0000021175-13-000040.txt : 20131028 0000021175-13-000040.hdr.sgml : 20131028 20131028113038 ACCESSION NUMBER: 0000021175-13-000040 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20131028 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20131028 DATE AS OF CHANGE: 20131028 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CNA FINANCIAL CORP CENTRAL INDEX KEY: 0000021175 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 366169860 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05823 FILM NUMBER: 131172324 BUSINESS ADDRESS: STREET 1: CNA STREET 2: 333 S. WABASH CITY: CHICAGO STATE: IL ZIP: 60604 BUSINESS PHONE: 3128225000 MAIL ADDRESS: STREET 1: CNA STREET 2: 333 S. WABASH CITY: CHICAGO STATE: IL ZIP: 60604 8-K 1 q3138k.htm FORM 8-K 2013 Q3 8K


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) October 28, 2013

CNA FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
 
1-5823
 
36-6169860
(State or other jurisdiction
 
(Commission
 
(IRS Employer
of incorporation)
 
File Number)
 
Identification No.)



333 S. Wabash, Chicago, Illinois
 
60604
(Address of principal executive offices)
 
(Zip Code)

Registrant's telephone number, including area code (312) 822-5000

NOT APPLICABLE
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



1


ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On October 28, 2013, the registrant issued a press release and posted on its website (www.cna.com) a financial supplement providing information on its results of operations for the third quarter 2013. The press release is furnished as Exhibit 99.1 and the financial supplement is furnished as Exhibit 99.2 to this Form 8-K.
The information under Item 2.02 and in Exhibits 99.1 and 99.2 in this Current Report is being furnished and shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information under Item 2.02 and in Exhibits 99.1 and 99.2 in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits:
See Exhibit Index.


2


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
CNA Financial Corporation
 
 
(Registrant)
 
 
 
Date:  October 28, 2013
By
/s/ D. Craig Mense
 
 
(Signature)
 
 
D. Craig Mense
Executive Vice President and
Chief Financial Officer


3


EXHIBIT INDEX

Exhibit No.
 
Description
 
CNA Financial Corporation press release, issued October 28, 2013 providing information on the third quarter 2013 results of operations.
 
 
 
 
CNA Financial Corporation financial supplement, posted on its website October 28, 2013, providing supplemental financial information on the third quarter 2013.


4
 EX-99.1 2 q313exhibit991.htm EX-99.1 Q3-13 Exhibit 99.1


FOR IMMEDIATE RELEASE    
CONTACT:
MEDIA:
 
ANALYSTS:
Jennifer Martinez, 312/822-5167
 
James Anderson, 312/822-7757
Sarah Pang, 312/822-6394
 
Derek Smith, 312/822-6612
 
 
David Adams, 312/822-2183
CNA FINANCIAL ANNOUNCES THIRD QUARTER 2013 RESULTS:
•
NET OPERATING INCOME OF $269 MILLION
•
P&C NET WRITTEN PREMIUM GROWTH OF 2%
•
BOOK VALUE PER SHARE EX AOCI OF $44.64, AN INCREASE OF 5% FOR THE YEAR
•
OPERATING ROE OF 9%
•
QUARTERLY DIVIDEND OF $0.20 PER SHARE
CHICAGO, October 28, 2013 --- CNA Financial Corporation (NYSE: CNA) today announced third quarter 2013 results, which included net operating income of $269 million, or $1.00 per share, and net income of $272 million, or $1.01 per share. Property & Casualty Operations' combined ratio for the third quarter was 94.0%.
CNA Financial also declared a quarterly dividend of $0.20 per share, payable November 26, 2013 to stockholders of record on November 12, 2013.
 
Results for the Three Months Ended September 30 (a)
 
 
Results for the Nine Months Ended September 30 (a)
 
($ millions, except per share data)
2013
 
 
2012
 
 
2013
 
2012
 
Net operating income
$
269

 
 
$
216

 
 
$
704

 
 
$
594

 
Net income
272

 
 
221

 
 
716

 
 
637

 
 
 
 
 
 
 
 
 
 
 
 
 
Net operating income per diluted share
$
1.00

 
 
$
0.80

 
 
$
2.61

 
 
$
2.20

 
Net income per diluted share
1.01

 
 
0.82

 
 
2.65

 
 
2.36

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2013
 
 
December 31, 2012
 
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Book value per share
$
45.06

 
 
$
45.71

 
 
(1
)
%
 
 
 
Book value per share excluding AOCI
44.64

 
 
42.62

 
 
5

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
Management utilizes the net operating income financial measure to monitor the Company's operations. Please refer to Note O in the Consolidated Financial Statements within CNA's Annual Report on Form 10-K for the year ended December 31, 2012 for further discussion of this measure.


1


Property & Casualty Operations' net operating income was $330 million for the third quarter of 2013 as compared with $264 million in the prior year quarter. This increase was primarily due to improved non-catastrophe current accident year underwriting results and higher favorable net prior year development, partially offset by higher catastrophe losses. Net written premiums grew 2% year over year, driven by increases in CNA Specialty and Hardy.
Net operating results for our non-core segments decreased $13 million as compared with the prior year quarter. The Life & Group Non-Core segment was adversely affected by unfavorable morbidity in our long term care business, partially offset by the effect of rate increase actions and favorable persistency in that business.
Pretax net investment income was $597 million for the third quarter of 2013, essentially unchanged from $601 million in the prior year quarter.
Property & Casualty Operations
“CNA’s third quarter results reflect improved earnings and sustained progress in our core P&C business performance,” said Thomas F. Motamed, Chairman and Chief Executive Officer of CNA Financial Corporation. “We are pleased with these results and are encouraged by the margin improvement, the ongoing favorable rate trends, and the continued shift in our book of business toward focus customer segments.”
 
Results for the Three Months Ended September 30
 
Results for the Nine Months Ended September 30
($ millions)
2013
 
2012
 
2013
 
2012
Net written premiums
$
1,619

 
 
$
1,590

 
 
$
5,115

 
 
$
4,805

 
NWP growth (% year over year)
2

%
 
—

%
 
6

%
 
2

%
Net operating income
$
330

 
 
$
264

 
 
$
845

 
 
$
698

 
 
 
 
 
 
 
 
 
 
 
 
 
Loss ratio
60.9

%
 
65.4

%
 
65.6

%
 
67.3

%
Effect of catastrophe impacts
(2.5
)
 
 
(1.6
)
 
 
(3.0
)
 
 
(2.6
)
 
Effect of development-related items
4.4

 
 
2.6

 
 
2.1

 
 
2.8

 
Loss ratio excluding catastrophes and development
62.8

%
 
66.4

%
 
64.7

%
 
67.5

%
 
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
94.0

%
 
99.7

%
 
99.0

%
 
101.1

%
Combined ratio excluding catastrophes and development
95.9

%
 
100.7

%
 
98.1

%
 
101.3

%


2


Business Operating Highlights
CNA Specialty
 
Results for the Three Months Ended September 30
 
Results for the Nine Months Ended September 30
($ millions)
2013
 
2012
 
2013
 
2012
Net written premiums
$
778

 
 
$
723

 
 
$
2,337

 
 
$
2,206

 
NWP growth (% year over year)
8

%
 
(4
)
%
 
6

%
 
2

%
Net operating income
$
187

 
 
$
136

 
 
$
475

 
 
$
374

 
 
 
 
 
 
 
 
 
 
 
 
 
Loss ratio
55.6

%
 
62.5

%
 
60.1

%
 
63.6

%
Effect of catastrophe impacts
(1.7
)
 
 
(0.5
)
 
 
(0.9
)
 
 
(0.4
)
 
Effect of development-related items
9.9

 
 
5.4

 
 
6.3

 
 
4.2

 
Loss ratio excluding catastrophes and development
63.8

%
 
67.4

%
 
65.5

%
 
67.4

%
 
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
85.3

%
 
93.7

%
 
90.1

%
 
95.1

%
Combined ratio excluding catastrophes and development
93.5

%
 
98.6

%
 
95.5

%
 
98.9

%
•
Net written premiums increased $55 million for the third quarter of 2013 as compared with the prior year quarter. This increase was driven by increased rate. Average rate increased 6% for the third quarter of 2013 as compared with an increase of 5% for the prior year quarter for the policies that renewed in each period. Retention of 85% was achieved in each period.
•
Net operating income increased $51 million for the third quarter of 2013 as compared with the prior year quarter. This increase was primarily due to improved underwriting results.
•
The combined ratio improved 8.4 points for the third quarter of 2013 as compared with the prior year quarter. The loss ratio improved 6.9 points, due to higher favorable net prior year development and an improved non-catastrophe current accident year loss ratio, partially offset by higher catastrophe losses. The expense ratio improved 1.6 points, primarily due to the impact of lower underwriting expenses and a higher net earned premium base.


3


CNA Commercial
 
Results for the Three Months Ended September 30
 
Results for the Nine Months Ended September 30
($ millions)
2013
 
2012
 
2013
 
2012
Net written premiums
$
760

 
 
$
811

 
 
$
2,504

 
 
$
2,543

 
NWP growth (% year over year)
(6
)
%
 
(3
)
%
 
(2
)
%
 
—

%
Net operating income
$
131

 
 
$
125

 
 
$
368

 
 
$
321

 
 
 
 
 
 
 
 
 
 
 
 
 
Loss ratio
67.9

%
 
70.5

%
 
72.1

%
 
71.3

%
Effect of catastrophe impacts
(2.9
)
 
 
(2.8
)
 
 
(4.8
)
 
 
(4.7
)
 
Effect of development-related items
(0.8
)
 
 
(0.3
)
 
 
(1.0
)
 
 
1.7

 
Loss ratio excluding catastrophes and development
64.2

%
 
67.4

%
 
66.3

%
 
68.3

%
 
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
103.0

%
 
106.0

%
 
107.2

%
 
106.8

%
Combined ratio excluding catastrophes and development
99.3

%
 
102.9

%
 
101.4

%
 
103.8

%
•
Net written premiums decreased $51 million for the third quarter of 2013 as compared with the prior year quarter. This decrease was primarily driven by previous underwriting actions taken in certain business classes. These underwriting actions were partially offset by continued strong rate increases. Average rate increased 8% for the third quarter of 2013 as compared with an increase of 7% for the prior year quarter for the policies that renewed in each period. Retention of 71% and 77% was achieved in each period.
•
Net operating income increased $6 million for the third quarter of 2013 as compared with the prior year quarter. This increase was primarily due to improved current accident year underwriting results.
•
The combined ratio improved 3.0 points for the third quarter of 2013 as compared with the prior year quarter. The loss ratio improved 2.6 points, primarily due to an improved current accident year loss ratio. The expense ratio improved 0.4 points, primarily due to the impact of lower underwriting expenses.


4


Hardy
 
Results for the Three Months Ended September 30
 
Results for the Nine Months Ended September 30
($ millions)
2013
 
2012
 
2013
 
2012
Net written premiums
$
81

 
 
$
56

 
 
$
274

 
 
$
56

 
NWP growth (% year over year)
45

%
 
 
 
 
N/M

%
 
 
 
Net operating income
$
12

 
 
$
3

 
 
$
2

 
 
$
3

 
 
 
 
 
 
 
 
 
 
 
 
 
Loss ratio
40.5

%
 
33.3

%
 
47.3

%
 
33.3

%
Effect of catastrophe impacts
(5.4
)
 
 
—

 
 
(2.0
)
 
 
—

 
Effect of development-related items
4.9

 
 
8.9

 
 
(4.3
)
 
 
8.9

 
Loss ratio excluding catastrophes and development
40.0

%
 
42.2

%
 
41.0

%
 
42.2

%
 
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
85.1

%
 
85.8

%
 
95.4

%
 
85.8

%
Combined ratio excluding catastrophes and development
84.6

%
 
94.7

%
 
89.1

%
 
94.7

%
•
Hardy, a specialized Lloyd's of London underwriter, was acquired on July 2, 2012.
•
Net written premiums increased $25 million for the third quarter of 2013 as compared with the prior year quarter. This increase was driven by growth of non-marine property and a reduction in the amount of reinsurance purchased across several business units. In addition, a change in Hardy's share of the results of Syndicate 382 contributed to the growth in the period. Hardy retains 100% of the results for the 2013 year of account, while 25% of the capital for the 2012 year of account was provided by third parties. Average rate decreased 5% for the third quarter of 2013 as compared with an increase of 1% for the prior year quarter for the policies that renewed in each period. Retention of 75% and 73% was achieved in each period.
•
Net operating income increased $9 million for the third quarter of 2013 as compared with the prior year quarter. This increase was primarily due to improved non-catastrophe underwriting results, partially offset by higher catastrophe losses.
•
The combined ratio improved 0.7 points for the third quarter of 2013 as compared with the prior year quarter. The loss ratio increased 7.2 points, primarily due to higher catastrophe losses. The expense ratio improved 7.9 points, primarily due to the higher net earned premium base.

Life & Group Non-Core
 
Results for the Three Months Ended September 30
 
Results for the Nine Months Ended September 30
 
($ millions)
2013
 
2012
 
2013
 
 
2012
 
Operating revenues
$
346

 
 
$
343

 
 
$
1,041

 
 
$
1,036

 
Total claims, benefits and expenses
425

 
 
400

 
 
1,221

 
 
1,160

 
Net operating loss
(35
)
 
 
(22
)
 
 
(71
)
 
 
(38
)
 
•
Net operating loss increased $13 million for the third quarter of 2013 as compared with the prior year quarter. Results were affected by unfavorable morbidity in our long term care business, partially offset by the effect of rate increase actions and favorable persistency in that business.


5


Corporate & Other Non-Core
 
Results for the Three Months Ended September 30
 
Results for the Nine Months Ended September 30
($ millions)
2013
 
2012
 
2013
 
 
2012
 
Operating revenues
$
11

 
 
$
13

 
 
$
30

 
 
$
36

 
Total claims, benefits and expenses
53

 
 
50

 
 
138

 
 
131

 
Net operating loss
(26
)
 
 
(26
)
 
 
(70
)
 
 
(66
)
 
•
Corporate & Other Non-Core 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 A&EP. Results for the third quarter of 2013 were comparable to the prior year quarter.


6


Net Operating Income (Loss)
 
Results for the Three Months Ended September 30
 
Results for the Nine Months Ended September 30
($ millions)
2013
 
2012
 
2013
 
2012
CNA Specialty
$
187

 
$
136

 
$
475

 
$
374

CNA Commercial
131

 
125

 
368

 
321

Hardy
12

 
3

 
2

 
3

Total P&C Operations
330

 
264

 
845

 
698

Life & Group Non-Core
(35
)
 
(22
)
 
(71
)
 
(38
)
Corporate & Other Non-Core
(26
)
 
(26
)
 
(70
)
 
(66
)
Total
$
269

 
$
216

 
$
704

 
$
594

Net Income (Loss)
 
Results for the Three Months Ended September 30
 
Results for the Nine Months Ended September 30
($ millions)
2013
 
2012
 
2013
 
2012
CNA Specialty
$
188

 
$
136

 
$
474

 
$
386

CNA Commercial
132

 
132

 
364

 
343

Hardy
13

 
2

 
4

 
2

Total P&C Operations
333

 
270

 
842

 
731

Life & Group Non-Core
(35
)
 
(24
)
 
(62
)
 
(29
)
Corporate & Other Non-Core
(26
)
 
(25
)
 
(64
)
 
(65
)
Total
$
272

 
$
221

 
$
716

 
$
637

Property & Casualty Operations Gross Written Premiums
 
Results for the Three Months Ended September 30
 
Results for the Nine Months Ended September 30
($ millions)
2013
 
2012
 
2013
 
2012
CNA Specialty
$
1,368

 
$
1,211

 
$
3,980

 
$
3,670

CNA Commercial
805

 
864

 
2,715

 
2,715

Hardy
105

 
87

 
359

 
87

Total P&C Operations
$
2,278

 
$
2,162

 
$
7,054

 
$
6,472

Property & Casualty Operations Net Written Premiums
 
Results for the Three Months Ended September 30
 
Results for the Nine Months Ended September 30
($ millions)
2013
 
2012
 
2013
 
2012
CNA Specialty
$
778

 
$
723

 
$
2,337

 
$
2,206

CNA Commercial
760

 
811

 
2,504

 
2,543

Hardy
81

 
56

 
274

 
56

Total P&C Operations
$
1,619

 
$
1,590

 
$
5,115

 
$
4,805


7


About the Company
Serving businesses and professionals since 1897, CNA is the country's eighth largest commercial insurance writer and the 13th largest property and casualty company.  CNA's insurance products include standard commercial lines, specialty lines, surety, marine and other property and casualty coverages.  CNA's services include risk management, information services, underwriting, risk control and claims administration.  For more information, please visit CNA at www.cna.com. “CNA” is a service mark registered by CNA Financial Corporation with the United States Patent and Trademark Office. Certain CNA Financial Corporation subsidiaries use the “CNA” service mark in connection with insurance underwriting and claims activities.
Conference Call and Webcast/Presentation Information
A conference call for investors and the professional investment community will be held at 10:00 a.m. (ET) today. On the conference call will be Thomas F. Motamed, Chairman and Chief Executive Officer of CNA Financial Corporation, and other members of senior management. Participants can access the call by dialing (888) 287-5563, or for international callers, (719) 325-2494. The call will also be broadcast live on the internet at http://investor.cna.com or you may go to the investor relations pages of the CNA website (www.cna.com) for further details. A presentation will be posted and available on the CNA website and will provide additional insight into the results.
The call is available to the media, but questions will be restricted to investors and the professional investment community. A taped replay of the call will be available through November 4, 2013 by dialing (888) 203-1112, or for international callers, (719) 457-0820. The replay passcode is 2231661. The replay will also be available on CNA's website. Financial supplement information related to the results is available on the investor relations pages of the CNA website or by contacting David Adams at (312) 822-2183.
Definition of Reported Segments
CNA Specialty provides professional and management liability, surety and other property and casualty coverages and services, which include warranty and service contracts. Specialty products are sold both domestically and abroad, through brokers, independent agencies and managing general underwriters.
CNA Commercial works with an independent agency distribution system and brokers to market a broad range of property and casualty insurance products and services to small, middle-market and large businesses and organizations domestically and abroad.
Hardy, a specialized Lloyd's of London underwriter, was acquired on July 2, 2012. Through Lloyd's Syndicate 382, Hardy underwrites primarily short-tail exposures in marine and aviation, non-marine property, specialty lines and property treaty reinsurance.
Life & Group Non-Core primarily includes the results of the life and group lines of business that are in run-off. Net earned premiums relate primarily to the individual and group long term care businesses.
Corporate & Other Non-Core 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.
Financial Measures
In the evaluation of the results of CNA Specialty, CNA Commercial and Hardy, management utilizes 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 (GAAP). 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.
This press release may also reference or contain financial measures that are not in accordance with GAAP.  For reconciliations of non-GAAP measures to the most comparable GAAP measures, please refer herein and/or to CNA's most recent 10-K on file with the Securities and Exchange Commission, as well as the financial supplement, available at www.cna.com.
Forward-Looking Statement
This press release may include statements which relate to anticipated future events (forward-looking statements) rather than actual present conditions or historical events.  These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and generally include words such as “believes”, “expects”, “intends”, “anticipates”, “estimates” and similar expressions.  Forward-looking statements, by their nature, are subject to a variety of inherent risks and uncertainties that could cause actual results to differ materially from the results projected.  Many of these risks and uncertainties cannot be controlled by CNA. For a detailed description of these risks and uncertainties affecting CNA, please refer to CNA's most recent 10-K on file with the Securities and Exchange Commission available at www.cna.com.
Any forward-looking statements made in this press release are made by CNA as of the date of this press release.  Further, CNA does not have any obligation to update or revise any forward-looking statement contained in this press release, even if CNA's expectations or any related events, conditions or circumstances change.

# # #


8
 EX-99.2 3 q313exhibit992.htm EX-99.2 Q3-13 Exhibit 99.2





 
 
 
 
 




CNA Financial Corporation
Supplemental Financial Information


September 30, 2013



 
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..................................................................................................................................................................................................
Components of Income (Loss), Per Share Data and Return on Equity.............................................................................................................................
Selected Balance Sheets Data and Statements of Cash Flows Data...............................................................................................................................
Property & Casualty - Results of Operations
 
Property & Casualty...........................................................................................................................................................................................................
CNA Specialty....................................................................................................................................................................................................................
CNA Commercial...............................................................................................................................................................................................................
Hardy.................................................................................................................................................................................................................................
Non-Core - Results of Operations
 
Life & Group Non-Core......................................................................................................................................................................................................
Corporate & Other Non-Core.............................................................................................................................................................................................
Investment Information
 
Investment Summary - Consolidated................................................................................................................................................................................
Investment Summary - Property & Casualty and Corporate & Other Non-Core...............................................................................................................
Investment Summary - Life & Group Non-Core.................................................................................................................................................................
Investments - Fixed Maturity Securities by Credit Rating..................................................................................................................................................
Components of Pretax Net Investment Income.................................................................................................................................................................
Other
 
Claim & Claim Adjustment Expense Reserve Rollforward................................................................................................................................................
Net Carried Life & Group Non-Core Policyholder Reserves..............................................................................................................................................
Statutory Data - Preliminary...............................................................................................................................................................................................
Definitions and Presentation..............................................................................................................................................................................................






Statements of Operations
Periods ended September 30
Three Months
 
 
Nine Months
 
(In millions)
2013
 
2012
 
Change
 
 
2013
 
2012
 
Change
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earned premiums
$
1,825

 
$
1,781

 
2

%
 
$
5,389

 
$
5,098

 
6

%
Net investment income
597

 
601

 
(1
)
 
 
1,808

 
1,719

 
5

 
Net realized investment gains (losses):
 
 
 
 
 
 
 
 
 
 
 
 
 
Other-than-temporary impairment (OTTI) losses
(15
)
 
(62
)
 


 
 
(49
)
 
(89
)
 

 
Portion of OTTI recognized in Other comprehensive income (loss)
(2
)
 
(2
)
 


 
 
(2
)
 
(25
)
 


 
Net OTTI losses recognized in earnings
(17
)
 
(64
)
 


 
 
(51
)
 
(114
)
 


 
Other net realized investment gains (losses)
21

 
72

 


 
 
69

 
180

 


 
Net realized investment gains (losses)
4

 
8

 


 
 
18

 
66

 


 
Other revenues
78

 
76

 


 
 
285

 
230

 

 
Total revenues
2,504

 
2,466

 
2

 
 
7,500

 
7,113

 
5

 
Claims, Benefits and Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Insurance claims and policyholders' benefits
1,414

 
1,435

 

 
 
4,364

 
4,164

 


 
Amortization of deferred acquisition costs
341

 
333

 

 
 
1,004

 
937

 


 
Other operating expenses
332

 
341

 

 
 
993

 
976

 


 
Interest
42

 
43

 

 
 
125

 
128

 


 
Total claims, benefits and expenses
2,129

 
2,152

 
1

 
 
6,486

 
6,205

 
(5
)
 
Income (loss) before income tax
375

 
314

 
19

 
 
1,014

 
908

 
12

 
Income tax (expense) benefit
(103
)
 
(93
)
 


 
 
(298
)
 
(271
)
 


 
Net income (loss)
$
272

 
$
221

 
23

%
 
$
716

 
$
637

 
12

%



1



Components of Income (Loss), Per Share Data and Return on Equity
Periods ended September 30
Three Months
 
Nine Months
 
(In millions, except per share data)
2013
 
2012
 
2013
 
2012
 
Components of Income (Loss)
 
 
 
 
 
 
 
 
Net operating income (loss)
$
269

 
$
216

 
$
704

 
$
594

 
Net realized investment gains (losses)
3

 
5

 
12

 
43

 
Income (loss)
$
272

 
$
221

 
$
716

 
$
637

 
 
 
 
 
 
 
 
 
 
Diluted Earnings (Loss) Per Common Share
 
 
 
 
 
 
 
 
Net operating income (loss)
$
1.00

 
$
0.80

 
$
2.61

 
$
2.20

 
Net realized investment gains (losses)
0.01

 
0.02

 
0.04

 
0.16

 
Diluted earnings (loss) per share
$
1.01

 
$
0.82


$
2.65


$
2.36

 
 
 
 
 
 
 
 
 
 
Weighted Average Outstanding Common Stock and Common Stock Equivalents
 
 
 
 
 
 
 
 
Basic
269.7

 
269.4

 
269.6

 
269.4

 
Diluted
270.2

 
269.8

 
270.1

 
269.8

 
 
 
 
 
 
 
 
 
 
Return on Equity
 
 
 
 
 
 
 
 
Net income (loss) (1)
9.0

%
7.1

%
7.8

%
7.0

%
Net operating income (loss) (2)
9.0

 
7.5

 
8.0

 
7.0

 
(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.


2



Selected Balance Sheets Data and Statements of Cash Flows Data
(In millions, except per share data)
September 30, 2013
 
December 31, 2012
Total assets
$
57,187

 
$
58,522

Insurance reserves
38,590

 
40,005

Debt
2,559

 
2,570

Total liabilities
45,034

 
46,208

Accumulated other comprehensive income (loss) (1)
113

 
831

Total stockholders' equity
12,153

 
12,314

 
 
 
 
Book value per common share
$
45.06

 
$
45.71

Book value per common share excluding AOCI
$
44.64

 
$
42.62

 
 
 
 
Outstanding shares of common stock (in millions of shares)
269.7

 
269.4

Three months ended September 30

2013
 
2012
Net cash flows provided (used) by operating activities
$
352

 
$
375

Net cash flows provided (used) by investing activities
(218
)
 
(237
)
Net cash flows provided (used) by financing activities
(73
)
 
(112
)
Net cash flows provided (used) by operating, investing and financing activities
$
61

 
$
26

Nine months ended September 30

2013
 
2012
Net cash flows provided (used) by operating activities
$
921

 
$
993

Net cash flows provided (used) by investing activities
(689
)
 
(747
)
Net cash flows provided (used) by financing activities
(200
)
 
(195
)
Net cash flows provided (used) by operating, investing and financing activities
$
32

 
$
51

(1) At September 30, 2013 and December 31, 2012, the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $723 million and $1,511 million. To the extent that unrealized gains on fixed income securities supporting certain products within the Life & Group Non-Core segment would result in a premium deficiency if realized, a related decrease in Deferred acquisition costs and/or increase in Insurance reserves are recorded, net of tax, as a reduction of net unrealized gains through Other comprehensive income (loss) (Shadow Adjustments).


3


Property & Casualty - Results of Operations
Periods ended September 30
Three Months
 
 
Nine Months
 
(In millions)
2013
 
2012
 
Change
 
 
2013
 
2012
 
Change
 
Gross written premiums
$
2,278

 
$
2,162

 
5

%
 
$
7,054

 
$
6,472

 
9

%
Net written premiums
1,619

 
1,590

 
2

 
 
5,115

 
4,805

 
6

 
Net earned premiums
1,686

 
1,642

 
3

 
 
4,972

 
4,679

 
6

 
Net investment income
379

 
391

 


 
 
1,163

 
1,094

 


 
Other revenues
78

 
69

 


 
 
276

 
202

 


 
Total operating revenues
2,143

 
2,102

 
2

 
 
6,411

 
5,975

 
7

 
Insurance claims and policyholders' benefits
1,031

 
1,076

 

 
 
3,270

 
3,155

 


 
Amortization of deferred acquisition costs
334

 
327

 


 
 
983

 
915

 


 
Other insurance related expenses
219

 
232

 


 
 
669

 
660

 


 
Other expenses
67

 
67

 


 
 
205

 
184

 


 
Total claims, benefits and expenses
1,651

 
1,702

 
3

 
 
5,127

 
4,914

 
(4
)
 
Operating income (loss) before income tax
492

 
400

 
23

 
 
1,284

 
1,061

 
21

 
Income tax (expense) benefit on operating income (loss)
(162
)
 
(136
)
 


 
 
(439
)
 
(363
)
 


 
Net operating income (loss)
$
330

 
$
264

 
25

%
 
$
845

 
$
698

 
21

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss & LAE
60.9

%
65.4

%
4.5

pts
 
65.6

%
67.3

%
1.7

pts
Acquisition expense
19.7

 
19.6

 
(0.1
)
 
 
19.5

 
19.1

 
(0.4
)
 
Underwriting expense
13.2

 
14.5

 
1.3

 
 
13.7

 
14.5

 
0.8

 
Expense
32.9

 
34.1

 
1.2

 
 
33.2

 
33.6

 
0.4

 
Dividend
0.2

 
0.2

 
—

 
 
0.2

 
0.2

 
—

 
Combined ratio
94.0

 
99.7

 
5.7

 
 
99.0

 
101.1

 
2.1

 
Combined ratio excluding catastrophes and development
95.9

%
100.7

%
4.8

pts
 
98.1

%
101.3

%
3.2

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pretax net accident year catastrophe losses incurred
$
42

 
$
27

 

 
 
$
146

 
$
123

 

 
Impact on loss & LAE ratio
2.5

%
1.6

%
(0.9
)
pts
 
3.0

%
2.6

%
(0.4
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pretax net prior year development and other (1): (favorable) / unfavorable
$
(71
)
 
$
(45
)
 


 
 
$
(110
)
 
$
(152
)
 


 
Impact on loss & LAE ratio
(4.4
)
%
(2.6
)
%
1.8

pts
 
(2.1
)
%
(2.8
)
%
(0.7
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rate
7

%
6

%
1

pts
 
7

%
5

%
2

pts
Retention
77

%
80

%
(3
)
pts
 
78

%
81

%
(3
)
pts
New Business (Specialty and Commercial only)
$
266

 
$
284

 
(6
)
%
 
$
858

 
$
921

 
(7
)
%
(1) Other includes the impacts of interest accretion and change in allowance for uncollectible reinsurance and deductible amounts.

4



CNA Specialty - Results of Operations
Periods ended September 30
Three Months
 
 
Nine Months
 
(In millions)
2013
 
2012
 
Change
 
 
2013
 
2012
 
Change
 
Gross written premiums
$
1,368

 
$
1,211

 
13

%
 
$
3,980

 
$
3,670

 
8

%
Net written premiums
778

 
723

 
8

 
 
2,337

 
2,206

 
6

 
Net earned premiums
768

 
738

 
4

 
 
2,237

 
2,163

 
3

 
Net investment income
159

 
159

 


 
 
480

 
446

 


 
Other revenues
67

 
58

 


 
 
190

 
171

 


 
Total operating revenues
994

 
955

 
4

 
 
2,907

 
2,780

 
5

 
Insurance claims and policyholders' benefits
430

 
461

 

 
 
1,349

 
1,376

 


 
Amortization of deferred acquisition costs
161

 
156

 


 
 
467

 
458

 


 
Other insurance related expenses
64

 
73

 


 
 
200

 
222

 


 
Other expenses
58

 
53

 


 
 
172

 
153

 


 
Total claims, benefits and expenses
713

 
743

 
4

 
 
2,188

 
2,209

 
1

 
Operating income (loss) before income tax
281

 
212

 
33

 
 
719

 
571

 
26

 
Income tax (expense) benefit on operating income (loss)
(94
)
 
(76
)
 


 
 
(244
)
 
(197
)
 


 
Net operating income (loss)
$
187

 
$
136

 
38

%
 
$
475

 
$
374

 
27

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss & LAE
55.6

%
62.5

%
6.9

pts
 
60.1

%
63.6

%
3.5

pts
Acquisition expense
19.8

 
20.1

 
0.3

 
 
19.6

 
20.0

 
0.4

 
Underwriting expense
9.6

 
10.9

 
1.3

 
 
10.2

 
11.5

 
1.3

 
Expense
29.4

 
31.0

 
1.6

 
 
29.8

 
31.5

 
1.7

 
Dividend
0.3

 
0.2

 
(0.1
)
 
 
0.2

 
—

 
(0.2
)
 
Combined ratio
85.3

 
93.7

 
8.4

 
 
90.1

 
95.1

 
5.0

 
Combined ratio excluding catastrophes and development
93.5

%
98.6

%
5.1

pts
 
95.5

%
98.9

%
3.4

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pretax net accident year catastrophe losses incurred
$
13

 
$
3

 


 
 
$
20

 
$
8

 


 
Impact on loss & LAE ratio
1.7

%
0.5

%
(1.2
)
pts
 
0.9

%
0.4

%
(0.5
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pretax net prior year development and other (1): (favorable) / unfavorable
$
(77
)
 
$
(40
)
 


 
 
$
(146
)
 
$
(95
)
 


 
Impact on loss & LAE ratio
(9.9
)
%
(5.4
)
%
4.5

pts
 
(6.3
)
%
(4.2
)
%
2.1

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rate
6

%
5

%
1

pts
 
6

%
4

%
2

pts
Retention
85

%
85

%
—

pts
 
85

%
86

%
(1
)
pts
New Business
$
105

 
$
88

 
19

%
 
$
304

 
$
297

 
2

%
(1) Other includes the impacts of interest accretion and change in allowance for uncollectible reinsurance and deductible amounts.


5



CNA Commercial - Results of Operations
Periods ended September 30
Three Months
 
 
Nine Months
 
(In millions)
2013
 
2012
 
Change
 
 
2013
 
2012
 
Change
 
Gross written premiums
$
805

 
$
864

 
(7
)
%
 
$
2,715

 
$
2,715

 
—

%
Net written premiums
760

 
811

 
(6
)
 
 
2,504

 
2,543

 
(2
)
 
Net earned premiums
832

 
840

 
(1
)
 
 
2,509

 
2,452

 
2

 
Net investment income
219

 
230

 


 
 
680

 
646

 


 
Other revenues
10

 
11

 


 
 
85

 
31

 


 
Total operating revenues
1,061

 
1,081

 
(2
)
 
 
3,274

 
3,129

 
5

 
Insurance claims and policyholders' benefits
566

 
594

 


 
 
1,814

 
1,758

 


 
Amortization of deferred acquisition costs
148

 
151

 


 
 
450

 
437

 


 
Other insurance related expenses
141

 
146

 


 
 
426

 
425

 


 
Other expenses
7

 
7

 


 
 
18

 
24

 


 
Total claims, benefits and expenses
862

 
898

 
4

 
 
2,708

 
2,644

 
(2
)
 
Operating income (loss) before income tax
199

 
183

 
9

 
 
566

 
485

 
17

 
Income tax (expense) benefit on operating income (loss)
(68
)
 
(58
)
 


 
 
(198
)
 
(164
)
 


 
Net operating income (loss)
$
131

 
$
125

 
5

%
 
$
368

 
$
321

 
15

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss & LAE
67.9

%
70.5

%
2.6

pts
 
72.1

%
71.3

%
(0.8
)
pts
Acquisition expense
18.9

 
18.2

 
(0.7
)
 
 
18.7

 
18.0

 
(0.7
)
 
Underwriting expense
15.9

 
17.0

 
1.1

 
 
16.2

 
17.2

 
1.0

 
Expense
34.8

 
35.2

 
0.4

 
 
34.9

 
35.2

 
0.3

 
Dividend
0.3

 
0.3

 
—

 
 
0.2

 
0.3

 
0.1

 
Combined ratio
103.0

 
106.0

 
3.0

 
 
107.2

 
106.8

 
(0.4
)
 
Combined ratio excluding catastrophes and development
99.3

%
102.9

%
3.6

pts
 
101.4

%
103.8

%
2.4

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pretax net accident year catastrophe losses incurred
$
24

 
$
24

 


 
 
$
121

 
$
115

 


 
Impact on loss & LAE ratio
2.9

%
2.8

%
(0.1
)
pts
 
4.8

%
4.7

%
(0.1
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pretax net prior year development and other (1): (favorable) / unfavorable
$
9

 
$
1

 


 
 
$
22

 
$
(51
)
 


 
Impact on loss & LAE ratio
0.8

%
0.3

%
(0.5
)
pts
 
1.0

%
(1.7
)
%
(2.7
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rate
8

%
7

%
1

pts
 
9

%
6

%
3

pts
Retention
71

%
77

%
(6
)
pts
 
74

%
77

%
(3
)
pts
New Business
$
161

 
$
196

 
(18
)
%
 
$
554

 
$
624

 
(11
)
%
(1) Other includes the impacts of interest accretion and change in allowance for uncollectible reinsurance and deductible amounts.


6



Hardy - Results of Operations
Periods ended September 30
Three Months
 
 
Nine Months
 
(In millions)
2013
 
2012
 
Change
 
 
2013
 
2012 (2)

 
Change
 
Gross written premiums
$
105

 
$
87

 
21

%
 
$
359

 
$
87

 
N/M

%
Net written premiums
81

 
56

 
45

 
 
274

 
56

 
N/M

 
Net earned premiums
86

 
64

 
34

 
 
226

 
64

 
N/M

 
Net investment income
1

 
2

 


 
 
3

 
2

 


 
Other revenues
1

 
—

 


 
 
1

 
—

 


 
Total operating revenues
88

 
66

 
33

 
 
230

 
66

 
N/M

 
Insurance claims and policyholders' benefits
35

 
21

 


 
 
107

 
21

 


 
Amortization of deferred acquisition costs
25

 
20

 


 
 
66

 
20

 


 
Other insurance related expenses
14

 
13

 


 
 
43

 
13

 


 
Other expenses
2

 
7

 


 
 
15

 
7

 


 
Total claims, benefits and expenses
76

 
61

 
(25
)
 
 
231

 
61

 
N/M

 
Operating income (loss) before income tax
12

 
5

 
140

 
 
(1
)
 
5

 
(120
)
 
Income tax (expense) benefit on operating income (loss)
—

 
(2
)
 


 
 
3

 
(2
)
 


 
Net operating income (loss)
$
12

 
$
3

 
N/M

%
 
$
2

 
$
3

 
(33
)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss & LAE
40.5

%
33.3

%
(7.2
)
pts
 
47.3

%
33.3

%
(14.0
)
pts
Acquisition expense
27.4

 
32.3

 
4.9

 
 
27.9

 
32.3

 
4.4

 
Underwriting expense
17.2

 
20.2

 
3.0

 
 
20.2

 
20.2

 
—

 
Expense
44.6

 
52.5

 
7.9

 
 
48.1

 
52.5

 
4.4

 
Dividend
—

 
—

 
—

 
 
—

 
—

 
—

 
Combined ratio
85.1

 
85.8

 
0.7

 
 
95.4

 
85.8

 
(9.6
)
 
Combined ratio excluding catastrophes and development
84.6

%
94.7

%
10.1

pts
 
89.1

%
94.7

%
5.6

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pretax net accident year catastrophe losses incurred
$
5

 
$
—

 


 
 
$
5

 
$
—

 


 
Impact on loss & LAE ratio
5.4

%
—

%
(5.4
)
pts
 
2.0

%
—

%
(2.0
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pretax net prior year development and other (1): (favorable) / unfavorable
$
(3
)
 
$
(6
)
 


 
 
$
14

 
$
(6
)
 


 
Impact on loss & LAE ratio
(4.9
)
%
(8.9
)
%
(4.0
)
pts
 
4.3

%
(8.9
)
%
(13.2
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rate
(5
)
%
1

%
(6
)
pts
 
(1
)
%
1

%
(2
)
pts
Retention
75

%
73

%
2

pts
 
71

%
73

%
(2
)
pts
 
 
 
 
 


 
 
 
 
 
 


 
(1) Other includes the impacts of interest accretion and change in allowance for uncollectible reinsurance and deductible amounts.
(2) Hardy was acquired on July 2, 2012.

7



Life & Group Non-Core - Results of Operations
Periods ended September 30
Three Months
 
 
Nine Months
 
(In millions)
2013
 
2012
 
Change
 
 
2013
 
2012
 
Change
 
Net earned premiums
$
140

 
$
141

 
(1
)
%
 
$
419

 
$
421

 
—

%
Net investment income
209

 
201

 
4

 
 
620

 
600

 
3

 
Other revenues
(3
)
 
1

 


 
 
2

 
15

 


 
Total operating revenues
346

 
343

 
1

 
 
1,041

 
1,036

 
—

 
Insurance claims and policyholders' benefits
379

 
351

 


 
 
1,088

 
1,014

 


 
Amortization of deferred acquisition costs
7

 
6

 


 
 
21

 
22

 


 
Other insurance related expenses
34

 
35

 


 
 
100

 
106

 


 
Other expenses
5

 
8

 


 
 
12

 
18

 


 
Total claims, benefits and expenses
425

 
400

 
(6
)
 
 
1,221

 
1,160

 
(5
)
 
Operating income (loss) before income tax
(79
)
 
(57
)
 
(39
)
 
 
(180
)
 
(124
)
 
(45
)
 
Income tax (expense) benefit on operating income (loss)
44

 
35

 


 
 
109

 
86

 


 
Net operating income (loss)
$
(35
)
 
$
(22
)
 
(59
)
%
 
$
(71
)
 
$
(38
)
 
(87
)
%


8



Corporate & Other Non-Core - Results of Operations
Periods ended September 30
Three Months
 
 
Nine Months
 
(In millions)
2013
 
2012
 
Change
 
 
2013
 
2012
 
Change
 
Net earned premiums
$
(1
)
 
$
(2
)
 


 
 
$
(2
)
 
$
(2
)
 


 
Net investment income
9

 
9

 


 
 
25

 
25

 


 
Other revenues
3

 
6

 


 
 
7

 
13

 


 
Total operating revenues
11

 
13

 
(15
)
%
 
30

 
36

 
(17
)
%
Insurance claims and policyholders' benefits
4

 
8

 


 
 
6

 
(5
)
 


 
Amortization of deferred acquisition costs
—

 
—

 


 
 
—

 
—

 


 
Other insurance related expenses
—

 
1

 


 
 
(1
)
 
—

 


 
Other expenses
49

 
41

 


 
 
133

 
136

 


 
Total claims, benefits and expenses
53

 
50

 
(6
)
 
 
138

 
131

 
(5
)
 
Operating income (loss) before income tax
(42
)
 
(37
)
 
(14
)
 
 
(108
)
 
(95
)
 
(14
)
 
Income tax (expense) benefit on operating income (loss)
16

 
11

 


 
 
38

 
29

 


 
Net operating income (loss)
$
(26
)
 
$
(26
)
 
—

%
 
$
(70
)
 
$
(66
)
 
(6
)
%


9


Investment Summary - Consolidated
 
September 30, 2013

June 30, 2013

December 31, 2012
(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
$
21,183

 
$
1,544

 
$
21,788

 
$
1,679

 
$
22,236

 
$
2,677

States, municipalities and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Tax-exempt
7,903

 
118

 
6,871

 
211

 
6,605

 
720

Taxable
3,556

 
321

 
3,868

 
430

 
4,178

 
691

Total states, municipalities and political subdivisions
11,459

 
439

 
10,739

 
641

 
10,783

 
1,411

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
RMBS
4,819

 
40

 
5,096

 
65

 
5,920

 
175

CMBS
2,017

 
75

 
2,009

 
68

 
1,822

 
130

Other ABS
956

 
14

 
947

 
14

 
952

 
23

Total asset-backed
7,792

 
129

 
8,052

 
147

 
8,694

 
328

U.S. Treasury and obligations of government-sponsored enterprises
173

 
7

 
176

 
9

 
182

 
10

Foreign government
561

 
14

 
544

 
16

 
613

 
25

Redeemable preferred stock
106

 
12

 
132

 
11

 
125

 
12

Total fixed maturity securities
41,274

 
2,145

 
41,431

 
2,503

 
42,633

 
4,463

Equities
199

 
10

 
199

 
14

 
249

 
21

Limited partnership investments
2,790

 
—

 
2,665

 
—

 
2,462

 
—

Other invested assets
55

 
—

 
36

 
—

 
59

 
—

Mortgage loans
440

 
—

 
437

 
—

 
401

 
—

Short term investments
1,475

 
(1
)
 
1,531

 
(1
)
 
1,832

 
(1
)
Total investments
$
46,233

 
$
2,154

 
$
46,299

 
$
2,516

 
$
47,636

 
$
4,483

 
 
 
 
 
 
 
 
 
 
 
 
Net receivable/(payable) on investment activity
$
(106
)
 
$
—

 
$
(186
)
 
$
—

 
$
(22
)
 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
Effective portfolio duration (in years)
6.8

 
 
 
6.7

 
 
 
6.5

 
 
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


10


Investment Summary - Property & Casualty and Corporate & Other Non-Core
 
September 30, 2013
 
June 30, 2013
 
December 31, 2012
(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
$
13,767

 
$
545

 
$
14,025

 
$
583

 
$
13,959

 
$
977

States, municipalities and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Tax-exempt
3,123

 
64

 
2,355

 
55

 
2,117

 
143

Taxable
1,797

 
142

 
2,038

 
189

 
2,233

 
316

Total states, municipalities and political subdivisions
4,920

 
206

 
4,393

 
244

 
4,350

 
459

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
RMBS
4,489

 
27

 
4,754

 
51

 
5,515

 
155

CMBS
1,741

 
58

 
1,737

 
50

 
1,572

 
105

Other ABS
851

 
14

 
836

 
14

 
915

 
21

Total asset-backed
7,081

 
99

 
7,327

 
115

 
8,002

 
281

U.S. Treasury and obligations of government-sponsored enterprises
150

 
—

 
153

 
2

 
159

 
2

Foreign government
556

 
13

 
539

 
15

 
608

 
23

Redeemable preferred stock
8

 
1

 
34

 
—

 
35

 
1

Total fixed maturity securities
26,482

 
864

 
26,471

 
959

 
27,113

 
1,743

Equities
76

 
13

 
73

 
11

 
90

 
17

Limited partnership investments
2,790

 
—

 
2,665

 
—

 
2,462

 
—

Other invested assets
55

 
—

 
36

 
—

 
59

 
—

Mortgage loans
421

 
—

 
418

 
—

 
382

 
—

Short term investments
1,416

 
(1
)
 
1,430

 
—

 
1,762

 
(1
)
Total investments
$
31,240

 
$
876

 
$
31,093

 
$
970

 
$
31,868

 
$
1,759

 
 
 
 
 
 
 
 
 
 
 
 
Net receivable/(payable) on investment activity
$
(95
)
 
$
—

 
$
(111
)
 
$
—

 
$
(22
)
 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
Effective portfolio duration (in years)
4.4

 
 
 
4.3

 
 
 
3.9

 
 
Weighted average rating of fixed maturity securities
A

 
 
 
A

 
 
 
A

 
 

11


Investment Summary - Life & Group Non-Core
 
September 30, 2013
 
June 30, 2013
 
December 31, 2012
(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
$
7,416

 
$
999

 
$
7,763

 
$
1,096

 
$
8,277

 
$
1,700

States, municipalities and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Tax-exempt
4,780

 
54

 
4,516

 
156

 
4,488

 
577

Taxable
1,759

 
179

 
1,830

 
241

 
1,945

 
375

Total states, municipalities and political subdivisions
6,539

 
233

 
6,346

 
397

 
6,433

 
952

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
RMBS
330

 
13

 
342

 
14

 
405

 
20

CMBS
276

 
17

 
272

 
18

 
250

 
25

Other ABS
105

 
—

 
111

 
—

 
37

 
2

Total asset-backed
711

 
30

 
725

 
32

 
692

 
47

U.S. Treasury and obligations of government-sponsored enterprises
23

 
7

 
23

 
7

 
23

 
8

Foreign government
5

 
1

 
5

 
1

 
5

 
2

Redeemable preferred stock
98

 
11

 
98

 
11

 
90

 
11

Total fixed maturity securities
14,792

 
1,281

 
14,960

 
1,544

 
15,520

 
2,720

Equities
123

 
(3
)
 
126

 
3

 
159

 
4

Limited partnership investments
—

 
—

 
—

 
—

 
—

 
—

Other invested assets
—

 
—

 
—

 
—

 
—

 
—

Mortgage loans
19

 
—

 
19

 
—

 
19

 
—

Short term investments
59

 
—

 
101

 
(1
)
 
70

 
—

Total investments
$
14,993

 
$
1,278

 
$
15,206

 
$
1,546

 
$
15,768

 
$
2,724

 
 
 
 
 
 
 
 
 
 
 
 
Net receivable/(payable) on investment activity
$
(11
)
 
$
—

 
$
(75
)
 
$
—

 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
Effective portfolio duration (in years)
11.4

 
 
 
11.2

 
 
 
11.3

 
 
Weighted average rating of fixed maturity securities
A

 
 
 
A

 
 
 
A

 
 

12


Investments - Fixed Maturity Securities by Credit Rating  

September 30, 2013
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
$
—

 
$
—

 
$
307

 
$
12

 
$
1,325

 
$
77

 
$
6,940

 
$
690

 
$
10,670

 
$
690

 
$
1,941

 
$
75

 
$
21,183

 
$
1,544

States, municipalities and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tax-exempt
—

 
—

 
1,078

 
43

 
4,489

 
71

 
2,274

 
8

 
29

 
(2
)
 
33

 
(2
)
 
7,903

 
118

Taxable
—

 
—

 
466

 
40

 
2,365

 
211

 
725

 
70

 
—

 
—

 
—

 
—

 
3,556

 
321

Total states, municipalities and political subdivisions
—

 
—

 
1,544

 
83

 
6,854

 
282

 
2,999

 
78

 
29

 
(2
)
 
33

 
(2
)
 
11,459

 
439

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RMBS
3,253

 
5

 
96

 
(2
)
 
143

 
(1
)
 
173

 
—

 
130

 
(5
)
 
1,024

 
43

 
4,819

 
40

CMBS
80

 
2

 
475

 
18

 
445

 
18

 
371

 
10

 
298

 
13

 
348

 
14

 
2,017

 
75

Other ABS
—

 
—

 
280

 
6

 
258

 
4

 
356

 
4

 
62

 
—

 
—

 
—

 
956

 
14

Total asset-backed
3,333

 
7

 
851

 
22

 
846

 
21

 
900

 
14

 
490

 
8

 
1,372

 
57

 
7,792

 
129

U.S. Treasury and obligations of government-sponsored enterprises
173

 
7

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
173

 
7

Foreign government
—

 
—

 
213

 
7

 
254

 
5

 
94

 
2

 
—

 
—

 
—

 
—

 
561

 
14

Redeemable preferred stock
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
64

 
12

 
42

 
—

 
106

 
12

Total fixed maturity securities
$
3,506

 
$
14

 
$
2,915

 
$
124

 
$
9,279

 
$
385

 
$
10,933

 
$
784

 
$
11,253

 
$
708

 
$
3,388

 
$
130

 
$
41,274

 
$
2,145

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of total fixed maturity securities
9
%
 
 
 
7
%
 
 
 
23
%
 
 
 
26
%
 
 
 
27
%
 
 
 
8
%
 
 
 
100
%
 
 
The ratings presented are based on a ratings methodology that takes into account ratings from Standard & Poor's and Moody's Investors Services, Inc. in that order of preference. If a security is not rated by these rating agencies, an internal rating is formulated. For securities with credit support from third party guarantees, the rating reflects the greater of the underlying rating of the issuer or the insured rating.


13


Components of Pretax Net Investment Income
 
Consolidated
 
Periods ended September 30
Three Months
 
Nine Months
 
(In millions)
2013
 
2012
 
2013
 
2012
 
Fixed maturity securities
$
504

 
$
507

 
$
1,501

 
$
1,528

 
Limited partnership investments
93

 
89

 
303

 
184

 
Other
—

 
5

 
4

 
7

 
Net investment income
$
597

 
$
601

 
$
1,808

 
$
1,719

 
Average amortized cost of fixed maturity securities portfolio
$
39,001

 
$
37,912

 
$
38,658

 
$
37,800

 
Effective income yield for the fixed maturity securities portfolio, pretax (1)
5.2

%
5.3

%
5.2

%
5.4

%
Effective income yield for the fixed maturity securities portfolio, after tax (1)
3.6

%
3.7

%
3.6

%
3.7

%
 
Property & Casualty and Corporate and Other Non-Core
 
Periods ended September 30
Three Months
 
Nine Months
 
(In millions)
2013
 
2012
 
2013
 
2012
 
Fixed maturity securities
$
294

 
$
306

 
$
879

 
$
927

 
Limited partnership investments
93

 
89

 
302

 
184

 
Other
1

 
5

 
7

 
8

 
Net investment income
$
388

 
$
400

 
$
1,188

 
$
1,119

 
Average amortized cost of fixed maturity securities portfolio
$
25,532

 
$
25,516

 
$
25,452

 
$
25,597

 
Effective income yield for the fixed maturity securities portfolio, pretax (1)
4.6

%
4.8

%
4.6

%
4.8

%
Effective income yield for the fixed maturity securities portfolio, after tax (1)
3.1

%
3.2

%
3.1

%
3.2

%
 
Life & Group Non-Core
 
Periods ended September 30
Three Months
 
Nine Months
 
(In millions)
2013
 
2012
 
2013
 
2012
 
Fixed maturity securities
$
210

 
$
201

 
$
622

 
$
601

 
Limited partnership investments
—

 
—

 
1

 
—

 
Other
(1
)
 
—

 
(3
)
 
(1
)
 
Net investment income
$
209

 
$
201

 
$
620

 
$
600

 
Average amortized cost of fixed maturity securities portfolio
$
13,469

 
$
12,396

 
$
13,206

 
$
12,203

 
Effective income yield for the fixed maturity securities portfolio, pretax (1)
6.2

%
6.5

%
6.3

%
6.6

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

%
4.7

%
4.5

%
4.7

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


14



Claim & Claim Adjustment Expense Reserve Rollforward
Three months ended September 30, 2013
(In millions)
CNA
Specialty
 
CNA
Commercial
 
Hardy
 
P&C Operations
 
Life & Group
Non-Core
 
Corporate & Other
Non-Core
 
Total Operations
Claim & claim adjustment expense reserves, beginning of period
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross
$
6,877

 
$
10,973

 
$
447

 
$
18,297

 
$
3,031

 
$
3,011

 
$
24,339

Ceded
686

 
1,100

 
197

 
1,983

 
477

 
2,524

 
4,984

Net
6,191

 
9,873


250


16,314


2,554


487


19,355

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net incurred claim & claim adjustment expenses
427

 
566

 
33

 
1,026

 
219

 
4

 
1,249

Net claim & claim adjustment expense payments
(391
)
 
(745
)
 
(42
)
 
(1,178
)
 
(156
)
 
(11
)
 
(1,345
)
Foreign currency translation adjustment and other
21

 
13

 
7

 
41

 
(19
)
 
1

 
23

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Claim & claim adjustment expense reserves, end of period
 
 
 
 
 
 
 
 
 
 
 
 
 
Net
6,248

 
9,707

 
248

 
16,203

 
2,598

 
481

 
19,282

Ceded
598

 
1,056

 
184

 
1,838

 
452

 
2,390

 
4,680

Gross
$
6,846

 
$
10,763

 
$
432

 
$
18,041

 
$
3,050

 
$
2,871

 
$
23,962

Nine months ended September 30, 2013
(In millions)
CNA
Specialty
 
CNA
Commercial
 
Hardy
 
P&C Operations
 
Life & Group
Non-Core
 
Corporate & Other
Non-Core
 
Total Operations
Claim & claim adjustment expense reserves, beginning of period
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross
$
6,748

 
$
11,326

 
$
521

 
$
18,595

 
$
3,006

 
$
3,162

 
$
24,763

Ceded
636

 
1,115

 
247

 
1,998

 
478

 
2,650

 
5,126

Net
6,112

 
10,211

 
274

 
16,597

 
2,528

 
512

 
19,637

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net incurred claim & claim adjustment expenses
1,344

 
1,810

 
105

 
3,259

 
614

 
6

 
3,879

Net claim & claim adjustment expense payments
(1,205
)
 
(2,301
)
 
(126
)
 
(3,632
)
 
(474
)
 
(37
)
 
(4,143
)
Foreign currency translation adjustment and other
(3
)
 
(13
)
 
(5
)
 
(21
)
 
(70
)
 
—

 
(91
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Claim & claim adjustment expense reserves, end of period
 
 
 
 
 
 
 
 
 
 
 
 
 
Net
6,248

 
9,707

 
248

 
16,203

 
2,598

 
481

 
19,282

Ceded
598

 
1,056

 
184

 
1,838

 
452

 
2,390

 
4,680

Gross
$
6,846

 
$
10,763

 
$
432

 
$
18,041

 
$
3,050

 
$
2,871

 
$
23,962


15


Net Carried Life & Group Non-Core Policyholder Reserves
September 30, 2013
 
 
 
 
 
 
 
 
 
(In millions)
Claim and claim adjustment expenses
 
Future policy benefits
 
Policyholders' funds
 
Separate account business
 
Total
Long term care
$
1,847

 
$
7,247

 
$
—

 
$
—

 
$
9,094

Payout annuities
620

 
1,993

 
—

 
—

 
2,613

Institutional markets
1

 
11

 
68

 
213

 
293

Other
39

 
4

 
—

 
—

 
43

Total net reserves
2,507

 
9,255

 
68

 
213

 
12,043

Shadow adjustments (1)
90

 
686

 
—

 
—

 
776

Ceded reserves
453

 
740

 
34

 
—

 
1,227

Total gross reserves
$
3,050

 
$
10,681

 
$
102


$
213

 
$
14,046

December 31, 2012
 
 
 
 
 
 
 
 
 
(In millions)
Claim and claim adjustment expenses
 
Future policy benefits
 
Policyholders' funds
 
Separate account business
 
Total
Long term care
$
1,683

 
$
6,879

 
$
—

 
$
—

 
$
8,562

Payout annuities
637

 
2,008

 
—

 
—

 
2,645

Institutional markets
1

 
12

 
100

 
312

 
425

Other
45

 
4

 
—

 
—

 
49

Total net reserves
2,366

 
8,903

 
100

 
312

 
11,681

Shadow adjustments (1)
162

 
1,812

 
—

 
—

 
1,974

Ceded reserves
478

 
760

 
34

 
—

 
1,272

Total gross reserves
$
3,006

 
$
11,475

 
$
134

 
$
312

 
$
14,927

(1) To the extent that unrealized gains on fixed income securities supporting long term care products and payout annuity contracts would result in a premium deficiency if those gains were realized, a related decrease in Deferred acquisition costs and/or increase in Insurance reserves are recorded, net of tax, as a reduction of net unrealized gains through Other comprehensive income (loss) (Shadow Adjustments). The Shadow adjustments presented above do not include $348 million and $369 million related to Deferred acquisition costs at September 30, 2013 and December 31, 2012.

16


Statutory Data - Preliminary
Periods Ended September 30
Three Months
 
 
Nine Months
 
Income Statements
(Preliminary)
2013
 
 
 
Change
 
 
(Preliminary)
2013
 
 
 
Change
 
(In millions)
 
2012
 
 
 
 
2012
 
 
Combined Continental Casualty Companies
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross written premiums
$
2,148

 
$
2,048

 
5

%
 
$
6,557

 
$
6,269

 
5

%
Net written premiums
1,518

 
1,514

 
—

 
 
4,713

 
4,648

 
1

 
 
 
 
 
 

 
 
 
 
 
 
 
 
Net earned premiums
1,421

 
1,394

 
2

 
 
4,210

 
4,071

 
3

 
Claim and claim adjustment expenses
1,212

 
1,228

 


 
 
3,655

 
3,502

 

 
Acquisition expenses
270

 
275

 


 
 
825

 
810

 

 
Underwriting expenses
208

 
227

 


 
 
625

 
661

 

 
Policyholders' dividends
2

 
2

 


 
 
6

 
5

 

 
Underwriting income (loss)
(271
)
 
(338
)
 
20

 
 
(901
)
 
(907
)
 
1

 
Net investment income
434

 
436

 


 
 
1,329

 
1,351

 


 
Other income (loss)
3

 
3

 


 
 
88

 
11

 


 
Income tax (expense) benefit
(18
)
 
10

 


 
 
(33
)
 
(38
)
 


 
Net realized gains (losses)
(61
)
 
(36
)
 


 
 
(96
)
 
16

 


 
Net income (loss)
$
87

 
$
75

 
16

%
 
$
387

 
$
433

 
(11
)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial Ratios
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss and LAE
85.3

%
88.1

%
 
 
 
86.8

%
86.0

%
 
 
Acquisition expense
17.8

 
18.2

 
 
 
 
17.5

 
17.4

 
 
 
Underwriting expense
13.7

 
14.9

 
 
 
 
13.3

 
14.2

 
 
 
Expense
31.5

 
33.1

 
 
 
 
30.8

 
31.6

 
 
 
Dividend
0.1

 
0.2

 
 
 
 
0.1

 
0.1

 
 
 
Combined ratio
116.9

%
121.4

%
 
 
 
117.7

%
117.7

%
 
 
SUPPLEMENTAL STATUTORY DATA
(Preliminary) September 30, 2013
 
December 31, 2012
 
 
(In millions)
 
 
Combined Continental Casualty Companies
 
 
 
 
 
Statutory surplus (1)
$
10,370

 
$
9,998

 
 
Life Company
 
 
 
 
 
Statutory surplus
$
588

 
$
556

 
 
(1) Represents the combined statutory surplus of Continental Casualty Company and its subsidiaries, including the life company, as determined in accordance with statutory accounting practices.

17


Definitions and Presentation


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

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P&C Operations includes CNA Specialty, CNA Commercial and Hardy. Hardy was acquired on July 2, 2012.

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Life & Group Non-Core segment primarily includes the results of the life and group lines of business that are in run-off.

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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.

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Management utilizes the net operating income financial measure to monitor the Company’s operations. Please refer to Note O to the Consolidated Financial Statements within the 2012 Form 10-K for further discussion of this measure.

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In the evaluation of the results of CNA Specialty, CNA Commercial and Hardy, management utilizes the loss ratio, the expense ratio, the dividend ratio and the combined ratio. These ratios are calculated using financial results prepared in accordance with accounting principles generally accepted in the United States of America. The loss ratio is the percentage of net incurred claim and claim adjustment expenses to net earned premiums. The expense ratio is the percentage of insurance underwriting and acquisition expenses, including the amortization of deferred acquisition costs, to net earned premiums. The dividend ratio is the ratio of policyholders' dividends incurred to net earned premiums. The combined ratio is the sum of the loss, expense and dividend ratios. The statutory expense ratio reported on page 17 is the percentage of acquisition and underwriting expenses to net written premiums in accordance with statutory accounting practices.

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The majority of our limited partnership investments employ hedge fund strategies that generate returns primarily through investing in the fixed income and equity markets. While the Company generally does not invest in highly leveraged partnerships, there are risks which may result in losses due to short-selling, derivatives or other speculative investment practices. The use of leverage increases volatility generated by the underlying investment strategies.

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Certain immaterial differences are due to rounding.

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N/M = Not Meaningful



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