Document

0000021175-16-000197.txt : 20160801 0000021175-16-000197.hdr.sgml : 20160801 20160801112154 ACCESSION NUMBER: 0000021175-16-000197 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20160801 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20160801 DATE AS OF CHANGE: 20160801 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: 161796282 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 q2168k.htm FORM 8-K Document

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) August 1, 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 August 1, 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 second quarter 2016. 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: August 1, 2016	By	/s/ D. Craig Mense
		(Signature)
		D. Craig Mense Executive Vice President and Chief Financial Officer

EXHIBIT INDEX



Exhibit No.		Description
99.1		CNA Financial Corporation press release, issued August 1, 2016, providing information on the second quarter 2016 results of operations.

99.2		CNA Financial Corporation financial supplement, posted on its website August 1, 2016, providing supplemental financial information on the second quarter 2016.

EX-99.1 2 q216exhibit991.htm EXHIBIT Exhibit

FOR IMMEDIATE RELEASE

CONTACT:



MEDIA:		ANALYSTS:
Brandon Davis, 312-822-5885		James Anderson, 312-822-7757
Sarah Pang, 312-822-6394		Robert Tardella, 312-822-4387

CNA FINANCIAL ANNOUNCES SECOND QUARTER 2016 RESULTS


•	NET INCOME OF $209 MILLION; $0.77 PER SHARE


•	NET OPERATING INCOME OF $201 MILLION; $0.74 PER SHARE


•	P&C COMBINED RATIO OF 97.4% VS 98.4% IN 2015


•	BOOK VALUE PER SHARE EXCLUDING AOCI OF $43.16


•	QUARTERLY DIVIDEND OF $0.25 PER SHARE

CHICAGO, August 1, 2016 --- CNA Financial Corporation (NYSE: CNA) today announced second quarter 2016 net income of $209 million, or $0.77 per share, and net operating income of $201 million, or $0.74 per share. Property & Casualty Operations combined ratio for the second quarter was 97.4%.

CNA Financial also declared a quarterly dividend of $0.25 per share, payable August 31, 2016 to stockholders of record on August 15, 2016.



	Results for the Three Months Ended June 30				Results for the Six Months Ended June 30
($ millions, except per share data)	2016		2015		2016			2015
Net operating income (a)	$	201	$	132	$	292		$	357
Net realized investment gains (losses)	8		6		(17		)	14
Net income	$	209	$	138	$	275		$	371

Net operating income per diluted share	$	0.74	$	0.49	$	1.08		$	1.32
Net income per diluted share	0.77		0.51		1.02			1.37



	June 30, 2016		December 31, 2015
Book value per share	$	43.94	$	43.49
Book value per share excluding AOCI	43.16		44.66


(a)	Management utilizes the net operating income financial measure to monitor the Company's operations. Please refer to Note O in the Consolidated Financial Statements within CNA's annual Report on Form 10-K for the year ended December 31, 2015 for further discussion of this measure.

Property & Casualty Operations' net operating income was $229 million for the second quarter of 2016 as compared with $237 million in the prior year quarter. Improved underwriting results were more than offset by foreign currency exchange rate losses and lower investment income. Catastrophe losses were $58 million, after tax, as compared with $39 million, after tax, in the prior year quarter. Catastrophe losses in the second quarter of 2016 resulted primarily from U.S. weather-related events and the Fort McMurray wildfires.

Net operating results for our non-core segments improved $77 million from the prior year quarter reflecting a $54 million after-tax charge in 2015 related to the application of retroactive reinsurance accounting to adverse reserve development ceded under the 2010 Asbestos and Environmental Pollution (A&EP) Loss Portfolio Transfer.

Net investment income, after tax, was $362 million as compared with $356 million in the prior year quarter. Income from fixed maturity securities reflects an increase in the invested asset base. Limited partnerships returned 1.8% as compared with 1.6% in the prior year period.

Property & Casualty Operations

"Overall I am pleased with the result this quarter. Although our International segment had a disappointing quarter, all of our North American businesses produced solid results, led by another great underwriting result in our Specialty segment," said Thomas F. Motamed, Chairman and Chief Executive Officer of CNA Financial Corporation.



	Results for the Three Months Ended June 30								Results for the Six Months Ended June 30
($ millions)	2016				2015				2016				2015
Net written premiums	$	1,625			$	1,638			$	3,293			$	3,307
NWP change (% year over year)	(1		)	%	(1		)	%	—			%	(3		)	%
Net investment income	$	310			$	316			$	555			$	689
Net operating income	229				237				436				501
Net income	239				241				430				510

Loss ratio excluding catastrophes and development	63.9			%	61.7			%	62.9			%	62.0			%
Effect of catastrophe impacts	5.3				3.8				3.9				2.8
Effect of development-related items	(6.2		)		(0.7		)		(4.9		)		(0.1		)
Loss ratio	63.0			%	64.8			%	61.9			%	64.7			%

Combined ratio	97.4			%	98.4			%	96.8			%	98.6			%
Combined ratio excluding catastrophes and development	98.3			%	95.3			%	97.8			%	95.9			%

Business Operating Highlights

Specialty



	Results for the Three Months Ended June 30								Results for the Six Months Ended June 30
($ millions)	2016				2015				2016				2015
Net written premiums	$	691			$	672			$	1,375			$	1,370
NWP change (% year over year)	3			%	(4)			%	—			%	(3		)	%
Net operating income	$	164			$	137			$	291			$	272
Net income	166				137				286				275

Loss ratio excluding catastrophes and development	62.5			%	61.7			%	62.5			%	62.0			%
Effect of catastrophe impacts	1.3				0.7				1.0				0.9
Effect of development-related items	(9.9		)		(2.1		)		(8.0		)		(1.2		)
Loss ratio	53.9			%	60.3			%	55.5			%	61.7			%

Combined ratio	85.4			%	91.2			%	87.4			%	92.9			%
Combined ratio excluding catastrophes and development	94.0			%	92.6			%	94.4			%	93.2			%


•	Net operating income increased $27 million for the second quarter of 2016 as compared with the prior year quarter, primarily due to higher favorable net prior year development.

•

The combined ratio improved 5.8 points as compared with the prior year quarter. The loss ratio improved 6.4 points primarily due to higher favorable net prior year reserve development partially offset by a higher non-catastrophe current accident year loss ratio. Catastrophe losses were $9 million, or 1.3 points of the loss ratio, as compared to $5 million, or 0.7 points of the loss ratio for the prior year quarter. The expense ratio increased 0.6 points as compared with the prior year quarter, primarily due to higher net commissions.


•	Net written premiums increased $19 million as compared with the prior year quarter, reflecting steady retention, positive rate and a modest amount of new business. Average rate increased 1% for the policies that renewed in the second quarter of 2016 while achieving a retention of 86%.

Commercial



	Results for the Three Months Ended June 30							Results for the Six Months Ended June 30
($ millions)	2016				2015			2016				2015
Net written premiums	$	740			$	717		$	1,488			$	1,476
NWP change (% year over year)	3			%	4		%	1			%	(2		)	%
Net operating income	$	92			$	78		$	166			$	198
Net income	97				82			159				203

Loss ratio excluding catastrophes and development	61.6			%	62.6		%	61.6			%	63.3			%
Effect of catastrophe impacts	8.0				7.7			6.1				5.3
Effect of development-related items	(2.2		)		1.8			(1.9		)		1.0
Loss ratio	67.4			%	72.1		%	65.8			%	69.6			%

Combined ratio	103.5			%	107.2		%	102.7			%	105.3			%
Combined ratio excluding catastrophes and development	97.7			%	97.7		%	98.5			%	99.0			%


•	Net operating income increased $14 million for the second quarter of 2016 as compared with the prior year quarter, primarily due to favorable net prior year reserve development.

•

The combined ratio improved 3.7 points as compared with the prior year quarter. The loss ratio improved 4.7 points due to favorable net prior year reserve development and an improved non-catastrophe current accident year loss ratio. Catastrophe losses were $55 million, or 8.0 points of the loss ratio, as compared to $54 million, or 7.7 points of the loss ratio for the prior year quarter. The expense ratio increased 0.8 points as compared with the prior year quarter, due to higher underwriting expenses.


•	Net written premiums increased $23 million as compared with the prior year quarter, driven by higher retention and a steady level of new business. Average rate was flat for the policies that renewed in the second quarter of 2016 while achieving a retention of 83%.

International



	Results for the Three Months Ended June 30								Results for the Six Months Ended June 30
($ millions)	2016				2015				2016				2015
Net written premiums	$	194			$	249			$	430			$	461
NWP change (% year over year)	(22		)	%	(5		)	%	(7		)	%	(9		)	%
Net operating income	$	(27	)		$	22			$	(21	)		$	31
Net income	(24		)		22				(15		)		32

Loss ratio excluding catastrophes and development	76.5			%	58.6			%	69.0			%	57.7			%
Effect of catastrophe impacts	10.6				0.8				6.3				1.0
Effect of development-related items	(7.3		)		(4.4		)		(4.8		)		(1.0		)
Loss ratio	79.8			%	55.0			%	70.5			%	57.7			%

Combined ratio	118.6			%	92.2			%	108.8			%	95.1			%
Combined ratio excluding catastrophes and development	115.3			%	95.8			%	107.3			%	95.1			%


•	Net operating results decreased $49 million for the second quarter of 2016 as compared with the prior year quarter, primarily due to a higher level of large losses as well as higher catastrophe losses. Additionally, the comparison was negatively affected by $13 million due to fluctuations in foreign currency exchange rates.

•

The combined ratio increased 26.4 points as compared with the prior year quarter. The loss ratio increased 24.8 points due to an increase in the current accident year loss ratio driven by large losses related to political risk, property and financial institutions partially offset by higher favorable net prior year loss development. Catastrophe losses were $21 million, or 10.6 points of the loss ratio, primarily driven by the Fort McMurray wildfires, as compared to $1 million, or 0.8 points of the loss ratio for the prior year quarter. The expense ratio increased 1.6 points as compared with the prior year quarter, due to lower net earned premiums.

•

Net written premiums decreased $55 million as compared with the prior year quarter. Excluding the effect of foreign currency exchange rates and the timing of reinsurance spend, net written premiums for the second quarter of 2016 decreased 12% primarily due to lower retention and rate. Average rate decreased 2% for the policies that renewed in the second quarter of 2016 while achieving a retention of 70%.

Life & Group Non-Core



	Results for the Three Months Ended June 30						Results for the Six Months Ended June 30
($ millions)	2016			2015			2016			2015
Total operating revenues	$	327		$	316		$	645		$	642
Net investment income	188			179			375			358
Net operating loss	(4		)	(24		)	(6		)	(41		)
Net loss	(9		)	(23		)	(14		)	(37		)


•	Due to the recognition of the premium deficiency and resetting of actuarial assumptions in the fourth quarter of 2015, the operating results for our long term care business in 2016 now reflect the variance between actual experience and the expected results contemplated in our best estimate reserves.


•	The net operating loss of $4 million for the second quarter of 2016 was generally in line with expectations, as the impact of unfavorable persistency in our long term care business was partially offset by favorable mortality experience in our structured settlements and life settlement contracts business.

Corporate & Other Non-Core



	Results for the Three Months Ended June 30						Results for the Six Months Ended June 30
($ millions)	2016			2015			2016			2015
Net investment income	$	4		$	5		$	7		$	11
Interest expense	38			39			80			78
Net operating loss	(24		)	(81		)	(138		)	(103		)
Net loss	(21		)	(80		)	(141		)	(102		)

•

Net operating loss for the second quarter of 2016 as compared with the prior year quarter improved $57 million. Results in 2015 were negatively affected by a $54 million after-tax charge related to the application of retroactive reinsurance accounting to adverse reserve development ceded under the 2010 A&EP Loss Portfolio Transfer, as the Company completed the reserve review in the second quarter of 2015 and in the first quarter of 2016.

About the Company

Serving businesses and professionals since 1897, CNA is the country's eighth largest commercial insurance writer and the 14^th 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) 569-5033, or for international callers, (719) 325-2481. 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 on a global basis through its operations in Canada, the United Kingdom, Continental Europe and Singapore as well as through its presence 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 and other information, 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.

# # #

EX-99.2 3 q216exhibit992.htm EXHIBIT Exhibit

CNA Financial Corporation

Supplemental Financial Information

June 30, 2016

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..................................................................................................................................................................................................	1
Components of Income (Loss), Per Share Data and Return on Equity.............................................................................................................................	2
Selected Balance Sheet Data and Statement of Cash Flows Data...................................................................................................................................	3
Property & Casualty - Results of Operations
Property & Casualty...........................................................................................................................................................................................................	4
Specialty............................................................................................................................................................................................................................	5
Commercial.......................................................................................................................................................................................................................	6
International.......................................................................................................................................................................................................................	7
Non-Core - Results of Operations
Life & Group Non-Core......................................................................................................................................................................................................	8
Corporate & Other Non-Core.............................................................................................................................................................................................	9
Investment Information
Investment Summary - Consolidated................................................................................................................................................................................	10
Investment Summary - Property & Casualty and Corporate & Other Non-Core...............................................................................................................	11
Investment Summary - Life & Group Non-Core.................................................................................................................................................................	12
Investments - Fixed Maturity Securities by Credit Rating..................................................................................................................................................	13
Components of Net Investment Income............................................................................................................................................................................	14
Other
Claim & Claim Adjustment Expense Reserve Rollforward................................................................................................................................................	15
Life & Group Non-Core Policyholder Reserves.................................................................................................................................................................	16
Definitions and Presentation..............................................................................................................................................................................................	17

Statements of Operations



Periods ended June 30	Three Months								Six Months
(In millions)	2016			2015			Change		2016			2015			Change
Revenues:
Net earned premiums	$	1,730		$	1,735		—	%	$	3,429		$	3,422		—		%
Net investment income	502			500			—		937			1,058			(11	)
Net realized investment gains (losses):
Other-than-temporary impairment (OTTI) losses	(15		)	(31		)			(38		)	(43		)
Other net realized investment gains (losses)	31			31					18			53
Net realized investment gains (losses)	16			—					(20		)	10
Other revenues	100			92					197			189
Total revenues	2,348			2,327			1		4,543			4,679			(3	)
Claims, Benefits and Expenses:
Insurance claims and policyholders' benefits	1,339			1,469					2,747			2,808
Amortization of deferred acquisition costs	305			314					612			617
Other operating expenses	378			341					759			699
Interest	38			39					80			78
Total claims, benefits and expenses	2,060			2,163			5		4,198			4,202			—
Income (loss) before income tax	288			164					345			477
Income tax (expense) benefit	(79		)	(26		)			(70		)	(106		)
Net income (loss)	$	209		$	138		51	%	$	275		$	371		(26	)	%

Components of Income (Loss), Per Share Data and Return on Equity



Periods ended June 30	Three Months						Six Months
(In millions, except per share data)	2016			2015			2016				2015
Components of Income (Loss)
Net operating income (loss)	$	201		$	132		$	292			$	357
Net realized investment gains (losses)	8			6			(17		)		14
Net income (loss)	$	209		$	138		$	275			$	371

Diluted Earnings (Loss) Per Common Share
Net operating income (loss)	$	0.74		$	0.49		$	1.08			$	1.32
Net realized investment gains (losses)	0.03			0.02			(0.06		)		0.05
Diluted earnings (loss) per share	$	0.77		$	0.51		$	1.02			$	1.37

Weighted Average Outstanding Common Stock and Common Stock Equivalents
Basic	270.5			270.3			270.4				270.2
Diluted	270.9			270.7			270.9				270.7

Return on Equity
Net income (loss) ⁽¹⁾	7.2		%	4.5		%	4.7			%	5.9		%
Net operating income (loss) ⁽²⁾	6.9			4.4			4.9				5.8

(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.

Selected Balance Sheet Data and Statement of Cash Flows Data



(In millions, except per share data)	June 30, 2016		December 31, 2015
Total investments	$	46,549	$	44,699
Reinsurance receivables, net of allowance for uncollectible receivables	4,683		4,453
Total assets	56,906		55,045
Insurance reserves	37,980		36,486
Debt	2,708		2,560
Total liabilities	45,020		43,289
Accumulated other comprehensive income (loss) ⁽¹⁾	210		(315		)
Total stockholders' equity	11,886		11,756

Book value per common share	$	43.94	$	43.49
Book value per common share excluding AOCI	$	43.16	$	44.66

Outstanding shares of common stock (in millions of shares)	270.5		270.3

Statutory capital and surplus - Combined Continental Casualty Companies ⁽²⁾	$	10,584	$	10,723



Three months ended June 30	2016			2015
Net cash flows provided (used) by operating activities	$	279		$	446
Net cash flows provided (used) by investing activities	(158		)	(439		)
Net cash flows provided (used) by financing activities	(69		)	(67		)
Net cash flows provided (used) by operating, investing and financing activities	$	52		$	(60	)



Six months ended June 30	2016			2015
Net cash flows provided (used) by operating activities	$	613		$	540
Net cash flows provided (used) by investing activities	(167		)	87
Net cash flows provided (used) by financing activities	(538		)	(670		)
Net cash flows provided (used) by operating, investing and financing activities	$	(92	)	$	(43	)

(1) As of June 30, 2016 and December 31, 2015, the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $1,682 million and $1,111 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, an increase in Insurance reserves are recorded, net of tax, as a reduction of net unrealized gains through Other comprehensive income (loss) (Shadow Adjustments).

(2) Statutory capital and surplus as of June 30, 2016 is preliminary.

Property & Casualty - Results of Operations



Periods ended June 30	Three Months											Six Months
(In millions)	2016				2015				Change			2016				2015				Change
Gross written premiums	$	2,729			$	2,567			6		%	$	5,403			$	5,103			6		%
Net written premiums	1,625				1,638				(1	)		3,293				3,307				—

Net earned premiums	1,595				1,599				—			3,163				3,148				—
Net investment income	310				316							555				689
Other revenues	97				89							191				176
Total operating revenues	2,002				2,004				—			3,909				4,013				(3	)
Insurance claims and policyholders' benefits	1,007				1,040							1,964				2,043
Amortization of deferred acquisition costs	305				308							612				604
Other insurance related expenses	240				227							484				460
Other expenses	97				69							186				149
Total claims, benefits and expenses	1,649				1,644				—			3,246				3,256				—
Operating income (loss) before income tax	353				360							663				757
Income tax (expense) benefit on operating income (loss)	(124		)		(123		)					(227		)		(256		)
Net operating income (loss)	$	229			$	237			(3	)	%	$	436			$	501			(13	)	%

Other Performance Metrics
Underwriting gain (loss)	$	43			$	24			79		%	$	103			$	41			151		%

Loss & LAE ratio	63.0			%	64.8			%	1.8		pts	61.9			%	64.7			%	2.8		pts
Acquisition expense ratio	19.1				18.8				(0.3	)		19.3				19.1				(0.2	)
Underwriting expense ratio	15.1				14.6				(0.5	)		15.4				14.6				(0.8	)
Expense ratio	34.2				33.4				(0.8	)		34.7				33.7				(1.0	)
Dividend ratio	0.2				0.2				—			0.2				0.2				—
Combined ratio	97.4			%	98.4			%	1.0			96.8			%	98.6			%	1.8
Combined ratio excluding catastrophes and development	98.3			%	95.3			%	(3.0	)	pts	97.8			%	95.9			%	(1.9	)	pts

Net accident year catastrophe losses incurred	$	85			$	60						$	121			$	89
Effect on loss & LAE ratio	5.3			%	3.8			%	(1.5	)	pts	3.9			%	2.8			%	(1.1	)	pts

Net prior year development and other: (favorable) / unfavorable	$	(102	)		$	(15	)					$	(163	)		$	(7	)
Effect on loss & LAE ratio	(6.2		)	%	(0.7		)	%	5.5		pts	(4.9		)	%	(0.1		)	%	4.8		pts

Rate	—			%	1			%	(1	)	pts	—			%	1			%	(1	)	pts
Retention	82				81				1			83				80				3
New business ⁽¹⁾	$	269			$	237			14		%	$	531			$	486			9		%

(1) Beginning in 2016, new business includes Hardy. New business for Hardy was $36 million and $67 million for three and six months ended June 30, 2016.

Specialty - Results of Operations



Periods ended June 30	Three Months											Six Months
(In millions)	2016				2015				Change			2016				2015				Change
Gross written premiums	$	1,697			$	1,526			11		%	$	3,329			$	3,015			10		%
Net written premiums	691				672				3			1,375				1,370				—

Net earned premiums	702				689				2			1,384				1,369				1
Net investment income	133				134							240				289
Other revenues	89				81							176				159
Total operating revenues	924				904				2			1,800				1,817				(1	)
Insurance claims and policyholders' benefits	378				417							769				847
Amortization of deferred acquisition costs	148				146							292				290
Other insurance related expenses	73				66							148				135
Other expenses	79				69							154				136
Total claims, benefits and expenses	678				698				3			1,363				1,408				3
Operating income (loss) before income tax	246				206							437				409
Income tax (expense) benefit on operating income (loss)	(82		)		(69		)					(146		)		(137		)
Net operating income (loss)	$	164			$	137			20		%	$	291			$	272			7		%

Other Performance Metrics
Underwriting gain (loss)	$	103			$	60			72		%	$	175			$	97			80		%

Loss & LAE ratio	53.9			%	60.3			%	6.4		pts	55.5			%	61.7			%	6.2		pts
Acquisition expense ratio	20.1				19.6				(0.5	)		20.0				19.7				(0.3	)
Underwriting expense ratio	11.2				11.1				(0.1	)		11.7				11.3				(0.4	)
Expense ratio	31.3				30.7				(0.6	)		31.7				31.0				(0.7	)
Dividend ratio	0.2				0.2				—			0.2				0.2				—
Combined ratio	85.4			%	91.2			%	5.8			87.4			%	92.9			%	5.5
Combined ratio excluding catastrophes and development	94.0			%	92.6			%	(1.4	)	pts	94.4			%	93.2			%	(1.2	)	pts

Net accident year catastrophe losses incurred	$	9			$	5						$	13			$	12
Effect on loss & LAE ratio	1.3			%	0.7			%	(0.6	)	pts	1.0			%	0.9			%	(0.1	)	pts

Net prior year development and other: (favorable) / unfavorable	$	(72	)		$	(15	)					$	(117	)		$	(19	)
Effect on loss & LAE ratio	(9.9		)	%	(2.1		)	%	7.8		pts	(8.0		)	%	(1.2		)	%	6.8		pts

Rate	1			%	1			%	—		pts	1			%	1			%	—		pts
Retention	86				86				—			87				86				1
New business	$	61			$	63			(3	)	%	$	126			$	139			(9	)	%

Commercial - Results of Operations



Periods ended June 30	Three Months											Six Months
(In millions)	2016				2015				Change			2016				2015				Change
Gross written premiums	$	804			$	781			3		%	$	1,583			$	1,567			1		%
Net written premiums	740				717				3			1,488				1,476				1

Net earned premiums	696				703				(1	)		1,384				1,381				—
Net investment income	164				169							290				373
Other revenues	8				9							14				18
Total operating revenues	868				881				(1	)		1,688				1,772				(5	)
Insurance claims and policyholders' benefits	472				509							917				966
Amortization of deferred acquisition costs	117				117							233				234
Other insurance related expenses	130				130							271				257
Other expenses	11				5							16				13
Total claims, benefits and expenses	730				761				4			1,437				1,470				2
Operating income (loss) before income tax	138				120							251				302
Income tax (expense) benefit on operating income (loss)	(46		)		(42		)					(85		)		(104		)
Net operating income (loss)	$	92			$	78			18		%	$	166			$	198			(16	)	%

Other Performance Metrics
Underwriting gain (loss)	$	(23	)		$	(53	)		57		%	$	(37	)		$	(76	)		51		%

Loss & LAE ratio	67.4			%	72.1			%	4.7		pts	65.8			%	69.6			%	3.8		pts
Acquisition expense ratio	17.3				17.3				—			17.9				17.7				(0.2	)
Underwriting expense ratio	18.4				17.6				(0.8	)		18.6				17.7				(0.9	)
Expense ratio	35.7				34.9				(0.8	)		36.5				35.4				(1.1	)
Dividend ratio	0.4				0.2				(0.2	)		0.4				0.3				(0.1	)
Combined ratio	103.5			%	107.2			%	3.7			102.7			%	105.3			%	2.6
Combined ratio excluding catastrophes and development	97.7			%	97.7			%	—		pts	98.5			%	99.0			%	0.5		pts

Net accident year catastrophe losses incurred	$	55			$	54						$	83			$	73
Effect on loss & LAE ratio	8.0			%	7.7			%	(0.3	)	pts	6.1			%	5.3			%	(0.8	)	pts

Net prior year development and other: (favorable) / unfavorable	$	(16	)		$	10						$	(27	)		$	10
Effect on loss & LAE ratio	(2.2		)	%	1.8			%	4.0		pts	(1.9		)	%	1.0			%	2.9		pts

Rate	—			%	2			%	(2	)	pts	—			%	2			%	(2	)	pts
Retention	83				79				4			83				77				6
New business	$	146			$	149			(2	)	%	$	283			$	287			(1	)	%

International - Results of Operations



Periods ended June 30	Three Months											Six Months
(In millions)	2016				2015				Change			2016				2015				Change
Gross written premiums	$	228			$	260			(12	)	%	$	491			$	521			(6	)	%
Net written premiums	194				249				(22	)		430				461				(7	)

Net earned premiums	197				207				(5	)		395				398				(1	)
Net investment income	13				13							25				27
Other revenues	—				(1		)					1				(1		)
Total operating revenues	210				219				(4	)		421				424				(1	)
Insurance claims and policyholders' benefits	157				114							278				230
Amortization of deferred acquisition costs	40				45							87				80
Other insurance related expenses	37				31							65				68
Other expenses	7				(5		)					16				—
Total claims, benefits and expenses	241				185				(30	)		446				378				(18	)
Operating income (loss) before income tax	(31		)		34							(25		)		46
Income tax (expense) benefit on operating income (loss)	4				(12		)					4				(15		)
Net operating income (loss)	$	(27	)		$	22			N/M		%	$	(21	)		$	31			(168	)	%

Other Performance Metrics
Underwriting gain (loss)	$	(37	)		$	17			N/M		%	$	(35	)		$	20			N/M		%

Loss & LAE ratio	79.8			%	55.0			%	(24.8	)	pts	70.5			%	57.7			%	(12.8	)	pts
Acquisition expense ratio	22.0				21.5				(0.5	)		21.5				21.5				—
Underwriting expense ratio	16.8				15.7				(1.1	)		16.8				15.9				(0.9	)
Expense ratio	38.8				37.2				(1.6	)		38.3				37.4				(0.9	)
Dividend ratio	—				—				—			—				—				—
Combined ratio	118.6			%	92.2			%	(26.4	)		108.8			%	95.1			%	(13.7	)
Combined ratio excluding catastrophes and development	115.3			%	95.8			%	(19.5	)	pts	107.3			%	95.1			%	(12.2	)	pts

Net accident year catastrophe losses incurred	$	21			$	1						$	25			$	4
Effect on loss & LAE ratio	10.6			%	0.8			%	(9.8	)	pts	6.3			%	1.0			%	(5.3	)	pts

Net prior year development and other: (favorable) / unfavorable	$	(14	)		$	(10	)					$	(19	)		$	2
Effect on loss & LAE ratio	(7.3		)	%	(4.4		)	%	2.9		pts	(4.8		)	%	(1.0		)	%	3.8		pts

Rate	(2		)	%	(2		)	%	—		pts	(1		)	%	(1		)	%	—		pts
Retention	70				76				(6	)		75				77				(2	)
New business ⁽¹⁾	$	62			$	25			148		%	$	122			$	60			103		%

(1) Beginning in 2016, new business includes Hardy. New business for Hardy was $36 million and $67 million for three and six months ended June 30, 2016.

Life & Group Non-Core - Results of Operations



Periods ended June 30	Three Months									Six Months
(In millions)	2016			2015			Change			2016			2015			Change
Net earned premiums	$	136		$	137		(1	)	%	$	267		$	275		(3	)	%
Net investment income	188			179						375			358
Other revenues	3			—						3			9
Total operating revenues	327			316			3			645			642			—
Insurance claims and policyholders' benefits	340			344						663			684
Amortization of deferred acquisition costs	—			6						—			13
Other insurance related expenses	31			34						64			69
Other expenses	2			5						5			9
Total claims, benefits and expenses	373			389			4			732			775			6
Operating income (loss) before income tax	(46		)	(73		)				(87		)	(133		)
Income tax (expense) benefit on operating income (loss)	42			49						81			92
Net operating income (loss)	$	(4	)	$	(24	)	83		%	$	(6	)	$	(41	)	85		%

Corporate & Other Non-Core - Results of Operations



Periods ended June 30	Three Months									Six Months
(In millions)	2016			2015			Change			2016			2015			Change
Net earned premiums	$	(1	)	$	(1	)				$	(1	)	$	(1	)
Net investment income	4			5						7			11
Other revenues	—			3						3			4
Total operating revenues	3			7			(57	)	%	9			14			(36	)	%
Insurance claims and policyholders' benefits	(8		)	85						120			81
Amortization of deferred acquisition costs	—			—						—			—
Other insurance related expenses	(1		)	(2		)				(1		)	(2		)
Other expenses	47			47						101			92
Total claims, benefits and expenses	38			130			71			220			171			(29	)
Operating income (loss) before income tax	(35		)	(123		)				(211		)	(157		)
Income tax (expense) benefit on operating income (loss)	11			42						73			54
Net operating income (loss)	$	(24	)	$	(81	)	70		%	$	(138	)	$	(103	)	(34	)	%

Investment Summary - Consolidated



	June 30, 2016					March 31, 2016						December 31, 2015
(In millions)	Carrying Value			Net Unrealized Gains (Losses)		Carrying Value			Net Unrealized Gains (Losses)			Carrying Value		Net Unrealized Gains (Losses)
Fixed maturity securities:
Corporate and other bonds	$	19,214		$	1,591	$	18,109		$	1,031		$	17,760	$	677
States, municipalities and political subdivisions:
Tax-exempt	10,774			1,578		10,251			1,244			10,114		1,076
Taxable	2,999			534		2,928			457			3,060		369
Total states, municipalities and political subdivisions	13,773			2,112		13,179			1,701			13,174		1,445
Asset-backed:
RMBS	5,189			195		5,206			178			5,072		137
CMBS	2,163			83		2,199			62			2,197		43
Other ABS	931			3		921			(16		)	921		(2		)
Total asset-backed	8,283			281		8,326			224			8,190		178
U.S. Treasury and obligations of government-sponsored enterprises	92			11		140			7			67		5
Foreign government	460			22		463			16			346		12
Redeemable preferred stock	35			2		35			2			35		2
Total fixed maturity securities	41,857			4,019		40,252			2,981			39,572		2,319
Equities	123			6		189			7			197		6
Limited partnership investments	2,542			—		2,562			—			2,548		—
Other invested assets	33			—		45			—			44		—
Mortgage loans	610			—		675			—			678		—
Short term investments	1,384			1		1,648			1			1,660		—
Total investments	$	46,549		$	4,026	$	45,371		$	2,989		$	44,699	$	2,325

Net receivable/(payable) on investment activity	$	(114	)			$	(73	)				$	82

Effective portfolio duration (in years)	5.9					6.0						6.2
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

Investment Summary - Property & Casualty and Corporate & Other Non-Core



	June 30, 2016					March 31, 2016						December 31, 2015
(In millions)	Carrying Value			Net Unrealized Gains (Losses)		Carrying Value			Net Unrealized Gains (Losses)			Carrying Value		Net Unrealized Gains (Losses)
Fixed maturity securities:
Corporate and other bonds	$	13,500		$	619	$	12,857		$	316		$	12,594	$	96
States, municipalities and political subdivisions:
Tax-exempt	2,554			189		2,427			156			2,441		133
Taxable	1,342			172		1,388			166			1,579		132
Total states, municipalities and political subdivisions	3,896			361		3,815			322			4,020		265
Asset-backed:
RMBS	4,882			184		4,926			172			4,828		131
CMBS	2,003			75		2,041			55			2,038		37
Other ABS	832			4		843			(13		)	837		(1		)
Total asset-backed	7,717			263		7,810			214			7,703		167
U.S. Treasury and obligations of government-sponsored enterprises	67			7		115			2			42		—
Foreign government	460			22		463			16			346		12
Redeemable preferred stock	13			1		13			1			13		1
Total fixed maturity securities	25,653			1,273		25,073			871			24,718		541
Equities	64			3		81			4			87		1
Limited partnership investments	2,542			—		2,562			—			2,548		—
Other invested assets	33			—		45			—			44		—
Mortgage loans	553			—		617			—			622		—
Short term investments	1,299			1		1,538			1			1,513		—
Total investments	$	30,144		$	1,277	$	29,916		$	876		$	29,532	$	542

Net receivable/(payable) on investment activity	$	(113	)			$	(128	)				$	204

Effective portfolio duration (in years)	4.1					4.1						4.3
Weighted average rating of fixed maturity securities	A					A						A

Investment Summary - Life & Group Non-Core



	June 30, 2016						March 31, 2016					December 31, 2015
(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	$	5,714		$	972		$	5,252	$	715		$	5,166		$	581
States, municipalities and political subdivisions:
Tax-exempt	8,220			1,389			7,824		1,088			7,673			943
Taxable	1,657			362			1,540		291			1,481			237
Total states, municipalities and political subdivisions	9,877			1,751			9,364		1,379			9,154			1,180
Asset-backed:
RMBS	307			11			280		6			244			6
CMBS	160			8			158		7			159			6
Other ABS	99			(1		)	78		(3		)	84			(1		)
Total asset-backed	566			18			516		10			487			11
U.S. Treasury and obligations of government-sponsored enterprises	25			4			25		5			25			5
Foreign government	—			—			—		—			—			—
Redeemable preferred stock	22			1			22		1			22			1
Total fixed maturity securities	16,204			2,746			15,179		2,110			14,854			1,778
Equities	59			3			108		3			110			5
Limited partnership investments	—			—			—		—			—			—
Other invested assets	—			—			—		—			—			—
Mortgage loans	57			—			58		—			56			—
Short term investments	85			—			110		—			147			—
Total investments	$	16,405		$	2,749		$	15,455	$	2,113		$	15,167		$	1,783

Net receivable/(payable) on investment activity	$	(1	)				$	55				$	(122	)

Effective portfolio duration (in years)	8.7						9.2					9.6
Weighted average rating of fixed maturity securities	A						A					A

Investments - Fixed Maturity Securities by Credit Rating



June 30, 2016	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	$	—		$	—	$	65		$	4	$	606		$	50	$	4,949		$	594		$	11,600		$	923	$	1,994		$	20	$	19,214		$	1,591
States, municipalities and political subdivisions:
Tax-exempt	—			—		826			97		5,682			857		4,048			584			138			14		80			26		10,774			1,578
Taxable	—			—		323			41		1,971			344		631			147			30			1		44			1		2,999			534
Total states, municipalities and political subdivisions	—			—		1,149			138		7,653			1,201		4,679			731			168			15		124			27		13,773			2,112
Asset-backed:
RMBS	4,059			168		96			—		50			—		99			(1		)	64			—		821			28		5,189			195
CMBS	57			1		473			20		481			29		339			17			573			13		240			3		2,163			83
Other ABS	—			—		58			1		34			—		471			1			368			1		—			—		931			3
Total asset-backed	4,116			169		627			21		565			29		909			17			1,005			14		1,061			31		8,283			281
U.S. Treasury and obligations of government-sponsored enterprises	92			11		—			—		—			—		—			—			—			—		—			—		92			11
Foreign government	—			—		95			6		329			15		30			1			6			—		—			—		460			22
Redeemable preferred stock	—			—		—			—		—			—		—			—			11			1		24			1		35			2
Total fixed maturity securities	$	4,208		$	180	$	1,936		$	169	$	9,153		$	1,295	$	10,567		$	1,343		$	12,790		$	953	$	3,203		$	79	$	41,857		$	4,019

Percentage of total fixed maturity securities	10		%			5		%			22		%			25		%				30		%			8		%			100		%

Components of Net Investment Income



	Consolidated
Periods ended June 30	Three Months						Six Months
(In millions)	2016			2015			2016			2015
Taxable fixed maturities	$	349		$	352		$	694		$	694
Tax-exempt fixed maturities	100			100			201			201
Total fixed maturity securities	449			452			895			895
Limited partnership investments	46			48			32			162
Other, net of investment expense	7			—			10			1
Net investment income	$	502		$	500		$	937		$	1,058

Fixed maturity securities, after tax	$	325		$	324		$	647		$	642
Net investment income, after tax	362			356			677			750

Effective income yield for the fixed maturity securities portfolio, pretax	4.8		%	4.9		%	4.8		%	4.8		%
Effective income yield for the fixed maturity securities portfolio, after tax	3.5			3.5			3.4			3.5



	Property & Casualty and Corporate & Other Non-Core
Periods ended June 30	Three Months						Six Months
(In millions)	2016			2015			2016			2015
Taxable fixed maturities	$	242		$	249		$	480		$	491
Tax-exempt fixed maturities	18			21			37			43
Total fixed maturity securities	260			270			517			534
Limited partnership investments	46			48			32			162
Other, net of investment expense	8			3			13			4
Net investment income	$	314		$	321		$	562		$	700

Fixed maturity securities, after tax	$	178		$	183		$	352		$	362
Net investment income, after tax	214			216			382			471

Effective income yield for the fixed maturity securities portfolio, pretax	4.3		%	4.4		%	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 June 30	Three Months								Six Months
(In millions)	2016				2015				2016				2015
Taxable fixed maturities	$	107			$	103			$	214			$	203
Tax-exempt fixed maturities	82				79				164				158
Total fixed maturity securities	189				182				378				361
Limited partnership investments	—				—				—				—
Other, net of investment expense	(1		)		(3		)		(3		)		(3		)
Net investment income	$	188			$	179			$	375			$	358

Fixed maturity securities, after tax	$	147			$	141			$	295			$	280
Net investment income, after tax	148				140				295				279

Effective income yield for the fixed maturity securities portfolio, pretax	5.7			%	5.8			%	5.7			%	5.8			%
Effective income yield for the fixed maturity securities portfolio, after tax	4.4				4.5				4.5				4.5

Claim & Claim Adjustment Expense Reserve Rollforward



Three months ended June 30, 2016 (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	$	6,325		$	9,095		$	1,395		$	16,815		$	3,311		$	2,892		$	23,018
Ceded	761			590			145			1,496			290			2,613			4,399
Net	5,564			8,505			1,250			15,319			3,021			279			18,619

Net incurred claim & claim adjustment expenses	377			470			157			1,004			246			1			1,251
Net claim & claim adjustment expense payments	(376		)	(571		)	(95		)	(1,042		)	(195		)	(36		)	(1,273		)
Foreign currency translation adjustment and other	1			—			(26		)	(25		)	32			—			7

Claim & claim adjustment expense reserves, end of period
Net	5,566			8,404			1,286			15,256			3,104			244			18,604
Ceded	848			569			123			1,540			278			2,553			4,371
Gross	$	6,414		$	8,973		$	1,409		$	16,796		$	3,382		$	2,797		$	22,975



Six months ended June 30, 2016 (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	$	6,269		$	9,183		$	1,347		$	16,799		$	3,220		$	2,644		$	22,663
Ceded	701			607			128			1,436			290			2,361			4,087
Net	5,568			8,576			1,219			15,363			2,930			283			18,576

Net incurred claim & claim adjustment expenses	767			911			278			1,956			520			2			2,478
Net claim & claim adjustment expense payments	(770		)	(1,083		)	(216		)	(2,069		)	(385		)	(42		)	(2,496		)
Foreign currency translation adjustment and other	1			—			5			6			39			1			46

Claim & claim adjustment expense reserves, end of period
Net	5,566			8,404			1,286			15,256			3,104			244			18,604
Ceded	848			569			123			1,540			278			2,553			4,371
Gross	$	6,414		$	8,973		$	1,409		$	16,796		$	3,382		$	2,797		$	22,975

Life & Group Non-Core Policyholder Reserves



June 30, 2016
(In millions)	Claim and claim adjustment expenses		Future policy benefits		Total
Long term care	$	2,373	$	8,478	$	10,851
Structured settlement annuities	572		—		572
Other	19		—		19
Total	2,964		8,478		11,442
Shadow adjustments	140		2,448		2,588
Ceded reserves	278		214		492
Total gross reserves	$	3,382	$	11,140	$	14,522



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

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 O to the Condensed Consolidated Financial Statements within the December 31, 2015 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. 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

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