0000021175-16-000124.txt : 20160208 0000021175-16-000124.hdr.sgml : 20160208 20160208112758 ACCESSION NUMBER: 0000021175-16-000124 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20160208 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20160208 DATE AS OF CHANGE: 20160208 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: 161394604 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 q4158k.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) February 8, 2016

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))






ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On February 8, 2016, 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, 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.




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 8, 2016
By
/s/ D. Craig Mense
 
 
(Signature)
 
 
D. Craig Mense
Executive Vice President and
Chief Financial Officer





EXHIBIT INDEX

Exhibit No.
 
Description
 
CNA Financial Corporation press release, issued February 8, 2016, providing information on the fourth quarter and year ended December 31, 2015 results of operations.
 
 
 
 
CNA Financial Corporation financial supplement, posted on its website February 8, 2016, providing supplemental financial information on the fourth quarter and year ended December 31, 2015.



 EX-99.1 2 q415exhibit991.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 FOURTH QUARTER 2015 RESULTS
•
Q4 NOL OF $52M; NOI OF $171M EX LTC CHARGE & INVESTMENT ACCOUNTING CHANGE
•
2015 P&C COMBINED RATIO OF 95.4% VS 97.7% IN 2014
•
12/31/2015 BVPS EX AOCI OF $44.66, UP 4% FOR 2015 ADJUSTED FOR DIVIDENDS
•
SPECIAL DIVIDEND OF $2.00 PER SHARE; QUARTERLY DIVIDEND OF $0.25 PER SHARE
CHICAGO, February 8, 2016 --- CNA Financial Corporation (NYSE: CNA) today announced a fourth quarter 2015 net operating loss of $52 million, or $0.19 per share, and net loss of $70 million, or $0.26 per share. Full year 2015 results were net operating income of $515 million, or $1.90 per share, and net income of $479 million, or $1.77 per share. Property & Casualty Operations combined ratio for the fourth quarter and full year was 98.9% and 95.4%, respectively.
CNA Financial declared a special dividend of $2.00 per share and a quarterly dividend of $0.25 per share, payable March 9, 2016 to stockholders of record on February 22, 2016.
 
Results for the Three Months Ended December 31
 
Results for the Year Ended December 31
($ millions, except per share data)
2015
 
2014
 
2015
 
2014
Net operating (loss) income (a)
$
(52
)
 
$
205

 
$
515

 
$
849

Net realized investment (losses) gains
(18
)
 
(7
)
 
(36
)
 
39

Loss from discontinued operations, net of tax
—

 
—

 
—

 
(197
)
Net (loss) income
$
(70
)
 
$
198

 
$
479

 
$
691

 
 
 
 
 
 
 
 
Net operating (loss) income per diluted share
$
(0.19
)
 
$
0.76

 
$
1.90

 
$
3.14

Net (loss) income per diluted share
(0.26
)
 
0.73

 
1.77

 
2.55

 
December 31, 2015
 
December 31, 2014
Book value per share
$
43.49
 
 
$
47.39
 
Book value per share excluding AOCI
 
44.66
 
 
 
45.91
 

(a)
Management utilizes the net operating income financial measure to monitor the Company's operations. Please refer to Note J in the Condensed Consolidated Financial Statements within the September 30, 2015 Form 10-Q for further discussion of this measure.

1

Property & Casualty Operations' net operating income was $202 million for the fourth quarter of 2015 as compared with $314 million in the prior year quarter. The decrease was driven by less favorable underwriting results and lower net investment income. Catastrophe losses for the fourth quarter were $27 million, after tax, as compared with $7 million, after tax, in the prior year quarter. Catastrophe losses in the fourth quarter of 2015 were primarily due to International weather-related events.
Net operating results for our non-core segments decreased $145 million from the prior year quarter, driven by results in our Life & Group Non-Core segment. Life & Group Non-Core results included a $198 million after-tax charge related to recognition of a premium deficiency and a small deficiency in claim reserves in our long term care business.
Net investment income, after tax, decreased to $314 million for the fourth quarter of 2015 as compared with $365 million in the prior year quarter. This decrease was primarily driven by limited partnerships, which returned 0.9% in the current quarter as compared with 2.2% in the prior year quarter. Income from fixed maturity securities, after tax, decreased by $26 million driven by a $25 million change in estimate effected by a change in accounting principle adopted to better reflect the yield on fixed maturity securities that have call provisions.
Full Year 2015 Consolidated Results
Net operating income for the full year 2015 decreased $334 million to $515 million from $849 million in the prior year largely driven by the results of our Life & Group Non-Core and Corporate Non-Core segments. Net operating results for our non-core segments decreased $290 million as compared with the prior year, driven by the long term care reserve unlocking charge discussed above and the unfavorable effect of the application of retroactive reinsurance accounting to adverse reserve development ceded under the 2010 Asbestos and Environmental Pollution Loss Portfolio Transfer.
Property & Casualty Operations' net operating income was $966 million in 2015 as compared with $1,010 million in the prior year. This decrease was primarily due to lower net investment income, partially offset by improved underwriting results. Catastrophe losses for the full year were $95 million, after tax, as compared with $102 million, after tax, in the prior year.
Net investment income, after tax, was $1,329 million for the current year as compared with $1,473 million in the prior year. This decrease was primarily driven by limited partnerships, which returned 3.0% in 2015 as compared with 9.7% in the prior year. Income from fixed maturity securities, after tax, decreased $34 million driven by the accounting change discussed above and lower reinvestment rates.

2

Property & Casualty Operations
"CNA’s core P&C business continues to perform well, highlighted by our fifth consecutive year of underlying loss ratio improvement despite a tough insurance operating environment. Specialty had another year of strong performance and Commercial delivered a three-point improvement in their underlying loss ratio. We believe this is reflective of our constant focus on underwriting discipline," said Thomas F. Motamed, Chairman and Chief Executive Officer of CNA Financial Corporation. "This sustained progress in our P&C business, as well as our strong capital position, gave the Board of Directors the confidence to declare a special dividend for the third consecutive year, validating our commitment to creating long-term value for our shareholders."

 
Results for the Three Months Ended December 31
 
Results for the Year Ended December 31
($ millions)
2015
 
2014
 
2015
 
2014
Net written premiums
$
1,585

 
 
$
1,555

 
 
$
6,421

 
 
$
6,536

 
NWP change (% year over year)
2

%
 
(8
)
%
 
(2
)
%
 
(4
)
%
Net operating income
$
202

 
 
$
314

 
 
$
966

 
 
$
1,010

 
Net income
176

 
 
322

 
 
914

 
 
1,030

 
 
 
 
 
 
 
 
 
 
 
 
 
Loss ratio excluding catastrophes and development
61.7

%
 
61.4

%
 
61.9

%
 
62.8

%
Effect of catastrophe impacts
2.4

 
 
0.6

 
 
2.2

 
 
2.3

 
Effect of development-related items
(1.2
)
 
 
(2.4
)
 
 
(3.1
)
 
 
(0.5
)
 
Loss ratio
62.9

%
 
59.6

%
 
61.0

%
 
64.6

%
 
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
98.9

%
 
91.8

%
 
95.4

%
 
97.7

%
Combined ratio excluding catastrophes and development
97.7

%
 
93.6

%
 
96.3

%
 
95.9

%



3

Business Operating Highlights
Specialty
 
Results for the Three Months Ended December 31
 
Results for the Year Ended December 31
($ millions)
2015
 
2014
 
2015
 
2014
Net written premiums
$
704

 
 
$
689

 
 
$
2,781

 
 
$
2,839

 
NWP change (% year over year)
2

%
 
(3)

%
 
(2
)
%
 
(1)

%
Net operating income
$
109

 
 
$
154

 
 
$
560

 
 
$
634

 
Net income
98

 
 
158

 
 
538

 
 
644

 
 
 
 
 
 
 
 
 
 
 
 
 
Loss ratio excluding catastrophes and development
63.5

%
 
60.1

%
 
62.3

%
 
61.7

%
Effect of catastrophe impacts
(0.3
)
 
 
—

 
 
0.4

 
 
0.7

 
Effect of development-related items
(0.1
)
 
 
(2.0
)
 
 
(5.3
)
 
 
(5.1
)
 
Loss ratio
63.1

%
 
58.1

%
 
57.4

%
 
57.3

%
 
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
95.0

%
 
88.4

%
 
88.7

%
 
87.6

%
Combined ratio excluding catastrophes and development
95.4

%
 
90.4

%
 
93.6

%
 
92.0

%
•
Net operating income decreased $45 million for the fourth quarter of 2015 as compared with the prior year quarter, due to less favorable underwriting results and lower net investment income.
•
The combined ratio increased 6.6 points for the fourth quarter of 2015 as compared with the prior year quarter. The loss ratio increased 5.0 points, due to a higher current accident year loss ratio and less favorable net prior year development. The unfavorable quarter over quarter accident year comparison was driven by a re-evaluation of our 2015 loss ratio that increased the full year by 0.4 points, which resulted in a catch up impact of 1.6 points on the fourth quarter's loss ratio. In 2014, our fourth quarter accident year loss ratio was favorably affected by the re-evaluation of our estimated 2014 full year loss ratio downward by 0.5 points, and the related positive four quarter catch up impact was 2.0 points on the fourth quarter loss ratio. The expense ratio increased 1.5 points for the fourth quarter of 2015 as compared with the prior year quarter primarily driven by increased underwriting expenses.
•
Net written premiums were consistent as compared with the prior year quarter. Average rate was unchanged for the policies that renewed in the fourth quarter of 2015 while achieving a retention of 87%.

4

Commercial
 
Results for the Three Months Ended December 31
 
Results for the Year Ended December 31
($ millions)
2015
 
2014
 
2015
 
2014
Net written premiums
$
700

 
 
$
684

 
 
$
2,818

 
 
$
2,817

 
NWP change (% year over year)
2

%
 
(5
)
%
 
—

%
 
(5
)
%
Net operating income
$
96

 
 
$
132

 
 
$
369

 
 
$
307

 
Net income
81

 
 
136

 
 
338

 
 
317

 
 
 
 
 
 
 
 
 
 
 
 
 
Loss ratio excluding catastrophes and development
59.3

%
 
63.0

%
 
61.6

%
 
64.6

%
Effect of catastrophe impacts
2.7

 
 
0.6

 
 
3.6

 
 
4.4

 
Effect of development-related items
(1.4
)
 
 
0.6

 
 
(0.1
)
 
 
6.3

 
Loss ratio
60.6

%
 
64.2

%
 
65.1

%
 
75.3

%
 
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
99.6

%
 
96.8

%
 
101.5

%
 
109.3

%
Combined ratio excluding catastrophes and development
98.3

%
 
95.6

%
 
98.0

%
 
98.6

%
•
Net operating income decreased $36 million for the fourth quarter of 2015 as compared with the prior year quarter. This decrease was primarily driven by lower net investment income and less favorable current accident year underwriting results, partially offset by favorable development.
•
The combined ratio increased 2.8 points for the fourth quarter of 2015 as compared with the prior year quarter. The loss ratio improved 3.6 points, due to an improved non-catastrophe current accident year loss ratio and favorable net prior year development, partially offset by higher catastrophe losses. Catastrophe losses were $18 million, or 2.7 points of the loss ratio, for the fourth quarter of 2015 as compared with $4 million, or 0.6 points of the loss ratio, for the prior year quarter. The expense ratio increased 6.3 points for the fourth quarter of 2015 as compared with the prior year quarter. The unfavorable comparison was primarily driven by the increase in loss-based assessment fees related to our prior Defense Based Act workers' compensation writings as well as increased contingent commissions and underwriting expenses. Last year's fourth quarter was helped by the favorable impact of 2014 recoveries on insurance receivables written off in prior years.
•
Net written premiums increased $16 million for the fourth quarter of 2015 as compared with the prior year quarter, driven by an increased level of new business and improved retention. Average rate increased 1% for the policies that renewed in the fourth quarter of 2015 while achieving a retention of 84%.


5

International
 
Results for the Three Months Ended December 31
 
Results for the Year Ended December 31
($ millions)
2015
 
2014
 
2015
 
2014
Net written premiums
$
181

 
 
$
182

 
 
$
822

 
 
$
880

 
NWP change (% year over year)
(1
)
%
 
(30
)
%
 
(7
)
%
 
(8
)
%
Net operating (loss) income
$
(3
)
 
 
$
28

 
 
$
37

 
 
$
69

 
Net (loss) income
(3
)
 
 
28

 
 
38

 
 
69

 
 
 
 
 
 
 
 
 
 
 
 
 
Loss ratio excluding catastrophes and development
63.5

%
 
60.3

%
 
61.7

%
 
60.3

%
Effect of catastrophe impacts
10.7

 
 
2.2

 
 
3.3

 
 
1.0

 
Effect of development-related items
(3.9
)
 
 
(13.3
)
 
 
(5.5
)
 
 
(7.8
)
 
Loss ratio
70.3

%
 
49.2

%
 
59.5

%
 
53.5

%
 
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
109.9

%
 
86.9

%
 
97.6

%
 
92.4

%
Combined ratio excluding catastrophes and development
103.1

%
 
98.0

%
 
99.8

%
 
99.2

%
•
Net operating results decreased $31 million for the fourth quarter of 2015 as compared with the prior year quarter. This decrease was primarily due to decreased underwriting results, partially offset by less unfavorable effects of foreign currency exchange rates.
•
The combined ratio increased 23.0 points for the fourth quarter of 2015 as compared with the prior year quarter. The loss ratio increased 21.1 points, due to less favorable net prior year loss development, higher catastrophe losses and an increase in large losses. Catastrophe losses were $22 million, or 10.7 points of the loss ratio, for the fourth quarter of 2015 as compared with $5 million, or 2.2 points of the loss ratio, for the prior year quarter. The expense ratio increased 1.9 points, primarily due to the effect of lower net earned premiums.
•
Net written premiums were consistent for the fourth quarter of 2015 as compared with the prior year quarter. Average rate decreased 1% for the policies that renewed in the fourth quarter of 2015 while achieving a retention of 73%.

6

Life & Group Non-Core
 
Results for the Three Months Ended December 31
 
Results for the Year Ended December 31
($ millions)
2015
 
2014
 
2015
 
 
2014
 
Total operating revenues
$
299

 
 
$
324

 
 
$
1,259

 
 
$
1,272

 
Net operating loss
(243
)
 
 
(34
)
 
 
(314
)
 
 
(69
)
 
Net loss
(241
)
 
 
(55
)
 
 
(306
)
 
 
(62
)
 
•
Net operating loss increased $209 million for the fourth quarter of 2015 as compared with the prior year quarter. The increase was driven by a $296 million charge related to recognition of a premium deficiency and a $9 million deficiency in claim reserves in our long term care business. The after-tax impact of both of these items was $198 million. Excluding the effect of these items, results in 2015 were also negatively affected by higher morbidity in our long term care business.
Corporate & Other Non-Core
 
Results for the Three Months Ended December 31
 
Results for the Year Ended December 31
($ millions)
2015
 
2014
 
2015
 
 
2014
 
Interest expense
$
37

 
 
$
44

 
 
$
154

 
 
$
182

 
Net operating loss
(11
)
 
 
(75
)
 
 
(137
)
 
 
(92
)
 
Net loss
(5
)
 
 
(69
)
 
 
(129
)
 
 
(80
)
 
•
Net operating loss decreased $64 million for the fourth quarter of 2015 as compared with the prior year quarter. The prior year quarter included a $55 million after-tax lump sum settlement charge.

7

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) 576-4398, or for international callers, (719) 457-2689. 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, as well as the financial supplement, available at www.cna.com.
Forward-Looking Statement
This press release may include statements which relate to anticipated future events (forward-looking statements) rather than actual present conditions or historical events.  These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and generally include words such as “believes”, “expects”, “intends”, “anticipates”, “estimates” and similar expressions.  Forward-looking statements, by their nature, are subject to a variety of inherent risks and uncertainties that could cause actual results to differ materially from the results projected.  Many of these risks and uncertainties cannot be controlled by CNA. For a detailed description of these risks and uncertainties affecting CNA, please refer to CNA's most recent 10-K on file with the Securities and Exchange Commission available at www.cna.com.
Any forward-looking statements made in this press release are made by CNA as of the date of this press release.  Further, CNA does not have any obligation to update or revise any forward-looking statement contained in this press release, even if CNA's expectations or any related events, conditions or circumstances change.

# # #

8
 EX-99.2 3 q415exhibit992.htm EXHIBIT Exhibit





 
 
 
 
 




CNA Financial Corporation
Supplemental Financial Information


December 31, 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 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 Sheet Data and Statement 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 December 31
Three Months
 
 
Twelve Months
 
(In millions)
2015
 
2014
 
Change
 
 
2015
 
2014
 
Change
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earned premiums
$
1,748

 
$
1,785

 
(2
)
%
 
$
6,921

 
$
7,212

 
(4
)
%
Net investment income
428

 
511

 
(16
)
 
 
1,840

 
2,067

 
(11
)
 
Net realized investment gains (losses):
 
 
 
 
 
 
 
 
 
 
 
 
 
Other-than-temporary impairment (OTTI) losses
(57
)
 
(60
)
 


 
 
(156
)
 
(77
)
 

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

 
—

 


 
 
—

 
—

 


 
Net OTTI losses recognized in earnings
(57
)
 
(60
)
 


 
 
(156
)
 
(77
)
 


 
Other net realized investment gains (losses)
29

 
48

 


 
 
89

 
134

 


 
Net realized investment gains (losses)
(28
)
 
(12
)
 


 
 
(67
)
 
57

 


 
Other revenues
121

 
94

 


 
 
407

 
356

 

 
Total revenues
2,269

 
2,378

 
(5
)
 
 
9,101

 
9,692

 
(6
)
 
Claims, Benefits and Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Insurance claims and policyholders' benefits
1,376

 
1,350

 

 
 
5,384

 
5,591

 


 
Amortization of deferred acquisition costs
604

 
321

 

 
 
1,540

 
1,317

 


 
Other operating expenses
412

 
410

 

 
 
1,473

 
1,394

 


 
Interest
38

 
45

 

 
 
155

 
183

 


 
Total claims, benefits and expenses
2,430

 
2,126

 
(14
)
 
 
8,552

 
8,485

 
(1
)
 
Income (loss) before income tax
(161
)
 
252

 


 
 
549

 
1,207

 


 
Income tax (expense) benefit
91

 
(54
)
 


 
 
(70
)
 
(319
)
 


 
Income (loss) from continuing operations
(70
)
 
198

 
(135
)
 
 
479

 
888

 
(46
)
 
Income (loss) from discontinued operations, net of tax
—

 
—

 
 
 
 
—

 
(197
)
 
 
 
Net income (loss)
$
(70
)
 
$
198

 
(135
)
%
 
$
479

 
$
691

 
(31
)
%

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)
2015
 
2014
 
 
2015
 
2014
 
Components of Income (Loss)
 
 
 
 
 
 
 
 
 
Net operating income (loss)
$
(52
)
 
$
205

 
 
$
515

 
$
849

 
Net realized investment gains (losses)
(18
)
 
(7
)
 
 
(36
)
 
39

 
Income (loss) from continuing operations
(70
)
 
198

 
 
479

 
888

 
Income (loss) from discontinued operations
—

 
—

 
 
—

 
(197
)
 
Net income (loss)
$
(70
)
 
$
198

 
 
$
479

 
$
691

 
 
 
 
 
 
 
 
 
 
 
Diluted Earnings (Loss) Per Common Share
 
 
 
 
 
 
 
 
 
Net operating income (loss)
$
(0.19
)
 
$
0.76

 
 
$
1.90

 
$
3.14

 
Net realized investment gains (losses)
(0.07
)
 
(0.03
)
 
 
(0.13
)
 
0.14

 
Income (loss) from continuing operations
(0.26
)
 
0.73

 
 
1.77

 
3.28

 
Income (loss) from discontinued operations
—

 
—

 
 
—

 
(0.73
)
 
Diluted earnings (loss) per share
$
(0.26
)
 
$
0.73


 
$
1.77


$
2.55

 
 
 
 
 
 
 
 
 
 
 
Weighted Average Outstanding Common Stock and Common Stock Equivalents
 
 
 
 
 
 
 
 
 
Basic
270.3

 
270.0

 
 
270.2

 
269.9

 
Diluted
270.8

 
270.7

 
 
270.7

 
270.6

 
 
 
 
 
 
 
 
 
 
 
Return on Equity
 
 
 
 
 
 
 
 
 
Net income (loss) (1)
(2.3
)
%
6.1

%
 
3.9

%
5.4

%
Net operating income (loss) (2)
(1.7
)
 
6.7

 
 
4.2

 
6.9

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

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


2




Selected Balance Sheet Data and Statement of Cash Flows Data(1) 
(In millions, except per share data)
December 31, 2015
 
December 31, 2014
Total investments
$
44,699

 
$
46,262

Reinsurance receivables, net of allowance for uncollectible receivables
4,453

 
4,694

Total assets
55,047

 
55,566

Insurance reserves
36,486

 
36,380

Debt
2,562

 
2,559

Total liabilities
43,291

 
42,772

Accumulated other comprehensive income (loss) (2)
(315
)
 
400

Total stockholders' equity
11,756

 
12,794

 
 
 
 
Book value per common share
$
43.49

 
$
47.39

Book value per common share excluding AOCI
$
44.66

 
$
45.91

 
 
 
 
Outstanding shares of common stock (in millions of shares)
270.3

 
270.0

 
 
 
 
Statutory capital and surplus - Combined Continental Casualty Companies (3)
$
10,723

 
$
11,155

Three months ended December 31
2015
 
2014
Net cash flows provided (used) by operating activities
$
342

 
$
393

Net cash flows provided (used) by investing activities
(118
)
 
169

Net cash flows provided (used) by financing activities
(68
)
 
(614
)
Net cash flows provided (used) by operating, investing and financing activities
$
156

 
$
(52
)
Twelve months ended December 31
2015
 
2014
Net cash flows provided (used) by operating activities
$
1,387

 
$
1,440

Net cash flows provided (used) by investing activities
(372
)
 
(918
)
Net cash flows provided (used) by financing activities
(807
)
 
(519
)
Net cash flows provided (used) by operating, investing and financing activities
$
208

 
$
3

(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 December 31, 2015 and 2014, the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $1,111 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 December 31, 2015 is preliminary.

3




Property & Casualty - Results of Operations
Periods ended December 31
Three Months
 
 
Twelve Months
 
(In millions)
2015
 
2014
 
Change
 
 
2015
 
2014
 
Change
 
Gross written premiums
$
2,547

 
$
2,334

 
9

%
 
$
10,124

 
$
9,558

 
6

%
Net written premiums
1,585

 
1,555

 
2

 
 
6,421

 
6,536

 
(2
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earned premiums
1,612

 
1,646

 
(2
)
 
 
6,374

 
6,657

 
(4
)
 
Net investment income
259

 
326

 


 
 
1,119

 
1,344

 


 
Other revenues
120

 
87

 


 
 
392

 
333

 


 
Total operating revenues
1,991

 
2,059

 
(3
)
 
 
7,885

 
8,334

 
(5
)
 
Insurance claims and policyholders' benefits
1,017

 
984

 

 
 
3,902

 
4,316

 


 
Amortization of deferred acquisition costs
309

 
315

 


 
 
1,226

 
1,289

 


 
Other insurance related expenses
266

 
214

 


 
 
954

 
900

 


 
Other expenses
100

 
77

 


 
 
341

 
313

 


 
Total claims, benefits and expenses
1,692

 
1,590

 
(6
)
 
 
6,423

 
6,818

 
6

 
Operating income (loss) before income tax
299

 
469

 


 
 
1,462

 
1,516

 


 
Income tax (expense) benefit on operating income (loss)
(97
)
 
(155
)
 


 
 
(496
)
 
(506
)
 


 
Net operating income (loss)
$
202

 
$
314

 
(36
)
%
 
$
966

 
$
1,010

 
(4
)
%
 
 
 
 
 


 
 
 
 
 
 


 
Other Performance Metrics
 
 
 
 


 
 
 
 
 
 


 
Underwriting gain (loss)
$
20

 
$
133

 
(85
)
%
 
$
292

 
$
152

 
92

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss & LAE ratio
62.9

%
59.6

%
(3.3
)
pts
 
61.0

%
64.6

%
3.6

pts
Acquisition expense ratio
20.3

 
17.6

 
(2.7
)
 
 
19.4

 
19.0

 
(0.4
)
 
Underwriting expense ratio
15.5

 
14.4

 
(1.1
)
 
 
14.8

 
13.9

 
(0.9
)
 
Expense ratio
35.8

 
32.0

 
(3.8
)
 
 
34.2

 
32.9

 
(1.3
)
 
Dividend ratio
0.2

 
0.2

 
—

 
 
0.2

 
0.2

 
—

 
Combined ratio
98.9

%
91.8

%
(7.1
)
 
 
95.4

%
97.7

%
2.3

 
Combined ratio excluding catastrophes and development
97.7

%
93.6

%
(4.1
)
pts
 
96.3

%
95.9

%
(0.4
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net accident year catastrophe losses incurred
$
38

 
$
9

 

 
 
$
141

 
$
156

 

 
Effect on loss & LAE ratio
2.4

%
0.6

%
(1.8
)
pts
 
2.2

%
2.3

%
0.1

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net prior year development and other: (favorable) / unfavorable
$
(17
)
 
$
(39
)
 


 
 
$
(199
)
 
$
(43
)
 


 
Effect on loss & LAE ratio
(1.2
)
%
(2.4
)
%
(1.2
)
pts
 
(3.1
)
%
(0.5
)
%
2.6

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rate
—

%
3

%
(3
)
pts
 
1

%
3

%
(2
)
pts
Retention
84

%
79

%
5

pts
 
81

%
78

%
3

pts
New Business
$
231

 
$
192

 
20

%
 
$
942

 
$
915

 
3

%

4




Specialty - Results of Operations
Periods ended December 31
Three Months
 
 
Twelve Months
 
(In millions)
2015
 
2014
 
Change
 
 
2015
 
2014
 
Change
 
Gross written premiums
$
1,623

 
$
1,415

 
15

%
 
$
6,242

 
$
5,608

 
11

%
Net written premiums
704

 
689

 
2

 
 
2,781

 
2,839

 
(2
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earned premiums
707

 
712

 
(1
)
 
 
2,782

 
2,838

 
(2
)
 
Net investment income
109

 
137

 


 
 
474

 
560

 


 
Other revenues
111

 
77

 


 
 
356

 
295

 


 
Total operating revenues
927

 
926

 
—

 
 
3,612

 
3,693

 
(2
)
 
Insurance claims and policyholders' benefits
446

 
416

 

 
 
1,601

 
1,633

 


 
Amortization of deferred acquisition costs
149

 
150

 


 
 
589

 
592

 


 
Other insurance related expenses
76

 
65

 


 
 
278

 
262

 


 
Other expenses
92

 
63

 


 
 
301

 
254

 


 
Total claims, benefits and expenses
763

 
694

 
(10
)
 
 
2,769

 
2,741

 
(1
)
 
Operating income (loss) before income tax
164

 
232

 


 
 
843

 
952

 


 
Income tax (expense) benefit on operating income (loss)
(55
)
 
(78
)
 


 
 
(283
)
 
(318
)
 


 
Net operating income (loss)
$
109

 
$
154

 
(29
)
%
 
$
560

 
$
634

 
(12
)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Performance Metrics
 
 
 
 
 
 
 
 
 
 
 
 
 
Underwriting gain (loss)
36

 
81

 
(56
)
%
 
314

 
351

 
(11
)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss & LAE ratio
63.1

%
58.1

%
(5.0
)
pts
 
57.4

%
57.3

%
(0.1
)
pts
Acquisition expense ratio
20.1

 
19.5

 
(0.6
)
 
 
19.8

 
19.7

 
(0.1
)
 
Underwriting expense ratio
11.6

 
10.7

 
(0.9
)
 
 
11.3

 
10.4

 
(0.9
)
 
Expense ratio
31.7

 
30.2

 
(1.5
)
 
 
31.1

 
30.1

 
(1.0
)
 
Dividend ratio
0.2

 
0.1

 
(0.1
)
 
 
0.2

 
0.2

 
—

 
Combined ratio
95.0

%
88.4

%
(6.6
)
 
 
88.7

%
87.6

%
(1.1
)
 
Combined ratio excluding catastrophes and development
95.4

%
90.4

%
(5.0
)
pts
 
93.6

%
92.0

%
(1.6
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net accident year catastrophe losses incurred
$
(2
)
 
$
—

 


 
 
$
13

 
$
21

 


 
Effect on loss & LAE ratio
(0.3
)
%
—

%
0.3

pts
 
0.4

%
0.7

%
0.3

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net prior year development and other: (favorable) / unfavorable
$
(1
)
 
$
(14
)
 


 
 
$
(152
)
 
$
(149
)
 


 
Effect on loss & LAE ratio
(0.1
)
%
(2.0
)
%
(1.9
)
pts
 
(5.3
)
%
(5.1
)
%
0.2

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rate
—

%
3

%
(3
)
pts
 
1

%
3

%
(2
)
pts
Retention
87

%
86

%
1

pts
 
86

%
87

%
(1
)
pts
New Business
$
73

 
$
70

 
4

%
 
$
279

 
$
309

 
(10
)
%

5




Commercial - Results of Operations
Periods ended December 31
Three Months
 
 
Twelve Months
 
(In millions)
2015
 
2014
 
Change
 
 
2015
 
2014
 
Change
 
Gross written premiums
$
726

 
$
714

 
2

%
 
$
2,967

 
$
2,959

 
—

%
Net written premiums
700

 
684

 
2

 
 
2,818

 
2,817

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earned premiums
702

 
718

 
(2
)
 
 
2,788

 
2,906

 
(4
)
 
Net investment income
138

 
174

 


 
 
593

 
723

 


 
Other revenues
10

 
10

 


 
 
37

 
38

 


 
Total operating revenues
850

 
902

 
(6
)
 
 
3,418

 
3,667

 
(7
)
 
Insurance claims and policyholders' benefits
428

 
462

 


 
 
1,822

 
2,195

 


 
Amortization of deferred acquisition costs
117

 
122

 


 
 
469

 
493

 


 
Other insurance related expenses
153

 
111

 


 
 
538

 
487

 


 
Other expenses
5

 
6

 


 
 
28

 
31

 


 
Total claims, benefits and expenses
703

 
701

 
—

 
 
2,857

 
3,206

 
11

 
Operating income (loss) before income tax
147

 
201

 


 
 
561

 
461

 


 
Income tax (expense) benefit on operating income (loss)
(51
)
 
(69
)
 


 
 
(192
)
 
(154
)
 


 
Net operating income (loss)
$
96

 
$
132

 
(27
)
%
 
$
369

 
$
307

 
20

%
 
 
 
 
 


 
 
 
 
 
 


 
Other Performance Metrics
 
 
 
 


 
 
 
 
 
 


 
Underwriting gain (loss)
$
4

 
$
23

 
(83
)
%
 
$
(41
)
 
$
(269
)
 
85

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss & LAE ratio
60.6

%
64.2

%
3.6

pts
 
65.1

%
75.3

%
10.2

pts
Acquisition expense ratio
19.9

 
15.0

 
(4.9
)
 
 
18.2

 
17.0

 
(1.2
)
 
Underwriting expense ratio
18.7

 
17.3

 
(1.4
)
 
 
17.9

 
16.7

 
(1.2
)
 
Expense ratio
38.6

 
32.3

 
(6.3
)
 
 
36.1

 
33.7

 
(2.4
)
 
Dividend ratio
0.4

 
0.3

 
(0.1
)
 
 
0.3

 
0.3

 
—

 
Combined ratio
99.6

%
96.8

%
(2.8
)
 
 
101.5

%
109.3

%
7.8

 
Combined ratio excluding catastrophes and development
98.3

%
95.6

%
(2.7
)
pts
 
98.0

%
98.6

%
0.6

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net accident year catastrophe losses incurred
$
18

 
$
4

 


 
 
$
101

 
$
125

 


 
Effect on loss & LAE ratio
2.7

%
0.6

%
(2.1
)
pts
 
3.6

%
4.4

%
0.8

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net prior year development and other: (favorable) / unfavorable
$
(9
)
 
$
5

 


 
 
$
(10
)
 
$
177

 


 
Effect on loss & LAE ratio
(1.4
)
%
0.6

%
2.0

pts
 
(0.1
)
%
6.3

%
6.4

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rate
1

%
4

%
(3
)
pts
 
2

%
5

%
(3
)
pts
Retention
84

%
76

%
8

pts
 
79

%
73

%
6

pts
New Business
$
130

 
$
95

 
37

%
 
$
552

 
$
491

 
12

%

6




International - Results of Operations
Periods ended December 31
Three Months
 
 
Twelve Months
 
(In millions)
2015
 
2014
 
Change
 
 
2015
 
2014
 
Change
 
Gross written premiums
$
198

 
$
205

 
(3
)
%
 
$
915

 
$
991

 
(8
)
%
Net written premiums
181

 
182

 
(1
)
 
 
822

 
880

 
(7
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earned premiums
203

 
216

 
(6
)
 
 
804

 
913

 
(12
)
 
Net investment income
12

 
15

 


 
 
52

 
61

 


 
Other revenues
(1
)
 
—

 


 
 
(1
)
 
—

 


 
Total operating revenues
214

 
231

 
(7
)
 
 
855

 
974

 
(12
)
 
Insurance claims and policyholders' benefits
143

 
106

 


 
 
479

 
488

 


 
Amortization of deferred acquisition costs
43

 
43

 


 
 
168

 
204

 


 
Other insurance related expenses
37

 
38

 


 
 
138

 
151

 


 
Other expenses
3

 
8

 


 
 
12

 
28

 


 
Total claims, benefits and expenses
226

 
195

 
(16
)
 
 
797

 
871

 
8

 
Operating income (loss) before income tax
(12
)
 
36

 


 
 
58

 
103

 


 
Income tax (expense) benefit on operating income (loss)
9

 
(8
)
 


 
 
(21
)
 
(34
)
 


 
Net operating income (loss)
$
(3
)
 
$
28

 
(111
)
%
 
$
37

 
$
69

 
(46
)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Performance Metrics
 
 
 
 
 
 
 
 
 
 
 
 
 
Underwriting gain (loss)
$
(20
)
 
$
29

 
(169
)
%
 
$
19

 
$
70

 
(73
)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss & LAE ratio
70.3

%
49.2

%
(21.1
)
pts
 
59.5

%
53.5

%
(6.0
)
pts
Acquisition expense ratio
22.1

 
19.8

 
(2.3
)
 
 
22.0

 
22.9

 
0.9

 
Underwriting expense ratio
17.5

 
17.9

 
0.4

 
 
16.1

 
16.0

 
(0.1
)
 
Expense ratio
39.6

 
37.7

 
(1.9
)
 
 
38.1

 
38.9

 
0.8

 
Dividend ratio
—

 
—

 
—

 
 
—

 
—

 
—

 
Combined ratio
109.9

%
86.9

%
(23.0
)
 
 
97.6

%
92.4

%
(5.2
)
 
Combined ratio excluding catastrophes and development
103.1

%
98.0

%
(5.1
)
pts
 
99.8

%
99.2

%
(0.6
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net accident year catastrophe losses incurred
$
22

 
$
5

 


 
 
$
27

 
$
10

 


 
Effect on loss & LAE ratio
10.7

%
2.2

%
(8.5
)
pts
 
3.3

%
1.0

%
(2.3
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net prior year development and other: (favorable) / unfavorable
$
(7
)
 
$
(30
)
 


 
 
$
(37
)
 
$
(71
)
 


 
Effect on loss & LAE ratio
(3.9
)
%
(13.3
)
%
(9.4
)
pts
 
(5.5
)
%
(7.8
)
%
(2.3
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rate
(1
)
%
—

%
(1
)
pts
 
(1
)
%
(1
)
%
—

pts
Retention
73

%
66

%
7

pts
 
76

%
74

%
2

pts
New Business
28

 
27

 
—

%
 
111

 
115

 
(3
)
%

7




Life & Group Non-Core - Results of Operations
Periods ended December 31
Three Months
 
 
Twelve Months
 
(In millions)
2015
 
2014
 
Change
 
 
2015
 
2014
 
Change
 
Net earned premiums
$
136

 
$
139

 
(2
)
%
 
$
548

 
$
556

 
(1
)
%
Net investment income
164

 
179

 


 
 
704

 
700

 


 
Other revenues
(1
)
 
6

 


 
 
7

 
16

 


 
Total operating revenues
299

 
324

 
(8
)
 
 
1,259

 
1,272

 
(1
)
 
Insurance claims and policyholders' benefits
376

 
375

 


 
 
1,421

 
1,304

 


 
Amortization of deferred acquisition costs
295

 
6

 


 
 
314

 
28

 


 
Other insurance related expenses
38

 
34

 


 
 
142

 
130

 


 
Other expenses
1

 
(4
)
 


 
 
11

 
30

 


 
Total claims, benefits and expenses
710

 
411

 
(73
)
 
 
1,888

 
1,492

 
(27
)
 
Operating income (loss) before income tax
(411
)
 
(87
)
 


 
 
(629
)
 
(220
)
 


 
Income tax (expense) benefit on operating income (loss)
168

 
53

 


 
 
315

 
151

 


 
Net operating income (loss)
$
(243
)
 
$
(34
)
 
N/M

%
 
$
(314
)
 
$
(69
)
 
N/M

%


8




Corporate & Other Non-Core - Results of Operations
Periods ended December 31
Three Months
 
 
Twelve Months
 
(In millions)
2015
 
2014
 
Change
 
 
2015
 
2014
 
Change
 
Net earned premiums
$
—

 
$
—

 


 
 
$
(1
)
 
$
(1
)
 


 
Net investment income
5

 
6

 
 
 
 
17

 
23

 


 
Other revenues
2

 
1

 


 
 
8

 
7

 


 
Total operating revenues
7

 
7

 
—

%
 
24

 
29

 
(17
)
%
Insurance claims and policyholders' benefits
(17
)
 
(9
)
 


 
 
61

 
(29
)
 


 
Amortization of deferred acquisition costs
—

 
—

 


 
 
—

 
—

 


 
Other insurance related expenses
(1
)
 
—

 


 
 
(3
)
 
(1
)
 


 
Other expenses
46

 
134

 


 
 
183

 
205

 


 
Total claims, benefits and expenses
28

 
125

 
78

 
 
241

 
175

 
(38
)
 
Operating income (loss) before income tax
(21
)
 
(118
)
 


 
 
(217
)
 
(146
)
 


 
Income tax (expense) benefit on operating income (loss)
10

 
43

 


 
 
80

 
54

 


 
Net operating income (loss)
$
(11
)
 
$
(75
)
 
85

%
 
$
(137
)
 
$
(92
)
 
(49
)
%


9




Investment Summary - Consolidated
 
December 31, 2015

September 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
$
17,760

 
$
677

 
$
18,188

 
$
1,030

 
$
18,889

 
$
1,660

States, municipalities and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Tax-exempt
10,114

 
1,076

 
10,203

 
911

 
9,802

 
988

Taxable
3,060

 
369

 
3,094

 
408

 
2,938

 
467

Total states, municipalities and political subdivisions
13,174

 
1,445

 
13,297

 
1,319

 
12,740

 
1,455

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
RMBS
5,072

 
137

 
5,041

 
191

 
5,233

 
205

CMBS
2,197

 
43

 
2,251

 
68

 
2,144

 
88

Other ABS
921

 
(2
)
 
1,016

 
7

 
1,235

 
1

Total asset-backed
8,190

 
178

 
8,308

 
266

 
8,612

 
294

U.S. Treasury and obligations of government-sponsored enterprises
67

 
5

 
29

 
5

 
31

 
5

Foreign government
346

 
12

 
344

 
11

 
454

 
16

Redeemable preferred stock
35

 
2

 
35

 
2

 
42

 
3

Total fixed maturity securities
39,572

 
2,319

 
40,201

 
2,633

 
40,768

 
3,433

Equities
197

 
6

 
212

 
5

 
222

 
12

Limited partnership investments
2,548

 
—

 
2,738

 
—

 
2,937

 
—

Other invested assets
44

 
—

 
45

 
—

 
41

 
—

Mortgage loans
678

 
—

 
640

 
—

 
588

 
—

Short term investments
1,660

 
—

 
1,482

 
—

 
1,706

 
(1
)
Total investments
$
44,699

 
$
2,325

 
$
45,318

 
$
2,638

 
$
46,262

 
$
3,444

 
 
 
 
 
 
 
 
 
 
 
 
Net receivable/(payable) on investment activity
$
82

 
 
 
$
(92
)
 
 
 
$
(58
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective portfolio duration (in years)
6.2

 
 
 
6.5

 
 
 
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
 
December 31, 2015
 
September 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
$
12,594

 
$
96

 
$
12,926

 
$
276

 
$
13,444

 
$
542

States, municipalities and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Tax-exempt
2,441

 
133

 
2,663

 
112

 
2,561

 
127

Taxable
1,579

 
132

 
1,647

 
156

 
1,454

 
169

Total states, municipalities and political subdivisions
4,020

 
265

 
4,310

 
268

 
4,015

 
296

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
RMBS
4,828

 
131

 
4,921

 
183

 
5,101

 
196

CMBS
2,038

 
37

 
2,079

 
60

 
1,985

 
78

Other ABS
837

 
(1
)
 
931

 
7

 
1,144

 
2

Total asset-backed
7,703

 
167

 
7,931

 
250

 
8,230

 
276

U.S. Treasury and obligations of government-sponsored enterprises
42

 
—

 
4

 
—

 
7

 
(1
)
Foreign government
346

 
12

 
344

 
11

 
449

 
15

Redeemable preferred stock
13

 
1

 
13

 
1

 
13

 
2

Total fixed maturity securities
24,718

 
541

 
25,528

 
806

 
26,158

 
1,130

Equities
87

 
1

 
104

 
2

 
87

 
9

Limited partnership investments
2,548

 
—

 
2,738

 
—

 
2,937

 
—

Other invested assets
44

 
—

 
45

 
—

 
41

 
—

Mortgage loans
622

 
—

 
584

 
—

 
531

 
—

Short term investments
1,513

 
—

 
1,390

 
—

 
1,586

 
(1
)
Total investments
$
29,532

 
$
542

 
$
30,389

 
$
808

 
$
31,340

 
$
1,138

 
 
 
 
 
 
 
 
 
 
 
 
Net receivable/(payable) on investment activity
$
204

 
 
 
$
(41
)
 
 
 
$
4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective portfolio duration (in years)
4.3

 
 
 
4.4

 
 
 
4.0

 
 
Weighted average rating of fixed maturity securities
A

 
 
 
A

 
 
 
A

 
 

11




Investment Summary - Life & Group Non-Core
 
December 31, 2015
 
September 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
$
5,166

 
$
581

 
$
5,262

 
$
754

 
$
5,445

 
$
1,118

States, municipalities and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Tax-exempt
7,673

 
943

 
7,540

 
799

 
7,241

 
861

Taxable
1,481

 
237

 
1,447

 
252

 
1,484

 
298

Total states, municipalities and political subdivisions
9,154

 
1,180

 
8,987

 
1,051

 
8,725

 
1,159

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
RMBS
244

 
6

 
120

 
8

 
132

 
9

CMBS
159

 
6

 
172

 
8

 
159

 
10

Other ABS
84

 
(1
)
 
85

 
—

 
91

 
(1
)
Total asset-backed
487

 
11

 
377

 
16

 
382

 
18

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

 
5

 
25

 
5

 
24

 
6

Foreign government
—

 
—

 
—

 
—

 
5

 
1

Redeemable preferred stock
22

 
1

 
22

 
1

 
29

 
1

Total fixed maturity securities
14,854

 
1,778

 
14,673

 
1,827

 
14,610

 
2,303

Equities
110

 
5

 
108

 
3

 
135

 
3

Limited partnership investments
—

 
—

 
—

 
—

 
—

 
—

Other invested assets
—

 
—

 
—

 
—

 
—

 
—

Mortgage loans
56

 
—

 
56

 
—

 
57

 
—

Short term investments
147

 
—

 
92

 
—

 
120

 
—

Total investments
$
15,167

 
$
1,783

 
$
14,929

 
$
1,830

 
$
14,922

 
$
2,306

 
 
 
 
 
 
 
 
 
 
 
 
Net receivable/(payable) on investment activity
$
(122
)
 
 
 
$
(51
)
 
 
 
$
(62
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective portfolio duration (in years)
9.6

 
 
 
10.3

 
 
 
10.5

 
 
Weighted average rating of fixed maturity securities
A

 
 
 
A+

 
 
 
A+

 
 

12




Investments - Fixed Maturity Securities by Credit Rating  

December 31, 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
$
—

 
$
—

 
$
86

 
$
6

 
$
752

 
$
33

 
$
4,604

 
$
409

 
$
10,485

 
$
297

 
$
1,833

 
$
(68
)
 
$
17,760

 
$
677

States, municipalities and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tax-exempt
—

 
—

 
798

 
72

 
5,219

 
594

 
3,906

 
398

 
132

 
7

 
59

 
5

 
10,114

 
1,076

Taxable
—

 
—

 
298

 
30

 
2,148

 
251

 
554

 
90

 
17

 
(2
)
 
43

 
—

 
3,060

 
369

Total states, municipalities and political subdivisions
—

 
—

 
1,096

 
102

 
7,367

 
845

 
4,460

 
488

 
149

 
5

 
102

 
5

 
13,174

 
1,445

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RMBS
3,779

 
96

 
94

 
—

 
49

 
(1
)
 
122

 
—

 
75

 
1

 
953

 
41

 
5,072

 
137

CMBS
64

 
—

 
493

 
11

 
475

 
15

 
314

 
8

 
597

 
4

 
254

 
5

 
2,197

 
43

Other ABS
—

 
—

 
93

 
—

 
25

 
—

 
525

 
(1
)
 
278

 
(1
)
 
—

 
—

 
921

 
(2
)
Total asset-backed
3,843

 
96

 
680

 
11

 
549

 
14

 
961

 
7

 
950

 
4

 
1,207

 
46

 
8,190

 
178

U.S. Treasury and obligations of government-sponsored enterprises
67

 
5

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
67

 
5

Foreign government
—

 
—

 
76

 
4

 
251

 
8

 
19

 
—

 
—

 
—

 
—

 
—

 
346

 
12

Redeemable preferred stock
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
11

 
1

 
24

 
1

 
35

 
2

Total fixed maturity securities
$
3,910

 
$
101

 
$
1,938

 
$
123

 
$
8,919

 
$
900

 
$
10,044

 
$
904

 
$
11,595

 
$
307

 
$
3,166

 
$
(16
)
 
$
39,572

 
$
2,319

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of total fixed maturity securities
10
%
 
 
 
5
%
 
 
 
23
%
 
 
 
25
%
 
 
 
29
%
 
 
 
8
%
 
 
 
100
%
 
 

13




Components of Net Investment Income
 
Consolidated
 
Periods ended December 31
Three Months
 
Twelve Months
 
(In millions)
2015
 
2014
 
2015
 
2014
 
    Taxable fixed maturities, prior to accounting change
$
341

 
$
345

 
$
1,381

 
$
1,399

 
    Tax-exempt fixed maturities, prior to accounting change
105

 
102

 
409

 
404

 
Total fixed maturity securities, prior to accounting change
446

 
447

 
1,790

 
1,803

 
Impact of accounting change (1)
(39
)
 
—

 
(39
)
 
—

 
Total fixed maturity securities
407

 
447

 
1,751

 
1,803

 
Limited partnership investments
23

 
64

 
92

 
263

 
Other, net of investment expense
(2
)
 
—

 
(3
)
 
1

 
Net investment income
$
428

 
$
511

 
$
1,840

 
$
2,067

 
Fixed maturity securities, after tax
$
296

 
$
322

 
$
1,264

 
$
1,298

 
Net investment income, after tax
$
314

 
$
365

 
$
1,329

 
$
1,473

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

%
4.8

%
4.7

%
4.8

%
Effective income yield for the fixed maturity securities portfolio, after tax
3.2

%
3.4

%
3.4

%
3.5

%
 
Property & Casualty and Corporate & Other Non-Core
 
Periods ended December 31
Three Months
 
Twelve Months
 
(In millions)
2015
 
2014
 
2015
 
2014
 
    Taxable fixed maturities
$
232

 
$
244

 
$
965

 
$
992

 
    Tax-exempt fixed maturities
8

 
23

 
$
74

 
107

 
Total fixed maturity securities
240

 
267

 
1,039

 
1,099

 
Limited partnership investments
23

 
64

 
92

 
263

 
Other, net of investment expense
1

 
1

 
5

 
5

 
Net investment income
$
264

 
$
332

 
$
1,136

 
$
1,367

 
Fixed maturity securities, after tax
$
163

 
$
181

 
$
705

 
$
751

 
Net investment income, after tax
$
182

 
$
224

 
$
772

 
$
926

 
 
 
 
 
 
 
 
 
 
Effective income yield for the fixed maturity securities portfolio, pretax
3.9

%
4.2

%
4.2

%
4.3

%
Effective income yield for the fixed maturity securities portfolio, after tax
2.7

%
2.8

%
2.9

%
3.0

%
 
Life & Group Non-Core
 
Periods ended December 31
Three Months
 
Twelve Months
 
(In millions)
2015
 
2014
 
2015
 
2014
 
    Taxable fixed maturities
$
103

 
101

 
$
410

 
$
407

 
    Tax-exempt fixed maturities
64

 
79

 
302

 
297

 
Total fixed maturity securities
167

 
180

 
712

 
704

 
Limited partnership investments
—

 
—

 
—

 
—

 
Other, net of investment expense
(3
)
 
(1
)
 
(8
)
 
(4
)
 
Net investment income
$
164

 
$
179

 
$
704

 
$
700

 
Fixed maturity securities, after tax
$
133

 
$
141

 
$
559

 
$
547

 
Net investment income, after tax
$
132

 
$
141

 
$
557

 
$
547

 
 
 
 
 
 
 
 
 
 
Effective income yield for the fixed maturity securities portfolio, pretax
5.2

%
5.9

%
5.6

%
5.9

%
Effective income yield for the fixed maturity securities portfolio, after tax
4.1

%
4.6

%
4.4

%
4.6

%

(1) The amortization of premium and accretion of discount for fixed maturity securities takes into consideration call and maturity dates that produce the lowest yield. This represents a change from prior reporting periods as previously the amortization of premiums was to maturity. This change in estimate effected by a change in accounting principle was adopted in Q4 2015 and will result in a better reflection of the yield on fixed maturity securities with call provisions.

14




Claim & Claim Adjustment Expense Reserve Rollforward
Three months ended December 31, 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
$
6,199

 
$
9,283

 
$
1,365

 
$
16,847

 
$
3,286

 
$
2,734

 
$
22,867

Ceded
611

 
634

 
151

 
1,396

 
310

 
2,436

 
4,142

Net
5,588

 
8,649


1,214


15,451


2,976


298


18,725

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net incurred claim & claim adjustment expenses
445

 
426

 
144

 
1,015

 
239

 
1

 
1,255

Net claim & claim adjustment expense payments
(465
)
 
(499
)
 
(110
)
 
(1,074
)
 
(184
)
 
(15
)
 
(1,273
)
Foreign currency translation adjustment and other
—

 
—

 
(29
)
 
(29
)
 
(101
)
 
(1
)
 
(131
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Claim & claim adjustment expense reserves, end of period
 
 
 
 
 
 
 
 
 
 
 
 
 
Net
5,568

 
8,576

 
1,219

 
15,363

 
2,930

 
283

 
18,576

Ceded
701

 
607

 
128

 
1,436

 
290

 
2,361

 
4,087

Gross
$
6,269

 
$
9,183

 
$
1,347

 
$
16,799

 
$
3,220

 
$
2,644

 
$
22,663

Twelve months ended December 31, 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
1,597

 
1,815

 
480

 
3,892

 
949

 
4

 
4,845

Net claim & claim adjustment expense payments
(1,684
)
 
(2,092
)
 
(403
)
 
(4,179
)
 
(734
)
 
(32
)
 
(4,945
)
Foreign currency translation adjustment and other
—

 
—

 
(119
)
 
(119
)
 
(128
)
 
(4
)
 
(251
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Claim & claim adjustment expense reserves, end of period
 
 
 
 
 
 
 
 
 
 
 
 
 
Net
5,568

 
8,576

 
1,219

 
15,363

 
2,930

 
283

 
18,576

Ceded
701

 
607

 
128

 
1,436

 
290

 
2,361

 
4,087

Gross
$
6,269

 
$
9,183

 
$
1,347

 
$
16,799

 
$
3,220

 
$
2,644

 
$
22,663


15




Life & Group Non-Core Policyholder Reserves
December 31, 2015
 
 
 
 
 
(In millions)
Claim and claim adjustment expenses
 
Future policy benefits
 
Total
Long term care
$
2,229

 
$
8,335

 
$
10,564

Structured settlement annuities
581

 
—

 
581

Other
21

 
—

 
21

Total
2,831

 
8,335

 
11,166

Shadow adjustments
99

 
1,610

 
1,709

Ceded reserves
290

 
207

 
497

Total gross reserves
$
3,220

 
$
10,152

 
$
13,372

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 $314 million related to Deferred acquisition costs as of 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 J to the Condensed Consolidated Financial Statements within the September 30, 2015 Form 10-Q 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. In addition, management also utilizes rate, retention and new business in evaluating operating trends. Rate represents the average change in price on policies that renew excluding exposure change. Retention represents the percentage of premium dollars renewed in comparison to the expiring premium dollars from policies available to renew. New business represents premiums from policies written with new customers and additional policies written with existing customers.

•
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


17


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