OREANDA-NEWS. Fitch Ratings has affirmed CNA Financial Corporation's (CNA) Issuer Default Rating (IDR) at 'BBB+' and senior unsecured debt at 'BBB'. Fitch has also affirmed the Insurer Financial Strength (IFS) ratings of CNA's property/casualty insurance subsidiaries at 'A'. The Rating Outlook for all ratings is Stable. A full list of ratings follows at the end of this release.

KEY RATING DRIVERS

Fitch's rating rationale for the affirmation of CNA's ratings reflects the company's strong capitalization, stable earnings, and adequate reserve quality. The ratings also reflect anticipated challenges in a competitive property/casualty market rate environment, the potential for adverse reserve development and deterioration in runoff operations including long-term care.

CNA's financial leverage ratio was 18% at year-end 2014 essentially flat from prior year. GAAP earnings-based interest declined to 7.3x at year end 2014 down from prior year period of 8.7x as the company reported. The lower coverage was due to \$132 million less in pretax operating income in 2014 over prior year which was due to lower net investment income and lower prior year favorable development which was partially offset by improved current accident year underwriting results. Fitch expects that over the next 12-18 months CNA's financial leverage and earnings based interest coverage will approximate current levels.

CNA reported a GAAP combined ratio of 97.7% for full year 2014 a slight improvement over prior year of 97.9%. From a segment perspective, Commercial continues to underperform reporting a GAAP combined ratio of 109.3% for full year 2014 compared to 87.6% for Specialty and a 92.4% for International.

CNA reported \$43 million, approximately 0.5 pp on the combined ratio, of favorable development for full year 2014. While this is a credit positive Fitch notes that the level of favorable development has declined each year since 2010. In particular, Fitch has concerns about reserve adequacy related to the commercial business, long-term care, and other run-off operations. Favorably, Fitch believes that Specialty and International will likely be redundant but overall Fitch anticipates that reserve development will likely be neutral to negative in the near term.

CNA's capital position remains solid with stated GAAP stockholders' equity of \$12.8 billion at year-end 2014 and operating leverage of 0.51 times(x). CNA announced a \$2.00 per share special dividend that is payable in March 2015 and pro forma operating leverage increases modestly to 0.54x.

Fitch's rating rationale continues to recognize Loews' ownership of CNA, as the company benefits from the financial flexibility of a strong majority owner and is able to manage the company with a more long-term approach. Loews has demonstrated its support of CNA over the years through various actions that have improved CNA's capitalization. Fitch views Loews' continued commitment to likely lessen the magnitude of potential downgrades should CNA's creditworthiness deteriorate, but considers CNA's ratings standalone.

RATING SENSITIVITIES

Key rating triggers that could lead to an upgrade include:

--GAAP calendar year combined ratio for the ongoing property/casualty business of approximately 100% or better over several years;
--Strong improvement in total operating earnings that result in ROE of 9% and operating EBIT interest coverage at 9x or better;
--Overall flat to favorable GAAP loss reserve development;
--Achieving a Prism score of 'Very Strong' or higher for several consecutive years;
--Debt-to-total capital maintained below 25%.

Key rating triggers that could lead to a downgrade include:

--Charges related to investments or runoff operations which impede the company's ability to generate 5% annual growth in shareholders' equity before dividends and share repurchases(excluding FAS 115);
--Operating at GAAP calendar year combined ratio of approximately 105% or worse;
--Decline in total operating earnings that result in ROE below 6% and operating EBIT interest coverage at 6x or worse;
--Adverse GAAP reserve development in excess of 5% of prior year's equity;
--Achieving a Prism score of "Adequate" or below;
--Debt-to-total capital maintained above 30%.

Fitch has affirmed the following ratings with a Stable Outlook:

CNA Financial Corporation
--IDR at 'BBB+';
--\$350 million 6.5% due Aug. 15, 2016 at 'BBB';
--\$150 million 6.95% due Jan. 15, 2018 at 'BBB';
--\$350 million 7.35% due Nov. 15, 2019 at 'BBB';
--\$500 million 5.875% due Aug. 15, 2020 at 'BBB';
--\$400 million 5.75% due Aug. 15, 2021 at 'BBB';
--\$243 million 7.25% due Nov. 15, 2023 at 'BBB';
--\$550 million 3.95% due May 15, 2024 at 'BBB'.

Continental Casualty Company Group
Members:

American Casualty Company of Reading, Pennsylvania
Columbia Casualty Company
Continental Casualty Company
The Continental Insurance Company
The Continental Insurance Company of New Jersey
National Fire Insurance Company of Hartford
Surety Bonding Company of America
Transportation Insurance Company
Universal Surety of America
Valley Forge Insurance Company
Western Surety Company
--IFS at 'A'.