Fitch Ratings has affirmed
Fitch also affirmed CNA's senior unsecured debt at 'BBB+' and Long-Term Issuer Default Rating (IDR) at 'A-'. The Rating Outlook for all of the ratings is Stable.
Key Rating Drivers
The rating actions consider CNA's favorable financial performance, capital, and debt servicing capabilities and financial flexibility. Offsetting the positives is CNA's exposure to the runoff of the long-term care (LTC) business and a modestly elevated expense ratio.
Fitch views CNA's financial performance and earnings as strong. For 1H21, CNA reported a combined ratio of 96%, versus 103% in the prior period, and 101% for FY 2020. For full-year 2020, the company reported
CNA's capitalization and leverage are very strong with a financial leverage ratio at 20% as of
Fitch believes CNA's reserves are moderately redundant in p/c lines but likely deficient in LTC. Fitch's concerns with LTC are focused on uncertainties regarding utilization and morbidity trends, ability to obtain necessary rate increases, expectations for ongoing low interest rates and long-duration claims. Given market-wide uncertainties linked to the LTC business, Fitch believes CNA's LTC reserves, and those of many other LTC insurers, will require future strengthening.
CNA is majority owned by
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
A material reduction in LTC exposure.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Adverse development of LTC reserves of more than
Sustained GAAP underwriting loss;
Sustained adverse GAAP reserve development in excess of 3% of prior year's equity;
Sustained GAAP ROE of 6% or lower;
A reduction in the overall assessment of capital factor to 'a+' or lower.
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
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VIEW ADDITIONAL RATING DETAILS
Additional information is available on www.fitchratings.com
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