A.M. Best Co. has affirmed the financial strength rating (FSR) of
A (Excellent) and issuer credit ratings (ICR) of “a” of Western
Surety Company (WSC) and its subsidiaries, Surety Bonding Company
of America (SBCA) and Universal Surety of America (Universal
Surety), collectively referred to as Western Surety (and previously
known as CNA Surety Corporation Group [CNA Surety])
(headquartered in Chicago, IL). The outlook for all ratings is stable.
The ratings reflect Western Surety’s excellent level of risk-adjusted
capitalization, historically profitable underwriting and operating
performance and leading market position in the contract and
miscellaneous surety bond markets.
These positive rating factors are derived from Western Surety’s clearly
defined target markets, extensive distribution network, disciplined
underwriting, credit risk management and strong servicing capabilities.
In addition, Western Surety maintains a well-diversified surety and
fidelity book of business with respect to products, geography and market
segments, which enables the group to leverage its broad-based expertise
to develop and expand its leadership position in the surety marketplace.
Western Surety benefits from the financial flexibility of its indirect
parent, CNA Financial Corporation (CNAF) [NYSE: CNA], which has
relatively low financial leverage and solid coverage ratios.
Partially offsetting these positive rating factors is the sluggish
construction market and the highly competitive environment in the surety
market, which will pressure underwriting margins over the near term.
As of third quarter of 2012, Western Surety continued to report strong
underwriting and operating results, which it received, in part, from
favorable prior year loss reserve development. A.M. Best anticipates the
group will achieve positive underwriting and operating performance for
the remainder of 2012 and near term, despite the current weakness in the
construction industry and the economy (on a lagged basis to a certain
degree), the competitive environment in its markets and the likelihood
of a reduced level of favorable prior year loss reserve development.
While the ratings for Western Surety are stable, future positive rating
actions may result if it continues its strong underwriting and operating
performance. However, negative rating actions could result if the
underwriting and operating performance falls markedly short of A.M.
The methodology used in determining these ratings is Best’s Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best’s rating process and contains the different rating criteria
employed in the rating process. Key criteria utilized include: “Risk
Management and the Rating Process for Insurance Companies”; “Catastrophe
Analysis in A.M. Best’s Ratings”; “Insurance Holding Company and Debt
Ratings”; “Understanding BCAR for Property/Casualty Insurers”; and
“Rating Members of Insurance Groups.” Best’s Credit Rating Methodology
can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
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