0000021175-15-000100.txt : 20151102 0000021175-15-000100.hdr.sgml : 20151102 20151102105859 ACCESSION NUMBER: 0000021175-15-000100 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20151102 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20151102 DATE AS OF CHANGE: 20151102 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: 151189717 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 q3158k.htm FORM 8-K 8-K


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 2, 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 November 2, 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 third quarter 2015. 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 2, 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 November 2, 2015, providing information on the third quarter 2015 results of operations.
 
 
 
 
CNA Financial Corporation financial supplement, posted on its website November 2, 2015, providing supplemental financial information on the third quarter 2015.


4
 EX-99.1 2 q315exhibit991.htm EXHIBIT Exhibit


FOR IMMEDIATE RELEASE
CONTACT:
MEDIA:
 
ANALYSTS:
Brandon Davis, 312-822-5167
 
James Anderson, 312-822-7757
Sarah Pang, 312-822-6394
 
Derek G. Smith, 312-822-6612
 
 
Robert Tardella, 312-822-4387
CNA FINANCIAL ANNOUNCES THIRD QUARTER 2015 RESULTS
•
NET OPERATING INCOME OF $210 MILLION, $0.77 PER SHARE
•
P&C COMBINED RATIO OF 85.7%, LOWEST IN MORE THAN A DECADE
•
BOOK VALUE PER SHARE EXCLUDING AOCI OF $45.16
•
QUARTERLY DIVIDEND OF $0.25 PER SHARE
CHICAGO, November 2, 2015 --- CNA Financial Corporation (NYSE: CNA) today announced third quarter 2015 net operating income of $210 million, or $0.77 per share, and net income of $178 million, or $0.66 per share. Property & Casualty Operations' combined ratio for the third quarter was 85.7%.
CNA Financial also declared a quarterly dividend of $0.25 per share, payable December 2, 2015 to stockholders of record on November 16, 2015.
 
Results for the Three Months Ended September 30
 
Results for the Nine Months Ended September 30
($ millions, except per share data)
2015
 
2014
 
2015
 
2014
Net operating income (a)
$
210

 
$
182

 
$
567

 
$
644

Net realized investment gains (losses)
(32
)
 
27

 
(18
)
 
46

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

 
4

 
—

 
(197
)
Net income
$
178

 
$
213

 
$
549

 
$
493

 
 
 
 
 
 
 
 
Net operating income per diluted share
$
0.77

 
$
0.68

 
$
2.09

 
$
2.38

Net income per diluted share
0.66

 
0.79

 
2.03

 
1.82

 
September 30, 2015
 
December 31, 2014
Book value per share
$
45.38

 
$
47.39

Book value per share excluding AOCI
45.16

 
45.91


(a)
Management utilizes the net operating income financial measure to monitor the Company's operations. Please refer to Note P in the Consolidated Financial Statements within CNA's Annual Report on Form 10-K for the year ended December 31, 2014 for further discussion of this measure.

1

Property & Casualty Operations' net operating income was $263 million for the third quarter of 2015 as compared with $241 million in the prior year quarter. Improved underwriting results were partially offset by lower limited partnership investment results. Catastrophe losses were $10 million after tax for the third quarter of 2015 and prior year quarter, primarily due to U.S. weather-related events.
Net operating results for our non-core segments improved $6 million from the prior year quarter. The prior year quarter included a $34 million after-tax loss on a coinsurance transaction related to the sale of Continental Assurance Company and a $9 million reduction in the allowance for uncollectible reinsurance receivables. Excluding these items, the decline in results for our non-core segments in the current year quarter was driven by our long term care business.
After-tax net investment income decreased to $265 million for the third quarter of 2015 as compared with $346 million in the prior year quarter. This decrease was driven by limited partnership investments, which returned (3.2)% as compared with 1.0% in the prior year quarter.
Property & Casualty Operations
"Each of our segments achieved a solid underwriting result in the quarter highlighted by a P&C combined ratio of 85.7%,” said Thomas F. Motamed, Chairman and Chief Executive Officer of CNA Financial Corporation. “Most importantly, our loss ratio excluding catastrophes and development continues to step in the right direction particularly in the Commercial segment where we achieved a 3-point improvement from the same prior year period.”


 
Results for the Three Months Ended September 30
 
 
Results for the Nine Months Ended September 30
 
($ millions)
2015
 
2014
 
2015
 
2014
Net written premiums
$
1,529

 
 
$
1,560

 
 
$
4,836

 
 
$
4,981

 
NWP change (% year over year)
(2
)
%
 
(4
)
%
 
(3
)
%
 
(3
)
%
Net operating income
$
263

 
 
$
241

 
 
$
764

 
 
$
696

 
Net income
228

 
 
247

 
 
738

 
 
708

 
 
 
 
 
 
 
 
 
 
 
 
 
Loss ratio excluding catastrophes and development
61.9

%
 
62.9

%
 
62.0

%
 
63.2

%
Effect of catastrophe impacts
0.9

 
 
1.0

 
 
2.1

 
 
3.0

 
Effect of development-related items
(10.7
)
 
 
(1.1
)
 
 
(3.7
)
 
 
0.1

 
Loss ratio
52.1

%
 
62.8

%
 
60.4

%
 
66.3

%
 
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
85.7

%
 
96.1

%
 
94.3

%
 
99.7

%
Combined ratio excluding catastrophes and development
95.5

%
 
96.2

%
 
95.9

%
 
96.6

%


2

Business Operating Highlights
Specialty
 
Results for the Three Months Ended September 30
 
 
Results for the Nine Months Ended September 30
 
($ millions)
2015
 
2014
 
2015
 
2014
Net written premiums
$
707

 
 
$
736

 
 
$
2,077

 
 
$
2,150

 
NWP change (% year over year)
(4
)
%
 
—

%
 
(3
)
%
 
(1
)
%
Net operating income
$
179

 
 
$
184

 
 
$
451

 
 
$
480

 
Net income
165

 
 
186

 
 
440

 
 
486

 
 
 
 
 
 
 
 
 
 
 
 
 
Loss ratio excluding catastrophes and development
61.6

%
 
61.2

%
 
61.9

%
 
62.2

%
Effect of catastrophe impacts
0.5

 
 
0.7

 
 
0.7

 
 
1.0

 
Effect of development-related items
(18.6
)
 
 
(11.2
)
 
 
(7.1
)
 
 
(6.1
)
 
Loss ratio
43.5

%
 
50.7

%
 
55.5

%
 
57.1

%
 
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
74.4

%
 
80.8

%
 
86.6

%
 
87.4

%
Combined ratio excluding catastrophes and development
92.5

%
 
91.3

%
 
93.0

%
 
92.5

%
•
Net operating income decreased $5 million for the third quarter of 2015 as compared with the prior year quarter. Improved underwriting results were more than offset by lower net investment income.
•
The combined ratio improved 6.4 points for the third quarter of 2015 as compared with the prior year quarter. The loss ratio improved 7.2 points driven by higher favorable net prior year development. Catastrophe losses were $3 million, or 0.5 points of the loss ratio, for the third quarter of 2015 as compared with $5 million, or 0.7 points of the loss ratio for the prior year quarter. The expense ratio increased 1.0 point for the third quarter of 2015 as compared with the prior year quarter, due to the unfavorable effect of lower net earned premiums.
•
Net written premiums for the third quarter of 2015 decreased $29 million as compared with the prior year quarter, driven by lower new business. Average rate was flat for the policies that renewed in the third quarter of 2015 while achieving a retention of 86%.

3

Commercial
 
Results for the Three Months Ended September 30
 
 
Results for the Nine Months Ended September 30
 
($ millions)
2015
 
2014
 
2015
 
2014
Net written premiums
$
642

 
 
$
634

 
 
$
2,118

 
 
$
2,133

 
NWP change (% year over year)
1

%
 
(8
)
%
 
(1
)
%
 
(5
)
%
Net operating income
$
75

 
 
$
52

 
 
$
273

 
 
$
175

 
Net income
54

 
 
57

 
 
257

 
 
181

 
 
 
 
 
 
 
 
 
 
 
 
 
Loss ratio excluding catastrophes and development
60.4

%
 
63.3

%
 
62.3

%

65.1

%
Effect of catastrophe impacts
1.4

 
 
2.0

 
 
4.0

 
 
5.6

 
Effect of development-related items
(1.2
)
 
 
10.6

 
 
0.2

 
 
8.2

 
Loss ratio
60.6

%
 
75.9

%
 
66.5

%
 
78.9

%
 
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
95.8

%
 
110.7

%
 
102.1

%
 
113.4

%
Combined ratio excluding catastrophes and development
95.6

%
 
98.1

%
 
97.9

%
 
99.6

%
•
Net operating income increased $23 million for the third quarter of 2015 as compared with the prior year quarter, due to improved underwriting results partially offset by lower net investment income.
•
The combined ratio improved 14.9 points for the third quarter of 2015 as compared with the prior year quarter. The loss ratio improved 15.3 points, due to favorable net prior year development in the current year quarter as compared to unfavorable net prior year development for the prior year quarter and an improved current accident year loss ratio. Catastrophe losses were $10 million, or 1.4 points of the loss ratio, for the third quarter of 2015, as compared with $14 million, or 2.0 points of the loss ratio, for the prior year quarter. The expense ratio increased 0.6 points for the third quarter of 2015 as compared with the prior year quarter, due to the unfavorable effect of lower net earned premiums.
•
Net written premiums increased $8 million for the third quarter of 2015 as compared with the prior year quarter. Higher new business and retention as well as positive rate were substantially offset by the residual effect of previous underwriting actions undertaken in certain business classes. Average rate increased 2% for the policies that renewed in the third quarter of 2015 while achieving a retention of 76%.


4

International
 
Results for the Three Months Ended September 30
 
 
Results for the Nine Months Ended September 30
 
($ millions)
2015
 
2014
 
2015
 
2014
Net written premiums
$
180

 
 
$
190

 
 
$
641

 
 
$
698

 
NWP change (% year over year)
(5
)
%
 
(3
)
%
 
(8
)
%
 
—

%
Net operating income
$
9

 
 
$
5

 
 
$
40

 
 
$
41

 
Net income
9

 
 
4

 
 
41

 
 
41

 
 
 
 
 
 
 
 
 
 
 
 
 
Loss ratio excluding catastrophes and development
68.0

%
 
67.0

%
 
61.1

%

60.3

%
Effect of catastrophe impacts
0.3

 
 
(1.0
)
 
 
0.8

 
 
0.7

 
Effect of development-related items
(15.9
)
 
 
(6.3
)
 
 
(6.0
)
 
 
(6.2
)
 
Loss ratio
52.4

%
 
59.7

%
 
55.9

%
 
54.8

%
 
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
90.4

%
 
99.0

%
 
93.5

%
 
94.1

%
Combined ratio excluding catastrophes and development
106.0

%
 
106.3

%
 
98.7

%
 
99.6

%
•
Net operating income increased $4 million for the third quarter of 2015 as compared with the prior year quarter, due to improved underwriting results driven by higher favorable net prior year development.
•
The combined ratio improved 8.6 points for the third quarter of 2015 as compared with the prior year quarter. The loss ratio improved 7.3 points. This improvement was due to higher favorable net prior year development, partially offset by a higher current accident year loss ratio. The deterioration in the current accident year loss ratio was driven by large losses, including losses related to the explosion in Tianjin, China. The expense ratio improved 1.3 points due to lower expenses, partially offset by the unfavorable effect of lower net earned premiums.
•
Net written premiums decreased $10 million for the third quarter of 2015 as compared with the prior year quarter. The decrease was driven by the unfavorable effect of foreign currency exchange rates. Excluding the effect of foreign currency exchange rates, net written premiums increased 5% for the third quarter of 2015 as compared with the prior year quarter driven by higher new business. Average rate decreased 1% for the policies that renewed in the third quarter of 2015 while achieving a retention of 73%.

5

Life & Group Non-Core
 
Results for the Three Months Ended September 30
 
Results for the Nine Months Ended September 30
($ millions)
2015
 
2014
 
2015
 
2014
Total operating revenues
$
318

 
$
313

 
$
960

 
$
948

Net operating loss
(30
)
 
(42
)
 
(71
)
 
(35
)
Net loss
(28
)
 
(21
)
 
(65
)
 
(7
)
•
Net operating loss decreased $12 million for the third quarter of 2015 as compared with the prior year quarter. The prior year quarter included a $34 million after-tax loss on the coinsurance transaction. The net operating loss for our long term care business increased $23 million. Long term care results in 2014 benefited from unusually favorable morbidity experience as compared to unfavorable morbidity experience in the current year quarter.
Corporate & Other Non-Core
 
Results for the Three Months Ended September 30
 
Results for the Nine Months Ended September 30
($ millions)
2015
 
2014
 
2015
 
2014
Interest expense
$
39

 
$
48

 
$
117

 
$
138

Net operating loss
(23
)
 
(17
)
 
(126
)
 
(17
)
Net loss
(22
)
 
(17
)
 
(124
)
 
(11
)
•
Net operating loss increased $6 million for the third quarter of 2015 as compared with the prior year quarter. The current year quarter included lower interest expense due to maturity of higher coupon debt in the fourth quarter of 2014. Results in the prior year quarter were favorably affected by a $9 million after-tax reduction in the allowance for uncollectible reinsurance receivables arising from a change in estimate.



6

About the Company
Serving businesses and professionals since 1897, CNA is the country's eighth largest commercial insurance writer and the 14th 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) 299-7209, or for international callers, (719) 325-2494. The call will also be broadcast live on the internet at http://investor.cna.com or you may go to the investor relations pages of the CNA website (www.cna.com) for further details. A presentation will be posted and available on the CNA website and will provide additional insight into the results.
The call is available to the media, but questions will be restricted to investors and the professional investment community. An online replay will be available on CNA's website following the call. 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 asbestos and environmental pollution.
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 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.

# # #

7
 EX-99.2 3 q315exhibit992.htm EXHIBIT Exhibit
    





            

 
 
 
 
 




CNA Financial Corporation
Supplemental Financial Information


September 30, 2015



 
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...........................................................................................................................................................................................................
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.................................................................................................................................................................
Definitions and Presentation..............................................................................................................................................................................................



    




Statements of Operations

Periods ended September 30
Three Months
 
 
Nine Months
 
(In millions)
2015

2014
 
Change
 
 
2015
 
2014
 
Change
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earned premiums
$
1,751

 
$
1,810

 
(3
)
%
 
$
5,173

 
$
5,427

 
(5
)
%
Net investment income
354

 
480

 
(26
)
 
 
1,412

 
1,556

 
(9
)
 
Net realized investment gains (losses):
 
 
 
 
 
 
 
 
 
 
 
 
 
Other-than-temporary impairment (OTTI) losses
(56
)
 
(10
)
 
 
 
 
(99
)
 
(17
)
 
 
 
Portion of OTTI recognized in Other comprehensive income (loss)
—

 
—

 
 
 
 
—

 
—

 
 
 
Net OTTI losses recognized in earnings
(56
)
 
(10
)
 


 
 
(99
)
 
(17
)
 
 
 
Other net realized investment gains (losses)
7

 
47

 
 
 
 
60

 
86

 
 
 
Net realized investment gains (losses)
(49
)
 
37

 


 
 
(39
)
 
69

 
 
 
Other revenues
97

 
84

 
 
 
 
286

 
262

 
 
 
Total revenues
2,153

 
2,411

 
(11
)
 
 
6,832

 
7,314

 
(7
)
 
Claims, Benefits and Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Insurance claims and policyholders' benefits
1,200

 
1,354

 
 
 
 
4,008

 
4,241

 
 
 
Amortization of deferred acquisition costs
319

 
332

 
 
 
 
936

 
996

 
 
 
Other operating expenses
362

 
384

 
 
 
 
1,061

 
984

 
 
 
Interest
39

 
48

 
 
 
 
117

 
138

 
 
 
Total claims, benefits and expenses
1,920

 
2,118

 
9

 
 
6,122

 
6,359

 
4

 
Income (loss) before income tax
233

 
293

 


 
 
710

 
955

 
 
 
Income tax (expense) benefit
(55
)
 
(84
)
 
 
 
 
(161
)
 
(265
)
 
 
 
Income (loss) from continuing operations
178

 
209

 
(15
)
 
 
549

 
690

 
(20
)
 
Income (loss) from discontinued operations, net of tax
—

 
4

 
 
 
 
—

 
(197
)
 
 
 
Net income (loss)
$
178

 
$
213

 
(16
)
%
 
$
549

 
$
493

 
11

%


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)
2015
 
2014
 
 
2015
 
2014
 
Components of Income (Loss)
 
 
 
 
 
 
 
 
 
Net operating income (loss)
$
210

 
$
182

 
 
$
567

 
$
644

 
Net realized investment gains (losses), after tax
(32
)
 
27

 
 
(18
)
 
46

 
Income (loss) from continuing operations
178

 
209

 
 
549

 
690

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

 
4

 
 
—

 
(197
)
 
Net income (loss)
$
178

 
$
213

 
 
$
549

 
$
493

 
 
 
 
 
 
 
 
 
 
 
Diluted Earnings (Loss) Per Share
 
 
 
 
 
 
 
 
 
Net operating income (loss)
$
0.77

 
$
0.68

 
 
$
2.09

 
$
2.38

 
Net realized investment gains (losses), after tax
(0.11
)
 
0.09

 
 
(0.06
)
 
0.17

 
Income (loss) from continuing operations
0.66

 
0.77

 
 
2.03

 
2.55

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

 
0.02

 
 
—

 
(0.73
)
 
Diluted earnings (loss) per share
$
0.66

 
$
0.79

 

$
2.03

 
$
1.82

 
 
 
 
 
 
 
 
 
 
 
Weighted Average Outstanding Common Stock and Common Stock Equivalents
 
 
 
 
 
 
 
 
 
Basic
270.3

 
269.9

 
 
270.2

 
269.9

 
Diluted
270.8

 
270.6

 
 
270.7

 
270.6

 
 
 
 
 
 
 
 
 
 
 
Return on Equity
 
 
 
 
 
 
 
 
 
Net income (loss) (1)
5.8

%
6.5

%
 
5.8

%
5.1

%
Net operating income (loss) (2)
6.9

 
6.0

 
 
6.1

 
7.0

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

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


2

    




Selected Balance Sheets Data and Statements of Cash Flows Data(1) 
(In millions, except per share data)
September 30, 2015
 
December 31, 2014
Total investments
$
45,318

 
$
46,262

Reinsurance receivables, net of allowance for uncollectible receivables
4,491

 
4,694

Total assets
54,812

 
55,566

Insurance reserves
36,093

 
36,380

Debt
2,561

 
2,559

Total liabilities
42,547

 
42,772

Accumulated other comprehensive income (loss) (2)
60

 
400

Total stockholders' equity
12,265

 
12,794

 
 
 
 
Book value
$
45.38

 
$
47.39

Book value excluding AOCI
$
45.16

 
$
45.91

 
 
 
 
Outstanding shares of common stock
270.3

 
270.0

 
 
 
 
Statutory capital and surplus - Combined Continental Casualty Companies (3)
$
10,885

 
$
11,155

Three months ended September 30
2015
 
2014
Net cash flows provided (used) by operating activities
$
505

 
$
460

Net cash flows provided (used) by investing activities
(341
)
 
(353
)
Net cash flows provided (used) by financing activities
(69
)
 
(68
)
Net cash flows provided (used) by operating, investing and financing activities
$
95

 
$
39

Nine months ended September 30
2015
 
2014
Net cash flows provided (used) by operating activities
$
1,045

 
$
1,047

Net cash flows provided (used) by investing activities
(254
)
 
(1,087
)
Net cash flows provided (used) by financing activities
(739
)
 
95

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

 
$
55

(1) On August 1, 2014, CNA completed the sale of the common stock of Continental Assurance Company (CAC), CNA's former life insurance subsidiary. CNA elected to include CAC cash flow data in the comparative period.
(2) As of September 30, 2015 and December 31, 2014, the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $1,046 million and $1,288 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) Statutory capital and surplus as of September 30, 2015 is preliminary.

3

    



Property & Casualty - Results of Operations
Periods ended September 30
Three Months
 
 
Nine Months
 
(In millions)
2015
 
2014
 
Change
 
 
2015
 
2014
 
Change
 
Gross written premiums
$
2,474

 
$
2,320

 
7

%
 
$
7,577

 
$
7,224

 
5

%
Net written premiums
1,529

 
1,560

 
(2
)
 
 
4,836

 
4,981

 
(3
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earned premiums
1,614

 
1,671

 
(3
)
 
 
4,762

 
5,011

 
(5
)
 
Net investment income
171

 
298

 


 
 
860

 
1,018

 
 
 
Other revenues
96

 
86

 


 
 
272

 
246

 
 
 
Total operating revenues
1,881

 
2,055

 
(8
)
 
 
5,894

 
6,275

 
(6
)
 
Insurance claims and policyholders' benefits
842

 
1,053

 

 
 
2,885

 
3,332

 
 
 
Amortization of deferred acquisition costs
313

 
325

 


 
 
917

 
974

 
 
 
Other insurance related expenses
228

 
227

 


 
 
688

 
686

 
 
 
Other expenses
92

 
83

 


 
 
241

 
236

 
 
 
Total claims, benefits and expenses
1,475

 
1,688

 
13

 
 
4,731

 
5,228

 
10

 
Operating income (loss) before income tax
406

 
367

 


 
 
1,163

 
1,047

 
 
 
Income tax (expense) benefit on operating income (loss)
(143
)
 
(126
)
 


 
 
(399
)
 
(351
)
 
 
 
Net operating income (loss)
$
263

 
$
241

 
9

%
 
$
764

 
$
696

 
10

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Performance Metrics
 
 
 
 
 
 
 
 
 
 
 
 
 
Underwriting gain (loss)
$
231

 
$
66

 
N/M

%
 
$
272

 
$
19

 
N/M

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss & LAE ratio
52.1

%
62.8

%
10.7

pts
 
60.4

%
66.3

%
5.9

pts
Acquisition expense ratio
19.1

 
19.5

 
0.4

 
 
19.1

 
19.4

 
0.3

 
Underwriting expense ratio
14.4

 
13.6

 
(0.8
)
 
 
14.6

 
13.8

 
(0.8
)
 
Expense ratio
33.5

 
33.1

 
(0.4
)
 
 
33.7

 
33.2

 
(0.5
)
 
Dividend ratio
0.1

 
0.2

 
0.1

 
 
0.2

 
0.2

 
—

 
Combined ratio
85.7

%
96.1

%
10.4

 
 
94.3

%
99.7

%
5.4

 
Combined ratio excluding catastrophes and development
95.5

%
96.2

%
0.7

pts
 
95.9

%
96.6

%
0.7

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net accident year catastrophe losses incurred
$
14

 
$
17

 

 
 
$
103

 
$
147

 
 
 
Effect on loss & LAE ratio
0.9

%
1.0

%
0.1

pts
 
2.1

%
3.0

%
0.9

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net prior year development and other: (favorable) / unfavorable
$
(175
)
 
$
(19
)
 


 
 
$
(182
)
 
$
(4
)
 
 
 
Effect on loss & LAE ratio
(10.7
)
%
(1.1
)
%
9.6

pts
 
(3.7
)
%
0.1

%
3.8

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rate
1

%
3

%
(2
)
pts
 
1

%
3

%
(2
)
pts
Retention
80

%
79

%
1

pts
 
80

%
78

%
2

pts
New Business
$
225

 
$
224

 
—

%
 
$
711

 
$
723

 
(2
)
%

4

    



Specialty - Results of Operations
Periods ended September 30
Three Months
 
 
Nine Months
 
(In millions)
2015
 
2014
 
Change
 
 
2015

2014
 
Change
 
Gross written premiums
$
1,604

 
$
1,442

 
11

%
 
$
4,619

 
$
4,193

 
10

%
Net written premiums
707

 
736

 
(4
)
 
 
2,077

 
2,150

 
(3
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earned premiums
706

 
725

 
(3
)
 
 
2,075

 
2,126

 
(2
)
 
Net investment income
76

 
126

 
 
 
 
365

 
423

 


 
Other revenues
86

 
76

 
 
 
 
245

 
218

 


 
Total operating revenues
868

 
927

 
(6
)
 
 
2,685

 
2,767

 
(3
)
 
Insurance claims and policyholders' benefits
308

 
369

 
 
 
 
1,155

 
1,217

 

 
Amortization of deferred acquisition costs
150

 
151

 
 
 
 
440

 
442

 


 
Other insurance related expenses
67

 
65

 
 
 
 
202

 
197

 


 
Other expenses
73

 
65

 
 
 
 
209

 
191

 


 
Total claims, benefits and expenses
598

 
650

 
8

 
 
2,006

 
2,047

 
2

 
Operating income (loss) before income tax
270

 
277

 
 
 
 
679

 
720

 


 
Income tax (expense) benefit on operating income (loss)
(91
)
 
(93
)
 
 
 
 
(228
)
 
(240
)
 


 
Net operating income (loss)
$
179

 
$
184

 
(3
)
%
 
$
451

 
$
480

 
(6
)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Performance Metrics
 
 
 
 
 
 
 
 
 
 
 
 
 
Underwriting gain (loss)
$
181

 
$
140

 
29

%
 
$
278

 
$
270

 
3

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss & LAE ratio
43.5

%
50.7

%
7.2

pts
 
55.5

%
57.1

%
1.6

pts
Acquisition expense ratio
19.6

 
19.7

 
0.1

 
 
19.7

 
19.8

 
0.1

 
Underwriting expense ratio
11.2

 
10.1

 
(1.1
)
 
 
11.2

 
10.3

 
(0.9
)
 
Expense ratio
30.8

 
29.8

 
(1.0
)
 
 
30.9

 
30.1

 
(0.8
)
 
Dividend ratio
0.1

 
0.3

 
0.2

 
 
0.2

 
0.2

 
—

 
Combined ratio
74.4

%
80.8

%
6.4

 
 
86.6

%
87.4

%
0.8

 
Combined ratio excluding catastrophes and development
92.5

%
91.3

%
(1.2
)
pts
 
93.0

%
92.5

%
(0.5
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net accident year catastrophe losses incurred
$
3

 
$
5

 
 
 
 
$
15

 
$
21

 


 
Effect on loss & LAE ratio
0.5

%
0.7

%
0.2

pts
 
0.7

%
1.0

%
0.3

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net prior year development and other: (favorable) / unfavorable
$
(132
)
 
$
(83
)
 
 
 
 
$
(151
)
 
$
(135
)
 


 
Effect on loss & LAE ratio
(18.6
)
%
(11.2
)
%
7.4

pts
 
(7.1
)
%
(6.1
)
%
1.0

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rate
—

%
3

%
(3
)
pts
 
1

%
3

%
(2
)
pts
Retention
86

%
87

%
(1
)
pts
 
86

%
87

%
(1
)
pts
New Business
$
67

 
$
87

 
(23
)
%
 
$
206

 
$
239

 
(14
)
%

5

    



Commercial - Results of Operations
Periods ended September 30
Three Months
 
 
Nine Months
 
(In millions)
2015
 
2014
 
Change
 
 
2015
 
2014
 
Change
 
Gross written premiums
$
674

 
$
672

 
—

%
 
$
2,241

 
$
2,245

 
—

%
Net written premiums
642

 
634

 
1

 
 
2,118

 
2,133

 
(1
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earned premiums
705

 
721

 
(2
)
 
 
2,086

 
2,188

 
(5
)
 
Net investment income
82

 
157

 


 
 
455

 
549

 
 
 
Other revenues
9

 
10

 


 
 
27

 
28

 
 
 
Total operating revenues
796

 
888

 
(10
)
 
 
2,568

 
2,765

 
(7
)
 
Insurance claims and policyholders' benefits
428

 
550

 


 
 
1,394

 
1,733

 
 
 
Amortization of deferred acquisition costs
118

 
122

 


 
 
352

 
371

 
 
 
Other insurance related expenses
128

 
125

 


 
 
385

 
376

 
 
 
Other expenses
10

 
10

 


 
 
23

 
25

 
 
 
Total claims, benefits and expenses
684

 
807

 
15

 
 
2,154

 
2,505

 
14

 
Operating income (loss) before income tax
112

 
81

 


 
 
414

 
260

 
 
 
Income tax (expense) benefit on operating income (loss)
(37
)
 
(29
)
 


 
 
(141
)
 
(85
)
 
 
 
Net operating income (loss)
$
75

 
$
52

 
44

%
 
$
273

 
$
175

 
56

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Performance Metrics
 
 
 
 
 
 
 
 
 
 
 
 
 
Underwriting gain (loss)
$
31

 
$
(76
)
 
141

%
 
$
(45
)
 
$
(292
)
 
85

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss & LAE ratio
60.6

%
75.9

%
15.3

pts
 
66.5

%
78.9

%
12.4

pts
Acquisition expense ratio
17.6

 
17.6

 
—

 
 
17.7

 
17.6

 
(0.1
)
 
Underwriting expense ratio
17.6

 
17.0

 
(0.6
)
 
 
17.7

 
16.6

 
(1.1
)
 
Expense ratio
35.2

 
34.6

 
(0.6
)
 
 
35.4

 
34.2

 
(1.2
)
 
Dividend ratio
—

 
0.2

 
0.2

 
 
0.2

 
0.3

 
0.1

 
Combined ratio
95.8

%
110.7

%
14.9

 
 
102.1

%
113.4

%
11.3

 
Combined ratio excluding catastrophes and development
95.6

%
98.1

%
2.5

pts
 
97.9

%
99.6

%
1.7

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net accident year catastrophe losses incurred
$
10

 
$
14

 


 
 
$
83

 
$
121

 
 
 
Effect on loss & LAE ratio
1.4

%
2.0

%
0.6

pts
 
4.0

%
5.6

%
1.6

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net prior year development and other: (favorable) / unfavorable
$
(11
)
 
$
76

 


 
 
$
(1
)
 
$
172

 
 
 
Effect on loss & LAE ratio
(1.2
)
%
10.6

%
11.8

pts
 
0.2

%
8.2

%
8.0

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rate
2

%
4

%
(2
)
pts
 
2

%
5

%
(3
)
pts
Retention
76

%
74

%
2

pts
 
77

%
72

%
5

pts
New Business
$
135

 
$
116

 
16

%
 
$
422

 
$
396

 
7

%

6

    



International - Results of Operations
Periods ended September 30
Three Months
 
 
Nine Months
 
(In millions)
2015
 
2014
 
Change
 
 
2015
 
2014
 
Change
 
Gross written premiums
$
196

 
$
206

 
(5
)
%
 
$
717

 
$
786

 
(9
)
%
Net written premiums
180

 
190

 
(5
)
 
 
641

 
698

 
(8
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earned premiums
203

 
225

 
(10
)
 
 
601

 
697

 
(14
)
 
Net investment income
13

 
15

 


 
 
40

 
46

 
 
 
Other revenues
1

 
—

 


 
 
—

 
—

 
 
 
Total operating revenues
217

 
240

 
(10
)
 
 
641

 
743

 
(14
)
 
Insurance claims and policyholders' benefits
106

 
134

 


 
 
336

 
382

 
 
 
Amortization of deferred acquisition costs
45

 
52

 


 
 
125

 
161

 
 
 
Other insurance related expenses
33

 
37

 


 
 
101

 
113

 
 
 
Other expenses
9

 
8

 


 
 
9

 
20

 
 
 
Total claims, benefits and expenses
193

 
231

 
16

 
 
571

 
676

 
16

 
Operating income (loss) before income tax
24

 
9

 


 
 
70

 
67

 
 
 
Income tax (expense) benefit on operating income (loss)
(15
)
 
(4
)
 


 
 
(30
)
 
(26
)
 
 
 
Net operating income (loss)
$
9

 
$
5

 
80

%
 
$
40

 
$
41

 
(2
)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Performance Metrics
 
 
 
 
 
 
 
 
 
 
 
 
 
Underwriting gain (loss)
$
19

 
$
2

 
N/M

%
 
$
39

 
$
41

 
(5
)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss & LAE ratio
52.4

%
59.7

%
7.3

pts
 
55.9

%
54.8

%
(1.1
)
pts
Acquisition expense ratio
22.8

 
24.5

 
1.7

 
 
22.0

 
23.8

 
1.8

 
Underwriting expense ratio
15.2

 
14.8

 
(0.4
)
 
 
15.6

 
15.5

 
(0.1
)
 
Expense ratio
38.0

 
39.3

 
1.3

 
 
37.6

 
39.3

 
1.7

 
Dividend ratio
—

 
—

 
—

 
 
—

 
—

 
—

 
Combined ratio
90.4

%
99.0

%
8.6

 
 
93.5

%
94.1

%
0.6

 
Combined ratio excluding catastrophes and development
106.0

%
106.3

%
0.3

pts
 
98.7

%
99.6

%
0.9

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net accident year catastrophe losses incurred
$
1

 
$
(2
)
 


 
 
$
5

 
$
5

 
 
 
Effect on loss & LAE ratio
0.3

%
(1.0
)
%
(1.3
)
pts
 
0.8

%
0.7

%
(0.1
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net prior year development and other: (favorable) / unfavorable
$
(32
)
 
$
(12
)
 


 
 
$
(30
)
 
$
(41
)
 
 
 
Effect on loss & LAE ratio
(15.9
)
%
(6.3
)
%
9.6

pts
 
(6.0
)
%
(6.2
)
%
(0.2
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rate
(1
)
%
(1
)
%
—

pts
 
(1
)
%
(1
)
%
—

pts
Retention
73

%
72

%
1

pts
 
76

%
77

%
(1
)
pts
New Business
$
23

 
$
21

 
10

%
 
$
83

 
$
88

 
(6
)
%

7

    



Life & Group Non-Core - Results of Operations
Periods ended September 30
Three Months
 
 
Nine Months
 
(In millions)
2015
 
2014
 
Change
 
 
2015
 
2014
 
Change
 
Net earned premiums
$
137

 
$
139

 
(1
)
%
 
$
412

 
$
417

 
(1
)
%
Net investment income
182

 
177

 


 
 
540

 
521

 
 
 
Other revenues
(1
)
 
(3
)
 


 
 
8

 
10

 
 
 
Total operating revenues
318

 
313

 
2

 
 
960

 
948

 
1

 
Insurance claims and policyholders' benefits
361

 
319

 


 
 
1,045

 
929

 
 
 
Amortization of deferred acquisition costs
6

 
7

 


 
 
19

 
22

 
 
 
Other insurance related expenses
35

 
33

 


 
 
104

 
96

 
 
 
Other expenses
1

 
36

 


 
 
10

 
34

 
 
 
Total claims, benefits and expenses
403

 
395

 
(2
)
 
 
1,178

 
1,081

 
(9
)
 
Operating income (loss) before income tax
(85
)
 
(82
)
 


 
 
(218
)
 
(133
)
 
 
 
Income tax (expense) benefit on operating income (loss)
55

 
40

 


 
 
147

 
98

 
 
 
Net operating income (loss)
$
(30
)
 
$
(42
)
 
29

%
 
$
(71
)
 
$
(35
)
 
(103
)
%


8

    



Corporate & Other Non-Core - Results of Operations
Periods ended September 30
Three Months
 
 
Nine Months
 
(In millions)
2015
 
2014
 
Change
 
 
2015
 
2014
 
Change
 
Net earned premiums
$
—

 
$
—

 


 
 
$
(1
)
 
$
(1
)
 
 
 
Net investment income
1

 
5

 


 
 
12

 
17

 
 
 
Other revenues
2

 
1

 


 
 
6

 
6

 
 
 
Total operating revenues
3

 
6

 
(50
)
%
 
17

 
22

 
(23
)
%
Insurance claims and policyholders' benefits
(3
)
 
(18
)
 


 
 
78

 
(20
)
 
 
 
Amortization of deferred acquisition costs
—

 
—

 


 
 
—

 
—

 
 
 
Other insurance related expenses
—

 
—

 


 
 
(2
)
 
(1
)
 
 
 
Other expenses
45

 
53

 


 
 
137

 
71

 
 
 
Total claims, benefits and expenses
42

 
35

 
(20
)
 
 
213

 
50

 
N/M

 
Operating income (loss) before income tax
(39
)
 
(29
)
 


 
 
(196
)
 
(28
)
 
 
 
Income tax (expense) benefit on operating income (loss)
16

 
12

 


 
 
70

 
11

 
 
 
Net operating income (loss)
$
(23
)
 
$
(17
)
 
(35
)
%
 
$
(126
)
 
$
(17
)
 
N/M

%


9

    



Investment Summary - Consolidated
 
September 30, 2015
 
June 30, 2015

December 31, 2014
(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
$
18,188

 
$
1,030

 
$
18,127

 
$
1,249

 
$
18,889

 
$
1,660

States, municipalities and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Tax-exempt
10,203

 
911

 
9,837

 
765

 
9,802

 
988

Taxable
3,094

 
408

 
3,016

 
381

 
2,938

 
467

Total states, municipalities and political subdivisions
13,297

 
1,319

 
12,853

 
1,146

 
12,740

 
1,455

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
RMBS
5,041

 
191

 
5,100

 
160

 
5,233

 
205

CMBS
2,251

 
68

 
2,251

 
65

 
2,144

 
88

Other ABS
1,016

 
7

 
1,055

 
11

 
1,235

 
1

Total asset-backed
8,308

 
266

 
8,406

 
236

 
8,612

 
294

U.S. Treasury and obligations of government-sponsored enterprises
29

 
5

 
29

 
5

 
31

 
5

Foreign government
344

 
11

 
399

 
12

 
454

 
16

Redeemable preferred stock
35

 
2

 
35

 
2

 
42

 
3

Total fixed maturity securities
40,201

 
2,633

 
39,849

 
2,650

 
40,768

 
3,433

Equities
212

 
5

 
216

 
8

 
222

 
12

Limited partnership investments
2,738

 
—

 
2,930

 
—

 
2,937

 
—

Other invested assets
45

 
—

 
43

 
—

 
41

 
—

Mortgage loans
640

 
—

 
622

 
—

 
588

 
—

Short term investments
1,482

 
—

 
1,672

 
—

 
1,706

 
(1
)
Total investments
$
45,318

 
$
2,638

 
$
45,332

 
$
2,658

 
$
46,262

 
$
3,444

 
 
 
 
 
 
 
 
 
 
 
 
Net receivable/(payable) on investment activity
$
(92
)
 
 
 
$
(75
)
 
 
 
$
(58
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective portfolio duration (in years)
6.5

 
 
 
6.6

 
 
 
6.3

 
 
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, 2015
 
June 30, 2015
 
December 31, 2014
(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
$
12,926

 
$
276

 
$
12,796

 
$
400

 
$
13,444

 
$
542

States, municipalities and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Tax-exempt
2,663

 
112

 
2,589

 
82

 
2,561

 
127

Taxable
1,647

 
156

 
1,587

 
142

 
1,454

 
169

Total states, municipalities and political subdivisions
4,310

 
268

 
4,176

 
224

 
4,015

 
296

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
RMBS
4,921

 
183

 
4,974

 
151

 
5,101

 
196

CMBS
2,079

 
60

 
2,081

 
57

 
1,985

 
78

Other ABS
931

 
7

 
971

 
11

 
1,144

 
2

Total asset-backed
7,931

 
250

 
8,026

 
219

 
8,230

 
276

U.S. Treasury and obligations of government-sponsored enterprises
4

 
—

 
4

 
—

 
7

 
(1
)
Foreign government
344

 
11

 
397

 
12

 
449

 
15

Redeemable preferred stock
13

 
1

 
13

 
1

 
13

 
2

Total fixed maturity securities
25,528

 
806

 
25,412

 
856

 
26,158

 
1,130

Equities
104

 
2

 
99

 
5

 
87

 
9

Limited partnership investments
2,738

 
—

 
2,930

 
—

 
2,937

 
—

Other invested assets
45

 
—

 
43

 
—

 
41

 
—

Mortgage loans
584

 
—

 
566

 
—

 
531

 
—

Short term investments
1,390

 
—

 
1,561

 
(1
)
 
1,586

 
(1
)
Total investments
$
30,389

 
$
808

 
$
30,611

 
$
860

 
$
31,340

 
$
1,138

 
 
 
 
 
 
 
 
 
 
 
 
Net receivable/(payable) on investment activity
$
(41
)
 
 
 
$
(67
)
 
 
 
$
4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective portfolio duration (in years)
4.4

 
 
 
4.4

 
 
 
4.0

 
 
Weighted average rating of fixed maturity securities
A

 
 
 
A

 
 
 
A

 
 

11

    



Investment Summary - Life & Group Non-Core
 
September 30, 2015
 
June 30, 2015
 
December 31, 2014
(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
$
5,262

 
$
754

 
$
5,331

 
$
849

 
$
5,445

 
$
1,118

States, municipalities and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Tax-exempt
7,540

 
799

 
7,248

 
683

 
7,241

 
861

Taxable
1,447

 
252

 
1,429

 
239

 
1,484

 
298

Total states, municipalities and political subdivisions
8,987

 
1,051

 
8,677

 
922

 
8,725

 
1,159

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
RMBS
120

 
8

 
126

 
9

 
132

 
9

CMBS
172

 
8

 
170

 
8

 
159

 
10

Other ABS
85

 
—

 
84

 
—

 
91

 
(1
)
Total asset-backed
377

 
16

 
380

 
17

 
382

 
18

U.S. Treasury and obligations of government-sponsored enterprises
25

 
5

 
25

 
5

 
24

 
6

Foreign government
—

 
—

 
2

 
—

 
5

 
1

Redeemable preferred stock
22

 
1

 
22

 
1

 
29

 
1

Total fixed maturity securities
14,673

 
1,827

 
14,437

 
1,794

 
14,610

 
2,303

Equities
108

 
3

 
117

 
3

 
135

 
3

Limited partnership investments
—

 
—

 
—

 
—

 
—

 
—

Other invested assets
—

 
—

 
—

 
—

 
—

 
—

Mortgage loans
56

 
—

 
56

 
—

 
57

 
—

Short term investments
92

 
—

 
111

 
1

 
120

 
—

Total investments
$
14,929

 
$
1,830

 
$
14,721

 
$
1,798

 
$
14,922

 
$
2,306

 
 
 
 
 
 
 
 
 
 
 
 
Net receivable/(payable) on investment activity
$
(51
)
 
 
 
$
(8
)
 
 
 
$
(62
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective portfolio duration (in years)
10.3

 
 
 
10.5

 
 
 
10.5

 
 
Weighted average rating of fixed maturity securities
A+

 
 
 
A+

 
 
 
A+

 
 

12

    



Investments - Fixed Maturity Securities by Credit Rating  

September 30, 2015
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
$
—

 
$
—

 
$
166

 
$
6

 
$
961

 
$
58

 
$
4,992

 
$
501

 
$
10,285

 
$
476

 
$
1,784

 
$
(11
)
 
$
18,188

 
$
1,030

States, municipalities and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tax-exempt
—

 
—

 
1,017

 
81

 
5,920

 
576

 
3,061

 
245

 
113

 
2

 
92

 
7

 
10,203

 
911

Taxable
—

 
—

 
426

 
47

 
2,180

 
291

 
488

 
70

 
—

 
—

 
—

 
—

 
3,094

 
408

Total states, municipalities and political subdivisions
—

 
—

 
1,443

 
128

 
8,100

 
867

 
3,549

 
315

 
113

 
2

 
92

 
7

 
13,297

 
1,319

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RMBS
3,621

 
134

 
115

 
1

 
60

 
—

 
176

 
(1
)
 
107

 
1

 
962

 
56

 
5,041

 
191

CMBS
68

 
1

 
490

 
14

 
455

 
22

 
356

 
14

 
613

 
13

 
269

 
4

 
2,251

 
68

Other ABS
—

 
—

 
216

 
4

 
36

 
—

 
530

 
1

 
234

 
2

 
—

 
—

 
1,016

 
7

Total asset-backed
3,689

 
135

 
821

 
19

 
551

 
22

 
1,062

 
14

 
954

 
16

 
1,231

 
60

 
8,308

 
266

U.S. Treasury and obligations of government-sponsored enterprises
29

 
5

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
29

 
5

Foreign government
—

 
—

 
101

 
4

 
97

 
1

 
146

 
6

 
—

 
—

 
—

 
—

 
344

 
11

Redeemable preferred stock
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
11

 
1

 
24

 
1

 
35

 
2

Total fixed maturity securities
$
3,718

 
$
140

 
$
2,531

 
$
157

 
$
9,709

 
$
948

 
$
9,749

 
$
836

 
$
11,363

 
$
495

 
$
3,131

 
$
57

 
$
40,201

 
$
2,633

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of total fixed maturity securities
9
%
 
 
 
6
%
 
 
 
24
%
 
 
 
25
%
 
 
 
28
%
 
 
 
8
%
 
 
 
100
%
 
 



13

    



Components of Net Investment Income
 
Consolidated
 
Periods ended September 30
Three Months
 
Nine Months
 
(In millions)
2015
 
2014
 
2015
 
2014
 
Taxable fixed maturities
$
346

 
$
352

 
$
1,040

 
$
1,054

 
    Tax-exempt fixed maturities
103

 
101

 
304

 
302

 
Total fixed maturity securities
449

 
453

 
1,344

 
1,356

 
Limited partnership investments
(93
)
 
29

 
69

 
199

 
Other, net of investment expense
(2
)
 
(2
)
 
(1
)
 
1

 
Pretax net investment income
$
354

 
$
480

 
$
1,412

 
$
1,556

 
 
 
 
 
 
 
 
 
 
After-tax fixed maturity securities
$
326

 
$
327

 
$
968

 
$
976

 
After-tax net investment income
265

 
346

 
1,015

 
1,108

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

%
4.8

%
4.8

%
4.9

%
Effective income yield for the fixed maturity securities portfolio, after tax
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)
2015
 
2014
 
2015
 
2014
 
    Taxable fixed maturities
$
242

 
$
252

 
$
733

 
$
748

 
    Tax-exempt fixed maturities
23

 
23

 
66

 
84

 
Total fixed maturity securities
265

 
275

 
799

 
832

 
Limited partnership investments
(93
)
 
29

 
69

 
199

 
Other, net of investment expense
—

 
(1
)
 
4

 
4

 
Pretax net investment income
$
172

 
$
303

 
$
872

 
$
1,035

 
 
 
 
 
 
 
 
 
 
After-tax fixed maturity securities
$
180

 
$
188

 
$
542

 
$
570

 
After-tax net investment income
119

 
207

 
590

 
702

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

%
4.3

%
4.3

%
4.4

%
Effective income yield for the fixed maturity securities portfolio, after tax
2.9

 
3.0

 
2.9

 
3.0

 
 
Life & Group Non-Core
 
Periods ended September 30
Three Months
 
Nine Months
 
(In millions)
2015
 
2014
 
2015
 
2014
 
    Taxable fixed maturities
$
104

 
$
100

 
$
307

 
$
306

 
    Tax-exempt fixed maturities
80

 
78

 
238

 
218

 
Total fixed maturity securities
184

 
178

 
545

 
524

 
Limited partnership investments
—

 
—

 
—

 
—

 
Other, net of investment expense
(2
)
 
(1
)
 
(5
)
 
(3
)
 
Pretax net investment income
$
182

 
$
177

 
$
540

 
$
521

 
 
 
 
 
 
 
 
 
 
After-tax fixed maturity securities
$
146

 
$
139

 
$
426

 
$
406

 
After-tax net investment income
146

 
139

 
425

 
406

 
 
 
 
 
 
 
 
 
 
Effective income yield for the fixed maturity securities portfolio, pretax
5.8

%
5.9

%
5.8

%
5.9

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

 
4.6

 
4.5

 
4.6

 
 
 
 
 
 
 
 
 
 


14

    



Claim & Claim Adjustment Expense Reserve Rollforward
Three months ended September 30, 2015
(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
$
6,365

 
$
9,391

 
$
1,401

 
$
17,157

 
$
3,248

 
$
2,788

 
$
23,193

Ceded
687

 
635

 
154

 
1,476

 
324

 
2,484

 
4,284

Net
5,678

 
8,756


1,247


15,681


2,924


304


18,909

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net incurred claim & claim adjustment expenses
307

 
428

 
107

 
842

 
245

 
1

 
1,088

Net claim & claim adjustment expense payments
(397
)
 
(535
)
 
(104
)
 
(1,036
)
 
(189
)
 
(5
)
 
(1,230
)
Foreign currency translation adjustment and other
—

 
—

 
(36
)
 
(36
)
 
(4
)
 
(2
)
 
(42
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Claim & claim adjustment expense reserves, end of period
 
 
 
 
 
 
 
 
 
 
 
 
 
Net
5,588

 
8,649

 
1,214

 
15,451

 
2,976

 
298

 
18,725

Ceded
611

 
634

 
151

 
1,396

 
310

 
2,436

 
4,142

Gross
$
6,199

 
$
9,283

 
$
1,365

 
$
16,847

 
$
3,286

 
$
2,734

 
$
22,867

Nine months ended September 30, 2015
(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
$
6,229

 
$
9,514

 
$
1,441

 
$
17,184

 
$
3,183

 
$
2,904

 
$
23,271

Ceded
574

 
661

 
180

 
1,415

 
340

 
2,589

 
4,344

Net
5,655

 
8,853

 
1,261

 
15,769

 
2,843

 
315

 
18,927

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net incurred claim & claim adjustment expenses
1,152

 
1,389

 
336

 
2,877

 
710

 
3

 
3,590

Net claim & claim adjustment expense payments
(1,219
)
 
(1,593
)
 
(293
)
 
(3,105
)
 
(550
)
 
(17
)
 
(3,672
)
Foreign currency translation adjustment and other
—

 
—

 
(90
)
 
(90
)
 
(27
)
 
(3
)
 
(120
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Claim & claim adjustment expense reserves, end of period
 
 
 
 
 
 
 
 
 
 
 
 
 
Net
5,588

 
8,649

 
1,214

 
15,451

 
2,976

 
298

 
18,725

Ceded
611

 
634

 
151

 
1,396

 
310

 
2,436

 
4,142

Gross
$
6,199

 
$
9,283

 
$
1,365

 
$
16,847

 
$
3,286

 
$
2,734

 
$
22,867


15

    



Life & Group Non-Core Policyholder Reserves
September 30, 2015
 
 
 
 
 
(In millions)
Claim and claim adjustment expenses
 
Future policy benefits
 
Total
Long term care
$
2,251

 
$
8,116

 
$
10,367

Structured settlement annuities
586

 
—

 
586

Other
21

 
—

 
21

Total
2,858

 
8,116

 
10,974

Shadow adjustments (1)
118

 
1,196

 
1,314

Ceded reserves
310

 
208

 
518

Total gross reserves
$
3,286

 
$
9,520

 
$
12,806

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

(1) The Shadow adjustments presented above do not include $294 million and $314 million related to Deferred acquisition costs as of September 30, 2015 and December 31, 2014.

16

    



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 uses the net operating income (loss) financial measure to monitor the Company’s operations. Please refer to Note P to the Condensed Consolidated Financial Statements within the December 31, 2014 Form 10-K for further discussion of this measure.

•
Management uses underwriting results to monitor insurance operations. Underwriting results are pretax and are calculated as net earned premiums less total insurance expenses, which includes insurance claims and policyholders' benefits, amortization of deferred acquisition costs and other insurance related expenses.

•
In the evaluation of the results of Specialty, Commercial and International, management uses 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. Rate represents the average change in price on policies that renew excluding exposure change. Retention represents the expiring premium dollars renewed in comparison to the renewal premium dollars available to renew.

•
Pretax net prior year development and other includes the effects of interest accretion and change in allowance for uncollectible reinsurance and deductible amounts.

•
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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