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	q4-17exhibit991.htm
8-K - 8-K - CNA FINANCIAL CORP	a2017q48-k.htm

CNA Financial Corporation

Supplemental Financial Information

December 31, 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 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
Results of Operations
Property & Casualty...........................................................................................................................................................................................................	4
Specialty............................................................................................................................................................................................................................	5
Commercial.......................................................................................................................................................................................................................	6
International.......................................................................................................................................................................................................................	7
Life & Group......................................................................................................................................................................................................................	8
Corporate & Other.............................................................................................................................................................................................................	9
Investment Information
Investment Summary - Consolidated................................................................................................................................................................................	10
Investment Summary - Property & Casualty and Corporate & Other................................................................................................................................	11
Investment Summary - Life & Group.................................................................................................................................................................................	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 Policyholder Reserves..................................................................................................................................................................................	16
Definitions and Presentation..............................................................................................................................................................................................	17

Statements of Operations



Periods ended December 31	Three Months									Twelve Months
(In millions)	2017			2016			Change			2017			2016			Change
Revenues:
Net earned premiums	$	1,803		$	1,728		4		%	$	6,988		$	6,924		1	%
Net investment income	505			527			(4	)		2,034			1,988			2
Net realized investment gains (losses):
Other-than-temporary impairment (OTTI) losses	(5		)	(25		)				(14		)	(81		)
Other net realized investment gains (losses)	36			49						107			131
Net realized investment gains (losses)	31			24						93			50
Other revenues	109			111						427			404
Total revenues	2,448			2,390			2			9,542			9,366			2
Claims, Benefits and Expenses:
Insurance claims and policyholders' benefits	1,257			1,334						5,310			5,283
Amortization of deferred acquisition costs	307			309						1,233			1,235
Other operating expenses	437			390						1,528			1,552
Interest	37			40						161			159
Total claims, benefits and expenses	2,038			2,073			2			8,232			8,229			—
Income (loss) before income tax	410			317						1,310			1,137
Income tax (expense) benefit	(187		)	(76		)				(411		)	(278		)
Net income (loss)	$	223		$	241		(7	)	%	$	899		$	859		5	%

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)	2017				2016			2017				2016
Components of Income (Loss)
Core income (loss)	$	286			$	221		$	919			$	824
Net realized investment gains (losses)	20				20			63				35
Net deferred tax asset remeasurement	(83		)		—			(83		)		—
Net income (loss)	$	223			$	241		$	899			$	859

Diluted Earnings (Loss) Per Common Share
Core income (loss)	$	1.05			$	0.82		$	3.38			$	3.04
Net realized investment gains (losses)	0.08				0.07			0.23				0.13
Net deferred tax asset remeasurement	(0.31		)		—			(0.31		)		—
Diluted earnings (loss) per share	$	0.82			$	0.89		$	3.30			$	3.17

Weighted Average Outstanding Common Stock and Common Stock Equivalents
Basic	271.3				270.5			271.1				270.4
Diluted	272.3				271.5			272.1				271.1

Return on Equity
Net income (loss) ⁽¹⁾	7.3			%	8.0		%	7.4			%	7.2		%
Core income (loss) ⁽²⁾	9.4				7.4			7.5				6.8

(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 core 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, 2017		December 31, 2016
Total investments	$	46,870	$	45,420
Reinsurance receivables, net of allowance for uncollectible receivables	4,261		4,416
Total assets	56,567		55,233
Insurance reserves	37,212		36,431
Debt	2,858		2,710
Total liabilities	44,323		43,264
Accumulated other comprehensive income (loss) ⁽¹⁾	32		(173		)
Total stockholders' equity	12,244		11,969

Book value per common share	$	45.15	$	44.25
Book value per common share excluding AOCI	$	45.02	$	44.89

Outstanding shares of common stock (in millions of shares)	271.2		270.5

Statutory capital and surplus - Combined Continental Casualty Companies ⁽²⁾	$	10,726	$	10,748



Three months ended December 31	2017			2016
Net cash flows provided (used) by operating activities	$	360		$	296
Net cash flows provided (used) by investing activities	(206		)	(242		)
Net cash flows provided (used) by financing activities	(82		)	(68		)
Net cash flows provided (used) by operating, investing and financing activities	$	72		$	(14	)



Twelve months ended December 31	2017			2016
Net cash flows provided (used) by operating activities	$	1,254		$	1,416
Net cash flows provided (used) by investing activities	(424		)	(846		)
Net cash flows provided (used) by financing activities	(755		)	(673		)
Net cash flows provided (used) by operating, investing and financing activities	$	75		$	(103	)

(1) As of December 31, 2017 and 2016, the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $1,411 million and $1,014 million. To the extent that unrealized gains on fixed income securities supporting certain products within the Life & Group 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, 2017 is preliminary.

Property & Casualty - Results of Operations



Periods ended December 31	Three Months											Twelve Months
(In millions)	2017				2016				Change			2017				2016				Change
Gross written premiums	$	2,740			$	2,572			7		%	$	10,982			$	10,697			3		%
Net written premiums	1,601				1,525				5			6,534				6,442				1

Net earned premiums	1,668				1,593				5			6,450				6,389				1
Net investment income	305				322							1,232				1,205
Other revenues	107				103							423				394
Total operating revenues	2,080				2,018				3			8,105				7,988				1
Insurance claims and policyholders' benefits	991				1,035							4,060				3,899
Amortization of deferred acquisition costs	307				309							1,233				1,235
Other insurance related expenses	269				249							971				994
Other expenses	124				98							392				372
Total claims, benefits and expenses	1,691				1,691				—			6,656				6,500				(2	)
Core income (loss) before income tax	389				327							1,449				1,488
Income tax (expense) benefit on core income (loss)	(126		)		(110		)					(490		)		(506		)
Core income (loss)	$	263			$	217			21		%	$	959			$	982			(2	)	%

Other Performance Metrics
Underwriting gain (loss)	$	101			$	—			N/M		%	$	186			$	261			(29	)	%

Loss & LAE ratio	58.9			%	65.0			%	6.1		pts	62.6			%	60.8			%	(1.8	)	pts
Acquisition expense ratio	19.6				20.1				0.5			19.5				19.5				—
Underwriting expense ratio	15.0				15.0				—			14.7				15.4				0.7
Expense ratio	34.6				35.1				0.5			34.2				34.9				0.7
Dividend ratio	0.5				(0.2		)		(0.7	)		0.3				0.2				(0.1	)
Combined ratio	94.0			%	99.9			%	5.9			97.1			%	95.9			%	(1.2	)
Combined ratio excluding catastrophes and development	95.8			%	98.3			%	2.5		pts	95.5			%	97.9			%	2.4		pts

Net accident year catastrophe losses incurred	$	38			$	28						$	380			$	165
Effect on loss & LAE ratio	2.3			%	1.8			%	(0.5	)	pts	6.0			%	2.6			%	(3.4	)	pts

Net prior year development and other: (favorable) / unfavorable	$	(69	)		$	(2	)					$	(284	)		$	(299	)
Effect on loss & LAE ratio	(4.1		)	%	(0.2		)	%	3.9		pts	(4.4		)	%	(4.6		)	%	(0.2	)	pts

Rate	1			%	—			%	1		pts	—			%	(1		)	%	1		pts
Renewal premium change	2				1				1			2				2				—
Retention	85				84				1			86				85				1
New business	$	262			$	210			25		%	$	1,085			$	1,009			8		%

Specialty - Results of Operations



Periods ended December 31	Three Months											Twelve Months
(In millions)	2017				2016				Change			2017				2016				Change
Gross written premiums	$	1,754			$	1,679			4		%	$	6,942			$	6,799			2		%
Net written premiums	671				672				—			2,771				2,780				—

Net earned premiums	697				691				1			2,753				2,779				(1	)
Net investment income	131				136							538				516
Other revenues	101				93							392				362
Total operating revenues	929				920				1			3,683				3,657				1
Insurance claims and policyholders' benefits	395				368							1,539				1,471
Amortization of deferred acquisition costs	151				148							596				591
Other insurance related expenses	77				76							286				301
Other expenses	94				80							342				312
Total claims, benefits and expenses	717				672				(7	)		2,763				2,675				(3	)
Core income (loss) before income tax	212				248							920				982
Income tax (expense) benefit on core income (loss)	(72		)		(84		)					(310		)		(332		)
Core income (loss)	$	140			$	164			(15	)	%	$	610			$	650			(6	)	%

Other Performance Metrics
Underwriting gain (loss)	$	74			$	99			(25	)	%	$	332			$	416			(20	)	%

Loss & LAE ratio	56.5			%	53.5			%	(3.0	)	pts	55.8			%	52.8			%	(3.0	)	pts
Acquisition expense ratio	20.5				20.2				(0.3	)		20.1				20.1				—
Underwriting expense ratio	12.4				12.2				(0.2	)		11.9				11.9				—
Expense ratio	32.9				32.4				(0.5	)		32.0				32.0				—
Dividend ratio	0.2				(0.3		)		(0.5	)		0.2				0.2				—
Combined ratio	89.6			%	85.6			%	(4.0	)		88.0			%	85.0			%	(3.0	)
Combined ratio excluding catastrophes and development	95.0			%	96.1			%	1.1		pts	93.8			%	95.1			%	1.3		pts

Net accident year catastrophe losses incurred	$	2			$	4						$	49			$	18
Effect on loss & LAE ratio	0.3			%	0.5			%	0.2		pts	1.8			%	0.6			%	(1.2	)	pts

Net prior year development and other: (favorable) / unfavorable	$	(40	)		$	(76	)					$	(216	)		$	(305	)
Effect on loss & LAE ratio	(5.7		)	%	(11.0		)	%	(5.3	)	pts	(7.6		)	%	(10.7		)	%	(3.1	)	pts

Rate	—			%	1			%	(1	)	pts	—			%	1			%	(1	)	pts
Renewal premium change	2				1				1			2				2				—
Retention	85				87				(2	)		88				88				—
New business	$	64			$	57			12		%	$	251			$	249			1		%

Commercial - Results of Operations



Periods ended December 31	Three Months											Twelve Months
(In millions)	2017				2016				Change			2017				2016				Change
Gross written premiums	$	760			$	701			8		%	$	3,081			$	3,002			3		%
Net written premiums	713				669				7			2,882				2,841				1

Net earned premiums	743				701				6			2,840				2,804				1
Net investment income	160				173							642				638
Other revenues	6				11							31				32
Total operating revenues	909				885				3			3,513				3,474				1
Insurance claims and policyholders' benefits	465				570							1,946				1,936
Amortization of deferred acquisition costs	121				119							475				470
Other insurance related expenses	136				138							523				560
Other expenses	26				11							57				36
Total claims, benefits and expenses	748				838				11			3,001				3,002				—
Core income (loss) before income tax	161				47							512				472
Income tax (expense) benefit on core income (loss)	(54		)		(16		)					(171		)		(161		)
Core income (loss)	$	107			$	31			N/M		%	$	341			$	311			10		%

Other Performance Metrics
Underwriting gain (loss)	$	21			$	(126	)		117		%	$	(104	)		$	(162	)		36		%

Loss & LAE ratio	61.7			%	81.2			%	19.5		pts	67.9			%	68.7			%	0.8		pts
Acquisition expense ratio	17.9				19.4				1.5			18.0				18.3				0.3
Underwriting expense ratio	16.9				17.5				0.6			17.2				18.5				1.3
Expense ratio	34.8				36.9				2.1			35.2				36.8				1.6
Dividend ratio	0.9				(0.1		)		(1.0	)		0.6				0.3				(0.3	)
Combined ratio	97.4			%	118.0			%	20.6			103.7			%	105.8			%	2.1
Combined ratio excluding catastrophes and development	95.1			%	100.8			%	5.7		pts	96.0			%	99.2			%	3.2		pts

Net accident year catastrophe losses incurred	$	32			$	21						$	267			$	116
Effect on loss & LAE ratio	4.4			%	3.0			%	(1.4	)	pts	9.4			%	4.1			%	(5.3	)	pts

Net prior year development and other: (favorable) / unfavorable	$	(16	)		$	102						$	(40	)		$	70
Effect on loss & LAE ratio	(2.1		)	%	14.2			%	16.3		pts	(1.7		)	%	2.5			%	4.2		pts

Rate	1			%	(1		)	%	2		pts	—			%	(2		)	%	2		pts
Renewal premium change	2				1				1			2				3				(1	)
Retention	86				85				1			86				84				2
New business	$	130			$	102			27		%	$	559			$	520			8		%

International - Results of Operations



Periods ended December 31	Three Months											Twelve Months
(In millions)	2017				2016				Change			2017				2016				Change
Gross written premiums	$	226			$	192			18		%	$	959			$	896			7		%
Net written premiums	217				184				18			881				821				7

Net earned premiums	228				201				13			857				806				6
Net investment income	14				13							52				51
Other revenues	—				(1		)					—				—
Total operating revenues	242				213				14			909				857				6
Insurance claims and policyholders' benefits	131				97							575				492
Amortization of deferred acquisition costs	35				42							162				174
Other insurance related expenses	56				35							162				133
Other expenses	4				7							(7		)		24
Total claims, benefits and expenses	226				181				(25	)		892				823				(8	)
Core income (loss) before income tax	16				32							17				34
Income tax (expense) benefit on core income (loss)	—				(10		)					(9		)		(13		)
Core income (loss)	$	16			$	22			(27	)	%	$	8			$	21			(62	)	%

Other Performance Metrics
Underwriting gain (loss)	$	6			$	27			(78	)	%	$	(42	)		$	7			N/M		%

Loss & LAE ratio	57.2			%	48.3			%	(8.9	)	pts	67.0			%	61.0			%	(6.0	)	pts
Acquisition expense ratio	22.3				22.2				(0.1	)		22.4				21.9				(0.5	)
Underwriting expense ratio	17.2				15.6				(1.6	)		15.4				16.2				0.8
Expense ratio	39.5				37.8				(1.7	)		37.8				38.1				0.3
Dividend ratio	—				—				—			—				—				—
Combined ratio	96.7			%	86.1			%	(10.6	)		104.8			%	99.1			%	(5.7	)
Combined ratio excluding catastrophes and development	100.7			%	97.2			%	(3.5	)	pts	99.6			%	102.9			%	3.3		pts

Net accident year catastrophe losses incurred	$	4			$	3						$	64			$	31
Effect on loss & LAE ratio	1.5			%	1.7			%	0.2		pts	7.9			%	3.9			%	(4.0	)	pts

Net prior year development and other: (favorable) / unfavorable	$	(13	)		$	(28	)					$	(28	)		$	(64	)
Effect on loss & LAE ratio	(5.5		)	%	(12.8		)	%	(7.3	)	pts	(2.7		)	%	(7.7		)	%	(5.0	)	pts

Rate	1			%	(1		)	%	2		pts	—			%	(1		)	%	1		pts
Renewal premium change	3				2				1			2				(1		)		3
Retention	83				71				12			80				76				4
New business	$	68			$	51			33		%	$	275			$	240			15		%

Life & Group - Results of Operations



Periods ended December 31	Three Months								Twelve Months
(In millions)	2017		2016			Change			2017			2016			Change
Net earned premiums	$	135	$	135		—		%	$	539		$	536		1	%
Net investment income	195		200						782			767
Other revenues	1		(1		)				2			(2		)
Total operating revenues	331		334			(1	)		1,323			1,301			2
Insurance claims and policyholders' benefits	289		310						1,269			1,286
Amortization of deferred acquisition costs	—		—						—			—
Other insurance related expenses	33		31						129			132
Other expenses	2		1						7			8
Total claims, benefits and expenses	324		342			5			1,405			1,426			1
Core income (loss) before income tax	7		(8		)				(82		)	(125		)
Income tax (expense) benefit on core income (loss)	24		28						132			145
Core income (loss)	$	31	$	20		55		%	$	50		$	20		150	%

Corporate & Other - Results of Operations



Periods ended December 31	Three Months									Twelve Months
(In millions)	2017			2016			Change			2017			2016			Change
Net earned premiums	$	—		$	—					$	(1	)	$	(1	)
Net investment income	5			5						20			16
Other revenues	1			9						2			12
Total operating revenues	6			14			(57	)	%	21			27			(22	)	%
Insurance claims and policyholders' benefits	(23		)	(11		)				(19		)	98
Amortization of deferred acquisition costs	—			—						—			—
Other insurance related expenses	—			—						(2		)	(4		)
Other expenses	46			51						192			209
Total claims, benefits and expenses	23			40			43			171			303			44
Core income (loss) before income tax	(17		)	(26		)				(150		)	(276		)
Income tax (expense) benefit on core income (loss)	9			10						60			98
Core income (loss)	$	(8	)	$	(16	)	50		%	$	(90	)	$	(178	)	49		%

Investment Summary - Consolidated



	December 31, 2017					September 30, 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	$	18,810	$	1,597		$	19,588		$	1,619	$	18,970	$	1,247
States, municipalities and political subdivisions:
Tax-exempt	11,130		1,136			11,075			1,101		10,430		834
Taxable	2,897		413			2,881			393		2,810		346
Total states, municipalities and political subdivisions	14,027		1,549			13,956			1,494		13,240		1,180
Asset-backed:
RMBS	5,120		77			5,005			99		5,073		69
CMBS	1,872		32			1,900			42		2,040		24
Other ABS	1,094		11			1,061			14		1,025		3
Total asset-backed	8,086		120			7,966			155		8,138		96
U.S. Treasury and obligations of government-sponsored enterprises	109		(2		)	115			—		93		10
Foreign government	444		7			445			6		445		10
Redeemable preferred stock	11		1			20			2		19		1
Total fixed maturity securities	41,487		3,272			42,090			3,276		40,905		2,544
Equities:
Common stock	27		6			22			6		19		5
Preferred stock	668		30			107			5		91		(1		)
Total equities	695		36			129			11		110		4
Limited partnership investments	2,369		—			2,311			—		2,371		—
Other invested assets	44		—			42			—		36		—
Mortgage loans	839		—			722			—		591		—
Short term investments	1,436		(1		)	1,453			1		1,407		1
Total investments	$	46,870	$	3,307		$	46,747		$	3,288	$	45,420	$	2,549

Net receivable/(payable) on investment activity	$	23				$	(114	)			$	81

Effective duration (in years)	5.9					6.0					6.1
Weighted average rating	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



	December 31, 2017						September 30, 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	$	12,938		$	447		$	13,410		$	517		$	13,137	$	408
States, municipalities and political subdivisions:
Tax-exempt	2,827			112			2,840			119			2,883		70
Taxable	1,247			102			1,252			104			1,231		101
Total states, municipalities and political subdivisions	4,074			214			4,092			223			4,114		171
Asset-backed:
RMBS	4,951			72			4,829			93			4,811		63
CMBS	1,761			30			1,777			38			1,894		20
Other ABS	981			7			943			10			909		3
Total asset-backed	7,693			109			7,549			141			7,614		86
U.S. Treasury and obligations of government-sponsored enterprises	82			(4		)	86			(2		)	68		7
Foreign government	444			7			445			6			445		10
Redeemable preferred stock	5			1			6			1			5		—
Total fixed maturity securities	25,236			774			25,588			886			25,383		682
Equities:
Common stock	27			6			22			6			19		5
Preferred stock	237			7			42			1			38		(2		)
Total equities	264			13			64			7			57		3
Limited partnership investments	2,369			—			2,311			—			2,371		—
Other invested assets	44			—			42			—			36		—
Mortgage loans	639			—			618			—			519		—
Short term investments	1,354			(1		)	1,412			1			1,233		1
Total investments	$	29,906		$	786		$	30,035		$	894		$	29,599	$	686

Net receivable/(payable) on investment activity	$	(10	)				$	(151	)				$	53

Effective duration (in years)	4.4						4.4						4.6
Weighted average rating	A						A						A

Investment Summary - Life & Group



	December 31, 2017				September 30, 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	$	5,872	$	1,150	$	6,178	$	1,102	$	5,833	$	839
States, municipalities and political subdivisions:
Tax-exempt	8,303		1,024		8,235		982		7,547		764
Taxable	1,650		311		1,629		289		1,579		245
Total states, municipalities and political subdivisions	9,953		1,335		9,864		1,271		9,126		1,009
Asset-backed:
RMBS	169		5		176		6		262		6
CMBS	111		2		123		4		146		4
Other ABS	113		4		118		4		116		—
Total asset-backed	393		11		417		14		524		10
U.S. Treasury and obligations of government-sponsored enterprises	27		2		29		2		25		3
Foreign government	—		—		—		—		—		—
Redeemable preferred stock	6		—		14		1		14		1
Total fixed maturity securities	16,251		2,498		16,502		2,390		15,522		1,862
Equities:
Common stock	—		—		—		—		—		—
Preferred stock	431		23		65		4		53		1
Total equities	431		23		65		4		53		1
Limited partnership investments	—		—		—		—		—		—
Other invested assets	—		—		—		—		—		—
Mortgage loans	200		—		104		—		72		—
Short term investments	82		—		41		—		174		—
Total investments	$	16,964	$	2,521	$	16,712	$	2,394	$	15,821	$	1,863

Net receivable/(payable) on investment activity	$	33			$	37			$	28

Effective duration (in years)	8.4				8.6				8.7
Weighted average rating	A				A				A

Investments - Fixed Maturity Securities by Credit Rating



December 31, 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	$	—		$	—		$	52		$	1		$	471		$	31	$	4,228		$	472		$	12,125		$	1,025	$	1,934		$	68	$	18,810		$	1,597
States, municipalities and political subdivisions:
Tax-exempt	—			—			1,070			112			5,776			605		3,981			360			257			46		46			13		11,130			1,136
Taxable	—			—			356			30			1,960			263		544			110			37			10		—			—		2,897			413
Total states, municipalities and political subdivisions	—			—			1,426			142			7,736			868		4,525			470			294			56		46			13		14,027			1,549
Asset-backed:
RMBS	4,358			23			44			—			20			—		72			(1		)	47			1		579			54		5,120			77
CMBS	47			—			288			10			390			11		311			4			555			2		281			5		1,872			32
Other ABS	—			—			24			(3		)	100			1		472			5			498			8		—			—		1,094			11
Total asset-backed	4,405			23			356			7			510			12		855			8			1,100			11		860			59		8,086			120
U.S. Treasury and obligations of government-sponsored enterprises	109			(2		)	—			—			—			—		—			—			—			—		—			—		109			(2		)
Foreign government	—			—			120			2			265			3		35			2			24			—		—			—		444			7
Redeemable preferred stock	—			—			—			—			—			—		—			—			11			1		—			—		11			1
Total fixed maturity securities	$	4,514		$	21		$	1,954		$	152		$	8,982		$	914	$	9,643		$	952		$	13,554		$	1,093	$	2,840		$	140	$	41,487		$	3,272

Percentage of total fixed maturity securities	11		%				5		%				22		%			23		%				32		%			7		%			100		%

Components of Net Investment Income



	Consolidated
Periods ended December 31	Three Months						Twelve Months
(In millions)	2017			2016			2017			2016
Taxable fixed income securities	$	346		$	368		$	1,397		$	1,424
Tax-exempt fixed income securities	107			101			427			405
Total fixed income securities	453			469			1,824			1,829
Limited partnership investments	50			58			207			155
Other, net of investment expense	2			—			3			4
Pretax net investment income	$	505		$	527		$	2,034		$	1,988
Fixed income securities, after tax	$	330		$	339		$	1,324		$	1,322
Net investment income, after tax	366			379			1,462			1,427

Effective income yield for fixed income securities, pretax	4.7		%	4.9		%	4.7		%	4.8		%
Effective income yield for fixed income securities, after tax	3.4			3.5			3.4			3.5



	Property & Casualty and Corporate & Other
Periods ended December 31	Three Months						Twelve Months
(In millions)	2017			2016			2017			2016
Taxable fixed income securities	$	235		$	245		$	942		$	971
Tax-exempt fixed income securities	21			20			88			78
Total fixed income securities	256			265			1,030			1,049
Limited partnership investments	50			58			207			155
Other, net of investment expense	4			4			15			17
Pretax net investment income	$	310		$	327		$	1,252		$	1,221
Fixed income securities, after tax	$	175		$	181		$	703		$	715
Net investment income, after tax	212			223			849			828

Effective income yield for fixed income securities, pretax	4.1		%	4.3		%	4.2		%	4.3		%
Effective income yield for fixed income securities, after tax	2.8			2.9			2.9			2.9



	Life & Group
Periods ended December 31	Three Months								Twelve Months
(In millions)	2017				2016				2017				2016
Taxable fixed income securities	$	111			$	123			$	455			$	453
Tax-exempt fixed income securities	86				81				339				327
Total fixed income securities	197				204				794				780
Limited partnership investments	—				—				—				—
Other, net of investment expense	(2		)		(4		)		(12		)		(13		)
Pretax net investment income	$	195			$	200			$	782			$	767
Fixed income securities, after tax	$	155			$	158			$	621			$	607
Net investment income, after tax	154				156				613				599

Effective income yield for fixed income securities, pretax	5.6			%	5.9			%	5.7			%	5.8			%
Effective income yield for fixed income securities, after tax	4.4				4.6				4.4				4.5

Claim & Claim Adjustment Expense Reserve Rollforward



Three months ended December 31, 2017 (In millions)	Specialty			Commercial			International			P&C Operations			Life & Group			Corporate & Other			Total Operations
Claim & claim adjustment expense reserves, beginning of period
Gross	$	6,063		$	8,630		$	1,640		$	16,333		$	3,468		$	2,408		$	22,209
Ceded	811			571			216			1,598			222			2,188			4,008
Net	5,252			8,059			1,424			14,735			3,246			220			18,201

Net incurred claim & claim adjustment expenses	394			458			132			984			220			(8		)	1,196
Net claim & claim adjustment expense payments	(468		)	(552		)	(131		)	(1,151		)	(222		)	(7		)	(1,380		)
Foreign currency translation adjustment and other	1			(1		)	7			7			46			—			53

Claim & claim adjustment expense reserves, end of period
Net	5,179			7,964			1,432			14,575			3,290			205			18,070
Ceded	669			621			204			1,494			209			2,231			3,934
Gross	$	5,848		$	8,585		$	1,636		$	16,069		$	3,499		$	2,436		$	22,004



Twelve months ended December 31, 2017 (In millions)	Specialty			Commercial			International			P&C Operations			Life & Group			Corporate & Other			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	1,535			1,928			576			4,039			964			(4		)	4,999
Net claim & claim adjustment expense payments	(1,761		)	(2,269		)	(448		)	(4,478		)	(841		)	(22		)	(5,341		)
Foreign currency translation adjustment and other	1			—			103			104			58			1			163

Claim & claim adjustment expense reserves, end of period
Net	5,179			7,964			1,432			14,575			3,290			205			18,070
Ceded	669			621			204			1,494			209			2,231			3,934
Gross	$	5,848		$	8,585		$	1,636		$	16,069		$	3,499		$	2,436		$	22,004

Life & Group Policyholder Reserves



December 31, 2017
(In millions)	Claim and claim adjustment expenses		Future policy benefits		Total
Long term care	$	2,568	$	8,959	$	11,527
Structured settlement annuities	547		—		547
Other	16		—		16
Total	3,131		8,959		12,090
Shadow adjustments	159		1,990		2,149
Ceded reserves	209		230		439
Total gross reserves	$	3,499	$	11,179	$	14,678



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 segment primarily includes the results of long term care businesses that are in run-off.


•	Corporate & Other 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 core income (loss) financial measure (formerly referred to as net operating income) to monitor the Company’s operations. Please refer to Note O to the Consolidated Financial Statements within the December 31, 2017 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. Core 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.

•

Core 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, iii) any cumulative effects of changes in accounting guidance and iv) deferred tax asset and liability remeasurement as a result of an enacted U.S. Federal tax rate change. The calculation of core income (loss) excludes net realized investment gains or losses because net realized investment gains or losses 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 core income (loss) for each business segment to assess segment performance. Presentation of consolidated core 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.


•	Net investment income from fixed income securities, as presented, includes both fixed maturity and equity securities. The Company's equity holdings substantially consist of preferred stock with characteristics of debt securities, purchased for income generation.

•

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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