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

CNA Financial Corporation

Statements of Operations and Comprehensive Income (Loss)



Years ended December 31
(In millions)	2016			2015			2014
Revenues
Net investment income	$	3		$	1		$	1
Net realized investment (losses) gains	(7		)	5			4
Total revenues	(4		)	6			5
Expenses
Administrative and general	1			1			5
Interest	155			154			182
Total expenses	156			155			187
Loss from operations before income taxes and equity in net income of subsidiaries	(160		)	(149		)	(182		)
Income tax benefit	41			34			35
Loss before equity in net income of subsidiaries	(119		)	(115		)	(147		)
Equity in net income of subsidiaries	978			594			838
Net income	859			479			691
Equity in other comprehensive income of subsidiaries	142			(715		)	(42		)
Total Comprehensive Income (Loss)	$	1,001		$	(236	)	$	649

See accompanying Notes to Condensed Financial Information as well as the

Consolidated Financial Statements and accompanying Notes.

CNA Financial Corporation

Balance Sheets



December 31
(In millions, except share data)	2016			2015
Assets
Investment in subsidiaries	$	14,202		$	13,851
Cash	1			4
Short term investments	487			478
Amounts due from affiliates	6			—
Other assets	1			1
Total assets	$	14,697		$	14,334
Liabilities
Short term debt	$	—		$	350
Long term debt	2,680			2,180
Other liabilities	48			48
Total liabilities	2,728			2,578
Stockholders' Equity
Common stock ($2.50 par value; 500,000,000 shares authorized; 273,040,243 shares issued; 270,495,998 and 270,274,361 shares outstanding)	683			683
Additional paid-in capital	2,173			2,153
Retained earnings	9,359			9,313
Accumulated other comprehensive income	(173		)	(315		)
Treasury stock (2,544,245 and 2,765,882 shares), at cost	(73		)	(78		)
Total stockholders' equity	11,969			11,756
Total liabilities and stockholders' equity	$	14,697		$	14,334

See accompanying Notes to Condensed Financial Information as well as the

Consolidated Financial Statements and accompanying Notes.

CNA Financial Corporation

Statements of Cash Flows



Years ended December 31
(In millions)	2016			2015			2014
Cash Flows from Operating Activities
Net income	$	859		$	479		$	691
Adjustments to reconcile net income to net cash flows provided by operating activities:
Equity in net income of subsidiaries	(978		)	(594		)	(838		)
Dividends received from subsidiaries	765			900			650
Net realized investment losses (gains)	7			(5		)	(4		)
Other, net	21			4			14
Total adjustments	(185		)	305			(178		)
Net cash flows provided by operating activities	674			784			513
Cash Flows from Investing Activities
Change in short term investments	(9		)	21			6
Capital contributions to subsidiaries	—			—			(10		)
Other, net	4			7			5
Net cash flows (used) provided by investing activities	(5		)	28			1
Cash Flows from Financing Activities
Dividends paid to common stockholders	(813		)	(811		)	(541		)
Proceeds from the issuance of debt	498			—			546
Repayment of debt	(358		)	—			(549		)
Stock options exercised	—			1			5
Other, net	1			1			25
Net cash flows used by financing activities	(672		)	(809		)	(514		)
Net change in cash	(3		)	3			—
Cash, beginning of year	4			1			1
Cash, end of year	$	1		$	4		$	1

See accompanying Notes to Condensed Financial Information as well as the

Consolidated Financial Statements and accompanying Notes.

Notes to Condensed Financial Information

A. Summary of Significant Accounting Policies

Basis of Presentation

The condensed financial information of CNA Financial Corporation (CNAF or the Parent Company) should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Item 8 of this Form 10-K. CNAF’s subsidiaries are accounted for using the equity method of accounting. Equity in net income of these subsidiaries is presented on the Condensed Statements of Operations as Equity in net income of subsidiaries. Loews owned approximately 90% of the outstanding common stock of CNAF as of December 31, 2016.

Recently Adopted Accounting Standards Updates (ASU)

In April 2015, the Financial Accounting Standards Board (FASB) issued ASU No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The updated accounting guidance requires debt issuance costs to be presented as a deduction from the corresponding debt liability instead of the historical presentation as an unamortized debt issuance asset. As of January 1, 2016, the Parent Company adopted the updated accounting guidance retrospectively. The Parent Company adjusted its previously reported financial information included herein to reflect the change in accounting guidance for debt issuance costs. The impacts of adopting the new accounting standard on the Parent Company’s Consolidated Balance Sheet as of December 31, 2015, were a decrease in Other assets and a decrease in Long term debt of $2 million.

B. Commitments, Contingencies and Guarantees

As of December 31, 2016 and 2015 CNAF had recorded liabilities of approximately $5 million related to guarantee agreements. The Parent Company believes that it is not likely that any future indemnity claims will be significantly greater than the amounts recorded.

In the course of selling business entities and assets to third parties, CNAF has agreed to guarantee the performance of certain obligations of both a previously owned subsidiary and a current subsidiary. Such obligations include agreement to indemnify purchasers for losses arising out of breaches of representation and warranties with respect to the business entities or assets sold, including, in certain cases, losses arising from undisclosed liabilities or certain named litigation. The guarantee agreements may include provisions that survive indefinitely. As of December 31, 2016, the aggregate amount of quantifiable guarantee agreements in effect for sales of business entities, assets and third-party loans was $625 million. Should the company be required to make payments under the guarantee, it would have the right to seek reimbursement in certain cases from an affiliate of a previously owned subsidiary.

In addition, CNAF has agreed to provide indemnification to third-party purchasers for certain losses associated with sold business entities or assets that are not limited by a contractual monetary amount. As of December 31, 2016, CNAF had outstanding unlimited indemnifications in connection with the sales of certain of its business entities or assets that included tax liabilities arising prior to a purchaser’s ownership of an entity or asset, defects in title at the time of sale, employee claims arising prior to closing and in some cases losses arising from certain litigation and undisclosed liabilities. These indemnification agreements survive until the applicable statutes of limitation expire or until the agreed upon contract terms expire.

CNAF also provided guarantees, if the primary obligor fails to perform, to holders of structured settlement annuities provided by a previously owned subsidiary. As of December 31, 2016, the potential amount of future payments CNAF could be required to pay under these guarantees was approximately $1.9 billion, which will be paid over the lifetime of the annuitants. The Parent Company does not believe a payable is likely under these guarantees, as it is the beneficiary of a trust that must be maintained at a level that approximates the discounted reserves for these annuities.