SCHEDULE II. CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)

CNA Financial Corporation

Statements of Operations and Comprehensive Income



Years ended December 31
(In millions)	2013			2012			2011
Revenues
Net investment income	$	1		$	1		$	1
Net realized investment gains (losses)	4			4			(9		)
Other income	—			9			40
Total revenues	5			14			32
Expenses
Administrative and general	(7		)	1			3
Interest	165			164			167
Total expenses	158			165			170
Loss from operations before income taxes and equity in net income of subsidiaries	(153		)	(151		)	(138		)
Income tax benefit	22			144			46
Loss before equity in net income of subsidiaries	(131		)	(7		)	(92		)
Equity in net income of subsidiaries	1,068			635			704
Net income	937			628			612
Equity in other comprehensive income of subsidiaries	(389		)	351			143
Total Comprehensive Income	$	548		$	979		$	755

See accompanying Notes to Condensed Financial Information as well as the Consolidated Financial Statements and accompanying Notes.

CNA Financial Corporation

Balance Sheets



December 31
(In millions, except share data)	2013			2012
Assets
Investment in subsidiaries	$	14,708		$	14,427
Cash	1			—
Fixed maturity securities available-for-sale, at fair value (amortized cost of $1 and $2)	1			2
Short term investments	505			448
Amounts due from subsidiaries	3			2
Other assets	3			5
Total assets	$	15,221		$	14,884
Liabilities
Short term debt	$	549		$	3
Long term debt	1,981			2,527
Other liabilities	40			40
Total liabilities	2,570			2,570
Stockholders' Equity
Common stock ($2.50 par value; 500,000,000 shares authorized; 273,040,243 shares issued; 269,717,583 and 269,399,390 shares outstanding)	683			683
Additional paid-in capital	2,145			2,146
Retained earnings	9,495			8,774
Accumulated other comprehensive income	442			831
Treasury stock (3,322,660 and 3,640,853 shares), at cost	(91		)	(99		)
Notes receivable for the issuance of common stock	(23		)	(21		)
Total stockholders' equity	12,651			12,314
Total liabilities and stockholders' equity	$	15,221		$	14,884

See accompanying Notes to Condensed Financial Information as well as the Consolidated Financial Statements and accompanying Notes.

CNA Financial Corporation

Statements of Cash Flows



Years ended December 31
(In millions)	2013			2012			2011
Cash Flows from Operating Activities
Net income	$	937		$	628		$	612
Adjustments to reconcile net income to net cash flows provided (used) by operating activities:
Equity in net income of subsidiaries	(1,068		)	(635		)	(704		)
Dividends received from subsidiaries	400			450			—
Net realized investment (gains) losses	(4		)	(4		)	9
Other, net	8			19			55
Total adjustments	(664		)	(170		)	(640		)
Net cash flows provided (used) by operating activities	$	273		$	458		$	(28	)
Cash Flows from Investing Activities
Proceeds from fixed maturity securities	$	1		$	1		$	1
Change in short term investments	(57		)	(156		)	(77		)
Capital contributions to subsidiaries	(12		)	(399		)	(38		)
Return of capital from subsidiaries	—			—			6
Repayment of surplus note by subsidiary	—			250			250
Other, net	4			4			1
Net cash flows provided (used) by investing activities	$	(64	)	$	(300	)	$	143
Cash Flows from Financing Activities
Dividends paid to common stockholders	$	(216	)	$	(162	)	$	(108	)
Proceeds from the issuance of debt	—			—			396
Repayment of debt	(3		)	—			(409		)
Stock options exercised	2			1			5
Other, net	9			3			1
Net cash flows used by financing activities	$	(208	)	$	(158	)	$	(115	)
Net change in cash	$	1		$	—		$	—
Cash, beginning of year	—			—			—
Cash, end of year	$	1		$	—		$	—

See accompanying Notes to Condensed Financial Information as well as the Consolidated Financial Statements and accompanying Notes.

Notes to Condensed Financial Information

A. Basis of Presentation

The condensed financial information of CNA Financial Corporation (CNAF or the Parent Company) should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Item 8 of this Form 10-K. CNAF’s subsidiaries are accounted for using the equity method of accounting. Equity in net income of these subsidiaries is presented on the Condensed Statements of Operations as Equity in net income of subsidiaries. Loews owned approximately 90% of the outstanding common stock of CNAF as of December 31, 2013.

B. Commitments, Contingencies and Guarantees

In the course of selling business entities and assets to third parties, CNAF has agreed to indemnify purchasers for losses arising out of breaches of representation and warranties with respect to the business entities or assets being sold, including, in certain cases, losses arising from undisclosed liabilities or certain named litigation. Such indemnification agreements may include provisions that survive indefinitely. As of December 31, 2013, the aggregate amount of quantifiable indemnification agreements in effect for sales of business entities, assets and third-party loans was $255 million.

In addition, CNAF has agreed to provide indemnification to third-party purchasers for certain losses associated with sold business entities or assets that are not limited by a contractual monetary amount. As of December 31, 2013, CNAF had outstanding unlimited indemnifications in connection with the sales of certain of its business entities or assets that included tax liabilities arising prior to a purchaser’s ownership of an entity or asset, defects in title at the time of sale, employee claims arising prior to closing and in some cases losses arising from certain litigation and undisclosed liabilities. These indemnification agreements survive until the applicable statutes of limitation expire or until the agreed upon contract terms expire. As of December 31, 2013, CNAF has no recorded liabilities related to indemnification agreements. The Parent Company does not believe that any indemnity claim payments are likely.

In the normal course of business, CNAF has provided guarantees to holders of structured settlement annuities (SSA) provided by certain of its subsidiaries, which expire through 2120. CNAF would be required to remit SSA payments due to claimants if the primary obligor failed to perform on these contracts. The potential amount of future payments that CNAF could be required to pay under these guarantees are approximately $2 billion at December 31, 2013. The Parent Company does not believe that a payable is likely under these guarantees.