0000021175-15-000011.txt : 20150209 0000021175-15-000011.hdr.sgml : 20150209 20150209105638 ACCESSION NUMBER: 0000021175-15-000011 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20150209 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20150209 DATE AS OF CHANGE: 20150209 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: 15587094 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 q4148k.htm 8-K 2014 Q4 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) February 9, 2015

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 February 9, 2015, 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 fourth quarter and year ended December 31, 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:  February 9, 2015
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 February 9, 2015, providing information on the fourth quarter and year ended December 31, 2014 results of operations.
 
 
 
 
CNA Financial Corporation financial supplement, posted on its website February 9, 2015, providing supplemental financial information on the fourth quarter and year ended December 31, 2014.


4
 EX-99.1 2 q414exhibit991.htm EXHIBIT Q4-14 Exhibit 99.1


FOR IMMEDIATE RELEASE
CONTACT:
MEDIA:
 
ANALYSTS:
Sarah Pang, 312/822-6394
 
James Anderson, 312/822-7757
Brandon Davis, 312/822-5167
 
Derek Smith, 312/822-6612
 
 
Robert Tardella, 312/822-4387
CNA FINANCIAL ANNOUNCES FOURTH QUARTER 2014 RESULTS
•
Q4 NOI OF $0.76 PER SHARE; $0.96 ADJUSTED FOR PENSION SETTLEMENT CHARGE
•
EXCLUDING CHARGE, NOI OF $260 MILLION GENERATING OPERATING ROE OF 8.4%
•
P&C COMBINED RATIO EX CATS AND DEVELOPMENT OF 93.6%; 95.9% FULL YEAR 2014
•
BVPS EX AOCI UP 1% SINCE YEAR-END 2013; 6% INCLUDING DIVIDENDS
•
SPECIAL DIVIDEND OF $2.00 PER SHARE; QUARTERLY DIVIDEND OF $0.25 PER SHARE
CHICAGO, February 9, 2015 --- CNA Financial Corporation (NYSE: CNA) today announced fourth quarter 2014 net operating income of $205 million, or $0.76 per share, and net income of $198 million, or $0.73 per share. Full year 2014 results were net operating income of $849 million, or $3.14 per share, and net income of $691 million, or $2.55 per share. Property & Casualty Operations combined ratio for the fourth quarter and full year was 91.8% and 97.7%, respectively.
CNA Financial declared a special dividend of $2.00 per share and a quarterly dividend of $0.25 per share, payable March 12, 2015 to stockholders of record on February 23, 2015.
 
Results for the Three Months Ended December 31 (a)
 
Results for the Year Ended December 31 (a)
($ millions, except per share data)
2014
 
2013
 
2014
 
2013
Net operating income
$
205

 
$
206

 
$
849

 
$
901

Net realized investment gains (losses)
(7
)
 
7

 
39

 
14

Income from discontinued operations, net of tax
—

 
8

 
(197
)
 
22

Net income
$
198

 
$
221

 
$
691

 
$
937

 
 
 
 
 
 
 
 
Net operating income per diluted share
$
0.76

 
$
0.76

 
$
3.14

 
$
3.33

Net income per diluted share
0.73

 
0.82

 
2.55

 
3.47

 
December 31, 2014
 
December 31, 2013
Book value per share
$
47.39
 
 
$
46.91
 
Book value per share excluding AOCI
 
45.91
 
 
 
45.26
 

(a)
Management utilizes the net operating income financial measure to monitor the Company's operations. Please refer to Note K in the Condensed Consolidated Financial Statements within the September 30, 2014 Form 10-Q for further discussion of this measure.

1

Property & Casualty Operations' net operating income was $314 million for the fourth quarter of 2014 as compared with $340 million in the prior year quarter. This decrease was driven by lower net investment income, partially offset by improved current accident year underwriting results and higher favorable net prior year development. Catastrophe losses for the fourth quarter were $7 million after-tax as compared with $15 million after-tax in the prior year quarter.
Net operating results for our non-core segments improved $25 million from the prior year quarter. The net operating results for our Corporate & Other Non-Core segment improved $65 million while the results for our Life & Group Non-Core segment declined $40 million. Corporate & Other Non-Core segment results included a $55 million after-tax lump sum settlement charge in the fourth quarter of 2014 and the prior year period included a $123 million after-tax charge arising from retroactive reinsurance accounting related to the 2010 asbestos and environmental pollution (A&EP) Loss Portfolio Transfer (LPT).
After-tax net investment income decreased to $365 million for the fourth quarter of 2014 as compared with $419 million in the prior year quarter. This decrease was primarily driven by limited partnerships, which produced a rate of return of 2.2% as compared with 5.3% in the prior year quarter.
Full Year 2014 Consolidated Results
Net operating income for the full year 2014 declined $52 million to $849 million from $901 million in the prior year. Property & Casualty Operations' net operating income was $1,010 million in 2014 as compared with $1,185 million in the prior year. This decrease was primarily due to lower net investment income and lower favorable net prior year development, partially offset by improved current accident year underwriting results. Catastrophe impacts for the full year were $102 million after-tax as compared with $111 million after-tax in the prior year. Net operating results for our non-core segments improved $123 million as compared with the prior year, primarily driven by the LPT charge noted above.
After-tax net investment income was $1,473 million for the current year as compared with $1,578 million in the prior year. This decrease was primarily driven by limited partnerships, which produced a rate of return of 9.7% as compared with 18.3% in the prior year.

2

Property & Casualty Operations
"Our fourth quarter combined ratio of 91.8% was the result of strong underwriting performance across all three newly-defined P&C segments, Commercial, Specialty and International," said Thomas F. Motamed, Chairman and Chief Executive Officer of CNA Financial Corporation. "Our continued underwriting progress as well as the sustained financial strength and stability of CNA has given our Board the confidence to declare a special dividend of $2.00 per share.”

 
Results for the Three Months Ended December 31
 
Results for the Year Ended December 31
($ millions)
2014
 
2013
 
2014
 
2013
Net written premiums
$
1,555

 
 
$
1,684

 
 
$
6,536

 
 
$
6,799

 
NWP change (% year over year)
(8
)
%
 
5

%
 
(4
)
%
 
6

%
Net operating income
$
314

 
 
$
340

 
 
$
1,010

 
 
$
1,185

 
 
 
 
 
 
 
 
 
 
 
 
 
Loss ratio excluding catastrophes and development
61.4

%
 
61.3

%
 
62.8

%
 
63.8

%
Effect of catastrophe impacts
0.6

 
 
1.3

 
 
2.3

 
 
2.6

 
Effect of development-related items
(2.4
)
 
 
(0.6
)
 
 
(0.5
)
 
 
(1.8
)
 
Loss ratio
59.6

%
 
62.0

%
 
64.6

%
 
64.6

%
 
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
91.8

%
 
95.0

%
 
97.7

%
 
97.9

%
Combined ratio excluding catastrophes and development
93.6

%
 
94.3

%
 
95.9

%
 
97.1

%
As a result of realigned management responsibilities, CNA revised its property and casualty segments in the fourth quarter of 2014 to Specialty, Commercial and International. Results of CNA Europe and Canada that were previously included in the Specialty and Commercial segments are now included in the International segment. There was no change to the Life & Group Non-Core and Corporate & Other Non-Core segments. Prior period segment disclosures have been conformed to the current year presentation. The new segment structure reflects the way management currently reviews results and makes business decisions.


3

Business Operating Highlights
Specialty
 
Results for the Three Months Ended December 31
 
Results for the Year Ended December 31
($ millions)
2014
 
2013
 
2014
 
2013
Net written premiums
$
689

 
 
$
708

 
 
$
2,839

 
 
$
2,880

 
NWP change (% year over year)
(3)

%
 
6

%
 
(1
)
%
 
5

%
Net operating income
$
154

 
 
$
211

 
 
$
634

 
 
$
668

 
 
 
 
 
 
 
 
 
 
 
 
 
Loss ratio excluding catastrophes and development
60.1

%
 
58.9

%
 
61.7

%
 
63.6

%
Effect of catastrophe impacts
—

 
 
0.2

 
 
0.7

 
 
0.7

 
Effect of development-related items
(2.0
)
 
 
(10.4
)
 
 
(5.1
)
 
 
(7.3
)
 
Loss ratio
58.1

%
 
48.7

%
 
57.3

%
 
57.0

%
 
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
88.4

%
 
79.1

%
 
87.6

%
 
87.1

%
Combined ratio excluding catastrophes and development
90.4

%
 
89.3

%
 
92.0

%
 
93.7

%
•
Net operating income decreased $57 million for the fourth quarter of 2014 as compared with the prior year quarter, primarily due to lower favorable net prior year development and lower net investment income.
•
The combined ratio increased 9.3 points for the fourth quarter of 2014 as compared with the prior year quarter. The loss ratio increased 9.4 points, primarily due to lower favorable net prior year development and a higher current accident year loss ratio. The increase in the current accident year loss ratio was primarily driven by the favorable re-evaluation of the full year 2013 accident year in the fourth quarter of 2013. The full year 2014 current accident year loss ratio improved 1.9 points as compared to the prior year and reflected continued improvement throughout the year.
•
Net written premiums for the fourth quarter of 2014 were down as compared with the prior year quarter. Average rate increased 3% for the policies that renewed in the fourth quarter of 2014 while achieving a retention of 85%.

4

Commercial
 
Results for the Three Months Ended December 31
 
Results for the Year Ended December 31
($ millions)
2014
 
2013
 
2014
 
2013
Net written premiums
$
684

 
 
$
717

 
 
$
2,817

 
 
$
2,960

 
NWP change (% year over year)
(5
)
%
 
(3
)
%
 
(5
)
%
 
(2
)
%
Net operating income
$
132

 
 
$
91

 
 
$
307

 
 
$
448

 
 
 
 
 
 
 
 
 
 
 
 
 
Loss ratio excluding catastrophes and development
63.0

%
 
65.5

%
 
64.6

%
 
66.1

%
Effect of catastrophe impacts
0.6

 
 
2.7

 
 
4.4

 
 
4.4

 
Effect of development-related items
0.6

 
 
13.6

 
 
6.3

 
 
4.7

 
Loss ratio
64.2

%
 
81.8

%
 
75.3

%
 
75.2

%
 
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
96.8

%
 
114.1

%
 
109.3

%
 
109.5

%
Combined ratio excluding catastrophes and development
95.6

%
 
97.8

%
 
98.6

%
 
100.4

%
•
Net operating income increased $41 million for the fourth quarter of 2014 as compared with the prior year quarter. This increase was driven by the absence of unfavorable net prior year development and improved current accident year underwriting results, partially offset by lower net investment income.
•
The combined ratio improved 17.3 points for the fourth quarter of 2014 as compared with the prior year quarter. The loss ratio improved 17.6 points, primarily due to the absence of unfavorable net prior year development, a lower level of catastrophes and an improvement of 2.5 points in the non-catastrophe current accident year loss ratio, reflecting our re-evaluation of the full year 2014 current accident year results. The full year 2014 current accident year loss ratio improved 1.5 points as compared to the prior year. Catastrophe losses were $4 million, or 0.6 points of the loss ratio, for the fourth quarter of 2014 as compared with $19 million, or 2.7 points of the loss ratio, for the prior year quarter.
•
Net written premiums decreased $33 million for the fourth quarter of 2014 as compared with the prior year quarter, driven by a decreased level of new business as well as underwriting actions taken in certain business classes, partially offset by continued rate increases. Average rate increased 4% for the policies that renewed in the fourth quarter of 2014 while achieving a retention of 77%.


5

International
 
Results for the Three Months Ended December 31
 
Results for the Year Ended December 31
($ millions)
2014
 
2013
 
2014
 
2013
Net written premiums
$
182

 
 
$
259

 
 
$
880

 
 
$
959

 
NWP change (% year over year)
(30
)
%
 
30

%
 
(8
)
%
 
N/M

%
Net operating income
$
28

 
 
$
38

 
 
$
69

 
 
$
69

 
 
 
 
 
 
 
 
 
 
 
 
 
Loss ratio excluding catastrophes and development
60.3

%
 
55.3

%
 
60.3

%
 
57.2

%
Effect of catastrophe impacts
2.2

 
 
0.6

 
 
1.0

 
 
1.5

 
Effect of development-related items
(13.3
)
 
 
(12.9
)
 
 
(7.8
)
 
 
(5.3
)
 
Loss ratio
49.2

%
 
43.0

%
 
53.5

%
 
53.4

%
 
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
86.9

%
 
84.4

%
 
92.4

%
 
93.1

%
Combined ratio excluding catastrophes and development
98.0

%
 
96.7

%
 
99.2

%
 
96.9

%
•
Net written premiums decreased $77 million for the fourth quarter of 2014 as compared with the prior year quarter. This decrease was primarily driven by the positive impact of a Hardy commutation of a third-party capital provider's 15% share of the 2012 year of account in the fourth quarter of 2013. The Hardy commutation increased 2013 net written premiums by $51 million. Average rate decreased 1% for the policies that renewed in the fourth quarter of 2014 while achieving a retention of 66%.
•
Net operating income decreased $10 million for the fourth quarter of 2014 as compared with the prior year quarter. This decrease was primarily due to lower favorable net prior year premium and loss development.
•
The combined ratio increased 2.5 points for the fourth quarter of 2014 as compared with the prior year quarter. The loss ratio increased 6.2 points, due to the distortive effect of the 2013 commutation premium and a higher current accident year loss ratio. Catastrophe losses were $5 million, or 2.2 points of the loss ratio, for the fourth quarter of 2014 as compared with $2 million, or 0.6 points of the loss ratio, for the prior year quarter. The expense ratio improved 3.7 points, primarily due to decreased acquisition expenses.

6

Life & Group Non-Core
 
Results for the Three Months Ended December 31
 
Results for the Year Ended December 31
($ millions)
2014
 
2013
 
2014
 
 
2013
 
Operating revenues
$
324

 
 
$
305

 
 
$
1,272

 
 
$
1,217

 
Total claims, benefits and expenses
411

 
 
324

 
 
1,492

 
 
1,432

 
Net operating income (loss)
(34
)
 
 
6

 
 
(69
)
 
 
(74
)
 
•
Net operating results decreased $40 million for the fourth quarter of 2014 as compared with the prior year quarter. This decrease was primarily driven by unfavorable morbidity in our long term care business, partially offset by higher net investment income attributable to a higher invested asset base. Additionally, 2013 results included a $22 million after-tax non-recurring benefit.
Corporate & Other Non-Core
 
Results for the Three Months Ended December 31
 
Results for the Year Ended December 31
($ millions)
2014
 
2013
 
2014
 
 
2013
 
Operating revenues
$
7

 
 
$
9

 
 
$
29

 
 
$
39

 
Total claims, benefits and expenses
125

 
 
229

 
 
175

 
 
367

 
Net operating loss
(75
)
 
 
(140
)
 
 
(92
)
 
 
(210
)
 


7

Net Operating Income (Loss)
 
 
Results for the Three Months Ended December 31
 
Results for the Year Ended December 31
($ millions)
 
2014
 
2013
 
2014
 
2013
Specialty
 
$
154

 
$
211

 
$
634

 
$
668

Commercial
 
132

 
91

 
307

 
448

International
 
28

 
38

 
69

 
69

Total P&C Operations
 
314

 
340

 
1,010

 
1,185

Life & Group Non-Core
 
(34
)
 
6

 
(69
)
 
(74
)
Corporate & Other Non-Core
 
(75
)
 
(140
)
 
(92
)
 
(210
)
Total
 
$
205

 
$
206

 
$
849

 
$
901

Net Income (Loss)
 
 
Results for the Three Months Ended December 31
 
Results for the Year Ended December 31
($ millions)
 
2014
 
2013
 
2014
 
2013
Specialty
 
$
158

 
$
210

 
$
644

 
$
665

Commercial
 
136

 
86

 
317

 
438

International
 
28

 
37

 
69

 
72

Total P&C Operations
 
322

 
333

 
1,030

 
1,175

Life & Group Non-Core
 
(55
)
 
20

 
(62
)
 
(56
)
Corporate & Other Non-Core
 
(69
)
 
(140
)
 
(80
)
 
(204
)
Discontinued Operations
 
—

 
8

 
(197
)
 
22

Total
 
$
198

 
$
221

 
$
691

 
$
937

Property & Casualty Operations Gross Written Premiums
 
 
Results for the Three Months Ended December 31
 
Results for the Year Ended December 31
($ millions)
 
2014
 
2013
 
2014
 
2013
Specialty
 
$
1,415

 
$
1,319

 
$
5,608

 
$
5,134

Commercial
 
714

 
751

 
2,959

 
3,188

International
 
205

 
231

 
991

 
1,033

Total P&C Operations
 
$
2,334

 
$
2,301

 
$
9,558

 
$
9,355

Property & Casualty Operations Net Written Premiums
 
 
Results for the Three Months Ended December 31
 
Results for the Year Ended December 31
($ millions)
 
2014
 
2013
 
2014
 
2013
Specialty
 
$
689

 
$
708

 
$
2,839

 
$
2,880

Commercial
 
684

 
717

 
2,817

 
2,960

International
 
182

 
259

 
880

 
959

Total P&C Operations
 
$
1,555

 
$
1,684

 
$
6,536

 
$
6,799


8

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) 359-3610, or for international callers, (719) 457-2615. 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 February 16, 2015 by dialing (888) 203-1112, or for international callers, (719) 457-0820. The replay passcode is 2219361. 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 Robert Tardella at 312-822-4387.
Definition of Reported Segments
Specialty provides management and professional liability and other coverages through property and casualty products and services using a network of brokers, independent agencies and managing general underwriters.
Commercial works with an independent agency distribution system and a network of brokers to market a broad range of property and casualty insurance products and services to small, middle-market and large businesses and organizations.
International provides property and casualty insurance and specialty coverages in Canada, the United Kingdom and Continental Europe as well as globally through its operations at Lloyd’s of London.
Life & Group Non-Core primarily includes the results of the individual and group long term care businesses that are in run off.
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.
Financial Measures
In the evaluation of the results of Specialty, Commercial and International, 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.

# # #

9
 EX-99.2 3 q414exhibit992.htm EXHIBIT q414exhibit992.htm





 
 
 
 
 




CNA Financial Corporation
Supplemental Financial Information


December 31, 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 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...........................................................................................................................................................................................................
Specialty....................................................................................................................................................................................................................
Commercial...............................................................................................................................................................................................................
International.......................................................................................................................................................................................................................
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 - Preliminary...............................................................................................................................................................................................
Definitions and Presentation..............................................................................................................................................................................................





Segment Realignment

As a result of realigned management responsibilities, CNA revised its property and casualty segments in the fourth quarter of 2014 to Specialty, Commercial and International. Results of CNA Europe and Canada that were previously included in the Specialty and Commercial segments are now included in the International segment. There was no change to the Life & Group Non-Core and Corporate & Other Non-Core segments. Prior period segment disclosures have been conformed to the current year presentation. The new segment structure reflects the way management currently reviews results and makes business decisions.

i


Statements of Operations
Periods ended December 31
Three Months
 
 
Twelve Months
 
(In millions)
2014
 
2013
 
Change
 
 
2014
 
2013
 
Change
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earned premiums
$
1,785

 
$
1,882

 
(5
)
%
 
$
7,212

 
$
7,271

 
(1
)
%
Net investment income
511

 
602

 
(15
)
 
 
2,067

 
2,282

 
(9
)
 
Net realized investment gains (losses):
 
 
 
 
 
 
 
 
 
 
 
 
 
Other-than-temporary impairment (OTTI) losses
(60
)
 
(25
)
 


 
 
(77
)
 
(74
)
 

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

 
(1
)
 


 
 
—

 
(2
)
 


 
Net OTTI losses recognized in earnings
(60
)
 
(26
)
 


 
 
(77
)
 
(76
)
 


 
Other net realized investment gains (losses)
48

 
36

 


 
 
134

 
96

 


 
Net realized investment gains (losses)
(12
)
 
10

 


 
 
57

 
20

 


 
Other revenues
94

 
75

 


 
 
356

 
359

 

 
Total revenues
2,378

 
2,569

 
(7
)
 
 
9,692

 
9,932

 
(2
)
 
Claims, Benefits and Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Insurance claims and policyholders' benefits
1,350

 
1,547

 

 
 
5,591

 
5,806

 


 
Amortization of deferred acquisition costs
321

 
358

 

 
 
1,317

 
1,362

 


 
Other operating expenses
410

 
337

 

 
 
1,394

 
1,322

 


 
Interest
45

 
41

 

 
 
183

 
166

 


 
Total claims, benefits and expenses
2,126

 
2,283

 
7

 
 
8,485

 
8,656

 
2

 
Income (loss) before income tax
252

 
286

 
(12
)
 
 
1,207

 
1,276

 
(5
)
 
Income tax (expense) benefit
(54
)
 
(73
)
 


 
 
(319
)
 
(361
)
 


 
Income (loss) from continuing operations
198

 
213

 
(7
)
 
 
888

 
915

 
(3
)
 
Income (loss) from discontinued operations, net of tax
—

 
8

 
 
 
 
(197
)
 
22

 
 
 
Net income (loss)
$
198

 
$
221

 
(10
)
%
 
$
691

 
$
937

 
(26
)
%

1




Components of Income (Loss), Per Share Data and Return on Equity
Periods ended December 31
Three Months
 
Twelve Months
 
(In millions, except per share data)
2014
 
2013
 
2014
 
2013
 
Components of Income (Loss)
 
 
 
 
 
 
 
 
Net operating income (loss)
$
205

 
$
206

 
$
849

 
$
901

 
Net realized investment gains (losses)
(7
)
 
7

 
39

 
14

 
Income (loss) from continuing operations
198

 
213

 
888

 
915

 
Income (loss) from discontinued operations
—

 
8

 
(197
)
 
22

 
Net income (loss)
$
198

 
$
221

 
$
691

 
$
937

 
 
 
 
 
 
 
 
 
 
Diluted Earnings (Loss) Per Common Share
 
 
 
 
 
 
 
 
Net operating income (loss)
$
0.76

 
$
0.76

 
$
3.14

 
$
3.33

 
Net realized investment gains (losses)
(0.03
)
 
0.03

 
0.14

 
0.06

 
Income (loss) from continuing operations
0.73

 
0.79

 
3.28

 
3.39

 
Income (loss) from discontinued operations
—

 
0.03

 
(0.73
)
 
0.08

 
Diluted earnings (loss) per share
$
0.73

 
$
0.82


$
2.55


$
3.47

 
 
 
 
 
 
 
 
 
 
Weighted Average Outstanding Common Stock and Common Stock Equivalents
 
 
 
 
 
 
 
 
Basic
270.0

 
269.7

 
269.9

 
269.7

 
Diluted
270.7

 
270.4

 
270.6

 
270.2

 
 
 
 
 
 
 
 
 
 
Return on Equity
 
 
 
 
 
 
 
 
Net income (loss) (1)
6.1

%
7.1

%
5.4

%
7.5

%
Net operating income (loss) (2)
6.7

 
6.8

 
6.9

 
7.6

 
(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(1) 
(In millions, except per share data)
December 31, 2014
 
December 31, 2013
Total assets
$
55,566

 
$
57,194

Insurance reserves
36,380

 
38,394

Debt
2,559

 
2,560

Total liabilities
42,772

 
44,543

Accumulated other comprehensive income (loss) (2)
400

 
442

Total stockholders' equity
12,794

 
12,651

 
 
 
 
Book value per common share
$
47.39

 
$
46.91

Book value per common share excluding AOCI
$
45.91

 
$
45.26

 
 
 
 
Outstanding shares of common stock (in millions of shares)
270.0

 
269.7

Three months ended December 31

2014
 
2013
Net cash flows provided (used) by operating activities
$
393

 
$
283

Net cash flows provided (used) by investing activities
169

 
(209
)
Net cash flows provided (used) by financing activities
(614
)
 
(64
)
Net cash flows provided (used) by operating, investing and financing activities
$
(52
)
 
$
10

Twelve months ended December 31

2014
 
2013
Net cash flows provided (used) by operating activities
$
1,440

 
$
1,204

Net cash flows provided (used) by investing activities
(918
)
 
(898
)
Net cash flows provided (used) by financing activities
(519
)
 
(264
)
Net cash flows provided (used) by operating, investing and financing activities
$
3

 
$
42

(1) On August 1, 2014, CNA completed the sale of the common stock of Continental Assurance Company (CAC). CNA elected not to present the assets and liabilities as held for sale in the 2013 balance sheet data and included CAC cash flow data in the periods ended December 31, 2014 and 2013.
(2) At December 31, 2014 and 2013, the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $1,288 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 December 31
Three Months
 
 
Twelve Months
 
(In millions)
2014
 
2013
 
Change
 
 
2014
 
2013
 
Change
 
Gross written premiums
$
2,334

 
$
2,301

 
1

%
 
$
9,558

 
$
9,355

 
2

%
Net written premiums
1,555

 
1,684

 
(8
)
 
 
6,536

 
6,799

 
(4
)
 
Net earned premiums
1,646

 
1,743

 
(6
)
 
 
6,657

 
6,715

 
(1
)
 
Net investment income
326

 
425

 


 
 
1,344

 
1,588

 


 
Other revenues
87

 
77

 


 
 
333

 
353

 


 
Total operating revenues
2,059

 
2,245

 
(8
)
 
 
8,334

 
8,656

 
(4
)
 
Insurance claims and policyholders' benefits
984

 
1,084

 

 
 
4,316

 
4,354

 


 
Amortization of deferred acquisition costs
315

 
351

 


 
 
1,289

 
1,334

 


 
Other insurance related expenses
214

 
219

 


 
 
900

 
888

 


 
Other expenses
77

 
76

 


 
 
313

 
281

 


 
Total claims, benefits and expenses
1,590

 
1,730

 
8

 
 
6,818

 
6,857

 
1

 
Operating income (loss) before income tax
469

 
515

 
(9
)
 
 
1,516

 
1,799

 
(16
)
 
Income tax (expense) benefit on operating income (loss)
(155
)
 
(175
)
 


 
 
(506
)
 
(614
)
 


 
Net operating income (loss)
$
314

 
$
340

 
(8
)
%
 
$
1,010

 
$
1,185

 
(15
)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss & LAE
59.6

%
62.0

%
2.4

pts
 
64.6

%
64.6

%
—

pts
Acquisition expense
17.6

 
18.2

 
0.6

 
 
19.0

 
19.2

 
0.2

 
Underwriting expense
14.4

 
14.6

 
0.2

 
 
13.9

 
13.9

 
—

 
Expense
32.0

 
32.8

 
0.8

 
 
32.9

 
33.1

 
0.2

 
Dividend
0.2

 
0.2

 
—

 
 
0.2

 
0.2

 
—

 
Combined ratio
91.8

%
95.0

%
3.2

 
 
97.7

%
97.9

%
0.2

 
Combined ratio excluding catastrophes and development
93.6

%
94.3

%
0.7

pts
 
95.9

%
97.1

%
1.2

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pretax net accident year catastrophe losses incurred
$
9

 
$
23

 

 
 
$
156

 
$
169

 

 
Impact on loss & LAE ratio
0.6

%
1.3

%
0.7

pts
 
2.3

%
2.6

%
0.3

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pretax net prior year development and other (1): (favorable) / unfavorable
$
(39
)
 
$
(20
)
 


 
 
$
(43
)
 
$
(130
)
 


 
Impact on loss & LAE ratio
(2.4
)
%
(0.6
)
%
1.8

pts
 
(0.5
)
%
(1.8
)
%
(1.3
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rate
3

%
5

%
(2
)
pts
 
3

%
7

%
(4
)
pts
Retention
79

%
78

%
1

pts
 
78

%
79

%
(1
)
pts
New Business
$
192

 
$
224

 
(14
)
%
 
$
915

 
$
1,081

 
(15
)
%
(1) Other includes the impacts of interest accretion and change in allowance for uncollectible reinsurance and deductible amounts.

4



Specialty - Results of Operations
Periods ended December 31
Three Months
 
 
Twelve Months
 
(In millions)
2014
 
2013
 
Change
 
 
2014
 
2013
 
Change
 
Gross written premiums
$
1,415

 
$
1,319

 
7

%
 
$
5,608

 
$
5,134

 
9

%
Net written premiums
689

 
708

 
(3
)
 
 
2,839

 
2,880

 
(1
)
 
Net earned premiums
712

 
712

 
—

 
 
2,838

 
2,795

 
2

 
Net investment income
137

 
170

 


 
 
560

 
629

 


 
Other revenues
77

 
67

 


 
 
295

 
257

 


 
Total operating revenues
926

 
949

 
(2
)
 
 
3,693

 
3,681

 
—

 
Insurance claims and policyholders' benefits
416

 
347

 

 
 
1,633

 
1,599

 


 
Amortization of deferred acquisition costs
150

 
149

 


 
 
592

 
585

 


 
Other insurance related expenses
65

 
66

 


 
 
262

 
250

 


 
Other expenses
63

 
67

 


 
 
254

 
237

 


 
Total claims, benefits and expenses
694

 
629

 
(10
)
 
 
2,741

 
2,671

 
(3
)
 
Operating income (loss) before income tax
232

 
320

 
(28
)
 
 
952

 
1,010

 
(6
)
 
Income tax (expense) benefit on operating income (loss)
(78
)
 
(109
)
 


 
 
(318
)
 
(342
)
 


 
Net operating income (loss)
$
154

 
$
211

 
(27
)
%
 
$
634

 
$
668

 
(5
)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss & LAE
58.1

%
48.7

%
(9.4
)
pts
 
57.3

%
57.0

%
(0.3
)
pts
Acquisition expense
19.5

 
19.5

 
—

 
 
19.7

 
19.6

 
(0.1
)
 
Underwriting expense
10.7

 
10.7

 
—

 
 
10.4

 
10.3

 
(0.1
)
 
Expense
30.2

 
30.2

 
—

 
 
30.1

 
29.9

 
(0.2
)
 
Dividend
0.1

 
0.2

 
0.1

 
 
0.2

 
0.2

 
—

 
Combined ratio
88.4

%
79.1

%
(9.3
)
 
 
87.6

%
87.1

%
(0.5
)
 
Combined ratio excluding catastrophes and development
90.4

%
89.3

%
(1.1
)
pts
 
92.0

%
93.7

%
1.7

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pretax net accident year catastrophe losses incurred
$
—

 
$
2

 


 
 
$
21

 
$
22

 


 
Impact on loss & LAE ratio
—

%
0.2

%
0.2

pts
 
0.7

%
0.7

%
—

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pretax net prior year development and other (1): (favorable) / unfavorable
$
(14
)
 
$
(74
)
 


 
 
$
(149
)
 
$
(210
)
 


 
Impact on loss & LAE ratio
(2.0
)
%
(10.4
)
%
(8.4
)
pts
 
(5.1
)
%
(7.3
)
%
(2.2
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rate
3

%
5

%
(2
)
pts
 
3

%
6

%
(3
)
pts
Retention
85

%
85

%
—

pts
 
86

%
85

%
1

pts
New Business
$
70

 
$
77

 
(9
)
%
 
$
309

 
$
342

 
(10
)
%
(1) Other includes the impacts of interest accretion and change in allowance for uncollectible reinsurance and deductible amounts.


5



Commercial - Results of Operations
Periods ended December 31
Three Months
 
 
Twelve Months
 
(In millions)
2014
 
2013
 
Change
 
 
2014
 
2013
 
Change
 
Gross written premiums
$
714

 
$
751

 
(5
)
%
 
$
2,959

 
$
3,188

 
(7
)
%
Net written premiums
684

 
717

 
(5
)
 
 
2,817

 
2,960

 
(5
)
 
Net earned premiums
718

 
749

 
(4
)
 
 
2,906

 
3,004

 
(3
)
 
Net investment income
174

 
239

 


 
 
723

 
899

 


 
Other revenues
10

 
11

 


 
 
38

 
96

 


 
Total operating revenues
902

 
999

 
(10
)
 
 
3,667

 
3,999

 
(8
)
 
Insurance claims and policyholders' benefits
462

 
616

 


 
 
2,195

 
2,266

 


 
Amortization of deferred acquisition costs
122

 
130

 


 
 
493

 
526

 


 
Other insurance related expenses
111

 
108

 


 
 
487

 
498

 


 
Other expenses
6

 
8

 


 
 
31

 
32

 


 
Total claims, benefits and expenses
701

 
862

 
19

 
 
3,206

 
3,322

 
3

 
Operating income (loss) before income tax
201

 
137

 
47

 
 
461

 
677

 
(32
)
 
Income tax (expense) benefit on operating income (loss)
(69
)
 
(46
)
 


 
 
(154
)
 
(229
)
 


 
Net operating income (loss)
$
132

 
$
91

 
45

%
 
$
307

 
$
448

 
(31
)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss & LAE
64.2

%
81.8

%
17.6

pts
 
75.3

%
75.2

%
(0.1
)
pts
Acquisition expense
15.0

 
14.6

 
(0.4
)
 
 
17.0

 
17.5

 
0.5

 
Underwriting expense
17.3

 
17.4

 
0.1

 
 
16.7

 
16.5

 
(0.2
)
 
Expense
32.3

 
32.0

 
(0.3
)
 
 
33.7

 
34.0

 
0.3

 
Dividend
0.3

 
0.3

 
—

 
 
0.3

 
0.3

 
—

 
Combined ratio
96.8

%
114.1

%
17.3

 
 
109.3

%
109.5

%
0.2

 
Combined ratio excluding catastrophes and development
95.6

%
97.8

%
2.2

pts
 
98.6

%
100.4

%
1.8

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pretax net accident year catastrophe losses incurred
$
4

 
$
19

 


 
 
$
125

 
$
133

 


 
Impact on loss & LAE ratio
0.6

%
2.7

%
2.1

pts
 
4.4

%
4.4

%
—

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pretax net prior year development and other (1): (favorable) / unfavorable
$
5

 
$
102

 


 
 
$
177

 
$
138

 


 
Impact on loss & LAE ratio
0.6

%
13.6

%
13.0

pts
 
6.3

%
4.7

%
(1.6
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rate
4

%
7

%
(3
)
pts
 
5

%
9

%
(4
)
pts
Retention
77

%
73

%
4

pts
 
74

%
74

%
—

pts
New Business
$
95

 
$
120

 
(21
)
%
 
$
491

 
$
622

 
(21
)
%

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

6



International - Results of Operations
Periods ended December 31
Three Months
 
 
Twelve Months
 
(In millions)
2014
 
2013
 
Change
 
 
2014
 
2013
 
Change
 
Gross written premiums
$
205

 
$
231

 
(11
)
%
 
$
991

 
$
1,033

 
(4
)
%
Net written premiums
182

 
259

 
(30
)
 
 
880

 
959

 
(8
)
 
Net earned premiums
216

 
282

 
(23
)
 
 
913

 
916

 
—

 
Net investment income
15

 
16

 


 
 
61

 
60

 


 
Other revenues
—

 
(1
)
 


 
 
—

 
—

 


 
Total operating revenues
231

 
297

 
(22
)
 
 
974

 
976

 
—

 
Insurance claims and policyholders' benefits
106

 
121

 


 
 
488

 
489

 


 
Amortization of deferred acquisition costs
43

 
72

 


 
 
204

 
223

 


 
Other insurance related expenses
38

 
45

 


 
 
151

 
140

 


 
Other expenses
8

 
1

 


 
 
28

 
12

 


 
Total claims, benefits and expenses
195

 
239

 
18

 
 
871

 
864

 
(1
)
 
Operating income (loss) before income tax
36

 
58

 
(38
)
 
 
103

 
112

 
(8
)
 
Income tax (expense) benefit on operating income (loss)
(8
)
 
(20
)
 


 
 
(34
)
 
(43
)
 


 
Net operating income (loss)
$
28

 
$
38

 
(26
)
%
 
$
69

 
$
69

 
—

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss & LAE
49.2

%
43.0

%
(6.2
)
pts
 
53.5

%
53.4

%
(0.1
)
pts
Acquisition expense
19.8

 
24.6

 
4.8

 
 
22.9

 
23.6

 
0.7

 
Underwriting expense
17.9

 
16.8

 
(1.1
)
 
 
16.0

 
16.1

 
0.1

 
Expense
37.7

 
41.4

 
3.7

 
 
38.9

 
39.7

 
0.8

 
Dividend
—

 
—

 
—

 
 
—

 
—

 
—

 
Combined ratio
86.9

%
84.4

%
(2.5
)
 
 
92.4

%
93.1

%
0.7

 
Combined ratio excluding catastrophes and development
98.0

%
96.7

%
(1.3
)
pts
 
99.2

%
96.9

%
(2.3
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pretax net accident year catastrophe losses incurred
$
5

 
$
2

 


 
 
$
10

 
$
14

 


 
Impact on loss & LAE ratio
2.2

%
0.6

%
(1.6
)
pts
 
1.0

%
1.5

%
0.5

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pretax net prior year development and other (1): (favorable) / unfavorable
$
(30
)
 
$
(48
)
 


 
 
$
(71
)
 
$
(58
)
 


 
Impact on loss & LAE ratio
(13.3
)
%
(12.9
)
%
0.4

pts
 
(7.8
)
%
(5.3
)
%
2.5

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rate
(1
)
%
—

%
(1
)
pts
 
(1
)
%
1

%
(2
)
pts
Retention
66

%
80

%
(14
)
pts
 
74

%
79

%
(5
)
pts
New Business
27

 
27

 
—

%
 
115

 
117

 
(2
)
%

(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 December 31
Three Months
 
 
Twelve Months
 
(In millions)
2014
 
2013
 
Change
 
 
2014
 
2013
 
Change
 
Net earned premiums
$
139

 
$
140

 
(1
)
%
 
$
556

 
$
559

 
(1
)
%
Net investment income
179

 
170

 
5

 
 
700

 
662

 
6

 
Other revenues
6

 
(5
)
 


 
 
16

 
(4
)
 


 
Total operating revenues
324

 
305

 
6

 
 
1,272

 
1,217

 
5

 
Insurance claims and policyholders' benefits
375

 
278

 


 
 
1,304

 
1,261

 


 
Amortization of deferred acquisition costs
6

 
7

 


 
 
28

 
28

 


 
Other insurance related expenses
34

 
33

 


 
 
130

 
130

 


 
Other expenses
(4
)
 
6

 


 
 
30

 
13

 


 
Total claims, benefits and expenses
411

 
324

 
(27
)
 
 
1,492

 
1,432

 
(4
)
 
Operating income (loss) before income tax
(87
)
 
(19
)
 
N/M

 
 
(220
)
 
(215
)
 
(2
)
 
Income tax (expense) benefit on operating income (loss)
53

 
25

 


 
 
151

 
141

 


 
Net operating income (loss)
$
(34
)
 
$
6

 
N/M

%
 
$
(69
)
 
$
(74
)
 
7

%


8



Corporate & Other Non-Core - Results of Operations
Periods ended December 31
Three Months
 
 
Twelve Months
 
(In millions)
2014
 
2013
 
Change
 
 
2014
 
2013
 
Change
 
Net earned premiums
$
—

 
$
(1
)
 


 
 
$
(1
)
 
$
(3
)
 


 
Net investment income
6

 
7

 


 
 
23

 
32

 


 
Other revenues
1

 
3

 


 
 
7

 
10

 


 
Total operating revenues
7

 
9

 
(22
)
%
 
29

 
39

 
(26
)
%
Insurance claims and policyholders' benefits
(9
)
 
185

 


 
 
(29
)
 
191

 


 
Amortization of deferred acquisition costs
—

 
—

 


 
 
—

 
—

 


 
Other insurance related expenses
—

 
(4
)
 


 
 
(1
)
 
(5
)
 


 
Other expenses
134

 
48

 


 
 
205

 
181

 


 
Total claims, benefits and expenses
125

 
229

 
45

 
 
175

 
367

 
52

 
Operating income (loss) before income tax
(118
)
 
(220
)
 
46

 
 
(146
)
 
(328
)
 
55

 
Income tax (expense) benefit on operating income (loss)
43

 
80

 


 
 
54

 
118

 


 
Net operating income (loss)
$
(75
)
 
$
(140
)
 
46

%
 
$
(92
)
 
$
(210
)
 
56

%


9



Investment Summary - Consolidated
 
December 31, 2014

September 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
$
18,889

 
$
1,660

 
$
19,154

 
$
1,664

 
$
20,898

 
$
1,510

States, municipalities and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Tax-exempt
9,802

 
988

 
9,587

 
835

 
8,432

 
41

Taxable
2,938

 
467

 
2,882

 
407

 
3,125

 
235

Total states, municipalities and political subdivisions
12,740

 
1,455

 
12,469

 
1,242

 
11,557

 
276

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
RMBS
5,233

 
205

 
5,146

 
174

 
4,971

 
31

CMBS
2,144

 
88

 
2,158

 
79

 
2,063

 
68

Other ABS
1,235

 
1

 
1,230

 
8

 
955

 
10

Total asset-backed
8,612

 
294

 
8,534

 
261

 
7,989

 
109

U.S. Treasury and obligations of government-sponsored enterprises
31

 
5

 
30

 
5

 
144

 
5

Foreign government
454

 
16

 
471

 
15

 
543

 
12

Redeemable preferred stock
42

 
3

 
42

 
3

 
102

 
10

Total fixed maturity securities
40,768

 
3,433

 
40,700

 
3,190

 
41,233

 
1,922

Equities
222

 
12

 
211

 
14

 
185

 
6

Limited partnership investments
2,937

 
—

 
2,931

 
—

 
2,720

 
—

Other invested assets
41

 
—

 
44

 
—

 
54

 
—

Mortgage loans
588

 
—

 
556

 
—

 
508

 
—

Short term investments
1,706

 
(1
)
 
1,878

 
—

 
1,407

 
(1
)
Total investments
$
46,262

 
$
3,444

 
$
46,320

 
$
3,204

 
$
46,107

 
$
1,927

 
 
 
 
 
 
 
 
 
 
 
 
Net receivable/(payable) on investment activity
$
(58
)
 
 
 
$
(31
)
 
 
 
$
135

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective portfolio duration (in years)
6.3

 
 
 
6.5

 
 
 
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
 
December 31, 2014
 
September 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
$
13,444

 
$
542

 
$
13,738

 
$
582

 
$
13,590

 
$
509

States, municipalities and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Tax-exempt
2,561

 
127

 
2,574

 
123

 
3,176

 
36

Taxable
1,454

 
169

 
1,484

 
158

 
1,570

 
89

Total states, municipalities and political subdivisions
4,015

 
296

 
4,058

 
281

 
4,746

 
125

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
RMBS
5,101

 
196

 
5,080

 
168

 
4,641

 
22

CMBS
1,985

 
78

 
2,006

 
70

 
1,793

 
54

Other ABS
1,144

 
2

 
1,137

 
8

 
853

 
9

Total asset-backed
8,230

 
276

 
8,223

 
246

 
7,287

 
85

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

 
(1
)
 
7

 
(1
)
 
121

 
(1
)
Foreign government
449

 
15

 
466

 
14

 
538

 
11

Redeemable preferred stock
13

 
2

 
13

 
1

 
5

 
—

Total fixed maturity securities
26,158

 
1,130

 
26,505

 
1,123

 
26,287

 
729

Equities
87

 
9

 
87

 
11

 
61

 
9

Limited partnership investments
2,937

 
—

 
2,931

 
—

 
2,720

 
—

Other invested assets
41

 
—

 
44

 
—

 
54

 
—

Mortgage loans
531

 
—

 
510

 
—

 
489

 
—

Short term investments
1,586

 
(1
)
 
1,805

 
—

 
1,339

 
(1
)
Total investments
$
31,340

 
$
1,138

 
$
31,882

 
$
1,134

 
$
30,950

 
$
737

 
 
 
 
 
 
 
 
 
 
 
 
Net receivable/(payable) on investment activity
$
4

 
 
 
$
(24
)
 
 
 
$
140

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective portfolio duration (in years)
4.0

 
 
 
4.1

 
 
 
4.4

 
 
Weighted average rating of fixed maturity securities
A

 
 
 
A

 
 
 
A

 
 

11



Investment Summary - Life & Group Non-Core
 
December 31, 2014
 
September 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
$
5,445

 
$
1,118

 
$
5,416

 
$
1,082

 
$
7,308

 
$
1,001

States, municipalities and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Tax-exempt
7,241

 
861

 
7,013

 
712

 
5,256

 
5

Taxable
1,484

 
298

 
1,398

 
249

 
1,555

 
146

Total states, municipalities and political subdivisions
8,725

 
1,159

 
8,411

 
961

 
6,811

 
151

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
RMBS
132

 
9

 
66

 
6

 
330

 
9

CMBS
159

 
10

 
152

 
9

 
270

 
14

Other ABS
91

 
(1
)
 
93

 
—

 
102

 
1

Total asset-backed
382

 
18

 
311

 
15

 
702

 
24

U.S. Treasury and obligations of government-sponsored enterprises
24

 
6

 
23

 
6

 
23

 
6

Foreign government
5

 
1

 
5

 
1

 
5

 
1

Redeemable preferred stock
29

 
1

 
29

 
2

 
97

 
10

Total fixed maturity securities
14,610

 
2,303

 
14,195

 
2,067

 
14,946

 
1,193

Equities
135

 
3

 
124

 
3

 
124

 
(3
)
Limited partnership investments
—

 
—

 
—

 
—

 
—

 
—

Other invested assets
—

 
—

 
—

 
—

 
—

 
—

Mortgage loans
57

 
—

 
46

 
—

 
19

 
—

Short term investments
120

 
—

 
73

 
—

 
68

 
—

Total investments
$
14,922

 
$
2,306

 
$
14,438

 
$
2,070

 
$
15,157

 
$
1,190

 
 
 
 
 
 
 
 
 
 
 
 
Net receivable/(payable) on investment activity
$
(62
)
 
 
 
$
(7
)
 
 
 
$
(5
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective portfolio duration (in years)
10.5

 
 
 
11.1

 
 
 
11.3

 
 
Weighted average rating of fixed maturity securities
A+

 
 
 
A

 
 
 
A

 
 

12



Investments - Fixed Maturity Securities by Credit Rating  

December 31, 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
$
—

 
$
—

 
$
223

 
$
9

 
$
1,125

 
$
83

 
$
5,621

 
$
665

 
$
10,194

 
$
863

 
$
1,726

 
$
40

 
$
18,889

 
$
1,660

States, municipalities and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tax-exempt
—

 
—

 
1,108

 
116

 
5,275

 
571

 
3,199

 
293

 
183

 
6

 
37

 
2

 
9,802

 
988

Taxable
—

 
—

 
397

 
50

 
2,113

 
331

 
428

 
86

 
—

 
—

 
—

 
—

 
2,938

 
467

Total states, municipalities and political subdivisions
—

 
—

 
1,505

 
166

 
7,388

 
902

 
3,627

 
379

 
183

 
6

 
37

 
2

 
12,740

 
1,455

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RMBS
3,776

 
138

 
159

 
1

 
80

 
—

 
153

 
—

 
89

 
2

 
976

 
64

 
5,233

 
205

CMBS
75

 
1

 
540

 
18

 
478

 
25

 
407

 
18

 
462

 
16

 
182

 
10

 
2,144

 
88

Other ABS
—

 
—

 
298

 
3

 
169

 
1

 
621

 
(3
)
 
147

 
—

 
—

 
—

 
1,235

 
1

Total asset-backed
3,851

 
139

 
997

 
22

 
727

 
26

 
1,181

 
15

 
698

 
18

 
1,158

 
74

 
8,612

 
294

U.S. Treasury and obligations of government-sponsored enterprises
31

 
5

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
31

 
5

Foreign government
—

 
—

 
125

 
6

 
164

 
5

 
165

 
5

 
—

 
—

 
—

 
—

 
454

 
16

Redeemable preferred stock
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
18

 
2

 
24

 
1

 
42

 
3

Total fixed maturity securities
$
3,882

 
$
144

 
$
2,850

 
$
203

 
$
9,404

 
$
1,016

 
$
10,594

 
$
1,064

 
$
11,093

 
$
889

 
$
2,945

 
$
117

 
$
40,768

 
$
3,433

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of total fixed maturity securities
10
%
 
 
 
7
%
 
 
 
23
%
 
 
 
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 December 31
Three Months
 
Twelve Months
 
(In millions)
2014
 
2013
 
2014
 
2013
 
Taxable fixed maturities
$
345

 
$
361

 
$
1,399

 
$
1,510

 
    Tax-exempt fixed maturities

102

 
94

 
404

 
317

 
Total fixed maturity securities
447

 
455

 
1,803

 
1,827

 
Limited partnership investments
64

 
148

 
263

 
451

 
Other, net of investment expense
—

 
(1
)
 
1

 
4

 
Pretax net investment income
$
511

 
$
602

 
$
2,067

 
$
2,282

 
 
 
 
 
 
 
 
 
 
After-tax fixed maturity securities
$
322

 
$
324

 
$
1,298

 
$
1,282

 
After-tax net investment income
$
365

 
$
419

 
$
1,473

 
$
1,578

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

%
4.9

%
4.8

%
5.0

%
Effective income yield for the fixed maturity securities portfolio, after tax (1)
3.4

%
3.5

%
3.5

%
3.5

%
 
Property & Casualty and Corporate & Other Non-Core
 
Periods ended December 31
Three Months
 
Twelve Months
 
(In millions)
2014
 
2013
 
2014
 
2013
 
    Taxable fixed maturities
$
244

 
$
253

 
$
992

 
$
1,065

 
    Tax-exempt fixed maturities
23

 
32

 
107

 
99

 
Total fixed maturity securities
267

 
285

 
1,099

 
1,164

 
Limited partnership investments
64

 
148

 
263

 
450

 
Other, net of investment expense
1

 
(1
)
 
5

 
6

 
Pretax net investment income
$
332

 
$
432

 
$
1,367

 
$
1,620

 
 
 
 
 
 
 
 
 
 
After-tax fixed maturity securities
$
181

 
$
195

 
$
751

 
$
786

 
After-tax net investment income
$
224

 
$
290

 
$
926

 
$
1,083

 
 
 
 
 
 
 
 
 
 
Effective income yield for the fixed maturity securities portfolio, pretax (1)
4.2

%
4.5

%
4.3

%
4.6

%
Effective income yield for the fixed maturity securities portfolio, after tax (1)
2.8

%
3.1

%
3.0

%
3.1

%
 
Life & Group Non-Core
 
Periods ended December 31
Three Months
 
Twelve Months
 
(In millions)
2014
 
2013
 
2014
 
2013
 
    Taxable fixed maturities
$
101

 
$
108

 
$
407

 
$
445

 
    Tax-exempt fixed maturities
79

 
62

 
297

 
218

 
Total fixed maturity securities
180

 
170

 
704

 
663

 
Limited partnership investments
—

 
—

 
—

 
1

 
Other, net of investment expense
(1
)
 
—

 
(4
)
 
(2
)
 
Pretax net investment income
$
179

 
$
170

 
$
700

 
$
662

 
 
 
 
 
 
 
 
 
 
After-tax fixed maturity securities
$
141

 
$
129

 
$
547

 
$
496

 
After-tax net investment income
$
141

 
$
129

 
$
547

 
$
495

 
 
 
 
 
 
 
 
 
 
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

%
4.6

%
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 December 31, 2014
(In millions)

Specialty
 

Commercial
 
International
 
P&C Operations
 
Life & Group
Non-Core
 
Corporate & Other
Non-Core
 
Total Operations
Claim & claim adjustment expense reserves, beginning of period
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross
$
6,245

 
$
9,604

 
$
1,548

 
$
17,397

 
$
3,113

 
$
2,965

 
$
23,475

Ceded
586

 
598

 
214

 
1,398

 
364

 
2,637

 
4,399

Net
5,659

 
9,006


1,334


15,999


2,749


328


19,076

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net incurred claim & claim adjustment expenses
414

 
462

 
106

 
982

 
257

 
(5
)
 
1,234

Net claim & claim adjustment expense payments
(418
)
 
(615
)
 
(136
)
 
(1,169
)
 
(173
)
 
(8
)
 
(1,350
)
Foreign currency translation adjustment and other
—

 
—

 
(43
)
 
(43
)
 
10

 
—

 
(33
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Claim & claim adjustment expense reserves, end of period
 
 
 
 
 
 
 
 
 
 
 
 
 
Net
5,655

 
8,853

 
1,261

 
15,769

 
2,843

 
315

 
18,927

Ceded
574

 
661

 
180

 
1,415

 
340

 
2,589

 
4,344

Gross
$
6,229

 
$
9,514

 
$
1,441

 
$
17,184

 
$
3,183

 
$
2,904

 
$
23,271

Twelve months ended December 31, 2014
(In millions)

Specialty
 
 
Commercial
 
International
 
P&C Operations
 
Life & Group
Non-Core
 
Corporate & Other
Non-Core
 
Total Operations
Claim & claim adjustment expense reserves, beginning of period
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross
$
6,058

 
$
10,091

 
$
1,575

 
$
17,724

 
$
3,058

 
$
3,307

 
$
24,089

Ceded
476

 
980

 
241

 
1,697

 
435

 
2,840

 
4,972

Net
5,582

 
9,111

 
1,334

 
16,027

 
2,623

 
467

 
19,117

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net incurred claim & claim adjustment expenses
1,627

 
2,189

 
502

 
4,318

 
852

 
(2
)
 
5,168

Net claim & claim adjustment expense payments
(1,554
)
 
(2,447
)
 
(471
)
 
(4,472
)
 
(678
)
 
(150
)
 
(5,300
)
Foreign currency translation adjustment and other
—

 
—

 
(104
)
 
(104
)
 
46

 
—

 
(58
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Claim & claim adjustment expense reserves, end of period
 
 
 
 
 
 
 
 
 
 
 
 
 
Net
5,655

 
8,853

 
1,261

 
15,769

 
2,843

 
315

 
18,927

Ceded
574

 
661

 
180

 
1,415

 
340

 
2,589

 
4,344

Gross
$
6,229

 
$
9,514

 
$
1,441

 
$
17,184

 
$
3,183

 
$
2,904

 
$
23,271


15



Life & Group Non-Core Policyholder Reserves
December 31, 2014
 
 
 
 
 
(In millions)
Claim and claim adjustment expenses
 
Future policy benefits
 
Total
Long term care
$
2,064

 
$
7,782

 
$
9,846

Structured settlement annuities
606

 
—

 
606

Other
28

 
1

 
29

Total
2,698

 
7,783

 
10,481

Shadow adjustments (1)
145

 
1,522

 
1,667

Ceded reserves
340

 
185

 
525

Total gross reserves
$
3,183

 
$
9,490

 
$
12,673

December 31, 2013
 
 
 
 
 
 
 
 
 
(In millions)
Claim and claim adjustment expenses
 
Future policy benefits
 
Policyholders' funds
 
Separate account business
 
Total
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 $314 million and $342 million related to Deferred acquisition costs at December 31, 2014 and 2013.

16



Statutory Data - Preliminary
Periods Ended December 31
Three Months
 
 
Twelve Months
 
Income Statements
(Preliminary)
2014
 
 
 
Change
 
 
(Preliminary)
2014
 
 
 
Change
 
(In millions)
 
2013
 
 
 
 
2013
 
 
Combined Continental Casualty Companies
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross written premiums
$
2,219

 
$
2,175

 
2

%
 
$
8,914

 
$
8,732

 
2

%
Net written premiums
1,464

 
1,534

 
(5
)
 
 
6,007

 
6,247

 
(4
)
 
 
 
 
 
 

 
 
 
 
 
 
 
 
Net earned premiums
1,393

 
1,482

 
(6
)
 
 
5,598

 
5,692

 
(2
)
 
Claim and claim adjustment expenses
1,136

 
1,541

 


 
 
4,767

 
5,196

 

 
Acquisition expenses
240

 
234

 


 
 
1,027

 
1,059

 

 
Underwriting expenses
211

 
229

 


 
 
827

 
854

 

 
Policyholders' dividends
3

 
3

 


 
 
8

 
9

 

 
Underwriting income (loss)
(197
)
 
(525
)
 
62

 
 
(1,031
)
 
(1,426
)
 
28

 
Net investment income
482

 
614

 


 
 
2,015

 
1,943

 


 
Other income (loss)
(72
)
 
549

 


 
 
—

 
637

 


 
Income tax (expense) benefit
(47
)
 
(85
)
 


 
 
(102
)
 
(118
)
 


 
Net realized gains (losses)
(72
)
 
(27
)
 


 
 
32

 
(123
)
 


 
Net income (loss)
$
94

 
$
526

 
(82
)
%
 
$
914

 
$
913

 
—

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial Ratios
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss and LAE
81.6

%
104.0

%
 
 
 
85.2

%
91.3

%
 
 
Acquisition expense
16.4

 
15.3

 
 
 
 
17.1

 
17.0

 
 
 
Underwriting expense
14.4

 
14.9

 
 
 
 
13.8

 
13.7

 
 
 
Expense
30.8

 
30.2

 
 
 
 
30.9

 
30.7

 
 
 
Dividend
0.2

 
0.2

 
 
 
 
0.1

 
0.2

 
 
 
Combined ratio
112.6

%
134.4

%
 
 
 
116.2

%
122.2

%
 
 

SUPPLEMENTAL STATUTORY DATA
(Preliminary) December 31, 2014
 
December 31, 2013
 
 
(In billions)
 
 
Statutory surplus
$
11.2

 
$
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 includes Specialty, Commercial and International.

•
Life & Group Non-Core segment primarily includes the results of long term care businesses that are in run-off.

•
Corporate & Other Non-Core segment primarily includes certain corporate expenses including interest on corporate debt and the results of certain property and casualty business in run-off, including CNA Re and asbestos and environmental pollution. Intersegment eliminations are also included in this segment.

•
Management utilizes the net operating income financial measure to monitor the Company’s operations. Please refer to Note K to the Condensed Consolidated Financial Statements within the September 30, 2014 Form 10-Q for further discussion of this measure.

•
In the evaluation of the results of Specialty, Commercial and International, 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.

•
The majority of our limited partnership investments employ hedge fund strategies that generate returns primarily through investing in marketable securities in the public 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.

•
Certain immaterial differences are due to rounding.

•
N/M = Not Meaningful



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