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

Attached files

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EX-99.1 - EXHIBIT - CNA FINANCIAL CORP	q415exhibit991.htm
8-K - FORM 8-K - CNA FINANCIAL CORP	q4158k.htm

CNA Financial Corporation

Supplemental Financial Information

December 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 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 Sheet Data and Statement 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
Definitions and Presentation..............................................................................................................................................................................................	17

Statements of Operations



Periods ended December 31	Three Months									Twelve Months
(In millions)	2015			2014			Change			2015			2014			Change
Revenues:
Net earned premiums	$	1,748		$	1,785		(2	)	%	$	6,921		$	7,212		(4	)	%
Net investment income	428			511			(16	)		1,840			2,067			(11	)
Net realized investment gains (losses):
Other-than-temporary impairment (OTTI) losses	(57		)	(60		)				(156		)	(77		)
Portion of OTTI recognized in Other comprehensive income (loss)	—			—						—			—
Net OTTI losses recognized in earnings	(57		)	(60		)				(156		)	(77		)
Other net realized investment gains (losses)	29			48						89			134
Net realized investment gains (losses)	(28		)	(12		)				(67		)	57
Other revenues	121			94						407			356
Total revenues	2,269			2,378			(5	)		9,101			9,692			(6	)
Claims, Benefits and Expenses:
Insurance claims and policyholders' benefits	1,376			1,350						5,384			5,591
Amortization of deferred acquisition costs	604			321						1,540			1,317
Other operating expenses	412			410						1,473			1,394
Interest	38			45						155			183
Total claims, benefits and expenses	2,430			2,126			(14	)		8,552			8,485			(1	)
Income (loss) before income tax	(161		)	252						549			1,207
Income tax (expense) benefit	91			(54		)				(70		)	(319		)
Income (loss) from continuing operations	(70		)	198			(135	)		479			888			(46	)
Income (loss) from discontinued operations, net of tax	—			—						—			(197		)
Net income (loss)	$	(70	)	$	198		(135	)	%	$	479		$	691		(31	)	%

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)	2015				2014				2015				2014
Components of Income (Loss)
Net operating income (loss)	$	(52	)		$	205			$	515			$	849
Net realized investment gains (losses)	(18		)		(7		)		(36		)		39
Income (loss) from continuing operations	(70		)		198				479				888
Income (loss) from discontinued operations	—				—				—				(197		)
Net income (loss)	$	(70	)		$	198			$	479			$	691

Diluted Earnings (Loss) Per Common Share
Net operating income (loss)	$	(0.19	)		$	0.76			$	1.90			$	3.14
Net realized investment gains (losses)	(0.07		)		(0.03		)		(0.13		)		0.14
Income (loss) from continuing operations	(0.26		)		0.73				1.77				3.28
Income (loss) from discontinued operations	—				—				—				(0.73		)
Diluted earnings (loss) per share	$	(0.26	)		$	0.73			$	1.77			$	2.55

Weighted Average Outstanding Common Stock and Common Stock Equivalents
Basic	270.3				270.0				270.2				269.9
Diluted	270.8				270.7				270.7				270.6

Return on Equity
Net income (loss) ⁽¹⁾	(2.3		)	%	6.1			%	3.9			%	5.4			%
Net operating income (loss) ⁽²⁾	(1.7		)		6.7				4.2				6.9

(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 Sheet Data and Statement of Cash Flows Data⁽¹⁾



(In millions, except per share data)	December 31, 2015			December 31, 2014
Total investments	$	44,699		$	46,262
Reinsurance receivables, net of allowance for uncollectible receivables	4,453			4,694
Total assets	55,047			55,566
Insurance reserves	36,486			36,380
Debt	2,562			2,559
Total liabilities	43,291			42,772
Accumulated other comprehensive income (loss) ⁽²⁾	(315		)	400
Total stockholders' equity	11,756			12,794

Book value per common share	$	43.49		$	47.39
Book value per common share excluding AOCI	$	44.66		$	45.91

Outstanding shares of common stock (in millions of shares)	270.3			270.0

Statutory capital and surplus - Combined Continental Casualty Companies ⁽³⁾	$	10,723		$	11,155



Three months ended December 31	2015			2014
Net cash flows provided (used) by operating activities	$	342		$	393
Net cash flows provided (used) by investing activities	(118		)	169
Net cash flows provided (used) by financing activities	(68		)	(614		)
Net cash flows provided (used) by operating, investing and financing activities	$	156		$	(52	)



Twelve months ended December 31	2015			2014
Net cash flows provided (used) by operating activities	$	1,387		$	1,440
Net cash flows provided (used) by investing activities	(372		)	(918		)
Net cash flows provided (used) by financing activities	(807		)	(519		)
Net cash flows provided (used) by operating, investing and financing activities	$	208		$	3

(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) As of December 31, 2015 and 2014, the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $1,111 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).

(3) Statutory capital and surplus as of December 31, 2015 is preliminary.

Property & Casualty - Results of Operations



Periods ended December 31	Three Months											Twelve Months
(In millions)	2015				2014				Change			2015				2014				Change
Gross written premiums	$	2,547			$	2,334			9		%	$	10,124			$	9,558			6		%
Net written premiums	1,585				1,555				2			6,421				6,536				(2	)

Net earned premiums	1,612				1,646				(2	)		6,374				6,657				(4	)
Net investment income	259				326							1,119				1,344
Other revenues	120				87							392				333
Total operating revenues	1,991				2,059				(3	)		7,885				8,334				(5	)
Insurance claims and policyholders' benefits	1,017				984							3,902				4,316
Amortization of deferred acquisition costs	309				315							1,226				1,289
Other insurance related expenses	266				214							954				900
Other expenses	100				77							341				313
Total claims, benefits and expenses	1,692				1,590				(6	)		6,423				6,818				6
Operating income (loss) before income tax	299				469							1,462				1,516
Income tax (expense) benefit on operating income (loss)	(97		)		(155		)					(496		)		(506		)
Net operating income (loss)	$	202			$	314			(36	)	%	$	966			$	1,010			(4	)	%

Other Performance Metrics
Underwriting gain (loss)	$	20			$	133			(85	)	%	$	292			$	152			92		%

Loss & LAE ratio	62.9			%	59.6			%	(3.3	)	pts	61.0			%	64.6			%	3.6		pts
Acquisition expense ratio	20.3				17.6				(2.7	)		19.4				19.0				(0.4	)
Underwriting expense ratio	15.5				14.4				(1.1	)		14.8				13.9				(0.9	)
Expense ratio	35.8				32.0				(3.8	)		34.2				32.9				(1.3	)
Dividend ratio	0.2				0.2				—			0.2				0.2				—
Combined ratio	98.9			%	91.8			%	(7.1	)		95.4			%	97.7			%	2.3
Combined ratio excluding catastrophes and development	97.7			%	93.6			%	(4.1	)	pts	96.3			%	95.9			%	(0.4	)	pts

Net accident year catastrophe losses incurred	$	38			$	9						$	141			$	156
Effect on loss & LAE ratio	2.4			%	0.6			%	(1.8	)	pts	2.2			%	2.3			%	0.1		pts

Net prior year development and other: (favorable) / unfavorable	$	(17	)		$	(39	)					$	(199	)		$	(43	)
Effect on loss & LAE ratio	(1.2		)	%	(2.4		)	%	(1.2	)	pts	(3.1		)	%	(0.5		)	%	2.6		pts

Rate	—			%	3			%	(3	)	pts	1			%	3			%	(2	)	pts
Retention	84			%	79			%	5		pts	81			%	78			%	3		pts
New Business	$	231			$	192			20		%	$	942			$	915			3		%

Specialty - Results of Operations



Periods ended December 31	Three Months											Twelve Months
(In millions)	2015				2014				Change			2015				2014				Change
Gross written premiums	$	1,623			$	1,415			15		%	$	6,242			$	5,608			11		%
Net written premiums	704				689				2			2,781				2,839				(2	)

Net earned premiums	707				712				(1	)		2,782				2,838				(2	)
Net investment income	109				137							474				560
Other revenues	111				77							356				295
Total operating revenues	927				926				—			3,612				3,693				(2	)
Insurance claims and policyholders' benefits	446				416							1,601				1,633
Amortization of deferred acquisition costs	149				150							589				592
Other insurance related expenses	76				65							278				262
Other expenses	92				63							301				254
Total claims, benefits and expenses	763				694				(10	)		2,769				2,741				(1	)
Operating income (loss) before income tax	164				232							843				952
Income tax (expense) benefit on operating income (loss)	(55		)		(78		)					(283		)		(318		)
Net operating income (loss)	$	109			$	154			(29	)	%	$	560			$	634			(12	)	%

Other Performance Metrics
Underwriting gain (loss)	36				81				(56	)	%	314				351				(11	)	%

Loss & LAE ratio	63.1			%	58.1			%	(5.0	)	pts	57.4			%	57.3			%	(0.1	)	pts
Acquisition expense ratio	20.1				19.5				(0.6	)		19.8				19.7				(0.1	)
Underwriting expense ratio	11.6				10.7				(0.9	)		11.3				10.4				(0.9	)
Expense ratio	31.7				30.2				(1.5	)		31.1				30.1				(1.0	)
Dividend ratio	0.2				0.1				(0.1	)		0.2				0.2				—
Combined ratio	95.0			%	88.4			%	(6.6	)		88.7			%	87.6			%	(1.1	)
Combined ratio excluding catastrophes and development	95.4			%	90.4			%	(5.0	)	pts	93.6			%	92.0			%	(1.6	)	pts

Net accident year catastrophe losses incurred	$	(2	)		$	—						$	13			$	21
Effect on loss & LAE ratio	(0.3		)	%	—			%	0.3		pts	0.4			%	0.7			%	0.3		pts

Net prior year development and other: (favorable) / unfavorable	$	(1	)		$	(14	)					$	(152	)		$	(149	)
Effect on loss & LAE ratio	(0.1		)	%	(2.0		)	%	(1.9	)	pts	(5.3		)	%	(5.1		)	%	0.2		pts

Rate	—			%	3			%	(3	)	pts	1			%	3			%	(2	)	pts
Retention	87			%	86			%	1		pts	86			%	87			%	(1	)	pts
New Business	$	73			$	70			4		%	$	279			$	309			(10	)	%

Commercial - Results of Operations



Periods ended December 31	Three Months											Twelve Months
(In millions)	2015				2014				Change			2015				2014				Change
Gross written premiums	$	726			$	714			2		%	$	2,967			$	2,959			—		%
Net written premiums	700				684				2			2,818				2,817				—

Net earned premiums	702				718				(2	)		2,788				2,906				(4	)
Net investment income	138				174							593				723
Other revenues	10				10							37				38
Total operating revenues	850				902				(6	)		3,418				3,667				(7	)
Insurance claims and policyholders' benefits	428				462							1,822				2,195
Amortization of deferred acquisition costs	117				122							469				493
Other insurance related expenses	153				111							538				487
Other expenses	5				6							28				31
Total claims, benefits and expenses	703				701				—			2,857				3,206				11
Operating income (loss) before income tax	147				201							561				461
Income tax (expense) benefit on operating income (loss)	(51		)		(69		)					(192		)		(154		)
Net operating income (loss)	$	96			$	132			(27	)	%	$	369			$	307			20		%

Other Performance Metrics
Underwriting gain (loss)	$	4			$	23			(83	)	%	$	(41	)		$	(269	)		85		%

Loss & LAE ratio	60.6			%	64.2			%	3.6		pts	65.1			%	75.3			%	10.2		pts
Acquisition expense ratio	19.9				15.0				(4.9	)		18.2				17.0				(1.2	)
Underwriting expense ratio	18.7				17.3				(1.4	)		17.9				16.7				(1.2	)
Expense ratio	38.6				32.3				(6.3	)		36.1				33.7				(2.4	)
Dividend ratio	0.4				0.3				(0.1	)		0.3				0.3				—
Combined ratio	99.6			%	96.8			%	(2.8	)		101.5			%	109.3			%	7.8
Combined ratio excluding catastrophes and development	98.3			%	95.6			%	(2.7	)	pts	98.0			%	98.6			%	0.6		pts

Net accident year catastrophe losses incurred	$	18			$	4						$	101			$	125
Effect on loss & LAE ratio	2.7			%	0.6			%	(2.1	)	pts	3.6			%	4.4			%	0.8		pts

Net prior year development and other: (favorable) / unfavorable	$	(9	)		$	5						$	(10	)		$	177
Effect on loss & LAE ratio	(1.4		)	%	0.6			%	2.0		pts	(0.1		)	%	6.3			%	6.4		pts

Rate	1			%	4			%	(3	)	pts	2			%	5			%	(3	)	pts
Retention	84			%	76			%	8		pts	79			%	73			%	6		pts
New Business	$	130			$	95			37		%	$	552			$	491			12		%

International - Results of Operations



Periods ended December 31	Three Months											Twelve Months
(In millions)	2015				2014				Change			2015				2014				Change
Gross written premiums	$	198			$	205			(3	)	%	$	915			$	991			(8	)	%
Net written premiums	181				182				(1	)		822				880				(7	)

Net earned premiums	203				216				(6	)		804				913				(12	)
Net investment income	12				15							52				61
Other revenues	(1		)		—							(1		)		—
Total operating revenues	214				231				(7	)		855				974				(12	)
Insurance claims and policyholders' benefits	143				106							479				488
Amortization of deferred acquisition costs	43				43							168				204
Other insurance related expenses	37				38							138				151
Other expenses	3				8							12				28
Total claims, benefits and expenses	226				195				(16	)		797				871				8
Operating income (loss) before income tax	(12		)		36							58				103
Income tax (expense) benefit on operating income (loss)	9				(8		)					(21		)		(34		)
Net operating income (loss)	$	(3	)		$	28			(111	)	%	$	37			$	69			(46	)	%

Other Performance Metrics
Underwriting gain (loss)	$	(20	)		$	29			(169	)	%	$	19			$	70			(73	)	%

Loss & LAE ratio	70.3			%	49.2			%	(21.1	)	pts	59.5			%	53.5			%	(6.0	)	pts
Acquisition expense ratio	22.1				19.8				(2.3	)		22.0				22.9				0.9
Underwriting expense ratio	17.5				17.9				0.4			16.1				16.0				(0.1	)
Expense ratio	39.6				37.7				(1.9	)		38.1				38.9				0.8
Dividend ratio	—				—				—			—				—				—
Combined ratio	109.9			%	86.9			%	(23.0	)		97.6			%	92.4			%	(5.2	)
Combined ratio excluding catastrophes and development	103.1			%	98.0			%	(5.1	)	pts	99.8			%	99.2			%	(0.6	)	pts

Net accident year catastrophe losses incurred	$	22			$	5						$	27			$	10
Effect on loss & LAE ratio	10.7			%	2.2			%	(8.5	)	pts	3.3			%	1.0			%	(2.3	)	pts

Net prior year development and other: (favorable) / unfavorable	$	(7	)		$	(30	)					$	(37	)		$	(71	)
Effect on loss & LAE ratio	(3.9		)	%	(13.3		)	%	(9.4	)	pts	(5.5		)	%	(7.8		)	%	(2.3	)	pts

Rate	(1		)	%	—			%	(1	)	pts	(1		)	%	(1		)	%	—		pts
Retention	73			%	66			%	7		pts	76			%	74			%	2		pts
New Business	28				27				—		%	111				115				(3	)	%

Life & Group Non-Core - Results of Operations



Periods ended December 31	Three Months									Twelve Months
(In millions)	2015			2014			Change			2015			2014			Change
Net earned premiums	$	136		$	139		(2	)	%	$	548		$	556		(1	)	%
Net investment income	164			179						704			700
Other revenues	(1		)	6						7			16
Total operating revenues	299			324			(8	)		1,259			1,272			(1	)
Insurance claims and policyholders' benefits	376			375						1,421			1,304
Amortization of deferred acquisition costs	295			6						314			28
Other insurance related expenses	38			34						142			130
Other expenses	1			(4		)				11			30
Total claims, benefits and expenses	710			411			(73	)		1,888			1,492			(27	)
Operating income (loss) before income tax	(411		)	(87		)				(629		)	(220		)
Income tax (expense) benefit on operating income (loss)	168			53						315			151
Net operating income (loss)	$	(243	)	$	(34	)	N/M		%	$	(314	)	$	(69	)	N/M		%

Corporate & Other Non-Core - Results of Operations



Periods ended December 31	Three Months								Twelve Months
(In millions)	2015			2014			Change		2015			2014			Change
Net earned premiums	$	—		$	—				$	(1	)	$	(1	)
Net investment income	5			6					17			23
Other revenues	2			1					8			7
Total operating revenues	7			7			—	%	24			29			(17	)	%
Insurance claims and policyholders' benefits	(17		)	(9		)			61			(29		)
Amortization of deferred acquisition costs	—			—					—			—
Other insurance related expenses	(1		)	—					(3		)	(1		)
Other expenses	46			134					183			205
Total claims, benefits and expenses	28			125			78		241			175			(38	)
Operating income (loss) before income tax	(21		)	(118		)			(217		)	(146		)
Income tax (expense) benefit on operating income (loss)	10			43					80			54
Net operating income (loss)	$	(11	)	$	(75	)	85	%	$	(137	)	$	(92	)	(49	)	%

Investment Summary - Consolidated



	December 31, 2015					September 30, 2015					December 31, 2014
(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	$	17,760	$	677		$	18,188		$	1,030	$	18,889		$	1,660
States, municipalities and political subdivisions:
Tax-exempt	10,114		1,076			10,203			911		9,802			988
Taxable	3,060		369			3,094			408		2,938			467
Total states, municipalities and political subdivisions	13,174		1,445			13,297			1,319		12,740			1,455
Asset-backed:
RMBS	5,072		137			5,041			191		5,233			205
CMBS	2,197		43			2,251			68		2,144			88
Other ABS	921		(2		)	1,016			7		1,235			1
Total asset-backed	8,190		178			8,308			266		8,612			294
U.S. Treasury and obligations of government-sponsored enterprises	67		5			29			5		31			5
Foreign government	346		12			344			11		454			16
Redeemable preferred stock	35		2			35			2		42			3
Total fixed maturity securities	39,572		2,319			40,201			2,633		40,768			3,433
Equities	197		6			212			5		222			12
Limited partnership investments	2,548		—			2,738			—		2,937			—
Other invested assets	44		—			45			—		41			—
Mortgage loans	678		—			640			—		588			—
Short term investments	1,660		—			1,482			—		1,706			(1		)
Total investments	$	44,699	$	2,325		$	45,318		$	2,638	$	46,262		$	3,444

Net receivable/(payable) on investment activity	$	82				$	(92	)			$	(58	)

Effective portfolio duration (in years)	6.2					6.5					6.3
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, 2015					September 30, 2015					December 31, 2014
(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	$	12,594	$	96		$	12,926		$	276	$	13,444	$	542
States, municipalities and political subdivisions:
Tax-exempt	2,441		133			2,663			112		2,561		127
Taxable	1,579		132			1,647			156		1,454		169
Total states, municipalities and political subdivisions	4,020		265			4,310			268		4,015		296
Asset-backed:
RMBS	4,828		131			4,921			183		5,101		196
CMBS	2,038		37			2,079			60		1,985		78
Other ABS	837		(1		)	931			7		1,144		2
Total asset-backed	7,703		167			7,931			250		8,230		276
U.S. Treasury and obligations of government-sponsored enterprises	42		—			4			—		7		(1		)
Foreign government	346		12			344			11		449		15
Redeemable preferred stock	13		1			13			1		13		2
Total fixed maturity securities	24,718		541			25,528			806		26,158		1,130
Equities	87		1			104			2		87		9
Limited partnership investments	2,548		—			2,738			—		2,937		—
Other invested assets	44		—			45			—		41		—
Mortgage loans	622		—			584			—		531		—
Short term investments	1,513		—			1,390			—		1,586		(1		)
Total investments	$	29,532	$	542		$	30,389		$	808	$	31,340	$	1,138

Net receivable/(payable) on investment activity	$	204				$	(41	)			$	4

Effective portfolio duration (in years)	4.3					4.4					4.0
Weighted average rating of fixed maturity securities	A					A					A

Investment Summary - Life & Group Non-Core



	December 31, 2015						September 30, 2015					December 31, 2014
(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	$	5,166		$	581		$	5,262		$	754	$	5,445		$	1,118
States, municipalities and political subdivisions:
Tax-exempt	7,673			943			7,540			799		7,241			861
Taxable	1,481			237			1,447			252		1,484			298
Total states, municipalities and political subdivisions	9,154			1,180			8,987			1,051		8,725			1,159
Asset-backed:
RMBS	244			6			120			8		132			9
CMBS	159			6			172			8		159			10
Other ABS	84			(1		)	85			—		91			(1		)
Total asset-backed	487			11			377			16		382			18
U.S. Treasury and obligations of government-sponsored enterprises	25			5			25			5		24			6
Foreign government	—			—			—			—		5			1
Redeemable preferred stock	22			1			22			1		29			1
Total fixed maturity securities	14,854			1,778			14,673			1,827		14,610			2,303
Equities	110			5			108			3		135			3
Limited partnership investments	—			—			—			—		—			—
Other invested assets	—			—			—			—		—			—
Mortgage loans	56			—			56			—		57			—
Short term investments	147			—			92			—		120			—
Total investments	$	15,167		$	1,783		$	14,929		$	1,830	$	14,922		$	2,306

Net receivable/(payable) on investment activity	$	(122	)				$	(51	)			$	(62	)

Effective portfolio duration (in years)	9.6						10.3					10.5
Weighted average rating of fixed maturity securities	A						A+					A+

Investments - Fixed Maturity Securities by Credit Rating



December 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	$	—		$	—	$	86		$	6	$	752		$	33		$	4,604		$	409		$	10,485		$	297		$	1,833		$	(68	)	$	17,760		$	677
States, municipalities and political subdivisions:
Tax-exempt	—			—		798			72		5,219			594			3,906			398			132			7			59			5			10,114			1,076
Taxable	—			—		298			30		2,148			251			554			90			17			(2		)	43			—			3,060			369
Total states, municipalities and political subdivisions	—			—		1,096			102		7,367			845			4,460			488			149			5			102			5			13,174			1,445
Asset-backed:
RMBS	3,779			96		94			—		49			(1		)	122			—			75			1			953			41			5,072			137
CMBS	64			—		493			11		475			15			314			8			597			4			254			5			2,197			43
Other ABS	—			—		93			—		25			—			525			(1		)	278			(1		)	—			—			921			(2		)
Total asset-backed	3,843			96		680			11		549			14			961			7			950			4			1,207			46			8,190			178
U.S. Treasury and obligations of government-sponsored enterprises	67			5		—			—		—			—			—			—			—			—			—			—			67			5
Foreign government	—			—		76			4		251			8			19			—			—			—			—			—			346			12
Redeemable preferred stock	—			—		—			—		—			—			—			—			11			1			24			1			35			2
Total fixed maturity securities	$	3,910		$	101	$	1,938		$	123	$	8,919		$	900		$	10,044		$	904		$	11,595		$	307		$	3,166		$	(16	)	$	39,572		$	2,319

Percentage of total fixed maturity securities	10		%			5		%			23		%				25		%				29		%				8		%				100		%

Components of Net Investment Income



	Consolidated
Periods ended December 31	Three Months							Twelve Months
(In millions)	2015				2014			2015				2014
Taxable fixed maturities, prior to accounting change	$	341			$	345		$	1,381			$	1,399
Tax-exempt fixed maturities, prior to accounting change	105				102			409				404
Total fixed maturity securities, prior to accounting change	446				447			1,790				1,803
Impact of accounting change ⁽¹⁾	(39		)		—			(39		)		—
Total fixed maturity securities	407				447			1,751				1,803
Limited partnership investments	23				64			92				263
Other, net of investment expense	(2		)		—			(3		)		1
Net investment income	$	428			$	511		$	1,840			$	2,067
Fixed maturity securities, after tax	$	296			$	322		$	1,264			$	1,298
Net investment income, after tax	$	314			$	365		$	1,329			$	1,473

Effective income yield for the fixed maturity securities portfolio, pretax	4.3			%	4.8		%	4.7			%	4.8		%
Effective income yield for the fixed maturity securities portfolio, after tax	3.2			%	3.4		%	3.4			%	3.5		%



	Property & Casualty and Corporate & Other Non-Core
Periods ended December 31	Three Months						Twelve Months
(In millions)	2015			2014			2015			2014
Taxable fixed maturities	$	232		$	244		$	965		$	992
Tax-exempt fixed maturities	8			23			$	74		107
Total fixed maturity securities	240			267			1,039			1,099
Limited partnership investments	23			64			92			263
Other, net of investment expense	1			1			5			5
Net investment income	$	264		$	332		$	1,136		$	1,367
Fixed maturity securities, after tax	$	163		$	181		$	705		$	751
Net investment income, after tax	$	182		$	224		$	772		$	926

Effective income yield for the fixed maturity securities portfolio, pretax	3.9		%	4.2		%	4.2		%	4.3		%
Effective income yield for the fixed maturity securities portfolio, after tax	2.7		%	2.8		%	2.9		%	3.0		%



	Life & Group Non-Core
Periods ended December 31	Three Months								Twelve Months
(In millions)	2015				2014				2015				2014
Taxable fixed maturities	$	103			101				$	410			$	407
Tax-exempt fixed maturities	64				79				302				297
Total fixed maturity securities	167				180				712				704
Limited partnership investments	—				—				—				—
Other, net of investment expense	(3		)		(1		)		(8		)		(4		)
Net investment income	$	164			$	179			$	704			$	700
Fixed maturity securities, after tax	$	133			$	141			$	559			$	547
Net investment income, after tax	$	132			$	141			$	557			$	547

Effective income yield for the fixed maturity securities portfolio, pretax	5.2			%	5.9			%	5.6			%	5.9			%
Effective income yield for the fixed maturity securities portfolio, after tax	4.1			%	4.6			%	4.4			%	4.6			%

(1) The amortization of premium and accretion of discount for fixed maturity securities takes into consideration call and maturity dates that produce the lowest yield. This represents a change from prior reporting periods as previously the amortization of premiums was to maturity. This change in estimate effected by a change in accounting principle was adopted in Q4 2015 and will result in a better reflection of the yield on fixed maturity securities with call provisions.

Claim & Claim Adjustment Expense Reserve Rollforward



Three months ended December 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	$	6,199		$	9,283		$	1,365		$	16,847		$	3,286		$	2,734		$	22,867
Ceded	611			634			151			1,396			310			2,436			4,142
Net	5,588			8,649			1,214			15,451			2,976			298			18,725

Net incurred claim & claim adjustment expenses	445			426			144			1,015			239			1			1,255
Net claim & claim adjustment expense payments	(465		)	(499		)	(110		)	(1,074		)	(184		)	(15		)	(1,273		)
Foreign currency translation adjustment and other	—			—			(29		)	(29		)	(101		)	(1		)	(131		)

Claim & claim adjustment expense reserves, end of period
Net	5,568			8,576			1,219			15,363			2,930			283			18,576
Ceded	701			607			128			1,436			290			2,361			4,087
Gross	$	6,269		$	9,183		$	1,347		$	16,799		$	3,220		$	2,644		$	22,663



Twelve months ended December 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	1,597			1,815			480			3,892			949			4			4,845
Net claim & claim adjustment expense payments	(1,684		)	(2,092		)	(403		)	(4,179		)	(734		)	(32		)	(4,945		)
Foreign currency translation adjustment and other	—			—			(119		)	(119		)	(128		)	(4		)	(251		)

Claim & claim adjustment expense reserves, end of period
Net	5,568			8,576			1,219			15,363			2,930			283			18,576
Ceded	701			607			128			1,436			290			2,361			4,087
Gross	$	6,269		$	9,183		$	1,347		$	16,799		$	3,220		$	2,644		$	22,663

Life & Group Non-Core Policyholder Reserves



December 31, 2015
(In millions)	Claim and claim adjustment expenses		Future policy benefits		Total
Long term care	$	2,229	$	8,335	$	10,564
Structured settlement annuities	581		—		581
Other	21		—		21
Total	2,831		8,335		11,166
Shadow adjustments	99		1,610		1,709
Ceded reserves	290		207		497
Total gross reserves	$	3,220	$	10,152	$	13,372



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) The Shadow adjustments presented above do not include $314 million related to Deferred acquisition costs as of December 31, 2014.

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 J to the Condensed Consolidated Financial Statements within the September 30, 2015 Form 10-Q 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. In addition, management also utilizes rate, retention and new business in evaluating operating trends. Rate represents the average change in price on policies that renew excluding exposure change. Retention represents the percentage of premium dollars renewed in comparison to the expiring premium dollars from policies available to renew. New business represents premiums from policies written with new customers and additional policies written with existing customers.


•	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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