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Rating Action:

Moody's rates CNA Financial's senior notes Baa3; outlook stable

09 Nov 2009

$350 million of senior notes rated, due 2019.

New York, November 09, 2009 -- Moody's Investors Service has assigned provisional ratings to the shelf registration of CNA Financial Corp. (NYSE: CNA, provisional senior unsecured debt at (P)Baa3), and has assigned a Baa3 rating to $350 million of senior notes to be issued under the shelf. The notes mature in 2019, are redeemable at the option of the issuer, and rank pari passu with other senior unsecured obligations of CNA Financial Corp. Proceeds from the offering will be used to redeem $250 million of the company's $1.25 billion of 2008 senior preferred stock held by Loews Corporation, at par, and for general corporate purposes. The outlook for CNA Financial's debt ratings is stable, as is the outlook for the A3 insurance financial strength ratings on Continental Casualty Company and members of its property/casualty insurance inter-company pool.

According to Moody's, the ratings on CNA Financial Corp. and its subsidiaries reflect the group's leadership position in many major commercial and specialty property/casualty insurance lines in the U.S., its adequate capitalization, its improved operational controls and profitable specialty lines segment, and the historically supportive parentage of Loews. These strengths remain tempered by earnings and risk-adjusted capitalization levels that -- albeit improved in recent years -- have generally remained weaker than those of higher-rated peers, and by general industry risks arising from the group's exposures to asbestos and environmental liabilities, natural and manmade catastrophes, potential claim reserve volatility and reinsurance counterparty credit risks. Alan Murray, senior credit officer at Moody's added: "We view management's ongoing efforts to reduce the risk profile of the group's investment portfolio and to strengthen the profitability and operational focus of CNA's standard commercial lines segment positively. However, improvement in that segment's persistent high underwriting combined ratio will likely remain a challenge over the intermediate term, given intensely competitive industry-wide pricing conditions in this relatively commodity-like business segment."

According to Moody's, factors that could lead to a future rating upgrade include the following: 1) sustained improvement in core operating earnings, particularly in the standard commercial lines segment; 2) adjusted financial leverage below 25% on a sustained basis; 3) risk-adjusted capitalization on par with more highly-rated industry peers; and 4) an upgrade of Loews Corporation (senior debt at A3).

Factors that could lead to a downgrade include the following: 1) a decline in shareholders' equity of 15% or more, absent further capital support from Loews Corporation or other outside investors; 2) sustained adjusted financial leverage in excess of 30%; 3) a downgrade of Loews Corporation or an indication of diminished support of CNA by Loews; 4) earnings coverage of interest on debt and preferred dividends below 2x; or 5) annual adverse reserve development in excess of 5% of total reserves.

Moody's noted that the difference between the A3 insurance financial strength ratings of Continental Casualty Company and members of its inter-company pool, and CNA Financial Corporation's Baa3 senior debt rating is 3 notches, which is standard notching for US-based insurance groups.

The following provisional ratings have been assigned to CNA Financial Corp.'s multiple issuer/multiple seniority shelf registration, with a stable outlook:

CNA Financial Corporation: senior unsecured debt at (P)Baa3; subordinated debt at (P)Ba1; preferred stock at (P)Ba2;

CNA Financial Capital I, II and III: trust preferred securities at (P)Ba1, guaranteed on a subordinated basis by CNA Financial Corporation.

Additionally, and in connection with the assignment of provisional ratings to CNA Financial's current shelf registration, Moody's has withdrawn its provisional ratings on the company's prior expired shelf registration.

CNA Financial Corporation is engaged through its subsidiaries in commercial and specialty property and casualty insurance. For the first nine months of 2009, CNA Financial Corporation reported net written premiums for property/casualty insurance operations of $4.7 billion and net income of $173 million. As of September 30, 2009, shareholders' equity was $10.8 billion.

The most recent rating action on CNA Financial Corp. was on November 3, 2009 when Moody's affirmed its long-term ratings on CNA Financial Corporation and its subsidiaries and revised the outlook to stable, from negative, primarily reflecting the recovery of the group's equity capitalization that has resulted from tightened credit spreads and repositioning of the company's investment portfolio, as well as improvement in the holding company's internal liquidity position.

The principal methodology used in rating CNA is "Moody's Global Rating Methodology for Property and Casualty Insurers", published in July 2008 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.

Moody's insurance financial strength ratings are opinions of the ability of insurance companies to pay punctually senior policyholder claims and obligations.

Visit Moody's website at www.moodys/insurance.com for more information.

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
Robert Riegel
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's rates CNA Financial's senior notes Baa3; outlook stable
No Related Data.
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