0000021175-14-000077.txt : 20141103 0000021175-14-000077.hdr.sgml : 20141103 20141103121640 ACCESSION NUMBER: 0000021175-14-000077 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20141103 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20141103 DATE AS OF CHANGE: 20141103 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: 141188541 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 q3148k.htm 8-K 2014 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) November 3, 2014

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 November 3, 2014, 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 2014. 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:  November 3, 2014
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 November 3, 2014, providing information on the third quarter 2014 results of operations.
 
 
 
 
CNA Financial Corporation financial supplement, posted on its website November 3, 2014, providing supplemental financial information on the third quarter 2014.


4
 EX-99.1 2 q314exhibit991.htm EXHIBIT Q3-14 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 2014 RESULTS
•
NET OPERATING INCOME OF $182 MILLION, INCLUDING $34 MILLION CHARGE RELATED TO THE PREVIOUSLY ANNOUNCED ANNUITY REINSURANCE TRANSACTION
•
NOI OF $0.68 PER SHARE; ADJUSTED NOI OF $0.80 PER SHARE
•
P&C COMBINED RATIO EX CATS AND DEVELOPMENT OF 96.2%; 96.6% YEAR TO DATE
•
BOOK VALUE PER SHARE OF $48.28
•
QUARTERLY DIVIDEND OF $0.25 PER SHARE
CHICAGO, November 3, 2014 --- CNA Financial Corporation (NYSE: CNA) today announced third quarter 2014 results, which included net operating income of $182 million, or $0.68 per share, and net income of $213 million, or $0.79 per share. Property & Casualty Operations' combined ratio for the third quarter was 96.1%, or 96.2% excluding catastrophes and development.
CNA Financial also declared a quarterly dividend of $0.25 per share, payable December 3, 2014 to stockholders of record on November 17, 2014.
 
Results for the Three Months Ended September 30 (a)
 
Results for the Nine Months Ended September 30 (a)
($ millions, except per share data)
2014
 
2013
 
2014
 
2013
Net operating income
$
182

 
$
271

 
$
644

 
$
695

Income (loss) from discontinued operations, net of tax
4

 
1

 
(197
)
 
14

Net income
213

 
272

 
493

 
716

 
 
 
 
 
 
 
 
Net operating income per diluted share
$
0.68

 
$
1.00

 
$
2.38

 
$
2.57

Net income per diluted share
0.79

 
1.01

 
1.82

 
2.65

 
 
 
 
 
 
 
 
 
September 30, 2014
 
December 31, 2013
Book value per share
$48.28
 
$46.91
Book value per share excluding AOCI
$45.42
 
$45.26

(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, 2013 for further discussion of this measure.


1

Property & Casualty Operations' net operating income was $241 million for the third quarter of 2014 as compared with $330 million in the prior year quarter. This decline is due to lower net investment income and lower favorable net prior year development. After-tax catastrophe losses were $10 million for the three months ended September 30, 2014, primarily due to U.S. weather-related events, as compared with $28 million for the same period in 2013.
Our non-core segments produced a net operating loss of $59 million in the third quarter of 2014, unchanged from the prior year quarter. The current year period included a $34 million after-tax loss on an annuity coinsurance transaction related to the August 1, 2014 sale of Continental Assurance Company, as well as improved results in our long term care business and a reduction in the allowance for uncollectible reinsurance receivables.
After-tax net investment income decreased to $346 million for the third quarter of 2014 as compared with $386 million in the prior year quarter, reflecting reduced limited partnership returns.
Net realized investment gains increased $27 million for the third quarter of 2014 as compared with the prior year quarter, driven by higher net realized investment gains on sales of securities.

Property & Casualty Operations
"Our year to date underlying loss ratios for both Specialty and Commercial continue to show improvement compared with full year 2013," said Thomas F. Motamed, Chairman and Chief Executive Officer of CNA Financial Corporation. "We remain focused on our strategy to provide our customers deep, industry-focused expertise and to drive underwriting margin improvement while accepting the tradeoff of growth."


 
Results for the Three Months Ended September 30
 
Results for the Nine Months Ended September 30
($ millions)
2014
 
2013
 
2014

2013
Net written premiums
$
1,560

 
 
$
1,619

 
 
$
4,981



$
5,115


NWP Growth (% year over year)
(4
)
%
 
2

%
 
(3
)
%

6

%
Net operating income
$
241

 
 
$
330

 
 
$
696



$
845


 
 
 
 
 
 
 







Loss ratio excluding catastrophes and development
62.9

%
 
62.8

%
 
63.2

%

64.7

%
Effect of catastrophe impacts
1.0

 
 
2.5

 
 
3.0



3.0


Effect of development-related items
(1.1
)
 
 
(4.4
)
 
 
0.1



(2.1
)

Loss ratio
62.8

%
 
60.9

%
 
66.3

%

65.6

%
 
 
 
 
 
 
 







Combined ratio
96.1

%
 
94.0

%
 
99.7

%

99.0

%
Combined ratio excluding catastrophes and development
96.2

%
 
95.9

%
 
96.6

%

98.1

%


2

Business Operating Highlights
CNA Specialty
 
Results for the Three Months Ended September 30
 
Results for the Nine Months Ended September 30
($ millions)
2014

2013
 
2014
 
2013
Net written premiums
$
766



$
778


 
$
2,304

 
 
$
2,337

 
NWP Growth (% year over year)
(2
)
%

8

%
 
(1
)
%
 
6

%
Net operating income
$
192



$
187


 
$
508

 
 
$
475

 
 







 
 
 
 
 
 
Loss ratio excluding catastrophes and development
61.6

%

63.8

%
 
62.6

%
 
65.5

%
Effect of catastrophe impacts
0.6



1.7


 
0.9

 
 
0.9

 
Effect of development-related items
(10.8
)


(9.9
)

 
(6.4
)
 
 
(6.3
)
 
Loss ratio
51.4

%

55.6

%
 
57.1

%
 
60.1

%
 







 
 
 
 
 
 
Combined ratio
81.6

%

85.3

%
 
87.4

%
 
90.1

%
Combined ratio excluding catastrophes and development
91.8

%

93.5

%
 
92.9

%
 
95.5

%
•
Net operating income increased $5 million for the three months ended September 30, 2014 as compared with the same period in 2013. This increase was driven by improved underwriting results, partially offset by lower net investment income.
•
The combined ratio decreased 3.7 points for the three months ended September 30, 2014 as compared with the same period in 2013. The loss ratio decreased 4.2 points, primarily due to an improved current accident year loss ratio, including lower catastrophe losses, and increased favorable net prior year development. Catastrophe losses were $5 million, or 0.6 points of the loss ratio, for the three months ended September 30, 2014, as compared with $13 million, or 1.7 points of the loss ratio, for the three months ended September 30, 2013.
•
Net written premiums for the three months ended September 30, 2014 were down slightly as compared with the same period in 2013. Average rate increased 3% for the three months ended September 30, 2014, as compared with an increase of 6% for the three months ended September 30, 2013 for the policies that renewed in each period. Retention of 84% and 85% was achieved in each respective period.

3

CNA Commercial
 
Results for the Three Months Ended September 30
 
Results for the Nine Months Ended September 30
($ millions)
2014

2013
 
2014
 
2013
Net written premiums
$
709



$
760


 
$
2,387

 
 
$
2,504

 
NWP Growth (% year over year)
(7
)
%

(6)

%
 
(5
)
%
 
(2
)
%
Net operating income
$
64



$
131


 
$
201

 
 
$
368

 
 







 
 
 
 
 
 
Loss ratio excluding catastrophes and development
64.0

%

64.2

%
 
65.2

%
 
66.3

%
Effect of catastrophe impacts
1.9



2.9


 
5.0

 
 
4.8

 
Effect of development-related items
7.5



0.8


 
6.2

 
 
1.0

 
Loss ratio
73.4

%

67.9

%
 
76.4

%
 
72.1

%
 







 
 
 
 
 
 
Combined ratio
108.3

%

103.0

%
 
111.0

%
 
107.2

%
Combined ratio excluding catastrophes and development
98.9

%

99.3

%
 
99.8

%
 
101.4

%
•
Net operating income decreased $67 million for the three months ended September 30, 2014 as compared with the same period in 2013. This decrease was due to lower net investment income and higher unfavorable net prior year development.
•
The combined ratio increased 5.3 points for the three months ended September 30, 2014 as compared with the same period in 2013. The loss ratio increased 5.5 points, primarily due to higher unfavorable net prior year development. Catastrophe losses were $15 million, or 1.9 points of the loss ratio, for the three months ended September 30, 2014, as compared with $24 million, or 2.9 points of the loss ratio, for the three months ended September 30, 2013.
•
Net written premiums decreased $51 million for the three months ended September 30, 2014 as compared with the same period in 2013, driven by a decreased level of new business and underwriting actions taken in certain business classes, partially offset by continued rate increases. Average rate increased 4% for the three months ended September 30, 2014, as compared with an increase of 8% for the three months ended September 30, 2013 for the policies that renewed in each period. Retention of 74% and 72% was achieved in each respective period.

4

Hardy
 
Results for the Three Months Ended September 30
 
Results for the Nine Months Ended September 30
($ millions)
2014

2013
 
2014
 
2013
Net written premiums
$
85



$
81


 
$
290

 
 
$
274

 
NWP growth (% year over year)
5

%

45

%
 
6

%
 
N/M

 
Net operating income (loss)
$
(15
)


$
12


 
$
(13
)
 
 
$
2

 
 






 
 
 
 
 
 
Loss ratio excluding catastrophes and development
65.0

%

40.0

%
 
51.7

%
 
41.0

%
Effect of catastrophe impacts
(3.4
)


5.4


 
1.4

 
 
2.0

 
Effect of development-related items
4.1



(4.9
)

 
—

 
 
4.3

 
Loss ratio
65.7

%

40.5

%
 
53.1

%
 
47.3

%
 







 
 
 
 
 
 
Combined ratio
112.9

%

85.1

%
 
100.5

%
 
95.4

%
Combined ratio excluding catastrophes and development
112.2

%

84.6

%
 
99.1

%
 
89.1

%
•
Net operating results decreased $27 million for the three months ended September 30, 2014 as compared with the same period in 2013, primarily due to underwriting results.
•
The combined ratio increased 27.8 points for the three months ended September 30, 2014 as compared with the same period in 2013. The loss ratio increased 25.2 points driven by several large aviation losses and higher than expected underlying losses in the current accident year. The expense ratio increased 2.6 points driven by costs related to moving to a service company operating model, including real estate costs, as well as the effect of foreign currency exchange rates.
•
Net written premiums for the three months ended September 30, 2014 were largely consistent with the same period in 2013. Average rate decreased 6% for the three months ended September 30, 2014, as compared with a decrease of 4% for the three months ended September 30, 2013 for the policies that renewed in each period. Retention of 67% and 76% was achieved in each respective period.


5

Life & Group Non-Core
 
Results for the Three Months Ended September 30
 
Results for the Nine Months Ended September 30
($ millions)
2014


2013

 
2014
 
 
2013
 
Operating revenues
$
313



$
303


 
$
948

 
 
$
912

 
Total claims, benefits and expenses
395



383


 
1,081

 
 
1,108

 
Net operating income (loss)
(42
)


(33
)

 
(35
)
 
 
(80
)
 
•
Net operating loss increased $9 million for the three months ended September 30, 2014 as compared with the same period in 2013, primarily driven by a $34 million after-tax loss on a coinsurance transaction, partially offset by improved results in our long term care business. Our long term care business was favorably affected by morbidity, rate increase actions and higher net investment income.
Corporate & Other Non-Core
 
Results for the Three Months Ended September 30
 
Results for the Nine Months Ended September 30
($ millions)
2014


2013

 
2014
 
 
2013
 
Operating revenues
$
6



$
11


 
$
22

 
 
$
30

 
Total claims, benefits and expenses
35



53


 
50

 
 
138

 
Net operating income (loss)
(17
)


(26
)

 
(17
)
 
 
(70
)
 
•
Net results improved $9 million for the three months ended September 30, 2014 as compared with the same period in 2013, primarily driven by a reduction in the allowance for uncollectible reinsurance receivables arising from a change in estimate. Results also included higher interest expense from a new debt issuance in February 2014, in advance of the December 2014 maturity of our existing debt.



6

Net Operating Income (Loss)
 
Results for the Three Months Ended September 30
 
Results for the Nine Months Ended September 30
($ millions)
2014

2013
 
2014
 
2013
CNA Specialty
$
192


$
187

 
$
508

 
$
475

CNA Commercial
64


131

 
201

 
368

Hardy
(15
)

12

 
(13
)
 
2

Total P&C Operations
241


330

 
696

 
845

Life & Group Non-Core
(42
)

(33
)
 
(35
)
 
(80
)
Corporate & Other Non-Core
(17
)

(26
)
 
(17
)
 
(70
)
Total
$
182


$
271

 
$
644

 
$
695

Net Income (Loss)
 
Results for the Three Months Ended September 30
 
Results for the Nine Months Ended September 30
($ millions)
2014

2013
 
2014
 
2013
CNA Specialty
$
194


$
188

 
$
515

 
$
474

CNA Commercial
68


132

 
207

 
364

Hardy
(15
)

13

 
(14
)
 
4

Total P&C Operations
247


333

 
708

 
842

Life & Group Non-Core
(21
)

(36
)
 
(7
)
 
(76
)
Corporate & Other Non-Core
(17
)

(26
)
 
(11
)
 
(64
)
Discontinued Operations
4


1

 
(197
)
 
14

Total
$
213


$
272

 
$
493

 
$
716

Property & Casualty Operations Gross Written Premiums
 
Results for the Three Months Ended September 30
 
Results for the Nine Months Ended September 30
($ millions)
2014

2013
 
2014
 
2013
CNA Specialty
$
1,472


$
1,368

 
$
4,347

 
$
3,980

CNA Commercial
750


805

 
2,515

 
2,715

Hardy
98


105

 
362

 
359

Total P&C Operations
$
2,320


$
2,278

 
$
7,224

 
$
7,054

Property & Casualty Operations Net Written Premiums
 
Results for the Three Months Ended September 30
 
Results for the Nine Months Ended September 30
($ millions)
2014

2013
 
2014
 
2013
CNA Specialty
$
766


$
778

 
$
2,304

 
$
2,337

CNA Commercial
709


760

 
2,387

 
2,504

Hardy
85


81

 
290

 
274

Total P&C Operations
$
1,560


$
1,619

 
$
4,981

 
$
5,115


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) 587-0615, or for international callers, (719) 457-2645. 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 10, 2014 by dialing (888) 203-1112, or for international callers, (719) 457-0820. The replay passcode is 6028059. 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, through Lloyd's Syndicate 382, 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 individual and group long term care business, as well as closed blocks of structured settlement liabilities, group accident and health reinsurance and life settlement contracts.
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 q314exhibit992.htm EXHIBIT Q3-14 Exhibit 99.2





 
 
 
 
 



            
CNA Financial Corporation
Supplemental Financial Information


September 30, 2014



 
This report is for informational purposes only and includes consolidated financial statements and financial exhibits that are unaudited. This report should be read in conjunction with documents filed with the U.S. Securities and Exchange Commission, including the most recent Annual Report on Form 10-K.

 
 
 
 
 



Table of Contents


 
Page
Consolidated Results
 
Statements of Operations..................................................................................................................................................................................................
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 Net Investment Income............................................................................................................................................................................
Other
 
Claim & Claim Adjustment Expense Reserve Rollforward................................................................................................................................................
Life & Group Non-Core Policyholder Reserves.................................................................................................................................................................
Statutory Data - Combined Continental Casualty Companies - Preliminary......................................................................................................................
Definitions and Presentation..............................................................................................................................................................................................





Statements of Operations
Periods ended September 30
Three Months
 
 
Nine Months
 
(In millions)
2014

2013

Change

 
2014
 
2013
 
Change
 
Revenues:






 
 
 
 
 
 
 
Net earned premiums
$
1,810


$
1,825


(1
)
%
 
$
5,427

 
$
5,389

 
1

%
Net investment income
480


555


(14
)

 
1,556

 
1,680

 
(7
)
 
Net realized investment gains (losses):







 
 
 
 
 
 
 
Other-than-temporary impairment (OTTI) losses
(10
)

(15
)




 
(17
)
 
(49
)
 
 
 
Portion of OTTI recognized in Other comprehensive income (loss)
—


(1
)




 
—

 
(1
)
 
 
 
Net OTTI losses recognized in earnings
(10
)

(16
)




 
(17
)
 
(50
)
 
 
 
Other net realized investment gains (losses)
47


17





 
86

 
60

 
 
 
Net realized investment gains (losses)
37


1





 
69

 
10

 
 
 
Other revenues
84


77





 
262

 
284

 
 
 
Total revenues
2,411


2,458


(2
)

 
7,314

 
7,363

 
(1
)
 
Claims, Benefits and Expenses:







 
 
 
 
 
 
 
Insurance claims and policyholders' benefits
1,354


1,378




 
4,241

 
4,259

 
 
 
Amortization of deferred acquisition costs
332


341




 
996

 
1,004

 
 
 
Other operating expenses
384


326




 
984

 
985

 
 
 
Interest
48


42




 
138

 
125

 
 
 
Total claims, benefits and expenses
2,118


2,087


(1
)

 
6,359

 
6,373

 
—

 
Income (loss) from continuing operations before income tax
293


371


(21
)

 
955

 
990

 
(4
)
 
Income tax (expense) benefit
(84
)

(100
)




 
(265
)
 
(288
)
 
 
 
Income (loss) from continuing operations
209


271


(23
)

 
690

 
702

 
(2
)
 
Income (loss) from discontinued operations, net of tax
4


1





 
(197
)
 
14

 
 
 
Net income (loss)
$
213


$
272


(22
)
%
 
$
493

 
$
716

 
(31
)
%


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)
2014

2013

 
2014
 
2013
 
Components of Income (Loss)




 
 
 
 
 
Net operating income
$
182


$
271


 
$
644

 
$
695

 
Net realized investment gains
27


—


 
46

 
7

 
Income from continuing operations
209


271


 
690

 
702

 
Income (loss) from discontinued operations
4


1


 
(197
)
 
14

 
Net income
$
213


$
272


 
$
493

 
$
716

 
 




 
 
 
 
 
Diluted Earnings (Loss) Per Common Share




 
 
 
 
 
Net operating income (loss)
$
0.68


$
1.00


 
$
2.38

 
$
2.57

 
Net realized investment gains (losses)
0.09


—


 
0.17

 
0.03

 
Income (loss) from continuing operations
0.77


1.00


 
2.55

 
2.60

 
Income (loss) from discontinued operations
0.02


0.01


 
(0.73
)
 
0.05

 
Diluted earnings (loss) per share
$
0.79


$
1.01


 
$
1.82

 
$
2.65

 
 




 
 
 
 
 
Weighted Average Outstanding Common Stock and Common Stock Equivalents




 
 
 
 
 
Basic
269.9


269.7


 
269.9

 
269.6

 
Diluted
270.6


270.2


 
270.6

 
270.1

 
 




 
 
 
 
 
Return on Equity




 
 
 
 
 
Net income (loss) (1)
6.5

%
9.0

%
 
5.1

%
7.8

%
Net operating income (loss) (2)
6.0


9.1


 
7.0

 
7.9

 
(1) Annualized net income (loss) divided by the average stockholders' equity including accumulated other comprehensive income (loss) (AOCI) for the period. Average equity including AOCI is calculated using a simple average of the beginning and ending balances for the period.

(2) Annualized net operating income (loss) divided by the average stockholders' equity excluding AOCI for the period. Average equity excluding AOCI is calculated using a simple average of the beginning and ending balances for the period.


2


Selected Balance Sheets Data and Statements of Cash Flows Data
(In millions, except per share data)
September 30, 2014
 
December 31, 2013
Total assets
$
55,731

 
$
57,194

Insurance reserves
36,095

 
38,394

Debt
3,108

 
2,560

Total liabilities
42,697

 
44,543

Accumulated other comprehensive income (loss) (1)
773

 
442

Total stockholders' equity
13,034

 
12,651

 
 
 
 
Book value per common share
$
48.28

 
$
46.91

Book value per common share excluding AOCI
$
45.42

 
$
45.26

 
 
 
 
Outstanding shares of common stock (in millions of shares)
269.9

 
269.7

Three months ended September 30
2014
 
2013
Net cash flows provided (used) by operating activities
$
460

 
$
352

Net cash flows provided (used) by investing activities
(353
)
 
(218
)
Net cash flows provided (used) by financing activities
(68
)
 
(73
)
Net cash flows provided (used) by operating, investing and financing activities
$
39

 
$
61

Nine months ended September 30
2014

2013
Net cash flows provided (used) by operating activities
$
1,047


$
921

Net cash flows provided (used) by investing activities
(1,087
)

(689
)
Net cash flows provided (used) by financing activities
95


(200
)
Net cash flows provided (used) by operating, investing and financing activities
$
55


$
32

(1) At September 30, 2014 and December 31, 2013, the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $972 million and $532 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)
2014

2013

Change

 
2014
 
2013
 
Change
 
Gross written premiums
$
2,320


$
2,278


2

%
 
$
7,224

 
$
7,054

 
2

%
Net written premiums
1,560


1,619


(4
)

 
4,981

 
5,115

 
(3
)
 
Net earned premiums
1,671


1,686


(1
)

 
5,011

 
4,972

 
1

 
Net investment income
298


379





 
1,018

 
1,163

 
 
 
Other revenues
86


78





 
246

 
276

 
 
 
Total operating revenues
2,055


2,143


(4
)

 
6,275

 
6,411

 
(2
)
 
Insurance claims and policyholders' benefits
1,053


1,031





 
3,332

 
3,270

 
 
 
Amortization of deferred acquisition costs
325


334





 
974

 
983

 
 
 
Other insurance related expenses
227


219





 
686

 
669

 
 
 
Other expenses
83


67





 
236

 
205

 
 
 
Total claims, benefits and expenses
1,688


1,651


(2
)

 
5,228

 
5,127

 
(2
)
 
Operating income (loss) before income tax
367


492


(25
)

 
1,047

 
1,284

 
(18
)
 
Income tax (expense) benefit on operating income (loss)
(126
)

(162
)




 
(351
)
 
(439
)
 
 
 
Net operating income (loss)
$
241


$
330


(27
)
%
 
$
696

 
$
845

 
(18
)
%
 









 
 
 
 
 
 
 
Loss & LAE
62.8

%
60.9

%
(1.9
)
pts
 
66.3

%
65.6

%
(0.7
)
pts
Acquisition expense
19.5


19.7


0.2


 
19.4

 
19.5

 
0.1

 
Underwriting expense
13.6


13.2


(0.4
)

 
13.8

 
13.7

 
(0.1
)
 
Expense
33.1


32.9


(0.2
)

 
33.2

 
33.2

 
—

 
Dividend
0.2


0.2


—


 
0.2

 
0.2

 
—

 
Combined ratio
96.1


94.0


(2.1
)

 
99.7

 
99.0

 
(0.7
)
 
Combined ratio excluding catastrophes and development
96.2

%
95.9

%
(0.3
)
pts
 
96.6

%
98.1

%
1.5

pts
 









 
 
 
 
 
 
 
Pretax net accident year catastrophe losses incurred
$
17


$
42




 
$
147

 
$
146

 
 
 
Impact on loss & LAE ratio
1.0

%
2.5

%
1.5

pts
 
3.0

%
3.0

%
—

pts
 









 
 
 
 
 
 
 
Pretax net prior year development and other (1): (favorable) / unfavorable
$
(19
)

$
(71
)




 
$
(4
)
 
$
(110
)
 
 
 
Impact on loss & LAE ratio
(1.1
)
%
(4.4
)
%
(3.3
)
pts
 
0.1

%
(2.1
)
%
(2.2
)
pts
 









 
 
 
 
 
 
 
Rate
3

%
6

%
(3
)
pts
 
3

%
7

%
(4
)
pts
Retention
78

%
78

%
—

pts
 
78

%
79

%
(1
)
pts
New Business (CNA Specialty and CNA Commercial only)
$
224


$
266


(16
)
%
 
$
723

 
$
858

 
(16
)
%

(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)
2014

2013

Change

 
2014
 
2013
 
Change
 
Gross written premiums
$
1,472


$
1,368


8

%
 
$
4,347

 
$
3,980

 
9

%
Net written premiums
766


778


(2
)

 
2,304

 
2,337

 
(1
)
 
Net earned premiums
775


768


1


 
2,286

 
2,237

 
2

 
Net investment income
133


159





 
445

 
480

 
 
 
Other revenues
76


67





 
218

 
190

 
 
 
Total operating revenues
984


994


(1
)

 
2,949

 
2,907

 
1

 
Insurance claims and policyholders' benefits
400


430





 
1,308

 
1,349

 
 
 
Amortization of deferred acquisition costs
159


161





 
470

 
467

 
 
 
Other insurance related expenses
73


64





 
219

 
200

 
 
 
Other expenses
65


58





 
191

 
172

 
 
 
Total claims, benefits and expenses
697


713


2


 
2,188

 
2,188

 
—

 
Operating income (loss) before income tax
287


281


2


 
761

 
719

 
6

 
Income tax (expense) benefit on operating income (loss)
(95
)

(94
)




 
(253
)
 
(244
)
 
 
 
Net operating income (loss)
$
192


$
187


3

%
 
$
508

 
$
475

 
7

%
 









 
 
 
 
 
 
 
Loss & LAE
51.4

%
55.6

%
4.2

pts
 
57.1

%
60.1

%
3.0

pts
Acquisition expense
19.7


19.8


0.1


 
19.7

 
19.6

 
(0.1
)
 
Underwriting expense
10.2


9.6


(0.6
)

 
10.4

 
10.2

 
(0.2
)
 
Expense
29.9


29.4


(0.5
)

 
30.1

 
29.8

 
(0.3
)
 
Dividend
0.3


0.3


—


 
0.2

 
0.2

 
—

 
Combined ratio
81.6


85.3


3.7


 
87.4

 
90.1

 
2.7

 
Combined ratio excluding catastrophes and development
91.8

%
93.5

%
1.7

pts
 
92.9

%
95.5

%
2.6

pts
 









 
 
 
 
 
 
 
Pretax net accident year catastrophe losses incurred
$
5


$
13





 
$
21

 
$
20

 
 
 
Impact on loss & LAE ratio
0.6

%
1.7

%
1.1

pts
 
0.9

%
0.9

%
—

pts
 









 
 
 
 
 
 
 
Pretax net prior year development and other (1): (favorable) / unfavorable
$
(85
)

$
(77
)




 
$
(151
)
 
$
(146
)
 
 
 
Impact on loss & LAE ratio
(10.8
)
%
(9.9
)
%
0.9

pts
 
(6.4
)
%
(6.3
)
%
0.1

pts
 









 
 
 
 
 
 
 
Rate
3

%
6

%
(3
)
pts
 
3

%
6

%
(3
)
pts
Retention
84

%
85

%
(1
)
pts
 
85

%
85

%
—

pts
New Business
$
94


$
105


(10
)
%
 
$
276

 
$
304

 
(9
)
%
(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)
2014

2013

Change

 
2014
 
2013
 
Change
 
Gross written premiums
$
750


$
805


(7
)
%
 
$
2,515

 
$
2,715

 
(7
)
%
Net written premiums
709


760


(7
)

 
2,387

 
2,504

 
(5
)
 
Net earned premiums
808


832


(3
)

 
2,447

 
2,509

 
(2
)
 
Net investment income
163


219





 
569

 
680

 
 
 
Other revenues
11


10





 
29

 
85

 
 
 
Total operating revenues
982


1,061


(7
)

 
3,045

 
3,274

 
(7
)
 
Insurance claims and policyholders' benefits
596


566





 
1,877

 
1,814

 
 
 
Amortization of deferred acquisition costs
139


148





 
423

 
450

 
 
 
Other insurance related expenses
139


141





 
416

 
426

 
 
 
Other expenses
12


7





 
31

 
18

 
 
 
Total claims, benefits and expenses
886


862


(3
)

 
2,747

 
2,708

 
(1
)
 
Operating income (loss) before income tax
96


199


(52
)

 
298

 
566

 
(47
)
 
Income tax (expense) benefit on operating income (loss)
(32
)

(68
)




 
(97
)
 
(198
)
 
 
 
Net operating income (loss)
$
64


$
131


(51
)
%
 
$
201

 
$
368

 
(45
)
%
 









 
 
 
 
 
 
 
Loss & LAE
73.4

%
67.9

%
(5.5
)
pts
 
76.4

%
72.1

%
(4.3
)
pts
Acquisition expense
18.0


18.9


0.9


 
17.9

 
18.7

 
0.8

 
Underwriting expense
16.7


15.9


(0.8
)

 
16.5

 
16.2

 
(0.3
)
 
Expense
34.7


34.8


0.1


 
34.4

 
34.9

 
0.5

 
Dividend
0.2


0.3


0.1


 
0.2

 
0.2

 
—

 
Combined ratio
108.3


103.0


(5.3
)

 
111.0

 
107.2

 
(3.8
)
 
Combined ratio excluding catastrophes and development
98.9

%
99.3

%
0.4

pts
 
99.8

%
101.4

%
1.6

pts
 









 
 
 
 
 
 
 
Pretax net accident year catastrophe losses incurred
$
15


$
24





 
$
122

 
$
121

 
 
 
Impact on loss & LAE ratio
1.9

%
2.9

%
1.0

pts
 
5.0

%
4.8

%
(0.2
)
pts
 









 
 
 
 
 
 
 
Pretax net prior year development and other (1): (favorable) / unfavorable
$
60


$
9





 
$
144

 
$
22

 
 
 
Impact on loss & LAE ratio
7.5

%
0.8

%
(6.7
)
pts
 
6.2

%
1.0

%
(5.2
)
pts
 









 
 
 
 
 


 
Rate
4

%
8

%
(4
)
pts
 
5

%
9

%
(4
)
pts
Retention
74

%
72

%
2

pts
 
73

%
75

%
(2
)
pts
New Business
$
130


$
161


(19
)
%
 
$
447

 
$
554

 
(19
)
%
(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)
2014

2013

Change

 
2014
 
2013
 
Change
 
Gross written premiums
$
98


$
105


(7
)
%
 
$
362

 
$
359

 
1

%
Net written premiums
85


81


5


 
290

 
274

 
6

 
Net earned premiums
88


86


2


 
278

 
226

 
23

 
Net investment income
2


1





 
4

 
3

 
 
 
Other revenues
(1
)

1





 
(1
)
 
1

 
 
 
Total operating revenues
89


88


1


 
281

 
230

 
22

 
Insurance claims and policyholders' benefits
57


35





 
147

 
107

 
 
 
Amortization of deferred acquisition costs
27


25





 
81

 
66

 
 
 
Other insurance related expenses
15


14





 
51

 
43

 
 
 
Other expenses
6


2





 
14

 
15

 
 
 
Total claims, benefits and expenses
105


76


(38
)

 
293

 
231

 
(27
)
 
Operating income (loss) before income tax
(16
)

12


N/M


 
(12
)
 
(1
)
 
N/M

 
Income tax (expense) benefit on operating income (loss)
1


—





 
(1
)
 
3

 
 
 
Net operating income (loss)
$
(15
)

$
12


N/M

%
 
$
(13
)
 
$
2

 
N/M

%
 









 
 
 
 
 
 
 
Loss & LAE
65.7

%
40.5

%
(25.2
)
pts
 
53.1

%
47.3

%
(5.8
)
pts
Acquisition expense
30.9


27.4


(3.5
)

 
29.7

 
27.9

 
(1.8
)
 
Underwriting expense
16.3


17.2


0.9


 
17.7

 
20.2

 
2.5

 
Expense
47.2


44.6


(2.6
)

 
47.4

 
48.1

 
0.7

 
Dividend
—


—


—


 
—

 
—

 
—

 
Combined ratio
112.9


85.1


(27.8
)

 
100.5

 
95.4

 
(5.1
)
 
Combined ratio excluding catastrophes and development
112.2

%
84.6

%
(27.6
)
pts
 
99.1

%
89.1

%
(10.0
)
pts
 









 
 
 
 
 
 
 
Pretax net accident year catastrophe losses incurred
$
(3
)

$
5





 
$
4

 
$
5

 
 
 
Impact on loss & LAE ratio
(3.4
)
%
5.4

%
8.8

pts
 
1.4

%
2.0

%
0.6

pts
 









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


$
(3
)




 
$
3

 
$
14

 
 
 
Impact on loss & LAE ratio
4.1

%
(4.9
)
%
(9.0
)
pts
 
—

%
4.3

%
4.3

pts
 









 
 
 
 
 
 
 
Rate
(6
)
%
(4
)
%
(2
)
pts
 
(6
)
%
(1
)
%
(5
)
pts
Retention
67

%
76

%
(9
)
pts
 
73

%
72

%
1

pts

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

7


Life & Group Non-Core - Results of Operations
Periods ended September 30
Three Months
 
 
Nine Months
 
(In millions)
2014

2013

Change

 
2014
 
2013
 
Change
 
Net earned premiums
$
139


$
140


(1
)
%
 
$
417

 
$
419

 
—

%
Net investment income
177


167


6


 
521

 
492

 
6

 
Other revenues
(3
)

(4
)




 
10

 
1

 
 
 
Total operating revenues
313


303


3


 
948

 
912

 
4

 
Insurance claims and policyholders' benefits
319


343





 
929

 
983

 
 
 
Amortization of deferred acquisition costs
7


7





 
22

 
21

 
 
 
Other insurance related expenses
33


33





 
96

 
97

 
 
 
Other expenses
36


—





 
34

 
7

 
 
 
Total claims, benefits and expenses
395


383


(3
)

 
1,081

 
1,108

 
2

 
Operating income (loss) before income tax
(82
)

(80
)

(3
)

 
(133
)
 
(196
)
 
32

 
Income tax (expense) benefit on operating income (loss)
40


47





 
98

 
116

 
 
 
Net operating income (loss)
$
(42
)

$
(33
)

(27
)
%
 
$
(35
)
 
$
(80
)
 
56

%


8


Corporate & Other Non-Core - Results of Operations
Periods ended September 30
Three Months
 
 
Nine Months
 
(In millions)
2014

2013

Change

 
2014
 
2013
 
Change
 
Net earned premiums
$
—


$
(1
)




 
$
(1
)
 
$
(2
)
 
 
 
Net investment income
5


9





 
17

 
25

 
 
 
Other revenues
1


3





 
6

 
7

 
 
 
Total operating revenues
6


11


(45
)
%
 
22

 
30

 
(27
)
%
Insurance claims and policyholders' benefits
(18
)

4





 
(20
)
 
6

 


 
Amortization of deferred acquisition costs
—


—





 
—

 
—

 


 
Other insurance related expenses
—


—





 
(1
)
 
(1
)
 


 
Other expenses
53


49





 
71

 
133

 


 
Total claims, benefits and expenses
35


53


34


 
50

 
138

 
64

 
Operating income (loss) before income tax
(29
)

(42
)

31


 
(28
)
 
(108
)
 
74

 
Income tax (expense) benefit on operating income (loss)
12


16





 
11

 
38

 
 
 
Net operating income (loss)
$
(17
)

$
(26
)

35

%
 
$
(17
)
 
$
(70
)
 
76

%


9


Investment Summary - Consolidated
 
September 30, 2014
 
June 30, 2014

December 31, 2013
(In millions)
Carrying Value
 
Net Unrealized Gains (Losses)
 
Carrying Value
 
Net Unrealized Gains (Losses)
 
Carrying Value
 
Net Unrealized Gains (Losses)
Fixed maturity securities:
 
 
 
 
 
 
 
 
 
 
 
Corporate and other bonds
$
19,154

 
$
1,664

 
$
19,119

 
$
1,822

 
$
20,898

 
$
1,510

States, municipalities and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Tax-exempt
9,587

 
835

 
9,411

 
707

 
8,432

 
41

Taxable
2,882

 
407

 
2,926

 
401

 
3,125

 
235

Total states, municipalities and political subdivisions
12,469

 
1,242

 
12,337

 
1,108

 
11,557

 
276

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
RMBS
5,146

 
174

 
5,070

 
188

 
4,971

 
31

CMBS
2,158

 
79

 
2,099

 
100

 
2,063

 
68

Other ABS
1,230

 
8

 
1,185

 
13

 
955

 
10

Total asset-backed
8,534

 
261

 
8,354

 
301

 
7,989

 
109

U.S. Treasury and obligations of government-sponsored enterprises
30

 
5

 
66

 
5

 
144

 
5

Foreign government
471

 
15

 
550

 
17

 
543

 
12

Redeemable preferred stock
42

 
3

 
42

 
3

 
102

 
10

Total fixed maturity securities
40,700

 
3,190

 
40,468

 
3,256

 
41,233

 
1,922

Equities
211

 
14

 
194

 
19

 
185

 
6

Limited partnership investments
2,931

 
—

 
2,831

 
—

 
2,720

 
—

Other invested assets
44

 
—

 
45

 
—

 
54

 
—

Mortgage loans
556

 
—

 
518

 
—

 
508

 
—

Short term investments
1,878

 
—

 
2,024

 
—

 
1,407

 
(1
)
Total investments
$
46,320

 
$
3,204

 
$
46,080

 
$
3,275

 
$
46,107

 
$
1,927

 
 
 
 
 
 
 
 
 
 
 
 
Net receivable/(payable) on investment activity
$
(31
)
 
 
 
$
(145
)
 
 
 
$
135

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective portfolio duration (in years)
6.5

 
 
 
6.6

 
 
 
6.9

 
 
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, 2014
 
June 30, 2014
 
December 31, 2013
(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
$
13,738

 
$
582

 
$
13,682

 
$
707

 
$
13,590

 
$
509

States, municipalities and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Tax-exempt
2,574

 
123

 
2,769

 
120

 
3,176

 
36

Taxable
1,484

 
158

 
1,634

 
177

 
1,570

 
89

Total states, municipalities and political subdivisions
4,058

 
281

 
4,403

 
297

 
4,746

 
125

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
RMBS
5,080

 
168

 
4,984

 
182

 
4,641

 
22

CMBS
2,006

 
70

 
1,962

 
89

 
1,793

 
54

Other ABS
1,137

 
8

 
1,089

 
12

 
853

 
9

Total asset-backed
8,223

 
246

 
8,035

 
283

 
7,287

 
85

U.S. Treasury and obligations of government-sponsored enterprises
7

 
(1
)
 
43

 
(1
)
 
121

 
(1
)
Foreign government
466

 
14

 
545

 
16

 
538

 
11

Redeemable preferred stock
13

 
1

 
13

 
1

 
5

 
—

Total fixed maturity securities
26,505

 
1,123

 
26,721

 
1,303

 
26,287

 
729

Equities
87

 
11

 
81

 
16

 
61

 
9

Limited partnership investments
2,931

 
—

 
2,831

 
—

 
2,720

 
—

Other invested assets
44

 
—

 
45

 
—

 
54

 
—

Mortgage loans
510

 
—

 
499

 
—

 
489

 
—

Short term investments
1,805

 
—

 
1,934

 
—

 
1,339

 
(1
)
Total investments
$
31,882

 
$
1,134

 
$
32,111

 
$
1,319

 
$
30,950

 
$
737

 
 
 
 
 
 
 
 
 
 
 
 
Net receivable/(payable) on investment activity
$
(24
)
 
 
 
$
(134
)
 
 
 
$
140

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective portfolio duration (in years)
4.1

 
 
 
4.2

 
 
 
4.4

 
 
Weighted average rating of fixed maturity securities
A

 
 
 
A

 
 
 
A

 
 

11


Investment Summary - Life & Group Non-Core
 
September 30, 2014
 
June 30, 2014
 
December 31, 2013
(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
$
5,416

 
$
1,082

 
$
5,437

 
$
1,115

 
$
7,308

 
$
1,001

States, municipalities and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Tax-exempt
7,013

 
712

 
6,642

 
587

 
5,256

 
5

Taxable
1,398

 
249

 
1,292

 
224

 
1,555

 
146

Total states, municipalities and political subdivisions
8,411

 
961

 
7,934

 
811

 
6,811

 
151

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
RMBS
66

 
6

 
86

 
6

 
330

 
9

CMBS
152

 
9

 
137

 
11

 
270

 
14

Other ABS
93

 
—

 
96

 
1

 
102

 
1

Total asset-backed
311

 
15

 
319

 
18

 
702

 
24

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

 
6

 
23

 
6

 
23

 
6

Foreign government
5

 
1

 
5

 
1

 
5

 
1

Redeemable preferred stock
29

 
2

 
29

 
2

 
97

 
10

Total fixed maturity securities
14,195

 
2,067

 
13,747

 
1,953

 
14,946

 
1,193

Equities
124

 
3

 
113

 
3

 
124

 
(3
)
Limited partnership investments
—

 
—

 
—

 
—

 
—

 
—

Other invested assets
—

 
—

 
—

 
—

 
—

 
—

Mortgage loans
46

 
—

 
19

 
—

 
19

 
—

Short term investments
73

 
—

 
90

 
—

 
68

 
—

Total investments
$
14,438

 
$
2,070

 
$
13,969

 
$
1,956

 
$
15,157

 
$
1,190

 
 
 
 
 
 
 
 
 
 
 
 
Net receivable/(payable) on investment activity
$
(7
)
 
 
 
$
(11
)
 
 
 
$
(5
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective portfolio duration (in years)
11.1

 
 
 
11.4

 
 
 
11.3

 
 
Weighted average rating of fixed maturity securities
A

 
 
 
A

 
 
 
A

 
 

12


Investments - Fixed Maturity Securities by Credit Rating  

September 30, 2014
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
$
—

 
$
—

 
$
230

 
$
8

 
$
1,264

 
$
78

 
$
5,909

 
$
653

 
$
10,085

 
$
864

 
$
1,666

 
$
61

 
$
19,154

 
$
1,664

States, municipalities and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tax-exempt
—

 
—

 
1,102

 
105

 
5,206

 
516

 
3,061

 
253

 
181

 
(41
)
 
37

 
2

 
9,587

 
835

Taxable
—

 
—

 
392

 
44

 
2,060

 
288

 
430

 
75

 
—

 
—

 
—

 
—

 
2,882

 
407

Total states, municipalities and political subdivisions
—

 
—

 
1,494

 
149

 
7,266

 
804

 
3,491

 
328

 
181

 
(41
)
 
37

 
2

 
12,469

 
1,242

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RMBS
3,679

 
102

 
131

 
1

 
87

 
—

 
174

 
1

 
90

 
2

 
985

 
68

 
5,146

 
174

CMBS
76

 
1

 
547

 
17

 
464

 
20

 
393

 
14

 
487

 
17

 
191

 
10

 
2,158

 
79

Other ABS
—

 
—

 
327

 
3

 
166

 
2

 
604

 
2

 
133

 
1

 
—

 
—

 
1,230

 
8

Total asset-backed
3,755

 
103

 
1,005

 
21

 
717

 
22

 
1,171

 
17

 
710

 
20

 
1,176

 
78

 
8,534

 
261

U.S. Treasury and obligations of government-sponsored enterprises
30

 
5

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
30

 
5

Foreign government
—

 
—

 
161

 
6

 
161

 
4

 
149

 
5

 
—

 
—

 
—

 
—

 
471

 
15

Redeemable preferred stock
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
18

 
2

 
24

 
1

 
42

 
3

Total fixed maturity securities
$
3,785

 
$
108

 
$
2,890

 
$
184

 
$
9,408

 
$
908

 
$
10,720

 
$
1,003

 
$
10,994

 
$
845

 
$
2,903

 
$
142

 
$
40,700

 
$
3,190

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of total fixed maturity securities
9
%
 
 
 
7
%
 
 
 
24
%
 
 
 
26
%
 
 
 
27
%
 
 
 
7
%
 
 
 
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 Net Investment Income
 
Consolidated
 
Periods ended September 30
Three Months
 
 
Nine Months
 
(In millions)
2014
 
2013
 
 
2014
 
2013
 
Taxable fixed maturities
$
352


$
378


 
$
1,054

 
$
1,149

 
Tax-exempt fixed maturities
101


83


 
302

 
223

 
Total fixed maturity securities
453


461


 
1,356

 
1,372

 
Limited partnership investments
29


93


 
199

 
303

 
Other, net of investment expense
(2
)

1


 
1

 
5

 
Pretax net investment income
$
480


$
555


 
$
1,556

 
$
1,680

 
 






 
 
 
 
 
After-tax fixed maturity securities
$
327


$
324


 
$
976

 
$
958

 
After-tax net investment income
$
346


$
386


 
$
1,108

 
$
1,159

 
 






 
 
 
 
 
Effective income yield for the fixed maturity securities portfolio, pretax (1)
4.8

%
5.0

%
 
4.9

%
5.0

%
Effective income yield for the fixed maturity securities portfolio, after tax (1)
3.5

%
3.5

%
 
3.5

%
3.5

%
 
Property & Casualty and Corporate & Other Non-Core
 
Periods ended September 30
Three Months
 
 
Nine Months
 
(In millions)
2014
 
2013
 
 
2014
 
2013
 
Taxable fixed maturities
$
252


$
267


 
$
748

 
$
812

 
Tax-exempt fixed maturities
23


27


 
84

 
67

 
Total fixed maturity securities
275


294


 
832

 
879

 
Limited partnership investments
29


93


 
199

 
302

 
Other, net of investment expense
(1
)

1


 
4

 
7

 
Pretax net investment income
$
303


$
388


 
$
1,035

 
$
1,188

 
 






 
 
 
 
 
After-tax fixed maturity securities
$
188


$
199


 
$
570

 
$
591

 
After-tax net investment income
$
207


$
261


 
$
702

 
$
793

 
 






 
 
 
 
 
Effective income yield for the fixed maturity securities portfolio, pretax (1)
4.3

%
4.6

%
 
4.4

%
4.6

%
Effective income yield for the fixed maturity securities portfolio, after tax (1)
3.0

%
3.1

%
 
3.0

%
3.1

%
 
Life & Group Non-Core
 
Periods ended September 30
Three Months
 
 
Nine Months
 
(In millions)
2014
 
2013
 
 
2014
 
2013
 
Taxable fixed maturities
$
100


$
111


 
$
306

 
$
337

 
Tax-exempt fixed maturities
78


56


 
218

 
156

 
Total fixed maturity securities
178


167


 
524

 
493

 
Limited partnership investments
—


—


 
—

 
1

 
Other, net of investment expense
(1
)

—


 
(3
)
 
(2
)
 
Pretax net investment income
$
177


$
167


 
$
521

 
$
492

 
 






 
 
 
 
 
After-tax fixed maturity securities
$
139


$
125


 
$
406

 
$
367

 
After-tax net investment income
$
139


$
125


 
$
406

 
$
366

 
 






 
 
 
 
 
Effective income yield for the fixed maturity securities portfolio, pretax (1)
5.9

%
6.0

%
 
5.9

%
6.0

%
Effective income yield for the fixed maturity securities portfolio, after tax (1)
4.6

%
4.5

%
 
4.6

%
4.5

%
(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, 2014
CNA
Specialty
 
CNA
Commercial
 
Hardy
 
P&C Operations
 
Life & Group
Non-Core
 
Corporate & Other
Non-Core
 
Total Operations
(In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
Claim & claim adjustment expense reserves, beginning of period
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross
$
6,939

 
$
10,537

 
$
386

 
$
17,862

 
$
3,092

 
$
3,042

 
$
23,996

Ceded
656

 
988

 
129

 
1,773

 
368

 
2,708

 
4,849

Net
6,283

 
9,549

 
257

 
16,089

 
2,724

 
334

 
19,147

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net incurred claim & claim adjustment expenses
398

 
596

 
57

 
1,051

 
199

 
—

 
1,250

Net claim & claim adjustment expense payments
(408
)
 
(605
)
 
(56
)
 
(1,069
)
 
(179
)
 
(6
)
 
(1,254
)
Foreign currency translation adjustment and other
(38
)
 
(27
)
 
(7
)
 
(72
)
 
5

 
—

 
(67
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Claim & claim adjustment expense reserves, end of period
 
 
 
 
 
 
 
 
 
 
 
 
 
Net
6,235

 
9,513

 
251

 
15,999

 
2,749

 
328

 
19,076

Ceded
626

 
643

 
129

 
1,398

 
364

 
2,637

 
4,399

Gross
$
6,861

 
$
10,156

 
$
380

 
$
17,397

 
$
3,113

 
$
2,965

 
$
23,475

Nine months ended September 30, 2014
CNA
Specialty
 
CNA
Commercial
 
Hardy
 
P&C Operations
 
Life & Group
Non-Core
 
Corporate & Other
Non-Core
 
Total Operations
(In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
Claim & claim adjustment expense reserves, beginning of period
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross
$
6,689

 
$
10,649

 
$
386

 
$
17,724

 
$
3,058

 
$
3,307

 
$
24,089

Ceded
523

 
1,022

 
152

 
1,697

 
435

 
2,840

 
4,972

Net
6,166

 
9,627

 
234

 
16,027

 
2,623

 
467

 
19,117

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net incurred claim & claim adjustment expenses
1,304

 
1,872

 
160

 
3,336

 
595

 
3

 
3,934

Net claim & claim adjustment expense payments
(1,200
)
 
(1,964
)
 
(139
)
 
(3,303
)
 
(505
)
 
(142
)
 
(3,950
)
Foreign currency translation adjustment and other
(35
)
 
(22
)
 
(4
)
 
(61
)
 
36

 
—

 
(25
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Claim & claim adjustment expense reserves, end of period
 
 
 
 
 
 
 
 

 
 
 
 
Net
6,235

 
9,513

 
251

 
15,999

 
2,749

 
328

 
19,076

Ceded
626

 
643

 
129

 
1,398

 
364

 
2,637

 
4,399

Gross
$
6,861

 
$
10,156

 
$
380

 
$
17,397

 
$
3,113

 
$
2,965

 
$
23,475


15


Life & Group Non-Core Policyholder Reserves
September 30, 2014
Claim and claim adjustment expenses
 
Future policy benefits
 
Policyholders' funds
 
Separate account business
 
Total
(In millions)
 
 
 
 
Long term care
$
1,994

 
$
7,663

 
$
—

 
$
—

 
$
9,657

Structured settlement annuities
593

 
185

 
—

 
—

 
778

Institutional markets
—

 
—

 
—

 
—

 
—

Other
28

 
1

 
—

 
—

 
29

Total
2,615

 
7,849

 
—

 
—

 
10,464

Shadow adjustments (1)
134

 
1,041

 
—

 
—

 
1,175

Ceded reserves
364

 
—

 
—

 
—

 
364

Total gross reserves
$
3,113

 
$
8,890

 
$
—


$
—

 
$
12,003

December 31, 2013
Claim and claim adjustment expenses
 
Future policy benefits
 
Policyholders' funds
 
Separate account business
 
Total
(In millions)
 
 
 
 
Long term care
$
1,889

 
$
7,329

 
$
—

 
$
—

 
$
9,218

Annuities, including structured settlements
613

 
1,990

 
—

 
—

 
2,603

Institutional markets
1

 
9

 
57

 
181

 
248

Other
37

 
4

 
—

 
—

 
41

Total
2,540

 
9,332

 
57

 
181

 
12,110

Shadow adjustments (1)
83

 
406

 
—

 
—

 
489

Ceded reserves
435

 
733

 
35

 
—

 
1,203

Total gross reserves
$
3,058

 
$
10,471

 
$
92

 
$
181

 
$
13,802

(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 $320 million and $342 million related to Deferred acquisition costs at September 30, 2014 and December 31, 2013.

16


Statutory Data - Combined Continental Casualty Companies - Preliminary
Periods ended September 30
Three Months
 
 
Nine Months
 
Income Statements
(Preliminary)





 
(Preliminary)
 
 
 
 
 
(In millions)
2014

2013

Change

 
2014
 
2013
 
Change
 
 






 
 
 
 
 
 
 
Gross written premiums
$
2,184


$
2,148


2

%
 
$
6,695

 
$
6,557

 
2

%
Net written premiums
1,446


1,518


(5
)

 
4,543

 
4,713

 
(4
)
 
 






 
 
 
 
 
 
 
Net earned premiums
1,397


1,421


(2
)

 
4,205

 
4,210

 
—

 
Claim and claim adjustment expenses
1,201


1,212





 
3,631

 
3,655

 
 
 
Acquisition expenses
253


270





 
787

 
825

 
 
 
Underwriting expenses
208


208





 
616

 
625

 
 
 
Policyholders' dividends
3


2





 
5

 
6

 
 
 
Underwriting income (loss)
(268
)

(271
)

1


 
(834
)
 
(901
)
 
7

 
Net investment income
435


434





 
1,533

 
1,329

 
 
 
Other income (loss)
9


3





 
72

 
88

 
 
 
Income tax (expense) benefit
(40
)

(18
)




 
(55
)
 
(33
)
 
 
 
Net realized gains (losses)
112


(61
)




 
104

 
(96
)
 
 
 
Net income (loss)
$
248


$
87


185

%
 
$
820

 
$
387

 
112

%
 






 
 
 
 
 
 
 
Financial Ratios






 
 
 
 
 
 
 
Loss and LAE
86.0

%
85.3

%



 
86.3

%
86.8

%
 
 
Acquisition expense
17.5


17.8





 
17.3

 
17.5

 
 
 
Underwriting expense
14.4


13.7





 
13.6

 
13.3

 
 
 
Expense
31.9


31.5





 
30.9

 
30.8

 
 
 
Dividend
0.2


0.1





 
0.1

 
0.1

 
 
 
Combined ratio
118.1

%
116.9

%



 
117.3

%
117.7

%
 
 
 
 
 
 
 
 
 
Supplemental Statutory Data
 
 
 
 
 
 
(In billions)
(Preliminary)
 
 
 
 
 
September 30, 2014
December 31, 2013
 
 
 
Statutory surplus
$
11.4

 
$
11.1

 
 
 


17


Definitions and Presentation


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

•
P&C Operations include CNA Specialty, CNA Commercial and Hardy.

•
The Life & Group Non-Core segment primarily includes the results of our individual and group long term care business, as well as closed blocks of structured settlement liabilities, group accident and health reinsurance and life settlement contracts. These businesses are being managed as a run-off operation. Our group long term care business, while considered non-core, continues to accept new employees in existing groups.

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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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On August 1, 2014, the Company closed the previously announced sale of the common stock of CAC. In connection with the sale, the Company recorded an after-tax loss on disposition of $211 million, which is reflected in Income (loss) from discontinued operations.

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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 2013 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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