CNA FINANCIAL CORP - FORM 8-K - EX-99.2

Attached files

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8-K - FORM 8-K - CNA FINANCIAL CORP	q4138k.htm
EX-99.1 - EX-99.1 - CNA FINANCIAL CORP	q413exhibit991.htm

CNA Financial Corporation

Supplemental Financial Information

December 31, 2013

This report is for informational purposes only and includes consolidated financial statements and financial exhibits that are unaudited. This report should be read in conjunction with documents filed with the U.S. Securities and Exchange Commission, including the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

Table of Contents



	Page
Consolidated Results
Statements of Operations..................................................................................................................................................................................................	1
Components of Income (Loss), Per Share Data and Return on Equity.............................................................................................................................	2
Selected Balance Sheets Data and Statements of Cash Flows Data...............................................................................................................................	3
Property & Casualty - Results of Operations
Property & Casualty...........................................................................................................................................................................................................	4
CNA Specialty....................................................................................................................................................................................................................	5
CNA Commercial...............................................................................................................................................................................................................	6
Hardy.................................................................................................................................................................................................................................	7
Non-Core - Results of Operations
Life & Group Non-Core......................................................................................................................................................................................................	8
Corporate & Other Non-Core.............................................................................................................................................................................................	9
Investment Information
Investment Summary - Consolidated................................................................................................................................................................................	10
Investment Summary - Property & Casualty and Corporate & Other Non-Core...............................................................................................................	11
Investment Summary - Life & Group Non-Core.................................................................................................................................................................	12
Investments - Fixed Maturity Securities by Credit Rating..................................................................................................................................................	13
Components of Pretax Net Investment Income.................................................................................................................................................................	14
Other
Claim & Claim Adjustment Expense Reserve Rollforward................................................................................................................................................	15
Life & Group Non-Core Policyholder Reserves..............................................................................................................................................	16
Statutory Data - Preliminary...............................................................................................................................................................................................	17
Definitions and Presentation..............................................................................................................................................................................................	18

Statements of Operations



Periods ended December 31	Three Months								Twelve Months
(In millions)	2013			2012			Change		2013			2012			Change
Revenues:
Net earned premiums	$	1,882		$	1,784		5	%	$	7,271		$	6,882		6		%
Net investment income	642			563			14		2,450			2,282			7
Net realized investment gains (losses):
Other-than-temporary impairment (OTTI) losses	(27		)	(40		)			(76		)	(129		)
Portion of OTTI recognized in Other comprehensive income (loss)	—			—					(2		)	(25		)
Net OTTI losses recognized in earnings	(27		)	(40		)			(78		)	(154		)
Other net realized investment gains (losses)	40			37					109			217
Net realized investment gains (losses)	13			(3		)			31			63
Other revenues	76			90					361			320
Total revenues	2,613			2,434			7		10,113			9,547			6
Claims, Benefits and Expenses:
Insurance claims and policyholders' benefits	1,583			1,732					5,947			5,896
Amortization of deferred acquisition costs	358			337					1,362			1,274
Other operating expenses	332			359					1,325			1,335
Interest	41			42					166			170
Total claims, benefits and expenses	2,314			2,470			6		8,800			8,675			(1	)
Income (loss) before income tax	299			(36		)	N/M		1,313			872			51
Income tax (expense) benefit	(78		)	27					(376		)	(244		)
Net income (loss)	$	221		$	(9	)	N/M	%	$	937		$	628		49		%

Components of Income (Loss), Per Share Data and Return on Equity



Periods ended December 31	Three Months							Twelve Months
(In millions, except per share data)	2013			2012				2013			2012
Components of Income (Loss)
Net operating income (loss)	$	213		$	(7	)		$	917		$	587
Net realized investment gains (losses)	8			(2		)		20			41
Income (loss)	$	221		$	(9	)		$	937		$	628

Diluted Earnings (Loss) Per Common Share
Net operating income (loss)	$	0.79		$	(0.03	)		$	3.40		$	2.18
Net realized investment gains (losses)	0.03			—				0.07			0.15
Diluted earnings (loss) per share	$	0.82		$	(0.03	)		$	3.47		$	2.33

Weighted Average Outstanding Common Stock and Common Stock Equivalents
Basic	269.7			269.4				269.7			269.4
Diluted	270.4			269.4				270.2			269.8

Return on Equity
Net income (loss) ⁽¹⁾	7.1		%	(0.3		)	%	7.5		%	5.3		%
Net operating income (loss) ⁽²⁾	7.0			(0.2		)		7.7			5.2

(1) Annualized net income (loss) divided by the average stockholders' equity including accumulated other comprehensive income (loss) (AOCI) for the period. Average equity including AOCI is calculated using a simple average of the beginning and ending balances for the period.

(2) Annualized net operating income (loss) divided by the average stockholders' equity excluding AOCI for the period. Average equity excluding AOCI is calculated using a simple average of the beginning and ending balances for the period.

Selected Balance Sheets Data and Statements of Cash Flows Data



(In millions, except per share data)	December 31, 2013		December 31, 2012
Total assets	$	57,194	$	58,522
Insurance reserves	38,394		40,005
Debt	2,560		2,570
Total liabilities	44,543		46,208
Accumulated other comprehensive income (loss) ⁽¹⁾	442		831
Total stockholders' equity	12,651		12,314

Book value per common share	$	46.91	$	45.71
Book value per common share excluding AOCI	$	45.26	$	42.62

Outstanding shares of common stock (in millions of shares)	269.7		269.4



Three months ended December 31	2013			2012
Net cash flows provided (used) by operating activities	$	283		$	257
Net cash flows provided (used) by investing activities	(209		)	(187		)
Net cash flows provided (used) by financing activities	(64		)	(44		)
Net cash flows provided (used) by operating, investing and financing activities	$	10		$	26



Twelve months ended December 31	2013			2012
Net cash flows provided (used) by operating activities	$	1,204		$	1,250
Net cash flows provided (used) by investing activities	(898		)	(934		)
Net cash flows provided (used) by financing activities	(264		)	(239		)
Net cash flows provided (used) by operating, investing and financing activities	$	42		$	77

(1) At December 31, 2013 and 2012, the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $532 million and $1,511 million. To the extent that unrealized gains on fixed income securities supporting certain products within the Life & Group Non-Core segment would result in a premium deficiency if realized, a related decrease in Deferred acquisition costs and/or increase in Insurance reserves are recorded, net of tax, as a reduction of net unrealized gains through Other comprehensive income (loss) (Shadow Adjustments).

Property & Casualty - Results of Operations



Periods ended December 31	Three Months											Twelve Months
(In millions)	2013				2012				Change			2013				2012				Change
Gross written premiums	$	2,301			$	2,167			6		%	$	9,355			$	8,639			8		%
Net written premiums	1,684				1,609				5			6,799				6,414				6
Net earned premiums	1,743				1,645				6			6,715				6,324				6
Net investment income	425				355							1,588				1,449
Other revenues	77				69							353				271
Total operating revenues	2,245				2,069				9			8,656				8,044				8
Insurance claims and policyholders' benefits	1,084				1,335							4,354				4,490
Amortization of deferred acquisition costs	351				331							1,334				1,246
Other insurance related expenses	219				244							888				904
Other expenses	76				67							281				251
Total claims, benefits and expenses	1,730				1,977				12			6,857				6,891				—
Operating income (loss) before income tax	515				92				N/M			1,799				1,153				56
Income tax (expense) benefit on operating income (loss)	(175		)		(32		)					(614		)		(395		)
Net operating income (loss)	$	340			$	60			N/M		%	$	1,185			$	758			56		%

Loss & LAE	62.0			%	80.9			%	18.9		pts	64.6			%	70.8			%	6.2		pts
Acquisition expense	18.2				20.3				2.1			19.2				19.4				0.2
Underwriting expense	14.6				14.7				0.1			13.9				14.6				0.7
Expense	32.8				35.0				2.2			33.1				34.0				0.9
Dividend	0.2				0.2				—			0.2				0.2				—
Combined ratio	95.0				116.1				21.1			97.9				105.0				7.1
Combined ratio excluding catastrophes and development ⁽¹⁾	94.3			%	103.2			%	8.9		pts	97.1			%	101.9			%	4.8		pts

Pretax net accident year catastrophe losses incurred	$	23			$	268						$	169			$	391
Impact on loss & LAE ratio ⁽¹⁾	1.3			%	16.7			%	15.4		pts	2.6			%	6.4			%	3.8		pts

Pretax net prior year development and other ⁽²⁾: (favorable) / unfavorable	$	(20	)		$	(67	)					$	(130	)		$	(219	)
Impact on loss & LAE ratio	(0.6		)	%	(4.1		)	%	(3.5	)	pts	(1.8		)	%	(3.3		)	%	(1.5	)	pts

Rate	6			%	6			%	—		pts	7			%	6			%	1		pts
Retention	78			%	81			%	(3	)	pts	78			%	81			%	(3	)	pts
New Business (Specialty and Commercial only)	$	224			$	258			(13	)	%	$	1,082			$	1,179			(8	)	%

(1) Reflects the impact of reinstatement premiums.

(2) Other includes the impacts of interest accretion and change in allowance for uncollectible reinsurance and deductible amounts.

CNA Specialty - Results of Operations



Periods ended December 31	Three Months											Twelve Months
(In millions)	2013				2012				Change			2013				2012				Change
Gross written premiums	$	1,364			$	1,205			13		%	$	5,344			$	4,875			10		%
Net written premiums	754				718				5			3,091				2,924				6
Net earned premiums	767				735				4			3,004				2,898				4
Net investment income	177				146							657				592
Other revenues	67				59							257				230
Total operating revenues	1,011				940				8			3,918				3,720				5
Insurance claims and policyholders' benefits	361				457							1,710				1,833
Amortization of deferred acquisition costs	161				156							628				614
Other insurance related expenses	72				79							272				301
Other expenses	64				53							236				206
Total claims, benefits and expenses	658				745				12			2,846				2,954				4
Operating income (loss) before income tax	353				195				81			1,072				766				40
Income tax (expense) benefit on operating income (loss)	(121		)		(65		)					(365		)		(262		)
Net operating income (loss)	$	232			$	130			78		%	$	707			$	504			40		%

Loss & LAE	46.9			%	61.8			%	14.9		pts	56.7			%	63.2			%	6.5		pts
Acquisition expense	19.5				20.2				0.7			19.6				20.1				0.5
Underwriting expense	10.9				11.7				0.8			10.4				11.4				1.0
Expense	30.4				31.9				1.5			30.0				31.5				1.5
Dividend	0.1				0.2				0.1			0.2				0.1				(0.1	)
Combined ratio	77.4				93.9				16.5			86.9				94.8				7.9
Combined ratio excluding catastrophes and development	90.3			%	100.5			%	10.2		pts	94.2			%	99.3			%	5.1		pts

Pretax net accident year catastrophe losses incurred	$	2			$	10						$	22			$	18
Impact on loss & LAE ratio	0.2			%	1.4			%	1.2		pts	0.8			%	0.6			%	(0.2	)	pts

Pretax net prior year development and other ⁽¹⁾: (favorable) / unfavorable	$	(101	)		$	(58	)					$	(247	)		$	(153	)
Impact on loss & LAE ratio	(13.1		)	%	(8.0		)	%	5.1		pts	(8.1		)	%	(5.1		)	%	3.0		pts

Rate	5			%	6			%	(1	)	pts	6			%	5			%	1		pts
Retention	85			%	86			%	(1	)	pts	85			%	86			%	(1	)	pts
New Business	$	87			$	90			(3	)	%	$	391			$	387			1		%

(1) Other includes the impacts of interest accretion and change in allowance for uncollectible reinsurance and deductible amounts.

CNA Commercial - Results of Operations



Periods ended December 31	Three Months											Twelve Months
(In millions)	2013				2012				Change			2013				2012				Change
Gross written premiums	$	844			$	873			(3	)	%	$	3,559			$	3,588			(1	)	%
Net written premiums	808				830				(3	)		3,312				3,373				(2	)
Net earned premiums	841				854				(2	)		3,350				3,306				1
Net investment income	247				208							927				854
Other revenues	11				9							96				40
Total operating revenues	1,099				1,071				3			4,373				4,200				4
Insurance claims and policyholders' benefits	668				827							2,482				2,585
Amortization of deferred acquisition costs	150				151							600				588
Other insurance related expenses	121				153							547				578
Other expenses	8				12							26				36
Total claims, benefits and expenses	947				1,143				17			3,655				3,787				3
Operating income (loss) before income tax	152				(72		)		N/M			718				413				74
Income tax (expense) benefit on operating income (loss)	(52		)		28							(250		)		(136		)
Net operating income (loss)	$	100			$	(44	)		N/M		%	$	468			$	277			69		%

Loss & LAE	79.2			%	96.6			%	17.4		pts	73.9			%	77.9			%	4.0		pts
Acquisition expense	15.1				19.1				4.0			17.8				18.3				0.5
Underwriting expense	17.2				16.7				(0.5	)		16.4				17.0				0.6
Expense	32.3				35.8				3.5			34.2				35.3				1.1
Dividend	0.3				0.3				—			0.2				0.3				0.1
Combined ratio	111.8				132.7				20.9			108.3				113.5				5.2
Combined ratio excluding catastrophes and development ⁽¹⁾	97.8			%	105.6			%	7.8		pts	100.4			%	104.1			%	3.7		pts


Pretax net accident year catastrophe losses incurred	$	21			$	241						$	142			$	356
Impact on loss & LAE ratio ⁽¹⁾	2.5			%	28.2			%	25.7		pts	4.2			%	10.9			%	6.7		pts

Pretax net prior year development and other ⁽²⁾: (favorable) / unfavorable	$	97			$	(10	)					$	119			$	(61	)
Impact on loss & LAE ratio	11.5			%	(1.2		)	%	(12.7	)	pts	3.7			%	(1.6		)	%	(5.3	)	pts

Rate	7			%	7			%	—		pts	8			%	7			%	1		pts
Retention	74			%	78			%	(4	)	pts	74			%	77			%	(3	)	pts
New Business	$	137			$	168			(18	)	%	$	691			$	792			(13	)	%

(1) Reflects the impact of reinstatement premiums.

(2) Other includes the impacts of interest accretion and change in allowance for uncollectible reinsurance and deductible amounts.

Hardy - Results of Operations



Periods ended December 31	Three Months											Twelve Months
(In millions)	2013				2012				Change			2013				2012 ⁽²⁾				Change
Gross written premiums	$	93			$	89			4		%	$	452			$	176			157		%
Net written premiums	122				61				100			396				117				N/M
Net earned premiums	135				56				141			361				120				N/M
Net investment income	1				1							4				3
Other revenues	(1		)		1							—				1
Total operating revenues	135				58				133			365				124				194
Insurance claims and policyholders' benefits	55				51							162				72
Amortization of deferred acquisition costs	40				24							106				44
Other insurance related expenses	26				12							69				25
Other expenses	4				2							19				9
Total claims, benefits and expenses	125				89				(40	)		356				150				(137	)
Operating income (loss) before income tax	10				(31		)		132			9				(26		)		135
Income tax (expense) benefit on operating income (loss)	(2		)		5							1				3
Net operating income (loss)	$	8			$	(26	)		131		%	$	10			$	(23	)		143		%

Loss & LAE	40.7			%	91.2			%	50.5		pts	44.8			%	60.3			%	15.5		pts
Acquisition expense	29.6				39.3				9.7			28.5				35.6				7.1
Underwriting expense	19.8				23.3				3.5			20.1				21.6				1.5
Expense	49.4				62.6				13.2			48.6				57.2				8.6
Dividend	—				—				—			—				—				—
Combined ratio	90.1				153.8				63.7			93.4				117.5				24.1
Combined ratio excluding catastrophes and development ⁽¹⁾	91.0			%	105.8			%	14.8		pts	89.8			%	100.1			%	10.3		pts

Pretax net accident year catastrophe losses incurred	$	—			$	17						$	5			$	17
Impact on loss & LAE ratio ⁽¹⁾	—			%	37.0			%	37.0		pts	1.3			%	17.3			%	16.0		pts

Pretax net prior year development and other ⁽³⁾: (favorable) / unfavorable	$	(16	)		$	1						$	(2	)		$	(5	)
Impact on loss & LAE ratio	(0.9		)	%	2.8			%	3.7		pts	2.3			%	(4.0		)	%	(6.3	)	pts

Rate	(4		)	%	—			%	(4	)	pts	(2		)	%	1			%	(3	)	pts
Retention	63			%	63			%	—		pts	70			%	68			%	2		pts

(1) Reflects the impact of reinstatement premiums.

(2) Hardy was acquired on July 2, 2012.

(3) Other includes the impacts of interest accretion and change in allowance for uncollectible reinsurance and deductible amounts.

Life & Group Non-Core - Results of Operations



Periods ended December 31	Three Months									Twelve Months
(In millions)	2013			2012			Change			2013			2012			Change
Net earned premiums	$	140		$	139		1		%	$	559		$	560		—		%
Net investment income	210			201			4			830			801			4
Other revenues	(4		)	19						(2		)	34
Total operating revenues	346			359			(4	)		1,387			1,395			(1	)
Insurance claims and policyholders' benefits	314			408						1,402			1,422
Amortization of deferred acquisition costs	7			6						28			28
Other insurance related expenses	34			38						134			144
Other expenses	—			5						12			23
Total claims, benefits and expenses	355			457			22			1,576			1,617			3
Operating income (loss) before income tax	(9		)	(98		)	91			(189		)	(222		)	15
Income tax (expense) benefit on operating income (loss)	22			46						131			132
Net operating income (loss)	$	13		$	(52	)	125		%	$	(58	)	$	(90	)	36		%

Corporate & Other Non-Core - Results of Operations



Periods ended December 31	Three Months								Twelve Months
(In millions)	2013			2012			Change		2013			2012			Change
Net earned premiums	$	(1	)	$	—				$	(3	)	$	(2	)
Net investment income	7			7					32			32
Other revenues	3			2					10			15
Total operating revenues	9			9			—	%	39			45			(13	)	%
Insurance claims and policyholders' benefits	185			(11		)			191			(16		)
Amortization of deferred acquisition costs	—			—					—			—
Other insurance related expenses	(4		)	1					(5		)	1
Other expenses	48			46					181			182
Total claims, benefits and expenses	229			36			N/M		367			167			(120	)
Operating income (loss) before income tax	(220		)	(27		)	N/M		(328		)	(122		)	(169	)
Income tax (expense) benefit on operating income (loss)	80			12					118			41
Net operating income (loss)	$	(140	)	$	(15	)	N/M	%	$	(210	)	$	(81	)	(159	)	%

Investment Summary - Consolidated



	December 31, 2013					September 30, 2013						December 31, 2012
(In millions)	Carrying Value		Net Unrealized Gains (Losses)			Carrying Value			Net Unrealized Gains (Losses)			Carrying Value			Net Unrealized Gains (Losses)
Fixed maturity securities:
Corporate and other bonds	$	20,898	$	1,510		$	21,183		$	1,544		$	22,236		$	2,677
States, municipalities and political subdivisions:
Tax-exempt	8,432		41			7,903			118			6,605			720
Taxable	3,125		235			3,556			321			4,178			691
Total states, municipalities and political subdivisions	11,557		276			11,459			439			10,783			1,411
Asset-backed:
RMBS	4,971		31			4,819			40			5,920			175
CMBS	2,063		68			2,017			75			1,822			130
Other ABS	955		10			956			14			952			23
Total asset-backed	7,989		109			7,792			129			8,694			328
U.S. Treasury and obligations of government-sponsored enterprises	144		5			173			7			182			10
Foreign government	543		12			561			14			613			25
Redeemable preferred stock	102		10			106			12			125			12
Total fixed maturity securities	41,233		1,922			41,274			2,145			42,633			4,463
Equities	185		6			199			10			249			21
Limited partnership investments	2,720		—			2,790			—			2,462			—
Other invested assets	54		—			55			—			59			—
Mortgage loans	508		—			440			—			401			—
Short term investments	1,407		(1		)	1,475			(1		)	1,832			(1		)
Total investments	$	46,107	$	1,927		$	46,233		$	2,154		$	47,636		$	4,483

Net receivable/(payable) on investment activity	$	135	$	—		$	(106	)	$	—		$	(22	)	$	—

Effective portfolio duration (in years)	6.9					6.8						6.5
Weighted average rating of fixed maturity securities	A					A						A

RMBS - Residential mortgage-backed securities

CMBS - Commercial mortgage-backed securities

Other ABS - Other asset-backed securities

Investment Summary - Property & Casualty and Corporate & Other Non-Core



	December 31, 2013					September 30, 2013						December 31, 2012
(In millions)	Carrying Value		Net Unrealized Gains (Losses)			Carrying Value			Net Unrealized Gains (Losses)			Carrying Value			Net Unrealized Gains (Losses)
Fixed maturity securities:
Corporate and other bonds	$	13,590	$	509		$	13,767		$	545		$	13,959		$	977
States, municipalities and political subdivisions:
Tax-exempt	3,176		36			3,123			64			2,117			143
Taxable	1,570		89			1,797			142			2,233			316
Total states, municipalities and political subdivisions	4,746		125			4,920			206			4,350			459
Asset-backed:
RMBS	4,641		22			4,489			27			5,515			155
CMBS	1,793		54			1,741			58			1,572			105
Other ABS	853		9			851			14			915			21
Total asset-backed	7,287		85			7,081			99			8,002			281
U.S. Treasury and obligations of government-sponsored enterprises	121		(1		)	150			—			159			2
Foreign government	538		11			556			13			608			23
Redeemable preferred stock	5		—			8			1			35			1
Total fixed maturity securities	26,287		729			26,482			864			27,113			1,743
Equities	61		9			76			13			90			17
Limited partnership investments	2,720		—			2,790			—			2,462			—
Other invested assets	54		—			55			—			59			—
Mortgage loans	489		—			421			—			382			—
Short term investments	1,339		(1		)	1,416			(1		)	1,762			(1		)
Total investments	$	30,950	$	737		$	31,240		$	876		$	31,868		$	1,759

Net receivable/(payable) on investment activity	$	140	$	—		$	(95	)	$	—		$	(22	)	$	—

Effective portfolio duration (in years)	4.4					4.4						3.9
Weighted average rating of fixed maturity securities	A					A						A

Investment Summary - Life & Group Non-Core



	December 31, 2013						September 30, 2013						December 31, 2012
(In millions)	Carrying Value			Net Unrealized Gains (Losses)			Carrying Value			Net Unrealized Gains (Losses)			Carrying Value		Net Unrealized Gains (Losses)
Fixed maturity securities:
Corporate and other bonds	$	7,308		$	1,001		$	7,416		$	999		$	8,277	$	1,700
States, municipalities and political subdivisions:
Tax-exempt	5,256			5			4,780			54			4,488		577
Taxable	1,555			146			1,759			179			1,945		375
Total states, municipalities and political subdivisions	6,811			151			6,539			233			6,433		952
Asset-backed:
RMBS	330			9			330			13			405		20
CMBS	270			14			276			17			250		25
Other ABS	102			1			105			—			37		2
Total asset-backed	702			24			711			30			692		47
U.S. Treasury and obligations of government-sponsored enterprises	23			6			23			7			23		8
Foreign government	5			1			5			1			5		2
Redeemable preferred stock	97			10			98			11			90		11
Total fixed maturity securities	14,946			1,193			14,792			1,281			15,520		2,720
Equities	124			(3		)	123			(3		)	159		4
Limited partnership investments	—			—			—			—			—		—
Other invested assets	—			—			—			—			—		—
Mortgage loans	19			—			19			—			19		—
Short term investments	68			—			59			—			70		—
Total investments	$	15,157		$	1,190		$	14,993		$	1,278		$	15,768	$	2,724

Net receivable/(payable) on investment activity	$	(5	)	$	—		$	(11	)	$	—		$	—	$	—

Effective portfolio duration (in years)	11.3						11.4						11.3
Weighted average rating of fixed maturity securities	A						A						A

Investments - Fixed Maturity Securities by Credit Rating



December 31, 2013	U.S. Government, Government agencies and Government-sponsored enterprises						AAA						AA					A						BBB						Non-investment grade						Total
(In millions)	Fair Value			Net Unrealized Gains (Losses)			Fair Value			Net Unrealized Gains (Losses)			Fair Value			Net Unrealized Gains (Losses)		Fair Value			Net Unrealized Gains (Losses)			Fair Value			Net Unrealized Gains (Losses)			Fair Value			Net Unrealized Gains (Losses)			Fair Value			Net Unrealized Gains (Losses)
Corporate and other bonds	$	—		$	—		$	262		$	7		$	1,439		$	72	$	6,846		$	648		$	10,486		$	689		$	1,865		$	94		$	20,898		$	1,510
States, municipalities and political subdivisions:
Tax-exempt	—			—			1,034			34			4,629			22		2,682			(9		)	54			(4		)	33			(2		)	8,432			41
Taxable	—			—			427			27			2,086			146		612			62			—			—			—			—			3,125			235
Total states, municipalities and political subdivisions	—			—			1,461			61			6,715			168		3,294			53			54			(4		)	33			(2		)	11,557			276
Asset-backed:
RMBS	3,459			(11		)	100			(2		)	117			—		200			—			96			—			999			44			4,971			31
CMBS	80			—			479			15			427			13		359			10			404			13			314			17			2,063			68
Other ABS	—			—			278			5			243			3		366			2			68			—			—			—			955			10
Total asset-backed	3,539			(11		)	857			18			787			16		925			12			568			13			1,313			61			7,989			109
U.S. Treasury and obligations of government-sponsored enterprises	144			5			—			—			—			—		—			—			—			—			—			—			144			5
Foreign government	—			—			196			6			240			4		107			2			—			—			—			—			543			12
Redeemable preferred stock	—			—			—			—			—			—		—			—			63			10			39			—			102			10
Total fixed maturity securities	$	3,683		$	(6	)	$	2,776		$	92		$	9,181		$	260	$	11,172		$	715		$	11,171		$	708		$	3,250		$	153		$	41,233		$	1,922

Percentage of total fixed maturity securities	9		%				7		%				22		%			27		%				27		%				8		%				100		%

The ratings presented are based on a ratings methodology that takes into account ratings from Standard & Poor's and Moody's Investors Services, Inc. in that order of preference. If a security is not rated by these rating agencies, an internal rating is formulated. For securities with credit support from third party guarantees, the rating reflects the greater of the underlying rating of the issuer or the insured rating.

Components of Pretax Net Investment Income



	Consolidated
Periods ended December 31	Three Months							Twelve Months
(In millions)	2013				2012			2013			2012
Fixed maturity securities	$	497			$	494		$	1,998		$	2,022
Limited partnership investments	148				67			451			251
Other	(3		)		2			1			9
Net investment income	$	642			$	563		$	2,450		$	2,282
Average amortized cost of fixed maturity securities portfolio	$	39,223			$	38,054		$	38,799		$	37,868
Effective income yield for the fixed maturity securities portfolio, pretax ⁽¹⁾	5.1			%	5.2		%	5.1		%	5.3		%
Effective income yield for the fixed maturity securities portfolio, after tax ⁽¹⁾	3.6			%	3.6		%	3.6		%	3.7		%



	Property & Casualty and Corporate & Other Non-Core
Periods ended December 31	Three Months							Twelve Months
(In millions)	2013				2012			2013			2012
Fixed maturity securities	$	285			$	293		$	1,164		$	1,220
Limited partnership investments	148				67			450			251
Other	(1		)		2			6			10
Net investment income	$	432			$	362		$	1,620		$	1,481
Average amortized cost of fixed maturity securities portfolio	$	25,569			$	25,411		$	25,479		$	25,553
Effective income yield for the fixed maturity securities portfolio, pretax ⁽¹⁾	4.5			%	4.6		%	4.6		%	4.8		%
Effective income yield for the fixed maturity securities portfolio, after tax ⁽¹⁾	3.1			%	3.1		%	3.1		%	3.2		%



	Life & Group Non-Core
Periods ended December 31	Three Months							Twelve Months
(In millions)	2013				2012			2013				2012
Fixed maturity securities	$	212			$	201		$	834			$	802
Limited partnership investments	—				—			1				—
Other	(2		)		—			(5		)		(1		)
Net investment income	$	210			$	201		$	830			$	801
Average amortized cost of fixed maturity securities portfolio	$	13,654			$	12,643		$	13,320			$	12,315
Effective income yield for the fixed maturity securities portfolio, pretax⁽¹⁾	6.2			%	6.4		%	6.3			%	6.5			%
Effective income yield for the fixed maturity securities portfolio, after tax ⁽¹⁾	4.6			%	4.6		%	4.5			%	4.7			%

(1) Annualized yields based on the average amortized cost of the fixed maturity securities portfolio.

Claim & Claim Adjustment Expense Reserve Rollforward



Three months ended December 31, 2013 (In millions)	CNA Specialty			CNA Commercial			Hardy			P&C Operations			Life & Group Non-Core			Corporate & Other Non-Core			Total Operations
Claim & claim adjustment expense reserves, beginning of period
Gross	$	6,846		$	10,763		$	432		$	18,041		$	3,050		$	2,871		$	23,962
Ceded	598			1,056			184			1,838			452			2,390			4,680
Net	6,248			9,707			248			16,203			2,598			481			19,282

Net incurred claim & claim adjustment expenses	360			667			55			1,082			196			(4		)	1,274
Net claim & claim adjustment expense payments	(441		)	(744		)	(69		)	(1,254		)	(163		)	(9		)	(1,426		)
Foreign currency translation adjustment and other	(1		)	(3		)	—			(4		)	(8		)	(1		)	(13		)

Claim & claim adjustment expense reserves, end of period
Net	6,166			9,627			234			16,027			2,623			467			19,117
Ceded	523			1,022			152			1,697			435			2,840			4,972
Gross	$	6,689		$	10,649		$	386		$	17,724		$	3,058		$	3,307		$	24,089



Twelve months ended December 31, 2013 (In millions)	CNA Specialty			CNA Commercial			Hardy			P&C Operations			Life & Group Non-Core			Corporate & Other Non-Core			Total Operations
Claim & claim adjustment expense reserves, beginning of period
Gross	$	6,748		$	11,326		$	521		$	18,595		$	3,006		$	3,162		$	24,763
Ceded	636			1,115			247			1,998			478			2,650			5,126
Net	6,112			10,211			274			16,597			2,528			512			19,637

Net incurred claim & claim adjustment expenses	1,704			2,477			160			4,341			810			2			5,153
Net claim & claim adjustment expense payments	(1,646		)	(3,045		)	(195		)	(4,886		)	(637		)	(46		)	(5,569		)
Foreign currency translation adjustment and other	(4		)	(16		)	(5		)	(25		)	(78		)	(1		)	(104		)

Claim & claim adjustment expense reserves, end of period
Net	6,166			9,627			234			16,027			2,623			467			19,117
Ceded	523			1,022			152			1,697			435			2,840			4,972
Gross	$	6,689		$	10,649		$	386		$	17,724		$	3,058		$	3,307		$	24,089

Life & Group Non-Core Policyholder Reserves



December 31, 2013
(In millions)	Claim and claim adjustment expenses		Future policy benefits		Policyholders' funds		Separate account business		Total
Long term care	$	1,889	$	7,329	$	—	$	—	$	9,218
Payout annuities	613		1,990		—		—		2,603
Institutional markets	1		9		57		181		248
Other	37		4		—		—		41
Total	2,540		9,332		57		181		12,110
Shadow adjustments ⁽¹⁾	83		406		—		—		489
Ceded reserves	435		733		35		—		1,203
Total gross reserves	$	3,058	$	10,471	$	92	$	181	$	13,802



December 31, 2012
(In millions)	Claim and claim adjustment expenses		Future policy benefits		Policyholders' funds		Separate account business		Total
Long term care	$	1,683	$	6,879	$	—	$	—	$	8,562
Payout annuities	637		2,008		—		—		2,645
Institutional markets	1		12		100		312		425
Other	45		4		—		—		49
Total	2,366		8,903		100		312		11,681
Shadow adjustments ⁽¹⁾	162		1,812		—		—		1,974
Ceded reserves	478		760		34		—		1,272
Total gross reserves	$	3,006	$	11,475	$	134	$	312	$	14,927

(1) To the extent that unrealized gains on fixed income securities supporting long term care products and payout annuity contracts would result in a premium deficiency if those gains were realized, a related decrease in Deferred acquisition costs and/or increase in Insurance reserves are recorded, net of tax, as a reduction of net unrealized gains through Other comprehensive income (loss) (Shadow Adjustments). The Shadow adjustments presented above do not include $342 million and $369 million related to Deferred acquisition costs at December 31, 2013 and 2012.

Statutory Data - Preliminary



Periods Ended December 31	Three Months										Twelve Months
Income Statements	(Preliminary) 2013								Change		(Preliminary) 2013								Change
(In millions)	(Preliminary) 2013				2012				Change		(Preliminary) 2013				2012				Change
Combined Continental Casualty Companies
Gross written premiums	$	2,175			$	2,040			7	%	$	8,732			$	8,309			5	%
Net written premiums	1,534				1,515				1		6,247				6,163				1

Net earned premiums	1,482				1,422				4		5,692				5,493				4
Claim and claim adjustment expenses	1,541				1,754						5,196				5,256
Acquisition expenses	234				267						1,059				1,077
Underwriting expenses	229				241						854				902
Policyholders' dividends	3				6						9				11
Underwriting income (loss)	(525		)		(846		)		38		(1,426		)		(1,753		)		19
Net investment income	614				483						1,943				1,834
Other income (loss)	549				257						637				268
Income tax (expense) benefit	(85		)		17						(118		)		(21		)
Net realized gains (losses)	(27		)		47						(123		)		63
Net income (loss)	$	526			$	(42	)		N/M	%	$	913			$	391			134	%

Financial Ratios
Loss and LAE	104.0			%	123.3			%			91.3			%	95.7			%
Acquisition expense	15.3				17.7						17.0				17.5
Underwriting expense	14.9				15.9						13.7				14.6
Expense	30.2				33.6						30.7				32.1
Dividend	0.2				0.4						0.2				0.2
Combined ratio	134.4			%	157.3			%			122.2			%	128.0			%



SUPPLEMENTAL STATUTORY DATA	(Preliminary) December 31, 2013		December 31, 2012
(In millions)	(Preliminary) December 31, 2013		December 31, 2012
Combined Continental Casualty Companies
Statutory surplus ⁽¹⁾	$	11,137	$	9,998
Life Company
Statutory surplus	$	597	$	556

(1) Represents the combined statutory surplus of Continental Casualty Company and its subsidiaries, including the life company, as determined in accordance with statutory accounting practices.

Definitions and Presentation


•	Collectively, CNA Financial Corporation (CNAF) and its subsidiaries are referred to as CNA or the Company.


•	P&C Operations includes CNA Specialty, CNA Commercial and Hardy. Hardy was acquired on July 2, 2012.


•	Life & Group Non-Core segment primarily includes the results of the life and group lines of business that are in run-off.


•	Corporate & Other Non-Core segment primarily includes certain corporate expenses including interest on corporate debt and the results of certain property and casualty business in run-off, including CNA Re and asbestos and environmental pollution. Intersegment eliminations are also included in this segment.


•	Management utilizes the net operating income financial measure to monitor the Company’s operations. Please refer to Note K to the Condensed Consolidated Financial Statements within the September 30, 2013 Form 10-Q for further discussion of this measure.

•

In the evaluation of the results of CNA Specialty, CNA Commercial and Hardy, management utilizes the loss ratio, the expense ratio, the dividend ratio and the combined ratio. These ratios are calculated using financial results prepared in accordance with accounting principles generally accepted in the United States of America. The loss ratio is the percentage of net incurred claim and claim adjustment expenses to net earned premiums. The expense ratio is the percentage of insurance underwriting and acquisition expenses, including the amortization of deferred acquisition costs, to net earned premiums. The dividend ratio is the ratio of policyholders' dividends incurred to net earned premiums. The combined ratio is the sum of the loss, expense and dividend ratios. The statutory expense ratio reported on page 17 is the percentage of acquisition and underwriting expenses to net written premiums in accordance with statutory accounting practices.

•

The majority of our limited partnership investments employ hedge fund strategies that generate returns primarily through investing in the fixed income and equity markets. While the Company generally does not invest in highly leveraged partnerships, there are risks which may result in losses due to short-selling, derivatives or other speculative investment practices. The use of leverage increases volatility generated by the underlying investment strategies.


•	Certain immaterial differences are due to rounding.


•	N/M = Not Meaningful

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