital or other financial support that may be provided
by CNA's parent, Loews Corporation.
Moody's notes that Loews' ownership of CNA continues to be
a material supportive factor to the ratings and that, in view of
that support, the rating agency expects that its review would result
in either a ratings confirmation or a one-notch downgrade.
The following ratings have been placed on review for possible downgrade:
CNA Financial Corporation:
Senior debt at Baa2; Senior shelf at (P)Baa2;
Subordinated shelf at (P)Baa3;
Junior subordinated shelf at (P)Baa3;
Preferred stock at Ba1;
CNA Financial Corporation - Prime-2 rating for commercial
paper.
CNA Financial Capital I, II and III - trust preferred shelf
at (P)Baa3.
The Continental Corporation - senior debt at Baa3.
Members of the Continental Casualty Company intercompany reinsurance pool
- insurance financial strength at A3:
American Casualty Company of Reading, Pennsylvania;
CNA Casualty of California;
CNA Lloyd's of Texas;
Columbia Casualty Company;
Continental Casualty Company;
National Fire Insurance Company of Hartford;
Transcontinental Insurance Company;
Transportation Insurance Company;
Valley Forge Insurance Company.
Members of the Continental Insurance Company intercompany reinsurance
pool - insurance financial strength at A3:
Boston Old Colony Insurance Company;
The Buckeye Union Insurance Company;
Continental Insurance Company;
Continental Insurance Company of New Jersey;
Continental Lloyd's Insurance Company;
Commercial Insurance Company of Newark, New Jersey;
Continental Reinsurance Corporation;
The Fidelity and Casualty Company of New York;
Firemen's Insurance Company of Newark, New Jersey;
The Glens Falls Insurance Company;
Kansas City Fire and Marine Insurance Company;
Mayflower Insurance Company;
National-Ben Franklin Insurance Company of Illinois;
Niagara Fire Insurance Company;
Pacific Insurance Company.
Members of the CNA Life Insurance Group - insurance financial strength
at A2:
Continental Assurance Company;
Valley Forge Life Insurance Company.
CNA Financial Corporation is engaged through its subsidiaries primarily
in commercial property and casualty insurance and reinsurance, and
in life insurance. For the six months ended June 30, 2003,
CNA Financial Corporation reported total revenues and net income of $5.9
billion and $153 million, respectively. This compares
with total revenues of $6.8 billion and net income of $51
million, for the comparable period ended June 30, 2002.
Shareholders' equity at June 30, 2003 was reported at $10.3
billion.
New York
Alan Murray
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Ted Collins
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653