-----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, ODp4QWtNe1XtCLUN4wk1GIbFqYQv+QugIecDQ6tAYNKyWBQmB49GtWaMU+/Dey+B AvO8lcKJ4EaKjOlDlJ/Jcg== 0000950137-04-000972.txt : 20040213 0000950137-04-000972.hdr.sgml : 20040213 20040213172919 ACCESSION NUMBER: 0000950137-04-000972 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20040213 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040213 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: 04600792 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 c82843e8vk.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) February 13, 2004 ------------------------------------- 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 February 12, 2004, providing information on changes to CNA's Board of Directors 99.2 CNA Financial Corporation press release, issued February 12, 2004, providing information on fourth quarter and year-end 2003 results of operations 99.3 CNA Financial Corporation financial supplement, issued February 12, 2004, providing supplemental financial information on fourth quarter and year-end 2003 results of operations Item 9. Regulation FD Disclosure On February 12, 2004 CNA Financial Corporation issued a press release announcing the appointment of Paul J. Liska to its Board of Directors and the departure of Antoinette Cook Bush. The press release is furnished as Exhibit 99.1 to this Form 8-K. 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 February 12, 2004 CNA Financial Corporation issued a press release and financial supplement providing information on its results of operations for the fourth quarter and year-end 2003. The press release is furnished as Exhibit 99.2 and the financial supplement is furnished as Exhibit 99.3 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: February 13, 2004 /s/ Robert V. Deutsch -------------------------------- By: Robert V. Deutsch Its: Executive Vice President and Chief Financial Officer Page 2 of 2 EX-99.1 3 c82843exv99w1.txt FINANCIAL SUPPLEMENT EXHIBIT 99.1 [CNA LOGO] FOR IMMEDIATE RELEASE - -------------------------------------------------------------------------------- CONTACT: MEDIA: ANALYSTS: Charles M. Boesel, 312/822-2592 Dawn M. Jaffray, 312/822-7757 Katrina W. Parker, 312/822-5167 CNA ANNOUNCES APPOINTMENT OF PAUL J. LISKA TO BOARD OF DIRECTORS AND DEPARTURE OF ANTOINETTE COOK BUSH CHICAGO, FEBRUARY 12, 2004 -- Today, CNA Financial Corporation (NYSE: CNA) announced that Paul J. Liska joined its Board of Directors, effective February 11, 2004. Mr. Liska will serve as chairman of its Audit Committee and as a member of its Finance and Executive Committees. "We are delighted to welcome Paul Liska to our Board," said Stephen W. Lilienthal, chief executive officer of CNA. "We look forward to his counsel and support, and particularly to the wealth of financial experience he brings to our Audit Committee and Board." Mr. Liska was President, Credit and Financial Products at Sears Roebuck and Co. prior to the sale of its credit card business to Citicorp in 2003. From 2001 to late 2002, he was Chief Financial Officer at Sears. From 1997 to 2001, he served as Executive Vice President and Chief Financial Officer at The St. Paul Companies. Mr. Liska is an alumnus of the J.L. Kellogg Graduate School of Management at Northwestern University. CNA also announced today the departure of Antoinette Cook Bush from its Board of Directors, effective today. Ms. Bush is leaving to resume her legal practice as a partner in the Washington, D.C. offices of Skadden, Arps, Slate, Meagher & Flom LLP. "CNA has been strengthened and enriched by the integrity and acumen that Toni Bush has demonstrated throughout her years of service to the company," Mr. Lilienthal observed. "Her contributions will be missed, and we wish her success and satisfaction in her new position." Ms. Bush joined CNA's Board of Directors in 1993 and has served on its Executive, Finance, Incentive Compensation and Audit Committees. 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. 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. Page 1 of 2 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 2 of 2 EX-99.2 4 c82843exv99w2.txt PRESS RELEASE EXHIBIT 99.2 [CNA LOGO] FOR IMMEDIATE RELEASE - -------------------------------------------------------------------------------- CONTACT: MEDIA: ANALYSTS: Charles M. Boesel, 312/822-2592 Dawn M. Jaffray, 312/822-7757 Katrina W. Parker, 312/822-5167 CNA FINANCIAL ANNOUNCES 4TH QUARTER AND YEAR-END 2003 RESULTS CHICAGO, FEBRUARY 12, 2004 --- CNA Financial Corporation (NYSE: CNA) today reported net income for the fourth quarter of 2003 of $174 million, or $0.67 per share, as compared with net income of $50 million, or $0.21 per share, for the same period in 2002. The net loss for the year ended December 31, 2003 was $1,433 million, or $6.58 per share, compared with net income of $155 million, or $0.68 per share, in 2002. The increase in fourth quarter of 2003 results over the prior period is primarily due to strong results in Property and Casualty Operations. Rate increases, solid production of new business, continued underwriting discipline and a focus on expense management all contributed to the 99.1% combined ratio for Property and Casualty Operations in the fourth quarter of 2003. The decrease in net results for the year ended December 31, 2003 over the prior year was principally a result of unfavorable net prior year development of $1,849 million after-tax and an increase in bad debt reserves for insurance and reinsurance receivables of $396 million after-tax. "A review of the strategic options for all of CNA's businesses was completed to provide the greatest opportunity to maximize shareholder value and concentrate efforts to focus solely on Property and Casualty Operations," said Stephen W. Lilienthal, Chairman and Chief Executive Officer of the CNA insurance companies. "Despite the actions that were taken in 2003 to strengthen the balance sheet, CNA's Property and Casualty Operations have finished the year with solid accident year results driven by strong support from our distribution network, solid rate increases and excellence in underwriting and claims." As part of the previously announced capital plan, in order to replenish statutory capital of CNA's insurance subsidiaries adversely impacted by the 2003 charges discussed above, Loews Corporation (Loews), the 90% owner of CNA's outstanding shares, purchased $750 million of a new series of CNA convertible preferred stock in November of 2003. Loews committed additional capital support of up to $500 million by February 27, 2004 through the purchase of surplus notes of Continental Casualty Company (CCC), CNA's principal insurance subsidiary, in the event certain additions to CCC's statutory capital are not achieved through asset sales. In addition, Loews committed to an additional $150 million of capital support by March 31, 2004, in a form to be determined. Page 1 of 10 As a result of the sale of the Group Benefits business, CNA estimates that Loews will purchase $45 million of CCC surplus notes pursuant to such commitment. In addition, CNA has recently announced that it has entered into an agreement to sell its individual life business and has estimated that this sale will result in an addition to CCC's statutory surplus in excess of $400 million. However, the sale of the individual life business, which is subject to customary closing conditions and regulatory approvals, is not expected to be consummated by February 26, 2004. As a result, Loews will be obligated to purchase $300 million of additional CCC surplus notes. Following the consummation of the individual life sale, CNA plans to seek approval from the insurance regulatory authority for the repayment of the surplus notes purchased in relation to such sale, although no assurance can be given that sale of the individual life business will be consummated or that the regulatory approval will be obtained. Realized investment results improved $42 million after-tax in the fourth quarter of 2003 as compared with the same period in 2002. The increase was due primarily to a reduction in impairment losses for other-than-temporary declines in fair value for fixed maturity and equity securities, partially offset by a $130 million after-tax loss on the previously announced sale of the Group Benefits business. After-tax investment related impairment losses were $12 million for the fourth quarter of 2003 as compared with $232 million for the same period in 2002.
================================================================================================ NET INCOME - ------------------------------------------------------------------------------------------------ RESULTS FOR THE RESULTS FOR THE THREE MONTHS ENDED YEAR ENDED DECEMBER 31 DECEMBER 31 - ------------------------------------------------------------------------------------------------ ($ MILLIONS) 2003 2002 2003 2002 - ------------------------------------------------------------------------------------------------ INCOME (LOSS) BEFORE NET REALIZED INVESTMENT GAINS (LOSSES) $ 194 $ 112 $(1,718) $ 396 NET REALIZED INVESTMENT (LOSSES) GAINS (20) (62) 285 (149) --------------------------------------------- INCOME (LOSS) FROM CONTINUING OPERATIONS 174 50 (1,433) 247 LOSS FROM DISCONTINUED OPERATIONS (a) - - - (35) CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE (b) - - - (57) ================================================================================================ NET INCOME (LOSS) $ 174 $ 50 $(1,433) $ 155 ================================================================================================
(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. Page 2 of 10
=========================================================================================== PER SHARE RESULTS AVAILABLE TO COMMON STOCKHOLDERS - ------------------------------------------------------------------------------------------- RESULTS FOR THE RESULTS FOR THE THREE MONTHS ENDED YEAR ENDED DECEMBER 31 DECEMBER 31 - ------------------------------------------------------------------------------------------- 2003 (a) 2002 2003 (a) 2002 --------------------------------------- INCOME (LOSS) FROM CONTINUING OPERATIONS (b) $0.67 $0.21 $(6.58) $1.10 LOSS FROM DISCONTINUED OPERATIONS (c) - - - (0.16) CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE (d) - - - (0.26) =========================================================================================== NET INCOME (LOSS) $0.67 $0.21 $(6.58) $0.68 ===========================================================================================
(a) Included in the weighted average number of common shares for the three months and year ended December 31, 2003 are the effects of additional common stock equivalents related to the November of 2003 sale of $750 million of convertible preferred shares to Loews Corporation. The preferred shares are convertible into 32,327,015 shares of CNA common stock. The conversion is expected to occur in 2004. (b) The three months and year ended December 31, 2003 per share results available to common stockholders are reduced by $15 million and $60 million, or $0.06 per share and $0.27 per share, of accumulated but undeclared preferred stock dividends. The three months and year ended December 31, 2002 per share results available to common stockholders were both reduced by $2 million, or $0.01 per share, of accumulated but undeclared preferred stock dividends. (c) During the first quarter of 2002, CNA Vida, a Chilean-based life insurance company, was sold and reported as discontinued operations in accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets. (d) Represents the effect of the adoption of SFAS 142, which was a change in accounting for goodwill and indefinite-lived intangible assets in 2002.
=========================================================================================================================== SEGMENT RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2003 - --------------------------------------------------------------------------------------------------------------------------- STANDARD SPECIALTY P&C CNA P&C GROUP LIFE CORPORATE ($ MILLIONS) LINES LINES OPS. RE SEGMENTS OPS. OPS. & OTHER TOTAL - --------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) BEFORE NET REALIZED INVESTMENT GAINS (LOSSES) $ 70 $ 81 $ 151 $ 16 $ 167 $ 30 $ 8 $ (11) $ 194 NET REALIZED INVESTMENT GAINS (LOSSES) 66 34 100 12 112 (127) 17 (22) (20) =========================================================================================================================== NET INCOME (LOSS) $ 136 $ 115 $ 251 $ 28 $ 279 $ (97) $ 25 $ (33) $ 174 ===========================================================================================================================
============================================================================================================================ SEGMENT RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2002 ============================================================================================================================ STANDARD SPECIALTY P&C CNA P&C GROUP LIFE CORPORATE ($ MILLIONS) LINES LINES OPS. RE SEGMENTS OPS. OPS. & OTHER TOTAL - ---------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) BEFORE NET REALIZED INVESTMENT GAINS (LOSSES) $ 42 $ 19 $ 61 $ 26 $ 87 $ 31 $ 5 $ (11) $ 112 NET REALIZED INVESTMENT (LOSSES) GAINS (23) (20) (43) 68 25 (31) (33) (23) (62) ============================================================================================================================ NET INCOME (LOSS) $ 19 $ (1) $ 18 $ 94 $ 112 $ - $ (28) $ (34) $ 50 ============================================================================================================================
Page 3 of 10
=================================================================================================================================== SEGMENT RESULTS FOR THE YEAR ENDED DECEMBER 31, 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) $ (956) $(111) $(1,067) $ (27) $(1,094) $ 100 $ 45 $ (769) $(1,718) NET REALIZED INVESTMENT GAINS (LOSSES) 219 94 313 50 363 (131) 23 30 285 =================================================================================================================================== NET (LOSS) INCOME $ (737) $ (17) $ (754) $ 23 $ (731) $ (31) $ 68 $ (739) $(1,433) ===================================================================================================================================
The following table highlights the after-tax significant items for the year ended December 31, 2003.
=================================================================================================================================== AFTER-TAX SIGNIFICANT ITEMS (a) YEAR ENDED DECEMBER 31, 2003 - ----------------------------------------------------------------------------------------------------------------------------------- STANDARD SPECIALTY P&C CNA P&C GROUP LIFE CORPORATE ($ MILLIONS) LINES LINES OPS. RE SEGMENTS OPS. OPS. & OTHER TOTAL - ----------------------------------------------------------------------------------------------------------------------------------- NET PRIOR YEAR DEVELOPMENT (b) $ (905) $(279) $(1,184) $(97) $(1,281) $ - $ - $ (568) $ (1,849) INCREASE IN BAD DEBT PROVISION FOR REINSURANCE RECEIVABLES (36) (51) (87) (1) (88) - - (151) (239) INCREASE IN BAD DEBT PROVISION FOR INSURANCE RECEIVABLES (157) - (157) - (157) - - - (157) INCREASE IN UNALLOCATED CLAIM ADJUSTMENT EXPENSE (ULAE) RESERVES (3) (18) (21) - (21) - - (44) (65) =================================================================================================================================== TOTAL $(1,101) $(348) $ (1,449) $(98) $(1,547) $ - $ - $ (763) $ (2,310) ===================================================================================================================================
(a) Additional after-tax items not included in the above table that have an adverse effect on the year ended December 31, 2003 results included a $48 million increase in certain insurance-related assessments, $30 million of dividend reserve development, $27 million increase in individual long term care reserves and $96 million of interest expense related to additional cessions to corporate aggregate and other reinsurance contracts. (b) Net prior year development for the year ended December 31, 2003 included both premium development and claim and allocated claim adjustment expense reserve development. Page 4 of 10
=================================================================================================================================== SEGMENT RESULTS FOR THE YEAR ENDED DECEMBER 31, 2002 - ----------------------------------------------------------------------------------------------------------------------------------- STANDARD SPECIALTY P&C CNA P&C GROUP LIFE CORPORATE ($ MILLIONS) LINES LINES OPS. RE SEGMENTS OPS. OPS. & OTHER TOTAL - ---------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) BEFORE NET REALIZED INVESTMENT GAINS (LOSSES) $ 197 $ 28 $ 225 $ 65 $ 290 $ 104 $ 94 $ (92) $ 396 NET REALIZED INVESTMENT (LOSSES) GAINS (56) (52) (108) 71 (37) (39) (74) 1 (149) -------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM CONTINUING OPERATIONS 141 (24) 117 136 253 65 20 (91) 247 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) $ 141 $ (72) $ 69 $ 136 $ 205 $ 65 $ (23) $ (92) $ 155 ===================================================================================================================================
(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.
==================================================================== PROPERTY & CASUALTY SEGMENTS GROSS WRITTEN PREMIUMS - -------------------------------------------------------------------- THREE MONTHS ENDED YEAR ENDED DECEMBER 31 DECEMBER 31 - -------------------------------------------------------------------- ($ MILLIONS) 2003 2002 2003 2002 - -------------------------------------------------------------------- STANDARD LINES $1,354 $1,010 $5,619 $5,027 SPECIALTY LINES 908 875 3,695 3,359 ---------------------------------------- TOTAL P&C OPERATIONS 2,262 1,885 9,314 8,386 CNA RE 44 154 572 732 ==================================================================== TOTAL P&C SEGMENTS $2,306 $2,039 $9,886 $9,118 ====================================================================
===================================================================== PROPERTY & CASUALTY SEGMENTS NET WRITTEN PREMIUMS - --------------------------------------------------------------------- THREE MONTHS ENDED YEAR ENDED DECEMBER 31 DECEMBER 31 - --------------------------------------------------------------------- ($ MILLIONS) 2003 2002 2003 2002 - --------------------------------------------------------------------- STANDARD LINES $ 974 $ 848 $3,802 $4,020 SPECIALTY LINES 745 643 2,809 2,383 ----------------------------------------- TOTAL P&C OPERATIONS 1,719 1,491 6,611 6,403 CNA RE 41 111 478 605 ===================================================================== TOTAL P&C SEGMENTS $1,760 $1,602 $7,089 $7,008 =====================================================================
===================================================================== GROUP AND LIFE OPERATIONS NET EARNED PREMIUMS - --------------------------------------------------------------------- THREE MONTHS ENDED YEAR ENDED DECEMBER 31 DECEMBER 31 - --------------------------------------------------------------------- ($ MILLIONS) 2003 2002 2003 2002 - --------------------------------------------------------------------- GROUP OPERATIONS (a) $ 330 $ 310 $1,312 $2,327 LIFE OPERATIONS 246 220 1,029 930 =====================================================================
(a) For the year ended December 31, 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. Page 5 of 10
============================================================================================= PROPERTY & CASUALTY CALENDAR YEAR LOSS RATIOS - --------------------------------------------------------------------------------------------- THREE MONTHS ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 - --------------------------------------------------------------------------------------------- 2003 2002 2003 2002 - --------------------------------------------------------------------------------------------- STANDARD LINES 67.7% 71.7% 102.5% 72.0% SPECIALTY LINES 67.7 75.6 84.9 77.1 TOTAL P&C OPERATIONS 67.7 73.1 95.1 73.9 CNA RE 84.3 71.1 95.2 78.4 TOTAL P&C SEGMENTS 69.1 72.9 95.2 74.2 TOTAL P&C COMPANIES (a) 75.2% 78.8% 110.5% 79.4% =============================================================================================
(a) P&C Companies includes Standard Lines, Specialty Lines, CNA Re and P&C business written in Group Operations, Life Operations and Corporate and Other, including asbestos, environmental pollution and mass tort exposures (APMT). The P&C Companies ratios exclude the impact of commutation transactions between CNA's property and casualty and life and group companies.
================================================================================================= PROPERTY & CASUALTY CALENDAR YEAR COMBINED RATIOS - ------------------------------------------------------------------------------------------------- THREE MONTHS ENDED DECEMBER 31 YEAR ENDED DECEMBER 31 - ------------------------------------------------------------------------------------------------- 2003 2002 2003 2002 - ------------------------------------------------------------------------------------------------- STANDARD LINES 101.8% 105.7% 150.7% 104.4% SPECIALTY LINES 95.1 104.9 119.2 109.3 TOTAL P&C OPERATIONS 99.1 105.4 137.6 106.1 CNA RE 100.9 97.8 124.7 109.1 TOTAL P&C SEGMENTS 99.3 104.6 136.6 106.4 TOTAL P&C COMPANIES (a) 105.0% 111.1% 154.2% 109.6% ===============================================================================================
(a) P&C Companies includes Standard Lines, Specialty Lines, CNA Re and P&C business written in Group Operations, Life Operations and Corporate and Other, including APMT. The P&C Companies ratios exclude the impact of commutation transactions between CNA's property and casualty and life and group companies.
========================================================================================================= PROPERTY & CASUALTY GROSS ACCIDENT YEAR LOSS RATIOS - --------------------------------------------------------------------------------------------------------- ACCIDENT YEAR 2003 ACCIDENT YEAR 2002 ACCIDENT YEAR 2002 EVALUATED AT EVALUATED AT EVALUATED AT DECEMBER 31, 2003 DECEMBER 31, 2002 DECEMBER 31, 2003 - --------------------------------------------------------------------------------------------------------- STANDARD LINES 65.8% 74.6% 67.5% SPECIALTY LINES 64.4 68.1 70.0 TOTAL P&C OPERATIONS 65.2 72.1 68.5 CNA RE 64.3 64.2 61.4 ========================================================================================================= TOTAL P&C SEGMENTS 65.2% 71.5% 67.9% =========================================================================================================
======================================================================================================= PROPERTY & CASUALTY NET ACCIDENT YEAR LOSS RATIOS - ------------------------------------------------------------------------------------------------------- ACCIDENT YEAR 2003 ACCIDENT YEAR 2002 ACCIDENT YEAR 2002 EVALUATED AT EVALUATED AT EVALUATED AT DECEMBER 31, 2003 DECEMBER 31, 2002 DECEMBER 31, 2003 - ------------------------------------------------------------------------------------------------------- STANDARD LINES 68.3% 75.3% 71.5% SPECIALTY LINES 68.1 71.7 72.8 TOTAL P&C OPERATIONS 68.2 74.1 72.0 CNA RE 69.2 69.4 62.5 ======================================================================================================= TOTAL P&C SEGMENTS 68.3% 73.7% 71.2% =======================================================================================================
Page 6 of 10 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. o Net written premiums increased $126 million for the fourth quarter of 2003 as compared with the same period in 2002. This increase was due primarily to increased rate and retention across most of Standard Lines businesses. o Standard Lines achieved average rate increases during the fourth quarter of 2003 of 12%. o Net results for the fourth quarter of 2003 increased $117 million as compared with the same period in 2002, primarily related to improved current net accident year loss ratios and improved net investment results, including increased limited partnership income. SPECIALTY LINES provides a broad array of professional, financial and specialty property and casualty products and services in the U.S. and abroad. o Net written premiums increased $102 million for the fourth quarter of 2003 as compared with the same period in 2002, due primarily to rate increases and new business in professional liability lines. o Specialty Lines achieved average rate increases during the fourth quarter of 2003 of 20%, primarily across most professional liability lines of business. o Net results for the fourth quarter of 2003 increased $116 million as compared with the same period in 2002, primarily related to improved current net accident year loss ratios and improved net investment results, including increased limited partnership income. CNA RE operated globally as a reinsurer in the broker market for treaty products and in the direct market for facultative products. o 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 and will manage the run-off of its retained liabilities. o Net written premiums decreased $70 million for the fourth quarter of 2003 as compared with the same period in 2002 primarily due to the decision to withdraw from the assumed reinsurance business. o Net results for the fourth quarter of 2003 decreased $66 million as compared to the same period in 2002, primarily related to a decrease in net investment results. Page 7 of 10 GROUP OPERATIONS provides group long term care and specialty medical products and investment products and services to employers, affinity groups and other entities that purchase insurance as a group. o On December 31, 2003, CNA sold its Group Benefits business to Hartford Financial Services Group, Inc. The business sold included group life and accident, and short and long term disability insurance. CNA`s group long term care and specialty medical businesses were excluded from the sale. CNA has also announced the decision to cease new sales in its institutional markets business. o Net results for the fourth quarter of 2003 decreased $97 million as compared with the same period in 2002, principally due to a decrease in net realized investment results. This decrease was primarily due to the $130 million after-tax loss recorded on the sale of the Group Benefits business during the fourth quarter of 2003. 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. o As previously announced, CNA has entered into a definitive agreement to sell its individual life insurance business to Swiss Re Life & Health America Inc. (Swiss Re) for approximately $690 million. The business sold includes term, universal and permanent life insurance policies and individual annuity products. CNA`s individual long term care and structured settlement businesses are excluded from the sale. CNA has also announced the decision to cease new sales in its structured settlement business. o Net earned premiums increased $26 million for the fourth 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. o Net results for the fourth quarter of 2003 increased $53 million as compared with the same period in 2002, primarily related to increased net realized investment results, favorable life settlement results and favorable life mortality, partially offset by unfavorable reserve strengthening for individual long term care due to increased morbidity. 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. o Net results for the fourth quarter of 2003 improved $1 million as compared with the same period in 2002. The net results in the fourth quarter of 2003 include increased net investment income, including increased limited partnership income. NET INVESTMENT INCOME Pretax net investment income of $436 million for the fourth quarter of 2003 decreased $2 million as compared with the same period in 2002. The change was primarily due to increased holdings in lower yielding tax-exempt and short term investment securities and the absence in 2003 of a $34 million pretax dividend income from Canary Wharf Group plc. These declines were partially offset by a $68 million pretax improvement in limited partnership income. Page 8 of 10 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. 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 10:00 A.M. TO 11:00 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 800-818-5264 OR FOR INTERNATIONAL CALLERS 913-981-4910. 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 FOR ONE WEEK UNTIL FEBRUARY 19, 2004 BY DIALING 888-203-1112 AND USING PASSCODE 254941 OR FOR INTERNATIONAL CALLERS 719-457-0820 AND USING PASSCODE 254941. IT WILL ALSO BE ARCHIVED LATER IN THE DAY FOR REPLAY ON OUR WEBSITE. FINANCIAL SUPPLEMENT INFORMATION RELATED TO THE FOURTH QUARTER RESULTS IS AVAILABLE ON THE INVESTOR RELATIONS PAGES OF THE CNA WEBSITE OR BY CONTACTING DAWN JAFFRAY AT 312-822-7757. Page 9 of 10 FORWARD-LOOKING STATEMENT The statements contained in this press release or made during the conference call referenced above, which are not historical facts, are forward-looking statements. When included in this press release or the conference call, 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 or of the conference call. The Company expressly disclaims any obligation or undertaking to release any updates or revisions to any forward-looking statement contained in this press release or made in the conference call 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 and the conference call may reference 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 the text of this press release and the financial supplement posted on the Company's website. # # # Page 10 of 10 EX-99.3 5 c82843exv99w3.txt PRESS RELEASE EXHIBIT 99.3 CNA FINANCIAL CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION DECEMBER 31, 2003 . . . CNA FINANCIAL CORPORATION Table of Contents December 31, 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 Statements 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 and Corporate & Other Segments 11-12 Property & Casualty 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 Gross Loss and ALAE Ratios by Segment and Line of Business 26 Net Loss and ALAE Ratios by Segment and Line of Business 27 Group Operations Segment - Historical GAAP Results of Operations 28 Life Operations Segment - Historical GAAP Results of Operations 29 Asbestos Summary by Policyholder Category 30
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 Statement of Financial Accounting Standards No. 144 (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 FINANCIAL CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION NON-GAAP FINANCIAL MEASURES This financial supplement presents certain GAAP and non-GAAP financial measures to provide information used by management to monitor the Company's operating performance. Management utilizes various financial measures to monitor the Company's insurance operations and investment portfolio. Underwriting results, which are derived from certain income statement amounts, are considered non-GAAP financial measures and are used by management to monitor performance of the Company's insurance operations. The Company's investment portfolio is monitored through analysis of various quantitative and qualitative factors, and certain decisions related to the sale or impairment of investments produce realized gains and losses. Net realized investment gains and losses, which are comprised of after-tax realized investment gains and losses net of participating policyholders' and minority interest, are a non-GAAP financial measure. Underwriting results are computed as net earned premiums less net incurred claims and the cost incurred to settle these claims, acquisition expenses and underwriting expenses. Management uses underwriting results and operating ratios to monitor insurance operations' results without the impact of certain factors, including investment income, other revenues, other expenses, minority interest, income tax benefit (expense) and net realized investment gains or losses. Management excludes these factors in order to analyze the direct relationship between the net earned premiums and the related claims and the cost incurred to settle these claims, acquisition expenses and underwriting expenses. Management excludes after-tax net realized investment gains or losses when analyzing the insurance operations because net realized investment gains or losses related to the Company's available-for-sale investment portfolio are largely discretionary, except for losses related to other-than-temporary impairments, and are generally driven by economic factors that are not necessarily consistent with key drivers of underwriting performance. Operating ratios are calculated using insurance results and are used by the insurance industry and regulators such as state departments of insurance and the National Association of Insurance Commissioners for financial regulation and as a basis of comparison among companies. The ratios presented in this financial supplement are calculated using GAAP financial results and include the loss and loss adjustment expense ratio (loss ratio) as well as the expense, dividend and combined ratios. The loss ratio is the percentage of net incurred claim and claim adjustment expenses to net earned premiums. The expense ratio is the percentage of underwriting and acquisition expenses, including the amortization of deferred acquisition costs, to net earned premiums. The dividend ratio is the ratio of dividends incurred to net earned premiums. The combined ratio is the sum of the loss, expense and dividend ratios. The Company's investment portfolio is monitored by management through analyses of various factors including unrealized gains and losses on securities, portfolio duration and exposure to interest rate, market and credit risk. Based on such analyses, the Company may impair an investment security in accordance with its policy, or sell a security. Such activities will produce realized gains and losses. While management uses various non-GAAP financial measures to monitor various aspects of the Company's performance, relying on any measure other than net income, which is the most directly comparable GAAP measure to underwriting results and realized gains and losses, is not a complete representation of financial performance. Management believes that its process of evaluating performance through the use of these non-GAAP financial measures provides a basis for understanding the operations and the impact to net income as a whole. Management also believes that investors find these non-GAAP financial measures described above useful to help interpret the underlying trends and performance, as well as to provide visibility into the significant components of net income. ii CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT STATEMENTS OF OPERATIONS
PERIOD ENDED DECEMBER 31 THREE MONTHS TWELVE MONTHS FAV / FAV / (UNFAV) (UNFAV) (In millions) 2003 2002 % CHANGE 2003 2002 % CHANGE -------- -------- -------- -------- -------- -------- STATEMENTS OF OPERATIONS Revenues: Net earned premiums $ 2,510 $ 2,288 10% $ 9,214 $ 10,213 (10)% Net investment income 436 438 -- 1,647 1,730 (5) Realized investment (losses) gains, net of participating policyholders' and minority interests (6) (115) 95 460 (252) N/A Other revenues 107 130 (18) 395 595 (34) -------- -------- -------- -------- Total revenues 3,047 2,741 11 11,716 12,286 (5) -------- -------- -------- -------- Claims, benefits and expenses: Insurance claims and policyholders' benefits 1,947 1,850 (5) 9,916 8,392 (18) Other operating expenses 823 832 1 4,022 3,440 (17) Restructuring and other related charges -- (37) N/A -- (37) N/A Interest 30 38 21 130 150 13 -------- -------- -------- -------- Total claims, benefits and expenses 2,800 2,683 (4) 14,068 11,945 (18) -------- -------- -------- -------- Income (loss) from continuing operations before income tax and minority interest 247 58 N/A (2,352) 341 N/A Income tax (expense) benefit (70) 7 N/A 913 (68) N/A Minority interest (3) (15) 80 6 (26) 123 -------- -------- -------- -------- Income (loss) from continuing operations before cumulative effect of a change in accounting principle 174 50 N/A (1,433) 247 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 income (loss) $ 174 $ 50 N/A% $ (1,433) $ 155 N/A% ======== ======== ======== ========
1 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT COMPONENTS OF NET INCOME AND PER SHARE DATA
PERIOD ENDED DECEMBER 31 THREE MONTHS TWELVE MONTHS FAV / FAV / (UNFAV) (UNFAV) (In millions, except per share data) 2003 2002 % CHANGE 2003 2002 % CHANGE ------- ------- -------- ------- ------- -------- COMPONENTS OF NET INCOME (LOSS) Income (loss) before net realized investment (losses) gains $ 194 $ 112 73% $(1,718) $ 396 N/A% Net realized investment (losses) gains, net of participating policyholders' and minority interests (20) (62) 68 285 (149) N/A ------- ------- ------- ------- Income (loss) from continuing operations 174 50 N/A (1,433) 247 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 income (loss) $ 174 $ 50 N/A% $(1,433) $ 155 N/A% ======= ======= ======= ======= BASIC AND DILUTED EARNINGS (LOSS) PER SHARE Income (loss) from continuing operations (1) $ 0.67 $ 0.21 N/A $ (6.58) $ 1.10 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 earnings (loss) per share available to common stockholders $ 0.67 $ 0.21 N/A% $ (6.58) $ 0.68 N/A% ======= ======= ======= ======= Weighted average outstanding common stock and common stock equivalents (2) 237.0 223.6 227.0 223.6
(1) The three months and year ended December 31, 2003 per share results available to common stockholders were reduced by $15 million and $60 million, or $0.06 per share and $0.27 per share, of accumulated but undeclared preferred stock dividends. The three months and year ended December 31, 2002 per share results available to common stockholders were both reduced by $2 million, or $0.01 per share, of accumulated but undeclared preferred stock dividends. (2) Included in the weighted average number of common shares for the three months and year ended December 31, 2003 are the effects of additional common stock equivalents related to the November of 2003 sale of $750 million of convertible preferred shares to Loews Corporation. The preferred shares are convertible into 32,327,015 shares of CNA common stock. The conversion is expected to occur in 2004. 2 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT SELECTED BALANCE SHEET DATA AND CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS DATA
DECEMBER 31, DECEMBER 31, (In millions, except per share data) 2003 2002 ------- ------- Total assets $68,503 $61,731 Insurance reserves 45,383 40,179 Debt 1,904 2,292 Total liabilities 59,295 52,074 Minority interest 256 256 Accumulated other comprehensive income 841 604 Total stockholders' equity 8,952 9,401 Book value per common share $ 31.80 $ 38.68 Book value per common share excluding unrealized gain or loss on fixed maturity securities $ 28.98 $ 36.53 Outstanding shares of common stock (in millions of shares) 255.9 223.6
THREE MONTHS ENDED DECEMBER 31
(In millions) 2003 2002 ----- ----- Net cash flows provided by operating activities $ 297 $ 234 Net cash flows used by investing activities (882) (853) Net cash flows provided by financing activities 546 486 ----- ----- Net cash flows $ (39) $(133) ===== =====
TWELVE MONTHS ENDED DECEMBER 31
(In millions) 2003 2002 ------- ------- Net cash flows provided by operating activities $ 1,779 $ 1,040 Net cash flows used by investing activities (2,152) (1,488) Net cash flows provided by financing activities 386 432 ------- ------- Net cash flows $ 13 $ (16) ======= =======
3 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY INSURANCE CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVE DATA
CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVES (1) STANDARD SPECIALTY P&C TOTAL P&C (In millions) LINES LINES OPERATIONS CNA RE SEGMENTS -------- --------- ---------- ------ --------- As of December 31, 2003 Gross $12,983 $6,470 $19,453 $2,288 $21,741 Ceded 4,916 2,475 7,391 1,031 8,422 Net 8,067 3,995 12,062 1,257 13,319 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) GROUP LIFE CORPORATE TOTAL (In millions) OPERATIONS(2) OPERATIONS & OTHER OPERATIONS ------------- ---------- --------- ---------- As of December 31, 2003 Gross $1,404 $1,539 $7,046 $31,730 Ceded 1,301 72 4,421 14,216 Net 103 1,467 2,625 17,514 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 December 31, 2003 and December 31, 2002 include $448 million ($138 million in Group Operations, $133 million in Life Operations and $177 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 December 31, 2003 and December 31, 2002 include $230 million ($30 million in Group Operations, $64 million in Life Operations and $136 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. (2) On December 31, 2003 CNA completed the sale of its Group Benefits business to Hartford Life (Hartford). As part of the sale, $1,309 million of claim and claim adjustment expense reserves were ceded to Hartford. 4 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY INSURANCE CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVE ROLLFORWARD(1)
PERIOD ENDED DECEMBER 31, 2003 THREE MONTHS TWELVE MONTHS ENDED ENDED (In millions) ------------ ------------- Claim & claim adjustment expense reserves, beginning of period Gross $ 32,264 $ 27,370 Ceded 13,309 10,727 ---------- ---------- Net 18,955 16,643 ---------- ---------- Net incurred claim & claim adjustment expenses 1,807 9,270 Net claim & claim adjustment expense payments (1,939) (7,090) Net reserves ceded as part of Group Benefits sale (2) (1,309) (1,309) Claim & claim adjustment expense reserves, end of period Net 17,514 17,514 Ceded 14,216 14,216 ---------- ---------- Gross $ 31,730 $ 31,730 ========== ==========
(1) Gross reserves as of December 31, 2003 and December 31, 2002 include $448 million and $1,722 million of Life & Group company reserves, which are primarily related to accident and health business. Net reserves as of December 31, 2003 and December 31, 2002 include $230 million and $1,578 million of Life & Group company reserves, which are primarily related to accident and health business. (2) On December 31, 2003 CNA completed the sale of its Group Benefits business to Hartford. As part of the sale, $1,309 million of claim and claim adjustment reserves were ceded to Hartford. 5 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT INVESTMENTS BY ASSET CLASS
DECEMBER 31, 2003 DECEMBER 31, 2002 BOOK MARKET BOOK MARKET (In millions) VALUE VALUE VALUE VALUE ------- ------- ------- ------- PROPERTY & CASUALTY AND OTHER COMPANIES Investments: Fixed maturity securities $22,126 $22,857 $17,673 $18,172 Equity securities 246 468 467 614 Short-term investments 6,785 6,784 5,780 5,778 Limited partnership investments 1,113 1,113 1,055 1,055 Mortgage loans and other invested assets 48 58 61 73 ------- ------- ------- ------- Subtotal 30,318 31,280 25,036 25,692 Securities lending collateral 307 307 399 399 ------- ------- ------- ------- Total investments $30,625 $31,587 $25,435 $26,091 ------- ------- ------- ------- LIFE AND GROUP COMPANIES Investments: Fixed maturity securities $ 5,438 $ 5,821 $ 7,860 $ 8,103 Equity securities 47 59 52 52 Short-term investments 324 324 686 686 Limited partnership investments 4 4 5 5 Mortgage loans, policy loans and other invested assets 197 182 210 211 ------- ------- ------- ------- Subtotal 6,010 6,390 8,813 9,057 Securities lending collateral 123 123 145 145 ------- ------- ------- ------- Total investments $ 6,133 $ 6,513 $ 8,958 $ 9,202 ------- ------- ------- ------- TOTAL INVESTMENTS $36,758 $38,100 $34,393 $35,293 ======= ======= ======= =======
6 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY SEGMENTS - OPERATING RESULTS
THREE MONTHS ENDED STANDARD LINES SPECIALTY LINES P&C OPERATIONS FAV / FAV / FAV / DECEMBER 31 (UNFAV) (UNFAV) (UNFAV) (In millions) 2003 2002 % CHANGE 2003 2002 % CHANGE 2003 2002 % CHANGE ------- ------- -------- ----- ----- -------- ------- ------- -------- Gross written premiums $ 1,354 $ 1,010 34% $ 908 $ 875 4% $ 2,262 $ 1,885 20% Net written premiums 974 848 15 745 643 16 1,719 1,491 15 Net earned premiums 1,079 978 10 718 584 23 1,797 1,562 15 Claim and claim adjustment expenses 730 701 (4) 486 441 (10) 1,216 1,142 (6) Acquisition expenses 224 188 (19) 118 103 (15) 342 291 (18) Underwriting expenses 131 130 (1) 77 69 (12) 208 199 (5) Policyholders' dividends 14 16 13 1 1 -- 15 17 12 Restructuring & other related costs -- (2) N/A -- (1) N/A -- (3) N/A ------- ------- ----- ----- ------- ------- Underwriting (loss) income (20) (55) 64 36 (29) N/A 16 (84) 119 ------- ------- ----- ----- ------- ------- Net investment income 100 94 6 74 69 7 174 163 7 Other revenues 33 80 (59) 35 26 35 68 106 (36) Other expenses 26 73 64 39 23 (70) 65 96 32 Non-insurance restructuring & other related costs -- (6) N/A -- -- N/A -- (6) N/A ------- ------- ----- ----- ------- ------- Income before income tax, minority interest and net realized investment gains (losses) 87 52 67 106 43 147 193 95 103 Income tax expense (17) (10) (70) (22) (9) (144) (39) (19) (105) Minority interest -- -- N/A (3) (15) 80 (3) (15) 80 ------- ------- ----- ----- ------- ------- Income before net realized investment gains (losses) 70 42 67 81 19 N/A 151 61 148 Realized investment gains (losses) 102 (35) N/A 50 (31) N/A 152 (66) N/A Income tax (expense) benefit on realized investment gains (losses) (36) 12 N/A (16) 11 N/A (52) 23 N/A ------- ------- ----- ----- ------- ------- Income (loss) from continuing operations 136 19 N/A 115 (1) N/A 251 18 N/A Cumulative effect of a change in accounting principle -- -- N/A -- -- N/A -- -- N/A ------- ------- ----- ----- ------- ------- Net income (loss) $ 136 $ 19 N/A% $115 $ (1) N/A% $ 251 $ 18 N/A% ======= ======= ===== ===== ======= ======= FINANCIAL RATIOS Loss & LAE 67.7% 71.7% 67.7% 75.6% 67.7% 73.1% Acquisition expense 20.7 19.1 16.5 17.7 19.0 18.6 Underwriting expense 12.1 13.3 10.8 11.5 11.6 12.6 Dividends 1.3 1.6 0.1 0.1 0.8 1.1 ------- ------- ----- ----- ------- ------- Expense ratio, including dividends 34.1 34.0 27.4 29.3 31.4 32.3 ------- ------- ----- ----- ------- ------- Combined ratio 101.8% 105.7% 95.1% 104.9% 99.1% 105.4% ======= ======= ===== ===== ======= =======
7 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY SEGMENTS - OPERATING RESULTS
THREE MONTHS ENDED CNA RE TOTAL P&C SEGMENTS DECEMBER 31 FAV / FAV / (UNFAV) (UNFAV) (In millions) 2003 2002 % CHANGE 2003 2002 % CHANGE ----- ----- -------- ------- ------- -------- Gross written premiums $ 44 $ 154 (71)% $ 2,306 $ 2,039 13% Net written premiums 41 111 (63) 1,760 1,602 10 Net earned premiums 165 180 (8) 1,962 1,742 13 Claim and claim adjustment expenses 139 128 (9) 1,355 1,270 (7) Acquisition expenses 17 33 48 359 324 (11) Underwriting expenses 10 15 33 218 214 (2) Policyholders' dividends -- -- N/A 15 17 12 Restructuring & other related costs -- -- N/A -- (3) N/A ----- ----- ------- ------- Underwriting (loss) income (1) 4 (125) 15 (80) 119 ----- ----- ------- ------- Net investment income 17 35 (51) 191 198 (4) Other revenues 6 -- N/A 74 106 (30) Other expenses 1 (1) (200) 66 95 31 Non-insurance restructuring & other related costs -- -- N/A -- (6) N/A ----- ----- ------- ------- Income before income tax, minority interest and net realized investment gains 21 40 (48) 214 135 59 Income tax expense (5) (14) 64 (44) (33) (33) Minority interest -- -- N/A (3) (15) 80 ----- ----- ------- ------- Income before net realized investment gains 16 26 (38) 167 87 92 Realized investment gains 19 83 (77) 171 17 N/A Income tax (expense) benefit on realized investment gains (7) (15) 53 (59) 8 N/A ----- ----- ------- ------- Income from continuing operations 28 94 (70) 279 112 149 Cumulative effect of a change in accounting principle -- -- N/A -- -- N/A ----- ----- ------- ------- Net income $ 28 $ 94 (70)% $ 279 $ 112 149% ===== ===== ======= ======= FINANCIAL RATIOS Loss & LAE 84.3% 71.1% 69.1% 72.9% Acquisition expense 9.9 18.3 18.2 18.6 Underwriting expense 6.7 8.4 11.3 12.1 Dividends -- -- 0.7 1.0 ----- ----- ------- ------- Expense ratio, including dividends 16.6 26.7 30.2 31.7 ----- ----- ------- ------- Combined ratio 100.9% 97.8% 99.3% 104.6% ===== ===== ======= =======
8 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY SEGMENTS - OPERATING RESULTS
TWELVE MONTHS ENDED STANDARD LINES SPECIALTY LINES P&C OPERATIONS DECEMBER 31 FAV / FAV / FAV / (UNFAV) (UNFAV) (UNFAV) (In millions) 2003 2002 % CHANGE 2003 2002 % CHANGE 2003 2002 % CHANGE ------- ------- -------- ------- ------- -------- ------- ------- -------- Gross written premiums $ 5,619 $ 5,027 12% $ 3,695 $ 3,359 10% $ 9,314 $ 8,386 11% Net written premiums 3,802 4,020 (5) 2,809 2,383 18 6,611 6,403 3 Net earned premiums 3,743 4,018 (7) 2,666 2,178 22 6,409 6,196 3 Claim and claim adjustment expenses 3,835 2,892 (33) 2,262 1,679 (35) 6,097 4,571 (33) Acquisition expenses 1,142 724 (58) 621 436 (42) 1,763 1,160 (52) Underwriting expenses 562 509 (10) 292 264 (11) 854 773 (10) Policyholders' dividends 100 73 (37) 3 3 -- 103 76 (36) Restructuring & other related costs -- (2) N/A -- (1) N/A -- (3) N/A ------- ------- ------- ------- ------- ------- Underwriting loss (1,896) (178) N/A (512) (203) (152) (2,408) (381) N/A ------- ------- ------- ------- ------- ------- Net investment income 336 398 (16) 287 253 13 623 651 (4) Other revenues 198 323 (39) 116 146 (21) 314 469 (33) Other expenses 181 289 37 111 110 (1) 292 399 27 Non-insurance restructuring & other related costs -- (6) N/A -- -- N/A -- (6) N/A ------- ------- ------- ------- ------- ------- (Loss) income before income tax, minority interest and net realized investment gains (losses) (1,543) 260 N/A (220) 86 N/A (1,763) 346 N/A Income tax benefit (expense) 587 (63) N/A 103 (32) N/A 690 (95) N/A Minority interest -- -- N/A 6 (26) 123 6 (26) 123 ------- ------- ------- ------- ------- ------- (Loss) income before net realized investment gains (losses) (956) 197 N/A (111) 28 N/A (1,067) 225 N/A Realized investment gains (losses) 338 (86) N/A 144 (77) N/A 482 (163) N/A Income tax (expense) benefit on realized investment gains (losses) (119) 30 N/A (50) 25 N/A (169) 55 N/A ------- ------- ------- ------- ------- ------- (Loss) income from continuing operations (737) 141 N/A (17) (24) 29 (754) 117 N/A Cumulative effect of a change in accounting principle -- -- N/A -- (48) N/A -- (48) N/A ------- ------- ------- ------- ------- ------- Net (loss) income $ (737) $ 141 N/A% $ (17) $ (72) 76% $ (754) $ 69 N/A% ======= ======= ======= ======= ======= ======= FINANCIAL RATIOS Loss & LAE 102.5% 72.0% 84.9% 77.1% 95.1% 73.9% Acquisition expense 30.5 18.0 23.3 20.0 27.5 18.7 Underwriting expense 15.0 12.6 10.9 12.1 13.4 12.3 Dividends 2.7 1.8 0.1 0.1 1.6 1.2 ------- ------- ------- ------- ------- ------- Expense ratio, including dividends 48.2 32.4 34.3 32.2 42.5 32.2 ------- ------- ------- ------- ------- ------- Combined ratio 150.7% 104.4% 119.2% 109.3% 137.6% 106.1% ======= ======= ======= ======= ======= =======
9 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY SEGMENTS - OPERATING RESULTS
TWELVE MONTHS ENDED CNA RE TOTAL P&C SEGMENTS DECEMBER 31 FAV / FAV / (UNFAV) (UNFAV) (In millions) 2003 2002 % CHANGE 2003 2002 % CHANGE ------- ------- -------- ------- ------- -------- Gross written premiums $ 572 $ 732 (22)% $ 9,886 $ 9,118 8% Net written premiums 478 605 (21) 7,089 7,008 1 Net earned premiums 536 642 (17) 6,945 6,838 2 Claim and claim adjustment expenses 510 503 (1) 6,607 5,074 (30) Acquisition expenses 104 136 24 1,867 1,296 (44) Underwriting expenses 54 61 11 908 834 (9) Policyholders' dividends -- -- N/A 103 76 (36) Restructuring & other related costs -- -- N/A -- (3) N/A ------- ------- ------- ------- Underwriting loss (132) (58) (128) (2,540) (439) N/A ------- ------- ------- ------- Net investment income 72 144 (50) 695 795 (13) Other revenues 7 2 N/A 321 471 (32) Other expenses 1 1 -- 293 400 27 Non-insurance restructuring & other related costs -- -- N/A -- (6) N/A ------- ------- ------- ------- (Loss) income before income tax, minority interest and net realized investment gains (losses) (54) 87 (162) (1,817) 433 N/A Income tax benefit (expense) 27 (22) N/A 717 (117) N/A Minority interest -- -- N/A 6 (26) 123 ------- ------- ------- ------- (Loss) income before net realized investment gains (losses) (27) 65 (142) (1,094) 290 N/A Realized investment gains (losses) 73 81 (10) 555 (82) N/A Income tax (expense) benefit on realized investment gains (losses) (23) (10) (130) (192) 45 N/A ------- ------- ------- ------- Income (loss) from continuing operations 23 136 (83) (731) 253 N/A Cumulative effect of a change in accounting principle -- -- N/A -- (48) N/A ------- ------- ------- ------- Net income (loss) $ 23 $ 136 (83)% $ (731) $ 205 N/A% ======= ======= ======= ======= FINANCIAL RATIOS Loss & LAE 95.2% 78.4% 95.2% 74.2% Acquisition expense 19.4 21.3 26.9 19.0 Underwriting expense 10.1 9.4 13.0 12.1 Dividends -- -- 1.5 1.1 ------- ------- ------- ------- Expense ratio, including dividends 29.5 30.7 41.4 32.2 ------- ------- ------- ------- Combined ratio 124.7% 109.1% 136.6% 106.4% ======= ======= ======= =======
10 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT GROUP & LIFE AND CORPORATE & OTHER SEGMENTS - OPERATING RESULTS
THREE MONTHS ENDED TOTAL P&C SEGMENTS GROUP OPERATIONS LIFE OPERATIONS CORPORATE & OTHER TOTAL OPERATIONS DECEMBER 31 (In millions) 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 ------- ------- ----- ----- ----- ----- ----- ----- ------- ------- Net earned premiums $ 1,962 $ 1,742 $ 330 $ 310 $ 246 $ 220 $ (28) $ 16 $ 2,510 $ 2,288 Insurance claims & policyholders' benefits 1,355 1,270 245 234 345 294 (16) 32 1,929 1,830 Policyholders' dividends 15 17 -- 1 3 4 -- (2) 18 20 Insurance related expenses 577 538 112 113 66 51 (2) 14 753 716 Restructuring & other related costs -- (3) -- -- -- (1) -- (27) -- (31) Net investment income 191 198 63 64 131 138 51 38 436 438 Other revenues 74 106 14 26 39 17 (20) (19) 107 130 Other expenses 66 95 5 5 (7) 18 36 36 100 154 Non-insurance restructuring & other related costs -- (6) -- -- -- -- -- -- -- (6) ------- ------- ----- ----- ----- ----- ----- ----- ------- ------- Income (loss) before income tax, minority interest and net realized investment gains (losses) 214 135 45 47 9 9 (15) (18) 253 173 Income tax (expense) benefit (44) (33) (15) (16) (1) (4) 4 7 (56) (46) Minority interest (3) (15) -- -- -- -- -- -- (3) (15) ------- ------- ----- ----- ----- ----- ----- ----- ------- ------- Income (loss) before net realized investment gains (losses) 167 87 30 31 8 5 (11) (11) 194 112 Realized investment gains (losses) 171 17 (170) (48) 26 (49) (33) (35) (6) (115) Income tax (expense) benefit on realized investment gains (losses) (59) 8 43 17 (9) 16 11 12 (14) 53 ------- ------- ----- ----- ----- ----- ----- ----- ------- ------- Income (loss) from continuing operations 279 112 (97) -- 25 (28) (33) (34) 174 50 Loss from discontinued operations -- -- -- -- -- -- -- -- -- -- Cumulative effect of a change in accounting principle -- -- -- -- -- -- -- -- -- -- ------- ------- ----- ----- ----- ----- ----- ----- ------- ------- Net income (loss) $ 279 $ 112 $ (97) $ -- $ 25 $ (28) $ (33) $ (34) $ 174 $ 50 ======= ======= ===== ===== ===== ===== ===== ===== ======= =======
OTHER FINANCIAL DATA TOTAL P&C GROUP LIFE CORPORATE TOTAL Property & Casualty Company SEGMENTS OPERATIONS(1) OPERATIONS & OTHER OPERATIONS(1) Information 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 ------- ------- ----- ----- ----- ----- ----- ----- ------- ------- Gross written premiums $ 2,306 $ 2,039 $ 179 $ 229 $ 124 $ 126 $ 420 $ 475 $ 3,029 $ 2,869 Net written premiums 1,760 1,602 1 -- 125 126 1 23 1,887 1,751 Net earned premiums 1,962 1,742 -- -- 127 125 (2) (19) 2,087 1,848 Underwriting income (loss) 15 (80) (6) (2) (107) (94) (5) (30) (103) (206) FINANCIAL RATIOS Loss & LAE 69.1% 72.9% N/A% N/A% 160.3% 153.7% N/A% N/A% 75.2% 78.8% Acquisition expense 18.2 18.6 N/A N/A 17.5 11.8 N/A N/A 19.4 19.4 Underwriting expense 11.3 12.1 N/A N/A 6.4 9.8 N/A N/A 9.7 12.0 Dividends 0.7 1.0 N/A N/A -- -- N/A N/A 0.7 0.9 ------- ------- ----- ----- ----- ----- ----- ----- ------- ------- Expense ratio, including dividends 30.2 31.7 N/A N/A 23.9 21.6 N/A N/A 29.8 32.3 ------- ------- ----- ----- ----- ----- ----- ----- ------- ------- Combined ratio 99.3% 104.6% N/A% N/A% 184.2% 175.3% N/A% N/A% 105.0% 111.1% ======= ======= ===== ===== ===== ===== ===== ===== ======= =======
(1) The P&C Companies ratios exclude the impact of commutation transactions between CNA's property and casualty and life and group companies. 11 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT GROUP & LIFE AND CORPORATE & OTHER SEGMENTS - OPERATING RESULTS
TWELVE MONTHS ENDED TOTAL P&C SEGMENTS GROUP LIFE OPERATIONS CORPORATE & OTHER TOTAL DECEMBER 31 OPERATIONS (1) OPERATIONS (1) (In millions) 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 ------- ------- ------- -------- ------- ------- ------- ------ ------- ------- Net earned premiums $ 6,945 $6,838 $ 1,312 $ 2,327 $1,029 $ 930 $ (72) $ 118 $ 9,214 $10,213 Insurance claims & policyholders' benefits 6,607 5,074 1,005 1,955 1,256 1,104 934 173 9,802 8,306 Policyholders' dividends 103 76 1 1 17 14 (7) (5) 114 86 Insurance related expenses 2,775 2,130 454 529 287 239 236 14 3,752 2,912 Restructuring & other related costs -- (3) -- -- -- (1) -- (27) -- (31) Net investment income 695 795 263 252 524 540 165 143 1,647 1,730 Other revenues 321 471 60 92 103 106 (89) (74) 395 595 Other expenses 293 400 27 29 37 74 43 175 400 678 Non-insurance restructuring & other related costs -- (6) -- -- -- -- -- -- -- (6) ------- ------ ------- ------- ------ ------- ----- ----- ------- ------- (Loss) income before income tax, minority interest and net realized investment gains (losses) (1,817) 433 148 157 59 146 (1,202) (143) (2,812) 593 Income tax benefit (expense) 717 (117) (48) (53) (14) (52) 433 51 1,088 (171) Minority interest 6 (26) -- -- -- -- -- -- 6 (26) ------- ------ ------- ------- ------ ------- ------ ------ ------- ------- (Loss) income before net realized investment gains (losses) (1,094) 290 100 104 45 94 (769) (92) (1,718) 396 Realized investment gains (losses) 555 (82) (177) (60) 36 (111) 46 1 460 (252) Income tax (expense) benefit on realized investment gains (losses) (192) 45 46 21 (13) 37 (16) -- (175) 103 ------- ------ ------- ------- ------ ------- ------- ----- ------- ------- (Loss) income from continuing operations (731) 253 (31) 65 68 20 (739) (91) (1,433) 247 Loss from discontinued operations -- -- -- -- -- (35) -- -- -- (35) Cumulative effect of a change in accounting principle -- (48) -- -- -- (8) -- (1) -- (57) ------- ------ ------- ------- ------ ------- ------ ----- ------- ------- Net (loss) income $ (731) $ 205 $ (31) $ 65 $ 68 $ (23) $ (739) $ (92) $(1,433) $ 155 ======= ====== ======= ======= ====== ======= ====== ===== ======= =======
OTHER FINANCIAL DATA TOTAL P&C GROUP LIFE CORPORATE TOTAL Property & Casualty Company Information SEGMENTS OPERATIONS(1)(2) OPERATIONS & OTHER OPERATIONS(1)(2) 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 ------- ------- ------- ------- ------ ------ ------- ------ ------- ------- Gross written premiums $ 9,886 $ 9,118 $ 768 $2,016 $ 519 $ 497 $ 1,836 $1,824 $13,009 $13,455 Net written premiums 7,089 7,008 1 1,149 519 496 (6) -- 7,603 8,653 Net earned premiums 6,945 6,838 -- 1,151 516 481 (6) (32) 7,455 8,438 Underwriting (loss) income (2,540) (439) (2) 13 (288) (223) (1,213) (164) (4,043) (813) FINANCIAL RATIOS Loss & LAE 95.2% 74.2% N/A% 87.3% 129.9% 122.8% N/A% N/A% 110.5% 79.4% Acquisition expense 26.9 19.0 N/A (0.5) 16.6 13.8 N/A N/A 29.6 16.3 Underwriting expense 13.0 12.1 N/A 12.1 9.3 9.8 N/A N/A 12.7 13.0 Dividends 1.5 1.1 N/A -- -- -- N/A N/A 1.4 0.9 ------- ------- ----- ------ ------ ------ ------- ------ ------- ------- Expense ratio, including dividends 41.4 32.2 N/A 11.6 25.9 23.6 N/A N/A 43.7 30.2 ------- ------- ----- ------ ------ ------ ------- ------ ------- ------- Combined ratio 136.6% 106.4% N/A% 98.9% 155.8% 146.4% N/A% N/A% 154.2% 109.6% ======= ======= ===== ====== ====== ====== ======= ====== ======= =======
(1) Included in gross written, net written and earned premiums for 2002 is $1,151 million related to the National Postal Mail Handlers Union contract, which was transferred on July 1, 2002. (2) The P&C Companies ratios exclude the impact of commutation transactions between CNA's property and casualty and life and group companies. 12 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY SEGMENTS - CATASTROPHE LOSSES
CATASTROPHE LOSSES (PRETAX) TOTAL P&C (In millions) STANDARD LINES SPECIALTY LINES P&C OPERATIONS CNA RE SEGMENTS -------------- --------------- -------------- ---------- ---------- Three months ended December 31, 2003 $ 1 $ 2 $ 3 $ 8 $ 11 Twelve months ended December 31, 2003 96 18 114 29 143 Three months ended December 31, 2002 $ 9 $ -- $ 9 $ -- $ 9 Twelve months ended December 31, 2002 23 19 42 17 59
CATASTROPHE LOSSES (AFTER-TAX) TOTAL P&C (In millions) STANDARD LINES SPECIALTY LINES P&C OPERATIONS CNA RE SEGMENTS -------------- --------------- -------------- ---------- ---------- Three months ended December 31, 2003 $ 1 $ 1 $ 2 $ 5 $ 7 Twelve months ended December 31, 2003 62 12 74 19 93 Three months ended December 31, 2002 $ 6 $ -- $ 6 $ -- $ 6 Twelve months ended December 31, 2002 15 12 27 11 38
13 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT ANALYSIS OF PRETAX NET INVESTMENT INCOME
(In millions) STANDARD LINES ------------------------------------------------------------------------------------------------- 1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 3Q03 4Q03 YTD 2003 ------ ------ ------ ------ -------- ------ ------ ------ ------ -------- Limited partnership income $ 3 $ 20 $ (39) $ (2) $ (18) $ 13 $ 40 $ 33 $ 33 $ 119 Interest on funds withheld and other deposits (38) (44) (36) (56) (174) (34) (76) (114) (43) (267) Other investment income 138 158 142 152 590 131 120 123 110 484 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Net investment income $ 103 $ 134 $ 67 $ 94 $ 398 $ 110 $ 84 $ 42 $ 100 $ 336 ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== SPECIALTY LINES ------------------------------------------------------------------------------------------------- 1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 3Q03 4Q03 YTD 2003 ------ ------ ------ ------ -------- ------ ------ ------ ------ -------- Limited partnership income $ 1 $ 8 $ (14) $ (1) $ (6) $ 5 $ 17 $ 13 $ 14 $ 49 Interest on funds withheld and other deposits (9) (7) (11) (7) (34) (6) (7) (12) (3) (28) Other investment income 68 74 74 77 293 71 69 63 63 266 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Net investment income $ 60 $ 75 $ 49 $ 69 $ 253 $ 70 $ 79 $ 64 $ 74 $ 287 ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== P&C OPERATIONS ------------------------------------------------------------------------------------------------- 1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 3Q03 4Q03 YTD 2003 ------ ------ ------ ------ -------- ------ ------ ------ ------ -------- Limited partnership income $ 4 $ 28 $ (53) $ (3) $ (24) $ 18 $ 57 $ 46 $ 47 $ 168 Interest on funds withheld and other deposits (47) (51) (47) (63) (208) (40) (83) (126) (46) (295) Other investment income 206 232 216 229 883 202 189 186 173 750 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Net investment income $ 163 $ 209 $ 116 $ 163 $ 651 $ 180 $ 163 $ 106 $ 174 $ 623 ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== CNA RE ------------------------------------------------------------------------------------------------- 1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 3Q03 4Q03 YTD 2003 ------ ------ ------ ------ -------- ------ ------ ------ ------ -------- Limited partnership income $ 1 $ 5 $ (9) $ (1) $ (4) $ 2 $ 8 $ 7 $ 6 $ 23 Interest on funds withheld and other deposits (11) (6) (6) (6) (29) (6) (10) (22) (10) (48) Other investment income 43 49 43 42 177 28 24 24 21 97 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Net investment income $ 33 $ 48 $ 28 $ 35 $ 144 $ 24 $ 22 $ 9 $ 17 $ 72 ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== TOTAL P&C SEGMENTS ------------------------------------------------------------------------------------------------- 1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 3Q03 4Q03 YTD 2003 ------ ------ ------ ------ -------- ------ ------ ------ ------ -------- Limited partnership income $ 5 $ 33 $ (62) $ (4) $ (28) $ 20 $ 65 $ 53 $ 53 $ 191 Interest on funds withheld and other deposits (58) (57) (53) (69) (237) (46) (93) (148) (56) (343) Other investment income 249 281 259 271 1,060 230 213 210 194 847 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Net investment income $ 196 $ 257 $ 144 $ 198 $ 795 $ 204 $ 185 $ 115 $ 191 $ 695 ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
14 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT ANALYSIS OF PRETAX NET INVESTMENT INCOME
(In millions) TOTAL P&C SEGMENTS ------------------------------------------------------------------------------------------------- 1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 3Q03 4Q03 YTD 2003 ------ ------ ------ ------ -------- ------ ------ ------ ------ -------- Limited partnership income $ 5 $ 33 $ (62) $ (4) $ (28) $ 20 $ 65 $ 53 $ 53 $ 191 Interest on funds withheld and other deposits (58) (57) (53) (69) (237) (46) (93) (148) (56) (343) Other investment income 249 281 259 271 1,060 230 213 210 194 847 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------- Net investment income $ 196 $ 257 $ 144 $ 198 $ 795 $ 204 $ 185 $ 115 $ 191 $ 695 ====== ====== ====== ====== ====== ====== ====== ====== ====== ======= GROUP OPERATIONS ------------------------------------------------------------------------------------------------- 1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 3Q03 4Q03 YTD 2003 ------ ------ ------ ------ -------- ------ ------ ------ ------ -------- Limited partnership income $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- Interest on funds withheld and other deposits -- -- -- -- -- -- -- -- -- -- Other investment income 61 62 65 64 252 63 70 67 63 263 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------- Net investment income $ 61 $ 62 $ 65 $ 64 $ 252 $ 63 $ 70 $ 67 $ 63 $ 263 ====== ====== ====== ====== ====== ====== ====== ====== ====== ======= LIFE OPERATIONS ------------------------------------------------------------------------------------------------- 1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 3Q03 4Q03 YTD 2003 ------ ------ ------ ------ -------- ------ ------ ------ ------ -------- Limited partnership income $ -- $ -- $ (1) $ (1) $ (2) $ -- $ -- $ 1 $ -- $ 1 Interest on funds withheld and other deposits -- -- -- -- -- -- -- -- -- -- Other investment income 134 137 132 139 542 131 133 128 131 523 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------- Net investment income $ 134 $ 137 $ 131 $ 138 $ 540 $ 131 $ 133 $ 129 $ 131 $ 524 ====== ====== ====== ====== ====== ====== ====== ====== ====== ======= CORPORATE & OTHER ------------------------------------------------------------------------------------------------- 1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 3Q03 4Q03 YTD 2003 ------ ------ ------ ------ -------- ------ ------ ------ ------ -------- Limited partnership income $ 2 $ 5 $ (10) $ (1) $ (4) $ 3 $ 10 $ 7 $ 9 $ 29 Interest on funds withheld and other deposits -- -- -- (2) (2) (1) -- -- -- (1) Other investment income 33 41 34 41 149 32 29 34 42 137 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------- Net investment income $ 35 $ 46 $ 24 $ 38 $ 143 $ 34 $ 39 $ 41 $ 51 $ 165 ====== ====== ====== ====== ====== ====== ====== ====== ====== ======= TOTAL OPERATIONS ------------------------------------------------------------------------------------------------- 1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 3Q03 4Q03 YTD 2003 ------ ------ ------ ------ -------- ------ ------ ------ ------ -------- Limited partnership income $ 7 $ 38 $ (73) $ (6) $ (34) $ 23 $ 75 $ 61 $ 62 $ 221 Interest on funds withheld and other deposits (58) (57) (53) (71) (239) (47) (93) (148) (56) (344) Other investment income 477 521 490 515 2,003 456 445 439 430 1,770 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------- Net investment income $ 426 $ 502 $ 364 $ 438 $1,730 $ 432 $ 427 $ 352 $ 436 $ 1,647 ====== ====== ====== ====== ====== ====== ====== ====== ====== =======
15 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT STATUTORY DATA - PRELIMINARY
PERIOD ENDED DECEMBER 31 THREE MONTHS TWELVE MONTHS Income Statement (PRELIMINARY) FAV / (UNFAV) (PRELIMINARY) FAV / (UNFAV) (In millions) 2003 2002 % CHANGE 2003 2002 % CHANGE ------------- -------- ------------- ------------- -------- ------------- PROPERTY & CASUALTY COMPANIES Gross written premiums $ 2,595 $ 3,011 (14)% $ 13,175 $ 13,930 (5)% Net written premiums 1,796 1,688 6 7,067 8,103 (13) Net earned premiums 1,298 1,696 (23) 5,979 7,650 (22) Claim and claim adjustment expenses 880 1,242 29 7,030 6,120 (15) Acquisition expenses 234 331 29 1,299 1,331 2 Underwriting expenses 192 164 (17) 886 969 9 Policyholders' dividends 18 20 10 68 80 15 Restructuring and other related costs -- -- N/A -- -- N/A -------- -------- -------- -------- Underwriting loss (26) (61) 57 (3,304) (850) N/A Net investment income 865 864 -- 1,717 1,826 (6) Other (expense) revenue (6) (65) 91 (634) (212) (199) Income tax (expense) benefit (45) 81 (156) 666 28 N/A Net realized (losses) gains (401) 51 N/A 51 (21) N/A -------- -------- -------- -------- Net income (loss) $ 387 $ 870 (56)% $ (1,504) $ 771 N/A % ======== ======== ======== ======== FINANCIAL RATIOS Loss and LAE 67.8 % 73.2 % 117.6 % 80.0 % Acquisition expense 13.0 19.6 18.4 16.4 Underwriting expense 10.8 9.7 12.5 12.0 Policyholders' dividends 1.3 1.2 1.1 1.0 -------- -------- -------- -------- Expense ratio 25.1 30.5 32.0 29.4 -------- -------- -------- -------- Combined ratio 92.9 % 103.7 % 149.6 % 109.4 % ======== ======== ======== ======== LIFE COMPANIES Premium income $ 440 $ 469 $ 1,916 $ 1,884
SUPPLEMENTAL STATUTORY DATA (PRELIMINARY) DECEMBER 31, DECEMBER 31, (In millions) 2003 2002 ------------ ------------ PROPERTY & CASUALTY COMPANIES Statutory surplus (1) $ 6,548 $ 6,705 LIFE COMPANIES Statutory surplus $ 705 $ 1,645 Gross life insurance in force 388,968 437,409
(1) Surplus includes the Property & Casualty Companies' equity ownership of the life insurance subsidiaries. 16 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY SEGMENTS LOSS AND LAE RATIO ANALYSIS
STANDARD LINES CNA RE -------------------------------------------- -------------------------------------------- 2003 YTD 2002 FY 2002 FY 2003 YTD 2002 FY 2002 FY EVALUATED AT EVALUATED AT EVALUATED AT EVALUATED AT EVALUATED AT EVALUATED AT 12/31/03 12/31/02 12/31/03 12/31/03 12/31/02 12/31/03 ------------ ------------ ------------ ------------ ------------ ------------ Gross Accident Year 65.8 % 74.6 % 67.5 % 64.3 % 64.2 % 61.4 % Impact of Finite Reinsurance -- (0.1) -- -- 0.2 0.2 Impact of Other Reinsurance 2.5 0.8 4.0 4.9 5.0 0.9 ------------ ------------ ------------ ------------ ------------ ------------ Net Accident Year 68.3 75.3 71.5 % 69.2 69.4 62.5 % ============ ============ Impact of Corporate Covers (7.6) -- (12.3) (6.4) Impact of Development 41.8 (3.3) 38.3 15.4 ------------ ------------ ------------ ------------ Net Calendar Year 102.5% 72.0 % 95.2 % 78.4 % ============ ============ ============ ============
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 12/31/03 12/31/02 12/31/03 12/31/03 12/31/02 12/31/03 ------------ ------------ ------------ ------------ ------------ ------------ Gross Accident Year 64.4 % 68.1 % 70.0 % 65.2 % 71.5 % 67.9 % Impact of Finite Reinsurance -- -- -- -- -- -- Impact of Other Reinsurance 3.7 3.6 2.8 3.1 2.2 3.3 ------------ ------------ ------------ ------------ ------------ ------------ Net Accident Year 68.1 71.7 72.8 % 68.3 73.7 71.2 % ============ ============ Impact of Corporate Covers (1.3) (1.2) (5.6) (1.1) Impact of Development 18.1 6.6 32.5 1.6 ------------ ------------ ------------ ------------ Net Calendar Year 84.9% 77.1 % 95.2 % 74.2 % ============ ============ ============ ============
P&C OPERATIONS -------------------------------------------- 2003 YTD 2002 FY 2002 FY EVALUATED AT EVALUATED AT EVALUATED AT 12/31/03 12/31/02 12/31/03 ------------ ------------ ------------ Gross Accident Year 65.2 % 72.1 % 68.5 % Impact of Finite Reinsurance -- -- -- Impact of Other Reinsurance 3.0 2.0 3.5 ------------ ------------ ------------ Net Accident Year 68.2 74.1 72.0 % ============ Impact of Corporate Covers (5.1) (0.4) Impact of Development 32.0 0.2 ------------ ------------ Net Calendar Year 95.1 % 73.9 % ============ ============
17 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT IMPACT OF SIGNIFICANT ITEMS
THREE MONTHS ENDED STANDARD LINES DECEMBER 31, 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 $ (9) $ (4) $ -- $ -- $ 1,079 Claim and claim adjustment expenses 753 (18) (5) -- -- 730 Acquisition expenses 224 -- -- -- -- 224 Underwriting expenses 131 -- -- -- -- 131 Policyholders' dividends 14 -- -- -- -- 14 Restructuring & other related costs -- -- -- -- -- -- ------------ ------------- ---------- ----------- --------- ------- Underwriting (loss) income (30) 9 1 -- -- (20) ------------ ------------- ---------- ----------- --------- ------- Net investment income 100 -- -- -- -- 100 Other revenues 33 -- -- -- -- 33 Other expenses 26 -- -- -- -- 26 Non-insurance restructuring & other related costs -- -- -- -- -- -- ------------ ------------- ---------- ----------- --------- ------- Income (loss) before income tax, minority interest and net realized investment gains 77 9 1 -- -- 87 Income tax (expense) benefit (14) (3) -- -- -- (17) Minority interest -- -- -- -- -- -- ------------ ------------- ---------- ----------- --------- ------- Income (loss) before net realized investment gains 63 6 1 -- -- 70 Realized investment gains 102 -- -- -- -- 102 Income tax expense on realized investment gains (36) -- -- -- -- (36) ------------ ------------- ---------- ----------- --------- ------- Income (loss) from continuing operations 129 6 1 -- -- 136 Cumulative effect of a change in accounting principle -- -- -- -- -- -- ------------ ------------- ---------- ----------- --------- ------- Net income (loss) $ 129 $ 6 $ 1 $ -- $ -- $ 136 ============ ============= ========== =========== ========= ======= FINANCIAL RATIOS Loss & LAE 67.7 % Acquisition expense 20.7 Underwriting expense 12.1 Dividends 1.3 ------- Expense ratio, including dividends 34.1 ------- Combined ratio 101.8 % ======= THREE MONTHS ENDED SPECIALTY LINES DECEMBER 31, 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 $ 733 $ (15) $ -- $ -- $ -- $ 718 Claim and claim adjustment expenses 488 (5) 3 -- -- 486 Acquisition expenses 118 -- -- -- -- 118 Underwriting expenses 77 -- -- -- -- 77 Policyholders' dividends 1 -- -- -- -- 1 Restructuring & other related costs -- -- -- -- -- -- ------------ ------------- ---------- ----------- --------- ------- Underwriting (loss) income 49 (10) (3) -- -- 36 ------------ ------------- ---------- ----------- --------- ------- Net investment income 74 -- -- -- -- 74 Other revenues 35 -- -- -- -- 35 Other expenses 39 -- -- -- -- 39 Non-insurance restructuring & other related costs -- -- -- -- -- -- ------------ ------------- ---------- ----------- --------- ------- Income (loss) before income tax, minority interest and net realized investment gains 119 (10) (3) -- -- 106 Income tax (expense) benefit (26) 3 1 -- -- (22) Minority interest (3) -- -- -- -- (3) ------------ ------------- ---------- ----------- --------- ------- Income (loss) before net realized investment gains 90 (7) (2) -- -- 81 Realized investment gains 50 -- -- -- -- 50 Income tax expense on realized investment gains (16) -- -- -- -- (16) ------------ ------------- ---------- ----------- --------- ------- Income (loss) from continuing operations 124 (7) (2) -- -- 115 Cumulative effect of a change in accounting principle -- -- -- -- -- -- ------------ ------------- ---------- ----------- --------- ------- Net income (loss) $ 124 $ (7) $ (2) $ -- $ -- $ 115 ============ ============= ========== =========== ========= ======= FINANCIAL RATIOS Loss & LAE 67.7 % Acquisition expense 16.5 Underwriting expense 10.8 Dividends 0.1 ------- Expense ratio, including dividends 27.4 ------- Combined ratio 95.1 % ======= P&C OPERATIONS 2003 RESULTS THREE MONTHS ENDED BEFORE CORPORATE REINSURANCE INSURANCE DECEMBER 31, 2003 SIGNIFICANT AGGREGATE BAD DEBT BAD DEBT 2003 (In millions) ITEMS DEVELOPMENT(1) COVERS(2) PROVISION PROVISION RESULTS ------------ ------------- ---------- ----------- --------- ------- Net earned premiums $ 1,825 $ (24) $ (4) $ -- $ -- $ 1,797 Claim and claim adjustment expenses 1,241 (23) (2) -- -- 1,216 Acquisition expenses 342 -- -- -- -- 342 Underwriting expenses 208 -- -- -- -- 208 Policyholders' dividends 15 -- -- -- -- 15 Restructuring & other related costs -- -- -- -- -- -- ------------ ------------- ---------- ----------- --------- ------- Underwriting income (loss) 19 (1) (2) -- -- 16 ------------ ------------- ---------- ----------- --------- ------- Net investment income 174 -- -- -- -- 174 Other revenues 68 -- -- -- -- 68 Other expenses 65 -- -- -- -- 65 Non-insurance restructuring & other related costs -- -- -- -- -- -- ------------ ------------- ---------- ----------- --------- ------- Income (loss) before income tax, minority interest and net realized investment gains 196 (1) (2) -- -- 193 Income tax (expense) benefit (40) -- 1 -- -- (39) Minority interest (3) -- -- -- -- (3) ------------ ------------- ---------- ----------- --------- ------- Income (loss) before net realized investment gains 153 (1) (1) -- -- 151 Realized investment gains 152 -- -- -- -- 152 Income tax expense on realized investment gains (52) -- -- -- -- (52) ------------ ------------- ---------- ----------- --------- ------- Income (loss) from continuing operations 253 (1) (1) -- -- 251 Cumulative effect of a change in accounting principle -- -- -- -- -- -- ------------ ------------- ---------- ----------- --------- ------- Net income (loss) $ 253 $ (1) $ (1) $ -- $ -- $ 251 ============ ============= ========== =========== ========= ======= FINANCIAL RATIOS Loss & LAE 67.7 % Acquisition expense 19.0 Underwriting expense 11.6 Dividends 0.8 ------- Expense ratio, including dividends 31.4 ------- Combined ratio 99.1 % =======
(1) Includes net prior year development for premiums, claim 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 FINANCIAL SUPPLEMENT IMPACT OF SIGNIFICANT ITEMS
THREE MONTHS ENDED CNA RE DECEMBER 31, 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 $ 157 $ 8 $ -- $ -- $ -- $ 165 Claim and claim adjustment expenses 130 7 2 -- -- 139 Acquisition expenses 17 -- -- -- -- 17 Underwriting expenses 10 -- -- -- -- 10 Policyholders' dividends -- -- -- -- -- -- Restructuring & other related costs -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Underwriting income (loss) -- 1 (2) -- -- (1) ------------ -------------- ---------- ----------- --------- ------- Net investment income 17 -- -- -- -- 17 Other revenues 6 -- -- -- -- 6 Other expenses 1 -- -- -- -- 1 Non-insurance restructuring & other related costs -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Income (loss) before income tax, minority interest and net realized investment gains 22 1 (2) -- -- 21 Income tax (expense) benefit (5) (1) 1 -- -- (5) Minority interest -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Income (loss) before net realized investment gains 17 -- (1) -- -- 16 Realized investment gains 19 -- -- -- -- 19 Income tax expense on realized investment gains (7) -- -- -- -- (7) ------------ -------------- ---------- ----------- --------- ------- Income (loss) from continuing operations 29 -- (1) -- -- 28 Cumulative effect of a change in accounting principle -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Net income (loss) $ 29 $ -- $ (1) $ -- $ -- $ 28 ============ ============== ========== =========== ========= ======= FINANCIAL RATIOS Loss & LAE 84.3 % Acquisition expense 9.9 Underwriting expense 6.7 Dividends -- ------- Expense ratio, including dividends 16.6 ------- Combined ratio 100.9 % ======= THREE MONTHS ENDED TOTAL P&C SEGMENTS DECEMBER 31, 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 $ 1,982 $ (16) $ (4) $ -- $ -- $ 1,962 Claim and claim adjustment expenses 1,371 (16) -- -- -- 1,355 Acquisition expenses 359 -- -- -- -- 359 Underwriting expenses 218 -- -- -- -- 218 Policyholders' dividends 15 -- -- -- -- 15 Restructuring & other related costs -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Underwriting income (loss) 19 -- (4) -- -- 15 ------------ -------------- ---------- ----------- --------- ------- Net investment income 191 -- -- -- -- 191 Other revenues 74 -- -- -- -- 74 Other expenses 66 -- -- -- -- 66 Non-insurance restructuring & other related costs -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Income (loss) before income tax, minority interest and net realized investment gains 218 -- (4) -- -- 214 Income tax (expense) benefit (45) (1) 2 -- -- (44) Minority interest (3) -- -- -- -- (3) ------------ -------------- ---------- ----------- --------- ------- Income (loss) before net realized investment gains 170 (1) (2) -- -- 167 Realized investment gains 171 -- -- -- -- 171 Income tax expense on realized investment gains (59) -- -- -- -- (59) ------------ -------------- ---------- ----------- --------- ------- Income (loss) from continuing operations 282 (1) (2) -- -- 279 Cumulative effect of a change in accounting principle -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Net income (loss) $ 282 $ (1) $ (2) $ -- $ -- $ 279 ============ ============== ========== =========== ========= ======= FINANCIAL RATIOS Loss & LAE 69.1 % Acquisition expense 18.2 Underwriting expense 11.3 Dividends 0.7 ------- Expense ratio, including dividends 30.2 ------- Combined ratio 99.3 % =======
(1) Includes net prior year development for premiums, claim 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 FINANCIAL SUPPLEMENT IMPACT OF SIGNIFICANT ITEMS
TWELVE MONTHS ENDED STANDARD LINES DECEMBER 31, 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 $ 4,230 $ (218) $ (269) $ -- $ -- $ 3,743 Claim and claim adjustment expenses 2,925 1,395 (485) -- -- 3,835 Acquisition expenses 845 -- -- 55 242 1,142 Underwriting expenses 562 -- -- -- -- 562 Policyholders' dividends 54 46 -- -- -- 100 Restructuring & other related costs -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Underwriting (loss) income (156) (1,659) 216 (55) (242) (1,896) ------------ -------------- ---------- ----------- --------- ------- Net investment income (loss) 413 -- (77) -- -- 336 Other revenues 198 -- -- -- -- 198 Other expenses 181 -- -- -- -- 181 Non-insurance restructuring & other related costs -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Income (loss) before income tax, minority interest and net realized investment gains 274 (1,659) 139 (55) (242) (1,543) Income tax (expense) benefit (49) 581 (49) 19 85 587 Minority interest -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Income (loss) before net realized investment gains 225 (1,078) 90 (36) (157) (956) Realized investment gains 338 -- -- -- -- 338 Income tax expense on realized investment gains (119) -- -- -- -- (119) ------------ -------------- ---------- ----------- --------- ------- Income (loss) from continuing operations 444 (1,078) 90 (36) (157) (737) Cumulative effect of a change in accounting principle -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Net income (loss) $ 444 $ (1,078) $ 90 $ (36) $ (157) $ (737) ============ ============== ========== =========== ========= ======= FINANCIAL RATIOS Loss & LAE 102.5% Acquisition expense 30.5 Underwriting expense 15.0 Dividends 2.7 ------- Expense ratio, including dividends 48.2 ------- Combined ratio 150.7% ======= TWELVE MONTHS ENDED SPECIALTY LINES DECEMBER 31, 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 $ 2,697 $ -- $ (31) $ -- $ -- $ 2,666 Claim and claim adjustment expenses 1,836 482 (56) -- -- 2,262 Acquisition expenses 542 -- -- 79 -- 621 Underwriting expenses 292 -- -- -- -- 292 Policyholders' dividends 3 -- -- -- -- 3 Restructuring & other related costs -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Underwriting (loss) income 24 (482) 25 (79) -- (512) ------------ -------------- ---------- ----------- --------- ------- Net investment income (loss) 297 -- (10) -- -- 287 Other revenues 116 -- -- -- -- 116 Other expenses 111 -- -- -- -- 111 Non-insurance restructuring & other related costs -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Income (loss) before income tax, minority interest and net realized investment gains 326 (482) 15 (79) -- (220) Income tax (expense) benefit (88) 168 (5) 28 -- 103 Minority interest (4) 10 -- -- -- 6 ------------ -------------- ---------- ----------- --------- ------- Income (loss) before net realized investment gains 234 (304) 10 (51) -- (111) Realized investment gains 144 -- -- -- -- 144 Income tax expense on realized investment gains (50) -- -- -- -- (50) ------------ -------------- ---------- ----------- --------- ------- Income (loss) from continuing operations 328 (304) 10 (51) -- (17) Cumulative effect of a change in accounting principle -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Net income (loss) $ 328 $ (304) $ 10 $ (51) $ -- $ (17) ============ ============== ========== =========== ========= ======= FINANCIAL RATIOS Loss & LAE 84.9% Acquisition expense 23.3 Underwriting expense 10.9 Dividends 0.1 ------- Expense ratio, including dividends 34.3 ------- Combined ratio 119.2% ======= TWELVE MONTHS ENDED P&C OPERATIONS DECEMBER 31, 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 $ 6,927 $ (218) $ (300) $ -- $ -- $ 6,409 Claim and claim adjustment expenses 4,761 1,877 (541) -- -- 6,097 Acquisition expenses 1,387 -- -- 134 242 1,763 Underwriting expenses 854 -- -- -- -- 854 Policyholders' dividends 57 46 -- -- -- 103 Restructuring & other related costs -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Underwriting (loss) income (132) (2,141) 241 (134) (242) (2,408) ------------ -------------- ---------- ----------- --------- ------- Net investment income (loss) 710 -- (87) -- -- 623 Other revenues 314 -- -- -- -- 314 Other expenses 292 -- -- -- -- 292 Non-insurance restructuring & other related costs -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Income (loss) before income tax, minority interest and net realized investment gains 600 (2,141) 154 (134) (242) (1,763) Income tax (expense) benefit (137) 749 (54) 47 85 690 Minority interest (4) 10 -- -- -- 6 ------------ -------------- ---------- ----------- --------- ------- Income (loss) before net realized investment gains 459 (1,382) 100 (87) (157) (1,067) Realized investment gains 482 -- -- -- -- 482 Income tax expense on realized investment gains (169) -- -- -- -- (169) ------------ -------------- ---------- ----------- --------- ------- Income (loss) from continuing operations 772 (1,382) 100 (87) (157) (754) Cumulative effect of a change in accounting principle -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Net income (loss) $ 772 $ (1,382) $ 100 $ (87) $ (157) $ (754) ============ ============== ========== =========== ========= ======= FINANCIAL RATIOS Loss & LAE 95.1% Acquisition expense 27.5 Underwriting expense 13.4 Dividends 1.6 ------- Expense ratio, including dividends 42.5 ------- Combined ratio 137.6% =======
(1) Includes net prior year development for premiums, claim 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 FINANCIAL CORPORATION FINANCIAL SUPPLEMENT IMPACT OF SIGNIFICANT ITEMS
TWELVE MONTHS ENDED CNA RE DECEMBER 31, 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 $ 567 $ 26 $ (57) $ -- $ -- $ 536 Claim and claim adjustment expenses 392 220 (102) -- -- 510 Acquisition expenses 102 -- -- 2 -- 104 Underwriting expenses 54 -- -- -- -- 54 Policyholders' dividends -- -- -- -- -- -- Restructuring & other related costs -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Underwriting income (loss) 19 (194) 45 (2) -- (132) ------------ -------------- ---------- ----------- --------- ------- Net investment income (loss) 89 -- (17) -- -- 72 Other revenues 7 -- -- -- -- 7 Other expenses 1 -- -- -- -- 1 Non-insurance restructuring & other related costs -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Income (loss) before income tax, minority interest and net realized investment gains 114 (194) 28 (2) -- (54) Income tax (expense) benefit (32) 68 (10) 1 -- 27 Minority interest -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Income (loss) before net realized investment gains 82 (126) 18 (1) -- (27) Realized investment gains 73 -- -- -- -- 73 Income tax expense on realized investment gains (23) -- -- -- -- (23) ------------ -------------- ---------- ----------- --------- ------- Income (loss) from continuing operations 132 (126) 18 (1) -- 23 Cumulative effect of a change in accounting principle -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Net income (loss) $ 132 $ (126) $ 18 $ (1) $ -- $ 23 ============ ============== ========== =========== ========= ======= FINANCIAL RATIOS Loss & LAE 95.2% Acquisition expense 19.4 Underwriting expense 10.1 Dividends -- ------- Expense ratio, including dividends 29.5 ------- Combined ratio 124.7% ======= TWELVE MONTHS ENDED TOTAL P&C SEGMENTS DECEMBER 31, 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 $ 7,494 $ (192) $ (357) $ -- $ -- $ 6,945 Claim and claim adjustment expenses 5,153 2,097 (643) -- -- 6,607 Acquisition expenses 1,489 -- -- 136 242 1,867 Underwriting expenses 908 -- -- -- -- 908 Policyholders' dividends 57 46 -- -- -- 103 Restructuring & other related costs -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Underwriting income (loss) (113) (2,335) 286 (136) (242) (2,540) ------------ -------------- ---------- ----------- --------- ------- Net investment income (loss) 799 -- (104) -- -- 695 Other revenues 321 -- -- -- -- 321 Other expenses 293 -- -- -- -- 293 Non-insurance restructuring & other related costs -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Income (loss) before income tax, minority interest and net realized investment gains 714 (2,335) 182 (136) (242) (1,817) Income tax (expense) benefit (169) 817 (64) 48 85 717 Minority interest (4) 10 -- -- -- 6 ------------ -------------- ---------- ----------- --------- ------- Income (loss) before net realized investment gains 541 (1,508) 118 (88) (157) (1,094) Realized investment gains 555 -- -- -- -- 555 Income tax expense on realized investment gains (192) -- -- -- -- (192) ------------ -------------- ---------- ----------- --------- ------- Income (loss) from continuing operations 904 (1,508) 118 (88) (157) (731) Cumulative effect of a change in accounting principle -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Net income (loss) $ 904 $ (1,508) $ 118 $ (88) $ (157) $ (731) ============ ============== ========== =========== ========= ======= FINANCIAL RATIOS Loss & LAE 95.2% Acquisition expense 26.9 Underwriting expense 13.0 Dividends 1.5 ------- Expense ratio, including dividends 41.4 ------- Combined ratio 136.6% =======
(1) Includes net prior year development for premiums, claim 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 IMPACT OF SIGNIFICANT ITEMS
THREE MONTHS ENDED STANDARD LINES DECEMBER 31, 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 $ 1,001 $ (22) $ (1) $ -- $ -- $ 978 Claim and claim adjustment expenses 773 (72) -- -- -- 701 Acquisition expenses 188 -- -- -- -- 188 Underwriting expenses 130 -- -- -- -- 130 Policyholders' dividends 18 (2) -- -- -- 16 Restructuring & other related costs (2) -- -- -- -- (2) ------------ -------------- ---------- ----------- --------- ------- Underwriting (loss) income (106) 52 (1) -- -- (55) ------------ -------------- ---------- ----------- --------- ------- Net investment income 94 -- -- -- -- 94 Other revenues 80 -- -- -- -- 80 Other expenses 73 -- -- -- -- 73 Non-insurance restructuring & other related costs (6) -- -- -- -- (6) ------------ -------------- ---------- ----------- --------- ------- Income (loss) before income tax, minority interest and net realized investment losses 1 52 (1) -- -- 52 Income tax benefit (expense) 8 (18) -- -- -- (10) Minority interest -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Income (loss) before net realized investment losses 9 34 (1) -- -- 42 Realized investment losses (35) -- -- -- -- (35) Income tax benefit on realized investment losses 12 -- -- -- -- 12 ------------ -------------- ---------- ----------- --------- ------- (Loss) income from continuing operations (14) 34 (1) -- -- 19 Cumulative effect of a change in accounting principle -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Net (loss) income $ (14) $ 34 $ (1) $ -- $ -- $ 19 ============ ============== ========== =========== ========= ======= FINANCIAL RATIOS Loss & LAE 71.7% Acquisition expense 19.1 Underwriting expense 13.3 Dividends 1.6 ------- Expense ratio, including dividends 34.0 ------- Combined ratio 105.7% ======= THREE MONTHS ENDED SPECIALTY LINES DECEMBER 31, 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 $ 607 $ (23) $ -- $ -- $ -- $ 584 Claim and claim adjustment expenses 413 28 -- -- -- 441 Acquisition expenses 103 -- -- -- -- 103 Underwriting expenses 69 -- -- -- -- 69 Policyholders' dividends 1 -- -- -- -- 1 ------------ -------------- ---------- ----------- --------- ------- Restructuring & other related costs (1) -- -- -- -- (1) ------------ -------------- ---------- ----------- --------- ------- Underwriting (loss) income 22 (51) -- -- -- (29) Net investment income 69 -- -- -- -- 69 Other revenues 26 -- -- -- -- 26 Other expenses 23 -- -- -- -- 23 Non-insurance restructuring & other related costs -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Income (loss) before income tax, minority interest and net realized investment losses 94 (51) -- -- -- 43 Income tax benefit (expense) (27) 18 -- -- -- (9) Minority interest (13) (2) -- -- -- (15) ------------ -------------- ---------- ----------- --------- ------- Income (loss) before net realized investment losses 54 (35) -- -- -- 19 Realized investment losses (31) -- -- -- -- (31) Income tax benefit on realized investment losses 11 -- -- -- -- 11 ------------ -------------- ---------- ----------- --------- ------- (Loss) income from continuing operations 34 (35) -- -- -- (1) Cumulative effect of a change in accounting principle -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Net (loss) income $ 34 $ (35) $ -- $ -- $ -- $ (1) ============ ============== ========== =========== ========= ======= FINANCIAL RATIOS Loss & LAE 75.6% Acquisition expense 17.7 Underwriting expense 11.5 Dividends 0.1 ------- Expense ratio, including dividends 29.3 ------- Combined ratio 104.9% ======= THREE MONTHS ENDED P&C OPERATIONS DECEMBER 31, 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 $ 1,608 $ (45) $ (1) $ -- $ -- $ 1,562 Claim and claim adjustment expenses 1,186 (44) -- -- -- 1,142 Acquisition expenses 291 -- -- -- -- 291 Underwriting expenses 199 -- -- -- -- 199 Policyholders' dividends 19 (2) -- -- -- 17 Restructuring & other related costs (3) -- -- -- -- (3) ------------ -------------- ---------- ----------- --------- ------- Underwriting (loss) income (84) 1 (1) -- -- (84) ------------ -------------- ---------- ----------- --------- ------- Net investment income 163 -- -- -- -- 163 Other revenues 106 -- -- -- -- 106 Other expenses 96 -- -- -- -- 96 Non-insurance restructuring & other related costs (6) -- -- -- -- (6) ------------ -------------- ---------- ----------- --------- ------- Income (loss) before income tax, minority interest and net realized investment losses 95 1 (1) -- -- 95 Income tax (expense) (19) -- -- -- -- (19) Minority interest (13) (2) -- -- -- (15) ------------ -------------- ---------- ----------- --------- ------- Income (loss) before net realized investment losses 63 (1) (1) -- -- 61 Realized investment losses (66) -- -- -- -- (66) Income tax benefit on realized investment losses 23 -- -- -- -- 23 ------------ -------------- ---------- ----------- --------- ------- Income (loss) from continuing operations 20 (1) (1) -- -- 18 Cumulative effect of a change in accounting principle -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Net income (loss) $ 20 $ (1) $ (1) $ -- $ -- $ 18 ============ ============== ========== =========== ========= ======= FINANCIAL RATIOS Loss & LAE 73.1% Acquisition expense 18.6 Underwriting expense 12.6 Dividends 1.1 ------- Expense ratio, including dividends 32.3 ------- Combined ratio 105.4% =======
(1) Includes net prior year development for premiums, claim 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 IMPACT OF SIGNIFICANT ITEMS
THREE MONTHS ENDED CNA RE DECEMBER 31, 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 $ 179 $ 1 $ -- $ -- $ -- $ 180 Claim and claim adjustment expenses 126 2 -- -- -- 128 Acquisition expenses 33 -- -- -- -- 33 Underwriting expenses 15 -- -- -- -- 15 Policyholders' dividends -- -- -- -- -- -- Restructuring & other related costs -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Underwriting income (loss) 5 (1) -- -- -- 4 ------------ -------------- ---------- ----------- --------- ------- Net investment income 35 -- -- -- -- 35 Other revenues -- -- -- -- -- -- Other expenses (1) -- -- -- -- (1) Non-insurance restructuring & other related costs -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Income (loss) before income tax, minority interest and net realized investment gains 41 (1) -- -- -- 40 Income tax (expense) (14) -- -- -- -- (14) Minority interest -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Income (loss) before net realized investment gains 27 (1) -- -- -- 26 Realized investment gains 83 -- -- -- -- 83 Income tax (expense) benefit on realized investment gains (15) -- -- -- -- (15) ------------ -------------- ---------- ----------- --------- ------- Income (loss) from continuing operations 95 (1) -- -- -- 94 Cumulative effect of a change in accounting principle -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Net income (loss) $ 95 $ (1) $ -- $ -- $ -- $ 94 ============ ============== ========== =========== ========= ======= FINANCIAL RATIOS Loss & LAE 71.1% Acquisition expense 18.3 Underwriting expense 8.4 Dividends -- ------- Expense ratio, including dividends 26.7 ------- Combined ratio 97.8% ======= THREE MONTHS ENDED TOTAL P&C SEGMENTS DECEMBER 31, 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 $ 1,787 $ (44) $ (1) $ -- $ -- $ 1,742 Claim and claim adjustment expenses 1,312 (42) -- -- -- 1,270 Acquisition expenses 324 -- -- -- -- 324 Underwriting expenses 214 -- -- -- -- 214 Policyholders' dividends 19 (2) -- -- -- 17 Restructuring & other related costs (3) -- -- -- -- (3) ------------ -------------- ---------- ----------- --------- ------- Underwriting income (loss) (79) -- (1) -- -- (80) ------------ -------------- ---------- ----------- --------- ------- Net investment income 198 -- -- -- -- 198 Other revenues 106 -- -- -- -- 106 Other expenses 95 -- -- -- -- 95 Non-insurance restructuring & other related costs (6) -- -- -- -- (6) ------------ -------------- ---------- ----------- --------- ------- Income (loss) before income tax, minority interest and net realized investment gains 136 -- (1) -- -- 135 Income tax (expense) (33) -- -- -- -- (33) Minority interest (13) (2) -- -- -- (15) ------------ -------------- ---------- ----------- --------- ------- Income (loss) before net realized investment gains 90 (2) (1) -- -- 87 Realized investment gains 17 -- -- -- -- 17 Income tax (expense) benefit on realized investment gains 8 -- -- -- -- 8 ------------ -------------- ---------- ----------- --------- ------- Income (loss) from continuing operations 115 (2) (1) -- -- 112 Cumulative effect of a change in accounting principle -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Net income (loss) $ 115 $ (2) $ (1) $ -- $ -- $ 112 ============ ============== ========== =========== ========= ======= FINANCIAL RATIOS Loss & LAE 72.9% Acquisition expense 18.6 Underwriting expense 12.1 Dividends 1.0 ------- Expense ratio, including dividends 31.7 ------- Combined ratio 104.6% =======
(1) Includes net prior year development for premiums, claim 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 FINANCIAL CORPORATION FINANCIAL SUPPLEMENT IMPACT OF SIGNIFICANT ITEMS
TWELVE MONTHS ENDED STANDARD LINES DECEMBER 31, 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 $ 4,085 $ (66) $ (1) $ -- $ -- $ 4,018 Claim and claim adjustment expenses 3,113 (221) -- -- -- 2,892 Acquisition expenses 724 -- -- -- -- 724 Underwriting expenses 509 -- -- -- -- 509 Policyholders' dividends 69 4 -- -- -- 73 Restructuring & other related costs (2) -- -- -- -- (2) ------------ -------------- ---------- ----------- --------- ------- Underwriting (loss) income (328) 151 (1) -- -- (178) ------------ -------------- ---------- ----------- --------- ------- Net investment income (loss) 398 -- -- -- -- 398 Other revenues 323 -- -- -- -- 323 Other expenses 289 -- -- -- -- 289 Non-insurance & other related costs (6) -- -- -- -- (6) ------------ -------------- ---------- ----------- --------- ------- Income (loss) before income tax, minority interest and net realized investment losses 110 151 (1) -- -- 260 Income tax (expense) benefit (10) (53) -- -- -- (63) Minority interest -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Income (loss) before net realized investment losses 100 98 (1) -- -- 197 Realized investment losses (86) -- -- -- -- (86) Income tax benefit on realized investment losses 30 -- -- -- -- 30 ------------ -------------- ---------- ----------- --------- ------- Income (loss) from continuing operations 44 98 (1) -- -- 141 Cumulative effect of a change in accounting principle -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Net income (loss) $ 44 $ 98 $ (1) $ -- $ -- $ 141 ============ ============== ========== =========== ========= ======= FINANCIAL RATIOS Loss & LAE 72.0% Acquisition expense 18.0 Underwriting expense 12.6 Dividends 1.8 ------ Expense ratio, including dividends 32.4 ------ Combined ratio 104.4% ====== TWELVE MONTHS ENDED SPECIALTY LINES DECEMBER 31, 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 $ 2,247 $ (30) $ (39) $ -- $ -- $ 2,178 Claim and claim adjustment expenses 1,611 123 (55) -- -- 1,679 Acquisition expenses 436 -- -- -- -- 436 Underwriting expenses 264 -- -- -- -- 264 Policyholders' dividends 3 -- -- -- -- 3 Restructuring & other related costs (1) -- -- -- -- (1) ------------ -------------- ---------- ----------- --------- ------- Underwriting (loss) income (66) (153) 16 -- -- (203) ------------ -------------- ---------- ----------- --------- ------- Net investment income (loss) 258 -- (5) -- -- 253 Other revenues 146 -- -- -- -- 146 Other expenses 110 -- -- -- -- 110 Non-insurance & other related costs -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Income (loss) before income tax, minority interest and net realized investment losses 228 (153) 11 -- -- 86 Income tax (expense) benefit (82) 54 (4) -- -- (32) Minority interest (25) (1) -- -- -- (26) ------------ -------------- ---------- ----------- --------- ------- Income (loss) before net realized investment losses 121 (100) 7 -- -- 28 Realized investment losses (77) -- -- -- -- (77) Income tax benefit on realized investment losses 25 -- -- -- -- 25 ------------ -------------- ---------- ----------- --------- ------- Income (loss) from continuing operations 69 (100) 7 -- -- (24) Cumulative effect of a change in accounting principle (48) -- -- -- -- (48) ------------ -------------- ---------- ----------- --------- ------- Net income (loss) $ 21 $ (100) $ 7 $ -- $ -- $ (72) ============ ============== ========== =========== ========= ======= FINANCIAL RATIOS Loss & LAE 77.1% Acquisition expense 20.0 Underwriting expense 12.1 Dividends 0.1 ------ Expense ratio, including dividends 32.2 ------ Combined ratio 109.3% ====== TWELVE MONTHS ENDED P&C OPERATIONS DECEMBER 31, 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 $ 6,332 $ (96) $ (40) $ -- $ -- $ 6,196 Claim and claim adjustment expenses 4,724 (98) (55) -- -- 4,571 Acquisition expenses 1,160 -- -- -- -- 1,160 Underwriting expenses 773 -- -- -- -- 773 Policyholders' dividends 72 4 -- -- -- 76 Restructuring & other related costs (3) -- -- -- -- (3) ------------ -------------- ---------- ----------- --------- ------- Underwriting (loss) income (394) (2) 15 -- -- (381) ------------ -------------- ---------- ----------- --------- ------- Net investment income (loss) 656 -- (5) -- -- 651 Other revenues 469 -- -- -- -- 469 Other expenses 399 -- -- -- -- 399 Non-insurance restructuring & other related costs (6) -- -- -- -- (6) ------------ -------------- ---------- ----------- --------- ------- Income (loss) before income tax, minority interest and net realized investment losses 338 (2) 10 -- -- 346 Income tax expense (92) 1 (4) -- -- (95) Minority interest (25) (1) -- -- -- (26) ------------ -------------- ---------- ----------- --------- ------- Income (loss) before net realized investment losses 221 (2) 6 -- -- 225 Realized investment losses (163) -- -- -- -- (163) Income tax benefit on realized investment losses 55 -- -- -- -- 55 ------------ -------------- ---------- ----------- --------- ------- Income (loss) from continuing operations 113 (2) 6 -- -- 117 Cumulative effect of a change in accounting principle (48) -- -- -- -- (48) ------------ -------------- ---------- ----------- --------- ------- Net income (loss) $ 65 $ (2) $ 6 $ -- $ -- $ 69 ============ ============== ========== =========== ========= ======= FINANCIAL RATIOS Loss & LAE 73.9% Acquisition expense 18.7 Underwriting expense 12.3 Dividends 1.2 ------- Expense ratio, including dividends 32.2 ------- Combined ratio 106.1% =======
(1) Includes net prior year development for premiums, claim 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 FINANCIAL CORPORATION FINANCIAL SUPPLEMENT IMPACT OF SIGNIFICANT ITEMS
TWELVE MONTHS ENDED CNA RE DECEMBER 31, 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 $ 599 $ 104 $ (61) $ -- $ -- $ 642 Claim and claim adjustment expenses 417 179 (93) -- -- 503 Acquisition expenses 136 -- -- -- -- 136 Underwriting expenses 61 -- -- -- -- 61 Policyholders' dividends -- -- -- -- -- -- Restructuring & other related costs -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Underwriting (loss) income (15) (75) 32 -- -- (58) ------------ -------------- ---------- ----------- --------- ------- Net investment income (loss) 149 -- (5) -- -- 144 Other revenues 2 -- -- -- -- 2 Other expenses 1 -- -- -- -- 1 Non-insurance & other related costs -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Income (loss) before income tax, minority interest and net realized investment gains (losses) 135 (75) 27 -- -- 87 Income tax (expense) benefit (39) 26 (9) -- -- (22) Minority interest -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Income (loss) before net realized investment gains (losses) 96 (49) 18 -- -- 65 Realized investment gains (losses) 81 -- -- -- -- 81 Income tax (expense) benefit on realized investment gains (losses) (10) -- -- -- -- (10) ------------ -------------- ---------- ----------- --------- ------- Income (loss) from continuing operations 167 (49) 18 -- -- 136 Cumulative effect of a change in accounting principle -- -- -- -- -- -- ------------ -------------- ---------- ----------- --------- ------- Net income (loss) $ 167 $ (49) $ 18 $ -- $ -- $ 136 ============ ============== ========== =========== ========= ======= FINANCIAL RATIOS Loss & LAE 78.4% Acquisition expense 21.3 Underwriting expense 9.4 Dividends -- ------- Expense ratio, including dividends 30.7 ------- Combined ratio 109.1% ======= TWELVE MONTHS ENDED TOTAL P&C SEGMENTS DECEMBER 31, 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 $ 6,931 $ 8 $ (101) $ -- $ -- $ 6,838 Claim and claim adjustment expenses 5,141 81 (148) -- -- 5,074 Acquisition expenses 1,296 -- -- -- -- 1,296 Underwriting expenses 834 -- -- -- -- 834 Policyholders' dividends 72 4 -- -- -- 76 Restructuring & other related costs (3) -- -- -- -- (3) ------------ -------------- ---------- ----------- --------- ------- Underwriting (loss) income (409) (77) 47 -- -- (439) ------------ -------------- ---------- ----------- --------- ------- Net investment income (loss) 805 -- (10) -- -- 795 Other revenues 471 -- -- -- -- 471 Other expenses 400 -- -- -- -- 400 Non-insurance & other related costs (6) -- -- -- -- (6) ------------ -------------- ---------- ----------- --------- ------- Income (loss) before income tax, minority interest and net realized investment gains (losses) 473 (77) 37 -- -- 433 Income tax (expense) benefit (131) 27 (13) -- -- (117) Minority interest (25) (1) -- -- -- (26) ------------ -------------- ---------- ----------- --------- ------- Income (loss) before net realized investment gains (losses) 317 (51) 24 -- -- 290 Realized investment gains (losses) (82) -- -- -- -- (82) Income tax (expense) benefit on realized investment gains (losses) 45 -- -- -- -- 45 ------------ -------------- ---------- ----------- --------- ------- Income (loss) from continuing operations 280 (51) 24 -- -- 253 Cumulative effect of a change in accounting principle (48) -- -- -- -- (48) ------------ -------------- ---------- ----------- --------- ------- Net income (loss) $ 232 $ (51) $ 24 $ -- $ -- $ 205 ============ ============== ========== =========== ========= ======= FINANCIAL RATIOS Loss & LAE 74.2% Acquisition expense 19.0 Underwriting expense 12.1 Dividends 1.1 ------- Expense ratio, including dividends 32.2 ------- Combined ratio 106.4% =======
(1) Includes net prior year development for premiums, claim 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 FINANCIAL CORPORATION FINANCIAL SUPPLEMENT GROSS LOSS AND ALAE RATIOS BY SEGMENT AND LINE OF BUSINESS CCC, CIC AND GALWAY
DECEMBER 31, 2003 ACCIDENT YEAR 2003 2002 2001 2000 1999 1998 1997 1996 --------- --------- --------- --------- --------- --------- --------- --------- BY SEGMENT Standard Lines 61% 62% 88% 98% 110% 95% 81% 74% Specialty Lines 62 70 117 104 100 88 86 71 CNA Re 65 61 173 93 120 124 90 84 P&C Segments 61 64 103 99 108 96 83 74 Corporate & Other 69 67 67 83 73 80 58 72 Total 63% 65% 94% 96% 101% 92% 77% 73% BY LINE OF BUSINESS Commercial Automobile Liability 64% 67% 91% 102% 103% 97% 90% 74% Workers Compensation 64 67 81 96 105 95 76 65 Commercial Multiple-Peril 60 62 80 95 110 93 80 83 Medical Malpractice 63 78 119 128 131 113 132 118 Special Liability 53 54 162 94 98 72 77 75 Other Liability 66 72 98 112 134 125 90 72 Special Property 60 51 85 60 65 75 59 76 Auto Physical Damage 65 54 64 74 69 67 62 65 Reinsurance A, B and C 63 64 234 100 125 110 72 75 Other 63 72 80 95 76 69 63 67 Total 63% 65% 94% 96% 101% 92% 78% 74%
26 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT NET LOSS AND ALAE RATIOS BY SEGMENT AND LINE OF BUSINESS CCC, CIC AND GALWAY
DECEMBER 31, 2003 ACCIDENT YEAR 2003 2002 2001 2000 1999 1998 1997 1996 ------ ------ ------ ------ ------ ------ ------ ------ BY SEGMENT Standard Lines 62% 65% 59% 80% 94% 95% 81% 76% Specialty Lines 66 74 91 104 108 96 84 78 CNA Re 70 60 106 89 118 128 96 90 P&C Segments 64 67 70 87 100 98 83 77 Corporate & Other (1) N/A N/A N/A N/A 76 79 67 71 Total 64% 67% 70% 86% 96% 94% 79% 76% BY LINE OF BUSINESS Commercial Automobile Liability 66% 68% 78% 87% 99% 100% 93% 80% Workers Compensation 65 70 30 76 91 97 76 65 Commercial Multiple-Peril 62 64 68 81 103 96 86 85 Medical Malpractice 62 85 128 135 143 123 138 121 Special Liability 57 57 70 94 82 71 75 62 Other Liability 68 76 77 89 112 115 88 77 Special Property 53 36 75 62 59 74 64 81 Auto Physical Damage 51 51 65 70 70 73 64 66 Reinsurance A, B and C 70 62 199 100 130 115 79 84 Other 57 72 113 129 85 74 62 71 Total 64% 67% 70% 86% 96% 94% 79% 76%
(1) Ratios subsequent to 1999 are not meaningful. 27 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT GROUP OPERATIONS SEGMENT - HISTORICAL GAAP RESULTS OF OPERATIONS (1) THREE MONTHS ENDED DECEMBER 31, 2003
GROUP GROUP OPERATIONS OPERATIONS EXCLUDING BUSINESSES TOTAL GROUP BUSINESSES INCLUDED OPERATIONS IN SALE (2) IN SALE AS REPORTED ------------------ ------------------ ------------------ (In millions) Net earned premiums $ 60 $ 270 $ 330 Insurance claims & policyholders' benefits 64 181 245 Policyholders' dividends -- -- -- Insurance related expenses 22 90 112 Net investment income 34 29 63 Other revenues 14 -- 14 Other expenses 4 1 5 ------------------ ------------------ ------------------ Income before income tax and net realized investment losses 18 27 45 Income tax expense (4) (11) (15) ------------------ ------------------ ------------------ Income before net realized investment losses 14 16 30 Realized investment losses (3) (4) (166) (170) Income tax benefit on realized investment losses (3) 1 42 43 ------------------ ------------------ ------------------ Net income (loss) $ 11 $ (108) $ (97) ================== ================== ==================
TWELVE MONTHS ENDED DECEMBER 31, 2003
GROUP GROUP OPERATIONS OPERATIONS EXCLUDING BUSINESSES TOTAL GROUP BUSINESSES INCLUDED OPERATIONS IN SALE (2) IN SALE AS REPORTED ------------------ ------------------ ------------------ (In millions) Net earned premiums $ 238 $ 1,074 $ 1,312 Insurance claims & policyholders' benefits 228 777 1,005 Policyholders' dividends 1 -- 1 Insurance related expenses 93 361 454 Net investment income 137 126 263 Other revenues 60 -- 60 Other expenses 26 1 27 ------------------ ------------------ ------------------ Income before income tax and net realized investment losses 87 61 148 Income tax expense (27) (21) (48) ------------------ ------------------ ------------------ Income before net realized investment losses 60 40 100 Realized investment losses (3) (19) (158) (177) Income tax benefit on realized investment losses (3) 7 39 46 ------------------ ------------------ ------------------ Net income (loss) $ 48 $ (79) $ (31) ================== ================== ==================
(1) The historical results do not reflect any possible effects on CNA's operating results, including but not limited to the potential impact of unabsorbed overhead or other expenses. (2) Excluded businesses principally include group long term care, institutional markets and specialty medical. (3) Realized investment losses include a $176 million pretax ($130 million after-tax) loss related to the sale of the Group Benefits businesses. 28 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT LIFE OPERATIONS SEGMENT - HISTORICAL GAAP RESULTS OF OPERATIONS (1) THREE MONTHS ENDED DECEMBER 31, 2003
LIFE LIFE OPERATIONS OPERATIONS EXCLUDING BUSINESSES TOTAL LIFE BUSINESSES INCLUDED OPERATIONS IN SALE (2) IN SALE AS REPORTED ------------------ ------------------ ------------------ (In millions) Net earned premiums $ 163 $ 83 $ 246 Insurance claims & policyholders' benefits 255 90 345 Policyholders' dividends -- 3 3 Insurance related expenses 32 34 66 Net investment income 79 52 131 Other revenues 34 5 39 Other expenses (8) 1 (7) ------------------ ------------------ ------------------ (Loss) income before income tax and net realized investment gains (3) 12 9 Income tax benefit (expense) 4 (5) (1) ------------------ ------------------ ------------------ Income before net realized investment gains 1 7 8 Realized investment gains 16 10 26 Income tax expense on realized investment gains (5) (4) (9) ------------------ ------------------ ------------------ Net income $ 12 $ 13 $ 25 ================== ================== ==================
TWELVE MONTHS ENDED DECEMBER 31, 2003
LIFE LIFE OPERATIONS OPERATIONS EXCLUDING BUSINESSES TOTAL LIFE BUSINESSES INCLUDED OPERATIONS IN SALE (2) IN SALE AS REPORTED ------------------ ------------------ ------------------ (In millions) Net earned premiums $ 648 $ 381 $ 1,029 Insurance claims & policyholders' benefits 864 392 1,256 Policyholders' dividends (1) 18 17 Insurance related expenses 141 146 287 Net investment income 315 209 524 Other revenues 81 22 103 Other expenses 35 2 37 ------------------ ------------------ ------------------ Income before income tax and net realized investment gains 5 54 59 Income tax benefit (expense) 5 (19) (14) ------------------ ------------------ ------------------ Income before net realized investment gains 10 35 45 Realized investment gains 23 13 36 Income tax expense on realized investment gains (8) (5) (13) ------------------ ------------------ ------------------ Net income $ 25 $ 43 $ 68 ================== ================== ==================
(1) The historical results do not reflect any possible effects on CNA's operating results of the proposed sale, including but not limited to the potential impact of unabsorbed overhead or other expenses. (2) Excluded businesses principally include individual long term care, structured settlement and life settlement contracts. 29 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT ASBESTOS SUMMARY BY POLICYHOLDER CATEGORY DECEMBER 31, 2003
ASBESTOS RESERVES PERCENT OF NUMBER OF 2003 PAID 12/31/2003 ASBESTOS POLICYHOLDERS (NET) (NET) RESERVES --------------- --------------- --------------- --------------- (In millions) POLICYHOLDERS WITH SETTLEMENT AGREEMENTS Structured Settlements 9 $ 20 $ 188 11% Wellington 5 2 23 1 Coverage in Place 32 40 109 6 Fibreboard 1 1 54 3 --------------- --------------- --------------- --------------- TOTAL WITH SETTLEMENT AGREEMENTS 47 63 374 21 OTHER POLICYHOLDERS WITH ACTIVE ACCOUNTS Large Asbestos Accounts 160 35 405 23 Small Asbestos Accounts 1,065 16 147 8 --------------- --------------- --------------- --------------- TOTAL OTHER POLICYHOLDERS 1,225 51 552 31 ASSUMED REINSURANCE & POOLS -- 7 157 9 UNASSIGNED IBNR -- -- 684 39 --------------- --------------- --------------- --------------- TOTAL 1,272 $ 121 $ 1,767 100% =============== =============== =============== ===============
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