EX-99.2 3 c94867exv99w2.txt FINANCIAL SUPPLEMENT EXHIBIT 99.2 CNA FINANCIAL CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION MARCH 31, 2005 . . . CNA FINANCIAL CORPORATION TABLE OF CONTENTS MARCH 31, 2005
PAGE ----- Supplemental Financial Information i Restatement for Reinsurance and Equity Investee Accounting ii Statements of Operations 1 Components of Net Income and Per Share Data 2 Selected Balance Sheet Data and Statements of Cash Flows Data 3 Claim & Claim Adjustment Expense Reserve Data 4 Claim & Claim Adjustment Expense Reserve Rollforward 5 Investments by Segment Aggregation 6 Property & Casualty Results of Operations 7 Life & Group Non-Core and Corporate & Other Non-Core Segments Results of Operations 8 Property & Casualty Operations and Corporate & Other Non-Core Segment - Catastrophe Losses 9 Analysis of Pretax Net Investment Income 10 Statutory Data - Preliminary 11 Property & Casualty Operations Loss and LAE Ratio Analysis 12 Life & Group Non-Core Segment - GAAP Results of Operations 13 Asbestos Summary by Policyholder Category 14
CNA FINANCIAL CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION DEFINITIONS AND PRESENTATION ----------------------------- - P&C OPERATIONS includes Standard Lines and Specialty Lines. - LIFE & GROUP NON-CORE segment primarily includes the results of the life and group lines of business that have been sold or placed in run-off. - CORPORATE & OTHER NON-CORE segment includes the results of certain property and casualty lines of business placed in run-off, including CNA Re. This segment also includes the results related to the centralized adjusting and settlement of APMT claims and interest expense on corporate debt. - PROPERTY AND CASUALTY COMPANIES includes Standard Lines, Specialty Lines and P&C business written in the Life & Group Non-Core and Corporate & Other Non-Core segments. - Underwriting results are net earned premiums less net incurred claims, the costs incurred to settle claims, acquisition expenses and underwriting expenses. - In evaluating the results of the Standard Lines and Specialty Lines, management utilizes the combined ratio, the loss ratio, the expense ratio, and the dividend ratio. These ratios are calculated using GAAP financial results. 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 underwriting and acquisition expenses, including the amortization of deferred acquisition costs, to net earned premiums. The dividend ratio is the ratio of dividends incurred to net earned premiums. The combined ratio is the sum of loss, expense and dividend ratios. - Limited partnerships (LPs) are a relatively small portion of CNA's overall investment portfolio. The majority of the LPs invest in a substantial number of securities that are readily marketable. CNA is primarily a passive investor in such partnerships and does not have influence over the partnerships' management, who are committed to operate them according to established guidelines and strategies. These strategies may include the use of leverage and hedging techniques that potentially introduce more volatility and risk to the partnerships. - On April 30, 2004, CNA completed the sale of its individual life insurance business. The business sold included term, universal and permanent life insurance policies and individual annuity products. CNA's individual long term care and structured settlement businesses were excluded from the sale. As a result of the then pending sale, at March 31, 2004, CNA classified the assets and liabilities of the individual life insurance business as held for sale and recorded a related impairment loss of $569 million pretax ($406 million after-tax). The results of the business sold are included in the Statements of Operations for the three months ended March 31, 2004. As a result of the sale, income statement results for the first quarter 2005 are not comparable to the corresponding 2004 results. - All amounts are in millions, except for per share and ratio information. - Certain immaterial differences are due to rounding. i CNA FINANCIAL CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION RESTATEMENT FOR REINSURANCE AND EQUITY INVESTEE ACCOUNTING Subsequent to the issuance of CNA's (the Company) 2004 Form 10-K, the Company revised its accounting for several reinsurance contracts, primarily with a former affiliate, and its equity accounting for that affiliate. The Company will restate its previously reported financial statements as of December 31, 2004, 2003 and 2002 and all related disclosures, as well as its interim financial data for all interim periods of 2004 and 2003, through the filing of a Form 10-K/A. This Financial Supplement reflects the effects of the restatement. The restatement is based upon reconsideration of the Company's accounting for its former equity interest in Accord Re Ltd. (Accord) and for several reinsurance contracts with Accord, but also includes two reinsurance agreements with unaffiliated parties that are immaterial in the aggregate. A subsidiary of The Continental Corporation (TCC) acquired a 49% ownership interest in Accord, a Bermuda company, in 1989 upon Accord's formation. TCC also provided capital support to Accord through a guarantee from a TCC subsidiary. TCC was acquired by the Company in 1995. Reinsurance relationships with Accord involved both property and casualty assumed reinsurance risks that were written by TCC subsidiaries and 100% ceded to Accord or reinsured from other cedents by Accord. Stop-loss protection in relation to those risks was obtained by Accord from a wholly-owned TCC subsidiary. All of the Company's reinsurance agreements with Accord relating to property risks were commuted as of year-end 2001, leaving six reinsurance agreements with Accord relating to casualty risks outstanding at that time. As of March 31, 2005 the Company provides no capital support to and has no ownership interest in Accord. During the period of the Company's minority ownership Accord also maintained reinsurance relationships with reinsurers unaffiliated with the Company. As previously reported the Company continues to respond to various subpoenas, interrogatories and other requests for information received from state and federal regulatory authorities relating to on-going insurance industry investigations of non-traditional insurance products, including finite reinsurance. In the course of complying with these requests the Company conducted a comprehensive review of its finite reinsurance relationships, including contracts with Accord. The Company accounted for its reinsurance cessions to Accord and related retrocessions from Accord as reinsurance. In connection with the aforementioned review, the Company has now concluded that the reinsurance cession and retrocession should be viewed as a single transaction which does not transfer risk. The restatement corrections apply deposit accounting to the Company's reinsurance cessions to Accord. The restatement corrections also include adjustments to the Company's historical equity method accounting for its ownership and economic interest in Accord, including the effects of applying deposit accounting to certain of Accord's reinsurance contracts with parties other than the Company. The remaining restatement corrections relate to applying deposit accounting to two small reinsurance treaties unrelated to Accord that were previously accounted for using reinsurance accounting. The impact of this revised accounting results in a reduction to stockholders' equity as of December 31, 2004 of $29 million, or 0.3%, and a decrease in net loss for the three months ended March 31, 2004 of $1 million, or 0.8%. The net loss adjustment has no impact on loss per share for the three months ended March 31, 2004. ii CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT STATEMENTS OF OPERATIONS
---------------------------------------------------------------------------------------------------------------------------------- PERIOD ENDED MARCH 31 THREE MONTHS FAV / (UNFAV) (In millions) 2005 2004 % CHANGE ---------------------------------------------------------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS Revenues: Net earned premiums $ 1,899 $ 2,168 (12)% Net investment income 406 475 (15) Realized investment losses net of participating policyholders' and minority interests (19) (458) 96 Other revenues 78 82 (5) ---------------- ---------------------- Total revenues 2,364 2,267 4 ---------------- ---------------------- Claims, benefits and expenses: Insurance claims and policyholders' benefits 1,434 1,638 12 Other operating expenses 652 765 15 Interest 37 35 (6) ---------------- ---------------------- Total claims, benefits and expenses 2,123 2,438 13 ---------------- ---------------------- Income (loss) before income tax and minority interest 241 (171) N/A Income tax (expense) benefit (56) 53 N/A Minority interest (7) (6) (17) ---------------- ---------------------- Net income (loss) $ 178 $ (124) N/A% ================ ====================== ----------------------------------------------------------------------------------------------------------------------------------
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CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT COMPONENTS OF NET INCOME AND PER SHARE DATA ------------------------------------------------------------------------------------------------------------------------------------ PERIOD ENDED MARCH 31 THREE MONTHS FAV / (UNFAV) (In millions, except per share data) 2005 2004 % CHANGE ------------------------------------------------------------------------------------------------------------------------------------ COMPONENTS OF NET INCOME Income before net realized investment losses $ 192 $ 209 (8)% Net realized investment losses net of participating policyholders' and minority interests (14) (333) 96 -------- --------- Net income (loss) $ 178 $ (124) N/A% ======== ========= BASIC AND DILUTED EARNINGS (LOSS) PER SHARE Basic and diluted earnings (loss) per share available to common stockholders (1) $ 0.63 $ (0.55) N/A% ======== ========= Weighted average outstanding common stock and common stock equivalents (2) 256.0 255.9 ======== ========= ------------------------------------------------------------------------------------------------------------------------------------
(1) The three months ended March 31, 2005 and 2004 per share results available to common stockholders are reduced by $17 million and $16 million, or $0.07 per share and $0.06 per share, of undeclared preferred stock dividends. (2) Included in the weighted average shares of common stock for 2004 are the effects of additional common stock equivalents related to the November of 2003 sale of shares to Loews Corporation. The effect of the preferred shares has been included in weighted average shares since issuance. The preferred shares were converted into 32.3 million shares of CNA common stock on April 20, 2004. 2 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT SELECTED BALANCE SHEET DATA AND STATEMENTS OF CASH FLOWS DATA
------------------------------------------------------------------------------------------------------------------------------------ MARCH 31, 2005 DECEMBER 31, 2004 (In millions, except per share data) ------------------------------------------------------------------------------------------------------------------------------------ Total assets $ 62,998 $ 62,411 Insurance reserves 43,186 43,653 Debt 2,244 2,257 Total liabilities 53,667 52,958 Minority interest 277 275 Accumulated other comprehensive income 346 650 Total stockholders' equity 9,054 9,178 Book value per common share (1) $ 31.88 $ 32.43 Book value per common share excluding unrealized gain or loss on fixed maturity securities (1) $ 30.32 $ 29.74 Outstanding shares of common stock (in millions of shares) (2) 256.0 256.0 ------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------ THREE MONTHS ENDED MARCH 31 (In millions) 2005 2004 ------------------------------------------------------------------------------------------------------------------------------------ Net cash flows provided by operating activities $ 124 $ 37 Net cash flows used by investing activities (115) (441) Net cash flows provided (used) by financing activities (11) 346 ------------------- ------------------- Net cash flows $ (2) $ (58) =================== =================== ------------------------------------------------------------------------------------------------------------------------------------
(1) Book value per common share as of March 31, 2005 and December 31, 2004 excludes $750 million and $750 million of preferred stock (Series H) and $144 million and $127 million of cumulative preferred dividends. (2) Included in the outstanding shares of common stock for 2004 are the effects of additional common stock equivalents related to the November of 2003 sale of $750 million of convertible preferred shares (Series I) to Loews Corporation. The effect of the preferred shares has been included in weighted average shares since issuance. The preferred shares were Converted into 32.3 million shares of CNA common stock on April 20, 2004. 3 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVE DATA
---------------------------------------------------------------------------------------------------------------------------------- CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVES (In millions) STANDARD LINES SPECIALTY LINES P&C OPERATIONS -------------------------------------------------------------------------------------------------------------------------------- As of March 31, 2005 Gross $14,192 $ 4,921 $19,113 Ceded 4,796 1,566 6,362 ------- ------- ------- Net 9,396 3,355 12,751 ------- ------- ------- As of December 31, 2004 Gross 14,302 4,860 19,162 Ceded 4,994 1,627 6,621 ------- ------- ------- Net $ 9,308 $ 3,233 $12,541 ------- ------- ------- --------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------- CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVES LIFE & GROUP CORPORATE & OTHER TOTAL OPERATIONS NON-CORE NON-CORE (In millions) -------------------------------------------------------------------------------------------------------------------------------- As of March 31, 2005 Gross $ 3,665 $ 8,335 $31,113 Ceded 1,839 5,295 13,496 ------- ------- ------- Net 1,826 3,040 17,617 ------- ------- ------- As of December 31, 2004 Gross 3,680 8,681 31,523 Ceded 1,856 5,402 13,879 ------- ------- ------- Net $ 1,824 $ 3,279 $17,644 ------- ------- ------- ---------------------------------------------------------------------------------------------------------------------------------
4 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVE ROLLFORWARD
----------------------------------------------------------------------------------------------------------------- PERIOD ENDED MARCH 31 THREE MONTHS ENDED (In millions) ------------------------------------------------------------------------------------------------------------------- Claim & claim adjustment expense reserves, beginning of period Gross $ 31,523 Ceded 13,879 -------- Net 17,644 -------- Net incurred claim & claim adjustment expenses 1,400 Net claim & claim adjustment expense payments (1,427) -------- Claim & claim adjustment expense reserves, end of period Net 17,617 Ceded 13,496 -------- Gross $ 31,113 ======== -------------------------------------------------------------------------------------------------------------------
5 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT INVESTMENTS BY SEGMENT AGGREGATION
------------------------------------------------------------------------------------------------------------------------------------ MARCH 31, 2005 DECEMBER 31, 2004 (In millions) BOOK VALUE FAIR VALUE BOOK VALUE FAIR VALUE ------------------------------------------------------------------------------------------------------------------------------------ PROPERTY & CASUALTY AND CORPORATE & OTHER NON-CORE: Fixed Maturities - Taxable $13,369 $13,467 $15,072 $15,346 Fixed Maturities - Tax Exempt 8,225 8,193 7,680 7,800 Equities 184 289 232 351 Short-term 5,569 5,569 3,599 3,600 Limited Partnership Investments 1,255 1,255 1,195 1,195 Mortgage Loans & Other 31 33 34 26 ------- ------- ------- ------- Subtotal 28,633 28,806 27,812 28,318 Securities Lending Collateral 1,105 1,105 904 904 ------- ------- ------- ------- TOTAL INVESTMENTS $29,738 $29,911 $28,716 $29,222 ------- ------- ------- ------- LIFE & GROUP NON-CORE: Fixed Maturities - Taxable $ 6,686 $ 7,195 $ 6,495 $ 7,124 Fixed Maturities - Tax Exempt 1,221 1,259 1,019 1,057 Equities 61 79 88 105 Short-term 845 845 1,345 1,345 Limited Partnership Investments 378 378 354 354 Mortgage Loans & Other 24 10 23 10 ------- ------- ------- ------- Subtotal 9,215 9,766 9,324 9,995 Securities Lending Collateral 6 6 14 14 ------- ------- ------- ------- TOTAL INVESTMENTS $ 9,221 $ 9,772 $ 9,338 $10,009 ------- ------- ------- ------- TOTAL INVESTMENTS $38,959 $39,683 $38,054 $39,231 ======= ======= ======= ======= ------------------------------------------------------------------------------------------------------------------------------------
6 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY RESULTS OF OPERATIONS
------------------------------------------------------------------------------------------------------------------------------------ THREE MONTHS ENDED STANDARD LINES SPECIALTY LINES MARCH 31 FAV / (UNFAV) FAV / (UNFAV) (In millions) 2005 2004 % CHANGE 2005 2004 % CHANGE ------------------------------------------------------------------------------------------------------------------------------------ Gross written premiums $ 1,516 $ 1,565 (3)% $ 769 $ 710 8% Net written premiums 1,171 1,265 (7) 594 581 2 Net earned premiums 1,169 1,258 (7) 573 529 8 Claim and claim adjustment expenses 830 823 (1) 357 334 (7) Acquisition expenses 246 271 9 115 97 (19) Underwriting expenses 132 152 13 39 43 9 Policyholders' dividends 4 9 56 1 2 50 -------- -------- ------- ------- ------- ------- Underwriting income (loss) (43) 3 N/A 61 53 15 -------- -------- ------- ------- ------- ------- Net investment income 183 138 33 56 62 (10) Other revenues 21 40 (48) 31 25 24 Other expenses 26 31 16 28 27 (4) -------- -------- ------- ------- ------- ------- Income before income tax, minority interest and net realized investment gains (losses) 135 150 (10) 120 113 6 Income tax expense (32) (34) 6 (36) (34) (6) Minority interest (2) (2) - (5) (4) (25) -------- -------- ------- ------- ------- ------- Income before net realized investment gains (losses) 101 114 (11) 79 75 5 Realized investment gains (losses) (5) 57 (109) 1 20 (95) Income tax (expense) benefit on realized investment gains (losses) (3) (19) 84 2 (7) 129 -------- -------- ------- ------- ------- ------- Net income $ 93 $ 152 (39)% $ 82 $ 88 (7)% ======== ======== ======= ======= ======= ======= FINANCIAL RATIOS Loss & LAE 71.0% 65.5% 62.3% 63.1% Acquisition expense 21.0 21.6 20.1 18.4 Underwriting expense 11.4 11.9 6.8 8.0 Dividends 0.3 0.7 0.2 0.4 -------- -------- ------- ------- Expense ratio, including dividends 32.7 34.2 27.1 26.8 -------- -------- ------- ------- Combined ratio 103.7% 99.7% 89.4% 89.9% ======== ======== ======= ======= ------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED P&C OPERATIONS MARCH 31 FAV / (UNFAV) (In millions) 2005 2004 % CHANGE --------------------------------------------------------------------------------------------------------------------------------- Gross written premiums $ 2,285 $ 2,275 -% Net written premiums 1,765 1,846 (4) Net earned premiums 1,742 1,787 (3) Claim and claim adjustment expenses 1,187 1,157 (3) Acquisition expenses 361 368 2 Underwriting expenses 171 195 12 Policyholders' dividends 5 11 55 ------------- ----------- ----------- Underwriting income (loss) 18 56 (68) ------------- ----------- ----------- Net investment income 239 200 20 Other revenues 52 65 (20) Other expenses 54 58 7 ------------- ----------- ----------- Income before income tax, minority interest and net realized investment gains (losses) 255 263 (3) Income tax expense (68) (68) - Minority interest (7) (6) (17) ------------- ----------- ----------- Income before net realized investment gains (losses) 180 189 (5) Realized investment gains (losses) (4) 77 (105) Income tax (expense) benefit on realized investment gains (losses) (1) (26) 96 ------------- ----------- ----------- Net income $ 175 $ 240 (27)% ============= =========== =========== FINANCIAL RATIOS Loss & LAE 68.1% 64.8% Acquisition expense 20.7 20.6 Underwriting expense 9.9 10.8 Dividends 0.3 0.6 ------------- ----------- Expense ratio, including dividends 30.9 32.0 ------------- ----------- Combined ratio 99.0% 96.8% ============= =========== -------------------------------------------------------------------------------------------------------------------------
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CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT LIFE & GROUP NON-CORE AND CORPORATE & OTHER NON-CORE SEGMENTS RESULTS OF OPERATIONS ------------------------------------------------------------------------------------------------------------------------------------ THREE MONTHS ENDED P&C OPERATIONS LIFE & GROUP NON-CORE MARCH 31 FAV / (UNFAV) (In millions) 2005 2004 2005 2004 % CHANGE ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 1,742 $ 1,787 $ 166 $ 326 (49)% Insurance claims & policyholders' benefits 1,187 1,157 234 407 43 Policyholders' dividends 5 11 - 6 N/A Insurance related expenses 532 563 61 108 44 Net investment income 239 200 106 206 (49) Other revenues 52 65 33 34 (3) Other expenses 54 58 14 21 33 ------------- ----------- ----------- ---------- Income (loss) before income tax, minority interest and net realized investment gains (losses) 255 263 (4) 24 (117) Income tax (expense) benefit (68) (68) 5 (5) 200 Minority interest (7) (6) - - N/A ------------- ----------- ----------- ---------- Income before net realized investment gains (losses) 180 189 1 19 (95) Realized investment gains (losses) (4) 77 (5) (562) 99 Income tax (expense) benefit on realized investment gains (losses) (1) (26) 2 161 (99) ------------- ----------- ----------- ---------- Net income (loss) $ 175 $ 240 $ (2) $ (382) 99% ============= =========== =========== ========== ------------------------------------------------------------------------------------------------------------------------------------ OTHER FINANCIAL DATA P&C OPERATIONS LIFE & GROUP NON-CORE PROPERTY & CASUALTY COMPANY INFORMATION FAV / (UNFAV) % CHANGE 2005 2004 2005 2004 ------------------------------------------------------------------------------------------------------------------------------------ Gross written premiums $ 2,285 $ 2,275 $ 278 $ 319 (13) % Net written premiums 1,765 1,846 172 176 (2) Net earned premiums 1,742 1,787 161 166 (3) Underwriting gain (loss) 18 56 (113) (101) (12) % FINANCIAL RATIOS Loss & LAE 68.1% 64.8% 136.3% 128.5 % Acquisition expense 20.7 20.6 15.7 17.3 Underwriting expense 9.9 10.8 18.2 15.0 Dividends 0.3 0.6 - - ------------ ------------ ------------ ----------- Expense ratio, including dividends 30.9 32.0 33.9 32.3 ------------ ------------ ------------ ----------- Combined ratio 99.0% 96.8% 170.2% 160.8 % ============ ============ ============ =========== ------------------------------------------------------------------------------------------------------------------------------------
CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT LIFE & GROUP NON-CORE AND CORPORATE & OTHER NON-CORE SEGMENTS RESULTS OF OPERATIONS ----------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED CORPORATE & OTHER NON-CORE FAV / MARCH 31 (UNFAV) (In millions) 2005 2004 % CHANGE ----------------------------------------------------------------------------------------------------------------- Net earned premiums $ (9) $ 55 (116)% Insurance claims & policyholders' benefits 8 56 86 Policyholders' dividends - 1 N/A Insurance related expenses 11 27 59 Net investment income 61 69 (12) Other revenues (7) (17) 59 Other expenses 17 23 26 --------- -------- Income (loss) before income tax, minority interest and net realized investment gains (losses) 9 - N/A Income tax (expense) benefit 2 1 100 Minority interest - - N/A --------- -------- Income before net realized investment gains (losses) 11 1 N/A Realized investment gains (losses) (10) 27 (137) Income tax (expense) benefit on realized investment gains (losses) 4 (10) 140 --------- -------- Net income (loss) $ 5 $ 18 (72)% ========= ======== ----------------------------------------------------------------------------------------------------------------- OTHER FINANCIAL DATA CORPORATE & OTHER NON-CORE PROPERTY & CASUALTY COMPANY INFORMATION FAV / (UNFAV) 2005 2004 % CHANGE ----------------------------------------------------------------------------------------------------------------- Gross written premiums $ 252 $ 637 (60)% Net written premiums (20) (16) (25) Net earned premiums (8) 71 (111) Underwriting gain (loss) (27) (28) 4% FINANCIAL RATIOS Loss & LAE (85.6)% 102.4% Acquisition expense (29.1) 29.6 Underwriting expense (100.7) 9.3 Dividends - - ---------- -------- Expense ratio, including dividends (129.8) 38.9 ---------- -------- Combined ratio (215.4)% 141.3% ========== ======== -----------------------------------------------------------------------------------------------------------------
CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT LIFE & GROUP NON-CORE AND CORPORATE & OTHER NON-CORE SEGMENTS RESULTS OF OPERATIONS ----------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED TOTAL OPERATIONS MARCH 31 FAV / (UNFAV) (In millions) 2005 2004 % CHANGE ----------------------------------------------------------------------------------------------------------- Net earned premiums $ 1,899 $ 2,168 (12)% Insurance claims & policyholders' benefits 1,429 1,620 12 Policyholders' dividends 5 18 72 Insurance related expenses 604 698 13 Net investment income 406 475 (15) Other revenues 78 82 (5) Other expenses 85 102 17 -------- --------- Income (loss) before income tax, minority interest and net realized investment gains (losses) 260 287 9 Income tax (expense) benefit (61) (72) 15 Minority interest (7) (6) (17) -------- --------- Income before net realized investment gains (losses) 192 209 (8) Realized investment gains (losses) (19) (458) 96 Income tax (expense) benefit on realized investment gains (losses) 5 125 (96) -------- --------- Net income (loss) $ 178 $ (124) N/A% -------- --------- ----------------------------------------------------------------------------------------------------------- OTHER FINANCIAL DATA TOTAL OPERATIONS PROPERTY & CASUALTY COMPANY INFORMATION FAV / (UNFAV) 2005 2004 % CHANGE ----------------------------------------------------------------------------------------------------------- Gross written premiums $ 2,815 $ 3,231 (13)% Net written premiums 1,917 2,006 (4) Net earned premiums 1,895 2,024 (6) Underwriting gain (loss) (122) (73) (67)% FINANCIAL RATIOS Loss & LAE 74.6 % 71.3 % Acquisition expense 20.5 20.7 Underwriting expense 11.0 11.0 Dividends 0.3 0.6 -------- --------- Expense ratio, including dividends 31.8 32.3 -------- --------- Combined ratio 106.4 % 103.6 % ======== ========= -------------------------------------------------------------------------------------------------------------
8 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY OPERATIONS AND CORPORATE & OTHER NON-CORE SEGMENT - CATASTROPHE LOSSES
------------------------------------------------------------------------------------------------------------------------------------ CORPORATE & OTHER CATASTROPHE LOSSES (PRETAX) STANDARD LINES SPECIALTY LINES P&C OPERATIONS NON-CORE TOTAL (In millions) ------------------------------------------------------------------------------------------------------------------------------------ Three months ended March 31, 2005 $ 1 $ - $ 1 $ - $ 1 Three months ended March 31, 2004 $ 6 $ 2 $ 8 $ - $ 8 ------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------ CATASTROPHE LOSSES (AFTER-TAX) STANDARD LINES SPECIALTY LINES P&C OPERATIONS CORPORATE & OTHER TOTAL NON-CORE (In millions) ------------------------------------------------------------------------------------------------------------------------------------ Three months ended March 31, 2005 $ 1 $ - $ 1 $ - $ 1 Three months ended March 31, 2004 $ 4 $ 1 $ 5 $ - $ 5 ------------------------------------------------------------------------------------------------------------------------------------
9 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT ANALYSIS OF PRETAX NET INVESTMENT INCOME
------------------------------------------------------------------------------------------------------------------------------------ (In millions) STANDARD LINES ------------------------------------------------------------------------------------------------------------------------------------ 1Q04 2Q04 3Q04 4Q04 YTD 2004 1Q05 ----- ----- ----- ----- --------- ----- Limited partnership income $ 37 $ 13 $ 12 $ 39 $ 101 $ 42 Interest on funds withheld and other deposits (38) (43) (44) (70) (195) (18) Income from trading securities - - - 1 1 1 Other investment income 139 149 157 144 589 158 ------------------------------------------------------------------------------- Net investment income $ 138 $ 119 $ 125 $ 114 $ 496 $ 183 ===============================================================================
------------------------------------------------------------------------------- SPECIALTY LINES ------------------------------------------------------------------------------- 1Q04 2Q04 3Q04 4Q04 YTD 2004 1Q05 ----- ----- ----- ----- --------- ----- Limited partnership income $ 13 $ 5 $ 4 $ 14 $ 36 $ 13 Interest on funds withheld and other deposits (2) (2) (3) (7) (14) (12) Income from trading securities - - - - - - Other investment income 51 56 60 57 224 55 ------------------------------------------------------------------------------- Net investment income $ 62 $ 59 $ 61 $ 64 $ 246 $ 56 ===============================================================================
------------------------------------------------------------------------------- P&C OPERATIONS ------------------------------------------------------------------------------- 1Q04 2Q04 3Q04 4Q04 YTD 2004 1Q05 ----- ----- ----- ----- --------- ----- Limited partnership income $ 50 $ 18 $ 16 $ 53 $ 137 $ 55 Interest on funds withheld and other deposits (40) (45) (47) (77) (209) (30) Income from trading securities - - - 1 1 1 Other investment income 190 205 217 201 813 213 ------------------------------------------------------------------------------- Net investment income $ 200 $ 178 $ 186 $ 178 $ 742 $ 239 ===============================================================================
------------------------------------------------------------------------------- LIFE & GROUP NON-CORE ------------------------------------------------------------------------------- 1Q04 2Q04 3Q04 4Q04 YTD 2004 1Q05 ----- ----- ----- ----- --------- ----- Limited partnership income $ 9 $ 6 $ 3 $ 11 $ 29 $ 9 Interest on funds withheld and other deposits - - - - - - Income from trading securities 20 13 (20) 96 109 (31) Other investment income 177 123 126 128 554 128 ------------------------------------------------------------------------------- Net investment income $ 206 $ 142 $ 109 $ 235 $ 692 $ 106 ===============================================================================
------------------------------------------------------------------------------- CORPORATE & OTHER NON-CORE ------------------------------------------------------------------------------- 1Q04 2Q04 3Q04 4Q04 YTD 2004 1Q05 ----- ----- ----- ----- --------- ----- Limited partnership income $ 16 $ 6 $ 6 $ 18 $ 46 $ 15 Interest on funds withheld and other deposits (8) (10) (7) (27) (52) (9) Income from trading securities - - - - - - Other investment income 61 65 67 59 252 55 ------------------------------------------------------------------------------- Net investment income $ 69 $ 61 $ 66 $ 50 $ 246 $ 61 ===============================================================================
------------------------------------------------------------------------------- TOTAL OPERATIONS ------------------------------------------------------------------------------- 1Q04 2Q04 3Q04 4Q04 YTD 2004 1Q05 ----- ----- ----- ----- --------- ----- Limited partnership income $ 75 $ 30 $ 25 $ 82 $ 212 $ 79 Interest on funds withheld and other deposits (48) (55) (54) (104) (261) (39) Income from trading securities 20 13 (20) 97 110 (30) Other investment income 428 393 410 388 1,619 396 ------------------------------------------------------------------------------- Net investment income $ 475 $ 381 $ 361 $ 463 $1,680 $ 406 ===============================================================================
10 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT STATUTORY DATA - PRELIMINARY
-------------------------------------------------------------------------------------------------------------------------------- PERIOD ENDED MARCH 31 THREE MONTHS INCOME STATEMENT (PRELIMINARY) FAV / (UNFAV) (In millions) 2005 2004 % CHANGE -------------------------------------------------------------------------------------------------------------------------------- PROPERTY & CASUALTY COMPANIES Gross written premiums $ 2,527 $ 2,910 (13)% Net written premiums 1,802 1,868 (4) Net earned premiums 1,631 1,750 7 Claim and claim adjustment expenses 1,256 1,285 2 Acquisition expenses 334 348 4 Underwriting expenses 237 230 (3) Policyholders' dividends 5 13 62 ------------------------ ---------------------- Underwriting loss (201) (126) (60) Net investment income (1) 833 308 170 Other revenues/expenses (37) (52) 29 Income tax expense (43) (113) 62 Net realized gains 22 166 (87) ------------------------ ---------------------- Net income $ 574 $ 183 N/A % ======================== ====================== FINANCIAL RATIOS Loss and LAE 77.0 % 73.4 % Acquisition expense 18.5 18.6 Underwriting expense 13.2 12.4 Policyholders' dividends 0.3 0.7 ------------------------ ---------------------- Expense ratio 32.0 31.7 ------------------------ ---------------------- Combined ratio 109.0 % 105.1 % ======================== ====================== LIFE COMPANIES Earned premium $ 4 $ 455 -------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL STATUTORY DATA (PRELIMINARY) DECEMBER 31, 2004 (In millions) MARCH 31, 2005 -------------------------------------------------------------------------------------------------------------------------------- PROPERTY & CASUALTY COMPANIES Statutory surplus (2) $ 7,117 $ 6,999 LIFE COMPANIES Statutory surplus $ 717 $ 1,177 Gross life insurance in force 56,421 56,645 --------------------------------------------------------------------------------------------------------------------------------
(1) Includes $500 million of dividends from CCC's life subsidiary, Continental Assurance Company. (2) Surplus includes the Property & Casualty Companies' equity ownership of the life insurance subsidiary. 11 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY OPERATIONS LOSS AND LAE RATIO ANALYSIS
--------------------------------------------------------------------------- STANDARD LINES --------------------------------------------------------------------------- 2005 YTD 2004 FY 2004 YTD EVALUATED AT EVALUATED AT EVALUATED AT 03/31 12/31/04 03/31/05 --------------------------------------------------------------------------- Gross Accident Year 63.0 % 67.2 % 65.5 % Impact of Reinsurance 1.4 2.0 2.6 ---------------------- ----------------------- ------------------ Net Accident Year 64.4 69.2 68.1 % ================== Impact of Corporate Covers 1.1 (0.2) Impact of Development & Change in Allowance for Uncollectible Reinsurance 5.5 1.7 ---------------------- ----------------------- Net Calendar Year 71.0 % 70.7 % ====================== ======================= -------------------------------------------------------------------------- SPECIALTY LINES -------------------------------------------------------------------------- 2005 YTD 2004 FY 2004 YTD EVALUATED AT EVALUATED AT EVALUATED AT 03/31 12/31/04 03/31/05 -------------------------------------------------------------------------- Gross Accident Year 59.9 % 64.1 % 59.6 % Impact of Reinsurance (0.9) (0.6) 0.1 ---------------------- ----------------------- ------------------ Net Accident Year 59.0 63.5 59.7 % ================== Impact of Corporate Covers (2.2) 0.9 Impact of Development & Change in Allowance for Uncollectible Reinsurance 5.5 (1.1) ---------------------- ----------------------- Net Calendar Year 62.3 % 63.3 % ====================== ======================= -------------------------------------------------------------------------- -------------------------------------------------------------------------- P&C OPERATIONS -------------------------------------------------------------------------- 2005 YTD 2004 FY 2004 YTD EVALUATED AT EVALUATED AT EVALUATED AT 03/31 12/31/04 03/31/05 -------------------------------------------------------------------------- Gross Accident Year 62.0 % 66.3 % 63.7 % Impact of Reinsurance 0.5 1.1 1.7 ---------------------- ----------------------- ------------------ Net Accident Year 62.5 67.4 65.4 % ================== Impact of Corporate Covers - 0.2 Impact of Development & Change in Allowance for Uncollectible Reinsurance 5.6 0.8 ---------------------- ----------------------- Net Calendar Year 68.1 % 68.4 % ====================== ======================= --------------------------------------------------------------------------
12 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT LIFE & GROUP NON-CORE SEGMENT - GAAP RESULTS OF OPERATIONS
----------------------------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED MARCH 31, 2005 LIFE & GROUP NON-CORE EXCLUDING BUSINESSES LIFE & GROUP NON-CORE TOTAL LIFE & GROUP NON- (In millions) SOLD (1) BUSINESSES SOLD (2) CORE AS REPORTED ----------------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 163 $ 3 $ 166 Insurance claims & policyholders' benefits 233 1 234 Policyholders' dividends (1) 1 - Insurance related expenses 31 30 61 Net investment income 104 2 106 Other revenues 23 10 33 Other expenses 15 (1) 14 ---------------------- ---------------------- --------------- Income (loss) before income tax and net realized investment losses 12 (16) (4) Income tax benefit - 5 5 ---------------------- ---------------------- --------------- Income (loss) before net realized investment losses 12 (11) 1 Realized investment losses (5) - (5) Income tax benefit on realized investment losses 2 - 2 ---------------------- ---------------------- --------------- Net income (loss) $ 9 $ (11) $ (2) ====================== ====================== =============== ----------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED MARCH 31, 2004 LIFE & GROUP NON-CORE EXCLUDING BUSINESSES LIFE & GROUP NON-CORE TOTAL LIFE & GROUP NON- (In millions) SOLD (1) BUSINESSES SOLD (2)(3) CORE AS REPORTED ----------------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 187 $ 139 $ 326 Insurance claims & policyholders' benefits 284 123 407 Policyholders' dividends - 6 6 Insurance related expenses 45 63 108 Net investment income 154 52 206 Other revenues 16 18 34 Other expenses 14 7 21 ---------------------- ---------------------- --------------- Income before income tax and net realized investment gains (losses) 14 10 24 Income tax expense (2) (3) (5) ---------------------- ---------------------- --------------- Income before net realized investment gains (losses) 12 7 19 Realized investment gains (losses) 5 (567) (562) Income tax (expense) benefit on realized investment gains (losses) (1) 162 161 ---------------------- ---------------------- --------------- Net income (loss) $ 16 $ (398) $ (382) ====================== ====================== =============== -----------------------------------------------------------------------------------------------------------------------------------
(1) Retained life and group businesses principally include group and individual long term care, structured settlements and institutional markets. (2) Life and group businesses sold include group, individual life, CNA Trust, and specialty medical. Included in this column are the effects of shared corporate overhead expenses which continue to be allocated to the sold businesses. (3) For the three months ended March 31, 2004, net realized investment losses for Life & Group Non-Core businesses sold include a pretax impairment loss of $569 million ($406 million after-tax) related to the individual life business. 13 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT ASBESTOS SUMMARY BY POLICYHOLDER CATEGORY
--------------------------------------------------------------------------------------------------------------------------------- MARCH 31, 2005 NET PAID NET ASBESTOS PERCENT OF NUMBER OF LOSSES IN 2005 RESERVES ASBESTOS NET POLICYHOLDERS (IN MILLIONS) (IN MILLIONS) RESERVES --------------------------------------------------------------------------------------------------------------------------------- POLICYHOLDERS WITH SETTLEMENT AGREEMENTS Structured Settlements 13 $ 18 $ 158 10 % Wellington 4 1 17 1 Coverage in Place 33 5 71 4 Fibreboard 1 - 54 3 ------------------- ----------------- ---------------- ------------------- TOTAL WITH SETTLEMENT AGREEMENTS 51 24 300 18 OTHER POLICYHOLDERS WITH ACTIVE ACCOUNTS Large Asbestos Accounts 184 20 360 22 Small Asbestos Accounts 1,084 8 132 8 ------------------- ----------------- ---------------- ------------------- TOTAL OTHER POLICYHOLDERS 1,268 28 492 30 ASSUMED REINSURANCE & POOLS 1 147 9 UNASSIGNED IBNR (1) 696 43 ------------------- ----------------- ---------------- ------------------- TOTAL 1,319 $ 53 $ 1,635 100 % =================== ================= ================ =================== ---------------------------------------------------------------------------------------------------------------------------------
(1) IBNR includes claims that are incurred but not reported. 14