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	q2-17exhibit991.htm
8-K - 8-K - CNA FINANCIAL CORP	q2178k.htm

CNA Financial Corporation

Supplemental Financial Information

June 30, 2017

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 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 June 30	Three Months									Six Months
(In millions)	2017			2016			Change			2017			2016			Change
Revenues:
Net earned premiums	$	1,734		$	1,730		—		%	$	3,379		$	3,429		(1	)	%
Net investment income	475			502			(5	)		1,020			937			9
Net realized investment gains (losses):
Other-than-temporary impairment (OTTI) losses	(2		)	(15		)				(4		)	(38		)
Other net realized investment gains (losses)	52			31						90			18
Net realized investment gains (losses)	50			16						86			(20		)
Other revenues	107			100						211			197
Total revenues	2,366			2,348			1			4,696			4,543			3
Claims, Benefits and Expenses:
Insurance claims and policyholders' benefits	1,280			1,339						2,573			2,747
Amortization of deferred acquisition costs	312			305						617			612
Other operating expenses	364			378						710			759
Interest	40			38						83			80
Total claims, benefits and expenses	1,996			2,060			3			3,983			4,198			5
Income (loss) before income tax	370			288						713			345
Income tax (expense) benefit	(98		)	(79		)				(181		)	(70		)
Net income (loss)	$	272		$	209		30		%	$	532		$	275		93		%

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



Periods ended June 30	Three Months						Six Months
(In millions, except per share data)	2017			2016			2017			2016
Components of Income (Loss)
Net operating income (loss)	$	239		$	201		$	474		$	292
Net realized investment gains (losses)	33			8			58			(17		)
Net income (loss)	$	272		$	209		$	532		$	275

Diluted Earnings (Loss) Per Common Share
Net operating income (loss)	$	0.88		$	0.74		$	1.74		$	1.08
Net realized investment gains (losses)	0.12			0.03			0.22			(0.06		)
Diluted earnings (loss) per share	$	1.00		$	0.77		$	1.96		$	1.02

Weighted Average Outstanding Common Stock and Common Stock Equivalents
Basic	271.1			270.5			271.0			270.4
Diluted	271.9			270.9			271.9			270.9

Return on Equity
Net income (loss) ⁽¹⁾	9.2		%	7.2		%	8.9		%	4.7			%
Net operating income (loss) ⁽²⁾	8.0			6.9			7.9			4.9

(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



(In millions, except per share data)	June 30, 2017		December 31, 2016
Total investments	$	46,268	$	45,420
Reinsurance receivables, net of allowance for uncollectible receivables	4,426		4,416
Total assets	56,205		55,233
Insurance reserves	37,110		36,431
Debt	2,711		2,710
Total liabilities	44,177		43,264
Accumulated other comprehensive income (loss) ⁽¹⁾	32		(173		)
Total stockholders' equity	12,028		11,969

Book value per common share	$	44.39	$	44.25
Book value per common share excluding AOCI	$	44.26	$	44.89

Outstanding shares of common stock (in millions of shares)	271.0		270.5

Statutory capital and surplus - Combined Continental Casualty Companies ⁽²⁾	$	10,643	$	10,748



Three months ended June 30	2017			2016
Net cash flows provided (used) by operating activities	$	233		$	279
Net cash flows provided (used) by investing activities	(243		)	(158		)
Net cash flows provided (used) by financing activities	(68		)	(69		)
Net cash flows provided (used) by operating, investing and financing activities	$	(78	)	$	52

Six months ended June 30	2017			2016
Net cash flows provided (used) by operating activities	$	515		$	613
Net cash flows provided (used) by investing activities	111			(167		)
Net cash flows provided (used) by financing activities	(677		)	(538		)
Net cash flows provided (used) by operating, investing and financing activities	$	(51	)	$	(92	)

(1) As of June 30, 2017 and December 31, 2016 the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $1,221 million and $1,014 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 June 30, 2017 is preliminary.

Property & Casualty - Results of Operations



Periods ended June 30	Three Months											Six Months
(In millions)	2017				2016				Change			2017				2016				Change
Gross written premiums	$	2,778			$	2,729			2		%	$	5,530			$	5,403			2		%
Net written premiums	1,702				1,625				5			3,334				3,293				1

Net earned premiums	1,600				1,595				—			3,112				3,163				(2	)
Net investment income	276				310							619				555
Other revenues	106				97							209				191
Total operating revenues	1,982				2,002				(1	)		3,940				3,909				1
Insurance claims and policyholders' benefits	954				1,007							1,896				1,964
Amortization of deferred acquisition costs	312				305							617				612
Other insurance related expenses	231				240							453				484
Other expenses	92				97							181				186
Total claims, benefits and expenses	1,589				1,649				4			3,147				3,246				3
Operating income (loss) before income tax	393				353							793				663
Income tax (expense) benefit on operating income (loss)	(132		)		(124		)					(264		)		(227		)
Net operating income (loss)	$	261			$	229			14		%	$	529			$	436			21		%

Other Performance Metrics
Underwriting gain (loss)	$	103			$	43			140		%	$	146			$	103			42		%

Loss & LAE ratio	59.4			%	63.0			%	3.6		pts	60.7			%	61.9			%	1.2		pts
Acquisition expense ratio	19.1				19.1				—			19.4				19.3				(0.1	)
Underwriting expense ratio	14.7				15.1				0.4			14.9				15.4				0.5
Expense ratio	33.8				34.2				0.4			34.3				34.7				0.4
Dividend ratio	0.3				0.2				(0.1	)		0.3				0.2				(0.1	)
Combined ratio	93.5			%	97.4			%	3.9			95.3			%	96.8			%	1.5
Combined ratio excluding catastrophes and development	94.6			%	98.3			%	3.7		pts	95.9			%	97.8			%	1.9		pts

Net accident year catastrophe losses incurred	$	39			$	85						$	73			$	121
Effect on loss & LAE ratio	2.4			%	5.3			%	2.9		pts	2.3			%	3.9			%	1.6		pts

Net prior year development and other: (favorable) / unfavorable	$	(59	)		$	(102	)					$	(86	)		$	(163	)
Effect on loss & LAE ratio	(3.5		)	%	(6.2		)	%	(2.7	)	pts	(2.9		)	%	(4.9		)	%	(2.0	)	pts

Rate	—			%	—			%	—		pts	—			%	—			%	—		pts
Renewal premium change	2				1				1			2				2				—
Retention	84				84				—			84				84				—
New business	$	292			$	269			9		%	$	553			$	531			4		%

Specialty - Results of Operations



Periods ended June 30	Three Months											Six Months
(In millions)	2017				2016				Change			2017				2016				Change
Gross written premiums	$	1,677			$	1,697			(1	)	%	$	3,424			$	3,329			3		%
Net written premiums	716				691				4			1,395				1,375				1

Net earned premiums	689				702				(2	)		1,353				1,384				(2	)
Net investment income	120				133							273				240
Other revenues	98				89							192				176
Total operating revenues	907				924				(2	)		1,818				1,800				1
Insurance claims and policyholders' benefits	399				378							786				769
Amortization of deferred acquisition costs	149				148							292				292
Other insurance related expenses	72				73							141				148
Other expenses	82				79							163				154
Total claims, benefits and expenses	702				678				(4	)		1,382				1,363				(1	)
Operating income (loss) before income tax	205				246							436				437
Income tax (expense) benefit on operating income (loss)	(69		)		(82		)					(146		)		(146		)
Net operating income (loss)	$	136			$	164			(17	)	%	$	290			$	291			—		%

Other Performance Metrics
Underwriting gain (loss)	$	69			$	103			(33	)	%	$	134			$	175			(23	)	%

Loss & LAE ratio	57.7			%	53.9			%	(3.8	)	pts	57.9			%	55.5			%	(2.4	)	pts
Acquisition expense ratio	20.1				20.1				—			20.0				20.0				—
Underwriting expense ratio	11.9				11.2				(0.7	)		12.1				11.7				(0.4	)
Expense ratio	32.0				31.3				(0.7	)		32.1				31.7				(0.4	)
Dividend ratio	0.2				0.2				—			0.1				0.2				0.1
Combined ratio	89.9			%	85.4			%	(4.5	)		90.1			%	87.4			%	(2.7	)
Combined ratio excluding catastrophes and development	92.8			%	94.0			%	1.2		pts	93.9			%	94.4			%	0.5		pts

Net accident year catastrophe losses incurred	$	5			$	9						$	9			$	13
Effect on loss & LAE ratio	0.8			%	1.3			%	0.5		pts	0.7			%	1.0			%	0.3		pts

Net prior year development and other: (favorable) / unfavorable	$	(28	)		$	(72	)					$	(64	)		$	(117	)
Effect on loss & LAE ratio	(3.7		)	%	(9.9		)	%	(6.2	)	pts	(4.5		)	%	(8.0		)	%	(3.5	)	pts

Rate	1			%	—			%	1		pts	1			%	1			%	—		pts
Renewal premium change	1				1				—			2				2				—
Retention	88				88				—			88				88				—
New business	$	66			$	61			8		%	$	123			$	126			(2	)	%

Commercial - Results of Operations



Periods ended June 30	Three Months											Six Months
(In millions)	2017				2016				Change			2017				2016				Change
Gross written premiums	$	849			$	804			6		%	$	1,599			$	1,583			1		%
Net written premiums	767				740				4			1,482				1,488				—

Net earned premiums	705				696				1			1,356				1,384				(2	)
Net investment income	143				164							321				290
Other revenues	9				8							18				14
Total operating revenues	857				868				(1	)		1,695				1,688				—
Insurance claims and policyholders' benefits	426				472							866				917
Amortization of deferred acquisition costs	118				117							234				233
Other insurance related expenses	128				130							254				271
Other expenses	11				11							25				16
Total claims, benefits and expenses	683				730				6			1,379				1,437				4
Operating income (loss) before income tax	174				138							316				251
Income tax (expense) benefit on operating income (loss)	(59		)		(46		)					(107		)		(85		)
Net operating income (loss)	$	115			$	92			25		%	$	209			$	166			26		%

Other Performance Metrics
Underwriting gain (loss)	$	33			$	(23	)		N/M		%	$	2			$	(37	)		105		%

Loss & LAE ratio	60.0			%	67.4			%	7.4		pts	63.4			%	65.8			%	2.4		pts
Acquisition expense ratio	17.2				17.3				0.1			18.1				17.9				(0.2	)
Underwriting expense ratio	17.3				18.4				1.1			17.8				18.6				0.8
Expense ratio	34.5				35.7				1.2			35.9				36.5				0.6
Dividend ratio	0.6				0.4				(0.2	)		0.5				0.4				(0.1	)
Combined ratio	95.1			%	103.5			%	8.4			99.8			%	102.7			%	2.9
Combined ratio excluding catastrophes and development	94.5			%	97.7			%	3.2		pts	97.2			%	98.5			%	1.3		pts

Net accident year catastrophe losses incurred	$	35			$	55						$	62			$	83
Effect on loss & LAE ratio	4.8			%	8.0			%	3.2		pts	4.4			%	6.1			%	1.7		pts

Net prior year development and other: (favorable) / unfavorable	$	(29	)		$	(16	)					$	(11	)		$	(27	)
Effect on loss & LAE ratio	(4.2		)	%	(2.2		)	%	2.0		pts	(1.8		)	%	(1.9		)	%	(0.1	)	pts

Rate	—			%	—			%	—		pts	—			%	—			%	—		pts
Renewal premium change	2				2				—			1				3				(2	)
Retention	82				84				(2	)		84				83				1
New business	$	153			$	146			5		%	$	292			$	283			3		%

International - Results of Operations



Periods ended June 30	Three Months											Six Months
(In millions)	2017				2016				Change			2017				2016				Change
Gross written premiums	$	252			$	228			11		%	$	507			$	491			3		%
Net written premiums	219				194				13			457				430				6

Net earned premiums	206				197				5			403				395				2
Net investment income	13				13							25				25
Other revenues	(1		)		—							(1		)		1
Total operating revenues	218				210				4			427				421				1
Insurance claims and policyholders' benefits	129				157							244				278
Amortization of deferred acquisition costs	45				40							91				87
Other insurance related expenses	31				37							58				65
Other expenses	(1		)		7							(7		)		16
Total claims, benefits and expenses	204				241				15			386				446				13
Operating income (loss) before income tax	14				(31		)					41				(25		)
Income tax (expense) benefit on operating income (loss)	(4		)		4							(11		)		4
Net operating income (loss)	$	10			$	(27	)		137		%	$	30			$	(21	)		N/M		%

Other Performance Metrics
Underwriting gain (loss)	$	1			$	(37	)		103		%	$	10			$	(35	)		129		%

Loss & LAE ratio	62.8			%	79.8			%	17.0		pts	60.6			%	70.5			%	9.9		pts
Acquisition expense ratio	22.3				22.0				(0.3	)		22.0				21.5				(0.5	)
Underwriting expense ratio	15.0				16.8				1.8			15.1				16.8				1.7
Expense ratio	37.3				38.8				1.5			37.1				38.3				1.2
Dividend ratio	—				—				—			—				—				—
Combined ratio	100.1			%	118.6			%	18.5			97.7			%	108.8			%	11.1
Combined ratio excluding catastrophes and development	101.1			%	115.3			%	14.2		pts	98.8			%	107.3			%	8.5		pts

Net accident year catastrophe losses incurred	$	(1	)		$	21						$	2			$	25
Effect on loss & LAE ratio	(0.5		)	%	10.6			%	11.1		pts	0.6			%	6.3			%	5.7		pts

Net prior year development and other: (favorable) / unfavorable	$	(2	)		$	(14	)					$	(11	)		$	(19	)
Effect on loss & LAE ratio	(0.5		)	%	(7.3		)	%	(6.8	)	pts	(1.7		)	%	(4.8		)	%	(3.1	)	pts

Rate	—			%	(2		)	%	2		pts	—			%	(1		)	%	1		pts
Renewal premium change	4				(3		)		7			2				(2		)		4
Retention	78				76				2			78				79				(1	)
New business	$	73			$	62			18		%	$	138			$	122			13		%

Life & Group Non-Core - Results of Operations



Periods ended June 30	Three Months									Six Months
(In millions)	2017			2016			Change			2017			2016			Change
Net earned premiums	$	135		$	136		(1	)	%	$	268		$	267		—	%
Net investment income	195			188						392			375
Other revenues	—			3						1			3
Total operating revenues	330			327			1			661			645			2
Insurance claims and policyholders' benefits	328			340						658			663
Amortization of deferred acquisition costs	—			—						—			—
Other insurance related expenses	32			31						64			64
Other expenses	1			2						3			5
Total claims, benefits and expenses	361			373			3			725			732			1
Operating income (loss) before income tax	(31		)	(46		)				(64		)	(87		)
Income tax (expense) benefit on operating income (loss)	36			42						73			81
Net operating income (loss)	$	5		$	(4	)	N/M		%	$	9		$	(6	)	N/M	%

Corporate & Other Non-Core - Results of Operations



Periods ended June 30	Three Months									Six Months
(In millions)	2017			2016			Change			2017			2016			Change
Net earned premiums	$	(1	)	$	(1	)				$	(1	)	$	(1	)
Net investment income	4			4						9			7
Other revenues	1			—						1			3
Total operating revenues	4			3			33		%	9			9			—	%
Insurance claims and policyholders' benefits	(2		)	(8		)				19			120
Amortization of deferred acquisition costs	—			—						—			—
Other insurance related expenses	(2		)	(1		)				(2		)	(1		)
Other expenses	50			47						94			101
Total claims, benefits and expenses	46			38			(21	)		111			220			50
Operating income (loss) before income tax	(42		)	(35		)				(102		)	(211		)
Income tax (expense) benefit on operating income (loss)	15			11						38			73
Net operating income (loss)	$	(27	)	$	(24	)	(13	)	%	$	(64	)	$	(138	)	54	%

Investment Summary - Consolidated



	June 30, 2017					March 31, 2017				December 31, 2016
(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	$	19,406		$	1,560	$	19,246	$	1,391	$	18,970	$	1,247
States, municipalities and political subdivisions:
Tax-exempt	10,972			996		10,649		847		10,430		834
Taxable	2,854			369		2,803		341		2,810		346
Total states, municipalities and political subdivisions	13,826			1,365		13,452		1,188		13,240		1,180
Asset-backed:
RMBS	4,921			86		4,743		71		5,073		69
CMBS	1,952			45		1,935		33		2,040		24
Other ABS	1,061			11		1,049		6		1,025		3
Total asset-backed	7,934			142		7,727		110		8,138		96
U.S. Treasury and obligations of government-sponsored enterprises	115			2		103		8		93		10
Foreign government	449			11		432		13		445		10
Redeemable preferred stock	19			1		20		1		19		1
Total fixed maturity securities	41,749			3,081		40,980		2,711		40,905		2,544
Equities	118			10		120		8		110		4
Limited partnership investments	2,380			—		2,389		—		2,371		—
Other invested assets	42			—		40		—		36		—
Mortgage loans	646			—		611		—		591		—
Short term investments	1,333			—		1,139		1		1,407		1
Total investments	$	46,268		$	3,091	$	45,279	$	2,720	$	45,420	$	2,549

Net receivable/(payable) on investment activity	$	(194	)			$	56			$	81

Effective portfolio duration (in years)	6.1					6.2				6.1
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



	June 30, 2017						March 31, 2017					December 31, 2016
(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	$	13,253		$	502		$	13,186		$	462	$	13,137	$	408
States, municipalities and political subdivisions:
Tax-exempt	2,892			106			2,979			78		2,883		70
Taxable	1,249			102			1,227			98		1,231		101
Total states, municipalities and political subdivisions	4,141			208			4,206			176		4,114		171
Asset-backed:
RMBS	4,744			79			4,560			63		4,811		63
CMBS	1,822			41			1,799			29		1,894		20
Other ABS	942			8			932			5		909		3
Total asset-backed	7,508			128			7,291			97		7,614		86
U.S. Treasury and obligations of government-sponsored enterprises	86			(1		)	73			5		68		7
Foreign government	449			11			432			13		445		10
Redeemable preferred stock	5			—			6			—		5		—
Total fixed maturity securities	25,442			848			25,194			753		25,383		682
Equities	64			7			65			5		57		3
Limited partnership investments	2,380			—			2,389			—		2,371		—
Other invested assets	42			—			40			—		36		—
Mortgage loans	570			—			540			—		519		—
Short term investments	1,235			—			1,059			1		1,233		1
Total investments	$	29,733		$	855		$	29,287		$	759	$	29,599	$	686

Net receivable/(payable) on investment activity	$	(164	)				$	(35	)			$	53

Effective portfolio duration (in years)	4.4						4.6					4.6
Weighted average rating of fixed maturity securities	A-						A-					A

Investment Summary - Life & Group Non-Core



	June 30, 2017					March 31, 2017				December 31, 2016
(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	$	6,153		$	1,058	$	6,060	$	929	$	5,833	$	839
States, municipalities and political subdivisions:
Tax-exempt	8,080			890		7,670		769		7,547		764
Taxable	1,605			267		1,576		243		1,579		245
Total states, municipalities and political subdivisions	9,685			1,157		9,246		1,012		9,126		1,009
Asset-backed:
RMBS	177			7		183		8		262		6
CMBS	130			4		136		4		146		4
Other ABS	119			3		117		1		116		—
Total asset-backed	426			14		436		13		524		10
U.S. Treasury and obligations of government-sponsored enterprises	29			3		30		3		25		3
Foreign government	—			—		—		—		—		—
Redeemable preferred stock	14			1		14		1		14		1
Total fixed maturity securities	16,307			2,233		15,786		1,958		15,522		1,862
Equities	54			3		55		3		53		1
Limited partnership investments	—			—		—		—		—		—
Other invested assets	—			—		—		—		—		—
Mortgage loans	76			—		71		—		72		—
Short term investments	98			—		80		—		174		—
Total investments	$	16,535		$	2,236	$	15,992	$	1,961	$	15,821	$	1,863

Net receivable/(payable) on investment activity	$	(30	)			$	91			$	28

Effective portfolio duration (in years)	8.7					8.8				8.7
Weighted average rating of fixed maturity securities	A					A				A

Investments - Fixed Maturity Securities by Credit Rating



June 30, 2017	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	$	—		$	—	$	54		$	1		$	574		$	53	$	4,439		$	464		$	12,141		$	954		$	2,198		$	88	$	19,406		$	1,560
States, municipalities and political subdivisions:
Tax-exempt	—			—		919			95			5,746			542		4,122			330			150			15			35			14		10,972			996
Taxable	—			—		356			30			1,959			254		514			86			25			(1		)	—			—		2,854			369
Total states, municipalities and political subdivisions	—			—		1,275			125			7,705			796		4,636			416			175			14			35			14		13,826			1,365
Asset-backed:
RMBS	4,083			37		38			—			25			—		75			(1		)	48			—			652			50		4,921			86
CMBS	51			—		321			12			410			14		352			9			558			6			260			4		1,952			45
Other ABS	—			—		40			(3		)	75			—		490			7			456			7			—			—		1,061			11
Total asset-backed	4,134			37		399			9			510			14		917			15			1,062			13			912			54		7,934			142
U.S. Treasury and obligations of government-sponsored enterprises	115			2		—			—			—			—		—			—			—			—			—			—		115			2
Foreign government	—			—		91			4			315			7		22			—			21			—			—			—		449			11
Redeemable preferred stock	—			—		—			—			—			—		—			—			10			1			9			—		19			1
Total fixed maturity securities	$	4,249		$	39	$	1,819		$	139		$	9,104		$	870	$	10,014		$	895		$	13,409		$	982		$	3,154		$	156	$	41,749		$	3,081

Percentage of total fixed maturity securities	10		%			4		%				22		%			24		%				32		%				8		%			100		%

Components of Net Investment Income



	Consolidated
Periods ended June 30	Three Months						Six Months
(In millions)	2017			2016			2017			2016
Taxable fixed maturities	$	351		$	349		$	698		$	694
Tax-exempt fixed maturities	106			100			214			201
Total fixed maturity securities	457			449			912			895
Limited partnership investments	16			46			106			32
Other, net of investment expense	2			7			2			10
Net investment income	$	475		$	502		$	1,020		$	937
Fixed maturity securities, after tax	$	330		$	325		$	659		$	647
Net investment income, after tax	344			362			733			677

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



	Property & Casualty and Corporate & Other Non-Core
Periods ended June 30	Three Months						Six Months
(In millions)	2017			2016			2017			2016
Taxable fixed maturities	$	236		$	242		$	469		$	480
Tax-exempt fixed maturities	23			18			46			37
Total fixed maturity securities	259			260			515			517
Limited partnership investments	16			46			106			32
Other, net of investment expense	5			8			7			13
Net investment income	$	280		$	314		$	628		$	562
Fixed maturity securities, after tax	$	177		$	178		$	352		$	352
Net investment income, after tax	191			214			426			382

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



	Life & Group Non-Core
Periods ended June 30	Three Months								Six Months
(In millions)	2017				2016				2017				2016
Taxable fixed maturities	$	115			$	107			$	229			$	214
Tax-exempt fixed maturities	83				82				168				164
Total fixed maturity securities	198				189				397				378
Limited partnership investments	—				—				—				—
Other, net of investment expense	(3		)		(1		)		(5		)		(3		)
Net investment income	$	195			$	188			$	392			$	375
Fixed maturity securities, after tax	$	153			$	147			$	307			$	295
Net investment income, after tax	153				148				307				295

Effective income yield for the fixed maturity securities portfolio, pretax	5.7			%	5.7			%	5.7			%	5.7			%
Effective income yield for the fixed maturity securities portfolio, after tax	4.4				4.4				4.4				4.5

Claim & Claim Adjustment Expense Reserve Rollforward



Three months ended June 30, 2017 (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	$	6,224		$	8,760		$	1,343		$	16,327		$	3,373		$	2,560		$	22,260
Ceded	812			576			118			1,506			237			2,333			4,076
Net	5,412			8,184			1,225			14,821			3,136			227			18,184

Net incurred claim & claim adjustment expenses	398			423			129			950			253			1			1,204
Net claim & claim adjustment expense payments	(450		)	(581		)	(99		)	(1,130		)	(211		)	(4		)	(1,345		)
Foreign currency translation adjustment and other	—			2			45			47			9			—			56

Claim & claim adjustment expense reserves, end of period
Net	5,360			8,028			1,300			14,688			3,187			224			18,099
Ceded	869			558			142			1,569			230			2,281			4,080
Gross	$	6,229		$	8,586		$	1,442		$	16,257		$	3,417		$	2,505		$	22,179



Six months ended June 30, 2017 (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	$	6,149		$	8,894		$	1,328		$	16,371		$	3,358		$	2,614		$	22,343
Ceded	745			589			127			1,461			249			2,384			4,094
Net	5,404			8,305			1,201			14,910			3,109			230			18,249

Net incurred claim & claim adjustment expenses	784			859			244			1,887			488			2			2,377
Net claim & claim adjustment expense payments	(828		)	(1,137		)	(204		)	(2,169		)	(419		)	(9		)	(2,597		)
Foreign currency translation adjustment and other	—			1			59			60			9			1			70

Claim & claim adjustment expense reserves, end of period
Net	5,360			8,028			1,300			14,688			3,187			224			18,099
Ceded	869			558			142			1,569			230			2,281			4,080
Gross	$	6,229		$	8,586		$	1,442		$	16,257		$	3,417		$	2,505		$	22,179

Life & Group Non-Core Policyholder Reserves



June 30, 2017
(In millions)	Claim and claim adjustment expenses		Future policy benefits		Total
Long term care	$	2,509	$	8,825	$	11,334
Structured settlement annuities	554		—		554
Other	14		—		14
Total	3,077		8,825		11,902
Shadow adjustments	110		1,768		1,878
Ceded reserves	230		231		461
Total gross reserves	$	3,417	$	10,824	$	14,241



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

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 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 renewal premium change, rate, retention and new business in evaluating operating trends. Renewal premium change represents the estimated change in average premium on policies that renew, including rate and exposure changes. Rate represents the average change in price on policies that renew excluding exposure change. Exposure represents the measure of risk used in the pricing of the insurance product. Retention represents the percentage of premium dollars renewed in comparison to the expiring premium dollars from policies available to renew. Rate, renewal premium change and retention presented for the prior year is updated to reflect subsequent activity on policies written in the period. 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 i) net realized investment gains or losses, ii) income or loss from discontinued operations and iii) 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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