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

CNA Financial Corporation

Statements of Operations and Comprehensive Income



Years ended December 31
(In millions)	2014			2013			2012
Revenues
Net investment income	$	1		$	1		$	1
Net realized investment gains	4			4			4
Other income	—			—			9
Total revenues	5			5			14
Expenses
Administrative and general	5			(7		)	1
Interest	182			165			164
Total expenses	187			158			165
Loss from operations before income taxes and equity in net income of subsidiaries	(182		)	(153		)	(151		)
Income tax benefit	35			22			144
Loss before equity in net income of subsidiaries	(147		)	(131		)	(7		)
Equity in net income of subsidiaries	838			1,068			635
Net income	691			937			628
Equity in other comprehensive income of subsidiaries	(42		)	(389		)	351
Total Comprehensive Income	$	649		$	548		$	979

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

CNA Financial Corporation

Balance Sheets



December 31
(In millions, except share data)	2014			2013
Assets
Investment in subsidiaries	$	14,867		$	14,708
Cash	1			1
Fixed maturity securities available-for-sale, at fair value (amortized cost of $1 and $1)	1			1
Short term investments	499			505
Amounts due from subsidiaries	—			3
Other assets	3			3
Total assets	$	15,371		$	15,221
Liabilities
Short term debt	$	—		$	549
Long term debt	2,529			1,981
Other liabilities	48			40
Total liabilities	2,577			2,570
Stockholders' Equity
Common stock ($2.50 par value; 500,000,000 shares authorized; 273,040,243 shares issued; 269,980,202 and 269,717,583 shares outstanding)	683			683
Additional paid-in capital	2,151			2,145
Retained earnings	9,645			9,495
Accumulated other comprehensive income	400			442
Treasury stock (3,060,041 and 3,322,660 shares), at cost	(84		)	(91		)
Notes receivable for the issuance of common stock	(1		)	(23		)
Total stockholders' equity	12,794			12,651
Total liabilities and stockholders' equity	$	15,371		$	15,221

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

CNA Financial Corporation

Statements of Cash Flows



Years ended December 31
(In millions)	2014			2013			2012
Cash Flows from Operating Activities
Net income	$	691		$	937		$	628
Adjustments to reconcile net income to net cash flows provided by operating activities:
Equity in net income of subsidiaries	(838		)	(1,068		)	(635		)
Dividends received from subsidiaries	650			400			450
Net realized investment gains	(4		)	(4		)	(4		)
Other, net	14			8			19
Total adjustments	(178		)	(664		)	(170		)
Net cash flows provided by operating activities	513			273			458
Cash Flows from Investing Activities
Proceeds from fixed maturity securities	—			1			1
Change in short term investments	6			(57		)	(156		)
Capital contributions to subsidiaries	(10		)	(12		)	(399		)
Repayment of surplus note by subsidiary	—			—			250
Other, net	5			4			4
Net cash flows used by investing activities	1			(64		)	(300		)
Cash Flows from Financing Activities
Dividends paid to common stockholders	(541		)	(216		)	(162		)
Proceeds from the issuance of debt	546			—			—
Repayment of debt	(549		)	(3		)	—
Stock options exercised	5			2			1
Other, net	25			9			3
Net cash flows used by financing activities	(514		)	(208		)	(158		)
Net change in cash	—			1			—
Cash, beginning of year	1			—			—
Cash, end of year	$	1		$	1		$	—

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

Notes to Condensed Financial Information

A. Basis of Presentation

The condensed financial information of CNA Financial Corporation (CNAF or the Parent Company) should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Item 8 of this Form 10-K. CNAF’s subsidiaries are accounted for using the equity method of accounting. Equity in net income of these subsidiaries is presented on the Condensed Statements of Operations as Equity in net income of subsidiaries. Loews owned approximately 90% of the outstanding common stock of CNAF as of December 31, 2014.

B. Commitments, Contingencies and Guarantees

As of December 31, 2014 CNAF had recorded liabilities of approximately $5 million related to indemnification agreements. The Parent Company believes that it is not likely that any future indemnity claims will be significantly greater than the amounts recorded. As of December 31, 2013 CNAF had no recorded liabilities related to guarantee or indemnification agreements.

In the course of selling business entities and assets to third parties, CNAF has agreed to guarantee the performance of certain obligations of both a previously owned subsidiary and a current subsidiary. Such obligations include agreement to indemnify purchasers for losses arising out of breaches of representation and warranties with respect to the business entities or assets sold, including, in certain cases, losses arising from undisclosed liabilities or certain named litigation. The guarantee agreements may include provisions that survive indefinitely. As of December 31, 2014, the aggregate amount of quantifiable guarantee agreements in effect for sales of business entities, assets and third-party loans was $625 million. Should the company be required to make payments under the guarantee, it would have the right to seek reimbursement in certain cases from an affiliate of a previously owned subsidiary.

In addition, CNAF has agreed to provide indemnification to third-party purchasers for certain losses associated with sold business entities or assets that are not limited by a contractual monetary amount. As of December 31, 2014, CNAF had outstanding unlimited indemnifications in connection with the sales of certain of its business entities or assets that included tax liabilities arising prior to a purchaser’s ownership of an entity or asset, defects in title at the time of sale, employee claims arising prior to closing and in some cases losses arising from certain litigation and undisclosed liabilities. These indemnification agreements survive until the applicable statutes of limitation expire or until the agreed upon contract terms expire.

In the normal course of business, CNAF also provided guarantees, if the primary obligor fails to perform, to holders of structured settlement annuities provided by a previously owned subsidiary, which are estimated to mature through 2120. The potential amount of future payments CNAF could be required to pay under these guarantees was approximately $1.9 billion at December 31, 2014. The Parent Company does not believe a payable is likely under these guarantees, as it is the beneficiary of a trust that must be maintained at a level that approximates the discounted reserves for these annuities.