-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TrrFlWjkY8FLPRWMmuGuFJKwUNw2cUiwTzQxXbhm7RhhfxcAy+AkWjsKBYjTUbIx VCigus2dKPJHAzQ3Vwok/A== 0000950137-03-005862.txt : 20031112 0000950137-03-005862.hdr.sgml : 20031112 20031112155904 ACCESSION NUMBER: 0000950137-03-005862 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031112 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20031112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CNA FINANCIAL CORP CENTRAL INDEX KEY: 0000021175 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 366169860 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05823 FILM NUMBER: 03993973 BUSINESS ADDRESS: STREET 1: CNA PLZ STREET 2: 235 CITY: CHICAGO STATE: IL ZIP: 60685 BUSINESS PHONE: 3128225000 MAIL ADDRESS: STREET 1: CNA PLAZA STREET 2: 235 CITY: CHICAGO STATE: IL ZIP: 60685 8-K 1 c80816e8vk.txt CURRENT REPORT ============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) November 12, 2003 ---------- CNA FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 1-5823 36-6169860 (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) CNA PLAZA, CHICAGO, ILLINOIS 60685 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (312) 822-5000 Not Applicable (Former Name or Former Address, if Changed Since Last Report) ============================================================================== Page 1 of 2 Item 7. Financial Statements and Exhibits (c) Exhibits:
Exhibit No. Description - ----------- -------------------------------------------------------------- 99.1 CNA Financial Corporation press release, issued November 12, 2003, providing information on 3rd quarter 2003 results of operations 99.2 CNA Financial Corporation financial supplement, issued November 12, 2003, providing supplemental financial information for the third quarter 2003
Item 12. Results of Operations and Financial Condition The information in this Current Report is being furnished and shall not be deemed "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended. On November 12, 2003 CNA Financial Corporation issued a press release and financial supplement providing information on its results of operations for the third quarter 2003. The press release is furnished as Exhibit 99.1 and the financial supplement is furnished as Exhibit 99.2 to this Form 8-K. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CNA FINANCIAL CORPORATION Dated: November 12, 2003 /s/ Robert V. Deutsch -------------------------------- By: Robert V. Deutsch Its: Executive Vice President and Chief Financial Officer Page 2 of 2 EX-99.1 3 c80816exv99w1.htm PRESS RELEASE, ISSUED 11/12/03 exv99w1
 

EXHIBIT 99.1

(CNA LOGO)

FOR IMMEDIATE RELEASE

CONTACT:

     
MEDIA:   ANALYSTS:
Charles M. Boesel, 312/822-2592
Katrina W. Parker, 312/822-5167		   Dawn M. Jaffray, 312/822-7757

CNA FINANCIAL ANNOUNCES
3rd QUARTER 2003 NET LOSS AND CAPITAL PLAN

CHICAGO, November 12, 2003 -— CNA Financial Corporation (NYSE: CNA) today announced third quarter of 2003 results, which included significant reserve strengthening as a result of the Company’s recently completed reserve reviews. The Company also announced a plan to strengthen its capital base.

The third quarter of 2003 results included the following after-tax charges:

  •   Net prior year development of $1,495 million, which includes premium and claim and allocated claim adjustment expense development.

  •   Increase in bad debt reserves for insurance and reinsurance receivables of $332 million.

Including the above items, the Company reported a net loss for the third quarter of 2003 of $1,760 million, or $7.94 per share, as compared with net income of $54 million, or $0.24 per share, for the same period in 2002. The net loss for the nine months ended September 30, 2003 was $1,607 million, or $7.39 per share, compared with net income of $105 million, or $0.47 per share, for the same period in 2002.

The net prior year development consisted of $978 million after-tax related to core reserves and $517 million after-tax related to asbestos, environmental pollution and mass tort (APMT) reserves. The primary factors that led to the net prior year development were the previously announced third quarter of 2003 comprehensive reserve reviews, which included construction defect and other volatile exposures, and a ground up analysis of APMT exposures. The net prior year development also resulted in additional cessions to the Company’s reinsurance contracts, including the corporate aggregate reinsurance treaties. These additional cessions resulted in $67 million of after-tax interest expense, which is recorded as a reduction in net investment income.

Page 1 of 11

 

To support statutory capital adversely impacted by the significant third quarter charges, CNA has developed a capital plan, which includes substantial support from Loews Corporation (Loews), the owner of 90% of CNA’s outstanding shares. The capital plan includes a number of components, including the capital support from Loews and possible sales or other dispositions of businesses and assets. Under an agreement approved by a special committee of independent members of CNA’s Board of Directors, Loews has agreed to purchase $750 million of a new series of CNA non-voting convertible preferred stock, having terms that make it economically equivalent to CNA common stock. The conversion price is based on current average market prices of CNA common stock. Proceeds from the preferred stock sale will be applied by CNA to increase the statutory surplus of CNA’s principal insurance subsidiary, Continental Casualty Company (CCC). Under the agreement, Loews has also committed up to $500 million of additional capital support, through the purchase of surplus notes of CCC, in the event that certain additions to CCC’s statutory capital are not achieved by February 26, 2004 from business or asset sales and related actions. The obligation of Loews to consummate this agreement is subject to certain customary closing conditions. In addition, Loews has indicated its commitment to provide up to an additional $150 million by March 31, 2004, in a form to be determined, to support the statutory capital of CCC in the event of additional shortfalls in relation to business and asset sales. Other elements of the capital plan include the October of 2003 sale of CNA Re renewal rights and withdrawal from the assumed reinsurance business, CNA’s previously announced initiative to reduce operating expenses by $200 million and planned changes in the ownership structure of certain insurance subsidiaries to align statutory capital more efficiently.

“CNA has undergone enormous change over the last two years” said Stephen W. Lilienthal, Chairman and Chief Executive Officer of the CNA insurance companies. “Essentially, we have re-underwritten, re-platformed, re-staffed and repositioned the business portfolio, and will be recapitalizing CNA. I am certainly disappointed with the actions necessary to strengthen our balance sheet, but I remain very positive about the current performance of our core businesses, particularly Property and Casualty and Group Operations.”

The current accident year continued to improve within the primary property and casualty businesses as evidenced by strong rate increases during the quarter and solid production of new business. Gross written premiums increased 12% in the third quarter of 2003 compared with the same period in 2002.

Realized investment results increased $89 million after-tax in the third quarter of 2003 as compared with the same period in 2002. This increase was due primarily to increased realized gains related to derivative securities and a reduction in impairment losses for other-than-temporary declines in market values for fixed maturity and equity securities, partially offset by decreased gains on sales of fixed maturity securities. After-tax investment related impairment losses were $10 million for the third quarter of 2003 as compared with $144 million for the same period in 2002.

Page 2 of 11

 

Net Income

                                 
    Results for the three months ended   Results for the nine months ended
    September 30   September 30
   
 
($ millions)   2003   2002(c)   2003   2002(c)
 
 
 
 
(Loss) income before net realized investment gains (losses)
   $ (1,865 )   $ 38     $ (1,912 )   $ 284  
Net realized investment gains (losses)
     105       16       305       (87 )
 
    
     
     
     
 
(Loss) Income from continuing operations
     (1,760 )     54       (1,607 )     197  
Loss from discontinued operations (a)
     —       —       —       (35 )
Cumulative effect of a change in accounting principle (b)
     —       —       —       (57 )
 
    
     
     
     
 
Net (loss) income
   $ (1,760 )   $ 54     $ (1,607 )   $ 105  
 
    
     
     
     
 

  (a)   During the first quarter of 2002, CNA Vida, a Chilean-based life insurance company, was sold and reported as discontinued operations in accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets.

  (b)   Represents the effect of the adoption of SFAS 142, which was a change in accounting for goodwill and indefinite-lived intangible assets in 2002.

  (c)   The three and nine months ended September 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.

Per Share Results Available to Common Stockholders

                                 
    Results for the three months ended   Results for the nine months ended
    September 30   September 30
   
 
    2003   2002(d)   2003   2002(d)
   
 
 
 
(Loss) Income from continuing operations (a)
   $ (7.94 )   $ 0.24     $ (7.39 )   $ 0.89  
Loss from discontinued operations (b)
     —       —       —       (0.16 )
Cumulative effect of a change in accounting principle (c)
     —       —       —       (0.26 )
 
    
     
     
     
 
Net (loss) income
   $ (7.94 )   $ 0.24     $ (7.39 )   $ 0.47  
 
    
     
     
     
 

  (a)   The three and nine months ended September 30, 2003 per share results available to common stockholders are reduced by $15 million and $45 million, or $0.07 per share and $0.20 per share, of accumulated but undeclared preferred stock dividends.

  (b)   During the first quarter of 2002, CNA Vida, a Chilean-based life insurance company, was sold and reported as discontinued operations in accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets.

  (c)   Represents the effect of the adoption of SFAS 142, which was a change in accounting for goodwill and indefinite-lived intangible assets in 2002.

  (d)   The three and nine months ended September 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.

Page 3 of 11

 

Segment Results for the Three Months Ended September 30, 2003

                                                                         
    Standard   Specialty   P&C   CNA   P&C   Group   Life   Corporate    
($ millions)   Lines   Lines   Ops.   Re   Segments   Ops.   Ops.   & Other   Total
 
 
 
 
 
 
 
 
 
(Loss) income before net realized investment gains
   $ (917 )   $ (180 )   $ (1,097 )   $ (81 )   $ (1,178 )   $ 25     $ 10     $ (722 )   $ (1,865 )
Net realized investment gains
     35       16       51       7       58       17       21       9       105  
 
    
     
     
     
     
     
     
     
     
 
Net (loss) income
   $ (882 )   $ (164 )   $ (1,046 )   $ (74 )   $ (1,120 )   $ 42     $ 31     $ (713 )   $ (1,760 )
 
    
     
     
     
     
     
     
     
     
 

Segment Results for the Three Months Ended September 30, 2002

                                                                         
    Standard   Specialty   P&C   CNA   P&C   Group   Life   Corporate    
($ millions)   Lines   Lines   Ops.   Re   Segments   Ops.   Ops.(c)   & Other   Total(c)
 
 
 
 
 
 
 
 
 
Income (loss) before net realized investment gains (losses)
   $ 105     $ (65 )   $ 40     $ (25 )   $ 15     $ 30     $ 31     $ (38 )   $ 38  
Net realized investment (losses) gains
     (17 )     (11 )     (28 )     (1 )     (29 )     4       (14 )     55       16  
 
    
     
     
     
     
     
     
     
     
 
Net income (loss)
   $ 88     $ (76 )   $ 12     $ (26 )   $ (14 )   $ 34     $ 17     $ 17     $ 54  
 
    
     
     
     
     
     
     
     
     
 

Segment Results for the Nine Months Ended September 30, 2003

                                                                         
    Standard   Specialty   P&C   CNA   P&C   Group   Life   Corporate    
($ millions)   Lines   Lines   Ops.   Re   Segments   Ops.   Ops.   & Other   Total
 
 
 
 
 
 
 
 
 
(Loss) income before net realized investment gains (losses)
   $ (1,026 )   $ (192 )   $ (1,218 )   $ (43 )   $ (1,261 )   $ 70     $ 37     $ (758 )   $ (1,912 )
Net realized investment gains (losses)
     153       60       213       38       251       (4 )     6       52       305  
 
    
     
     
     
     
     
     
     
     
 
Net (loss) income
   $ (873 )   $ (132 )   $ (1,005 )   $ (5 )   $ (1,010 )   $ 66     $ 43     $ (706 )   $ (1,607 )
 
    
     
     
     
     
     
     
     
     
 

Page 4 of 11

 

Segment Results for the Nine Months Ended September 30, 2002

                                                                         
    Standard   Specialty   P&C   CNA   P&C   Group   Life   Corporate    
($ millions)   Lines   Lines   Ops.   Re   Segments   Ops.   Ops.(c)   & Other   Total(c)
 
 
 
 
 
 
 
 
 
Income (loss) before net realized investment gains (losses)
   $ 155     $ 9     $ 164     $ 39     $ 203     $ 73     $ 89     $ (81 )   $ 284  
Net realized investment (losses) gains
     (33 )     (32 )     (65 )     3       (62 )     (8 )     (41 )     24       (87 )
 
    
     
     
     
     
     
     
     
     
 
Income (loss) from continuing operations
     122       (23 )     99       42       141       65       48       (57 )     197  
Loss from discontinued operations (a)
     —       —       —       —       —       —       (35 )     —       (35 )
Cumulative effect of a change in accounting principle (b)
     —       (48 )     (48 )     —       (48 )     —       (8 )     (1 )     (57 )
 
    
     
     
     
     
     
     
     
     
 
Net income (loss)
   $ 122     $ (71 )   $ 51     $ 42     $ 93     $ 65     $ 5     $ (58 )   $ 105  
 
    
     
     
     
     
     
     
     
     
 

  (a)   During the first quarter of 2002, CNA Vida, a Chilean-based life insurance company, was sold and reported as discontinued operations in accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets.

  (b)   Represents the effect of the adoption of SFAS 142, which was a change in accounting for goodwill and indefinite-lived intangible assets in 2002.

  (c)   The three and nine months ended September 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.

Property & Casualty Segments Gross Written Premiums

                                   
      Three months ended September 30   Nine months ended September 30
     
 
($ millions)   2003   2002   2003   2002
 
 
 
 
Standard Lines
   $ 1,406     $ 1,213     $ 4,265     $ 4,017  
Specialty Lines
     944       889       2,787       2,484  
 
    
     
     
     
 
 
Total P&C Operations
     2,350       2,102       7,052       6,501  
CNA Re
     150       179       528       578  
 
    
     
     
     
 
Total P&C Segments
   $ 2,500     $ 2,281     $ 7,580     $ 7,079  
 
    
     
     
     
 

Property & Casualty Segments Net Written Premiums

                                   
      Three months ended September 30   Nine months ended September 30
     
 
($ millions)   2003   2002   2003   2002
 
 
 
 
Standard Lines
   $ 834     $ 1,033     $ 2,828     $ 3,172  
Specialty Lines
     719       628       2,064       1,740  
 
    
     
     
     
 
 
Total P&C Operations
     1,553       1,661       4,892       4,912  
CNA Re
     109       167       437       494  
 
    
     
     
     
 
Total P&C Segments
   $ 1,662     $ 1,828     $ 5,329     $ 5,406  
 
    
     
     
     
 

Page 5 of 11

 

Group and Life Operations Net Earned Premiums

                                 
    Three months ended September 30   Nine months ended September 30
   
 
($ millions)   2003   2002   2003   2002
 
 
 
 
Group Operations (a)
   $ 338     $ 292     $ 982     $ 2,017  
Life Operations
     264       236       783       710  
 
    
     
     
     
 

  (a)   For the nine months ended September 30, 2002, net earned premiums included $1,151 million related to the National Postal Mail Handlers Union (Mail Handlers Plan) contract, which was transferred on July 1, 2002.

Property & Casualty Calendar Year Loss Ratios

                                   
      Three months ended September 30   Nine months ended September 30
     
 
      2003   2002   2003   2002
     
 
 
 
Standard Lines
     194.8 %     60.6 %     116.6 %     72.1 %
Specialty Lines
     110.1       90.7       91.2       77.6  
 
Total P&C Operations
     156.6       71.3       105.8       74.0  
CNA Re
     211.4       115.4       100.0       81.2  
 
Total P&C Segments
     159.6       75.4       105.4       74.6  
 
    
     
     
     
 
Total P&C Companies
     212.1 %     79.0 %     124.3 %     79.6 %
 
    
     
     
     
 

Property & Casualty Calendar Year Combined Ratios

                                   
      Three months ended September 30   Nine months ended September 30
     
 
      2003   2002   2003   2002
     
 
 
 
Standard Lines
     283.3 %     91.8 %     170.4 %     104.0 %
Specialty Lines
     157.4       125.3       128.1       110.9  
 
Total P&C Operations
     226.4       103.7       152.6       106.4  
CNA Re
     263.3       146.0       135.3       113.4  
 
Total P&C Segments
     228.4       107.6       151.3       107.0  
 
    
     
     
     
 
Total P&C Companies
     290.7 %     112.6 %     173.4 %     109.2 %
 
    
     
     
     
 

Property & Casualty Gross Accident Year Loss Ratios

                           
      Accident year 2003   Accident year 2002   Accident year 2002
      evaluated at   evaluated at   evaluated at
      September 30, 2003   December 31, 2002   September 30, 2003
     
 
 
Standard Lines
     65.4 %     74.6 %     66.6 %
Specialty Lines
     64.9       68.1       68.6  
 
Total P&C Operations
     65.2       72.1       67.4  
CNA Re
     59.7       64.2       61.2  
 
    
     
     
 
Total P&C Segments
     64.8 %     71.5 %     66.9 %
 
    
     
     
 

Page 6 of 11

 

Property & Casualty Net Accident Year Loss Ratios

                           
      Accident year 2003   Accident year 2002   Accident year 2002
      evaluated at   evaluated at   evaluated at
      September 30, 2003   December 31, 2002   September 30, 2003
     
 
 
Standard Lines
     68.4 %     75.3 %     70.6 %
Specialty Lines
     68.7       71.7       73.0  
 
Total P&C Operations
     68.5       74.1       71.4  
CNA Re
     63.9       69.3       62.0  
 
    
     
     
 
Total P&C Segments
     68.1 %     73.6 %     70.6 %
 
    
     
     
 

     The following table highlights the after-tax significant items for the third quarter of 2003.

After-Tax Significant Items(a)
Quarter Ended September 30, 2003

                                                                         
    Standard   Specialty   P&C   CNA   P&C   Group   Life   Corporate    
($ millions)   Lines   Lines   Ops.   Re   Segments   Ops.   Ops.   & Other   Total
 
 
 
 
 
 
 
 
 
Net prior year development (b)
   $ (708 )   $ (148 )   $ (856 )   $ (88 )   $ (944 )   $ —     $ —     $ (551 )   $ (1,495 )
Increase in bad debt provision for reinsurance receivables
     (36 )     (51 )     (87 )     (1 )     (88 )     —       —       (112 )     (200 )
Increase in bad debt provision for insurance receivables
     (132 )     —       (132 )     —       (132 )     —       —       —       (132 )
Increase in unallocated claim adjustment expense (ULAE) reserves
     (3 )     (18 )     (21 )     —       (21 )     —       —       (44 )     (65 )
 
    
     
     
     
     
     
     
     
     
 
Total
   $ (879 )   $ (217 )   $ (1,096 )   $ (89 )   $ (1,185 )   $ —     $ —     $ (707 )   $ (1,892 )
 
    
     
     
     
     
     
     
     
     
 

  (a)   Additional after-tax items not included in the above table that have an adverse effect on third quarter of 2003 results included a $48 million increase in certain insurance-related assessments, $30 million of dividend reserve development and $67 million of interest expense related to additional cessions to corporate aggregate and other reinsurance contracts.

  (b)   Net prior year development for the third quarter of 2003 included both premium development and claim and allocated claim adjustment expense reserve development.

Page 7 of 11

 

Business Operating Highlights

Standard Lines includes standard property and casualty coverages sold to small and middle market commercial businesses primarily through an independent agency distribution system, and excess and surplus lines, as well as insurance and risk management products sold to large corporations.

•   Net written premiums decreased $199 million for the third quarter of 2003 as compared with the same period in 2002. This decrease was due primarily to increased ceded premiums, including premiums ceded to corporate aggregate reinsurance treaties, as a result of the net unfavorable prior year reserve development recorded in the third quarter of 2003.

•   Standard Lines achieved average rate increases during the third quarter of 2003 of 16%.

•   Net results for the third quarter of 2003 decreased $970 million as compared with the same period in 2002, primarily related to a $798 million after-tax increase in unfavorable net prior year development, $26 million after-tax increase in dividend reserve development, $168 million after-tax increase in the bad debt provisions for insurance and reinsurance receivables, $48 million after-tax increase in certain insurance-related assessments and $51 million increase in interest expense related to reinsurance contracts. These declines were partially offset by improvements in the current net accident year loss ratio and net investment results.

Specialty Lines provides a broad array of professional, financial and specialty property and casualty products and services in the U.S. and abroad.

•   Net written premiums increased $91 million for the third quarter of 2003 as compared with the same period in 2002, due primarily to rate increases and new business in professional liability lines, partially offset by increased ceded premiums to corporate aggregate reinsurance treaties as a result of the net unfavorable prior year reserve development recorded in the third quarter of 2003.

•   Specialty Lines achieved average rate increases during the third quarter of 2003 of 21%, primarily across most professional liability lines of business.

•   Net results for the third quarter of 2003 decreased $88 million as compared with the same period in 2002, primarily related to a $92 million after-tax increase in unfavorable net prior year development, $18 million after-tax increase in ULAE reserves, $51 million after-tax increase in the bad debt provision for reinsurance receivables, $10 million after-tax increase in certain insurance-related assessments and $4 million increase in interest expense related to reinsurance contracts. These declines were partially offset by improvements in the current net accident year loss ratio and net investment results.

Page 8 of 11

 

CNA Re operated globally as a reinsurer in the broker market for treaty products and in the direct market for facultative products.

•   In October of 2003, CNA sold the renewal rights for most of the treaty business of CNA Re to Folksamerica Reinsurance Company, a wholly owned subsidiary of White Mountains Insurance Group, Ltd. Concurrent with the sale, CNA announced its withdrawal from the assumed reinsurance business.

•   Net written premiums decreased $58 million for the third quarter of 2003 as compared with the same period in 2002, due primarily to increased ceded premiums to corporate aggregate reinsurance treaties, as a result of the net unfavorable prior year reserve development recorded in the third quarter of 2003.

•   Net results for the third quarter of 2003 decreased $48 million as compared to the same period in 2002, primarily related to $45 million after-tax increase in unfavorable net prior year development, and $9 million after-tax increase in interest expense related to reinsurance contracts.

Group Operations provides a broad array of group life and group health insurance and investment products and services to employers, affinity groups and other entities that purchase insurance as a group.

•   Net earned premiums increased $46 million for the third quarter of 2003 as compared with the same period in 2002, due principally to new sales and rate increases in the disability, specialty medical, life and long term care products within Group Benefits.

•   Group Operations achieved average rate increases during the third quarter of 2003 of approximately 5%.

•   Net income for the third quarter of 2003 increased $8 million as compared with the same period in 2002, primarily related to increased net realized investment gains of $13 million, partially offset by $9 million of after-tax non-recurring fee income received in the third quarter of 2002 in relation to the transfer of the Mail Handlers Plan.

Life Operations provides financial protection to individuals through a full product line of term life insurance, universal life insurance, individual long term care insurance, annuities and other products. Life Operations has several distribution relationships and partnerships including managing general agencies, other independent agencies working with CNA life sales offices, a network of brokers and dealers, and other independent insurance consultants.

•   Net earned premiums increased $28 million for the third quarter of 2003 as compared with the same period in 2002, due primarily to higher sales of structured settlement annuities and a higher base of the inforce long term care product.

•   Net income for the third quarter of 2003 increased $14 million as compared with the same period in 2002, primarily related to increased net realized investment results, partially offset by unfavorable individual long term care morbidity due to increased frequency of claims, and a $3 million after-tax write-off of capitalized software costs.

Page 9 of 11

 

Corporate and Other segment contains certain corporate expenses such as interest on corporate debt and losses and expenses related to the centralized adjusting and settlement of APMT. In addition, this segment includes the results of certain run-off insurance and non-insurance operations.

•   Net results for the third quarter of 2003 decreased $730 million as compared with the same period in 2002, primarily related to a $545 million after-tax increase in unfavorable net prior year development, principally related to APMT, $44 million after-tax increase in ULAE reserves, $112 million after-tax increase in the bad debt provision for reinsurance receivables and $10 million after-tax increase in certain insurance-related assessments.

Net Investment Income

Pretax net investment income decreased $12 million to $352 million for the third quarter of 2003 as compared with the same period in 2002. The change was primarily due to lower investment yields on fixed maturity securities and a $95 million increase in interest costs on funds withheld and other deposits related to certain reinsurance contracts. The interest costs on these reinsurance contracts increased due to additional cessions to the corporate aggregate and other reinsurance treaties as a result of the unfavorable net prior year development recorded in the third quarter of 2003. These declines were partially offset by improved limited partnership investment results.

About the Company

CNA is the country’s fourth largest commercial insurance writer and the 11th largest property and casualty company. CNA’s insurance products include standard commercial lines, specialty lines, surety, marine and other property and casualty coverages; life and accident insurance; group long term care, disability and life insurance; and pension products. CNA services include risk management, information services, underwriting, risk control and claims administration. For more information, please visit CNA at www.cna.com. CNA is a registered service mark, trade name and domain name of CNA Financial Corporation.

Conference Call and Webcast Information:

A conference call for investors and the professional investment community will be held from 8:00 a.m. to 9:30 a.m. EST today. On the conference call will be Stephen W. Lilienthal, Chairman and Chief Executive Officer of the CNA insurance companies, and other members of senior management. Participants can access the call by dialing 800-967-7140 or for international callers 719-457-2629. The call will also be broadcast live on the internet at http://investors.cna.com or you may go to the investor relations pages of the CNA Website (www.cna.com) for further details.

The call is available to the media, but questions will be restricted to investors and the professional investment community. A taped replay of the call will be available until November 19, 2003 by dialing 888-203-1112 and using passcode 235538 or for international callers 719-457-0820 and using passcode 235538. It will also be archived later in the day for replay on our Website. Financial supplement information related to the third quarter results is available on the investor relations pages of the CNA Website or by contacting Dawn Jaffray at 312-822-7757.

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FORWARD-LOOKING STATEMENT

The statements contained in this press release, which are not historical facts, are forward-looking statements. When included in this press release, the words “believes,” “expects,” “intends,” “anticipates,” “estimates,” and analogous expressions are intended to identify forward-looking statements. Forward-looking statements include expected developments in the insurance business of CNA (the “Company”), including losses for asbestos, environmental pollution and mass tort claims; the Company’s expectations concerning its revenues, earnings, expenses and investment activities; expected cost savings and other results from the Company’s expense reduction and restructuring activities; and the Company’s proposed actions in response to trends in its business.

Such statements, and the financial condition and results of operations of the Company and the price of the Company’s common stock, are subject to a variety of inherent risks and uncertainties. These risks and uncertainties could cause actual results to differ materially from those projected. Such risks and uncertainties include, among others: general economic and business conditions, including inflationary pressures on medical care costs, construction costs and other economic sectors that increase the severity of claims; changes in financial markets such as fluctuations in interest rates, long-term periods of low interest rates, credit conditions and currency, commodity and stock prices; the effects of corporate bankruptcies, such as Enron and WorldCom, on surety bond claims, as well as on capital markets and on the markets for directors & officers and errors & omissions coverages; changes in foreign or domestic political, social and economic conditions; regulatory initiatives and compliance with governmental regulations; judicial decisions and rulings, including interpretation of policy provisions, decisions regarding coverage and theories of liability, trends in litigation and the outcome of any litigation involving the Company; changes in tax laws and regulations; regulatory limitations and restrictions upon the Company and its insurance subsidiaries; the impact of competitive products, policies and pricing and the competitive environment in which the Company operates, including changes in the Company’s books of business; product and policy availability and demand and market responses, including the level of ability to obtain rate increases and decline or non-renew underpriced accounts, to achieve premium targets and profitability and to realize growth and retention estimates; development of claims and the impact on loss reserves, including changes in claim settlement practices; the effectiveness of current initiatives by claims management to reduce loss and expense ratio through more efficacious claims handling techniques; the performance of reinsurance companies under reinsurance contracts with the Company; results of financing efforts, including the availability of bank credit facilities; changes in the Company’s composition of operating segments; weather and other natural physical events, including the severity and frequency of storms, hail, snowfall and other winter conditions, as well as of natural disasters such as hurricanes and earthquakes; man-made disasters, including the possible occurrence of terrorist attacks and the effect of the absence of applicable terrorism legislation on coverages; the occurrence of epidemics; exposure to liabilities due to claims made by insureds and others relating to asbestos remediation and health-based asbestos impairments, and exposure to liabilities for environmental pollution and other mass tort claims; whether a national privately financed trust to replace litigation of asbestos claims with payments to claimants from the trust will be established or approved through federal legislation, or, if established and approved, whether it will contain funding requirements in excess of the Company’s established loss reserves or carried loss reserves; the sufficiency of the Company’s loss reserves and the possibility of future increases in reserves; the level of success in integrating acquired businesses and operations, and in consolidating existing ones; the possibility of changes in the Company’s ratings by ratings agencies, including the inability to access certain markets or distribution channels and the required collateralization of future payment obligations as a result of such changes, and changes in rating agency policies and practices; the actual closing of contemplated transactions and agreements; and various other matters and risks (many of which are beyond the Company’s control) detailed in the Company’s Securities and Exchange Commission filings.

These forward-looking statements speak only as of the date of this press release. The Company expressly disclaims any obligation or undertaking to release any updates or revisions to any forward-looking statement contained in this press release to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based.

This press release may also contain financial measures that are not in accordance with generally accepted accounting principles (GAAP). For reconciliations of non-GAAP measures to the most comparable GAAP measures, refer to this press release and the financial supplement posted on the Company’s website.

# # #

Page 11 of 11 EX-99.2 4 c80816exv99w2.txt FINANCIAL SUPPLEMENT, ISSUED 11/12/03 EXHIBIT 99.2 (CNA LOGO) CNA FINANCIAL CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION SEPTEMBER 30, 2003 (CNA LOGO) CNA FINANCIAL CORPORATION TABLE OF CONTENTS SEPTEMBER 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 Group & Life Segments and Corporate & Other 11-12 Catastrophe Losses 13 Analysis of Pretax Net Investment Income 14-15 Statutory Data - Preliminary 16 Property & Casualty Segments Loss and LAE Ratio Analysis 17 Impact of Significant Items 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 LOGO) 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, in Specialty Lines, Life Operations and Corporate & Other. i (CNA LOGO) 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 LOGO) CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30 THREE MONTHS NINE MONTHS FAV/ FAV/ (UNFAV) (UNFAV) (In millions) 2003 2002 (1) % CHANGE 2003 2002 (1) % CHANGE - --------------------------------------------------------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS Revenues: Net earned premiums $ 2,126 $ 2,262 (6)% $ 6,704 $ 7,925 (15)% Net investment income 352 364 (3) 1,211 1,292 (6) Realized investment gains (losses), net of participating policyholders' and minority interests 164 24 N/A 466 (137) N/A Other revenues 83 137 (39) 288 465 (38) ------- ------- -------- ------- Total revenues 2,725 2,787 (2) 8,669 9,545 (9) ------- ------- -------- ------- Claims, benefits and expenses: Insurance claims and policyholders' benefits 4,032 1,850 (118) 7,969 6,542 (22) Other operating expenses 1,440 823 (75) 3,199 2,608 (23) Interest 33 37 11 100 112 11 ------- ------- -------- ------- Total claims, benefits and expenses 5,505 2,710 (103) 11,268 9,262 (22) ------- ------- -------- ------- (Loss) income from continuing operations before income tax and minority interest (2,780) 77 N/A (2,599) 283 N/A Income tax benefit (expense) 1,006 (22) N/A 983 (75) N/A Minority interest 14 (1) N/A 9 (11) 182 ------- ------- -------- ------- (Loss) income from continuing operations before cumulative effect of a change in accounting principle (1,760) 54 N/A (1,607) 197 N/A 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 (loss) income $(1,760) $ 54 N/A % $ (1,607) $ 105 N/A % ======= ======= ======== ======= - ---------------------------------------------------------------------------------------------------------------------------------
(1) The three months and nine months ended September 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 LOGO) CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT COMPONENTS OF NET INCOME AND PER SHARE DATA
- ---------------------------------------------------------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30 THREE MONTHS NINE MONTHS FAV/ FAV/ (UNFAV) (UNFAV) (In millions, except per share data) 2003 2002 (1) % CHANGE 2003 2002 (1) % CHANGE - ---------------------------------------------------------------------------------------------------------------------------------- COMPONENTS OF NET (LOSS) INCOME (Loss) income before net realized investment gains (losses) $(1,865) $38 N/A % $(1,912) $ 284 N/A % Net realized investment gains (losses), net of participating policyholders' and minority interests 105 16 N/A 305 (87) N/A ------- ----- ------- ------ (Loss) income from continuing operations (1,760) 54 N/A (1,607) 197 N/A 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 (loss) income $(1,760) $54 N/A % $(1,607) $ 105 N/A % ======= ===== ======= ====== BASIC AND DILUTED (LOSS) EARNINGS PER SHARE (Loss) income from continuing operations (2) $ (7.94) $0.24 N/A $ (7.39) $ 0.89 N/A 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 (loss) earnings per share available to common stockholders $ (7.94) $0.24 N/A % $ (7.39) $ 0.47 N/A % ======= ===== ======= ====== Weighted average outstanding common stock and common stock equivalents 223.6 223.6 223.6 223.6 - ----------------------------------------------------------------------------------------------------------------------------------
(1) The three months and nine months ended September 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 nine months ended September 30, 2003 were reduced by $15 million and $45 million, or $0.07 per share and $0.20 per share, of accumulated but undeclared preferred stock dividends. 2 (CNA LOGO) CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT SELECTED BALANCE SHEET DATA AND CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS DATA
- ----------------------------------------------------------------------------------------- SEPTEMBER 30, DECEMBER 31, (In millions, except per share data) 2003 2002 - ----------------------------------------------------------------------------------------- Total assets $67,850 $61,731 Insurance reserves 46,053 40,179 Debt 2,153 2,292 Total liabilities 59,404 52,074 Minority interest 245 256 Accumulated other comprehensive income 1,013 604 Total stockholders' equity 8,201 9,401 Book value per common share $ 33.11 $ 38.68 Book value per common share excluding unrealized gain or loss on fixed maturity securities $ 29.29 $ 36.53 Outstanding shares of common stock (in millions of shares) 223.6 223.6 - -----------------------------------------------------------------------------------------
- ------------------------------------------------------------------------- THREE MONTHS ENDED SEPTEMBER 30 (In millions) 2003 2002 - ------------------------------------------------------------------------- Net cash flows provided by operating activities $ 1,367 $ 371 Net cash flows used by investing activities (1,318) (225) Net cash flows used by financing activities (11) (32) ------- ----- Net cash flows $ 38 $ 114 ======= ===== - -------------------------------------------------------------------------
- ------------------------------------------------------------------------- NINE MONTHS ENDED SEPTEMBER 30 (In millions) 2003 2002 - ------------------------------------------------------------------------- Net cash flows provided by operating activities $ 1,482 $ 806 Net cash flows used by investing activities (1,270) (635) Net cash flows used by financing activities (160) (54) ------- ----- Net cash flows $ 52 $ 117 ======= ===== - -------------------------------------------------------------------------
3 (CNA LOGO) 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 September 30, 2003 Gross $13,153 $6,417 $19,570 $2,336 $21,906 Ceded 4,994 2,452 7,446 1,061 8,507 Net 8,159 3,965 12,124 1,275 13,399 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 September 30, 2003 Gross $1,493 $1,479 $7,386 $32,264 Ceded 91 83 4,628 13,309 Net 1,402 1,396 2,758 18,955 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 September 30, 2003 and December 31, 2002 include $1,774 million ($1,431 million in Group Operations, $138 million in Life Operations and $205 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 September 30, 2003 and December 31, 2002 include $1,636 million ($1,415 million in Group Operations, $59 million in Life Operations and $162 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 LOGO) CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY INSURANCE CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVE ROLLFORWARD (1)
- ------------------------------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30, 2003 THREE MONTHS NINE MONTHS ENDED ENDED (In millions) - ------------------------------------------------------------------------------------------------------- Claim & claim adjustment expense reserves, beginning of period Gross $ 27,944 $ 27,370 Ceded 11,485 10,727 -------- -------- Net 16,459 16,643 -------- -------- Net incurred claim & claim adjustment expenses 3,802 7,463 Net claim & claim adjustment expense payments (1,306) (5,151) Claim & claim adjustment expense reserves, end of period Net 18,955 18,955 Ceded 13,309 13,309 -------- -------- Gross $ 32,264 $ 32,264 ======== ======== - -------------------------------------------------------------------------------------------------------
(1) Gross reserves as of September 30, 2003 and December 31, 2002 include $1,774 million and $1,722 million of Life & Group company reserves, which are primarily related to accident and health business. Net reserves as of September 30, 2003 and December 31, 2002 include $1,636 million and $1,578 million of Life & Group company reserves, which are primarily related to accident and health business. 5 (CNA LOGO) CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT INVESTMENTS BY ASSET CLASS
- ------------------------------------------------------------------------------------------------------------------ SEPTEMBER 30, 2003 DECEMBER 31, 2002 BOOK MARKET BOOK MARKET (In millions) VALUE VALUE VALUE VALUE - ------------------------------------------------------------------------------------------------------------------ PROPERTY & CASUALTY AND OTHER COMPANIES Investments: Fixed maturity securities $19,237 $19,951 $17,673 $18,172 Equity securities 308 513 467 614 Short-term investments 5,258 5,258 5,780 5,778 Limited partnership investments 1,209 1,209 1,055 1,055 Mortgage loans and other invested assets 44 34 61 73 ------- ------- ------- ------- Subtotal 26,056 26,965 25,036 25,692 Securities lending collateral 698 698 399 399 ------- ------- ------- ------- Total investments $26,754 $27,663 $25,435 $26,091 ------- ------- ------- ------- LIFE AND GROUP COMPANIES Investments: Fixed maturity securities $ 8,197 $ 8,796 $ 7,860 $ 8,103 Equity securities 52 62 52 52 Short-term investments 918 918 686 686 Limited partnership investments 4 4 5 5 Mortgage loans, policy loans and other invested assets 202 189 210 211 ------- ------- ------- ------- Subtotal 9,373 9,969 8,813 9,057 Securities lending collateral 170 170 145 145 ------- ------- ------- ------- Total investments $ 9,543 $10,139 $ 8,958 $ 9,202 ------- ------- ------- ------- TOTAL INVESTMENTS $36,297 $37,802 $34,393 $35,293 ======= ======= ======= ======= - ------------------------------------------------------------------------------------------------------------------
6 (CNA LOGO) CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY SEGMENTS - OPERATING RESULTS
- ------------------------------------------------------------------------------------------------------------------------------------ THREE MONTHS ENDED STANDARD LINES SPECIALTY LINES P&C OPERATIONS SEPTEMBER 30 FAV/(UNFAV) FAV/(UNFAV) FAV/(UNFAV) (In millions) 2003 2002 % CHANGE 2003 2002 % CHANGE 2003 2002 % CHANGE - ------------------------------------------------------------------------------------------------------------------------------------ Gross written premiums $ 1,406 $ 1,213 16 % $ 944 $ 889 6 % $ 2,350 $ 2,102 12 % Net written premiums 834 1,033 (19) 719 628 14 1,553 1,661 (7) Net earned premiums 802 992 (19) 660 551 20 1,462 1,543 (5) Claim and claim adjustment expenses 1,563 602 (160) 727 499 (46) 2,290 1,101 (108) Acquisition expenses 498 151 N/A 238 122 (95) 736 273 (170) Underwriting expenses 151 132 (14) 73 69 (6) 224 201 (11) Policyholders' dividends 60 26 (131) 1 - N/A 61 26 (135) ------- ------- ----- ----- ------- ------- Underwriting (loss) income (1,470) 81 N/A (379) (139) (173) (1,849) (58) N/A ------- ------- ----- ----- ------- ------- Net investment income 42 67 (37) 64 49 31 106 116 (9) Other revenues 35 80 (56) 35 33 6 70 113 (38) Other expenses 38 75 49 29 31 6 67 106 37 ------- ------- ----- ----- ------- ------- (Loss) income before income tax, minority interest and net realized investment gains (losses) (1,431) 153 N/A (309) (88) N/A (1,740) 65 N/A Income tax benefit (expense) 514 (48) N/A 115 24 N/A 629 (24) N/A Minority interest - - N/A 14 (1) N/A 14 (1) N/A ------- ------- ----- ----- ------- ------- (Loss) income before net realized investment gains (losses) (917) 105 N/A (180) (65) (177) (1,097) 40 N/A Realized investment gains (losses) 54 (27) N/A 28 (15) N/A 82 (42) N/A Income tax (expense) benefit on realized investment gains (losses) (19) 10 N/A (12) 4 N/A (31) 14 N/A ------- ------- ----- ----- ------- ------- (Loss) income from continuing operations (882) 88 N/A (164) (76) (116) (1,046) 12 N/A Cumulative effect of a change in accounting principle - - N/A - - N/A - - N/A ------- ------- ----- ----- ------- ------- Net (loss) income $ (882) $ 88 N/A % $(164) $ (76) (116)% $(1,046) $ 12 N/A % ======= ======= ===== ===== ======= ======= FINANCIAL RATIOS Loss & LAE 194.8 % 60.6 % 110.1 % 90.7 % 156.6 % 71.3 % Acquisition expense 62.1 15.3 35.9 22.0 50.3 17.7 Underwriting expense 18.9 13.3 11.2 12.4 15.3 13.0 Dividends 7.5 2.6 0.2 0.2 4.2 1.7 ------- ------- ----- ----- ------- ------- Expense ratio, including dividends 88.5 31.2 47.3 34.6 69.8 32.4 ------- ------- ----- ----- ------- ------- Combined ratio 283.3 % 91.8 % 157.4 % 125.3 % 226.4 % 103.7 % ======= ======= ===== ===== ======= ======= - ------------------------------------------------------------------------------------------------------------------------------------
7 (CNA LOGO) CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY SEGMENTS - OPERATING RESULTS
- ----------------------------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED CNA RE TOTAL P&C SEGMENTS SEPTEMBER 30 FAV/(UNFAV) FAV/(UNFAV) (In millions) 2003 2002 % CHANGE 2003 2002 % CHANGE - ----------------------------------------------------------------------------------------------------------------------------------- Gross written premiums $ 150 $ 179 (16)% $ 2,500 $ 2,281 10 % Net written premiums 109 167 (35) 1,662 1,828 (9) Net earned premiums 84 157 (46) 1,546 1,700 (9) Claim and claim adjustment expenses 178 181 2 2,468 1,282 (93) Acquisition expenses 26 34 24 762 307 (148) Underwriting expenses 17 14 (21) 241 215 (12) Policyholders' dividends - - N/A 61 26 (135) ----- ----- ------- ------- Underwriting loss (137) (72) (90) (1,986) (130) N/A ----- ----- ------- ------- Net investment income 9 28 (68) 115 144 (20) Other revenues - 1 N/A 70 114 (39) Other expenses - 2 N/A 67 108 38 ----- ----- ------- ------- (Loss) income before income tax, minority interest and net realized investment gains (losses) (128) (45) (184) (1,868) 20 N/A Income tax benefit (expense) 47 20 135 676 (4) N/A Minority interest - - N/A 14 (1) N/A ----- ----- ------- ------- (Loss) income before net realized investment gains (losses) (81) (25) N/A (1,178) 15 N/A Realized investment gains (losses) 12 (5) N/A 94 (47) N/A Income tax (expense) benefit on realized investment gains (losses) (5) 4 N/A (36) 18 N/A ----- ----- ------- ------- Loss from continuing operations (74) (26) (185) (1,120) (14) N/A Cumulative effect of a change in accounting principle - - N/A - - N/A ----- ----- ------- ------- Net loss $ (74) $ (26) (185)% $(1,120) $ (14) N/A % ===== ===== ======= ======= FINANCIAL RATIOS Loss & LAE 211.4 % 115.4 % 159.6 % 75.4 % Acquisition expense 31.4 22.0 49.3 18.1 Underwriting expense 20.5 8.6 15.5 12.6 Dividends - - 4.0 1.5 ----- ----- ------- ------- Expense ratio, including dividends 51.9 30.6 68.8 32.2 ----- ----- ------- ------- Combined ratio 263.3 % 146.0 % 228.4 % 107.6 % ===== ===== ======= ======= - -----------------------------------------------------------------------------------------------------------------------------------
8 (CNA LOGO) CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY SEGMENTS - OPERATING RESULTS
- ------------------------------------------------------------------------------------------------------------------------------------ NINE MONTHS ENDED STANDARD LINES SPECIALTY LINES P&C OPERATIONS SEPTEMBER 30 FAV/(UNFAV) FAV/(UNFAV) FAV/(UNFAV) (In millions) 2003 2002 % CHANGE 2003 2002 % CHANGE 2003 2002 % CHANGE - ------------------------------------------------------------------------------------------------------------------------------------ Gross written premiums $ 4,265 $ 4,017 6 % $ 2,787 $ 2,484 12 % $ 7,052 $ 6,501 8 % Net written premiums 2,828 3,172 (11) 2,064 1,740 19 4,892 4,912 (0) Net earned premiums 2,664 3,040 (12) 1,948 1,594 22 4,612 4,634 (0) Claim and claim adjustment expenses 3,105 2,191 (42) 1,776 1,238 (43) 4,881 3,429 (42) Acquisition expenses 918 536 (71) 503 333 (51) 1,421 869 (64) Underwriting expenses 431 379 (14) 215 195 (10) 646 574 (13) Policyholders' dividends 86 57 (51) 2 2 0 88 59 (49) ------- ------- ------- ------- ------- ------- Underwriting loss (1,876) (123) N/A (548) (174) N/A (2,424) (297) N/A ------- ------- ------- ------- ------- ------- Net investment income 236 304 (22) 213 184 16 449 488 (8) Other revenues 165 243 (32) 81 120 (33) 246 363 (32) Other expenses 155 216 28 72 87 17 227 303 25 ------- ------- ------- ------- ------- ------- (Loss) income before income tax, minority interest and net realized investment gains (losses) (1,630) 208 N/A (326) 43 N/A (1,956) 251 N/A Income tax benefit (expense) 604 (53) N/A 125 (23) N/A 729 (76) N/A Minority interest - - N/A 9 (11) 182 9 (11) 182 ------- ------- ------- ------- ------- ------- (Loss) income before net realized investment gains (losses) (1,026) 155 N/A (192) 9 N/A (1,218) 164 N/A Realized investment gains (losses) 236 (51) N/A 94 (46) N/A 330 (97) N/A Income tax (expense) benefit on realized investment gains (losses) (83) 18 N/A (34) 14 N/A (117) 32 N/A ------- ------- ------- ------- ------- ------- (Loss) income from continuing operations (873) 122 N/A (132) (23) N/A (1,005) 99 N/A Cumulative effect of a change in accounting principle - - N/A - (48) N/A - (48) N/A ------- ------- ------- ------- ------- ------- Net (loss) income $ (873) $ 122 N/A % $ (132) $ (71) (86)% $(1,005) $ 51 N/A % ======= ======= ======= ======= ======= ======= FINANCIAL RATIOS Loss & LAE 116.6 % 72.1 % 91.2 % 77.6 % 105.8 % 74.0 % Acquisition expense 34.5 17.6 25.8 20.9 30.8 18.8 Underwriting expense 16.1 12.4 11.0 12.3 14.1 12.3 Dividends 3.2 1.9 0.1 0.1 1.9 1.3 ------- ------- ------- ------- ------- ------- Expense ratio, including dividends 53.8 31.9 36.9 33.3 46.8 32.4 ------- ------- ------- ------- ------- ------- Combined ratio 170.4 % 104.0 % 128.1 % 110.9 % 152.6 % 106.4 % ======= ======= ======= ======= ======= ======= - ------------------------------------------------------------------------------------------------------------------------------------
9 (CNA LOGO) CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY SEGMENTS - OPERATING RESULTS
- ----------------------------------------------------------------------------------------------------------------------------------- NINE MONTHS ENDED CNA RE TOTAL P&C SEGMENTS SEPTEMBER 30 FAV/(UNFAV) FAV/(UNFAV) (In millions) 2003 2002 % CHANGE 2003 2002 % CHANGE - ----------------------------------------------------------------------------------------------------------------------------------- Gross written premiums $ 528 $ 578 (9)% $ 7,580 $ 7,079 7 % Net written premiums 437 494 (12) 5,329 5,406 (1) Net earned premiums 371 462 (20) 4,983 5,096 (2) Claim and claim adjustment expenses 371 375 1 5,252 3,804 (38) Acquisition expenses 87 103 16 1,508 972 (55) Underwriting expenses 44 46 4 690 620 (11) Policyholders' dividends - - N/A 88 59 (49) ----- ----- ------- ------- Underwriting loss (131) (62) (111) (2,555) (359) N/A ----- ----- ------- ------- Net investment income 55 109 (50) 504 597 (16) Other revenues 1 2 (50) 247 365 (32) Other expenses - 2 N/A 227 305 26 ----- ----- ------- ------- (Loss) income before income tax, minority interest and net realized investment gains (losses) (75) 47 N/A (2,031) 298 N/A Income tax benefit (expense) 32 (8) N/A 761 (84) N/A Minority interest - - N/A 9 (11) 182 ----- ----- ------- ------- (Loss) income before net realized investment gains (losses) (43) 39 N/A (1,261) 203 N/A Realized investment gains (losses) 54 (2) N/A 384 (99) N/A Income tax (expense) benefit on realized investment gains (losses) (16) 5 N/A (133) 37 N/A ----- ----- ------- ------- (Loss) income from continuing operations (5) 42 (112) (1,010) 141 N/A Cumulative effect of a change in accounting principle - - N/A - (48) N/A ----- ----- ------- ------- Net (loss) income $ (5) $ 42 (112)% $(1,010) $ 93 N/A % ===== ===== ======= ======= FINANCIAL RATIOS Loss & LAE 100.0 % 81.2 % 105.4 % 74.6 % Acquisition expense 23.6 22.4 30.3 19.1 Underwriting expense 11.7 9.8 13.8 12.1 Dividends - - 1.8 1.2 ----- ----- ------- ------- Expense ratio, including dividends 35.3 32.2 45.9 32.4 ----- ----- ------- ------- Combined ratio 135.3 % 113.4 % 151.3 % 107.0 % ===== ===== ======= ======= - -----------------------------------------------------------------------------------------------------------------------------------
10 (CNA LOGO) CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT GROUP & LIFE AND CORPORATE & OTHER SEGMENTS - OPERATING RESULTS
- ------------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED TOTAL P&C GROUP LIFE CORPORATE TOTAL SEPTEMBER 30 SEGMENTS OPERATIONS OPERATIONS (2) & OTHER OPERATIONS (2) (In millions) 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 - ---------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 1,546 $ 1,700 $ 338 $ 292 $ 264 $ 236 $ (22) $ 34 $ 2,126 $ 2,262 Insurance claims & policyholders' benefits 2,468 1,282 262 222 315 271 922 44 3,967 1,819 Policyholders' dividends 61 26 1 - 5 4 (2) 1 65 31 Insurance related expenses 1,003 522 111 102 69 60 203 7 1,386 691 Net investment income 115 144 67 65 129 131 41 24 352 364 Other revenues 70 114 13 21 21 34 (21) (32) 83 137 Other expenses 67 108 7 8 13 19 - 34 87 169 ------- ------- ----- ----- ----- ----- ----- ---- ------- ------- (Loss) income before income tax, minority interest and net realized investment gains (losses) (1,868) 20 37 46 12 47 (1,125) (60) (2,944) 53 Income tax benefit (expense) 676 (4) (12) (16) (2) (16) 403 22 1,065 (14) Minority interest 14 (1) - - - - - - 14 (1) ------- ------- ----- ----- ----- ----- ----- ---- ------- ------- (Loss) income before net realized investment gains (losses) (1,178) 15 25 30 10 31 (722) (38) (1,865) 38 Realized investment gains (losses) 94 (47) 25 5 33 (20) 12 86 164 24 Income tax (expense) benefit on realized investment gains (losses) (36) 18 (8) (1) (12) 6 (3) (31) (59) (8) ------- ------- ----- ----- ----- ----- ----- ---- ------- ------- (Loss) income from continuing operations (1,120) (14) 42 34 31 17 (713) 17 (1,760) 54 Loss from discontinued operations - - - - - - - - - - Cumulative effect of a change in accounting principle - - - - - - - - - - ------- ------- ----- ----- ----- ----- ----- ---- ------- ------- Net (loss) income $(1,120) $ (14) $ 42 $ 34 $ 31 $ 17 $(713) $ 17 $(1,760) $ 54 ======= ======= ===== ===== ===== ===== ===== ==== ======= ======= - ----------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------ OTHER FINANCIAL DATA PROPERTY & CASUALTY COMPANY INFORMATION TOTAL P&C GROUP LIFE CORPORATE TOTAL SEGMENTS OPERATIONS (1) OPERATIONS & OTHER OPERATIONS (1) 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 - ------------------------------------------------------------------------------------------------------------------------------ Gross written premiums $ 2,500 $ 2,281 $ 185 $ 218 127 $ 124 $ 490 $ 446 $ 3,302 $ 3,069 Net written premiums 1,662 1,828 - (2) 127 124 1 (26) 1,790 1,924 Net earned premiums 1,546 1,700 - - 129 122 (3) (19) 1,672 1,803 Underwriting (loss) income (1,986) (130) 3 7 (66) (50) (1,138) (55) (3,187) (228) FINANCIAL RATIOS Loss & LAE 159.6 % 75.4 % N/A % N/A % 124.0 % 118.1 % N/A % N/A % 212.1 % 79.0 % Acquisition expense 49.3 18.1 N/A N/A 19.2 13.7 N/A N/A 58.6 17.4 Underwriting expense 15.5 12.6 N/A N/A 7.9 9.2 N/A N/A 16.3 14.8 Dividends 4.0 1.5 - N/A - - N/A N/A 3.7 1.4 -------- -------- ----- ----- -------- ------ -------- ------ -------- -------- Expense ratio, including dividends 68.8 32.2 N/A N/A 27.1 22.9 N/A N/A 78.6 33.6 -------- -------- ----- ----- -------- ------ -------- ------ -------- -------- Combined ratio 228.4 % 107.6 % N/A % N/A % 151.1 % 141.0 % N/A % N/A % 290.7 % 112.6 % ======== ======== ===== ===== ======== ====== ======== ====== ======== ======== - ------------------------------------------------------------------------------------------------------------------------------
(1) Included in gross written premiums for 2003 and 2002 is $177 million and $209 million of business ceded to CNA Group Life Assurance Company. (2) The three months ended September 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. 11 (CNA LOGO) CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT GROUP & LIFE AND CORPORATE & OTHER SEGMENTS - OPERATING RESULTS
- ------------------------------------------------------------------------------------------------------------------------------------ NINE MONTHS ENDED TOTAL P&C GROUP LIFE CORPORATE TOTAL SEPTEMBER 30 SEGMENTS OPERATIONS (1) OPERATIONS (3) & OTHER OPERATIONS (1)(3) (In millions) 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 - ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 4,983 $ 5,096 $ 982 $ 2,017 $ 783 $ 710 $ (44) $ 102 $ 6,704 $ 7,925 Insurance claims & policyholders' benefits 5,252 3,804 760 1,721 911 810 950 141 7,873 6,476 Policyholders' dividends 88 59 1 - 14 10 (7) (3) 96 66 Insurance related expenses 2,198 1,592 342 416 221 188 238 - 2,999 2,196 Net investment income 504 597 200 188 393 402 114 105 1,211 1,292 Other revenues 247 365 46 66 64 89 (69) (55) 288 465 Other expenses 227 305 22 24 44 56 7 139 300 524 ------- ------- ----- ------- ----- ----- ------- ----- ------- ------- (Loss) income before income tax, minority interest and net realized investment gains (losses) (2,031) 298 103 110 50 137 (1,187) (125) (3,065) 420 Income tax benefit (expense) 761 (84) (33) (37) (13) (48) 429 44 1,144 (125) Minority interest 9 (11) - - - - - - 9 (11) ------- ------- ----- ------- ----- ----- ------- ----- ------- ------- (Loss) income before net realized investment gains (losses) (1,261) 203 70 73 37 89 (758) (81) (1,912) 284 Realized investment gains (losses) 384 (99) (7) (12) 10 (62) 79 36 466 (137) Income tax (expense) benefit on realized investment gains (losses) (133) 37 3 4 (4) 21 (27) (12) (161) 50 ------- ------- ----- ------- ----- ----- ------- ----- ------- ------- (Loss) income from continuing operations (1,010) 141 66 65 43 48 (706) (57) (1,607) 197 Loss from discontinued operations - - - - - (35) - - - (35) Cumulative effect of a change in accounting principle - (48) - - - (8) - (1) - (57) ------- ------- ----- ------- ----- ----- ------- ----- ------- ------- Net (loss) income $(1,010) $ 93 $ 66 $ 65 $ 43 $ 5 $ (706) $ (58) $(1,607) $ 105 ======= ======= ===== ======= ===== ===== ======= ===== ======= ======= - ------------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- OTHER FINANCIAL DATA TOTAL P&C GROUP LIFE CORPORATE TOTAL PROPERTY & CASUALTY SEGMENTS OPERATIONS (1)(2) OPERATIONS & OTHER OPERATIONS (1)(2) COMPANY INFORMATION 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 - ---------------------------------------------------------------------------------------------------------------------------------- Gross written premiums $ 7,580 $ 7,079 $ 589 $ 1,787 $ 395 $ 371 $ 1,416 $1,349 $ 9,980 $10,586 Net written premiums 5,329 5,406 - 1,149 394 370 (7) (23) 5,716 6,902 Net earned premiums 4,983 5,096 - 1,151 389 356 (4) (13) 5,368 6,590 Underwriting (loss) income (2,555) (359) 4 15 (181) (129) (1,208) (134) (3,940) (607) FINANCIAL RATIOS Loss & LAE 105.4 % 74.6 % N/A % 87.7 % 119.9 % 111.9 % N/A % N/A % 124.3 % 79.6 % Acquisition expense 30.3 19.1 N/A (0.6) 16.4 14.5 N/A N/A 33.6 15.5 Underwriting expense 13.8 12.1 N/A 11.6 10.2 9.8 N/A N/A 13.8 13.2 Dividends 1.8 1.2 - - - - N/A N/A 1.7 0.9 -------- -------- ----- -------- ------- ------ -------- ------ -------- ------- Expense ratio, including dividends 45.9 32.4 N/A 11.0 26.6 24.3 N/A N/A 49.1 29.6 -------- -------- ----- -------- ------- ------ -------- ------ -------- ------- Combined ratio 151.3 % 107.0 % N/A % 98.7 % 146.5 % 136.2 % N/A % N/A % 173.4 % 109.2 % ======== ======== ===== ======== ======= ====== ======== ====== ======== ======= - ----------------------------------------------------------------------------------------------------------------------------------
(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 $562 million and $603 million of business ceded to CNA Group Life Assurance Company. (3) The nine months ended September 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 LOGO) CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY SEGMENTS - CATASTROPHE LOSSES
- -------------------------------------------------------------------------------------------------------------------------------- CATASTROPHE LOSSES (PRETAX) STANDARD SPECIALTY P&C TOTAL P&C (In millions) LINES LINES OPERATIONS CNA RE SEGMENTS - -------------------------------------------------------------------------------------------------------------------------------- Three months ended September 30, 2003 $34 $13 $ 47 $10 $ 57 Nine months ended September 30, 2003 95 16 111 21 132 Three months ended September 30, 2002 $ 5 $17 $ 22 $17 $ 39 Nine months ended September 30, 2002 14 19 33 17 50 - --------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------- CATASTROPHE LOSSES (AFTER-TAX) STANDARD SPECIALTY P&C TOTAL P&C (In millions) LINES LINES OPERATIONS CNA RE SEGMENTS - -------------------------------------------------------------------------------------------------------------------------------- Three months ended September 30, 2003 $22 $ 8 $30 $ 7 $37 Nine months ended September 30, 2003 62 10 72 14 86 Three months ended September 30, 2002 $ 3 $11 $14 $11 $25 Nine months ended September 30, 2002 9 12 21 11 32 - --------------------------------------------------------------------------------------------------------------------------------
13 (CNA LOGO) CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT ANALYSIS OF PRETAX NET INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------------------------------------- (In millions) STANDARD LINES - ----------------------------------------------------------------------------------------------------------------------------------- 1Q02 2Q02 3Q02 4Q02 2002 1Q03 2Q03 3Q03 YTD 2003 ---- ---- ---- ---- ---- ---- ---- ---- -------- Limited partnership income $ 3 $ 20 $(39) $ (2) $ (18) $ 13 $ 40 $ 33 $ 86 Interest on funds withheld and other deposits (38) (44) (36) (56) (174) (34) (76) (114) (224) Other investment income 138 158 142 152 590 131 120 123 374 ------------------------------------------------------------------------------- Net investment income $103 $134 $ 67 $ 94 $ 398 $110 $ 84 $ 42 $ 236 =============================================================================== ------------------------------------------------------------------------------- SPECIALTY LINES ------------------------------------------------------------------------------- 1Q02 2Q02 3Q02 4Q02 2002 1Q03 2Q03 3Q03 YTD 2003 ---- ---- ---- ---- ---- ---- ---- ---- -------- Limited partnership income $ 1 $ 8 $(14) $ (1) $ (6) $ 5 $17 $ 13 $ 35 Interest on funds withheld and other deposits (9) (7) (11) (7) (34) (6) (7) (12) (25) Other investment income 68 74 74 77 293 71 69 63 203 ------------------------------------------------------------------------------- Net investment income $ 60 $ 75 $ 49 $ 69 $ 253 $70 $79 $ 64 $213 =============================================================================== ------------------------------------------------------------------------------- P&C OPERATIONS ------------------------------------------------------------------------------- 1Q02 2Q02 3Q02 4Q02 2002 1Q03 2Q03 3Q03 YTD 2003 ---- ---- ---- ---- ---- ---- ---- ---- -------- Limited partnership income $ 4 $ 28 $(53) $ (3) $ (24) $ 18 $ 57 $ 46 $ 121 Interest on funds withheld and other deposits (47) (51) (47) (63) (208) (40) (83) (126) (249) Other investment income 206 232 216 229 883 202 189 186 577 ------------------------------------------------------------------------------- Net investment income $163 $209 $116 $163 $ 651 $180 $163 $ 106 $ 449 =============================================================================== ------------------------------------------------------------------------------- CNA RE ------------------------------------------------------------------------------- 1Q02 2Q02 3Q02 4Q02 2002 1Q03 2Q03 3Q03 YTD 2003 ---- ---- ---- ---- ---- ---- ---- ---- -------- Limited partnership income $ 1 $ 5 $(9) $(1) $ (4) $ 2 $ 8 $ 7 $ 17 Interest on funds withheld and other deposits (11) (6) (6) (6) (29) (6) (10) (22) (38) Other investment income 43 49 43 42 177 28 24 24 76 ------------------------------------------------------------------------------- Net investment income $ 33 $ 48 $28 $35 $144 $24 $ 22 $ 9 $ 55 =============================================================================== ------------------------------------------------------------------------------- TOTAL P&C SEGMENTS ------------------------------------------------------------------------------- 1Q02 2Q02 3Q02 4Q02 2002 1Q03 2Q03 3Q03 YTD 2003 ---- ---- ---- ---- ---- ---- ---- ---- -------- Limited partnership income $ 5 $ 33 $(62) $ (4) $ (28) $ 20 $ 65 $ 53 $ 138 Interest on funds withheld and other deposits (58) (57) (53) (69) (237) (46) (93) (148) (287) Other investment income 249 281 259 271 1,060 230 213 210 653 ------------------------------------------------------------------------------- Net investment income $196 $257 $144 $198 $ 795 $ 204 $185 $ 115 $ 504 ===============================================================================
14 (CNA LOGO) 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 3Q03 YTD 2003 ---- ---- ---- ---- -------- ---- ---- ---- -------- Limited partnership income $ 5 $ 33 $(62) $ (4) $ (28) $ 20 $ 65 $ 53 $ 138 Interest on funds withheld and other deposits (58) (57) (53) (69) (237) (46) (93) (148) (287) Other investment income 249 281 259 271 1,060 230 213 210 653 ------------------------------------------------------------------------------------ Net investment income $196 $257 $144 $198 $ 795 $204 $ 185 $ 115 $ 504 ==================================================================================== ------------------------------------------------------------------------------------ GROUP OPERATIONS ------------------------------------------------------------------------------------ 1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 3Q03 YTD 2003 ---- ---- ---- ---- -------- ---- ---- ---- -------- Limited partnership income $-- $-- $-- $-- $ -- $-- $-- $-- $ -- Interest on funds withheld and other deposits -- -- -- -- -- -- -- -- -- Other investment income 61 62 65 64 252 63 70 67 200 ------------------------------------------------------------------------------------ Net investment income $61 $62 $65 $64 $252 $63 $70 $67 $200 ==================================================================================== ------------------------------------------------------------------------------------ LIFE OPERATIONS ------------------------------------------------------------------------------------ 1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 3Q03 YTD 2003 ---- ---- ---- ---- -------- ---- ---- ---- -------- Limited partnership income $ -- $ -- $ (1) $ (1) $ (2) $ -- $ -- $ 1 $ 1 Interest on funds withheld and other deposits -- -- -- -- -- -- -- -- -- Other investment income 134 137 132 139 542 131 133 128 392 ------------------------------------------------------------------------------------ Net investment income $134 $137 $131 $138 $540 $131 $133 $129 $393 ==================================================================================== ------------------------------------------------------------------------------------ CORPORATE & OTHER ------------------------------------------------------------------------------------ 1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 3Q03 YTD 2003 ---- ---- ---- ---- -------- ---- ---- ---- -------- Limited partnership income $ 2 $ 5 $(10) $(1) $ (4) $ 3 $10 $ 7 $ 20 Interest on funds withheld and other deposits -- -- -- (2) (2) (1) -- -- (1) Other investment income 33 41 34 41 149 32 29 34 95 ------------------------------------------------------------------------------------ Net investment income $35 $46 $ 24 $38 $143 $34 $39 $41 $114 ==================================================================================== ------------------------------------------------------------------------------------ TOTAL OPERATIONS ------------------------------------------------------------------------------------ 1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 3Q03 YTD 2003 ---- ---- ---- ---- -------- ---- ---- ---- -------- Limited partnership income $ 7 $ 38 $(73) $ (6) $ (34) $ 23 $ 75 $ 61 $ 159 Interest on funds withheld and other deposits (58) (57) (53) (71) (239) (47) (93) (148) (288) Other investment income 477 521 490 515 2,003 456 445 439 1,340 ------------------------------------------------------------------------------------ Net investment income $426 $502 $364 $438 $1,730 $432 $427 $ 352 $1,211 ====================================================================================
15 CNA FINANCIAL CORPORATION (CNA LOGO) FINANCIAL SUPPLEMENT STATUTORY DATA - PRELIMINARY
- ------------------------------------------------------------------------------------------------------------------------------------ PERIOD ENDED SEPTEMBER 30 THREE MONTHS NINE MONTHS INCOME STATEMENT (PRELIMINARY) FAV / (UNFAV) (PRELIMINARY) FAV / (UNFAV) (In millions) 2003 2002 % CHANGE 2003 2002 % CHANGE - ------------------------------------------------------------------------------------------------------------------------------------ PROPERTY & CASUALTY COMPANIES Gross written premiums $ 3,449 $ 2,875 20 % $ 10,580 $ 10,919 (3)% Net written premiums 1,763 1,894 (7) 5,654 6,828 (17) Net earned premiums 1,563 1,737 (10) 5,085 6,369 (20) Claim and claim adjustment expenses 3,445 1,424 (142) 6,417 5,121 (25) Acquisition expenses 377 362 (4) 1,147 1,142 (0) Underwriting expenses 296 285 (4) 840 872 4 Policyholders' dividends 13 27 52 53 62 15 Restructuring and other related costs - - N/A - - N/A ------- ------- -------- -------- Underwriting loss (2,568) (361) N/A (3,372) (828) N/A Net investment income 374 341 10 969 1,047 (7) Other revenue (280) (52) N/A (404) (163) (148) Income tax benefit (expense) 695 (39) N/A 739 (64) N/A Net realized gains (losses) 141 (89) N/A 445 (64) N/A ------- ------- -------- -------- Net loss $(1,638) $ (200) N/A % $ (1,623) $ (72) N/A % ======= ======= ======== ======== FINANCIAL RATIOS Loss and LAE 220.3 % 82.0 % 126.2 % 80.4 % Acquisition expense 21.4 19.1 20.3 16.7 Underwriting expense 16.8 15.1 14.9 12.8 Policyholders' dividends 0.8 1.5 1.0 1.0 ------- ------- -------- -------- Expense ratio 39.0 35.7 36.2 30.5 ------- ------- -------- -------- Combined ratio 259.3 % 117.7 % 162.4 % 110.9 % ======= ======= ======== ======== LIFE COMPANIES Premium income $ 496 $ 454 $ 1,476 $ 1,415 - ------------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- SUPPLEMENTAL STATUTORY DATA (PRELIMINARY) SEPTEMBER 30, DECEMBER 31, (In millions) 2003 2002 - -------------------------------------------------------------------------------- PROPERTY & CASUALTY COMPANIES Statutory surplus (1) $ 5,213 $ 6,836 LIFE COMPANIES Statutory surplus $ 1,597 $ 1,645 Gross life insurance in force 432,606 437,751 - --------------------------------------------------------------------------------
(1) Surplus includes the Property & Casualty Companies' equity ownership of the life insurance subsidiaries. 16 CNA FINANCIAL CORPORATION (CNA LOGO) FINANCIAL SUPPLEMENT PROPERTY & CASUALTY SEGMENTS LOSS AND LAE RATIO ANALYSIS
------------------------------------------- ------------------------------------------- STANDARD LINES CNA RE ------------------------------------------- ------------------------------------------- 2003 YTD 2002 FY 2002 FY 2003 YTD 2002 FY 2002 FY EVALUATED AT EVALUATED AT EVALUATED AT EVALUATED AT EVALUATED AT EVALUATED AT 9/30/03 12/31/02 9/30/03 9/30/03 12/31/02 9/30/03 ------------------------------------------- ------------------------------------------- Gross Accident Year 65.4 % 74.6 % 66.6 % 59.7 % 64.2 % 61.2 % Impact of Finite Reinsurance - (0.1) - - 0.2 0.2 Impact of Other Reinsurance 3.0 0.8 4.0 4.2 4.9 0.6 ----- ----- ----- ----- ----- ----- Net Accident Year 68.4 75.3 70.6 % 63.9 69.3 62.0 % ===== ===== Impact of Corporate Covers (10.4) - (19.1) (6.4) Impact of Development 58.6 (3.3) 55.2 15.4 ----- ----- ----- ----- Net Calendar Year 116.6 % 72.0 % 100.0 % 78.3 % ===== ===== ===== ===== ------------------------------------------- -------------------------------------------
------------------------------------------- ------------------------------------------- SPECIALTY LINES P&C SEGMENTS ------------------------------------------- ------------------------------------------- 2003 YTD 2002 FY 2002 FY 2003 YTD 2002 FY 2002 FY EVALUATED AT EVALUATED AT EVALUATED AT EVALUATED AT EVALUATED AT EVALUATED AT 9/30/03 12/31/02 9/30/03 9/30/03 12/31/02 9/30/03 ------------------------------------------- ------------------------------------------- Gross Accident Year 64.9 % 68.1 % 68.6 % 64.8 % 71.5 % 66.9 % Impact of Finite Reinsurance - - - - - - Impact of Other Reinsurance 3.8 3.6 4.4 3.3 2.1 3.7 ----- ----- ----- ----- ----- ----- Net Accident Year 68.7 71.7 73.0 % 68.1 73.6 70.6 % ===== ===== Impact of Corporate Covers (2.0) (1.2) (7.8) (1.1) Impact of Development 24.5 6.6 45.1 1.6 ----- ----- ----- ----- Net Calendar Year 91.2 % 77.1 % 105.4 % 74.1 % ===== ===== ===== ===== ------------------------------------------- -------------------------------------------
------------------------------------------- P&C OPERATIONS ------------------------------------------- 2003 YTD 2002 FY 2002 FY EVALUATED AT EVALUATED AT EVALUATED AT 9/30/03 12/31/02 9/30/03 ------------------------------------------- Gross Accident Year 65.2 % 72.1 % 67.4 % Impact of Finite Reinsurance - - - Impact of Other Reinsurance 3.3 2.0 4.0 ----- ----- ----- Net Accident Year 68.5 74.1 71.4 % ===== Impact of Corporate Covers (7.0) (0.4) Impact of Development 44.3 0.2 ----- ----- Net Calendar Year 105.8 % 73.9 % ===== ===== -------------------------------------------
17 CNA FINANCIAL CORPORATION (CNA LOGO) FINANCIAL SUPPLEMENT IMPACT OF SIGNIFICANT ITEMS
- ------------------------------------------------------------------------------------------------------------------------------ THREE MONTHS ENDED STANDARD LINES SEPTEMBER 30, 2003 2003 RESULTS BEFORE CORPORATE REINSURANCE INSURANCE SIGNIFICANT AGGREGATE BAD DEBT BAD DEBT 2003 (In millions) ITEMS DEVELOPMENT (1) COVERS (2) PROVISION PROVISION RESULTS - ------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 1,092 $ (130) $ (160) $ - $ - $ 802 Claim and claim adjustment expenses 758 1,105 (300) - - 1,563 Acquisition expenses 240 - - 55 203 498 Underwriting expenses 151 - - - - 151 Policyholders' dividends 14 46 - - - 60 ------- --------- ------- ----- ------ ------- Underwriting (loss) income (71) (1,281) 140 (55) (203) (1,470) ------- --------- ------- ----- ------ ------- Net investment income (loss) 95 - (53) - - 42 Other revenues 35 - - - - 35 Other expenses 38 - - - - 38 ------- --------- ------- ----- ------ ------- Income (loss) before income tax, minority interest and net realized investment gains 21 (1,281) 87 (55) (203) (1,431) Income tax benefit (expense) 6 448 (30) 19 71 514 Minority interest - - - - - - ------- --------- ------- ----- ------ ------- Income (loss) before net realized investment gains 27 (833) 57 (36) (132) (917) Realized investment gains 54 - - - - 54 Income tax expense on realized investment gains (19) - - - - (19) ------- --------- ------- ----- ------ ------- Income (loss) from continuing operations 62 (833) 57 (36) (132) (882) Cumulative effect of a change in accounting principle - - - - - - ------- --------- ------- ----- ------ ------- Net income (loss) $ 62 $ (833) $ 57 $ (36) $ (132) $ (882) ======= ========= ======= ===== ====== ======= FINANCIAL RATIOS Loss & LAE 194.8 % Acquisition expense 62.1 Underwriting expense 18.9 Dividends 7.5 ------- Expense ratio, including dividends 88.5 ------- Combined ratio 283.3 % =======
- ------------------------------------------------------------------------------------------------------------------------------------ SPECIALTY LINES 2003 RESULTS BEFORE CORPORATE REINSURANCE INSURANCE SIGNIFICANT AGGREGATE BAD DEBT BAD DEBT 2003 ITEMS DEVELOPMENT (1) COVERS (2) PROVISION PROVISION RESULTS - ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 691 $ 1 $ (32) $ - $ - $ 660 Claim and claim adjustment expenses 504 282 (59) - - 727 Acquisition expenses 159 - - 79 - 238 Underwriting expenses 73 - - - - 73 Policyholders' dividends 1 - - - - 1 ----- ------ ----- ------ ----- ------- Underwriting (loss) income (46) (281) 27 (79) - (379) ----- ------ ----- ------ ----- ------- Net investment income (loss) 74 - (10) - - 64 Other revenues 35 - - - - 35 Other expenses 29 - - - - 29 ----- ------ ----- ------ ----- ------- Income (loss) before income tax, minority interest and net realized investment gains 34 (281) 17 (79) - (309) Income tax benefit (expense) (5) 98 (6) 28 - 115 Minority interest 5 9 - - - 14 ----- ------ ----- ------ ----- ------- Income (loss) before net realized investment gains 34 (174) 11 (51) - (180) Realized investment gains 28 - - - - 28 Income tax expense on realized investment gains (12) - - - - (12) ----- ------ ----- ------ ----- ------- Income (loss) from continuing operations 50 (174) 11 (51) - (164) Cumulative effect of a change in accounting principle - - - - - - ----- ------ ----- ------ ----- ------- Net income (loss) $ 50 $ (174) $ 11 $ (51) $ - $ (164) ===== ====== ===== ====== ===== ======= FINANCIAL RATIOS Loss & LAE 110.1 % Acquisition expense 35.9 Underwriting expense 11.2 Dividends 0.2 ------- Expense ratio, including dividends 47.3 ------- Combined ratio 157.4 % =======
- ------------------------------------------------------------------------------------------------------------------------------------ P&C OPERATIONS 2003 RESULTS BEFORE CORPORATE REINSURANCE INSURANCE SIGNIFICANT AGGREGATE BAD DEBT BAD DEBT 2003 ITEMS DEVELOPMENT (1) COVERS (2) PROVISION PROVISION RESULTS - ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 1,783 $ (129) $ (192) $ - $ - $ 1,462 Claim and claim adjustment expenses 1,262 1,387 (359) - - 2,290 Acquisition expenses 399 - - 134 203 736 Underwriting expenses 224 - - - - 224 Policyholders' dividends 15 46 - - - 61 ------- -------- ------ ---- ----- -------- Underwriting (loss) income (117) (1,562) 167 (134) (203) (1,849) ------- -------- ------ ---- ----- -------- Net investment income (loss) 169 - (63) - - 106 Other revenues 70 - - - - 70 Other expenses 67 - - - - 67 ------- -------- ------ ---- ----- -------- Income (loss) before income tax, minority interest and net realized investment gains 55 (1,562) 104 (134) (203) (1,740) Income tax benefit (expense) 1 546 (36) 47 71 629 Minority interest 5 9 - - - 14 ------- -------- ------ ---- ----- -------- Income (loss) before net realized investment gains 61 (1,007) 68 (87) (132) (1,097) Realized investment gains 82 - - - - 82 Income tax expense on realized investment gains (31) - - - - (31) ------- -------- ------ ---- ----- -------- Income (loss) from continuing operations 112 (1,007) 68 (87) (132) (1,046) Cumulative effect of a change in accounting principle - - - - - - ------- -------- ------ ---- ----- -------- Net income (loss) $ 112 $ (1,007) $ 68 $(87) $(132) $ (1,046) ======= ======== ====== ==== ===== ======== FINANCIAL RATIOS Loss & LAE 156.6 % Acquisition expense 50.3 Underwriting expense 15.3 Dividends 4.2 -------- Expense ratio, including dividends 69.8 -------- Combined ratio 226.4 % ========
(1) Includes net prior year development for premiums, claims and allocated claim adjustment expense reserves, dividends, and change in reserves for unallocated claim adjustment expenses. (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 (CNA LOGO) FINANCIAL SUPPLEMENT IMPACT OF SIGNIFICANT ITEMS
- ------------------------------------------------------------------------------------------------------------------------------------ THREE MONTHS ENDED CNA RE SEPTEMBER 30, 2003 2003 RESULTS BEFORE CORPORATE REINSURANCE INSURANCE SIGNIFICANT AGGREGATE BAD DEBT BAD DEBT 2003 (In millions) ITEMS DEVELOPMENT (1) COVERS (2) PROVISION PROVISION RESULTS - ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 121 $ 6 $(43) $ - $ - $ 84 Claim and claim adjustment expenses 79 179 (80) - - 178 Acquisition expenses 24 - - 2 - 26 Underwriting expenses 17 - - - - 17 Policyholders' dividends - - - - - - ----- ----- ---- ---- ---- ----- Underwriting income (loss) 1 (173) 37 (2) - (137) ----- ----- ---- ---- ---- ----- Net investment income (loss) 23 - (14) - - 9 Other revenues - - - - - - Other expenses - - - - - - ----- ----- ---- ---- ---- ----- Income (loss) before income tax, minority interest and net realized investment gains 24 (173) 23 (2) - (128) Income tax (expense) benefit (7) 61 (8) 1 - 47 Minority interest - - - - - - ----- ----- ---- ---- ---- ----- Income (loss) before net realized investment gains 17 (112) 15 (1) - (81) Realized investment gains 12 - - - - 12 Income tax expense on realized investment gains (5) - - - - (5) ----- ----- ---- ---- ---- ----- Income (loss) from continuing operations 24 (112) 15 (1) - (74) Cumulative effect of a change in accounting principle - - - - - - ----- ----- ---- ---- ---- ----- Net income (loss) $ 24 $(112) $ 15 $ (1) $ - $ (74) ===== ===== ==== ==== ==== ===== FINANCIAL RATIOS Loss & LAE 211.4 % Acquisition expense 31.4 Underwriting expense 20.5 Dividends - ----- Expense ratio, including dividends 51.9 ----- Combined ratio 263.3 % =====
- ------------------------------------------------------------------------------------------------------------------------------------ TOTAL P&C SEGMENTS 2003 RESULTS BEFORE CORPORATE REINSURANCE INSURANCE SIGNIFICANT AGGREGATE BAD DEBT BAD DEBT 2003 ITEMS DEVELOPMENT (1) COVERS (2) PROVISION PROVISION RESULTS - ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 1,904 $ (123) $ (235) $ - $ - $ 1,546 Claim and claim adjustment expenses 1,341 1,566 (439) - - 2,468 Acquisition expenses 423 - - 136 203 762 Underwriting expenses 241 - - - - 241 Policyholders' dividends 15 46 - - - 61 -------- -------- ------ ---- ----- -------- Underwriting income (loss) (116) (1,735) 204 (136) (203) (1,986) -------- -------- ------ ---- ----- -------- Net investment income (loss) 192 - (77) - - 115 Other revenues 70 - - - - 70 Other expenses 67 - - - - 67 -------- -------- ------ ---- ----- -------- Income (loss) before income tax, minority interest and net realized investment gains 79 (1,735) 127 (136) (203) (1,868) Income tax (expense) benefit (6) 607 (44) 48 71 676 Minority interest 5 9 - - - 14 -------- -------- ------ ---- ----- -------- Income (loss) before net realized investment gains 78 (1,119) 83 (88) (132) (1,178) Realized investment gains 94 - - - - 94 Income tax expense on realized investment gains (36) - - - - (36) -------- -------- ------ ---- ----- -------- Income (loss) from continuing operations 136 (1,119) 83 (88) (132) (1,120) Cumulative effect of a change in accounting principle - - - - - - -------- -------- ------ ---- ----- -------- Net income (loss) $ 136 $ (1,119) $ 83 $(88) $(132) $ (1,120) ======== ======== ====== ==== ===== ======== FINANCIAL RATIOS Loss & LAE 159.6 % Acquisition expense 49.3 Underwriting expense 15.5 Dividends 4.0 -------- Expense ratio, including dividends 68.8 -------- Combined ratio 228.4 % ==========
(1) Includes net prior year development for premiums, claims and allocated claim adjustment expense reserves, dividends, and change in reserves for unallocated claim adjustment expenses. (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 (CNA LOGO) FINANCIAL SUPPLEMENT IMPACT OF SIGNIFICANT ITEMS
- ---------------------------------------------------------------------------------------------------------------------------- NINE MONTHS ENDED STANDARD LINES SEPTEMBER 30, 2003 2003 RESULTS BEFORE CORPORATE REINSURANCE INSURANCE SIGNIFICANT AGGREGATE BAD DEBT BAD DEBT 2003 (In millions) ITEMS DEVELOPMENT (1) COVERS (2) PROVISION PROVISION RESULTS - ---------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 3,138 $ (209) $(265) $ - $ - $ 2,664 Claim and claim adjustment expenses 2,172 1,413 (480) - - 3,105 Acquisition expenses 621 - - 55 242 918 Underwriting expenses 431 - - - - 431 Policyholders' dividends 40 46 - - - 86 ------- -------- ----- ---- ----- ------- Underwriting (loss) income (126) (1,668) 215 (55) (242) (1,876) ------- -------- ----- ---- ----- ------- Net investment income (loss) 313 - (77) - - 236 Other revenues 165 - - - - 165 Other expenses 155 - - - - 155 ------- -------- ----- ---- ----- ------- Income (loss) before income tax, minority interest and net realized investment gains 197 (1,668) 138 (55) (242) (1,630) Income tax (expense) benefit (36) 584 (48) 19 85 604 Minority interest - - - - - - ------- -------- ----- ---- ----- ------- Income (loss) before net realized investment gains 161 (1,084) 90 (36) (157) (1,026) Realized investment gains 236 - - - - 236 Income tax expense on realized investment gains (83) - - - - (83) ------- -------- ----- ---- ----- ------- Income (loss) from continuing operations 314 (1,084) 90 (36) (157) (873) Cumulative effect of a change in accounting principle - - - - - - ------- -------- ----- ---- ----- ------- Net income (loss) $ 314 (1,084) $ 90 $(36) $(157) $ (873) ======= ======== ===== ==== ===== ======= FINANCIAL RATIOS Loss & LAE 116.6 % Acquisition expense 34.5 Underwriting expense 16.1 Dividends 3.2 ------- Expense ratio, including dividends 53.8 ------- Combined ratio 170.4 % ======= - ----------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------- SPECIALTY LINES 2003 RESULTS BEFORE CORPORATE REINSURANCE INSURANCE SIGNIFICANT AGGREGATE BAD DEBT BAD DEBT 2003 ITEMS DEVELOPMENT (1) COVERS (2) PROVISION PROVISION RESULTS - -------------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 1,964 $ 16 $ (32) $ - $ - $ 1,948 Claim and claim adjustment expenses 1,348 487 (59) - - 1,776 Acquisition expenses 424 - - 79 - 503 Underwriting expenses 215 - - - - 215 Policyholders' dividends 2 - - - - 2 ------- ------- ------ ---- ---- ------- Underwriting (loss) income (25) (471) 27 (79) - (548) ------- ------- ------ ---- ---- ------- Net investment income (loss) 223 - (10) - - 213 Other revenues 81 - - - - 81 Other expenses 72 - - - - 72 ------- ------- ------ ---- ---- ------- Income (loss) before income tax, minority interest and net realized investment gains 207 (471) 17 (79) - (326) Income tax (expense) benefit (63) 166 (6) 28 - 125 Minority interest - 9 - - - 9 ------- ------- ------ ---- ---- ------- Income (loss) before net realized 144 (296) 11 (51) - (192) investment gains Realized investment gains 94 - - - - 94 Income tax expense on realized investment gains (34) - - - - (34) ------- ------- ------ ---- ---- ------- Income (loss) from continuing operations 204 (296) 11 (51) - (132) Cumulative effect of a change in accounting principle - - - - - - ------- ------- ------ ---- ---- ------- Net income (loss) $ 204 $ (296) $ 11 $(51) $ - $ (132) ======= ======= ====== ==== ==== ======= FINANCIAL RATIOS Loss & LAE 91.2 % Acquisition expense 25.8 Underwriting expense 11.0 Dividends 0.1 Expense ratio, including dividends ------- Combined ratio 36.9 ------- 128.1 % ======= - --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------- P&C OPERATIONS 2003 RESULTS BEFORE CORPORATE REINSURANCE INSURANCE SIGNIFICANT AGGREGATE BAD DEBT BAD DEBT 2003 ITEMS DEVELOPMENT (1) COVERS (2) PROVISION PROVISION RESULTS - --------------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 5,102 $ (193) $ (297) $ - $ - $ 4,612 Claim and claim adjustment expenses 3,520 1,900 (539) - - 4,881 Acquisition expenses 1,045 - - 134 242 1,421 Underwriting expenses 646 - - - - 646 Policyholders' dividends 42 46 - - - 88 ------- ------- ------ ----- ----- ------- Underwriting (loss) income (151) (2,139) 242 (134) (242) (2,424) ------- ------- ------ ----- ----- ------- Net investment income (loss) 536 - (87) - - 449 Other revenues 246 - - - - 246 Other expenses 227 - - - - 227 ------- ------- ------ ----- ----- ------- Income (loss) before income tax, minority interest and net realized investment gains 404 (2,139) 155 (134) (242) (1,956) Income tax (expense) benefit (99) 750 (54) 47 85 729 Minority interest - 9 - - - 9 ------- ------- ------ ----- ----- ------- Income (loss) before net realized investment gains 305 (1,380) 101 (87) (157) (1,218) Realized investment gains 330 - - - - 330 Income tax expense on realized investment gains (117) - - - - (117) ------- ------- ------ ----- ----- ------- Income (loss) from continuing operations 518 (1,380) 101 (87) (157) (1,005) Cumulative effect of a change in accounting principle - - - - - - ------- ------- ------ ----- ----- ------- Net income (loss) $ 518 $(1,380) $ 101 $ (87) $(157) $(1,005) ======= ======= ====== ===== ===== ======= FINANCIAL RATIOS Loss & LAE 105.8 % Acquisition expense 30.8 Underwriting expense 14.1 Dividends 1.9 ------- Expense ratio, including dividends 46.8 ------- Combined ratio 152.6 % ======= - ---------------------------------------------------------------------------------------------------------------------------------
(1) Includes net prior year development for premiums, claims and allocated claim adjustment expense reserves, dividends, and change in reserves for unallocated claim adjustment expenses. (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 LOGO) CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT IMPACT OF SIGNIFICANT ITEMS
- ------------------------------------------------------------------------------------------------------------------------------------ NINE MONTHS ENDED CNA RE SEPTEMBER 30, 2003 2003 RESULTS BEFORE CORPORATE REINSURANCE INSURANCE SIGNIFICANT AGGREGATE BAD DEBT BAD DEBT 2003 (In millions) ITEMS DEVELOPMENT (1) COVERS (2) PROVISION PROVISION RESULTS - ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 410 $ 18 $ (57) $ - $ - $ 371 Claim and claim adjustment expenses 262 213 (104) - - 371 Acquisition expenses 85 - - 2 - 87 Underwriting expenses 44 - - - - 44 Policyholders' dividends - - - - - - ----- ------ --- --- ---- ------ Underwriting income (loss) 19 (195) 47 (2) - (131) ----- ------ --- --- ---- ------ Net investment income (loss) 72 - (17) - - 55 Other revenues 1 - - - - 1 Other expenses - - - - - - ----- ------ --- --- ---- ------ Income (loss) before income tax, minority interest and net realized investment gains 92 (195) 30 (2) - (75) Income tax (expense) benefit (26) 68 (11) 1 - 32 Minority interest - - - - - - ----- ------ --- --- ---- ------ Income (loss) before net realized investment gains 66 (127) 19 (1) - (43) Realized investment gains 54 - - - - 54 Income tax expense on realized investment gains (16) - - - - (16) ----- ------ --- --- ---- ------ Income (loss) from continuing operations 104 (127) 19 (1) - (5) Cumulative effect of a change in accounting principle - - - - - - ----- ------ --- --- ---- ------ Net income (loss) $ 104 $ (127) $ 19 $(1) $ - $ (5) ===== ====== ===== === ==== ====== FINANCIAL RATIOS Loss & LAE 100.0 % Acquisition expense 23.6 Underwriting expense 11.7 Dividends - ------ Expense ratio, including dividends 35.3 ------ Combined ratio 135.3 % ====== - -------------------------------------------------------------------------------------------------------------------------
TOTAL P&C SEGMENTS 2003 RESULTS BEFORE CORPORATE REINSURANCE INSURANCE SIGNIFICANT AGGREGATE BAD DEBT BAD DEBT 2003 ITEMS DEVELOPMENT (1) COVERS (2) PROVISION PROVISION RESULTS - ------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 5,512 $ (175) $ (354) $ - $ - $ 4,983 Claim and claim adjustment expenses 3,782 2,113 (643) - - 5,252 Acquisition expenses 1,130 - - 136 242 1,508 Underwriting expenses 690 - - - - 690 Policyholders' dividends 42 46 - - - 88 ------- ------- ------ ---- ----- ------- Underwriting income (loss) (132) (2,334) 289 (136) (242) (2,555) ------- ------- ------ ---- ----- ------- Net investment income (loss) 608 - (104) - - 504 Other revenues 247 - - - - 247 Other expenses 227 - - - - 227 ------- ------- ------ ---- ----- ------- Income (loss) before income tax, 496 (2,334) 185 (136) (242) (2,031) minority interest and net realized investment gains (125) 818 (65) 48 85 761 Income tax (expense) benefit - 9 - - - 9 Minority interest ------- ------- ------ ---- ----- ------- Income (loss) before net realized investment gains 371 (1,507) 120 (88) (157) (1,261) Realized investment gains 384 - - - - 384 Income tax expense on realized investment gains (133) - - - - (133) ------- ------- ------ ---- ----- ------- Income (loss) from continuing operations 622 (1,507) 120 (88) (157) (1,010) Cumulative effect of a change in accounting principle - - - - - - ------- ------- ------ ---- ----- ------- Net income (loss) $ 622 $(1,507) $ 120 $(88) $(157) $(1,010) ======= ======= ====== ==== ===== ======= FINANCIAL RATIOS Loss & LAE 105.4 % Acquisition expense 30.3 Underwriting expense 13.8 Dividends 1.8 ------- Expense ratio, including dividends 45.9 ------- Combined ratio 151.3 % ======= - -------------------------------------------------------------------------------------------------------------------------
(1) Includes net prior year development for premiums, claims and allocated claim adjustment expense reserves, dividends, and change in reserves for unallocated claim adjustment expenses. (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 (CNA LOGO) IMPACT OF SIGNIFICANT ITEMS
- ------------------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED STANDARD LINES SEPTEMBER 30, 2002 2002 RESULTS BEFORE CORPORATE REINSURANCE INSURANCE SIGNIFICANT AGGREGATE BAD DEBT BAD DEBT 2002 (In millions) ITEMS DEVELOPMENT (1) COVERS (2) PROVISION PROVISION RESULTS - ------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 1,032 $ (40) $ - $ - $ - $ 992 Claim and claim adjustment expenses 780 (178) - - - 602 Acquisition expenses 151 - - - - 151 Underwriting expenses 132 - - - - 132 Policyholders' dividends 20 6 - - - 26 ------- ------- --- --- --- ----- Underwriting (loss) income (51) 132 - - - 81 ------- ------- --- --- --- ----- Net investment income 67 - - - - 67 Other revenues 80 - - - - 80 Other expenses 75 - - - - 75 ------- ------- --- --- --- ----- Income (loss) before income tax, minority interest and net realized investment losses 21 132 - - - 153 Income tax (expense) benefit (2) (46) - - - (48) Minority interest - - - - - - ------- ------- --- --- --- ----- Income (loss) before net realized investment losses 19 86 - - - 105 Realized investment losses (27) - - - - (27) Income tax benefit on realized investment losses 10 - - - - 10 ------- ------- --- --- --- ----- Income (loss) from continuing operations 2 86 - - - 88 Cumulative effect of a change in accounting principle - - - - - - ------- ------- --- --- --- ----- Net income (loss) $ 2 $ 86 $ - $ - $ - $ 88 ======= ======= === === === ===== FINANCIAL RATIOS Loss & LAE 60.6 % Acquisition expense 15.3 Underwriting expense 13.3 Dividends 2.6 ----- Expense ratio, including dividends 31.2 ----- Combined ratio 91.8 % ===== - -------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------- SPECIALTY LINES 2002 RESULTS BEFORE CORPORATE REINSURANCE INSURANCE SIGNIFICANT AGGREGATE BAD DEBT BAD DEBT 2002 ITEMS DEVELOPMENT (1) COVERS (2) PROVISION PROVISION RESULTS - ------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 588 $ 2 $ (39) $ - $ - $ 551 Claim and claim adjustment expenses 451 103 (55) - - 499 Acquisition expenses 122 - - - - 122 Underwriting expenses 69 - - - - 69 Policyholders' dividends - - - - - - ----- ----- ----- --- --- ----- Underwriting (loss) income (54) (101) 16 - - (139) ----- ----- ----- --- --- ----- Net investment income 54 - (5) - - 49 Other revenues 33 - - - - 33 Other expenses 31 - - - - 31 ----- ----- ----- --- --- ----- Income (loss) before income tax, minority interest and net realized investment losses 2 (101) 11 - - (88) Income tax (expense) benefit (7) 35 (4) - - 24 Minority interest (1) - - - - (1) ----- ----- ----- --- --- ----- Income (loss) before net realized investment losses (6) (66) 7 - - (65) Realized investment losses (15) - - - - (15) Income tax benefit on realized investment losses 4 - - - - 4 ----- ----- ----- --- --- ----- Income (loss) from continuing operations (17) (66) 7 - - (76) Cumulative effect of a change in accounting principle - - - - - - ----- ----- ----- --- --- ----- Net income (loss) $ (17) $ (66) $ 7 $ - $ - $ (76) ===== ===== ===== === === ===== FINANCIAL RATIOS Loss & LAE 90.7 % Acquisition expense 22.0 Underwriting expense 12.4 Dividends 0.2 ----- Expense ratio, including dividends 34.6 ----- Combined ratio 125.3 % ===== - -------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------- P&C OPERATIONS 2002 RESULTS BEFORE CORPORATE REINSURANCE INSURANCE SIGNIFICANT AGGREGATE BAD DEBT BAD DEBT 2002 ITEMS DEVELOPMENT (1) COVERS (2) PROVISION PROVISION RESULTS - ------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 1,620 $ (38) $ (39) $ - $ - $ 1,543 Claim and claim adjustment expenses 1,231 (75) (55) - - 1,101 Acquisition expenses 273 - - - - 273 Underwriting expenses 201 - - - - 201 Policyholders' dividends 20 6 - - - 26 ------- ------- ------ --- --- ------- Underwriting (loss) income (105) 31 16 - - (58) ------- ------- ------ --- --- ------- Net investment income (loss) 121 - (5) - - 116 Other revenues 113 - - - - 113 Other expenses 106 - - - - 106 ------- ------- ------ --- --- ------- Income before income tax, minority interest and net realized investment losses 23 31 11 - - 65 Income tax (expense) (9) (11) (4) - - (24) Minority interest (1) - - - - (1) ------- ------- ------ --- --- ------- Income before net realized investment losses 13 20 7 - - 40 Realized investment losses (42) - - - - (42) Income tax benefit on realized investment losses 14 - - - - 14 ------- ------- ------ --- --- ------- (Loss) income from continuing operations (15) 20 7 - - 12 Cumulative effect of a change in accounting principle - - - - - ------- ------- ------ --- --- ------- Net (loss) income $ (15) $ 20 $ 7 $ - $ - $ 12 ======= ======= ====== === === ======= FINANCIAL RATIOS Loss & LAE 71.3 % Acquisition expense 17.7 Underwriting expense 13.0 Dividends 1.7 ------- Expense ratio, including dividends 32.4 ------- Combined ratio 103.7 % ======= - -------------------------------------------------------------------------------------------------------------------------
(1) Includes net prior year development for premiums, claims and allocated claim adjustment expense reserves, dividends, and change in reserves for unallocated claim adjustment expenses. (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 (CNA LOGO) IMPACT OF SIGNIFICANT ITEMS
- ------------------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED CNA RE SEPTEMBER 30, 2002 2002 RESULTS BEFORE CORPORATE REINSURANCE INSURANCE SIGNIFICANT AGGREGATE BAD DEBT BAD DEBT 2002 (In millions) ITEMS DEVELOPMENT (1) COVERS (2) PROVISION PROVISION RESULTS - ------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 132 $ 25 $ - $ - $ - $ 157 Claim and claim adjustment expenses 89 92 - - - 181 Acquisition expenses 34 - - - - 34 Underwriting expenses 14 - - - - 14 Policyholders' dividends - - - - - - ----- ----- ---- --- --- ----- Underwriting (loss) income (5) (67) - - - (72) ----- ----- ---- --- --- ----- Net investment income (loss) 28 - - - - 28 Other revenues 1 - - - - 1 Other expenses 2 - - - - 2 ----- ----- ---- --- --- ----- Income (loss) before income tax, minority interest and net realized investment losses 22 (67) - - - (45) Income tax (expense) benefit (3) 23 - - - 20 Minority interest - - - - - - ----- ----- ---- --- --- ----- Income (loss) before net realized investment losses 19 (44) - - - (25) Realized investment losses (5) - - - - (5) Income tax benefit on realized investment losses 4 - - - - 4 ----- ----- ---- --- --- ----- Income (loss) from continuing operations 18 (44) - - - (26) Cumulative effect of a change in accounting principle - - - - - - ----- ----- ---- --- --- ----- Net income (loss) $ 18 $ (44) $ - $ - $ - $ (26) ===== ===== ==== === === ===== FINANCIAL RATIOS Loss & LAE 115.4 % Acquisition expense 22.0 Underwriting expense 8.6 Dividends - ----- Expense ratio, including dividends 30.6 ----- Combined ratio 146.0 % ===== - -------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------- TOTAL P&C SEGMENTS 2002 RESULTS BEFORE CORPORATE REINSURANCE INSURANCE SIGNIFICANT AGGREGATE BAD DEBT BAD DEBT 2002 ITEMS DEVELOPMENT (1) COVERS (2) PROVISION PROVISION RESULTS - ------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 1,752 $ (13) $ (39) $ - $ - $ 1,700 Claim and claim adjustment expenses 1,320 17 (55) - - 1,282 Acquisition expenses 307 - - - - 307 Underwriting expenses 215 - - - - 215 Policyholders' dividends 20 6 - - - 26 ------- ------- ------- --- --- ------- Underwriting (loss) income (110) (36) 16 - - (130) ------- ------- ------- --- --- ------- Net investment income (loss) 149 - (5) - - 144 Other revenues 114 - - - - 114 Other expenses 108 - - - - 108 ------- ------- ------- --- --- ------- Income (loss) before income tax, minority interest and net realized investment losses 45 (36) 11 - - 20 Income tax (expense) benefit (12) 12 (4) - - (4) Minority interest (1) - - - - (1) ------- ------- ------- --- --- ------- Income (loss) before net realized investment losses 32 (24) 7 - - 15 Realized investment losses (47) - - - - (47) Income tax benefit on realized investment losses 18 - - - - 18 ------- ------- ------- --- --- ------- Income (loss) from continuing operations 3 (24) 7 - - (14) Cumulative effect of a change in accounting principle - - - - - - ------- ------- ------- --- --- ------- Net income (loss) $ 3 $ (24) $ 7 $ - $ - $ (14) ======= ======= ======= === === ======= FINANCIAL RATIOS Loss & LAE 75.4 % Acquisition expense 18.1 Underwriting expense 12.6 Dividends 1.5 ------- Expense ratio, including dividends 32.2 ------- Combined ratio 107.6 % ======= - -------------------------------------------------------------------------------------------------------------------------
(1) Includes net prior year development for premiums, claims and allocated claim adjustment expense reserves, dividends, and change in reserves for unallocated claim adjustment expenses. (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 LOGO) CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT IMPACT OF SIGNIFICANT ITEMS
- ------------------------------------------------------------------------------------------------------------------------- NINE MONTHS ENDED STANDARD LINES SEPTEMBER 30, 2002 2002 RESULTS BEFORE CORPORATE REINSURANCE INSURANCE SIGNIFICANT AGGREGATE BAD DEBT BAD DEBT 2002 (In millions) ITEMS DEVELOPMENT (1) COVERS (2) PROVISION PROVISION RESULTS - ------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 3,084 $ (44) $ - $ - $ - $ 3,040 Claim and claim adjustment expenses 2,340 (149) - - - 2,191 Acquisition expenses 536 - - - - 536 Underwriting expenses 379 - - - - 379 Policyholders' dividends 51 6 - - - 57 ------- ------- ------- --- --- ------- Underwriting (loss) income (222) 99 - - - (123) ------- ------- ------- --- --- ------- Net investment income (loss) 304 - - - - 304 Other revenues 243 - - - - 243 Other expenses 216 - - - - 216 ------- ------- ------- --- --- ------- Income (loss) before income tax, minority interest and net realized investment losses 109 99 - - - 208 Income tax (expense) benefit (18) (35) - - - (53) Minority interest - - - - - - ------- ------- ------- --- --- ------- Income (loss) before net realized investment losses 91 64 - - - 155 Realized investment losses (51) - - - - (51) Income tax benefit on realized investment losses 18 - - - - 18 ------- ------- ------- --- --- ------- Income (loss) from continuing operations 58 64 - - - 122 Cumulative effect of a change in accounting principle - - - - - - ------- ------- ------- --- --- ------- Net income (loss) $ 58 $ 64 $ - $ - $ - $ 122 ======= ======= ======= === === ======= FINANCIAL RATIOS Loss & LAE 72.1 % Acquisition expense 17.6 Underwriting expense 12.4 Dividends 1.9 ------- Expense ratio, including dividends 31.9 ------- Combined ratio 104.0 % ======= - -------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------- SPECIALTY LINES 2002 RESULTS BEFORE CORPORATE REINSURANCE INSURANCE SIGNIFICANT AGGREGATE BAD DEBT BAD DEBT 2002 ITEMS DEVELOPMENT (1) COVERS (2) PROVISION PROVISION RESULTS - ------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 1,640 $ (7) $ (39) $ - $ - $ 1,594 Claim and claim adjustment expenses 1,198 95 (55) - - 1,238 Acquisition expenses 333 - - - - 333 Underwriting expenses 195 - - - - 195 Policyholders' dividends 2 - - - - 2 ------- ------- ------ --- --- ------- Underwriting (loss) income (88) (102) 16 - - (174) ------- ------- ------ --- --- ------- Net investment income (loss) 189 - (5) - - 184 Other revenues 120 - - - - 120 Other expenses 87 - - - - 87 ------- ------- ------ --- --- ------- Income (loss) before income tax, minority interest and net realized investment losses 134 (102) 11 - - 43 Income tax (expense) benefit (53) 34 (4) - - (23) Minority interest (11) - - - - (11) ------- ------- ------ --- --- ------- Income (loss) before net realized investment losses 70 (68) 7 - - 9 Realized investment losses (46) - - - - (46) Income tax benefit on realized investment losses 14 - - - - 14 ------- ------- ------ --- --- ------- Income (loss) from continuing operations 38 (68) 7 - - (23) Cumulative effect of a change in accounting principle (48) - - - - (48) ------- ------- ------ --- --- ------- Net income (loss) $ (10) $ (68) $ 7 $ - $ - $ (71) ======= ======= ====== === === ======= FINANCIAL RATIOS Loss & LAE 77.6 % Acquisition expense 20.9 Underwriting expense 12.3 Dividends 0.1 ------- Expense ratio, including dividends 33.3 ------- Combined ratio 110.9 % ======= - ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------ P&C OPERATIONS 2002 RESULTS BEFORE CORPORATE REINSURANCE INSURANCE SIGNIFICANT AGGREGATE BAD DEBT BAD DEBT 2002 ITEMS DEVELOPMENT(1) COVERS (2) PROVISION PROVISION RESULTS - ------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 4,724 $ (51) $ (39) $ - $ - $ 4,634 Claim and claim adjustment expenses 3,538 (54) (55) - - 3,429 Acquisition expenses 869 - - - - 869 Underwriting expenses 574 - - - - 574 Policyholders' dividends 53 6 - - - 59 ------- ------- ------ --- --- ------- Underwriting (loss) income (310) (3) 16 - - (297) ------- ------- ------ --- --- ------- Net investment income (loss) 493 - (5) - - 488 Other revenues 363 - - - - 363 Other expenses 303 - - - - 303 ------- ------- ------ --- --- ------- Income (loss) before income tax, minority interest and net realized investment losses 243 (3) 11 - - 251 Income tax expense (71) (1) (4) - - (76) Minority interest (11) - - - - (11) ------- ------- ------ --- --- ------- Income (loss) before net realized investment losses 161 (4) 7 - - 164 Realized investment losses (97) - - - - (97) Income tax benefit on realized investment losses 32 - - - - 32 ------- ------- ------ --- --- ------- Income (loss) from continuing operations 96 (4) 7 - - 99 Cumulative effect of a change in accounting principle (48) - - - - (48) ------- ------- ------ --- --- ------- Net income (loss) $ 48 $ (4) $ 7 $ - $ - $ 51 ======= ======= ====== === === ======= FINANCIAL RATIOS Loss & LAE 74.0 % Acquisition expense 18.8 Underwriting expense 12.3 Dividends 1.3 ------- Expense ratio, including dividends 32.4 ------- Combined ratio 106.4 % ======= - -------------------------------------------------------------------------------------------------------------------------
(1) Includes net prior year development for premiums, claims and allocated claim adjustment expense reserves, dividends, and change in reserves for unallocated claim adjustment expenses. (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 LOGO) CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT IMPACT OF SIGNIFICANT ITEMS
- ------------------------------------------------------------------------------------------------------------------------- NINE MONTHS ENDED CNA RE SEPTEMBER 30, 2002 2002 RESULTS BEFORE CORPORATE REINSURANCE INSURANCE SIGNIFICANT AGGREGATE BAD DEBT BAD DEBT 2002 (In millions) ITEMS DEVELOPMENT (1) COVERS (2) PROVISION PROVISION RESULTS - ------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 420 $ 103 $ (61) $ - $ - $ 462 Claim and claim adjustment expenses 291 177 (93) - - 375 Acquisition expenses 103 - - - - 103 Underwriting expenses 46 - - - - 46 Policyholders' dividends - - - - - - ----- ------ ----- --- --- ----- Underwriting (loss) income (20) (74) 32 - - (62) ----- ------ ----- --- --- ----- Net investment income (loss) 114 - (5) - - 109 Other revenues 2 - - - - 2 Other expenses 2 - - - - 2 ----- ------ ----- --- --- ----- Income (loss) before income tax, minority interest and net realized investment losses 94 (74) 27 - - 47 Income tax (expense) benefit (25) 26 (9) - - (8) Minority interest - - - - - - ----- ------ ----- --- --- ----- Income (loss) before net realized investment losses 69 (48) 18 - - 39 Realized investment losses (2) - - - - (2) Income tax benefit on realized investment losses 5 - - - - 5 ----- ------ ----- --- --- ----- Income (loss) from continuing operations 72 (48) 18 - - 42 Cumulative effect of a change in accounting principle - - - - - - ----- ------ ----- --- --- ----- Net income (loss) $ 72 $ (48) $ 18 $ - $ - $ 42 ===== ====== ===== === === ===== FINANCIAL RATIOS Loss & LAE 81.2 % Acquisition expense 22.4 Underwriting expense 9.8 Dividends - ----- Expense ratio, including dividends 32.2 ----- Combined ratio 113.4 % ===== - ---------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------- TOTAL P&C SEGMENTS 2002 RESULTS BEFORE CORPORATE REINSURANCE INSURANCE SIGNIFICANT AGGREGATE BAD DEBT BAD DEBT 2002 ITEMS DEVELOPMENT (1) COVERS (2) PROVISION PROVISION RESULTS - ------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 5,144 $ 52 $ (100) $ - $ - $ 5,096 Claim and claim adjustment expenses 3,829 123 (148) - - 3,804 Acquisition expenses 972 - - - - 972 Underwriting expenses 620 - - - - 620 Policyholders' dividends 53 6 - - - 59 ------- ------- ------ --- --- ------- Underwriting (loss) income (330) (77) 48 - - (359) ------- ------- ------ --- --- ------- Net investment income (loss) 607 - (10) - - 597 Other revenues 365 - - - - 365 Other expenses 305 - - - - 305 ------- ------- ------ --- --- ------- Income (loss) before income tax, minority interest and net realized investment losses 337 (77) 38 - - 298 Income tax (expense) benefit (96) 25 (13) - - (84) Minority interest (11) - - - - (11) ------- ------- ------ --- --- ------- Income (loss) before net realized investment losses 230 (52) 25 - - 203 Realized investment losses (99) - - - - (99) Income tax benefit on realized investment losses 37 - - - - 37 ------- ------- ------ --- --- ------- Income (loss) from continuing operations 168 (52) 25 - - 141 Cumulative effect of a change in accounting principle (48) - - - - (48) ------- ------- ------ --- --- ------- Net income (loss) $ 120 $ (52) $ 25 $ - $ - $ 93 ======= ======= ======= === === ======== FINANCIAL RATIOS Loss & LAE 74.6 % Acquisition expense 19.1 Underwriting expense 12.1 Dividends 1.2 -------- 32.4 Expense ratio, including dividends -------- Combined ratio 107.0 % ======== - --------------------------------------------------------------------------------------------------------------------------
(1) Includes net prior year development for premiums, claims and allocated claim adjustment expense reserves, dividends, and change in reserves for unallocated claim adjustment expenses. (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 LOGO) CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY AND CASUALTY BUSINESS SUMMARY OF LOSS, ALAE AND DIVIDEND DEVELOPMENT BY SEGMENT AND LINE OF BUSINESS
- --------------------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED ACCIDENT YEAR SEPTEMBER 30 (In millions) 2002 2001 2000 1999 1998 & P TOTAL - --------------------------------------------------------------------------------------------------------------------------- BY SEGMENT Standard Lines (1) $ 158 $ 46 $ (200) $ (144) $ (1,004) $ (1,144) Specialty Lines (9) (80) (55) (18) (64) (226) CNA Re 42 (44) (42) (22) (70) (136) Corporate & Other - - - 8 (854) (846) ------- ------- ------ ------- -------- -------- Total $ 191 $ (78) $ (297) $ (176) $ (1,992) $ (2,352) ======= ======= ====== ======= ======== ======== BY LINE OF BUSINESS Commercial Automobile Liability $ 20 $ 37 $ (17) $ (14) $ (32) $ (6) Workers Compensation 48 58 (147) 7 (404) (438) Commercial Multiple-Peril 66 (19) (32) (85) (304) (374) Medical Malpractice (6) (35) (18) 2 (44) (101) Special Liability 19 (1) (13) (6) 4 3 Other Liability (32) (107) (9) (49) (863) (1,060) Special Property 52 40 (18) (14) (12) 48 Fidelity/Surety (23) (15) 19 9 13 3 Reinsurance A, B, C 52 (23) (31) (4) (145) (151) Products Liability (11) (15) (36) (33) (148) (243) Other 6 2 5 11 (57) (33) ------- ------- ------ ------- -------- -------- Total $ 191 $ (78) $ (297) $ (176) $ (1,992) $ (2,352) ======= ======= ====== ======= ======== ======== - ---------------------------------------------------------------------------------------------------------------------------
(1) Includes $9 million of interest accretion and $46 million of dividend development. 26 (CNA LOGO) CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT GROSS LOSS AND ALAE RATIOS BY SEGMENT AND LINE OF BUSINESS CCC, CIC AND GALWAY
- ------------------------------------------------------------------------------------------------------------------- SEPTEMBER 30, 2003 ACCIDENT YEAR 2003 2002 2001 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------- BY SEGMENT Standard Lines 60 % 61 % 88 % 99 % 109 % 95 % 81 % 74 % Specialty Lines 62 67 114 102 98 89 87 72 CNA Re 61 61 173 94 120 124 91 83 P&C Segments 61 63 102 99 108 96 83 74 Corporate & Other 77 68 66 82 73 80 58 72 Total 64 % 64 % 93 % 96 % 101 % 92 % 78 % 74 % BY LINE OF BUSINESS Commercial Automobile Liability 63 % 66 % 92 % 102 % 103 % 95 % 90 % 74 % Workers Compensation 64 66 80 96 104 95 75 65 Commercial Multiple-Peril 62 62 80 96 110 92 80 83 Medical Malpractice 63 66 103 124 127 116 136 118 Special Liability 56 55 161 93 98 72 78 75 Other Liability 65 72 96 111 133 126 90 72 Special Property 52 49 87 63 68 79 59 76 Auto Physical Damage 63 54 64 74 69 67 62 65 Reinsurance A, B and C 58 64 N/A 101 125 112 73 75 Other 75 70 79 94 74 69 63 67 Total 64 % 64 % 93 % 96 % 101 % 92 % 78 % 74 % - -------------------------------------------------------------------------------------------------------------------
27 (CNA LOGO) CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT NET LOSS AND ALAE RATIOS BY SEGMENT AND LINE OF BUSINESS CCC, CIC AND GALWAY
- ------------------------------------------------------------------------------------------------------------------- SEPTEMBER 30, 2003 ACCIDENT YEAR 2003 2002 2001 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------- BY SEGMENT Standard Lines 62 % 64 % 59 % 81 % 94 % 95 % 80 % 76 % Specialty Lines 66 74 87 103 106 97 85 78 CNA Re 65 59 105 90 118 129 97 90 P&C Segments 63 66 69 87 100 98 83 77 Corporate & Other (1) N/A N/A N/A N/A 77 80 67 71 Total 63 % 66 % 69 % 86 % 95 % 94 % 79 % 76 % BY LINE OF BUSINESS Commercial Automobile Liability 64 % 68 % 79 % 88 % 99 % 98 % 93 % 80 % Workers Compensation 64 68 31 76 90 97 75 65 Commercial Multiple-Peril 65 64 68 83 102 94 86 85 Medical Malpractice 62 69 116 135 144 127 142 122 Special Liability 58 58 70 93 83 70 76 62 Other Liability 67 77 73 87 111 118 87 77 Special Property 47 36 90 70 65 81 64 81 Auto Physical Damage 52 52 65 70 70 73 64 66 Reinsurance A, B and C 63 61 193 101 129 115 80 84 Other 55 71 97 118 82 74 62 71 Total 63 % 66 % 69 % 86 % 95 % 94 % 79 % 76 % - -------------------------------------------------------------------------------------------------------------------
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