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

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8-K - FORM 8-K - CNA FINANCIAL CORP	q1158k.htm
EX-99.1 - EXHIBIT - CNA FINANCIAL CORP	q115exhibit991.htm

CNA Financial Corporation

Supplemental Financial Information

March 31, 2015

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.

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
Specialty.............................................................................................................................................................................................................................	5
Commercial........................................................................................................................................................................................................................	6
International.......................................................................................................................................................................................................................	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 Net Investment Income............................................................................................................................................................................	14
Other
Claim & Claim Adjustment Expense Reserve Rollforward................................................................................................................................................	15
Life & Group Non-Core Policyholder Reserves.................................................................................................................................................................	16
Statutory Data - Combined Continental Casualty Companies...........................................................................................................................................	17
Definitions and Presentation..............................................................................................................................................................................................	18

Statements of Operations



Three months ended March 31
(In millions)	2015			2014			Change
Revenues:
Net earned premiums	$	1,687		$	1,806		(7	)	%
Net investment income	558			526			6
Net realized investment gains (losses):
Other-than-temporary impairment (OTTI) losses	(12		)	(2		)
Portion of OTTI recognized in Other comprehensive income (loss)	—			—
Net OTTI losses recognized in earnings	(12		)	(2		)
Other net realized investment gains (losses)	22			48
Net realized investment gains (losses)	10			46
Other revenues	97			85
Total revenues	2,352			2,463			(5	)
Claims, Benefits and Expenses:
Insurance claims and policyholders' benefits	1,339			1,446
Amortization of deferred acquisition costs	303			329
Other operating expenses	358			346
Interest	39			44
Total claims, benefits and expenses	2,039			2,165			6
Income (loss) before income tax	313			298
Income tax (expense) benefit	(80		)	(78		)
Income (loss) from continuing operations	233			220			6
Loss from discontinued operations, net of tax	—			(207		)
Net income (loss)	$	233		$	13		N/M		%

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



Three months ended March 31
(In millions, except per share data)	2015			2014
Components of Income (Loss)
Net operating income (loss)	$	225		$	190
Net realized investment gains (losses), after tax	8			30
Income (loss) from continuing operations	233			220
Loss from discontinued operations, net of tax	—			(207		)
Net income (loss)	$	233		$	13

Diluted Earnings (Loss) Per Common Share
Net operating income (loss)	$	0.83		$	0.70
Net realized investment gains (losses), after tax	0.03			0.11
Income (loss) from continuing operations	0.86			0.81
Loss from discontinued operations, net of tax	—			(0.76		)
Diluted earnings (loss) per share	$	0.86		$	0.05

Weighted Average Outstanding Common Stock and Common Stock Equivalents
Basic	270.1			269.8
Diluted	270.7			270.5

Return on Equity
Net income (loss) ⁽¹⁾	7.4		%	0.4			%
Net operating income (loss) ⁽²⁾	7.4			6.3

(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⁽¹⁾



(In millions, except per share data)	March 31, 2015		December 31, 2014
Total investments	$	45,932	$	46,262
Total assets	55,465		55,566
Insurance reserves	36,705		36,380
Debt	2,560		2,559
Total liabilities	43,028		42,772
Accumulated other comprehensive income (loss) ⁽²⁾	421		400
Total stockholders' equity	12,437		12,794

Book value per common share	$	46.02	$	47.39
Book value per common share excluding AOCI	$	44.47	$	45.91

Outstanding shares of common stock (in millions of shares)	270.2		270.0



Three months ended March 31	2015			2014
Net cash flows provided (used) by operating activities	$	94		$	168
Net cash flows provided (used) by investing activities	526			(354		)
Net cash flows provided (used) by financing activities	(603		)	210
Net cash flows provided (used) by operating, investing and financing activities	$	17		$	24

(1) On August 1, 2014, CNA completed the sale of the common stock of Continental Assurance Company (CAC), CNA's former life insurance subsidiary. CNA elected to include CAC cash flow data in the comparative period.

(2) At March 31, 2015 and December 31, 2014, the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $1,370 million and $1,288 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



Three months ended March 31
(In millions)	2015				2014				Change
Gross written premiums	$	2,536			$	2,494			2		%
Net written premiums	1,669				1,767				(6	)

Net earned premiums	1,549				1,668				(7	)
Net investment income	373				350
Other revenues	87				78
Total operating revenues	2,009				2,096				(4	)
Insurance claims and policyholders' benefits	1,003				1,143
Amortization of deferred acquisition costs	296				321
Other insurance related expenses	233				231
Other expenses	80				76
Total claims, benefits and expenses	1,612				1,771				9
Operating income (loss) before income tax	397				325
Income tax (expense) benefit on operating income (loss)	(133		)		(106		)
Net operating income (loss)	$	264			$	219			21		%

Other Performance Metrics
Underwriting gain (loss)	$	17			$	(27	)		163		%

Loss & LAE	64.5			%	68.3			%	3.8		pts
Acquisition expense	19.4				19.4				—
Underwriting expense	14.7				13.7				(1.0	)
Expense	34.1				33.1				(1.0	)
Dividend	0.3				0.2				(0.1	)
Combined ratio	98.9			%	101.6			%	2.7
Combined ratio excluding catastrophes and development	96.7			%	97.2			%	0.5		pts

Pretax net accident year catastrophe losses incurred	$	29			$	74
Effect on loss & LAE ratio	1.9			%	4.5			%	2.6		pts

Pretax net prior year development and other: (favorable) / unfavorable	$	8			$	(13	)
Effect on loss & LAE ratio	0.3			%	(0.1		)	%	(0.4	)	pts

Rate	2			%	4			%	(2	)	pts
Retention	79			%	79			%	—		pts
New Business	$	249			$	269			(7	)	%

Specialty - Results of Operations



Three months ended March 31
(In millions)	2015				2014				Change
Gross written premiums	$	1,489			$	1,363			9		%
Net written premiums	698				713				(2	)

Net earned premiums	680				692				(2	)
Net investment income	155				144
Other revenues	78				68
Total operating revenues	913				904				1
Insurance claims and policyholders' benefits	430				443
Amortization of deferred acquisition costs	144				143
Other insurance related expenses	69				65
Other expenses	67				61
Total claims, benefits and expenses	710				712				—
Operating income (loss) before income tax	203				192
Income tax (expense) benefit on operating income (loss)	(68		)		(63		)
Net operating income (loss)	$	135			$	129			5		%

Other Performance Metrics
Underwriting gain (loss)	$	37			$	41			(10	)	%

Loss & LAE	63.1			%	63.9			%	0.8		pts
Acquisition expense	19.9				19.7				(0.2	)
Underwriting expense	11.4				10.3				(1.1	)
Expense	31.3				30.0				(1.3	)
Dividend	0.2				0.2				—
Combined ratio	94.6			%	94.1			%	(0.5	)
Combined ratio excluding catastrophes and development	93.7			%	93.5			%	(0.2	)	pts

Pretax net accident year catastrophe losses incurred	$	7			$	11
Effect on loss & LAE ratio	1.1			%	1.6			%	0.5		pts

Pretax net prior year development and other: (favorable) / unfavorable	$	(4	)		$	(9	)
Effect on loss & LAE ratio	(0.2		)	%	(1.0		)	%	(0.8	)	pts

Rate	2			%	4			%	(2	)	pts
Retention	84			%	86			%	(2	)	pts
New Business	$	76			$	81			(6	)	%

Commercial - Results of Operations



Three months ended March 31
(In millions)	2015				2014				Change
Gross written premiums	$	786			$	826			(5	)	%
Net written premiums	759				807				(6	)

Net earned premiums	678				735				(8	)
Net investment income	204				191
Other revenues	9				10
Total operating revenues	891				936				(5	)
Insurance claims and policyholders' benefits	457				570
Amortization of deferred acquisition costs	117				123
Other insurance related expenses	127				126
Other expenses	8				8
Total claims, benefits and expenses	709				827				14
Operating income (loss) before income tax	182				109
Income tax (expense) benefit on operating income (loss)	(62		)		(35		)
Net operating income (loss)	$	120			$	74			62		%

Other Performance Metrics
Underwriting gain (loss)	$	(23	)		$	(84	)		73		%

Loss & LAE	66.9			%	77.1			%	10.2		pts
Acquisition expense	18.2				17.7				(0.5	)
Underwriting expense	17.8				16.2				(1.6	)
Expense	36.0				33.9				(2.1	)
Dividend	0.4				0.3				(0.1	)
Combined ratio	103.3			%	111.3			%	8.0
Combined ratio excluding catastrophes and development	100.5			%	101.4			%	0.9		pts

Pretax net accident year catastrophe losses incurred	$	19			$	60
Effect on loss & LAE ratio	2.8			%	8.4			%	5.6		pts

Pretax net prior year development and other: (favorable) / unfavorable	$	—			$	6
Effect on loss & LAE ratio	—			%	1.5			%	1.5		pts

Rate	3			%	6			%	(3	)	pts
Retention	76			%	74			%	2		pts
New Business	$	138			$	147			(6	)	%

International - Results of Operations



Three months ended March 31
(In millions)	2015				2014				Change
Gross written premiums	$	261			$	305			(14	)	%
Net written premiums	212				247				(14	)

Net earned premiums	191				241				(21	)
Net investment income	14				15
Other revenues	—				—
Total operating revenues	205				256				(20	)
Insurance claims and policyholders' benefits	116				130
Amortization of deferred acquisition costs	35				55
Other insurance related expenses	37				40
Other expenses	5				7
Total claims, benefits and expenses	193				232				17
Operating income (loss) before income tax	12				24
Income tax (expense) benefit on operating income (loss)	(3		)		(8		)
Net operating income (loss)	$	9			$	16			(44	)	%

Other Performance Metrics
Underwriting gain (loss)	$	3			$	16			(81	)	%

Loss & LAE	60.7			%	54.2			%	(6.5	)	pts
Acquisition expense	21.6				23.8				2.2
Underwriting expense	16.0				15.5				(0.5	)
Expense	37.6				39.3				1.7
Dividend	—				—				—
Combined ratio	98.3			%	93.5			%	(4.8	)
Combined ratio excluding catastrophes and development	94.3			%	95.1			%	0.8		pts

Pretax net accident year catastrophe losses incurred	$	3			$	3
Effect on loss & LAE ratio	1.3			%	1.2			%	(0.1	)	pts

Pretax net prior year development and other: (favorable) / unfavorable	$	12			$	(10	)
Effect on loss & LAE ratio	2.7			%	(2.8		)	%	(5.5	)	pts

Rate	(1		)	%	—			%	(1	)	pts
Retention	76			%	82			%	(6	)	pts
New Business	$	35			$	41			(15	)	%

Life & Group Non-Core - Results of Operations



Three months ended March 31
(In millions)	2015			2014			Change
Net earned premiums	$	138		$	139		(1	)	%
Net investment income	179			171
Other revenues	9			5
Total operating revenues	326			315			3
Insurance claims and policyholders' benefits	340			306
Amortization of deferred acquisition costs	7			8
Other insurance related expenses	35			32
Other expenses	4			1
Total claims, benefits and expenses	386			347			(11	)
Operating income (loss) before income tax	(60		)	(32		)
Income tax (expense) benefit on operating income (loss)	43			30
Net operating income (loss)	$	(17	)	$	(2	)	N/M		%

Corporate & Other Non-Core - Results of Operations



Three months ended March 31
(In millions)	2015			2014			Change
Net earned premiums	$	—		$	(1	)
Net investment income	6			5
Other revenues	1			2
Total operating revenues	7			6			17	%
Insurance claims and policyholders' benefits	(4		)	(3		)
Amortization of deferred acquisition costs	—			—
Other insurance related expenses	—			(1		)
Other expenses	45			51
Total claims, benefits and expenses	41			47			13
Operating income (loss) before income tax	(34		)	(41		)
Income tax (expense) benefit on operating income (loss)	12			14
Net operating income (loss)	$	(22	)	$	(27	)	19	%

Investment Summary - Consolidated



	March 31, 2015					December 31, 2014
(In millions)	Carrying Value			Net Unrealized Gains (Losses)		Carrying Value			Net Unrealized Gains (Losses)
Fixed maturity securities:
Corporate and other bonds	$	18,552		$	1,824	$	18,889		$	1,660
States, municipalities and political subdivisions:
Tax-exempt	9,822			1,029		9,802			988
Taxable	3,141			498		2,938			467
Total states, municipalities and political subdivisions	12,963			1,527		12,740			1,455
Asset-backed:
RMBS	5,226			228		5,233			205
CMBS	2,260			109		2,144			88
Other ABS	1,123			14		1,235			1
Total asset-backed	8,609			351		8,612			294
U.S. Treasury and obligations of government-sponsored enterprises	30			6		31			5
Foreign government	409			19		454			16
Redeemable preferred stock	42			3		42			3
Total fixed maturity securities	40,605			3,730		40,768			3,433
Equities	225			12		222			12
Limited partnership investments	2,967			—		2,937			—
Other invested assets	43			—		41			—
Mortgage loans	586			—		588			—
Short term investments	1,506			—		1,706			(1		)
Total investments	$	45,932		$	3,742	$	46,262		$	3,444

Net receivable/(payable) on investment activity	$	(57	)			$	(58	)

Effective portfolio duration (in years)	6.3					6.3
Weighted average rating of fixed maturity securities	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



	March 31, 2015					December 31, 2014
(In millions)	Carrying Value			Net Unrealized Gains (Losses)		Carrying Value		Net Unrealized Gains (Losses)
Fixed maturity securities:
Corporate and other bonds	$	13,020		$	656	$	13,444	$	542
States, municipalities and political subdivisions:
Tax-exempt	2,499			130		2,561		127
Taxable	1,636			184		1,454		169
Total states, municipalities and political subdivisions	4,135			314		4,015		296
Asset-backed:
RMBS	5,093			218		5,101		196
CMBS	2,095			97		1,985		78
Other ABS	1,029			14		1,144		2
Total asset-backed	8,217			329		8,230		276
U.S. Treasury and obligations of government-sponsored enterprises	5			—		7		(1		)
Foreign government	404			17		449		15
Redeemable preferred stock	13			1		13		2
Total fixed maturity securities	25,794			1,317		26,158		1,130
Equities	88			7		87		9
Limited partnership investments	2,967			—		2,937		—
Other invested assets	43			—		41		—
Mortgage loans	529			—		531		—
Short term investments	1,385			—		1,586		(1		)
Total investments	$	30,806		$	1,324	$	31,340	$	1,138

Net receivable/(payable) on investment activity	$	(53	)			$	4

Effective portfolio duration (in years)	4.1					4.0
Weighted average rating of fixed maturity securities	A					A

Investment Summary - Life & Group Non-Core



	March 31, 2015					December 31, 2014
(In millions)	Carrying Value			Net Unrealized Gains (Losses)		Carrying Value			Net Unrealized Gains (Losses)
Fixed maturity securities:
Corporate and other bonds	$	5,532		$	1,168	$	5,445		$	1,118
States, municipalities and political subdivisions:
Tax-exempt	7,323			899		7,241			861
Taxable	1,505			314		1,484			298
Total states, municipalities and political subdivisions	8,828			1,213		8,725			1,159
Asset-backed:
RMBS	133			10		132			9
CMBS	165			12		159			10
Other ABS	94			—		91			(1		)
Total asset-backed	392			22		382			18
U.S. Treasury and obligations of government-sponsored enterprises	25			6		24			6
Foreign government	5			2		5			1
Redeemable preferred stock	29			2		29			1
Total fixed maturity securities	14,811			2,413		14,610			2,303
Equities	137			5		135			3
Limited partnership investments	—			—		—			—
Other invested assets	—			—		—			—
Mortgage loans	57			—		57			—
Short term investments	121			—		120			—
Total investments	$	15,126		$	2,418	$	14,922		$	2,306

Net receivable/(payable) on investment activity	$	(4	)			$	(62	)

Effective portfolio duration (in years)	10.3					10.5
Weighted average rating of fixed maturity securities	A+					A+

Investments - Fixed Maturity Securities by Credit Rating



March 31, 2015	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	$	—		$	—	$	190		$	9	$	1,038		$	93	$	5,309		$	692	$	10,319		$	965	$	1,696		$	65	$	18,552		$	1,824
States, municipalities and political subdivisions:
Tax-exempt	—			—		1,100			121		5,303			588		3,201			311		117			6		101			3		9,822			1,029
Taxable	—			—		401			53		2,294			354		446			91		—			—		—			—		3,141			498
Total states, municipalities and political subdivisions	—			—		1,501			174		7,597			942		3,647			402		117			6		101			3		12,963			1,527
Asset-backed:
RMBS	3,724			163		143			3		72			—		197			—		98			2		992			60		5,226			228
CMBS	75			2		562			20		492			31		399			22		540			21		192			13		2,260			109
Other ABS	—			—		258			5		96			1		584			6		185			2		—			—		1,123			14
Total asset-backed	3,799			165		963			28		660			32		1,180			28		823			25		1,184			73		8,609			351
U.S. Treasury and obligations of government-sponsored enterprises	30			6		—			—		—			—		—			—		—			—		—			—		30			6
Foreign government	—			—		108			5		154			6		147			8		—			—		—			—		409			19
Redeemable preferred stock	—			—		—			—		—			—		—			—		18			2		24			1		42			3
Total fixed maturity securities	$	3,829		$	171	$	2,762		$	216	$	9,449		$	1,073	$	10,283		$	1,130	$	11,277		$	998	$	3,005		$	142	$	40,605		$	3,730

Percentage of total fixed maturity securities	9		%			7		%			23		%			26		%			28		%			7		%			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 Net Investment Income



Three months ended March 31	Consolidated
(In millions)	2015			2014
Taxable fixed maturities	$	342		$	352
Tax-exempt fixed maturities	101			100
Total fixed maturity securities	443			452
Limited partnership investments	114			73
Other, net of investment expense	1			1
Pretax net investment income	$	558		$	526

After-tax fixed maturity securities	$	318		$	324
After-tax net investment income	$	394		$	371

Effective income yield for the fixed maturity securities portfolio, pretax ⁽¹⁾	4.8		%	4.9		%
Effective income yield for the fixed maturity securities portfolio, after tax ⁽¹⁾	3.4		%	3.5		%



	Property & Casualty and Corporate & Other Non-Core
Three months ended March 31	Property & Casualty and Corporate & Other Non-Core
(In millions)	2015			2014
Taxable fixed maturities	$	242		$	247
Tax-exempt fixed maturities	22			33
Total fixed maturity securities	264			280
Limited partnership investments	114			73
Other, net of investment expense	1			2
Pretax net investment income	$	379		$	355

After-tax fixed maturity securities	$	179		$	192
After-tax net investment income	$	255		$	241

Effective income yield for the fixed maturity securities portfolio, pretax ⁽¹⁾	4.3		%	4.4		%
Effective income yield for the fixed maturity securities portfolio, after tax ⁽¹⁾	2.9		%	3.0		%



Three months ended March 31	Life & Group Non-Core
(In millions)	2015			2014
Taxable fixed maturities	$	100		$	105
Tax-exempt fixed maturities	79			67
Total fixed maturity securities	179			172
Limited partnership investments	—			—
Other, net of investment expense	—			(1		)
Pretax net investment income	$	179		$	171

After-tax fixed maturity securities	$	139		$	132
After-tax net investment income	$	139		$	130

Effective income yield for the fixed maturity securities portfolio, pretax ⁽¹⁾	5.8		%	6.0			%
Effective income yield for the fixed maturity securities portfolio, after tax ⁽¹⁾	4.5		%	4.6			%

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

Claim & Claim Adjustment Expense Reserve Rollforward



Three months ended March 31, 2015 (In millions)	Specialty			Commercial			International			P&C Operations			Life & Group Non-Core			Corporate & Other Non-Core			Total Operations
Claim & claim adjustment expense reserves, beginning of period
Gross	$	6,229		$	9,514		$	1,441		$	17,184		$	3,183		$	2,904		$	23,271
Ceded	574			661			180			1,415			340			2,589			4,344
Net	5,655			8,853			1,261			15,769			2,843			315			18,927

Net incurred claim & claim adjustment expenses	429			454			116			999			236			1			1,236
Net claim & claim adjustment expense payments	(400		)	(516		)	(84		)	(1,000		)	(180		)	(5		)	(1,185		)
Foreign currency translation adjustment and other	—			—			(88		)	(88		)	4			(2		)	(86		)

Claim & claim adjustment expense reserves, end of period
Net	5,684			8,791			1,205			15,680			2,903			309			18,892
Ceded	668			650			172			1,490			334			2,532			4,356
Gross	$	6,352		$	9,441		$	1,377		$	17,170		$	3,237		$	2,841		$	23,248

Life & Group Non-Core Policyholder Reserves



March 31, 2015
(In millions)	Claim and claim adjustment expenses		Future policy benefits		Total
Long term care	$	2,132	$	7,886	$	10,018
Structured settlement annuities	598		—		598
Other	24		—		24
Total	2,754		7,886		10,640
Shadow adjustments ⁽¹⁾	149		1,652		1,801
Ceded reserves	334		209		543
Total gross reserves	$	3,237	$	9,747	$	12,984



December 31, 2014
(In millions)	Claim and claim adjustment expenses		Future policy benefits		Total
Long term care	$	2,064	$	7,782	$	9,846
Structured settlement annuities	606		—		606
Other	28		1		29
Total	2,698		7,783		10,481
Shadow adjustments ⁽¹⁾	145		1,522		1,667
Ceded reserves	340		185		525
Total gross reserves	$	3,183	$	9,490	$	12,673

(1) To the extent that unrealized gains on fixed income securities supporting long term care products 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 $307 million and $314 million related to Deferred acquisition costs at March 31, 2015 and December 31, 2014.

Statutory Data - Combined Continental Casualty Companies



Three months ended March 31
Income Statements	(Preliminary)								Change
(In millions)	2015				2014				Change
Gross written premiums	$	2,357			$	2,290			3		%
Net written premiums	1,623				1,621				—

Net earned premiums	1,313				1,374				(4	)
Claim and claim adjustment expenses	1,118				1,219
Acquisition expenses	276				278
Underwriting expenses	219				203
Policyholders' dividends	2				—
Underwriting income (loss)	(302		)		(326		)		7
Net investment income	462				598
Other income (loss)	11				(3		)
Income tax (expense) benefit	(3		)		(2		)
Net realized gains (losses)	(1		)		46
Net income (loss)	$	167			$	313			(47	)	%

Financial Ratios
Loss and LAE	85.2			%	88.8			%
Acquisition expense	17.0				17.1
Underwriting expense	13.5				12.5
Expense	30.5				29.6
Dividend	0.1				—
Combined ratio	115.8			%	118.4			%



SUPPLEMENTAL STATUTORY DATA	(Preliminary)
(In billions)	March 31, 2015		December 31, 2014
Statutory surplus	$	10.7	$	11.2

Definitions and Presentation


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


•	P&C Operations includes Specialty, Commercial and International.


•	Life & Group Non-Core segment primarily includes the results of long term care businesses 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 uses the net operating income (loss) financial measure to monitor the Company’s operations. Please refer to Note P to the Condensed Consolidated Financial Statements within the December 31, 2014 Form 10-K for further discussion of this measure.


•	Management uses underwriting results to monitor insurance operations. Underwriting results are pretax and are calculated as net earned premiums less total insurance expenses, which includes insurance claims and policyholders' benefits, amortization of deferred acquisition costs and other insurance related expenses.

•

In the evaluation of the results of Specialty, Commercial and International, management uses 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.


•	Pretax net prior year development and other includes the effects of interest accretion and change in allowance for uncollectible reinsurance and deductible amounts.

•

The majority of our limited partnership investments employ hedge fund strategies that generate returns primarily through investing in marketable securities in the public 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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