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

Attached files

file	filename
EX-99.1 - EXHIBIT 99.1 - CNA FINANCIAL CORP	q4-16exhibit991.htm
8-K - 8-K - CNA FINANCIAL CORP	a20168-kq4.htm

CNA Financial Corporation

Supplemental Financial Information

December 31, 2016

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)	2016			2015			Change			2016			2015			Change
Revenues:
Net earned premiums	$	1,728		$	1,748		(1	)	%	$	6,924		$	6,921		—	%
Net investment income	527			428			23			1,988			1,840			8
Net realized investment gains (losses):
Other-than-temporary impairment (OTTI) losses	(25		)	(57		)				(81		)	(156		)
Other net realized investment gains (losses)	49			29						131			89
Net realized investment gains (losses)	24			(28		)				50			(67		)
Other revenues	111			121						404			407
Total revenues	2,390			2,269			5			9,366			9,101			3
Claims, Benefits and Expenses:
Insurance claims and policyholders' benefits	1,334			1,376						5,283			5,384
Amortization of deferred acquisition costs	309			604						1,235			1,540
Other operating expenses	390			412						1,552			1,473
Interest	40			38						159			155
Total claims, benefits and expenses	2,073			2,430			15			8,229			8,552			4
Income (loss) before income tax	317			(161		)				1,137			549
Income tax (expense) benefit	(76		)	91						(278		)	(70		)
Net income (loss)	$	241		$	(70	)	N/M		%	$	859		$	479		79	%

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)	2016			2015				2016			2015
Components of Income (Loss)
Net operating income (loss)	$	221		$	(52	)		$	824		$	515
Net realized investment gains (losses)	20			(18		)		35			(36		)
Net income (loss)	$	241		$	(70	)		$	859		$	479

Diluted Earnings (Loss) Per Common Share
Net operating income (loss)	$	0.82		$	(0.19	)		$	3.04		$	1.90
Net realized investment gains (losses)	0.07			(0.07		)		0.13			(0.13		)
Diluted earnings (loss) per share	$	0.89		$	(0.26	)		$	3.17		$	1.77

Weighted Average Outstanding Common Stock and Common Stock Equivalents
Basic	270.5			270.3				270.4			270.2
Diluted	271.5			270.8				271.1			270.7

Return on Equity
Net income (loss) ⁽¹⁾	8.0		%	(2.3		)	%	7.2		%	3.9			%
Net operating income (loss) ⁽²⁾	7.4			(1.7		)		6.8			4.2

(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 Sheet Data and Statement of Cash Flows Data



(In millions, except per share data)	December 31, 2016			December 31, 2015
Total investments	$	45,420		$	44,699
Reinsurance receivables, net of allowance for uncollectible receivables	4,416			4,453
Total assets	55,233			55,045
Insurance reserves	36,431			36,486
Debt	2,710			2,560
Total liabilities	43,264			43,289
Accumulated other comprehensive income (loss) ⁽¹⁾	(173		)	(315		)
Total stockholders' equity	11,969			11,756

Book value per common share	$	44.25		$	43.49
Book value per common share excluding AOCI	$	44.89		$	44.66

Outstanding shares of common stock (in millions of shares)	270.5			270.3

Statutory capital and surplus - Combined Continental Casualty Companies ⁽²⁾	$	10,748		$	10,723



Three months ended December 31	2016			2015
Net cash flows provided (used) by operating activities	$	296		$	342
Net cash flows provided (used) by investing activities	(242		)	(118		)
Net cash flows provided (used) by financing activities	(68		)	(68		)
Net cash flows provided (used) by operating, investing and financing activities	$	(14	)	$	156



Twelve months ended December 31	2016			2015
Net cash flows provided (used) by operating activities	$	1,416		$	1,387
Net cash flows provided (used) by investing activities	(846		)	(372		)
Net cash flows provided (used) by financing activities	(673		)	(807		)
Net cash flows provided (used) by operating, investing and financing activities	$	(103	)	$	208

(1) As of December 31, 2016 and 2015, the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $1,014 million and $1,111 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, an increase in Insurance reserves are recorded, net of tax, as a reduction of net unrealized gains through Other comprehensive income (loss) (Shadow Adjustments).

(2) Statutory capital and surplus as of December 31, 2016 is preliminary.

Property & Casualty - Results of Operations



Periods ended December 31	Three Months											Twelve Months
(In millions)	2016				2015				Change			2016				2015				Change
Gross written premiums	$	2,572			$	2,547			1		%	$	10,697			$	10,124			6		%
Net written premiums	1,525				1,585				(4	)		6,442				6,421				—

Net earned premiums	1,593				1,612				(1	)		6,389				6,374				—
Net investment income	322				259							1,205				1,119
Other revenues	103				120							394				392
Total operating revenues	2,018				1,991				1			7,988				7,885				1
Insurance claims and policyholders' benefits	1,035				1,017							3,899				3,902
Amortization of deferred acquisition costs	309				309							1,235				1,226
Other insurance related expenses	249				266							994				954
Other expenses	98				100							372				341
Total claims, benefits and expenses	1,691				1,692				—			6,500				6,423				(1	)
Operating income (loss) before income tax	327				299							1,488				1,462
Income tax (expense) benefit on operating income (loss)	(110		)		(97		)					(506		)		(496		)
Net operating income (loss)	$	217			$	202			7		%	$	982			$	966			2		%

Other Performance Metrics
Underwriting gain (loss)	$	—			$	20			N/M		%	$	261			$	292			(11	)	%

Loss & LAE ratio	65.0			%	62.9			%	(2.1	)	pts	60.8			%	61.0			%	0.2		pts
Acquisition expense ratio	20.1				20.3				0.2			19.5				19.4				(0.1	)
Underwriting expense ratio	15.0				15.5				0.5			15.4				14.8				(0.6	)
Expense ratio	35.1				35.8				0.7			34.9				34.2				(0.7	)
Dividend ratio	(0.2		)		0.2				0.4			0.2				0.2				—
Combined ratio	99.9			%	98.9			%	(1.0	)		95.9			%	95.4			%	(0.5	)
Combined ratio excluding catastrophes and development	98.3			%	97.7			%	(0.6	)	pts	97.9			%	96.3			%	(1.6	)	pts

Net accident year catastrophe losses incurred	$	28			$	38						$	165			$	141
Effect on loss & LAE ratio	1.8			%	2.4			%	0.6		pts	2.6			%	2.2			%	(0.4	)	pts

Net prior year development and other: (favorable) / unfavorable	$	(2	)		$	(17	)					$	(299	)		$	(199	)
Effect on loss & LAE ratio	(0.2		)	%	(1.2		)	%	(1.0	)	pts	(4.6		)	%	(3.1		)	%	1.5		pts

Rate	—			%	—			%	—		pts	—			%	1			%	(1	)	pts
Retention	83			%	85			%	(2	)	pts	84			%	81			%	3		pts
New business ⁽¹⁾	$	217			$	231			(6	)	%	$	1,016			$	942			8		%

(1) Beginning in 2016, new business includes Hardy. New business for Hardy was $26 million and $133 million for three and twelve months ended December 31, 2016.

Specialty - Results of Operations



Periods ended December 31	Three Months											Twelve Months
(In millions)	2016				2015				Change			2016				2015				Change
Gross written premiums	$	1,679			$	1,623			3		%	$	6,799			$	6,242			9		%
Net written premiums	672				704				(5	)		2,780				2,781				—

Net earned premiums	691				707				(2	)		2,779				2,782				—
Net investment income	136				109							516				474
Other revenues	93				111							362				356
Total operating revenues	920				927				(1	)		3,657				3,612				1
Insurance claims and policyholders' benefits	368				446							1,471				1,601
Amortization of deferred acquisition costs	148				149							591				589
Other insurance related expenses	76				76							301				278
Other expenses	80				92							312				301
Total claims, benefits and expenses	672				763				12			2,675				2,769				3
Operating income (loss) before income tax	248				164							982				843
Income tax (expense) benefit on operating income (loss)	(84		)		(55		)					(332		)		(283		)
Net operating income (loss)	$	164			$	109			50		%	$	650			$	560			16		%

Other Performance Metrics
Underwriting gain (loss)	$	99			$	36			175		%	$	416			$	314			32		%

Loss & LAE ratio	53.5			%	63.1			%	9.6		pts	52.8			%	57.4			%	4.6		pts
Acquisition expense ratio	20.2				20.1				(0.1	)		20.1				19.8				(0.3	)
Underwriting expense ratio	12.2				11.6				(0.6	)		11.9				11.3				(0.6	)
Expense ratio	32.4				31.7				(0.7	)		32.0				31.1				(0.9	)
Dividend ratio	(0.3		)		0.2				0.5			0.2				0.2				—
Combined ratio	85.6			%	95.0			%	9.4			85.0			%	88.7			%	3.7
Combined ratio excluding catastrophes and development	96.1			%	95.4			%	(0.7	)	pts	95.1			%	93.6			%	(1.5	)	pts

Net accident year catastrophe losses incurred	$	4			$	(2	)					$	18			$	13
Effect on loss & LAE ratio	0.5			%	(0.3		)	%	(0.8	)	pts	0.6			%	0.4			%	(0.2	)	pts

Net prior year development and other: (favorable) / unfavorable	$	(76	)		$	(1	)					$	(305	)		$	(152	)
Effect on loss & LAE ratio	(11.0		)	%	(0.1		)	%	10.9		pts	(10.7		)	%	(5.3		)	%	5.4		pts

Rate	—			%	—			%	—		pts	1			%	1			%	—		pts
Retention	86			%	89			%	(3	)	pts	87			%	87			%	—		pts
New business	$	60			$	73			(18	)	%	$	252			$	279			(10	)	%

Commercial - Results of Operations



Periods ended December 31	Three Months											Twelve Months
(In millions)	2016				2015				Change			2016				2015				Change
Gross written premiums	$	701			$	726			(3	)	%	$	3,002			$	2,967			1		%
Net written premiums	669				700				(4	)		2,841				2,818				1

Net earned premiums	701				702				—			2,804				2,788				1
Net investment income	173				138							638				593
Other revenues	11				10							32				37
Total operating revenues	885				850				4			3,474				3,418				2
Insurance claims and policyholders' benefits	570				428							1,936				1,822
Amortization of deferred acquisition costs	119				117							470				469
Other insurance related expenses	138				153							560				538
Other expenses	11				5							36				28
Total claims, benefits and expenses	838				703				(19	)		3,002				2,857				(5	)
Operating income (loss) before income tax	47				147							472				561
Income tax (expense) benefit on operating income (loss)	(16		)		(51		)					(161		)		(192		)
Net operating income (loss)	$	31			$	96			(68	)	%	$	311			$	369			(16	)	%

Other Performance Metrics
Underwriting gain (loss)	$	(126	)		$	4			N/M		%	$	(162	)		$	(41	)		N/M		%

Loss & LAE ratio	81.2			%	60.6			%	(20.6	)	pts	68.7			%	65.1			%	(3.6	)	pts
Acquisition expense ratio	19.4				19.9				0.5			18.3				18.2				(0.1	)
Underwriting expense ratio	17.5				18.7				1.2			18.5				17.9				(0.6	)
Expense ratio	36.9				38.6				1.7			36.8				36.1				(0.7	)
Dividend ratio	(0.1		)		0.4				0.5			0.3				0.3				—
Combined ratio	118.0			%	99.6			%	(18.4	)		105.8			%	101.5			%	(4.3	)
Combined ratio excluding catastrophes and development	100.8			%	98.3			%	(2.5	)	pts	99.2			%	98.0			%	(1.2	)	pts

Net accident year catastrophe losses incurred	$	21			$	18						$	116			$	101
Effect on loss & LAE ratio	3.0			%	2.7			%	(0.3	)	pts	4.1			%	3.6			%	(0.5	)	pts

Net prior year development and other: (favorable) / unfavorable	$	102			$	(9	)					$	70			$	(10	)
Effect on loss & LAE ratio	14.2			%	(1.4		)	%	(15.6	)	pts	2.5			%	(0.1		)	%	(2.6	)	pts

Rate	(1		)	%	—			%	(1	)	pts	(2		)	%	1			%	(3	)	pts
Retention	84			%	83			%	1		pts	84			%	78			%	6		pts
New business	$	106			$	130			(18	)	%	$	524			$	552			(5	)	%

International - Results of Operations



Periods ended December 31	Three Months											Twelve Months
(In millions)	2016				2015				Change			2016				2015				Change
Gross written premiums	$	192			$	198			(3	)	%	$	896			$	915			(2	)	%
Net written premiums	184				181				2			821				822				—

Net earned premiums	201				203				(1	)		806				804				—
Net investment income	13				12							51				52
Other revenues	(1		)		(1		)					—				(1		)
Total operating revenues	213				214				—			857				855				—
Insurance claims and policyholders' benefits	97				143							492				479
Amortization of deferred acquisition costs	42				43							174				168
Other insurance related expenses	35				37							133				138
Other expenses	7				3							24				12
Total claims, benefits and expenses	181				226				20			823				797				(3	)
Operating income (loss) before income tax	32				(12		)					34				58
Income tax (expense) benefit on operating income (loss)	(10		)		9							(13		)		(21		)
Net operating income (loss)	$	22			$	(3	)		N/M		%	$	21			$	37			(43	)	%

Other Performance Metrics
Underwriting gain (loss)	$	27			$	(20	)		N/M		%	$	7			$	19			(63	)	%

Loss & LAE ratio	48.3			%	70.3			%	22.0		pts	61.0			%	59.5			%	(1.5	)	pts
Acquisition expense ratio	22.2				22.1				(0.1	)		21.9				22.0				0.1
Underwriting expense ratio	15.6				17.5				1.9			16.2				16.1				(0.1	)
Expense ratio	37.8				39.6				1.8			38.1				38.1				—
Dividend ratio	—				—				—			—				—				—
Combined ratio	86.1			%	109.9			%	23.8			99.1			%	97.6			%	(1.5	)
Combined ratio excluding catastrophes and development	97.2			%	103.1			%	5.9		pts	102.9			%	99.8			%	(3.1	)	pts

Net accident year catastrophe losses incurred	$	3			$	22						$	31			$	27
Effect on loss & LAE ratio	1.7			%	10.7			%	9.0		pts	3.9			%	3.3			%	(0.6	)	pts

Net prior year development and other: (favorable) / unfavorable	$	(28	)		$	(7	)					$	(64	)		$	(37	)
Effect on loss & LAE ratio	(12.8		)	%	(3.9		)	%	8.9		pts	(7.7		)	%	(5.5		)	%	2.2		pts

Rate	(1		)	%	(1		)	%	—		pts	(1		)	%	(1		)	%	—		pts
Retention	71			%	76			%	(5	)	pts	76			%	76			%	—		pts
New business ⁽¹⁾	$	51			$	28			—		%	$	240			$	111			116		%

(1) Beginning in 2016, new business includes Hardy. New business for Hardy was $26 million and $133 million for three and twelve months ended December 31, 2016.

Life & Group Non-Core - Results of Operations



Periods ended December 31	Three Months									Twelve Months
(In millions)	2016			2015			Change			2016			2015			Change
Net earned premiums	$	135		$	136		(1	)	%	$	536		$	548		(2	)	%
Net investment income	200			164						767			704
Other revenues	(1		)	(1		)				(2		)	7
Total operating revenues	334			299			12			1,301			1,259			3
Insurance claims and policyholders' benefits	310			376						1,286			1,421
Amortization of deferred acquisition costs	—			295						—			314
Other insurance related expenses	31			38						132			142
Other expenses	1			1						8			11
Total claims, benefits and expenses	342			710			52			1,426			1,888			24
Operating income (loss) before income tax	(8		)	(411		)				(125		)	(629		)
Income tax (expense) benefit on operating income (loss)	28			168						145			315
Net operating income (loss)	$	20		$	(243	)	108		%	$	20		$	(314	)	106		%

Corporate & Other Non-Core - Results of Operations



Periods ended December 31	Three Months									Twelve Months
(In millions)	2016			2015			Change			2016			2015			Change
Net earned premiums	$	—		$	—					$	(1	)	$	(1	)
Net investment income	5			5						16			17
Other revenues	9			2						12			8
Total operating revenues	14			7			100		%	27			24			13		%
Insurance claims and policyholders' benefits	(11		)	(17		)				98			61
Amortization of deferred acquisition costs	—			—						—			—
Other insurance related expenses	—			(1		)				(4		)	(3		)
Other expenses	51			46						209			183
Total claims, benefits and expenses	40			28			(43	)		303			241			(26	)
Operating income (loss) before income tax	(26		)	(21		)				(276		)	(217		)
Income tax (expense) benefit on operating income (loss)	10			10						98			80
Net operating income (loss)	$	(16	)	$	(11	)	(45	)	%	$	(178	)	$	(137	)	(30	)	%

Investment Summary - Consolidated



	December 31, 2016				September 30, 2016					December 31, 2015
(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	$	18,970	$	1,247	$	19,818		$	1,831	$	17,760	$	677
States, municipalities and political subdivisions:
Tax-exempt	10,430		834		10,523			1,425		10,114		1,076
Taxable	2,810		346		2,978			510		3,060		369
Total states, municipalities and political subdivisions	13,240		1,180		13,501			1,935		13,174		1,445
Asset-backed:
RMBS	5,073		69		5,365			191		5,072		137
CMBS	2,040		24		2,144			80		2,197		43
Other ABS	1,025		3		959			11		921		(2		)
Total asset-backed	8,138		96		8,468			282		8,190		178
U.S. Treasury and obligations of government-sponsored enterprises	93		10		76			8		67		5
Foreign government	445		10		438			23		346		12
Redeemable preferred stock	19		1		20			2		35		2
Total fixed maturity securities	40,905		2,544		42,321			4,081		39,572		2,319
Equities	110		4		116			8		197		6
Limited partnership investments	2,371		—		2,456			—		2,548		—
Other invested assets	36		—		35			—		44		—
Mortgage loans	591		—		629			—		678		—
Short term investments	1,407		1		1,423			—		1,660		—
Total investments	$	45,420	$	2,549	$	46,980		$	4,089	$	44,699	$	2,325

Net receivable/(payable) on investment activity	$	81			$	(98	)			$	82

Effective portfolio duration (in years)	6.1				5.8					6.2
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, 2016				September 30, 2016					December 31, 2015
(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	$	13,137	$	408	$	13,701		$	731	$	12,594	$	96
States, municipalities and political subdivisions:
Tax-exempt	2,883		70		2,543			170		2,441		133
Taxable	1,231		101		1,282			152		1,579		132
Total states, municipalities and political subdivisions	4,114		171		3,825			322		4,020		265
Asset-backed:
RMBS	4,811		63		5,075			183		4,828		131
CMBS	1,894		20		1,990			72		2,038		37
Other ABS	909		3		859			9		837		(1		)
Total asset-backed	7,614		86		7,924			264		7,703		167
U.S. Treasury and obligations of government-sponsored enterprises	68		7		51			4		42		—
Foreign government	445		10		438			23		346		12
Redeemable preferred stock	5		—		6			1		13		1
Total fixed maturity securities	25,383		682		25,945			1,345		24,718		541
Equities	57		3		60			5		87		1
Limited partnership investments	2,371		—		2,456			—		2,548		—
Other invested assets	36		—		35			—		44		—
Mortgage loans	519		—		557			—		622		—
Short term investments	1,233		1		1,344			—		1,513		—
Total investments	$	29,599	$	686	$	30,397		$	1,350	$	29,532	$	542

Net receivable/(payable) on investment activity	$	53			$	(50	)			$	204

Effective portfolio duration (in years)	4.6				4.1					4.3
Weighted average rating of fixed maturity securities	A				A					A

Investment Summary - Life & Group Non-Core



	December 31, 2016				September 30, 2016					December 31, 2015
(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	$	5,833	$	839	$	6,117		$	1,100	$	5,166		$	581
States, municipalities and political subdivisions:
Tax-exempt	7,547		764		7,980			1,255		7,673			943
Taxable	1,579		245		1,696			358		1,481			237
Total states, municipalities and political subdivisions	9,126		1,009		9,676			1,613		9,154			1,180
Asset-backed:
RMBS	262		6		290			8		244			6
CMBS	146		4		154			8		159			6
Other ABS	116		—		100			2		84			(1		)
Total asset-backed	524		10		544			18		487			11
U.S. Treasury and obligations of government-sponsored enterprises	25		3		25			4		25			5
Foreign government	—		—		—			—		—			—
Redeemable preferred stock	14		1		14			1		22			1
Total fixed maturity securities	15,522		1,862		16,376			2,736		14,854			1,778
Equities	53		1		56			3		110			5
Limited partnership investments	—		—		—			—		—			—
Other invested assets	—		—		—			—		—			—
Mortgage loans	72		—		72			—		56			—
Short term investments	174		—		79			—		147			—
Total investments	$	15,821	$	1,863	$	16,583		$	2,739	$	15,167		$	1,783

Net receivable/(payable) on investment activity	$	28			$	(48	)			$	(122	)

Effective portfolio duration (in years)	8.7				8.6					9.6
Weighted average rating of fixed maturity securities	A				A					A

Investments - Fixed Maturity Securities by Credit Rating



December 31, 2016	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	$	—		$	—	$	75		$	3		$	647		$	58	$	4,483		$	428		$	11,613		$	667		$	2,152		$	91	$	18,970		$	1,247
States, municipalities and political subdivisions:
Tax-exempt	—			—		892			68			5,484			456		3,921			291			85			3			48			16		10,430			834
Taxable	—			—		308			26			1,895			216		588			105			19			(1		)	—			—		2,810			346
Total states, municipalities and political subdivisions	—			—		1,200			94			7,379			672		4,509			396			104			2			48			16		13,240			1,180
Asset-backed:
RMBS	4,064			22		66			—			43			—		86			(2		)	58			—			756			49		5,073			69
CMBS	55			—		399			10			470			13		309			4			539			(3		)	268			—		2,040			24
Other ABS	—			—		59			(1		)	63			—		445			6			458			(2		)	—			—		1,025			3
Total asset-backed	4,119			22		524			9			576			13		840			8			1,055			(5		)	1,024			49		8,138			96
U.S. Treasury and obligations of government-sponsored enterprises	93			10		—			—			—			—		—			—			—			—			—			—		93			10
Foreign government	—			—		82			4			309			7		34			—			20			(1		)	—			—		445			10
Redeemable preferred stock	—			—		—			—			—			—		—			—			10			1			9			—		19			1
Total fixed maturity securities	$	4,212		$	32	$	1,881		$	110		$	8,911		$	750	$	9,866		$	832		$	12,802		$	664		$	3,233		$	156	$	40,905		$	2,544

Percentage of total fixed maturity securities	10		%			5		%				22		%			24		%				31		%				8		%			100		%

Components of Net Investment Income



	Consolidated
Periods ended December 31	Three Months							Twelve Months
(In millions)	2016			2015				2016			2015
Taxable fixed maturities	$	366		$	335			$	1,414		$	1,375
Tax-exempt fixed maturities	101			72				405			376
Total fixed maturity securities ⁽¹⁾	467			407				1,819			1,751
Limited partnership investments	58			23				155			92
Other, net of investment expense	2			(2		)		14			(3		)
Net investment income	$	527		$	428			$	1,988		$	1,840
Fixed maturity securities, after tax	$	335		$	296			$	1,308		$	1,264
Net investment income, after tax	379			314				1,427			1,329

Effective income yield for the fixed maturity securities portfolio, pretax	4.9		%	4.3			%	4.8		%	4.7			%
Effective income yield for the fixed maturity securities portfolio, after tax	3.5			3.2				3.5			3.4



	Property & Casualty and Corporate & Other Non-Core
Periods ended December 31	Three Months						Twelve Months
(In millions)	2016			2015			2016			2015
Taxable fixed maturities	$	244		$	232		$	966		$	965
Tax-exempt fixed maturities	20			8			78			74
Total fixed maturity securities	264			240			1,044			1,039
Limited partnership investments	58			23			155			92
Other, net of investment expense	5			1			22			5
Net investment income	$	327		$	264		$	1,221		$	1,136
Fixed maturity securities, after tax	$	179		$	163		$	708		$	705
Net investment income, after tax	223			182			828			772

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



	Life & Group Non-Core
Periods ended December 31	Three Months								Twelve Months
(In millions)	2016				2015				2016				2015
Taxable fixed maturities	$	122			$	103			$	448			$	410
Tax-exempt fixed maturities	81				64				327				302
Total fixed maturity securities	203				167				775				712
Limited partnership investments	—				—				—				—
Other, net of investment expense	(3		)		(3		)		(8		)		(8		)
Net investment income	$	200			$	164			$	767			$	704
Fixed maturity securities, after tax	$	156			$	133			$	600			$	559
Net investment income, after tax	156				132				599				557

Effective income yield for the fixed maturity securities portfolio, pretax	5.9			%	5.2			%	5.8			%	5.6			%
Effective income yield for the fixed maturity securities portfolio, after tax	4.6				4.1				4.5				4.4

(1) In the fourth quarter of 2015 the Company changed its accounting principle for amortization of premiums on fixed maturity securities to consider call and maturity dates that produce the lowest yield. This resulted in a $39 million decrease to net investment income in 2015, which included a $22 million cumulative adjustment related to prior periods.

Claim & Claim Adjustment Expense Reserve Rollforward



Three months ended December 31, 2016 (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	$	6,278		$	8,879		$	1,408		$	16,565		$	3,407		$	2,700		$	22,672
Ceded	798			600			123			1,521			271			2,464			4,256
Net	5,480			8,279			1,285			15,044			3,136			236			18,416

Net incurred claim & claim adjustment expenses	370			571			96			1,037			217			3			1,257
Net claim & claim adjustment expense payments	(446		)	(542		)	(133		)	(1,121		)	(206		)	(7		)	(1,334		)
Foreign currency translation adjustment and other	—			(3		)	(47		)	(50		)	(38		)	(2		)	(90		)

Claim & claim adjustment expense reserves, end of period
Net	5,404			8,305			1,201			14,910			3,109			230			18,249
Ceded	745			589			127			1,461			249			2,384			4,094
Gross	$	6,149		$	8,894		$	1,328		$	16,371		$	3,358		$	2,614		$	22,343



Twelve months ended December 31, 2016 (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	$	6,269		$	9,183		$	1,347		$	16,799		$	3,220		$	2,644		$	22,663
Ceded	701			607			128			1,436			290			2,361			4,087
Net	5,568			8,576			1,219			15,363			2,930			283			18,576

Net incurred claim & claim adjustment expenses	1,467			1,928			491			3,886			966			6			4,858
Net claim & claim adjustment expense payments	(1,632		)	(2,198		)	(456		)	(4,286		)	(791		)	(57		)	(5,134		)
Foreign currency translation adjustment and other	1			(1		)	(53		)	(53		)	4			(2		)	(51		)

Claim & claim adjustment expense reserves, end of period
Net	5,404			8,305			1,201			14,910			3,109			230			18,249
Ceded	745			589			127			1,461			249			2,384			4,094
Gross	$	6,149		$	8,894		$	1,328		$	16,371		$	3,358		$	2,614		$	22,343

Life & Group Non-Core Policyholder Reserves



December 31, 2016
(In millions)	Claim and claim adjustment expenses		Future policy benefits		Total
Long term care	$	2,426	$	8,654	$	11,080
Structured settlement annuities	565		—		565
Other	17		—		17
Total	3,008		8,654		11,662
Shadow adjustments	101		1,459		1,560
Ceded reserves	249		213		462
Total gross reserves	$	3,358	$	10,326	$	13,684



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

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 O to the Condensed Consolidated Financial Statements within the December 31, 2016 Form 10-K for further discussion of this non-GAAP financial 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.

•

This financial supplement may also reference or contain financial measures that are not in accordance with GAAP. Management utilizes these financial measures to monitor the Company's insurance operations and investment portfolio. Net operating income, which is derived from certain income statement amounts, is used by management to monitor performance of the Company's insurance operations. The Company's investment portfolio is monitored by management through analysis of various factors including unrealized gains and losses on securities, portfolio duration and exposure to market and credit risk. Based on such analyses, the Company may recognize an other-than-temporary impairment (OTTI) loss on an investment security in accordance with its policy, or sell a security, which may produce realized gains and losses.

•

Net operating income (loss) is calculated by excluding from net income (loss) the after-tax effects of 1) net realized investment gains or losses, 2) income or loss from discontinued operations and 3) any cumulative effects of changes in accounting guidance. The calculation of net operating income excludes net realized investment gains or losses because net realized investment gains or losses are largely discretionary, except for some losses related to OTTI, and are generally driven by economic factors that are not necessarily consistent with key drivers of underwriting performance, and are therefore not considered an indication of trends in insurance operations. Management monitors net operating income (loss) for each business segment to assess segment performance. Presentation of consolidated net operating income (loss) is deemed to be a non-GAAP financial measure. For reconciliations of non-GAAP measures to the most comparable GAAP measures and other information, please refer herein and/or to CNA's most recent 10-K on file with the Securities and Exchange Commission, as well as the press release, available at www.cna.com.


•	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. While the Company generally does not invest in highly leveraged partnerships, there are risks inherent in limited partnership investments 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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