EX-99.2 4 c78768exv99w2.txt FINANCIAL SUPPLEMENT EXHIBIT 99.2 CNA FINANCIAL CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION JUNE 30, 2003 CNA FINANCIAL CORPORATION TABLE OF CONTENTS JUNE 30, 2003
PAGE ---- Supplemental Financial Information i-ii Statements of Operations 1 Components of Net Income and Per Share Data 2 Selected Balance Sheet Data and Condensed Consolidated Statement of Cash Flows Data 3 Property & Casualty Insurance Claim & Claim Adjustment Expense Reserve Data 4 Property & Casualty Insurance Claim & Claim Adjustment Expense Reserve Rollforward 5 Investments by Asset Class 6 Operating Results and Other Financial Data by Segment: Property & Casualty Segments 7-10 Catastrophe Losses 11 Group & Life Segments and Corporate & Other 12-13 Analysis of Pretax Net Investment Income 14-15 Statutory Data - Preliminary 16 Property & Casualty Segments Loss and LAE Ratio Analysis 17 Impact of Prior Year Development 18-25 Summary of Development by Segment and Line of Business 26 Gross Loss and ALAE Ratios by Segment and Line of Business 27 Net Loss and ALAE Ratios by Segment and Line of Business 28
CNA FINANCIAL CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION DEFINITIONS AND PRESENTATION o P&C OPERATIONS includes Standard Lines and Specialty Lines. o P&C SEGMENTS includes Standard Lines, Specialty Lines and CNA Re. o CORPORATE & OTHER is comprised primarily of losses and expenses related to the centralized adjusting and settlement of asbestos, environmental pollution and mass tort claims, certain run-off insurance and non-insurance operations. The Corporate & Other segment results also include interest expense on corporate borrowings. o P&C COMPANIES includes Standard Lines, Specialty Lines, CNA Re and P&C business written in Group Operations, Life Operations and Corporate & Other. o The results from discontinued operations relate to CNA Vida, CNA's Chilean-based life insurer, which was sold in the first quarter of 2002. CNA Vida's results of operations, including the loss on sale, are reported as discontinued operations in all periods presented as required by SFAS 144. o Underwriting results are net earned premiums less net incurred claims, the costs incurred to settle claims, acquisition expenses and underwriting expenses. o The Loss & LAE ratio represents claim and claim adjustment expenses as a percentage of net earned premiums. o The expense ratio is the percentage of underwriting expenses, acquisition expenses and dividends, including the amortization of deferred acquisition costs, to net earned premiums. o The dividend ratio is the ratio of dividends incurred to net earned premiums. o Limited partnerships (LP's) are a relatively small portion of CNA's overall investment portfolio. The majority of the LP's invest in a substantial number of securities that are readily marketable. CNA is 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. o All amounts are in millions, except for per share and ratio information. o Certain immaterial differences are due to rounding. ACCOUNTING PRONOUNCEMENTS o During the third quarter of 2002, the Company completed its initial goodwill impairment testing under SFAS 142, Goodwill and Other Intangible Assets, and recorded a $57 million after-tax impairment charge. The impairment was recorded as a cumulative effect of a change in accounting principle as of January 1, 2002, primarily in Specialty Lines, Life Operations and Corporate & Other. i CNA FINANCIAL CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION NON-GAAP FINANCIAL MEASURES This financial supplement presents certain GAAP and non-GAAP financial measures to provide information used by management to monitor the Company's operating performance. Management utilizes various financial measures to monitor the Company's insurance operations and investment portfolio. Underwriting results, which are derived from certain income statement amounts, are considered non-GAAP financial measures and are used by management to monitor performance of the Company's insurance operations. The Company's investment portfolio is monitored through analysis of various quantitative and qualitative factors and certain decisions related to the sale or impairment of investments produce realized gains and losses. Net realized investment gains and losses, which are comprised of after-tax realized investment gains and losses net of participating policyholders' and minority interest are a non-GAAP financial measure. Underwriting results are computed as net earned premiums less net incurred claims and the cost incurred to settle these claims, acquisition expenses and underwriting expenses. Management uses underwriting results and operating ratios to monitor insurance operations' results without the impact of certain factors, including investment income, other revenues, other expenses, minority interest, income tax benefit (expense) and net realized investment gains or losses. Management excludes these factors in order to analyze the direct relationship between the net earned premiums and the related claims and the cost incurred to settle these claims, acquisition expenses and underwriting expenses. Management excludes after-tax net realized investment gains or losses when analyzing the insurance operations because net realized investment gains or losses related to the Company's available-for-sale investment portfolio are largely discretionary, except for losses related to other-than-temporary impairments, and are generally driven by economic factors that are not necessarily consistent with key drivers of underwriting performance. Operating ratios are calculated using insurance results and are used by the insurance industry and regulators such as state departments of insurance and the National Association of Insurance Commissioners for financial regulation and as a basis of comparison among companies. The ratios presented in this financial supplement are calculated using GAAP financial results and include the loss and loss adjustment expense ratio (loss ratio) as well as the expense, dividend and combined ratios. 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 the loss, expense and dividend ratios. The Company's investment portfolio is monitored by management through analyses of various factors including unrealized gains and losses on securities, portfolio duration and exposure to interest rate, market and credit risk. Based on such analyses, the Company may impair an investment security in accordance with its policy, or sell a security. Such activities will produce realized gains and losses. While management uses various non-GAAP financial measures to monitor various aspects of the Company's performance, relying on any measure other than net income, which is the most directly comparable GAAP measure to underwriting results and realized gains and losses, is not a complete representation of financial performance. Management believes that its process of evaluating performance through the use of these non-GAAP financial measures provides a basis for understanding the operations and the impact to net income as a whole. Management also believes that investors find these non-GAAP financial measures described above useful to help interpret the underlying trends and performance, as well as to provide visibility into the significant components of net income. ii CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT STATEMENTS OF OPERATIONS
------------------------------------------------------------------------------------------------------------------------------------ PERIOD ENDED JUNE 30 THREE MONTHS SIX MONTHS FAV / FAV / (UNFAV) (UNFAV) (In millions) 2003 2002 (1) % CHANGE 2003 2002 (1) % CHANGE ------------------------------------------------------------------------------------------------------------------------------------ STATEMENTS OF OPERATIONS Revenues: Net earned premiums $ 2,197 $ 2,826 (22)% $ 4,578 $ 5,663 (19)% Net investment income 427 502 (15) 859 928 (7) Realized investment gains (losses), net of participating policyholders' and minority interests 378 (162) N/A 302 (161) N/A Other revenues 97 146 (34) 205 328 (38) ------- ------- ------- ------- Total revenues 3,099 3,312 (6) 5,944 6,758 (12) ------- ------- ------- ------- Claims, benefits and expenses: Insurance claims and policyholders' benefits 2,067 2,382 13 3,937 4,692 16 Other operating expenses 922 854 (8) 1,759 1,785 1 Interest 33 38 13 67 75 11 ------- ------- ------- ------- Total claims, benefits and expenses 3,022 3,274 8 5,763 6,552 12 ------- ------- ------- ------- Income from continuing operations before income tax and minority interest 77 38 103 181 206 (12) Income tax expense (5) (2) (150) (23) (53) 57 Minority interest (2) (5) 60 (5) (10) 50 ------- ------- ------- ------- Income from continuing operations before cumulative effect of a change in accounting principle 70 31 126 153 143 7 Loss from discontinued operations, net of tax - - N/A - (35) N/A Cumulative effect of a change in accounting principle, net of tax - - N/A - (57) N/A ------- ------- ------- ------- Net income $ 70 $ 31 126 % $ 153 $ 51 200 % ======= ======= ======= ======= ------------------------------------------------------------------------------------------------------------------------------------
(1) The three months and six months ended June 30, 2002 results have been restated to reflect an adjustment to the Company's historical accounting for CNA's life settlement contracts and the related revenue recognition. Refer to CNA's 2002 Form 10-K for further information related to this restatement. 1 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT COMPONENTS OF NET INCOME AND PER SHARE DATA
------------------------------------------------------------------------------------------------------------------------------------ PERIOD ENDED JUNE 30 THREE MONTHS SIX MONTHS FAV / FAV / (UNFAV) (UNFAV) (In millions, except per share data) 2003 2002 (1) % CHANGE 2003 2002 (1) % CHANGE ------------------------------------------------------------------------------------------------------------------------------------ COMPONENTS OF NET INCOME (Loss) income before net realized investment gains (losses) $(179) $ 136 N/A % $ (47) $ 246 (119)% Net realized investment gains (losses), net of participating policyholders' and minority interests 249 (105) N/A 200 (103) N/A ----- ----- ----- ----- Income from continuing operations 70 31 126 153 143 7 Loss from discontinued operations, net of tax - - N/A - (35) N/A Cumulative effect of a change in accounting principle, net of tax - - N/A - (57) N/A ----- ----- ----- ----- Net income $ 70 $ 31 126 % $ 153 $ 51 200 % ===== ===== ===== ===== BASIC AND DILUTED EARNINGS PER SHARE Income from continuing operations (2) $0.25 $0.14 79 $0.55 $0.65 (15) Loss from discontinued operations, net of tax - - N/A - (0.16) N/A Cumulative effect of a change in accounting principle, net of tax - - N/A - (0.26) N/A ----- ----- ----- ----- Basic and diluted earnings per share available to common stockholders $0.25 $0.14 79 % $0.55 $0.23 139 % ===== ===== ===== ===== Weighted average outstanding common stock and common stock equivalents 223.6 223.6 223.6 223.6 ------------------------------------------------------------------------------------------------------------------------------------
(1) The three months and six months ended June 30, 2002 results have been restated to reflect an adjustment to the Company's historical accounting for CNA's life settlement contracts and the related revenue recognition. Refer to CNA's 2002 Form 10-K for further information related to this restatement. (2) The per share results available to common stockholders for the three months and six months ended June 30, 2003 were reduced by $15 million and $30 million, or $0.07 per share and $0.13 per share, of accumulated but undeclared preferred stock dividends. 2 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT SELECTED BALANCE SHEET DATA AND CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS DATA
----------------------------------------------------------------------------------------- JUNE 30, DECEMBER 31, (In millions, except per share data) 2003 2002 ----------------------------------------------------------------------------------------- Total assets $65,324 $61,731 Insurance reserves 41,451 40,179 Debt 2,158 2,292 Total liabilities 54,741 52,074 Minority interest 265 256 Accumulated other comprehensive income 1,370 604 Total stockholders' equity 10,318 9,401 Book value per common share $ 42.65 $ 38.68 Book value per common share excluding unrealized gain or loss on fixed maturity securities $ 37.43 $ 36.53 Outstanding shares of common stock (in millions of shares) 223.6 223.6 -----------------------------------------------------------------------------------------
--------------------------------------------------------------------- THREE MONTHS ENDED JUNE 30 (In millions) 2003 2002 --------------------------------------------------------------------- Net cash flows provided by operating activities $ 70 $ 513 Net cash flows used by investing activities (84) (445) Net cash flows used by financing activities (12) (17) ----- ----- Net cash flows $ (26) $ 51 ===== ===== ---------------------------------------------------------------------
-------------------------------------------------------------------------- SIX MONTHS ENDED JUNE 30 (In millions) 2003 2002 -------------------------------------------------------------------------- Net cash flows provided by operating activities $ 115 $ 435 Net cash flows provided (used) by investing activities 48 (410) Net cash flows used by financing activities (149) (22) ----- ----- Net cash flows $ 14 $ 3 ===== ===== --------------------------------------------------------------------------
3 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY INSURANCE CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVE DATA
------------------------------------------------------------------------------------------------------------------------------------ CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVES (1) TOTAL P&C (In millions) STANDARD LINES SPECIALTY LINES P&C OPERATIONS CNA RE SEGMENTS ------------------------------------------------------------------------------------------------------------------------------------ As of June 30, 2003 Gross $11,793 $ 6,085 $17,878 $2,064 $19,942 Ceded 4,666 2,618 7,284 847 8,131 Net 7,127 3,467 10,594 1,217 11,811 As of December 31, 2002 Gross $11,576 $ 5,874 $17,450 $2,264 $19,714 Ceded 4,314 2,501 6,815 902 7,717 Net 7,262 3,373 10,635 1,362 11,997 ------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------- CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVES (1) (In millions) GROUP OPERATIONS LIFE OPERATIONS CORPORATE & OTHER TOTAL OPERATIONS --------------------------------------------------------------------------------------------------------------------- As of June 30, 2003 Gross $ 1,468 $ 1,457 $ 5,077 $27,944 Ceded 89 84 3,181 11,485 Net 1,379 1,373 1,896 16,459 As of December 31, 2002 Gross $ 1,400 $ 1,409 $ 4,847 $27,370 Ceded 85 80 2,845 10,727 Net 1,315 1,329 2,002 16,643 ---------------------------------------------------------------------------------------------------------------------
(1) Gross reserves as of June 30, 2003 and December 31, 2002 include $1,762 million ($1,415 million in Group Operations, $141 million in Life Operations and $206 million in Corporate & Other) and $1,722 million ($1,350 million in Group Operations, $133 million in Life Operations and $239 million in Corporate & Other) of Life & Group company reserves, which are primarily related to accident and health business. Net reserves as of June 30, 2003 and December 31, 2002 include $1,622 million ($1,402 million in Group Operations, $61 million in Life Operations and $159 million in Corporate & Other) and $1,578 million ($1,337 million in Group Operations, $56 million in Life Operations and $185 million in Corporate & Other) of Life & Group company reserves, which are primarily related to accident and health business. 4 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY INSURANCE CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVE ROLLFORWARD (1)
----------------------------------------------------------------------------------------------------- THREE MONTHS SIX MONTHS ENDED ENDED (In millions) JUNE 30, 2003 JUNE 30, 2003 ----------------------------------------------------------------------------------------------------- Claim & claim adjustment expense reserves, beginning of period Gross $ 27,446 $ 27,370 Ceded 11,217 10,727 -------- -------- Net 16,229 16,643 -------- -------- Net incurred claim & claim adjustment expenses 1,935 3,661 Net claim & claim adjustment expense payments (1,705) (3,845) Claim & claim adjustment expense reserves, end of period Net 16,459 16,459 Ceded 11,485 11,485 -------- -------- Gross $ 27,944 $ 27,944 ======== ======== -----------------------------------------------------------------------------------------------------
(1) Gross reserves as of June 30, 2003 and December 31, 2002 include $1,762 million and $1,722 million of Life & Group company reserves, which are primarily related to accident and health business. Net reserves as of June 30, 2003 and December 31, 2002 include $1,622 million and $1,578 million of Life & Group company reserves, which are primarily related to accident and health business. 5 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT INVESTMENTS BY ASSET CLASS
----------------------------------------------------------------------------------------------------------------------- JUNE 30, 2003 DECEMBER 31, 2002 BOOK MARKET BOOK MARKET (In millions) VALUE VALUE VALUE VALUE ----------------------------------------------------------------------------------------------------------------------- PROPERTY & CASUALTY AND OTHER COMPANIES Investments: Fixed maturity securities $20,131 $21,148 $17,673 $18,172 Equity securities 368 577 467 614 Short-term investments 3,921 3,923 5,780 5,778 Limited partnership investments 1,141 1,141 1,055 1,055 Mortgage loans and other invested assets 50 38 61 73 ------- ------- ------- ------- Subtotal 25,611 26,827 25,036 25,692 Securities lending collateral 611 611 399 399 ------- ------- ------- ------- Total investments $26,222 $27,438 $25,435 $26,091 ------- ------- ------- ------- LIFE AND GROUP COMPANIES Investments: Fixed maturity securities $ 8,560 $ 9,339 $ 7,860 $ 8,103 Equity securities 58 70 52 52 Short-term investments 436 436 686 686 Limited partnership investments 5 5 5 5 Mortgage loans, policy loans and other invested assets 197 193 210 211 ------- ------- ------- ------- Subtotal 9,256 10,043 8,813 9,057 Securities lending collateral 365 365 145 145 ------- ------- ------- ------- Total investments $ 9,621 $10,408 $ 8,958 $ 9,202 ------- ------- ------- ------- TOTAL INVESTMENTS $35,843 $37,846 $34,393 $35,293 ======= ======= ======= ======= -----------------------------------------------------------------------------------------------------------------------
6 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY SEGMENTS - OPERATING RESULTS
------------------------------------------------------------------------------------------------------------------------------------ THREE MONTHS ENDED STANDARD LINES SPECIALTY LINES P&C OPERATIONS JUNE 30 FAV / (UNFAV) FAV / (UNFAV) FAV / (UNFAV) (In millions) 2003 2002 % CHANGE 2003 2002 % CHANGE 2003 2002 % CHANGE ------------------------------------------------------------------------------------------------------------------------------------ Gross written premiums $ 1,422 $ 1,194 19 % $ 863 $ 729 18 % $ 2,285 $ 1,923 19 % Net written premiums 890 1,056 (16) 681 572 19 1,571 1,628 (4) Net earned premiums 823 1,032 (20) 664 535 24 1,487 1,567 (5) Claim and claim adjustment expenses 773 805 4 616 377 (63) 1,389 1,182 (18) Acquisition expenses 222 186 (19) 137 109 (26) 359 295 (22) Underwriting expenses 143 121 (18) 73 63 (16) 216 184 (17) Policyholders' dividends 11 15 27 - 1 N/A 11 16 31 ------- ------- ----- ------- ------- ------- Underwriting loss (326) (95) N/A (162) (15) N/A (488) (110) N/A ------- ------- ----- ------- ------- ------- Net investment income 84 134 (37) 79 75 5 163 209 (22) Other revenues 59 80 (26) 26 33 (21) 85 113 (25) Other expenses 57 70 19 27 25 (8) 84 95 12 ------- ------- ----- ------- ------- ------- (Loss) income before income tax, minority interest and net realized investment gains (losses) (240) 49 N/A (84) 68 N/A (324) 117 N/A Income tax benefit (expense) 96 (9) N/A 28 (23) N/A 124 (32) N/A Minority interest - - N/A (2) (5) 60 (2) (5) 60 ------- ------- ----- ------- ------- ------- (Loss) income before net realized investment gains (losses) (144) 40 N/A (58) 40 N/A (202) 80 N/A Realized investment gains (losses) 169 (31) N/A 79 (26) N/A 248 (57) N/A Income tax (expense) benefit on realized investment gains (losses) (59) 10 N/A (24) 9 N/A (83) 19 N/A ------- ------- ----- ------- ------- ------- (Loss) income from continuing operations (34) 19 N/A (3) 23 (113) (37) 42 (188) Cumulative effect of a change in accounting principle - - N/A - - N/A - - N/A ------- ------- ----- ------- ------- ------- Net (loss) income $ (34) $ 19 N/A % $ (3) $ 23 (113)% $ (37) $ 42 (188)% ======= ======= ===== ======= ======= ======= FINANCIAL RATIOS Loss & LAE 93.9 % 78.1 % 92.7 % 70.3 % 93.4 % 75.5 % Acquisition expense 26.9 18.0 20.7 20.3 24.1 18.8 Underwriting expense 17.5 11.7 10.9 12.1 14.5 11.8 Dividends 1.3 1.5 0.1 0.1 0.8 1.0 ------- ------- ----- ------- ------- ------- Expense ratio, including dividends 45.7 31.2 31.7 32.5 39.4 31.6 ------- ------- ----- ------- ------- ------- Combined ratio 139.6 % 109.3 % 124.4 % 102.8 % 132.8 % 107.1 % ======= ======= ===== ======= ======= ======= ------------------------------------------------------------------------------------------------------------------------------------
7 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY SEGMENTS - OPERATING RESULTS
---------------------------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED CNA RE TOTAL P&C SEGMENTS JUNE 30 FAV / (UNFAV) FAV / (UNFAV) (In millions) 2003 2002 % CHANGE 2003 2002 % CHANGE ---------------------------------------------------------------------------------------------------------------------------------- Gross written premiums $ 148 $ 171 (13)% $ 2,433 $ 2,094 16 % Net written premiums 123 160 (23) 1,694 1,788 (5) Net earned premiums 134 168 (20) 1,621 1,735 (7) Claim and claim adjustment expenses 95 138 31 1,484 1,320 (12) Acquisition expenses 29 31 6 388 326 (19) Underwriting expenses 15 14 (7) 231 198 (17) Policyholders' dividends - - N/A 11 16 31 ------- ------- ------- ------- Underwriting loss (5) (15) 67 (493) (125) N/A ------- ------- ------- ------- Net investment income 22 48 (54) 185 257 (28) Other revenues - - N/A 85 113 (25) Other expenses - - N/A 84 95 12 ------- ------- ------- ------- Income (loss) before income tax, minority interest and net realized investment gains (losses) 17 33 (48) (307) 150 N/A Income tax (expense) benefit (4) (9) 56 120 (41) N/A Minority interest - - N/A (2) (5) 60 ------- ------- ------- ------- Income (loss) before net realized investment gains (losses) 13 24 (46) (189) 104 N/A Realized investment gains (losses) 33 (6) N/A 281 (63) N/A Income tax (expense) benefit on realized investment gains (losses) (11) 2 N/A (94) 21 N/A ------- ------- ------- ------- Income (loss) from continuing operations 35 20 75 (2) 62 (103) Cumulative effect of a change in accounting principle - - N/A - - N/A ------- ------- ------- ------- Net income (loss) $ 35 $ 20 75 % $ (2) $ 62 (103)% ======= ======= ======= ======= FINANCIAL RATIOS Loss & LAE 71.4 % 81.6 % 91.6 % 76.0 % Acquisition expense 21.9 18.2 23.9 18.7 Underwriting expense 10.5 9.1 14.2 11.6 Dividends - - 0.7 0.9 ------- ------- ------- ------- Expense ratio, including dividends 32.4 27.3 38.8 31.2 ------- ------- ------- ------- Combined ratio 103.8 % 108.9 % 130.4 % 107.2 % ======= ======= ======= ======= ----------------------------------------------------------------------------------------------------------------------------------
8 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY SEGMENTS - OPERATING RESULTS
------------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED STANDARD LINES SPECIALTY LINES P&C OPERATIONS JUNE 30 FAV / (UNFAV) FAV / (UNFAV) FAV / (UNFAV) (In millions) 2003 2002 % CHANGE 2003 2002 % CHANGE 2003 2002 % CHANGE ------------------------------------------------------------------------------------------------------------------------------------ Gross written premiums $ 2,859 $ 2,804 2 % $ 1,843 $ 1,595 16 % $ 4,702 $ 4,399 7 % Net written premiums 1,994 2,139 (7) 1,345 1,112 21 3,339 3,251 3 Net earned premiums 1,862 2,048 (9) 1,288 1,043 23 3,150 3,091 2 Claim and claim adjustment expenses 1,542 1,589 3 1,049 739 (42) 2,591 2,328 (11) Acquisition expenses 420 385 (9) 265 211 (26) 685 596 (15) Underwriting expenses 280 247 (13) 141 126 (12) 421 373 (13) Policyholders' dividends 26 31 16 1 2 50 27 33 18 ------- ------- ------- ------- ------- ------- Underwriting loss (406) (204) (99) (168) (35) N/A (574) (239) (140) ------- ------- ------- ------- ------- ------- Net investment income 194 237 (18) 149 135 10 343 372 (8) Other revenues 130 163 (20) 46 87 (47) 176 250 (30) Other expenses 117 141 17 44 56 21 161 197 18 ------- ------- ------- ------- ------- ------- (Loss) income before income tax, minority interest and net realized investment gains (losses) (199) 55 N/A (17) 131 (113) (216) 186 N/A Income tax benefit (expense) 90 (5) N/A 10 (47) 121 100 (52) N/A Minority interest - - N/A (5) (10) 50 (5) (10) 50 ------- ------- ------- ------- ------- ------- (Loss) income before net realized investment gains (losses) (109) 50 N/A (12) 74 (116) (121) 124 (198) Realized investment gains (losses) 182 (24) N/A 66 (31) N/A 248 (55) N/A Income tax (expense) benefit on realized investment gains (losses) (64) 8 N/A (22) 10 N/A (86) 18 N/A ------- ------- ------- ------- ------- ------- Income from continuing operations 9 34 (74) 32 53 (40) 41 87 (53) Cumulative effect of a change in accounting principle - - N/A - (48) N/A - (48) N/A ------- ------- ------- ------- ------- ------- Net income $ 9 $ 34 (74)% $ 32 $ 5 N/A % $ 41 $ 39 5 % ======= ======= ======= ======= ======= ======= FINANCIAL RATIOS Loss & LAE 82.8 % 77.6 % 81.4 % 70.8 % 82.3 % 75.3 % Acquisition expense 22.5 18.8 20.6 20.2 21.7 19.3 Underwriting expense 15.1 12.1 10.9 12.2 13.3 12.0 Dividends 1.4 1.5 0.1 0.1 0.9 1.1 ------- ------- ------- ------- ------- ------- Expense ratio, including dividends 39.0 32.4 31.6 32.5 35.9 32.4 ------- ------- ------- ------- ------- ------- Combined ratio 121.8 % 110.0 % 113.0 % 103.3 % 118.2 % 107.7 % ======= ======= ======= ======= ======= ======= ------------------------------------------------------------------------------------------------------------------------------------
9 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY SEGMENTS - OPERATING RESULTS
---------------------------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED CNA RE TOTAL P&C SEGMENTS JUNE 30 FAV / (UNFAV) FAV / (UNFAV) (In millions) 2003 2002 % CHANGE 2003 2002 % CHANGE ---------------------------------------------------------------------------------------------------------------------------------- Gross written premiums $ 378 $ 399 (5)% $ 5,080 $ 4,798 6 % Net written premiums 328 327 0 3,667 3,578 2 Net earned premiums 287 305 (6) 3,437 3,396 1 Claim and claim adjustment expenses 193 194 1 2,784 2,522 (10) Acquisition expenses 61 69 12 746 665 (12) Underwriting expenses 27 32 16 448 405 (11) Policyholders' dividends - - N/A 27 33 18 ------- ------- ------- ------- Underwriting income (loss) 6 10 (40) (568) (229) (148) ------- ------- ------- ------- Net investment income 46 81 (43) 389 453 (14) Other revenues 1 1 0 177 251 (29) Other expenses - - N/A 161 197 18 ------- ------- ------- ------- Income (loss) before income tax, minority interest and net realized investment gains (losses) 53 92 (42) (163) 278 (159) Income tax (expense) benefit (15) (28) 46 85 (80) N/A Minority interest - - N/A (5) (10) 50 ------- ------- ------- ------- Income (loss) before net realized investment gains (losses) 38 64 (41) (83) 188 (144) Realized investment gains (losses) 42 3 N/A 290 (52) N/A Income tax (expense) benefit on realized investment gains (losses) (11) 1 N/A (97) 19 N/A ------- ------- ------- ------- Income from continuing operations 69 68 1 110 155 (29) Cumulative effect of a change in accounting principle - - N/A - (48) N/A ------- ------- ------- ------- Net income $ 69 $ 68 1 % $ 110 $ 107 3 % ======= ======= ======= ======= FINANCIAL RATIOS Loss & LAE 67.4 % 63.6 % 81.0 % 74.3 % Acquisition expense 21.3 22.6 21.7 19.6 Underwriting expense 9.2 10.5 13.0 11.9 Dividends - - 0.8 1.0 ------- ------- ------- ------- Expense ratio, including dividends 30.5 33.1 35.5 32.5 ------- ------- ------- ------- Combined ratio 97.9 % 96.7 % 116.5 % 106.8 % ======= ======= ======= ======= ----------------------------------------------------------------------------------------------------------------------------------
10 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY SEGMENTS - CATASTROPHE LOSSES
-------------------------------------------------------------------------------------------------------------------------- CATASTROPHE LOSSES (PRETAX) (In millions) STANDARD LINES SPECIALTY LINES P&C OPERATIONS CNA RE TOTAL P&C SEGMENTS -------------------------------------------------------------------------------------------------------------------------- Three months ended June 30, 2003 $48 $ 1 $49 $11 $60 Six months ended June 30, 2003 61 3 64 11 75 Three months ended June 30, 2002 $ 6 $ 2 $ 8 $ - $ 8 Six months ended June 30, 2002 9 2 11 - 11 --------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------- CATASTROPHE LOSSES (AFTER-TAX) (In millions) STANDARD LINES SPECIALTY LINES P&C OPERATIONS CNA RE TOTAL P&C SEGMENTS ----------------------------------------------------------------------------------------------------------------------------------- Three months ended June 30, 2003 $31 $ 1 $32 $ 7 $39 Six months ended June 30, 2003 40 2 42 7 49 Three months ended June 30, 2002 $ 4 $ 1 $ 5 $ - $ 5 Six months ended June 30, 2002 6 1 7 - 7 -----------------------------------------------------------------------------------------------------------------------------------
11 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT GROUP & LIFE AND CORPORATE & OTHER SEGMENTS - OPERATING RESULTS
------------------------------------------------------------------------------------------------------------------------------------ THREE MONTHS ENDED TOTAL P&C GROUP LIFE CORPORATE & TOTAL JUNE 30 SEGMENTS OPERATIONS (1) OPERATIONS (3) OTHER OPERATIONS (3) (In millions) 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $1,621 $1,735 $329 $820 $263 $ 234 $(16) $ 37 $2,197 $2,826 Insurance claims & policyholders' benefits 1,484 1,320 254 724 301 266 15 54 2,054 2,364 Policyholders' dividends 11 16 - - 6 5 (4) (3) 13 18 Insurance related expenses 619 524 115 137 71 65 40 (2) 845 724 Net investment income 185 257 70 62 133 137 39 46 427 502 Other revenues 85 113 15 26 19 25 (22) (18) 97 146 Other expenses 84 95 8 10 14 18 4 45 110 168 ------ ------ ---- ---- ---- ----- ---- ---- ------ ------ (Loss) income before income tax, minority interest and net realized investment gains (losses) (307) 150 37 37 23 42 (54) (29) (301) 200 Income tax benefit (expense) 120 (41) (11) (12) (6) (15) 21 9 124 (59) Minority interest (2) (5) - - - - - - (2) (5) ------ ------ ---- ---- ---- ----- ---- ---- ------ ------ (Loss) income before net realized investment gains (losses) (189) 104 26 25 17 27 (33) (20) (179) 136 Realized investment gains (losses) 281 (63) 20 (27) 28 (53) 49 (19) 378 (162) Income tax (expense) benefit on realized investment gains (losses) (94) 21 (7) 9 (10) 18 (18) 9 (129) 57 ------ ------ ---- ---- ---- ----- ---- ---- ------ ------ (Loss) income from continuing operations (2) 62 39 7 35 (8) (2) (30) 70 31 Loss from discontinued operations - - - - - - - - - - Cumulative effect of a change in accounting principle - - - - - - - - - - ------ ------ ---- ---- ---- ----- ---- ---- ------ ------ Net (loss) income $ (2) $ 62 $ 39 $ 7 $ 35 $ (8) $ (2) $(30) $ 70 $ 31 ====== ====== ==== ==== ==== ===== ==== ==== ====== ======
------------------------------------------------------------------------------------------------------------------------------------ OTHER FINANCIAL DATA TOTAL P&C SEGMENTS GROUP LIFE OPERATIONS CORPORATE & OTHER TOTAL OPERATIONS PROPERTY & CASUALTY OPERATIONS(1)(2) COMPANY INFORMATION 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 ------------------------------------------------------------------------------------------------------------------------------------ Gross written premiums $ 2,433 $ 2,094 $ 193 $ 741 $ 131 $ 123 $ 505 $ 482 $ 3,262 $ 3,440 Net written premiums 1,694 1,788 - 535 131 122 1 - 1,826 2,445 Net earned premiums 1,621 1,735 - 535 130 118 (3) 2 1,748 2,390 Underwriting (loss) income (493) (125) (1) 3 (61) (39) (61) (39) (616) (200) FINANCIAL RATIOS Loss & LAE 91.6 % 76.0 % N/A % 89.5 % 121.7 % 109.8 % N/A % N/A % 95.1 % 81.5 % Acquisition expense 23.9 18.7 N/A 0.6 14.2 13.8 N/A N/A 25.5 14.4 Underwriting expense 14.2 11.6 N/A 9.2 10.6 9.9 N/A N/A 14.0 11.8 Dividends 0.7 0.9 N/A - - - N/A N/A 0.6 0.7 -------- -------- ------ ----- ----- ----- ------- ------ -------- -------- Expense ratio, including dividends 38.8 31.2 N/A 9.8 24.8 23.7 N/A N/A 40.1 26.9 -------- -------- ------ ----- ----- ----- ------- ------ -------- -------- Combined ratio 130.4 % 107.2 % N/A % 99.3 % 146.5 % 133.5 % N/A % N/A % 135.2 % 108.4 % ======== ======== ====== ===== ===== ===== ======= ====== ======== ======== ------------------------------------------------------------------------------------------------------------------------------------
(1) Included in gross written, net written and earned premiums for 2002 is $535 million relating to the National Postal Mail Handlers Union contract, which was transferred on July 1, 2002. (2) Included in gross written premiums for 2003 and 2002 is $185 million and $195 million of business ceded to CNA Group Life Assurance Company. (3) The three months ended June 30, 2002 results have been restated to reflect an adjustment to the Company's historical accounting for CNA's life settlement contracts and the related revenue recognition. Refer to CNA's 2002 Form 10-K for further information related to this restatement. 12 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT GROUP & LIFE AND CORPORATE & OTHER SEGMENTS - OPERATING RESULTS
------------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED TOTAL P&C GROUP LIFE CORPORATE TOTAL JUNE 30 SEGMENTS OPERATIONS (1) OPERATIONS (3) & OTHER OPERATIONS (3) (In millions) 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $3,437 $3,396 $644 $1,725 $519 $474 $(22) $ 68 $4,578 $5,663 Insurance claims & policyholders' benefits 2,784 2,522 498 1,499 596 539 28 97 3,906 4,657 Policyholders' dividends 27 33 - - 9 6 (5) (4) 31 35 Insurance related expenses 1,194 1,070 231 314 152 128 36 (7) 1,613 1,505 Net investment income 389 453 133 123 264 271 73 81 859 928 Other revenues 177 251 33 45 43 55 (48) (23) 205 328 Other expenses 161 197 15 16 31 37 6 105 213 355 ------ ------ ---- ------ ---- ---- ---- ---- ------ ------ (Loss) income before income tax, minority interest and net realized investment gains (losses) (163) 278 66 64 38 90 (62) (65) (121) 367 Income tax benefit (expense) 85 (80) (21) (21) (11) (32) 26 22 79 (111) Minority interest (5) (10) - - - - - - (5) (10) ------ ------ ---- ------ ---- ---- ---- ---- ------ ------ (Loss) income before net realized investment gains (losses) (83) 188 45 43 27 58 (36) (43) (47) 246 Realized investment gains (losses) 290 (52) (32) (17) (23) (42) 67 (50) 302 (161) Income tax (expense) benefit on realized investment gains (losses) (97) 19 11 5 8 15 (24) 19 (102) 58 ------ ------ ---- ------ ---- ---- ---- ---- ------ ------ Income (loss) from continuing operations 110 155 24 31 12 31 7 (74) 153 143 Loss from discontinued operations - - - - - (35) - - - (35) Cumulative effect of a change in accounting principle - (48) - - - (8) - (1) - (57) ------ ------ ---- ------ ---- ---- ---- ---- ------ ------ Net income (loss) $ 110 $ 107 $ 24 $ 31 $ 12 $(12) $ 7 $(75) $ 153 $ 51 ====== ====== ==== ====== ==== ==== ==== ==== ====== ======
------------------------------------------------------------------------------------------------------------------------------------ OTHER FINANCIAL DATA TOTAL P&C SEGMENTS GROUP LIFE OPERATIONS CORPORATE & OTHER TOTAL OPERATIONS PROPERTY & CASUALTY OPERATIONS(1)(2) COMPANY INFORMATION 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 ------------------------------------------------------------------------------------------------------------------------------------ Gross written premiums $ 5,080 $4,798 $ 404 $1,569 $ 268 $ 247 $ 926 $ 501 $ 6,678 $ 7,115 Net written premiums 3,667 3,578 - 1,151 267 246 (8) 3 3,926 4,978 Net earned premiums 3,437 3,396 - 1,151 260 234 (1) 6 3,696 4,787 Underwriting (loss) income (568) (229) 1 8 (115) (79) (70) (79) (752) (379) FINANCIAL RATIOS Loss & LAE 81.0 % 74.3 % N/A % 87.9 % 117.8 % 108.7 % N/A % N/A % 84.5 % 79.9 % Acquisition expense 21.7 19.6 N/A 0.2 14.9 15.0 N/A N/A 22.3 14.7 Underwriting expense 13.0 11.9 N/A 11.2 11.4 10.0 N/A N/A 12.8 12.6 Dividends 0.8 1.0 N/A - - - N/A N/A 0.7 0.7 -------- ------ ----- ------ ------ ------ ----- ----- ------- ------- Expense ratio, including dividends 35.5 32.5 N/A 11.4 26.3 25.0 N/A N/A 35.8 28.0 -------- ------ ----- ------ ------ ------ ----- ----- ------- ------- Combined ratio 116.5 % 106.8 % N/A % 99.3 % 144.1 % 133.7 % N/A % N/A % 120.3 % 107.9 % ======== ====== ===== ====== ====== ====== ===== ===== ======= ======= ------------------------------------------------------------------------------------------------------------------------------------
(1) Included in gross written, net written and earned premiums for 2002 is $1,151 million relating to the National Postal Mail Handlers Union contract, which was transferred on July 1, 2002. (2) Included in gross written premiums for 2003 and 2002 is $385 million and $394 million of business ceded to CNA Group Life Assurance Company. (3) The six months ended June 30, 2002 results have been restated to reflect an adjustment to the Company's historical accounting for CNA's life settlement contracts and the related revenue recognition. Refer to CNA's 2002 Form 10-K for further information related to this restatement. 13 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT ANALYSIS OF PRETAX NET INVESTMENT INCOME
--------------------------------------------------------------------------------------------------------------------- (In millions) STANDARD LINES --------------------------------------------------------------------------------------------------------------------- 1Q02 2Q02 3Q02 4Q02 2002 1Q03 2Q03 YTD 2003 ---- ---- ---- ---- ---- ---- ---- -------- Limited partnership income $ 3 $ 20 $ (39) $ (2) $ (18) $ 13 $ 40 $ 53 Interest on funds withheld and other deposits (38) (44) (36) (56) (174) (34) (76) (110) Other investment income 138 158 142 152 590 131 120 251 -------------------------------------------------------------------- Net investment income $ 103 $ 134 $ 67 $ 94 $ 398 $ 110 $ 84 $ 194 ==================================================================== ---------------------------------------------------------------------- SPECIALTY LINES ---------------------------------------------------------------------- 1Q02 2Q02 3Q02 4Q02 2002 1Q03 2Q03 YTD 2003 ---- ---- ---- ---- ---- ---- ---- -------- Limited partnership income $ 1 $ 8 $ (14) $ (1) $ (6) $ 5 $ 17 $ 22 Interest on funds withheld and other deposits (9) (7) (11) (7) (34) (6) (7) (13) Other investment income 68 74 74 77 293 71 69 140 -------------------------------------------------------------------- Net investment income $ 60 $ 75 $ 49 $ 69 $ 253 70 $ 79 $ 149 ==================================================================== ---------------------------------------------------------------------- P&C OPERATIONS ---------------------------------------------------------------------- 1Q02 2Q02 3Q02 4Q02 2002 1Q03 2Q03 YTD 2003 ---- ---- ---- ---- ---- ---- ---- -------- Limited partnership income $ 4 $ 28 $ (53) $ (3) $ (24) $ 18 $ 57 $ 75 Interest on funds withheld and other deposits (47) (51) (47) (63) (208) (40) (83) (123) Other investment income 206 232 216 229 883 202 189 391 -------------------------------------------------------------------- Net investment income $ 163 $ 209 $ 116 $ 163 $ 651 $ 180 $ 163 $ 343 ==================================================================== ---------------------------------------------------------------------- CNA RE ---------------------------------------------------------------------- 1Q02 2Q02 3Q02 4Q02 2002 1Q03 2Q03 YTD 2003 ---- ---- ---- ---- ---- ---- ---- -------- Limited partnership income $ 1 $ 5 $ (9) $ (1) $ (4) $ 2 $ 8 $ 10 Interest on funds withheld and other deposits (11) (6) (6) (6) (29) (6) (10) (16) Other investment income 43 49 43 42 177 28 24 52 -------------------------------------------------------------------- Net investment income $ 33 $ 48 $ 28 $ 35 $ 144 $ 24 $ 22 $ 46 ==================================================================== ---------------------------------------------------------------------- TOTAL P&C SEGMENTS ---------------------------------------------------------------------- 1Q02 2Q02 3Q02 4Q02 2002 1Q03 2Q03 YTD 2003 ---- ---- ---- ---- ---- ---- ---- -------- Limited partnership income $ 5 $ 33 $ (62) $ (4) $ (28) $ 20 $ 65 $ 85 Interest on funds withheld and other deposits (58) (57) (53) (69) (237) (46) (93) (139) Other investment income 249 281 259 271 1,060 230 213 443 -------------------------------------------------------------------- Net investment income $ 196 $ 257 $ 144 $ 198 $ 795 $ 204 $ 185 $ 389 ====================================================================
14 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT ANALYSIS OF PRETAX NET INVESTMENT INCOME
------------------------------------------------------------------------------------------------------------------------------------ (In millions) TOTAL P&C SEGMENTS ------------------------------------------------------------------------------------------------------------------------------------ 1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 YTD 2003 ---- ---- ---- ---- -------- ---- ---- -------- Limited partnership income $ 5 $ 33 $ (62) $ (4) $ (28) $ 20 $ 65 $ 85 Interest on funds withheld and other deposits (58) (57) (53) (69) (237) (46) (93) (139) Other investment income 249 281 259 271 1,060 230 213 443 ----------------------------------------------------------------------------------- Net investment income $ 196 $ 257 $ 144 $ 198 $ 795 $ 204 $ 185 $ 389 =================================================================================== ----------------------------------------------------------------------- GROUP OPERATIONS ----------------------------------------------------------------------- 1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 YTD 2003 ---- ---- ---- ---- -------- ---- ---- -------- Limited partnership income $ - $ - $ - $ - $ - $ - $ - $ - Interest on funds withheld and other deposits - - - - - - - - Other investment income 61 62 65 64 252 63 70 133 --------------------------------------------------------------------- Net investment income $ 61 $ 62 $ 65 $ 64 $252 $ 63 $ 70 $133 ===================================================================== ------------------------------------------------------------------ LIFE OPERATIONS ------------------------------------------------------------------ 1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 YTD 2003 ---- ---- ---- ---- -------- ---- ---- -------- Limited partnership income $ - $ - $ (1) $ (1) $ (2) $ - $ - $ - Interest on funds withheld and other deposits - - - - - - - - Other investment income 134 137 132 139 542 131 133 264 ---------------------------------------------------------------- Net investment income $ 134 $137 $ 131 $ 138 $ 540 $131 $ 133 $ 264 ================================================================ ---------------------------------------------------------------- CORPORATE & OTHER ---------------------------------------------------------------- 1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 YTD 2003 ---- ---- ---- ---- -------- ---- ---- -------- Limited partnership income $ 2 $ 5 $ (10) $ (1) $ (4) $ 3 $ 10 $ 13 Interest on funds withheld and other deposits - - - (2) (2) (1) - (1) Other investment income 33 41 34 41 149 32 29 61 ---------------------------------------------------------------- Net investment income $ 35 $ 46 $ 24 $ 38 $ 143 $ 34 $ 39 $ 73 ================================================================ ------------------------------------------------------------------- TOTAL OPERATIONS ------------------------------------------------------------------- 1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 YTD 2003 ---- ---- ---- ---- -------- ---- ---- -------- Limited partnership income $ 7 $ 38 $ (73) $ (6) $ (34) $ 23 $ 75 $ 98 Interest on funds withheld and other deposits (58) (57) (53) (71) (239) (47) (93) (140) Other investment income 477 521 490 515 2,003 456 445 901 ------------------------------------------------------------------ Net investment income $ 426 $ 502 $ 364 $ 438 $1,730 $ 432 $ 427 $ 859 ==================================================================
15 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT STATUTORY DATA - PRELIMINARY
-------------------------------------------------------------------------------------------------------------------------- PERIOD ENDED JUNE 30 THREE MONTHS SIX MONTHS INCOME STATEMENT (PRELIMINARY) FAV / (UNFAV) (PRELIMINARY) FAV / (UNFAV) (In millions) 2003 2002 % CHANGE 2003 2002 % CHANGE -------------------------------------------------------------------------------------------------------------------------- PROPERTY & CASUALTY COMPANIES Gross written premiums $ 3,486 $ 3,553 (2)% $ 7,131 $ 8,043 (11)% Net written premiums 1,820 2,433 (25) 3,891 4,933 (21) Net earned premiums 1,655 2,306 (28) 3,522 4,632 (24) Claim and claim adjustment expenses 1,581 1,881 16 2,972 3,697 20 Acquisition expenses 358 392 9 770 780 1 Underwriting expenses 294 258 (14) 544 587 7 Policyholders' dividends 15 11 (36) 41 35 (17) Restructuring and other related costs - - N/A - - N/A ------- ------- ------- ------- Underwriting loss (593) (236) (151) (805) (467) (72) Net investment income 296 360 (18) 594 706 (16) Other revenue (87) (56) (55) (124) (111) (12) Income tax benefit (expense) 54 (15) N/A 46 (25) N/A Net realized gains (losses) 287 (10) N/A 304 25 N/A ------- ------- ------- ------- Net (loss) income $ (43) $ 43 (200)% $ 15 $ 128 (88)% ======= ======= ======= ======= FINANCIAL RATIOS Loss and LAE 95.5 % 81.6 % 84.4 % 79.8 % Acquisition expense 19.6 16.1 19.8 15.8 Underwriting expense 16.2 10.5 13.9 11.9 Policyholders' dividends 0.9 0.5 1.2 0.8 ------- ------- ------- ------- Expense ratio 36.7 27.1 34.9 28.5 ------- ------- ------- ------- Combined ratio 132.2 % 108.7 % 119.3 % 108.3 % ======= ======= ======= ======= LIFE COMPANIES Premium income 488 466 980 962 -------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------ SUPPLEMENTAL STATUTORY DATA (PRELIMINARY) (In millions) JUNE 30, 2003 DECEMBER 31, 2002 ------------------------------------------------------------------------------------------------ PROPERTY & CASUALTY COMPANIES Statutory surplus (1) $ 6,995 $ 6,836 LIFE COMPANIES Statutory surplus $ 1,529 $ 1,645 Gross life insurance in force 434,781 437,751 ------------------------------------------------------------------------------------------------
(1) Surplus includes the Property & Casualty Companies' equity ownership of the life insurance subsidiaries. 16 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY SEGMENTS LOSS AND LAE RATIO ANALYSIS
-------------------------------------------- --------------------------------------------- STANDARD LINES CNA RE -------------------------------------------- --------------------------------------------- 2003 YTD 2002 YTD 2002 FY 2003 YTD 2002 YTD 2002 FY EVALUATED AT EVALUATED AT EVALUATED AT EVALUATED AT EVALUATED AT EVALUATED AT 6/30/03 12/31/02 6/30/03 6/30/03 12/31/02 6/30/03 ------------ ------------ ------------ ------------ ------------ ------------ Gross Accident Year 64.2 % 74.6 % 71.5 % 59.9 % 64.2 % 63.2 % Impact of Finite Reinsurance - (0.1) 0.0 - 0.2 0.1 Impact of Other Reinsurance 4.0 0.8 3.0 3.6 4.9 5.7 ---------- ---------- ------- ------- ------- ------ Net Accident Year 68.2 75.3 74.5 % 63.5 69.3 69.0 % ======= ====== Impact of Corporate Covers (5.6) - (5.5) (6.4) Impact of World Trade Center - - - 1.3 Impact of Development 20.2 (3.3) 9.4 14.1 ---------- ---------- ------- ------- Net Calendar Year 82.8 % 72.0 % 67.4 % 78.3 % ========== ========== ======= ======= -------------------------------------------- --------------------------------------------- -------------------------------------------- --------------------------------------------- SPECIALTY LINES P&C SEGMENTS -------------------------------------------- --------------------------------------------- 2003 YTD 2002 YTD 2002 FY 2003 YTD 2002 YTD 2002 FY EVALUATED AT EVALUATED AT EVALUATED AT EVALUATED AT EVALUATED AT EVALUATED AT 6/30/03 12/31/02 6/30/03 6/30/03 12/31/02 6/30/03 ------------ ------------ ------------ ------------ ------------ ------------ Gross Accident Year 64.9 % 68.1 % 69.4 % 64.2 % 71.5 % 70.2 % Impact of Finite Reinsurance - - - - - - Impact of Other Reinsurance 1.4 3.6 3.1 3.0 2.1 3.2 ---------- ---------- ------- ------- ------- ------ Net Accident Year 66.3 71.7 72.5 % 67.2 73.6 73.4 % ======= ====== Impact of Corporate Covers - (1.2) (3.6) (1.1) Impact of World Trade Center - - - 0.1 Impact of Development 15.1 6.6 17.4 1.5 ---------- ---------- ------- ------- Net Calendar Year 81.4 % 77.1 % 81.0 % 74.1 % ========== ========== ======= ======= -------------------------------------------- --------------------------------------------- -------------------------------------------- P&C OPERATIONS -------------------------------------------- 2003 YTD 2002 YTD 2002 FY EVALUATED AT EVALUATED AT EVALUATED AT 6/30/03 12/31/02 6/30/03 ------------ ------------ ------------ Gross Accident Year 64.5 % 72.1 % 70.8 % Impact of Finite Reinsurance - - 0.0 Impact of Other Reinsurance 3.0 2.0 3.0 ---------- ---------- ------- Net Accident Year 67.5 74.1 73.8 % ======= Impact of Corporate Covers (3.4) (0.4) Impact of World Trade Center - - Impact of Development 18.2 0.2 ---------- ---------- Net Calendar Year 82.3 % 73.9 % ========== ========== --------------------------------------------
17 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT IMPACT OF PRIOR YEAR DEVELOPMENT (1)
------------------------------------------------------------------------------------------------------------------------------------ THREE MONTHS ENDED STANDARD LINES SPECIALTY LINES JUNE 30, 2003 2003 RESULTS 2003 RESULTS BEFORE PRIOR PREMIUM CORPORATE BEFORE PRIOR PREMIUM CORPORATE YEAR AND LOSS AGGREGATE 2003 YEAR AND LOSS AGGREGATE 2003 (In millions) DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 1,044 $ (116) $ (105) $ 823 $ 672 $ (8) $ - $ 664 Claim and claim adjustment expenses 710 243 (180) 773 434 182 - 616 Acquisition expenses 222 - - 222 137 - - 137 Underwriting expenses 143 - - 143 73 - - 73 Policyholders' dividends 11 - - 11 - - - - ------- ------- ------- ------- ------- ------- ----- ------- Underwriting (loss) income (42) (359) 75 (326) 28 (190) - (162) ------- ------- ------- ------- ------- ------- ----- ------- Net investment income (loss) 108 - (24) 84 79 - - 79 Other revenues 59 - - 59 26 - - 26 Other expenses 57 - - 57 27 - - 27 ------- ------- ------- ------- ------- ------- ----- ------- Income (loss) before income tax, minority interest and net realized investment gains 68 (359) 51 (240) 106 (190) - (84) Income tax (expense) benefit (12) 126 (18) 96 (39) 67 - 28 Minority interest - - - - (2) - - (2) ------- ------- ------- ------- ------- ------- ----- ------- Income (loss) before net realized investment gains 56 (233) 33 (144) 65 (123) - (58) Realized investment gains 169 - - 169 79 - - 79 Income tax expense on realized investment gains (59) - - (59) (24) - - (24) ------- ------- ------- ------- ------- ------- ----- ------- Income (loss) from continuing operations 166 (233) 33 (34) 120 (123) - (3) Cumulative effect of a change in accounting principle - - - - - - - - ------- ------- ------- ------- ------- ------- ----- ------- Net income (loss) $ 166 $ (233) $ 33 $ (34) $ 120 $ (123) $ - $ (3) ======= ======= ======= ======= ======= ======= ===== ======= FINANCIAL RATIOS Loss & LAE 93.9% 92.7% Acquisition expense 26.9 20.7 Underwriting expense 17.5 10.9 Dividends 1.3 0.1 ------ ------- Expense ratio, including dividends 45.7 31.7 ------ ------- Combined ratio 139.6% 124.4% ====== ======= ------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------ P&C OPERATIONS 2003 RESULTS BEFORE PRIOR PREMIUM CORPORATE YEAR AND LOSS AGGREGATE 2003 DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $1,716 $ (124) $ (105) $1,487 Claim and claim adjustment expenses 1,144 425 (180) 1,389 Acquisition expenses 359 - - 359 Underwriting expenses 216 - - 216 Policyholders' dividends 11 - - 11 ------ ------ ------ ------ Underwriting (loss) income (14) (549) 75 (488) ------ ------ ------ ------ Net investment income (loss) 187 - (24) 163 Other revenues 85 - - 85 Other expenses 84 - - 84 ------ ------ ------ ------ Income (loss) before income tax, minority interest and net realized investment gains 174 (549) 51 (324) Income tax (expense) benefit (51) 193 (18) 124 Minority interest (2) - - (2) ------ ------ ------ ------ Income (loss) before net realized investment gains 121 (356) 33 (202) Realized investment gains 248 - - 248 Income tax expense on realized investment gains (83) - - (83) ------ ------ ------ ------ Income (loss) from continuing operations 286 (356) 33 (37) Cumulative effect of a change in accounting principle - - - - ------ ------ ------ ------ Net income (loss) $ 286 $ (356) $ 33 $ (37) ====== ====== ====== ====== FINANCIAL RATIOS Loss & LAE 93.4 % Acquisition expense 24.1 Underwriting expense 14.5 Dividends 0.8 ------ Expense ratio, including dividends 39.4 ------ Combined ratio 132.8 % ====== ------------------------------------------------------------------------------------------------------------------------------------
(1) Total development for the Property & Casualty Segments is comprised of Premium and Loss Development and the impact of the Corporate Aggregate Covers. (2) Pretax benefit of Aggregate Corporate Covers represents the current period ceded premiums and losses and associated interest expense. Interest expense on the funds withheld related to prior cessions to the Corporate Aggregate Covers is not presented on this schedule, but is included in the Analysis of Pretax Net Investment Income on pages 14 and 15. 18 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT IMPACT OF PRIOR YEAR DEVELOPMENT (1)
------------------------------------------------------------------------------------------------------------------------------------ THREE MONTHS ENDED CNA RE TOTAL P&C SEGMENTS JUNE 30, 2003 2003 RESULTS 2003 RESULTS BEFORE PRIOR PREMIUM CORPORATE BEFORE PRIOR PREMIUM CORPORATE YEAR AND LOSS AGGREGATE 2003 YEAR AND LOSS AGGREGATE 2003 (In millions) DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 136 $ 12 $ (14) $ 134 $ 1,852 $ (112) $ (119) $ 1,621 Claim and claim adjustment expenses 86 33 (24) 95 1,230 458 (204) 1,484 Acquisition expenses 29 - - 29 388 - - 388 Underwriting expenses 15 - - 15 231 - - 231 Policyholders' dividends - - - - 11 - - 11 ------- ------- ------- ------- ------- ------- ------- ------- Underwriting income (loss) 6 (21) 10 (5) (8) (570) 85 (493) ------- ------- ------- ------- ------- ------- ------- ------- Net investment income (loss) 25 - (3) 22 212 - (27) 185 Other revenues - - - - 85 - - 85 Other expenses - - - - 84 - - 84 ------- ------- ------- ------- ------- ------- ------- ------- Income (loss) before income tax, minority interest and net realized investment gains 31 (21) 7 17 205 (570) 58 (307) Income tax (expense) benefit (10) 8 (2) (4) (61) 201 (20) 120 Minority interest - - - - (2) - - (2) ------- ------- ------- ------- ------- ------- ------- ------- Income (loss) before net realized investment gains 21 (13) 5 13 142 (369) 38 (189) Realized investment gains 33 - - 33 281 - - 281 Income tax expense on realized investment gains (11) - - (11) (94) - - (94) ------- ------- ------- ------- ------- ------- ------- ------- Income (loss) from continuing operations 43 (13) 5 35 329 (369) 38 (2) Cumulative effect of a change in accounting principle - - - - - - - - ------- ------- ------- ------- ------- ------- ------- ------- Net income (loss) $ 43 $ (13) $ 5 $ 35 $ 329 $ (369) $ 38 $ (2) ======= ======= ======= ======= ======= ======= ======= ======= FINANCIAL RATIOS Loss & LAE 71.4 % 91.6% Acquisition expense 21.9 23.9 Underwriting expense 10.5 14.2 Dividends - 0.7 ------- ------- Expense ratio, including dividends 32.4 38.8 ------- ------- Combined ratio 103.8 % 130.4% ======= ======= ------------------------------------------------------------------------------------------------------------------------------------
(1) Total development for the Property & Casualty Segments is comprised of Premium and Loss Development and the impact of the Corporate Aggregate Covers. (2) Pretax benefit of Aggregate Corporate Covers represents the current period ceded premiums and losses and associated interest expense. Interest expense on the funds withheld related to prior cessions to the Corporate Aggregate Covers is not presented on this schedule, but is included in the Analysis of Pretax Net Investment Income on pages 14 and 15. 19 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT IMPACT OF PRIOR YEAR DEVELOPMENT (1)
------------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED STANDARD LINES SPECIALTY LINES JUNE 30, 2003 2003 RESULTS 2003 RESULTS BEFORE PRIOR PREMIUM CORPORATE BEFORE PRIOR PREMIUM CORPORATE YEAR AND LOSS AGGREGATE 2003 YEAR AND LOSS AGGREGATE 2003 (In millions) DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 2,046 $ (79) $ (105) $ 1,862 $ 1,273 $ 15 $ - $ 1,288 Claim and claim adjustment expenses 1,414 308 (180) 1,542 844 205 - 1,049 Acquisition expenses 420 - - 420 265 - - 265 Underwriting expenses 280 - - 280 141 - - 141 Policyholders' dividends 26 - - 26 1 - - 1 ------- ------- ------- ------- ------- ------- ------ ------- Underwriting (loss) income (94) (387) 75 (406) 22 (190) - (168) ------- ------- ------- ------- ------- ------- ------ ------- Net investment income (loss) 218 - (24) 194 149 - - 149 Other revenues 130 - - 130 46 - - 46 Other expenses 117 - - 117 44 - - 44 ------- ------- ------- ------- ------- ------- ------ ------- Income (loss) before income tax, minority interest and net realized investment gains 137 (387) 51 (199) 173 (190) - (17) Income tax (expense) benefit (27) 135 (18) 90 (54) 64 - 10 Minority interest - - - - (5) - - (5) ------- ------- ------- ------- ------- ------- ------ ------- Income (loss) before net realized investment gains 110 (252) 33 (109) 114 (126) - (12) Realized investment gains 182 - - 182 66 - - 66 Income tax expense on realized investment gains (64) - - (64) (22) - - (22) ------- ------- ------- ------- ------- ------- ------ ------- Income (loss) from continuing operations 228 (252) 33 9 158 (126) - 32 Cumulative effect of a change in accounting principle - - - - - - - - ------- ------- ------- ------- ------- ------- ------ ------- Net income (loss) $ 228 $ (252) $ 33 $ 9 $ 158 $ (126) $ - $ 32 ======= ======= ======= ======= ======= ======= ====== ======= FINANCIAL RATIOS Loss & LAE 82.8 % 81.4% Acquisition expense 22.5 20.6 Underwriting expense 15.1 10.9 Dividends 1.4 0.1 ------- ------- Expense ratio, including dividends 39.0 31.6 ------- ------- Combined ratio 121.8 % 113.0% ======= ======= ------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------ P&C OPERATIONS 2003 RESULTS BEFORE PRIOR PREMIUM CORPORATE YEAR AND LOSS AGGREGATE 2003 DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 3,319 $ (64) $ (105) $ 3,150 Claim and claim adjustment expenses 2,258 513 (180) 2,591 Acquisition expenses 685 - - 685 Underwriting expenses 421 - - 421 Policyholders' dividends 27 - - 27 ------- ------- ------- ------- Underwriting (loss) income (72) (577) 75 (574) ------- ------- ------- ------- Net investment income (loss) 367 - (24) 343 Other revenues 176 - - 176 Other expenses 161 - - 161 ------- ------- ------- ------- Income (loss) before income tax, minority interest and net realized investment gains 310 (577) 51 (216) Income tax (expense) benefit (81) 199 (18) 100 Minority interest (5) - - (5) ------- ------- ------- ------- Income (loss) before net realized investment gains 224 (378) 33 (121) Realized investment gains 248 - - 248 Income tax expense on realized investment gains (86) - - (86) ------- ------- ------- ------- Income (loss) from continuing operations 386 (378) 33 41 Cumulative effect of a change in accounting principle - - - - ------- ------- ------- ------- Net income (loss) $ 386 $ (378) $ 33 $ 41 ======= ======= ======= ======= FINANCIAL RATIOS Loss & LAE 82.3 % Acquisition expense 21.7 Underwriting expense 13.3 Dividends 0.9 ------- Expense ratio, including dividends 35.9 ------- Combined ratio 118.2 % ======= ------------------------------------------------------------------------------------------------------------------------------------
(1) Total development for the Property & Casualty Segments is comprised of Premium and Loss Development and the impact of the Corporate Aggregate Covers. (2) Pretax benefit of Aggregate Corporate Covers represents the current period ceded premiums and losses and associated interest expense. Interest expense on the funds withheld related to prior cessions to the Corporate Aggregate Covers is not presented on this schedule, but is included in the Analysis of Pretax Net Investment Income on pages 14 and 15. 20 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT IMPACT OF PRIOR YEAR DEVELOPMENT (1)
------------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED CNA RE TOTAL P&C SEGMENTS JUNE 30, 2003 2003 RESULTS 2003 RESULTS BEFORE PRIOR PREMIUM CORPORATE BEFORE PRIOR PREMIUM CORPORATE YEAR AND LOSS AGGREGATE 2003 YEAR AND LOSS AGGREGATE 2003 (In millions) DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 289 $ 12 $ (14) $ 287 $ 3,608 $ (52) $ (119) $ 3,437 Claim and claim adjustment expenses 183 34 (24) 193 2,441 547 (204) 2,784 Acquisition expenses 61 - - 61 746 - - 746 Underwriting expenses 27 - - 27 448 - - 448 Policyholders' dividends - - - - 27 - - 27 ------- ------- ------- ------- ------- ------- ------- ------- Underwriting income (loss) 18 (22) 10 6 (54) (599) 85 (568) ------- ------- ------- ------- ------- ------- ------- ------- Net investment income (loss) 49 - (3) 46 416 - (27) 389 Other revenues 1 - - 1 177 - - 177 Other expenses - - - - 161 - - 161 ------- ------- ------- ------- ------- ------- ------- ------- Income (loss) before income tax, minority interest and net realized investment gains 68 (22) 7 53 378 (599) 58 (163) Income tax (expense) benefit (21) 8 (2) (15) (102) 207 (20) 85 Minority interest - - - - (5) - - (5) ------- ------- ------- ------- ------- ------- ------- ------- Income (loss) before net realized investment gains 47 (14) 5 38 271 (392) 38 (83) Realized investment gains 42 - - 42 290 - - 290 Income tax expense on realized investment gains (11) - - (11) (97) - - (97) ------- ------- ------- ------- ------- ------- ------- ------- Income (loss) from continuing operations 78 (14) 5 69 464 (392) 38 110 Cumulative effect of a change in accounting principle - - - - - - - - ------- ------- ------- ------- ------- ------- ------- ------- Net income (loss) $ 78 $ (14) $ 5 $ 69 $ 464 $ (392) $ 38 $ 110 ======= ======= ======= ======= ======= ======= ======= ======= FINANCIAL RATIOS Loss & LAE 67.4 % 81.0 % Acquisition expense 21.3 21.7 Underwriting expense 9.2 13.0 Dividends - 0.8 ------- ------- Expense ratio, including dividends 30.5 35.5 ------- ------- Combined ratio 97.9 % 116.5 % ======= ======= ------------------------------------------------------------------------------------------------------------------------------------
(1) Total development for the Property & Casualty Segments is comprised of Premium and Loss Development and the impact of the Corporate Aggregate Covers. (2) Pretax benefit of Aggregate Corporate Covers represents the current period ceded premiums and losses and associated interest expense. Interest expense on the funds withheld related to prior cessions to the Corporate Aggregate Covers is not presented on this schedule, but is included in the Analysis of Pretax Net Investment Income on pages 14 and 15. 21 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT IMPACT OF PRIOR YEAR DEVELOPMENT (1)
------------------------------------------------------------------------------------------------------------------------------------ THREE MONTHS ENDED STANDARD LINES SPECIALTY LINES JUNE 30, 2002 2002 RESULTS 2002 RESULTS BEFORE PRIOR PREMIUM CORPORATE BEFORE PRIOR PREMIUM CORPORATE YEAR AND LOSS AGGREGATE 2002 YEAR AND LOSS AGGREGATE 2002 (In millions) DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 1,034 $ (2) $ - $ 1,032 $ 539 $ (4) $ - $ 535 Claim and claim adjustment expenses 775 30 - 805 381 (4) - 377 Acquisition expenses 186 - - 186 109 - - 109 Underwriting expenses 121 - - 121 63 - - 63 Policyholders' dividends 15 - - 15 1 - - 1 ------- ------- ------- ------- ------- ------- ---------- ------- Underwriting loss (63) (32) - (95) (15) - - (15) ------- ------- ------- ------- ------- ------- ---------- ------- Net investment income 134 - - 134 75 - - 75 Other revenues 80 - - 80 33 - - 33 Other expenses 70 - - 70 25 - - 25 ------- ------- ------- ------- ------- ------- ---------- ------- Income (loss) before income tax, minority interest and net realized investment losses 81 (32) - 49 68 - - 68 Income tax (expense) benefit (20) 11 - (9) (23) - - (23) Minority interest - - - - (5) - - (5) ------- ------- ------- ------- ------- ------- ---------- ------- Income (loss) before net realized investment losses 61 (21) - 40 40 - - 40 Realized investment losses (31) - - (31) (26) - - (26) Income tax benefit on realized investment losses 10 - - 10 9 - - 9 ------- ------- ------- ------- ------- ------- ---------- ------- Income (loss) from continuing operations 40 (21) - 19 23 - - 23 Cumulative effect of a change in accounting principle - - - - - - - - ------- ------- ------- ------- ------- ------- ---------- ------- Net income (loss) $ 40 $ (21) $ - $ 19 $ 23 $ - $ - $ 23 ======= ======= ======= ======= ======= ======= ========== ======= FINANCIAL RATIOS Loss & LAE 78.1 % 70.3 % Acquisition expense 18.0 20.3 Underwriting expense 11.7 12.1 Dividends 1.5 0.1 ------- ------- Expense ratio, including dividends 31.2 32.5 ------- ------- Combined ratio 109.3 % 102.8 % ======= ======= ------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------ P&C OPERATIONS 2002 RESULTS BEFORE PRIOR PREMIUM CORPORATE YEAR AND LOSS AGGREGATE 2002 DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 1,573 $ (6) $ - $ 1,567 Claim and claim adjustment expenses 1,156 26 - 1,182 Acquisition expenses 295 - - 295 Underwriting expenses 184 - - 184 Policyholders' dividends 16 - - 16 ------- ------- -------- ------- Underwriting loss (78) (32) - (110) ------- ------- -------- ------- Net investment income 209 - - 209 Other revenues 113 - - 113 Other expenses 95 - - 95 ------- ------- -------- ------- Income (loss) before income tax, minority interest and net realized investment losses 149 (32) - 117 Income tax (expense) benefit (43) 11 - (32) Minority interest (5) - - (5) ------- ------- -------- ------- Income (loss) before net realized investment losses 101 (21) - 80 Realized investment losses (57) - - (57) Income tax benefit on realized investment losses 19 - - 19 ------- ------- -------- ------- Income (loss) from continuing operations 63 (21) - 42 Cumulative effect of a change in accounting principle - - - - ------- ------- -------- ------- Net income (loss) $ 63 $ (21) $ - $ 42 ======= ======= ======== ======= FINANCIAL RATIOS Loss & LAE 75.5 % Acquisition expense 18.8 Underwriting expense 11.8 Dividends 1.0 ------- Expense ratio, including dividends 31.6 ------- Combined ratio 107.1 % ======= ------------------------------------------------------------------------------------------------------------------------------------
(1) Total development for the Property & Casualty Segments is comprised of Premium and Loss Development and the impact of the Corporate Aggregate Covers. (2) Pretax benefit of Aggregate Corporate Covers represents the current period ceded premiums and losses and associated interest expense. Interest expense on the funds withheld related to prior cessions to the Corporate Aggregate Covers is not presented on this schedule, but is included in the Analysis of Pretax Net Investment Income on pages 14 and 15. 22 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT IMPACT OF PRIOR YEAR DEVELOPMENT (1)
------------------------------------------------------------------------------------------------------------------------------------ THREE MONTHS ENDED CNA RE TOTAL P&C SEGMENTS JUNE 30, 2002 2002 RESULTS 2002 RESULTS BEFORE PRIOR PREMIUM CORPORATE BEFORE PRIOR PREMIUM CORPORATE YEAR AND LOSS AGGREGATE 2002 YEAR AND LOSS AGGREGATE 2002 (In millions) DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 160 $ 8 $ - $ 168 $ 1,733 $ 2 $ - $ 1,735 Claim and claim adjustment expenses 113 25 - 138 1,269 51 - 1,320 Acquisition expenses 31 - - 31 326 - - 326 Underwriting expenses 14 - - 14 198 - - 198 Policyholders' dividends - - - - 16 - - 16 ------- ------- ---- ------- ------- ------- --------- ------- Underwriting income (loss) 2 (17) - (15) (76) (49) - (125) ------- ------- ---- ------- ------- ------- --------- ------- Net investment income 48 - - 48 257 - - 257 Other revenues - - - - 113 - - 113 Other expenses - - - - 95 - - 95 ------- ------- ---- ------- ------- ------- --------- ------- Income (loss) before income tax, minority interest and net realized investment losses 50 (17) - 33 199 (49) - 150 Income tax (expense) benefit (3) (6) - (9) (46) 5 - (41) Minority interest - - - - (5) - - (5) ------- ------- ---- ------- ------- ------- --------- ------- Income (loss) before net realized investment losses 47 (23) - 24 148 (44) - 104 Realized investment losses (6) - - (6) (63) - - (63) Income tax benefit on realized investment losses 2 - - 2 21 - - 21 ------- ------- ---- ------- ------- ------- --------- ------- Income (loss) from continuing operations 43 (23) - 20 106 (44) - 62 Cumulative effect of a change in accounting principle - - - - - - - - ------- ------- ---- ------- ------- ------- --------- ------- Net income (loss) $ 43 $ (23) $ - $ 20 $ 106 $ (44) $ - $ 62 ======= ======= ==== ======= ======= ======= ========= ======= FINANCIAL RATIOS Loss & LAE 81.6 % 76.0% Acquisition expense 18.2 18.7 Underwriting expense 9.1 11.6 Dividends - 0.9 ------- ------- Expense ratio, including dividends 27.3 31.2 ------- ------- Combined ratio 108.9 % 107.2% ======= ======= ------------------------------------------------------------------------------------------------------------------------------------
(1) Total development for the Property & Casualty Segments is comprised of Premium and Loss Development and the impact of the Corporate Aggregate Covers. (2) Pretax benefit of Aggregate Corporate Covers represents the current period ceded premiums and losses and associated interest expense. Interest expense on the funds withheld related to prior cessions to the Corporate Aggregate Covers is not presented on this schedule, but is included in the Analysis of Pretax Net Investment Income on pages 14 and 15. 23 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT IMPACT OF PRIOR YEAR DEVELOPMENT (1)
------------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED STANDARD LINES SPECIALTY LINES JUNE 30, 2002 2002 RESULTS 2002 RESULTS BEFORE PRIOR PREMIUM CORPORATE BEFORE PRIOR PREMIUM CORPORATE YEAR AND LOSS AGGREGATE 2002 YEAR AND LOSS AGGREGATE 2002 (In millions) DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 2,052 $ (4) $ - $ 2,048 $ 1,053 $ (10) $ - $ 1,043 Claim and claim adjustment expenses 1,560 29 - 1,589 747 (8) - 739 Acquisition expenses 385 - - 385 211 - - 211 Underwriting expenses 247 - - 247 126 - - 126 Policyholders' dividends 31 - - 31 2 - - 2 ------- ------- ----- ------- ------- ------- ------- ------- Underwriting loss (171) (33) - (204) (33) (2) - (35) ------- ------- ----- ------- ------- ------- ------- ------- Net investment income 237 - - 237 135 - - 135 Other revenues 163 - - 163 87 - - 87 Other expenses 141 - - 141 56 - - 56 ------- ------- ----- ------- ------- ------- ------- ------- Income (loss) before income tax, minority interest and net realized investment losses 88 (33) - 55 133 (2) - 131 Income tax (expense) benefit (17) 12 - (5) (48) 1 - (47) Minority interest - - - - (10) - - (10) ------- ------- ----- ------- ------- ------- ------- ------- Income (loss) before net realized investment losses 71 (21) - 50 75 (1) - 74 Realized investment losses (24) - - (24) (31) - - (31) Income tax benefit on realized investment losses 8 - - 8 10 - - 10 ------- ------- ----- ------- ------- ------- ------- ------- Income (loss) from continuing operations 55 (21) - 34 54 (1) - 53 Cumulative effect of a change in accounting principle - - - - (48) - - (48) ------- ------- ----- ------- ------- ------- ------- ------- Net income (loss) $ 55 $ (21) $ - $ 34 $ 6 $ (1) $ - $ 5 ======= ======= ===== ======= ======= ======= ======= ======= FINANCIAL RATIOS Loss & LAE 77.6 % 70.8 % Acquisition expense 18.8 20.2 Underwriting expense 12.1 12.2 Dividends 1.5 0.1 -------- ------- Expense ratio, including dividends 32.4 32.5 -------- ------- Combined ratio 110.0 % 103.3 % ======== ======= ------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------ P&C OPERATIONS 2002 RESULTS BEFORE PRIOR PREMIUM CORPORATE YEAR AND LOSS AGGREGATE 2002 DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 3,105 $ (14) $ - $ 3,091 Claim and claim adjustment expenses 2,307 21 - 2,328 Acquisition expenses 596 - - 596 Underwriting expenses 373 - - 373 Policyholders' dividends 33 - - 33 ------- ------- -------- ------- Underwriting loss (204) (35) - (239) ------- ------- -------- ------- Net investment income 372 - - 372 Other revenues 250 - - 250 Other expenses 197 - - 197 ------- ------- -------- ------- Income (loss) before income tax, minority interest and net realized investment losses 221 (35) - 186 Income tax (expense) benefit (65) 13 - (52) Minority interest (10) - - (10) ------- ------- -------- ------- Income (loss) before net realized investment losses 146 (22) - 124 Realized investment losses (55) - - (55) Income tax benefit on realized investment losses 18 - - 18 ------- ------- -------- ------- Income (loss) from continuing operations 109 (22) - 87 Cumulative effect of a change in accounting principle (48) - - (48) ------- ------- -------- ------- Net income (loss) $ 61 $ (22) $ - $ 39 ======= ======= ======== ======= FINANCIAL RATIOS Loss & LAE 75.3 % Acquisition expense 19.3 Underwriting expense 12.0 Dividends 1.1 ------- Expense ratio, including dividends 32.4 ------- Combined ratio 107.7 % ======= ------------------------------------------------------------------------------------------------------------------------------------
(1) Total development for the Property & Casualty Segments is comprised of Premium and Loss Development and the impact of the Corporate Aggregate Covers. (2) Pretax benefit of Aggregate Corporate Covers represents the current period ceded premiums and losses and associated interest expense. Interest expense on the funds withheld related to prior cessions to the Corporate Aggregate Covers is not presented on this schedule, but is included in the Analysis of Pretax Net Investment Income on pages 14 and 15. 24 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT IMPACT OF PRIOR YEAR DEVELOPMENT (1)
------------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED CNA RE TOTAL P&C SEGMENTS JUNE 30, 2002 2002 RESULTS 2002 RESULTS BEFORE PRIOR PREMIUM CORPORATE BEFORE PRIOR PREMIUM CORPORATE YEAR AND LOSS AGGREGATE 2002 YEAR AND LOSS AGGREGATE 2002 (In millions) DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 288 $ 78 $ (61) $ 305 $ 3,393 $ 64 $ (61) $ 3,396 Claim and claim adjustment expenses 202 85 (93) 194 2,509 106 (93) 2,522 Acquisition expenses 69 - - 69 665 - - 665 Underwriting expenses 32 - - 32 405 - - 405 Policyholders' dividends - - - - 33 - - 33 ------- ------- ------- ------- ------- ------- ------- ------- Underwriting (loss) income (15) (7) 32 10 (219) (42) 32 (229) ------- ------- ------- ------- ------- ------- ------- ------- Net investment income (loss) 86 - (5) 81 458 - (5) 453 Other revenues 1 - - 1 251 - - 251 Other expenses - - - - 197 - - 197 ------- ------- ------- ------- ------- ------- ------- ------- Income (loss) before income tax, minority interest and net realized investment gains (losses) 72 (7) 27 92 293 (42) 27 278 Income tax (expense) benefit (21) 2 (9) (28) (86) 15 (9) (80) Minority interest - - - - (10) - - (10) ------- ------- ------- ------- ------- ------- ------- ------- Income (loss) before net realized investment gains (losses) 51 (5) 18 64 197 (27) 18 188 Realized investment gains (losses) 3 - - 3 (52) - - (52) Income tax benefit on realized investment gains (losses) 1 - - 1 19 - - 19 ------- ------- ------- ------- ------- ------- ------- ------- Income (loss) from continuing operations 55 (5) 18 68 164 (27) 18 155 Cumulative effect of a change in accounting principle - - - - (48) - - (48) ------- ------- ------- ------- ------- ------- ------- ------- Net income (loss) $ 55 $ (5) $ 18 $ 68 $ 116 $ (27) $ 18 $ 107 ======= ======= ======= ======= ======= ======= ======= ======= FINANCIAL RATIOS Loss & LAE 63.6 % 74.3 % Acquisition expense 22.6 19.6 Underwriting expense 10.5 11.9 Dividends - 1.0 ------- ------- Expense ratio, including dividends 33.1 32.5 ------- ------- Combined ratio 96.7 % 106.8 % ======= ======= ------------------------------------------------------------------------------------------------------------------------------------
(1) Total development for the Property & Casualty Segments is comprised of Premium and Loss Development and the impact of the Corporate Aggregate Covers. (2) Pretax benefit of Aggregate Corporate Covers represents the current period ceded premiums and losses and associated interest expense. Interest expense on the funds withheld related to prior cessions to the Corporate Aggregate Covers is not presented on this schedule, but is included in the Analysis of Pretax Net Investment Income on pages 14 and 15. 25 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY AND CASUALTY BUSINESS SUMMARY OF DEVELOPMENT BY SEGMENT AND LINE OF BUSINESS
------------------------------------------------------------------------------------------------------------------------------------ THREE MONTHS ENDED ACCIDENT YEAR JUNE 30 (In millions) 2002 2001 2000 1999 1998 & P TOTAL ------------------------------------------------------------------------------------------------------------------------------------ BY SEGMENT Standard Lines (1) $ 5 $ (51) $ (51) $ (95) $(102) $(294) Specialty Lines (24) (21) (29) (52) (64) (190) CNA Re 12 (18) (13) 10 (3) (12) Corporate & Other - - - 1 (8) (7) ----- ----- ----- ----- ----- ----- Total $ (7) $ (90) $ (93) $(136) $(177) $(503) ===== ===== ===== ===== ===== ===== BY LINE OF BUSINESS Commercial Automobile Liability $ 27 $ (32) $ 5 $ (30) $ 7 $ (23) Workers Compensation (1) 11 (12) (51) (85) (94) (231) Commercial Multiple-Peril (2) 5 9 (19) (16) (23) Medical Malpractice 3 (10) 4 (12) 9 (6) Special Liability 2 1 (7) 4 (10) (10) Other Liability (63) (23) (38) 45 41 (38) Special Property - (8) 2 (1) (77) (84) Fidelity/Surety (2) 1 9 (19) 4 (7) Reinsurance A, B, C 15 (11) (20) (13) (28) (57) Products Liability (1) (1) (9) (8) (12) (31) Other 3 - 3 2 (1) 7 ----- ----- ----- ----- ----- ----- Total $ (7) $ (90) $ (93) $(136) $(177) $(503) ===== ===== ===== ===== ===== ===== Total development before corporate cover impact $ (7) $(126) $(142) $(136) $(177) $(588) ===== ===== ===== ===== ===== ===== ------------------------------------------------------------------------------------------------------------------------------------
(1) Includes $10 million of interest accretion. 26 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT GROSS LOSS AND ALAE RATIOS BY SEGMENT AND LINE OF BUSINESS CCC, CIC AND GALWAY
------------------------------------------------------------------------------------------------------------------------------ JUNE 30, 2003 ACCIDENT YEAR 2003 2002 2001 2000 1999 1998 1997 1996 ------------------------------------------------------------------------------------------------------------------------------ BY SEGMENT Standard Lines 59 % 66 % 87 % 90 % 105 % 90 % 78 % 72 % Specialty Lines 64 69 112 100 97 89 86 74 CNA Re 61 63 166 81 117 122 87 80 P&C Segments 61 67 100 92 104 92 80 73 Corporate & Other 77 68 67 84 73 79 58 72 Total 64 % 67 % 92 % 90 % 98 % 89 % 76 % 73 % BY LINE OF BUSINESS Commercial Automobile Liability 62 % 73 % 94 % 99 % 101 % 93 % 89 % 74 % Workers Compensation 64 69 83 85 103 89 72 63 Commercial Multiple-Peril 61 67 77 88 103 85 75 79 Medical Malpractice 63 68 94 120 129 115 129 117 Special Liability 60 60 156 95 97 71 78 75 Other Liability 67 73 89 104 126 124 88 71 Special Property 45 56 91 59 65 75 59 76 Auto Physical Damage 63 55 64 75 69 67 62 65 Reinsurance A, B and C 60 68 228 87 125 110 68 72 Other 75 70 80 94 72 69 63 71 Total 64 % 67 % 92 % 90 % 98 % 89 % 76 % 73 % ------------------------------------------------------------------------------------------------------------------------------
27 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT NET LOSS AND ALAE RATIOS BY SEGMENT AND LINE OF BUSINESS CCC, CIC AND GALWAY
------------------------------------------------------------------------------------------------------------------------------ JUNE 30, 2003 ACCIDENT YEAR 2003 2002 2001 2000 1999 1998 1997 1996 ------------------------------------------------------------------------------------------------------------------------------ BY SEGMENT Standard Lines 62 % 68 % 61 % 76 % 90 % 89 % 77 % 73 % Specialty Lines 67 74 84 98 105 97 84 77 CNA Re 65 66 91 82 115 126 92 86 P&C Segments 63 69 69 82 96 94 80 75 Corporate & Other (1) N/A N/A N/A N/A 77 79 67 71 Total 63 % 69 % 69 % 81 % 93 % 91 % 77 % 74 % BY LINE OF BUSINESS Commercial Automobile Liability 64 % 70 % 85 % 85 % 96 % 96 % 92 % 80 % Workers Compensation 65 70 39 65 91 90 72 63 Commercial Multiple-Peril 63 70 67 81 95 87 80 81 Medical Malpractice 61 66 90 124 145 125 134 120 Special Liability 58 63 70 89 81 69 76 62 Other Liability 69 75 63 88 106 115 86 75 Special Property 46 53 112 63 60 76 64 81 Auto Physical Damage 53 54 68 71 70 73 64 66 Reinsurance A, B and C 65 73 175 91 128 113 74 80 Other 56 61 98 107 81 74 62 70 Total 63 % 69 % 69 % 81 % 93 % 91 % 77 % 74 % ------------------------------------------------------------------------------------------------------------------------------
(1) Ratios subsequent to 1999 are not meaningful. 28