EX-99.3 4 c85006exv99w3.txt FINANCIAL SUPPLEMENT APPENDIX Exhibit 99.3 a CNA FINANCIAL CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION APPENDIX FOR YEARS ENDED DECEMBER 31, 2002 AND 2003 CNA FINANCIAL CORPORATION TABLE OF CONTENTS DECEMBER 31, 2002 AND 2003 In the first quarter of 2004, CNA revised its reportable segment structure to reflect changes in how it manages its core operations and makes business decisions. The information provided in this document conforms previous supplemental financial information as if the 2004 segment changes occurred in the first quarter of 2002.
PAGE ---- Supplemental Financial Information i-ii 2002 Historical Results of Operations 1-6 2003 Historical Results of Operations 7-12 2002 Historical Impact of Significant Items* 13-16 2003 Historical Impact of Significant Items* 17-20 2002 Historical Property & Casualty Insurance Claim & Claim Adjustment Expense Reserve Data 21 2003 Historical Property & Casualty Insurance Claim & Claim Adjustment Expense Reserve Data 22
* There were no significant items reported at March 31, 2002 and 2003. CNA FINANCIAL CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION DEFINITIONS AND PRESENTATION - P&C OPERATIONS includes Standard Lines and Specialty Lines. - LIFE & GROUP NON-CORE segment primarily includes the results of the life and group lines of business that are held for sale, or have been sold or placed in run-off. - CORPORATE & OTHER NON-CORE segment includes the results of certain property and casualty lines of business placed in run-off, including CNA Re (formerly a stand-alone property and casualty segment). This segment also includes the results related to the centralized adjusting and settlement of APMT claims. - P&C COMPANIES includes Standard Lines, Specialty Lines and P&C business written in the Life & Group Non-Core and Corporate & Other Non-Core segments. - Underwriting results are net earned premiums less net incurred claims, the costs incurred to settle claims, acquisition expenses and underwriting expenses. - The Loss & LAE ratio represents claim and claim adjustment expenses as a percentage of net earned premiums. - The expense ratio is the percentage of underwriting expenses, acquisition expenses and dividends, including the amortization of deferred acquisition costs, to net earned premiums. - The dividend ratio is the ratio of dividends incurred to net earned premiums. - Limited partnerships (LPs) are a relatively small portion of CNA's overall investment portfolio. The majority of the LPs invest in a substantial number of securities that are readily marketable. CNA is 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. - All amounts are in millions, except for per share and ratio information. - Certain immaterial differences are due to rounding. i CNA FINANCIAL CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION NON-GAAP FINANCIAL MEASURES This financial supplement appendix 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 (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 appendix 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 2002 HISTORICAL RESULTS OF OPERATIONS CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT APPENDIX RESULTS OF OPERATIONS - STANDARD LINES
2002 (In millions) Q1 Q2 Q3 Q4 YTD ----------------------------------------------------------- ---------- ---------- ---------- ---------- ---------- Gross written premiums $ 1,811 $ 1,417 $ 1,442 $ 1,234 $ 5,904 Net written premiums 1,255 1,244 1,216 1,040 4,755 Net earned premiums 1,186 1,196 1,156 1,140 4,678 Claim and claim adjustment expenses 905 922 761 830 3,418 Acquisition expenses 232 224 194 225 875 Underwriting expenses 150 143 156 155 604 Policyholders' dividends 16 15 26 16 73 Restructuring & other related costs - - - (2) (2) ---------- ---------- ---------- ---------- ---------- Underwriting (loss) income (117) (108) 19 (84) (290) ---------- ---------- ---------- ---------- ---------- Net investment income 119 154 86 116 475 Other revenues 112 82 80 81 355 Other expenses 83 69 79 77 308 Non-insurance restructuring & other related costs - - - (6) (6) ---------- ---------- ---------- ---------- ---------- Income before income tax, minority interest and net realized investment gains (losses) 31 59 106 42 238 Income tax expense (5) (15) (36) - (56) Minority interest (2) (1) - (10) (13) ---------- ---------- ---------- ---------- ---------- Income before net realized investment gains (losses) 24 43 70 32 169 Realized investment gains (losses) 8 (33) (37) (57) (119) Income tax (expense) benefit on realized investment gains (losses) (3) 11 13 19 40 ---------- ---------- ---------- ---------- ---------- Income (loss) from continuing operations 29 21 46 (6) 90 Cumulative effect of a change in accounting principle (43) - - - (43) ---------- ---------- ---------- ---------- ---------- Net (loss) income $ (14) $ 21 $ 46 $ (6) $ 47 ========== ========== ========== ========== ========== FINANCIAL RATIOS Loss & LAE 76.3% 77.0% 65.8% 72.9% 73.1% Acquisition expense 19.5 18.7 16.8 19.7 18.7 Underwriting expense 12.7 12.0 13.5 13.6 12.8 Dividends 1.4 1.3 2.2 1.4 1.6 ---------- ---------- ---------- ---------- ---------- Expense ratio, including dividends 33.6 32.0 32.5 34.7 33.1 ---------- ---------- ---------- ---------- ---------- Combined ratio 109.9% 109.0% 98.3% 107.6% 106.2% ========== ========== ========== ========== ==========
1 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT APPENDIX RESULTS OF OPERATIONS - SPECIALTY LINES
2002 (In millions) Q1 Q2 Q3 Q4 YTD ----------------------------------------------------------- ---------- ---------- ---------- ---------- ---------- Gross written premiums $ 461 $ 466 $ 581 $ 558 $ 2,066 Net written premiums 335 376 424 439 1,574 Net earned premiums 326 353 366 406 1,451 Claim and claim adjustment expenses 226 248 311 281 1,066 Acquisition expenses 65 64 74 65 268 Underwriting expenses 37 40 41 40 158 Policyholders' dividends 1 - 1 1 3 Restructuring & other related costs - - - (1) (1) ---------- ---------- ---------- ---------- ---------- Underwriting (loss) income (3) 1 (61) 20 (43) ---------- ---------- ---------- ---------- ---------- Net investment income 42 54 30 46 172 Other revenues 25 31 30 22 108 Other expenses 19 26 28 21 94 Non-insurance restructuring & other related costs - - - - - ---------- ---------- ---------- ---------- ---------- Income (loss) before income tax, minority interest and net realized investment gains (losses) 45 60 (29) 67 143 Income tax (expense) benefit (14) (19) 13 (20) (40) Minority interest (3) (4) (1) (5) (13) ---------- ---------- ---------- ---------- ---------- Income (loss) before net realized investment gains (losses) 28 37 (17) 42 90 Realized investment gains (losses) 2 (16) (11) (14) (39) Income tax (expense) benefit on realized investment gains (losses) (1) 5 4 6 14 ---------- ---------- ---------- ---------- ---------- Income (loss) from continuing operations 29 26 (24) 34 65 Cumulative effect of a change in accounting principle (5) - - - (5) ---------- ---------- ---------- ---------- ---------- Net income (loss) $ 24 $ 26 $ (24) $ 34 $ 60 ========== ========== ========== ========== ========== FINANCIAL RATIOS Loss & LAE 69.4% 70.2% 84.9% 69.4% 73.5% Acquisition expense 19.9 18.1 20.2 16.1 18.5 Underwriting expense 11.3 11.2 11.5 9.5 10.8 Dividends 0.2 0.2 0.2 0.2 0.2 ---------- ---------- ---------- ---------- ---------- Expense ratio, including dividends 31.4 29.5 31.9 25.8 29.5 ---------- ---------- ---------- ---------- ---------- Combined ratio 100.8% 99.7% 116.8% 95.2% 103.0% ========== ========== ========== ========== ==========
2 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT APPENDIX RESULTS OF OPERATIONS - PROPERTY & CASUALTY OPERATIONS
2002 (In millions) Q1 Q2 Q3 Q4 YTD ----------------------------------------------------------- ---------- ---------- ---------- ---------- ---------- Gross written premiums $ 2,272 $ 1,883 $ 2,023 $ 1,792 $ 7,970 Net written premiums 1,590 1,620 1,640 1,479 6,329 Net earned premiums 1,512 1,549 1,522 1,546 6,129 Claim and claim adjustment expenses 1,131 1,170 1,072 1,111 4,484 Acquisition expenses 297 288 268 290 1,143 Underwriting expenses 187 183 197 195 762 Policyholders' dividends 17 15 27 17 76 Restructuring & other related costs - - - (3) (3) ---------- ---------- ---------- ---------- ---------- Underwriting loss (120) (107) (42) (64) (333) ---------- ---------- ---------- ---------- ---------- Net investment income 161 208 116 162 647 Other revenues 137 113 110 103 463 Other expenses 102 95 107 98 402 Non-insurance restructuring & other related costs - - - (6) (6) ---------- ---------- ---------- ---------- ---------- Income before income tax, minority interest and net realized investment gains (losses) 76 119 77 109 381 Income tax expense (19) (34) (23) (20) (96) Minority interest (5) (5) (1) (15) (26) ---------- ---------- ---------- ---------- ---------- Income before net realized investment gains (losses) 52 80 53 74 259 Realized investment gains (losses) 10 (49) (48) (71) (158) Income tax (expense) benefit on realized investment gains (losses) (4) 16 17 25 54 ---------- ---------- ---------- ---------- ---------- Income from continuing operations 58 47 22 28 155 Cumulative effect of a change in accounting principle (48) - - - (48) ---------- ---------- ---------- ---------- ---------- Net income $ 10 $ 47 $ 22 $ 28 $ 107 ========== ========== ========== ========== ========== FINANCIAL RATIOS Loss & LAE 74.8% 75.5% 70.4% 72.0% 73.2% Acquisition expense 19.6 18.6 17.6 18.8 18.7 Underwriting expense 12.4 11.8 13.0 12.4 12.3 Dividends 1.1 1.0 1.7 1.1 1.2 ---------- ---------- ---------- ---------- ---------- Expense ratio, including dividends 33.1 31.4 32.3 32.3 32.2 ---------- ---------- ---------- ---------- ---------- Combined ratio 107.9% 106.9% 102.7% 104.3% 105.4% ========== ========== ========== ========== ==========
3 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT APPENDIX RESULTS OF OPERATIONS - LIFE & GROUP NON-CORE
2002 (In millions) Q1 Q2 Q3 Q4 YTD ----------------------------------------------------------- ---------- ---------- ---------- ---------- ---------- Net earned premiums $ 1,178 $ 1,097 $ 568 $ 565 $ 3,408 Insurance claims & policyholders' benefits 1,080 1,034 530 566 3,210 Policyholders' dividends - 3 4 3 10 Insurance related expenses 247 209 166 170 792 Restructuring & other related costs - - - (1) (1) Net investment income 202 206 203 210 821 Other revenues 50 52 53 44 199 Other expenses 26 26 27 24 103 Non-insurance restructuring & other related costs - - - - - ---------- ---------- ---------- ---------- ---------- Income before income tax, minority interest and net realized investment gains (losses) 77 83 97 57 314 Income tax expense (26) (29) (33) (20) (108) Minority interest - - - - - ---------- ---------- ---------- ---------- ---------- Income before net realized investment gains (losses) 51 54 64 37 206 Realized investment gains (losses) 22 (83) (14) (100) (175) Income tax (expense) benefit on realized investment gains (losses) (8) 30 4 34 60 ---------- ---------- ---------- ---------- ---------- Income (loss) from continuing operations 65 1 54 (29) 91 Loss from discontinued operations (35) - - - (35) Cumulative effect of a change in accounting principle (8) - - - (8) ---------- ---------- ---------- ---------- ---------- Net income (loss) $ 22 $ 1 $ 54 $ (29) $ 48 ========== ========== ========== ========== ==========
P&C COMPANY INFORMATION
2002 (In millions) Q1 Q2 Q3 Q4 YTD ----------------------------------------------------------- ---------- ---------- ---------- ---------- ---------- Gross written premiums $ 953 $ 864 $ 343 $ 387 $ 2,547 Net written premiums 740 658 122 162 1,682 Net earned premiums 732 654 121 126 1,633 Underwriting loss (38) (40) (46) (101) (225) FINANCIAL RATIOS Loss & LAE 90.2% 93.3% 118.4% 153.8% 98.4% Acquisition expense 2.5 3.0 6.1 11.6 3.7 Underwriting expense 12.6 9.7 13.8 14.8 11.7 Dividends - - - - - ---------- ---------- ---------- ---------- ---------- Expense ratio, including dividends 15.1 12.7 19.9 26.4 15.4 ---------- ---------- ---------- ---------- ---------- Combined ratio 105.3% 106.0% 138.3% 180.2% 113.8% ========== ========== ========== ========== ==========
4 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT APPENDIX RESULTS OF OPERATIONS - CORPORATE & OTHER NON-CORE
2002 (In millions) Q1 Q2 Q3 Q4 YTD ----------------------------------------------------------- ---------- ---------- ---------- ---------- ---------- Net earned premiums $ 147 $ 180 $ 172 $ 177 $ 676 Insurance claims & policyholders' benefits 82 160 217 153 612 Policyholders' dividends - - - - - Insurance related expenses 50 44 60 61 215 Restructuring & other related costs - - - (27) (27) Net investment income 63 88 45 66 262 Other revenues (5) (19) (26) (17) (67) Other expenses 59 47 35 32 173 Non-insurance restructuring & other related costs - - - - - ---------- ---------- ---------- ---------- ---------- Income (loss) before income tax, minority interest and net realized investment (losses) gains 14 (2) (121) 7 (102) Income tax (expense) benefit (7) 4 42 (6) 33 Minority interest - - - - - ---------- ---------- ---------- ---------- ---------- Income (loss) before net realized investment (losses) gains 7 2 (79) 1 (69) Realized investment (losses) gains (31) (30) 86 56 81 Income tax benefit (expense) on realized investment (losses) gains 13 11 (29) (6) (11) ---------- ---------- ---------- ---------- ---------- (Loss) income from continuing operations (11) (17) (22) 51 1 Loss from discontinued operations - - - - - Cumulative effect of a change in accounting principle (1) - - - (1) ---------- ---------- ---------- ---------- ---------- Net (loss) income $ (12) $ (17) $ (22) $ 51 $ - ========== ========== ========== ========== ==========
P&C COMPANY INFORMATION
2002 (In millions) Q1 Q2 Q3 Q4 YTD ----------------------------------------------------------- ---------- ---------- ---------- ---------- ---------- Gross written premiums $ 852 $ 693 $ 703 $ 690 $ 2,938 Net written premiums 203 167 162 110 642 Net earned premiums 153 187 160 176 676 Underwriting loss (21) (53) (140) (41) (255) FINANCIAL RATIOS Loss & LAE 57.2% 89.8% 128.3% 85.5% 90.4% Acquisition expense 28.5 19.8 24.9 30.3 25.7 Underwriting expense 27.8 19.4 33.9 6.0 21.3 Dividends - - - - - ---------- ---------- ---------- ---------- ---------- Expense ratio, including dividends 56.3 39.2 58.8 36.3 47.0 ---------- ---------- ---------- ---------- ---------- Combined ratio 113.5% 129.0% 187.1% 121.8% 137.4% ========== ========== ========== ========== ==========
5 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT APPENDIX RESULTS OF TOTAL OPERATIONS
2002 (In millions) Q1 Q2 Q3 Q4 YTD ----------------------------------------------------------- ---------- ---------- ---------- ---------- ---------- Net earned premiums $ 2,837 $ 2,826 $ 2,262 $ 2,288 $ 10,213 Insurance claims & policyholders' benefits 2,293 2,364 1,819 1,830 8,306 Policyholders' dividends 17 18 31 20 86 Insurance related expenses 781 724 691 716 2,912 Restructuring & other related costs - - - (31) (31) Net investment income 426 502 364 438 1,730 Other revenues 182 146 137 130 595 Other expenses 187 168 169 154 678 Non-insurance restructuring & other related costs - - - (6) (6) ---------- ---------- ---------- ---------- ---------- Income before income tax, minority interest and net realized investment gains (losses) 167 200 53 173 593 Income tax expense (52) (59) (14) (46) (171) Minority interest (5) (5) (1) (15) (26) ---------- ---------- ---------- ---------- ---------- Income before net realized investment gains (losses) 110 136 38 112 396 Realized investment gains (losses) 1 (162) 24 (115) (252) Income tax benefit (expense) on realized investment gains (losses) 1 57 (8) 53 103 ---------- ---------- ---------- ---------- ---------- Income from continuing operations 112 31 54 50 247 Loss from discontinued operations (35) - - - (35) Cumulative effect of a change in accounting principle (57) - - - (57) ---------- ---------- ---------- ---------- ---------- Net income $ 20 $ 31 $ 54 $ 50 $ 155 ========== ========== ========== ========== ==========
P&C COMPANY INFORMATION
2002 (In millions) Q1 Q2 Q3 Q4 YTD ----------------------------------------------------------- ---------- ---------- ---------- ---------- ---------- Gross written premiums $ 4,077 $ 3,440 $ 3,069 $ 2,869 $ 13,455 Net written premiums 2,533 2,445 1,924 1,751 8,653 Net earned premiums 2,397 2,390 1,803 1,848 8,438 Underwriting loss (179) (200) (228) (206) (813) FINANCIAL RATIOS Loss & LAE 78.4% 81.5% 79.0% 78.8% 79.4% Acquisition expense 15.0 14.4 17.4 19.4 16.3 Underwriting expense 13.4 11.8 14.8 12.0 13.0 Dividends 0.7 0.7 1.4 0.9 0.9 ---------- ---------- ---------- ---------- ---------- Expense ratio, including dividends 29.1 26.9 33.6 32.3 30.2 ---------- ---------- ---------- ---------- ---------- Combined ratio 107.5% 108.4% 112.6% 111.1% 109.6% ========== ========== ========== ========== ==========
6 2003 HISTORICAL RESULTS OF OPERATIONS CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT APPENDIX RESULTS OF OPERATIONS - STANDARD LINES
2003 (In millions) Q1 Q2 Q3 Q4 YTD ----------------------------------------------------------- ---------- ---------- ---------- ---------- ---------- Gross written premiums $ 1,634 $ 1,651 $ 1,626 $ 1,575 $ 6,486 Net written premiums 1,273 1,087 1,028 1,173 4,561 Net earned premiums 1,219 1,018 1,001 1,292 4,530 Claim and claim adjustment expenses 893 896 1,726 872 4,387 Acquisition expenses 238 266 554 262 1,320 Underwriting expenses 160 172 180 164 676 Policyholders' dividends 15 11 60 14 100 Restructuring & other related costs - - - - - ---------- ---------- ---------- ---------- ---------- Underwriting loss (87) (327) (1,519) (20) (1,953) ---------- ---------- ---------- ---------- ---------- Net investment income 129 105 55 118 407 Other revenues 71 61 34 33 199 Other expenses 63 60 35 34 192 Non-insurance restructuring & other related costs - - - - - ---------- ---------- ---------- ---------- ---------- Income (loss) before income tax, minority interest and net realized investment gains 50 (221) (1,465) 97 (1,539) Income tax (expense) benefit (5) 85 520 (8) 592 Minority interest (1) 2 (2) (3) (4) ---------- ---------- ---------- ---------- ---------- Income (loss) before net realized investment gains 44 (134) (947) 86 (951) Realized investment gains 7 184 58 112 361 Income tax expense on realized investment gains (4) (62) (22) (39) (127) ---------- ---------- ---------- ---------- ---------- Income (loss) from continuing operations 47 (12) (911) 159 (717) Cumulative effect of a change in accounting principle - - - - - ---------- ---------- ---------- ---------- ---------- Net income (loss) $ 47 $ (12) $ (911) $ 159 $ (717) ========== ========== ========== ========== ========== FINANCIAL RATIOS Loss & LAE 73.3% 88.0% 172.4% 67.5% 96.8% Acquisition expense 19.5 26.1 55.3 20.3 29.1 Underwriting expense 13.2 16.9 18.0 12.7 15.0 Dividends 1.2 1.1 6.0 1.1 2.2 ---------- ---------- ---------- ---------- ---------- Expense ratio, including dividends 33.9 44.1 79.3 34.1 46.3 ---------- ---------- ---------- ---------- ---------- Combined ratio 107.2% 132.1% 251.7% 101.6% 143.1% ========== ========== ========== ========== ==========
7 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT APPENDIX RESULTS OF OPERATIONS - SPECIALTY LINES
2003 (In millions) Q1 Q2 Q3 Q4 YTD ----------------------------------------------------------- ---------- ---------- ---------- ---------- ---------- Gross written premiums $ 628 $ 614 $ 717 $ 670 $ 2,629 Net written premiums 476 487 528 547 2,038 Net earned premiums 428 459 451 502 1,840 Claim and claim adjustment expenses 284 402 547 339 1,572 Acquisition expenses 79 83 169 77 408 Underwriting expenses 43 45 44 44 176 Policyholders' dividends 1 - 1 1 3 Restructuring & other related costs - - - - - ---------- ---------- ---------- ---------- ---------- Underwriting income (loss) 21 (71) (310) 41 (319) ---------- ---------- ---------- ---------- ---------- Net investment income 49 53 47 52 201 Other revenues 17 30 35 33 115 Other expenses 13 25 30 32 100 Non-insurance restructuring & other related costs - - - - - ---------- ---------- ---------- ---------- ---------- Income (loss) before income tax, minority interest and net realized investment gains 74 (13) (258) 94 (103) Income tax (expense) benefit (24) 9 103 (29) 59 Minority interest (2) (3) 15 - 10 ---------- ---------- ---------- ---------- ---------- Income (loss) before net realized investment gains 48 (7) (140) 65 (34) Realized investment gains 3 59 19 33 114 Income tax expense on realized investment gains (1) (21) (7) (11) (40) ---------- ---------- ---------- ---------- ---------- Income (loss) from continuing operations 50 31 (128) 87 40 Cumulative effect of a change in accounting principle - - - - - ---------- ---------- ---------- ---------- ---------- Net income (loss) $ 50 $ 31 $ (128) $ 87 $ 40 ========== ========== ========== ========== ========== FINANCIAL RATIOS Loss & LAE 66.3% 87.5% 121.2% 67.7% 85.4% Acquisition expense 18.4 18.2 37.4 15.3 22.2 Underwriting expense 10.2 9.7 9.8 8.8 9.6 Dividends 0.1 0.1 0.3 0.2 0.2 ---------- ---------- ---------- ---------- ---------- Expense ratio, including dividends 28.7 28.0 47.5 24.3 32.0 ---------- ---------- ---------- ---------- ---------- Combined ratio 95.0% 115.5% 168.7% 92.0% 117.4% ========== ========== ========== ========== ==========
8 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT APPENDIX RESULTS OF OPERATIONS - PROPERTY & CASUALTY OPERATIONS
2003 (In millions) Q1 Q2 Q3 Q4 YTD ----------------------------------------------------------- ---------- ---------- ---------- ---------- ---------- Gross written premiums $ 2,262 $ 2,265 $ 2,343 $ 2,245 $ 9,115 Net written premiums 1,749 1,574 1,556 1,720 6,599 Net earned premiums 1,647 1,477 1,452 1,794 6,370 Claim and claim adjustment expenses 1,177 1,298 2,273 1,211 5,959 Acquisition expenses 317 349 723 339 1,728 Underwriting expenses 203 217 224 208 852 Policyholders' dividends 16 11 61 15 103 Restructuring & other related costs - - - - - ---------- ---------- ---------- ---------- ---------- Underwriting (loss) income (66) (398) (1,829) 21 (2,272) ---------- ---------- ---------- ---------- ---------- Net investment income 178 158 102 170 608 Other revenues 88 91 69 66 314 Other expenses 76 85 65 66 292 Non-insurance restructuring & other related costs - - - - - ---------- ---------- ---------- ---------- ---------- Income (loss) before income tax, minority interest and net realized investment gains 124 (234) (1,723) 191 (1,642) Income tax (expense) benefit (29) 94 623 (37) 651 Minority interest (3) (1) 13 (3) 6 ---------- ---------- ---------- ---------- ---------- Income (loss) before net realized investment gains 92 (141) (1,087) 151 (985) Realized investment gains 10 243 77 145 475 Income tax expense on realized investment gains (5) (83) (29) (50) (167) ---------- ---------- ---------- ---------- ---------- Income (loss) from continuing operations 97 19 (1,039) 246 (677) Cumulative effect of a change in accounting principle - - - - - ---------- ---------- ---------- ---------- ---------- Net income (loss) $ 97 $ 19 $ (1,039) $ 246 $ (677) ========== ========== ========== ========== ========== FINANCIAL RATIOS Loss & LAE 71.5% 87.8% 156.5% 67.5% 93.6% Acquisition expense 19.2 23.7 49.7 18.9 27.1 Underwriting expense 12.3 14.6 15.5 11.7 13.4 Dividends 1.0 0.8 4.2 0.8 1.6 ---------- ---------- ---------- ---------- ---------- Expense ratio, including dividends 32.5 39.1 69.4 31.4 42.1 ---------- ---------- ---------- ---------- ---------- Combined ratio 104.0% 126.9% 225.9% 98.9% 135.7% ========== ========== ========== ========== ==========
9 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT APPENDIX RESULTS OF OPERATIONS - LIFE & GROUP NON-CORE
2003 (In millions) Q1 Q2 Q3 Q4 YTD ----------------------------------------------------------- ---------- ---------- ---------- ---------- ---------- Net earned premiums $ 586 $ 603 $ 611 $ 576 $ 2,376 Insurance claims & policyholders' benefits 561 580 643 600 2,384 Policyholders' dividends 2 2 3 3 10 Insurance related expenses 200 193 184 177 754 Restructuring & other related costs - - - - - Net investment income 203 211 204 203 821 Other revenues 41 35 34 53 163 Other expenses 24 21 21 - 66 Non-insurance restructuring & other related costs - - - - - ---------- ---------- ---------- ---------- ---------- Income (loss) before income tax, minority interest and net realized investment (losses) gains 43 53 (2) 52 146 Income tax (expense) benefit (14) (15) 11 (15) (33) Minority interest - - - - - ---------- ---------- ---------- ---------- ---------- Income before net realized investment (losses) gains 29 38 9 37 113 Realized investment (losses) gains (104) 53 60 (150) (141) Income tax benefit (expense) on realized investment (losses) gains 36 (18) (21) 36 33 ---------- ---------- ---------- ---------- ---------- (Loss) income from continuing operations (39) 73 48 (77) 5 Loss from discontinued operations - - - - - Cumulative effect of a change in accounting principle - - - - - ---------- ---------- ---------- ---------- ---------- Net (loss) income $ (39) $ 73 $ 48 $ (77) $ 5 ========== ========== ========== ========== ==========
P&C COMPANY INFORMATION
2003 (In millions) Q1 Q2 Q3 Q4 YTD ----------------------------------------------------------- ---------- ---------- ---------- ---------- ---------- Gross written premiums $ 351 $ 326 $ 312 $ 307 $ 1,296 Net written premiums 137 132 127 128 524 Net earned premiums 130 132 128 130 520 Underwriting loss (58) (71) (102) (119) (350) FINANCIAL RATIOS Loss & LAE 114.6% 125.4% 150.9% 166.3% 139.3% Acquisition expense 16.2 16.2 20.8 19.1 18.1 Underwriting expense 14.1 12.3 7.8 5.5 9.8 Dividends - - - - - ---------- ---------- ---------- ---------- ---------- Expense ratio, including dividends 30.3 28.5 28.6 24.6 27.9 ---------- ---------- ---------- ---------- ---------- Combined ratio 144.9% 153.9% 179.5% 190.9% 167.2% ========== ========== ========== ========== ==========
10 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT APPENDIX RESULTS OF OPERATIONS - CORPORATE & OTHER NON-CORE
2003 (In millions) Q1 Q2 Q3 Q4 YTD ----------------------------------------------------------- ---------- ---------- ---------- ---------- ---------- Net earned premiums $ 148 $ 117 $ 63 $ 140 $ 468 Insurance claims & policyholders' benefits 114 176 1,051 118 1,459 Policyholders' dividends - - 1 - 1 Insurance related expenses 48 86 255 29 418 Restructuring & other related costs - - - - - Net investment income 51 58 46 63 218 Other revenues (21) (29) (20) (12) (82) Other expenses 3 4 1 34 42 Non-insurance restructuring & other related costs - - - - - ---------- ---------- ---------- ---------- ---------- Income (loss) before income tax, minority interest and net realized investment gains (losses) 13 (120) (1,219) 10 (1,316) Income tax (expense) benefit (2) 45 431 (4) 470 Minority interest - (1) 1 - - ---------- ---------- ---------- ---------- ---------- Income (loss) before net realized investment gains (losses) 11 (76) (787) 6 (846) Realized investment gains (losses) 18 82 27 (1) 126 Income tax expense on realized investment gains (losses) (4) (28) (9) - (41) ---------- ---------- ---------- ---------- ---------- Income (loss) from continuing operations 25 (22) (769) 5 (761) Loss from discontinued operations - - - - - Cumulative effect of a change in accounting principle - - - - - ---------- ---------- ---------- ---------- ---------- Net income (loss) $ 25 $ (22) $ (769) $ 5 $ (761) ========== ========== ========== ========== ==========
P&C COMPANY INFORMATION
2003 (In millions) Q1 Q2 Q3 Q4 YTD ----------------------------------------------------------- ---------- ---------- ---------- ---------- ---------- Gross written premiums $ 803 $ 671 $ 647 $ 477 $ 2,598 Net written premiums 214 120 107 39 480 Net earned premiums 171 139 92 163 565 Underwriting loss (12) (147) (1,257) (5) (1,421) FINANCIAL RATIOS Loss & LAE 79.7% 143.2% N/A% 86.3% 275.4% Acquisition expense 24.9 53.2 253.7 24.3 68.4 Underwriting expense 2.5 8.9 42.4 (7.3) 7.6 Dividends - - - - - ---------- ---------- ---------- ---------- ---------- Expense ratio, including dividends 27.4 62.1 296.1 17.0 76.0 ---------- ---------- ---------- ---------- ---------- Combined ratio 107.1% 205.3% N/A% 103.3% 351.4% ========== ========== ========== ========== ==========
11 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT APPENDIX RESULTS OF TOTAL OPERATIONS
2003 (In millions) Q1 Q2 Q3 Q4 YTD ----------------------------------------------------------- ---------- ---------- ---------- ---------- ---------- Net earned premiums $ 2,381 $ 2,197 $ 2,126 $ 2,510 $ 9,214 Insurance claims & policyholders' benefits 1,852 2,054 3,967 1,929 9,802 Policyholders' dividends 18 13 65 18 114 Insurance related expenses 768 845 1,386 753 3,752 Restructuring & other related costs - - - - - Net investment income 432 427 352 436 1,647 Other revenues 108 97 83 107 395 Other expenses 103 110 87 100 400 Non-insurance restructuring & other related costs - - - - - ---------- ---------- ---------- ---------- ---------- Income (loss) before income tax, minority interest and net realized investment (losses) gains 180 (301) (2,944) 253 (2,812) Income tax (expense) benefit (45) 124 1,065 (56) 1,088 Minority interest (3) (2) 14 (3) 6 ---------- ---------- ---------- ---------- ---------- Income (loss) before net realized investment (losses) gains 132 (179) (1,865) 194 (1,718) Realized investment (losses) gains (76) 378 164 (6) 460 Income tax benefit (expense) on realized investment (losses) gains 27 (129) (59) (14) (175) ---------- ---------- ---------- ---------- ---------- Income (loss) from continuing operations 83 70 (1,760) 174 (1,433) Loss from discontinued operations - - - - - Cumulative effect of a change in accounting principle - - - - - ---------- ---------- ---------- ---------- ---------- Net income (loss) $ 83 $ 70 $ (1,760) $ 174 $ (1,433) ========== ========== ========== ========== ==========
P&C COMPANY INFORMATION
2003 (In millions) Q1 Q2 Q3 Q4 YTD ----------------------------------------------------------- ---------- ---------- ---------- ---------- ---------- Gross written premiums $ 3,416 $ 3,262 $ 3,302 $ 3,029 $ 13,009 Net written premiums 2,100 1,826 1,790 1,887 7,603 Net earned premiums 1,948 1,748 1,672 2,087 7,455 Underwriting loss (136) (616) (3,188) (103) (4,043) FINANCIAL RATIOS Loss & LAE 75.1% 95.1% 212.1% 75.2% 110.5% Acquisition expense 19.5 25.5 58.6 19.4 29.6 Underwriting expense 11.6 14.0 16.3 9.7 12.7 Dividends 0.8 0.6 3.7 0.7 1.4 ---------- ---------- ---------- ---------- ---------- Expense ratio, including dividends 31.9 40.1 78.6 29.8 43.7 ---------- ---------- ---------- ---------- ---------- Combined ratio 107.0% 135.2% 290.7% 105.0% 154.2% ========== ========== ========== ========== ==========
12 2002 HISTORICAL IMPACT OF SIGNIFICANT ITEMS CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT APPENDIX IMPACT OF SIGNIFICANT ITEMS THREE MONTHS ENDED JUNE 30, 2002
STANDARD LINES 2002 RESULTS BEFORE CORPORATE REINSURANCE SIGNIFICANT AGGREGATE BAD DEBT INSURANCE BAD (In millions) ITEMS DEVELOPMENT (1) COVERS (2) PROVISION DEBT PROVISION 2002 RESULTS ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 1,193 $ 3 $ - $ - $ - $ 1,196 Claim and claim adjustment expenses 884 38 - - - 922 Acquisition expenses 224 - - - - 224 Underwriting expenses 143 - - - - 143 Policyholders' dividends 15 - - - - 15 Restructuring & other related costs - - - - - - ---------- ---------- -------- -------- -------- ---------- Underwriting (loss) income (73) (35) - - - (108) ---------- ---------- -------- -------- -------- ---------- Net investment income 154 - - - - 154 Other revenues 82 - - - - 82 Other expenses 69 - - - - 69 Non-insurance restructuring & other related costs - - - - - - ---------- ---------- -------- -------- -------- ---------- Income (loss) before income tax, minority interest and net realized investment losses 94 (35) - - - 59 Income tax (expense) benefit (27) 12 - - - (15) Minority interest (1) - - - - (1) ---------- ---------- -------- -------- -------- ---------- Income (loss) before net realized investment losses 66 (23) - - - 43 Realized investment losses (33) - - - - (33) Income tax benefit on realized investment losses 11 - - - - 11 ---------- ---------- -------- -------- -------- ---------- Income (loss) from continuing operations 44 (23) - - - 21 Cumulative effect of a change in accounting principle - - - - - - ---------- ---------- -------- -------- -------- ---------- Net income (loss) $ 44 $ (23) $ - $ - $ - $ 21 ========== ========== ======== ======== ======== ========== FINANCIAL RATIOS Loss & LAE 77.0% Acquisition expense 18.7 Underwriting expense 12.0 Dividends 1.3 ---------- Expense ratio, including dividends 32.0 ---------- Combined ratio 109.0% ========== SPECIALTY LINES 2002 RESULTS BEFORE CORPORATE REINSURANCE SIGNIFICANT AGGREGATE BAD DEBT INSURANCE BAD (In millions) ITEMS DEVELOPMENT (1) COVERS (2) PROVISION DEBT PROVISION 2002 RESULTS -------------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 360 $ (7) $ - $ - $ - $ 353 Claim and claim adjustment expenses 255 (7) - - - 248 Acquisition expenses 64 - - - - 64 Underwriting expenses 40 - - - - 40 Policyholders' dividends - - - - - - Restructuring & other related costs - - - - - - ---------- --------- -------- -------- --------- ------- Underwriting (loss) income 1 - - - - 1 ---------- --------- -------- -------- --------- ------- Net investment income 54 - - - - 54 Other revenues 31 - - - - 31 Other expenses 26 - - - - 26 Non-insurance restructuring & other related costs - - - - - - ---------- --------- -------- -------- --------- ------- Income (loss) before income tax, minority interest and net realized investment losses 60 - - - - 60 Income tax (expense) benefit (19) - - - - (19) Minority interest (4) - - - - (4) ---------- --------- -------- -------- --------- ------- Income (loss) before net realized investment losses 37 - - - - 37 Realized investment losses (16) - - - - (16) Income tax benefit on realized investment losses 5 - - - - 5 ---------- --------- -------- -------- --------- ------- Income (loss) from continuing operations 26 - - - - 26 Cumulative effect of a change in accounting principle - - - - - - ---------- --------- -------- -------- --------- ------- Net income (loss) $ 26 $ - $ - $ - $ - $ 26 ========== ========= ======== ======== ========= ======= FINANCIAL RATIOS Loss & LAE 70.2% Acquisition expense 18.1 Underwriting expense 11.2 Dividends 0.2 ------- Expense ratio, including dividends 29.5 ------- Combined ratio 99.7% =======
P&C OPERATIONS 2002 RESULTS BEFORE CORPORATE REINSURANCE SIGNIFICANT AGGREGATE BAD DEBT INSURANCE BAD ITEMS DEVELOPMENT (1) COVERS (2) PROVISION DEBT PROVISION 2002 RESULTS ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 1,553 $ (4) $ - $ - $ - $ 1,549 Claim and claim adjustment expenses 1,139 31 - - - 1,170 Acquisition expenses 288 - - - - 288 Underwriting expenses 183 - - - - 183 Policyholders' dividends 15 - - - - 15 Restructuring & other related costs - - - - - - ---------- ---------- -------- -------- -------- ---------- Underwriting loss (72) (35) - - - (107) ---------- ---------- -------- -------- -------- ---------- Net investment income 208 - - - - 208 Other revenues 113 - - - - 113 Other expenses 95 - - - - 95 Non-insurance restructuring & other related costs - - - - - - ---------- ---------- -------- -------- -------- ---------- Income (loss) before income tax, minority interest and net realized investment losses 154 (35) - - - 119 Income tax (expense) benefit (46) 12 - - - (34) Minority interest (5) - - - - (5) ---------- ---------- -------- -------- -------- ---------- Income (loss) before net realized investment losses 103 (23) - - - 80 Realized investment losses (49) - - - - (49) Income tax benefit on realized investment losses 16 - - - - 16 ---------- ---------- -------- -------- -------- ---------- Income (loss) from continuing operations 70 (23) - - - 47 Cumulative effect of a change in accounting principle - - - - - - ---------- ---------- -------- -------- -------- ---------- Net income (loss) $ 70 $ (23) $ - $ - $ - $ 47 ========== ========== ======== ======== ======== ========== FINANCIAL RATIOS Loss & LAE 75.5 % Acquisition expense 18.6 Underwriting expense 11.8 Dividends 1.0 ---------- Expense ratio, including dividends 31.4 ---------- Combined ratio 106.9 % ==========
(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 page 10 of the March 31, 2004 Financial Supplement. 13 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT APPENDIX IMPACT OF SIGNIFICANT ITEMS THREE MONTHS ENDED SEPTEMBER 30, 2002
STANDARD LINES 2002 RESULTS BEFORE CORPORATE REINSURANCE SIGNIFICANT AGGREGATE BAD DEBT INSURANCE BAD (In millions) ITEMS DEVELOPMENT (1) COVERS (2) PROVISION DEBT PROVISION 2002 RESULTS ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 1,202 $ (46) $ - $ - $ - $ 1,156 Claim and claim adjustment expenses 923 (162) - - - 761 Acquisition expenses 194 - - - - 194 Underwriting expenses 156 - - - - 156 Policyholders' dividends 20 6 - - - 26 Restructuring & other related costs - - - - - - ---------- ---------- -------- -------- -------- ---------- Underwriting (loss) income (91) 110 - - - 19 ---------- ---------- -------- -------- -------- ---------- Net investment income 86 - - - - 86 Other revenues 80 - - - - 80 Other expenses 79 - - - - 79 Non-insurance restructuring & other related costs - - - - - - ---------- ---------- -------- -------- -------- ---------- (Loss) income before income tax, minority interest and net realized investment losses (4) 110 - - - 106 Income tax benefit (expense) 4 (40) - - - (36) Minority interest - - - - - - ---------- ---------- -------- -------- -------- ---------- Income (loss) before net realized investment losses - 70 - - - 70 Realized investment losses (37) - - - - (37) Income tax benefit on realized investment losses 13 - - - - 13 ---------- ---------- -------- -------- -------- ---------- (Loss) income from continuing operations (24) 70 - - - 46 Cumulative effect of a change in accounting principle - - - - - - ---------- ---------- -------- -------- -------- ---------- Net (loss) income $ (24) $ 70 $ - $ - $ - $ 46 ========== ========== ======== ======== ======== ========== FINANCIAL RATIOS Loss & LAE 65.8% Acquisition expense 16.8 Underwriting expense 13.5 Dividends 2.2 ---------- Expense ratio, including dividends 32.5 ---------- Combined ratio 98.3% ========== SPECIALTY LINES 2002 RESULTS BEFORE CORPORATE REINSURANCE SIGNIFICANT AGGREGATE BAD DEBT INSURANCE BAD (In millions) ITEMS DEVELOPMENT(1) COVERS (2) PROVISION DEBT PROVISION 2002 RESULTS ---------------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 396 $ 9 $ (39) $ - $ - $ 366 Claim and claim adjustment expenses 289 77 (55) - - 311 Acquisition expenses 74 - - - - 74 Underwriting expenses 41 - - - - 41 Policyholders' dividends 1 - - - - 1 Restructuring & other related costs - - - - - - ---------- ------- ------- -------- --------- ------- Underwriting (loss) income (9) (68) 16 - - (61) ---------- ------- ------- -------- --------- ------- Net investment income 35 - (5) - - 30 Other revenues 30 - - - - 30 Other expenses 28 - - - - 28 Non-insurance restructuring & other related costs - - - - - - ---------- ------- ------- -------- --------- ------- (Loss) income before income tax, minority interest and net realized investment losses 28 (68) 11 - - (29) Income tax benefit (expense) (7) 24 (4) - - 13 Minority interest (2) 1 - - - (1) ---------- ------- ------- -------- --------- ------- Income (loss) before net realized investment losses 19 (43) 7 - - (17) Realized investment losses (11) - - - - (11) Income tax benefit on realized investment losses 4 - - - - 4 ---------- ------- ------- -------- --------- ------- (Loss) income from continuing operations 12 (43) 7 - - (24) Cumulative effect of a change in accounting principle - - - - - - ---------- ------- ------- -------- --------- ------- Net (loss) income $ 12 $ (43) $ 7 $ - $ - $ (24) ========== ======= ======= ======== ========= ======= FINANCIAL RATIOS Loss & LAE 84.9% Acquisition expense 20.2 Underwriting expense 11.5 Dividends 0.2 ------- Expense ratio, including dividends 31.9 ------- Combined ratio 116.8% =======
P&C OPERATIONS 2002 RESULTS BEFORE CORPORATE REINSURANCE SIGNIFICANT AGGREGATE BAD DEBT INSURANCE BAD ITEMS DEVELOPMENT(1) COVERS (2) PROVISION DEBT PROVISION 2002 RESULTS ---------------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 1,598 $ (37) $ (39) $ - $ - $ 1,522 Claim and claim adjustment expenses 1,212 (85) (55) - - 1,072 Acquisition expenses 268 - - - - 268 Underwriting expenses 197 - - - - 197 Policyholders' dividends 21 6 - - - 27 Restructuring & other related costs - - - - - - ---------- ---------- --------- ------------ ------------- ---------- Underwriting (loss) income (100) 42 16 - - (42) ---------- ---------- --------- ------------ ------------- ---------- Net investment income 121 - (5) - - 116 Other revenues 110 - - - - 110 Other expenses 107 - - - - 107 Non-insurance restructuring & other related costs - - - - - - ---------- ---------- --------- ------------ ------------- ---------- Income before income tax, minority interest and net realized investment losses 24 42 11 - - 77 Income tax expense (3) (16) (4) - - (23) Minority interest (2) 1 - - - (1) ---------- ---------- --------- ------------ ------------- ---------- Income before net realized investment losses 19 27 7 - - 53 Realized investment losses (48) - - - - (48) Income tax benefit on realized investment losses 17 - - - - 17 ---------- ---------- --------- ------------ ------------- ---------- (Loss) income from continuing operations (12) 27 7 - - 22 Cumulative effect of a change in accounting principle - - - - - - ---------- ---------- --------- ------------ ------------- ---------- Net (loss) income $ (12) $ 27 $ 7 $ - $ - $ 22 ========== ========== ========= ============ ============= ========== FINANCIAL RATIOS Loss & LAE 70.4% Acquisition expense 17.6 Underwriting expense 13.0 Dividends 1.7 ---------- Expense ratio, including dividends 32.3 ---------- Combined ratio 102.7% ==========
(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 page 10 of the March 31, 2004 Financial Supplement. 14 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT APPENDIX IMPACT OF SIGNIFICANT ITEMS
THREE MONTHS ENDED STANDARD LINES DECEMBER 31, 2002 2002 RESULTS BEFORE CORPORATE REINSURANCE SIGNIFICANT AGGREGATE BAD DEBT INSURANCE BAD (In millions) ITEMS DEVELOPMENT (1) COVERS (2) PROVISION DEBT PROVISION 2002 RESULTS ----------------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 1,179 $ (38) $ (1) $ - $ - $ 1,140 Claim and claim adjustment expenses 889 (59) - - - 830 Acquisition expenses 225 - - - - 225 Underwriting expenses 155 - - - - 155 Policyholders' dividends 18 (2) - - - 16 Restructuring & other related costs (2) - - - - (2) ----------- -------------- --------- -------- --------- ----------- Underwriting (loss) income (106) 23 (1) - - (84) ----------- -------------- --------- -------- --------- ----------- Net investment income 116 - - - - 116 Other revenues 81 - - - - 81 Other expenses 77 - - - - 77 Non-insurance restructuring & other related costs (6) - - - - (6) ----------- -------------- --------- -------- --------- ----------- Income (loss) before income tax, minority interest and net realized investment losses 20 23 (1) - - 42 Income tax benefit (expense) 11 (11) - - - - Minority interest (8) (2) - - - (10) ----------- -------------- --------- -------- --------- ----------- Income (loss) before net realized investment losses 23 10 (1) - - 32 Realized investment losses (57) - - - - (57) Income tax benefit on realized investment losses 19 - - - - 19 ----------- -------------- --------- -------- --------- ----------- (Loss) income from continuing operations (15) 10 (1) - - (6) Cumulative effect of a change in accounting principle - - - - - - ----------- -------------- --------- -------- --------- ----------- Net (loss) income $ (15) $ 10 $ (1) $ - $ - $ (6) =========== ============== ========= ======== ========= =========== FINANCIAL RATIOS Loss & LAE 72.9% Acquisition expense 19.7 Underwriting expense 13.6 Dividends 1.4 ----------- Expense ratio, including dividends 34.7 ----------- Combined ratio 107.6% =========== THREE MONTHS ENDED SPECIALTY LINES DECEMBER 31, 2002 2002 RESULTS BEFORE CORPORATE REINSURANCE SIGNIFICANT AGGREGATE BAD DEBT INSURANCE BAD (In millions) ITEMS DEVELOPMENT (1) COVERS (2) PROVISION DEBT PROVISION 2002 RESULTS ----------------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 409 $ (3) $ - $ - $ - $ 406 Claim and claim adjustment expenses 275 6 - - - 281 Acquisition expenses 65 - - - - 65 Underwriting expenses 40 - - - - 40 Policyholders' dividends 1 - - - - 1 Restructuring & other related costs (1) - - - - (1) ----------- -------------- ---------- ----------- ------------ ----------- Underwriting (loss) income 29 (9) - - - 20 ----------- -------------- ---------- ----------- ------------ ----------- Net investment income 46 - - - - 46 Other revenues 22 - - - - 22 Other expenses 21 - - - - 21 Non-insurance restructuring & other related costs - - - - - - ----------- -------------- ---------- ----------- ------------ ----------- Income (loss) before income tax, minority interest and net realized investment losses 76 (9) - - - 67 Income tax benefit (expense) (23) 3 - - - (20) Minority interest (5) - - - - (5) ----------- -------------- ---------- ----------- ------------ ----------- Income (loss) before net realized investment losses 48 (6) - - - 42 Realized investment losses (14) - - - - (14) Income tax benefit on realized investment losses 6 - - - - 6 ----------- -------------- ---------- ----------- ------------ ----------- (Loss) income from continuing operations 40 (6) - - - 34 Cumulative effect of a change in accounting principle - - - - - - ----------- -------------- ---------- ----------- ------------ ----------- Net (loss) income $ 40 $ (6) $ - $ - $ - $ 34 =========== ============== ========== =========== ============ =========== FINANCIAL RATIOS Loss & LAE 69.4% Acquisition expense 16.1 Underwriting expense 9.5 Dividends 0.2 ----------- Expense ratio, including dividends 25.8 ----------- Combined ratio 95.2% ===========
P&C OPERATIONS 2002 RESULTS BEFORE CORPORATE REINSURANCE SIGNIFICANT AGGREGATE BAD DEBT INSURANCE BAD ITEMS DEVELOPMENT (1) COVERS (2) PROVISION DEBT PROVISION 2002 RESULTS ----------------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 1,588 $ (41) $ (1) $ - $ - $ 1,546 Claim and claim adjustment expenses 1,164 (53) - - - 1,111 Acquisition expenses 290 - - - - 290 Underwriting expenses 195 - - - - 195 Policyholders' dividends 19 (2) - - - 17 Restructuring & other related costs (3) - - - - (3) ----------- -------------- --------- --------- ------------ ----------- Underwriting (loss) income (77) 14 (1) - - (64) ----------- -------------- --------- --------- ------------ ----------- Net investment income 162 - - - - 162 Other revenues 103 - - - - 103 Other expenses 98 - - - - 98 Non-insurance restructuring & other related costs (6) - - - - (6) ----------- -------------- --------- --------- ------------ ----------- Income (loss) before income tax, minority interest and net realized investment losses 96 14 (1) - - 109 Income tax expense (12) (8) - - - (20) Minority interest (13) (2) - - - (15) ----------- -------------- --------- --------- ------------ ----------- Income (loss) before net realized investment losses 71 4 (1) - - 74 Realized investment losses (71) - - - - (71) Income tax benefit on realized investment losses 25 - - - - 25 ----------- -------------- --------- --------- ------------ ----------- Income (loss) from continuing operations 25 4 (1) - - 28 Cumulative effect of a change in accounting principle - - - - - - ----------- -------------- --------- --------- ------------ ----------- Net income (loss) $ 25 $ 4 $ (1) $ - $ - $ 28 =========== ============== ========= ========= ============ =========== FINANCIAL RATIOS Loss & LAE 72.0% Acquisition expense 18.8 Underwriting expense 12.4 Dividends 1.1 ----------- Expense ratio, including dividends 32.3 ----------- Combined ratio 104.3% ===========
(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 page 10 of the March 31, 2004 Financial Supplement. CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT APPENDIX IMPACT OF SIGNIFICANT ITEMS
STANDARD LINES 2002 RESULTS TWELVE MONTHS ENDED BEFORE CORPORATE REINSURANCE INSURANCE DECEMBER 31, 2002 SIGNIFICANT AGGREGATE BAD DEBT BAD DEBT 2002 (In millions) ITEMS DEVELOPMENT (1) COVERS(2) PROVISION PROVISION RESULTS ------------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 4,760 $ (81) $ (1) $ - $ - $ 4,678 Claim and claim adjustment expenses 3,621 (203) - - - 3,418 Acquisition expenses 875 - - - - 875 Underwriting expenses 604 - - - - 604 Policyholders' dividends 69 4 - - - 73 Restructuring & other related costs (2) - - - - (2) ----------- --------- -------- ---------- ---------- ------- Underwriting (loss) income (407) 118 (1) - - (290) ----------- --------- -------- ---------- ---------- ------- Net investment income 475 - - - - 475 Other revenues 355 - - - - 355 Other expenses 308 - - - - 308 Non-insurance restructuring & other related costs (6) - - - - (6) ----------- --------- -------- ---------- ---------- ------- Income (loss) before income tax, minority interest and net realized investment losses 121 118 (1) - - 238 Income tax (expense) benefit (9) (47) - - - (56) Minority interest (11) (2) - - - (13) ----------- --------- -------- ---------- ---------- ------- Income (loss) before net realized investment losses 101 69 (1) - - 169 Realized investment losses (119) - - - - (119) Income tax benefit on realized investment losses 40 - - - - 40 ----------- --------- -------- ---------- ---------- ------- Income (loss) from continuing operations 22 69 (1) - - 90 Cumulative effect of a change in accounting principle (43) - - - - (43) ----------- --------- -------- ---------- ---------- ------- Net (loss) income $ (21) $ 69 $ (1) $ - $ - $ 47 =========== ========= ======== ========== ========== ======= FINANCIAL RATIOS Loss & LAE 73.1 % Acquisition expense 18.7 Underwriting expense 12.8 Dividends 1.6 ------- Expense ratio, including dividends 33.1 ------- Combined ratio 106.2 % ======= SPECIALTY LINES 2002 RESULTS TWELVE MONTHS ENDED BEFORE CORPORATE REINSURANCE INSURANCE DECEMBER 31, 2002 SIGNIFICANT AGGREGATE BAD DEBT BAD DEBT 2002 (In millions) ITEMS DEVELOPMENT (1) COVERS(2) PROVISION PROVISION RESULTS ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 1,504 $ (14) $ (39) $ - $ - $ 1,451 Claim and claim adjustment expenses 1,063 58 (55) - - 1,066 Acquisition expenses 268 - - - - 268 Underwriting expenses 158 - - - - 158 Policyholders' dividends 3 - - - - 3 Restructuring & other related costs (1) - - - - (1) --------- ---------- --------- ----------- --------- -------- Underwriting (loss) income 13 (72) 16 - - (43) --------- ---------- --------- ----------- --------- -------- Net investment income 177 - (5) - - 172 Other revenues 108 - - - - 108 Other expenses 94 - - - - 94 Non-insurance restructuring & other related costs - - - - - - --------- ---------- --------- ----------- --------- -------- Income (loss) before income tax, minority interest and net realized investment losses 204 (72) 11 - - 143 Income tax (expense) benefit (61) 25 (4) - - (40) Minority interest (14) 1 - - - (13) --------- ---------- --------- ----------- --------- -------- Income (loss) before net realized investment losses 129 (46) 7 - - 90 Realized investment losses (39) - - - - (39) Income tax benefit on realized investment losses 14 - - - - 14 --------- ---------- --------- ----------- --------- -------- Income (loss) from continuing operations 104 (46) 7 - - 65 Cumulative effect of a change in accounting principle (5) - - - - (5) --------- ---------- --------- ----------- --------- -------- Net (loss) income $ 99 $ (46) $ 7 $ - $ - $ 60 ========= ========== ========= =========== ========= ======== FINANCIAL RATIOS Loss & LAE 73.5 % Acquisition expense 18.5 Underwriting expense 10.8 Dividends 0.2 -------- Expense ratio, including dividends 29.5 -------- Combined ratio 103.0% ========
P&C OPERATIONS 2002 RESULTS TWELVE MONTHS ENDED BEFORE CORPORATE REINSURANCE INSURANCE DECEMBER 31, 2002 SIGNIFICANT AGGREGATE BAD DEBT BAD DEBT 2002 (In millions) ITEMS DEVELOPMENT (1) COVERS(2) PROVISION PROVISION RESULTS -------------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 6,264 $ (95) $ (40) $ - $ - $6,129 Claim and claim adjustment expenses 4,684 (145) (55) - - 4,484 Acquisition expenses 1,143 - - - - 1,143 Underwriting expenses 762 - - - - 762 Policyholders' dividends 72 4 - - - 76 Restructuring & other related costs (3) - - - - (3) --------- ------------- -------- -------- ----- ------ Underwriting (loss) income (394) 46 15 - - (333) --------- ------------- -------- -------- ----- ------ Net investment income 652 - (5) - - 647 Other revenues 463 - - - - 463 Other expenses 402 - - - - 402 Non-insurance restructuring & other related costs (6) - - - - (6) --------- ------------- -------- -------- ----- ------ Income before income tax, minority interest and net realized investment losses 325 46 10 - - 381 Income tax expense (70) (22) (4) - - (96) Minority interest (25) (1) - - - (26) --------- ------------- -------- -------- ----- ------ Income before net realized investment losses 230 23 6 - - 259 Realized investment losses (158) - - - - (158) Income tax benefit on realized investment losses 54 - - - - 54 --------- ------------- -------- -------- ----- ------ Income from continuing operations 126 23 6 - - 155 Cumulative effect of a change in accounting principle (48) - - - - (48) --------- ------------- -------- -------- ----- ------ Net income $ 78 $ 23 $ 6 $ - $ - $ 107 ========= ============= ======== ======== ===== ====== FINANCIAL RATIOS Loss & LAE 73.2% Acquisition expense 18.7 Underwriting expense 12.3 Dividends 1.2 ------ Expense ratio, including dividends 32.2 ------ 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 page 10 of the March 31, 2004 Financial Supplement. 16 2003 HISTORICAL IMPACT OF SIGNIFICANT ITEMS CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT APPENDIX IMPACT OF SIGNIFICANT ITEMS
THREE MONTHS ENDED STANDARD LINES JUNE 30, 2003 2003 RESULTS BEFORE CORPORATE REINSURANCE SIGNIFICANT AGGREGATE BAD DEBT INSURANCE BAD (In millions) ITEMS DEVELOPMENT (1) COVERS (2) PROVISION DEBT PROVISION 2003 RESULTS ----------------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 1,239 $ (116) $ (105) $ - $ - $ 1,018 Claim and claim adjustment expenses 830 246 (180) - - 896 Acquisition expenses 266 - - - - 266 Underwriting expenses 172 - - - - 172 Policyholders' dividends 11 - - - - 11 Restructuring & other related costs - - - - - - -------- -------- -------- -------- -------- -------- Underwriting (loss) income (40) (362) 75 - - (327) -------- -------- -------- -------- -------- -------- Net investment income 129 - (24) - - 105 Other revenues 61 - - - - 61 Other expenses 60 - - - - 60 Non-insurance restructuring & other related costs - - - - - - -------- -------- -------- -------- -------- -------- Income (loss) before income tax, minority interest and net realized investment gains 90 (362) 51 - - (221) Income tax (expense) benefit (24) 127 (18) - - 85 Minority interest 2 - - - - 2 -------- -------- -------- -------- -------- -------- Income (loss) before net realized investment gains 68 (235) 33 - - (134) Realized investment gains 184 - - - - 184 Income tax expense on realized investment gains (62) - - - - (62) -------- -------- -------- -------- -------- -------- Income (loss) from continuing operations 190 (235) 33 - - (12) Cumulative effect of a change in accounting principle - - - - - - -------- -------- -------- -------- -------- -------- Net income (loss) $ 190 $ (235) $ 33 $ - $ - $ (12) ======== ======== ======== ======== ======== ======== FINANCIAL RATIOS Loss & LAE 88.0% Acquisition expense 26.1 Underwriting expense 16.9 Dividends 1.1 -------- Expense ratio, including dividends 44.1 -------- Combined ratio 132.1% ========
THREE MONTHS ENDED SPECIALTY LINES JUNE 30, 2003 2003 RESULTS BEFORE CORPORATE REINSURANCE SIGNIFICANT AGGREGATE BAD DEBT INSURANCE BAD (In millions) ITEMS DEVELOPMENT (1) COVERS (2) PROVISION DEBT PROVISION 2003 RESULTS ----------------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 462 $ (3) $ - $ - $ - $ 459 Claim and claim adjustment expenses 301 101 - - - 402 Acquisition expenses 83 - - - - 83 Underwriting expenses 45 - - - - 45 Policyholders' dividends - - - - - - Restructuring & other related costs - - - - - - -------- -------- -------- -------- -------- -------- Underwriting (loss) income 33 (104) - - - (71) -------- -------- -------- -------- -------- -------- Net investment income 53 - - - - 53 Other revenues 30 - - - - 30 Other expenses 25 - - - - 25 Non-insurance restructuring & other related costs - - - - - - -------- -------- -------- -------- -------- -------- Income (loss) before income tax, minority interest and net realized investment gains 91 (104) - - - (13) Income tax (expense) benefit (27) 36 - - - 9 Minority interest (3) - - - - (3) -------- -------- -------- -------- -------- -------- Income (loss) before net realized investment gains 61 (68) - - - (7) Realized investment gains 59 - - - - 59 Income tax expense on realized investment gains (21) - - - - (21) -------- -------- -------- -------- -------- -------- Income (loss) from continuing operations 99 (68) - - - 31 Cumulative effect of a change in accounting principle - - - - - - -------- -------- -------- -------- -------- -------- Net income (loss) $ 99 $ (68) $ - $ - $ - $ 31 ======== ======== ======== ======== ======== ======== FINANCIAL RATIOS Loss & LAE 87.5% Acquisition expense 18.2 Underwriting expense 9.7 Dividends 0.1 -------- Expense ratio, including dividends 28.0 -------- Combined ratio 115.5% ========
THREE MONTHS ENDED P&C OPERATIONS JUNE 30, 2003 2003 RESULTS BEFORE CORPORATE REINSURANCE SIGNIFICANT AGGREGATE BAD DEBT INSURANCE BAD (In millions) ITEMS DEVELOPMENT (1) COVERS (2) PROVISION DEBT PROVISION 2003 RESULTS ----------------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 1,701 $ (119) $ (105) $ - $ - $ 1,477 Claim and claim adjustment expenses 1,131 347 (180) - - 1,298 Acquisition expenses 349 - - - - 349 Underwriting expenses 217 - - - - 217 Policyholders' dividends 11 - - - - 11 Restructuring & other related costs - - - - - - -------- -------- -------- -------- -------- -------- Underwriting (loss) income (7) (466) 75 - - (398) -------- -------- -------- -------- -------- -------- Net investment income 182 - (24) - - 158 Other revenues 91 - - - - 91 Other expenses 85 - - - - 85 Non-insurance restructuring & other related costs - - - - - - -------- -------- -------- -------- -------- -------- Income (loss) before income tax, minority interest and net realized investment gains 181 (466) 51 - - (234) Income tax (expense) benefit (51) 163 (18) - - 94 Minority interest (1) - - - - (1) -------- -------- -------- -------- -------- -------- Income (loss) before net realized investment gains 129 (303) 33 - - (141) Realized investment gains 243 - - - - 243 Income tax expense on realized investment gains (83) - - - - (83) -------- -------- -------- -------- -------- -------- Income (loss) from continuing operations 289 (303) 33 - - 19 Cumulative effect of a change in accounting principle - - - - - - -------- -------- -------- -------- -------- -------- Net income (loss) $ 289 $ (303) $ 33 $ - $ - $ 19 ======== ======== ======== ======== ======== ======== FINANCIAL RATIOS Loss & LAE 87.8% Acquisition expense 23.7 Underwriting expense 14.6 Dividends 0.8 -------- Expense ratio, including dividends 39.1 -------- Combined ratio 126.9% ========
(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 page 10 of the March 31, 2004 Financial Supplement. 17 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT APPENDIX IMPACT OF SIGNIFICANT ITEMS
THREE MONTHS ENDED STANDARD LINES SEPTEMBER 30, 2003 2003 RESULTS BEFORE CORPORATE REINSURANCE SIGNIFICANT AGGREGATE BAD DEBT INSURANCE BAD (In millions) ITEMS DEVELOPMENT (1) COVERS (2) PROVISION DEBT PROVISION 2003 RESULTS ----------------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 1,289 $ (128) $ (160) $ - $ - $ 1,001 Claim and claim adjustment expenses 891 1,135 (300) - - 1,726 Acquisition expenses 296 - - 55 203 554 Underwriting expenses 180 - - - - 180 Policyholders' dividends 14 46 - - - 60 Restructuring & other related costs - - - - - - -------- -------- -------- -------- -------- -------- Underwriting (loss) income (92) (1,309) 140 (55) (203) (1,519) -------- -------- -------- -------- -------- -------- Net investment income 108 - (53) - - 55 Other revenues 34 - - - - 34 Other expenses 35 - - - - 35 Non-insurance restructuring & other related costs - - - - - - -------- -------- -------- -------- -------- -------- Income (loss) before income tax, minority interest and net realized investment gains 15 (1,309) 87 (55) (203) (1,465) Income tax benefit (expense) 3 457 (30) 19 71 520 Minority interest (1) (1) - - - (2) -------- -------- -------- -------- -------- -------- Income (loss) before net realized investment gains 17 (853) 57 (36) (132) (947) Realized investment gains 58 - - - - 58 Income tax expense on realized investment gains (22) - - - - (22) -------- -------- -------- -------- -------- -------- Income (loss) from continuing operations 53 (853) 57 (36) (132) (911) Cumulative effect of a change in accounting principle - - - - - - -------- -------- -------- -------- -------- -------- Net income (loss) $ 53 $ (853) $ 57 $ (36) $ (132) $ (911) ======== ======== ======== ======== ======== ======== FINANCIAL RATIOS Loss & LAE 172.4% Acquisition expense 55.3 Underwriting expense 18.0 Dividends 6.0 -------- Expense ratio, including dividends 79.3 -------- Combined ratio 251.7% ========
THREE MONTHS ENDED SPECIALTY LINES SEPTEMBER 30, 2003 2003 RESULTS BEFORE CORPORATE REINSURANCE SIGNIFICANT AGGREGATE BAD DEBT INSURANCE BAD (In millions) ITEMS DEVELOPMENT (1) COVERS (2) PROVISION DEBT PROVISION 2003 RESULTS ----------------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 482 $ 1 $ (32) $ - $ - $ 451 Claim and claim adjustment expenses 362 244 (59) - - 547 Acquisition expenses 93 - - 76 - 169 Underwriting expenses 44 - - - - 44 Policyholders' dividends 1 - - - - 1 Restructuring & other related costs - - - - - - -------- -------- -------- -------- -------- -------- Underwriting (loss) income (18) (243) 27 (76) - (310) -------- -------- -------- -------- -------- -------- Net investment income 57 - (10) - - 47 Other revenues 35 - - - - 35 Other expenses 30 - - - - 30 Non-insurance restructuring & other related costs - - - - - - -------- -------- -------- -------- -------- -------- Income (loss) before income tax, minority interest and net realized investment gains 44 (243) 17 (76) - (258) Income tax benefit (expense) (3) 85 (6) 27 - 103 Minority interest 4 11 - - - 15 -------- -------- -------- -------- -------- -------- Income (loss) before net realized investment gains 45 (147) 11 (49) - (140) Realized investment gains 19 - - - - 19 Income tax expense on realized investment gains (7) - - - - (7) -------- -------- -------- -------- -------- -------- Income (loss) from continuing operations 57 (147) 11 (49) - (128) Cumulative effect of a change in accounting principle - - - - - - -------- -------- -------- -------- -------- -------- Net income (loss) $ 57 $ (147) $ 11 $ (49) $ - $ (128) ======== ======== ======== ======== ======== ======== FINANCIAL RATIOS Loss & LAE 121.2% Acquisition expense 37.4 Underwriting expense 9.8 Dividends 0.3 -------- Expense ratio, including dividends 47.5 -------- Combined ratio 168.7% ========
THREE MONTHS ENDED P&C OPERATIONS SEPTEMBER 30, 2003 2003 RESULTS BEFORE CORPORATE REINSURANCE SIGNIFICANT AGGREGATE BAD DEBT INSURANCE BAD (In millions) ITEMS DEVELOPMENT (1) COVERS (2) PROVISION DEBT PROVISION 2003 RESULTS ----------------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 1,771 $ (127) $ (192) $ - $ - $ 1,452 Claim and claim adjustment expenses 1,253 1,379 (359) - - 2,273 Acquisition expenses 389 - - 131 203 723 Underwriting expenses 224 - - - - 224 Policyholders' dividends 15 46 - - - 61 Restructuring & other related costs - - - - - - -------- -------- -------- -------- -------- -------- Underwriting (loss) income (110) (1,552) 167 (131) (203) (1,829) -------- -------- -------- -------- -------- -------- Net investment income 165 - (63) - - 102 Other revenues 69 - - - - 69 Other expenses 65 - - - - 65 Non-insurance restructuring & other related costs - - - - - - -------- -------- -------- -------- -------- -------- Income (loss) before income tax, minority interest and net realized investment gains 59 (1,552) 104 (131) (203) (1,723) Income tax benefit (expense) - 542 (36) 46 71 623 Minority interest 3 10 - - - 13 -------- -------- -------- -------- -------- -------- Income (loss) before net realized investment gains 62 (1,000) 68 (85) (132) (1,087) Realized investment gains 77 - - - - 77 Income tax expense on realized investment gains (29) - - - - (29) -------- -------- -------- -------- -------- -------- Income (loss) from continuing operations 110 (1,000) 68 (85) (132) (1,039) Cumulative effect of a change in accounting principle - - - - - - -------- -------- -------- -------- -------- -------- Net income (loss) $ 110 $ (1,000) $ 68 $ (85) $ (132) $ (1,039) ======== ======== ======== ======== ======== ======== FINANCIAL RATIOS Loss & LAE 156.5% Acquisition expense 49.7 Underwriting expense 15.5 Dividends 4.2 -------- Expense ratio, including dividends 69.4 -------- Combined ratio 225.9% ========
(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 page 10 of the March 31, 2004 Financial Supplement. 18 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT APPENDIX IMPACT OF SIGNIFICANT ITEMS
THREE MONTHS ENDED STANDARD LINES DECEMBER 31, 2003 2003 RESULTS BEFORE CORPORATE REINSURANCE SIGNIFICANT AGGREGATE BAD DEBT INSURANCE BAD (In millions) ITEMS DEVELOPMENT (1) COVERS (2) PROVISION DEBT PROVISION 2003 RESULTS ----------------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 1,304 $ (8) $ (4) $ - $ - $ 1,292 Claim and claim adjustment expenses 890 (13) (5) - - 872 Acquisition expenses 262 - - - - 262 Underwriting expenses 164 - - - - 164 Policyholders' dividends 14 - - - - 14 Restructuring & other related costs - - - - - - -------- -------- -------- -------- -------- -------- Underwriting (loss) income (26) 5 1 - - (20) -------- -------- -------- -------- -------- -------- Net investment income 118 - - - - 118 Other revenues 33 - - - - 33 Other expenses 34 - - - - 34 Non-insurance restructuring & other related costs - - - - - - -------- -------- -------- -------- -------- -------- Income (loss) before income tax, minority interest and net realized investment gains 91 5 1 - - 97 Income tax (expense) benefit (6) (2) - - - (8) Minority interest (3) - - - - (3) -------- -------- -------- -------- -------- -------- Income (loss) before net realized investment gains 82 3 1 - - 86 Realized investment gains 112 - - - - 112 Income tax expense on realized investment gains (39) - - - - (39) -------- -------- -------- -------- -------- -------- Income (loss) from continuing operations 155 3 1 - - 159 Cumulative effect of a change in accounting principle - - - - - - -------- -------- -------- -------- -------- -------- Net income (loss) $ 155 $ 3 $ 1 $ - $ - $ 159 ======== ======== ======== ======== ======== ======== FINANCIAL RATIOS Loss & LAE 67.5% Acquisition expense 20.3 Underwriting expense 12.7 Dividends 1.1 -------- Expense ratio, including dividends 34.1 -------- Combined ratio 101.6% ========
THREE MONTHS ENDED SPECIALTY LINES DECEMBER 31, 2003 2003 RESULTS BEFORE CORPORATE REINSURANCE SIGNIFICANT AGGREGATE BAD DEBT INSURANCE BAD (In millions) ITEMS DEVELOPMENT (1) COVERS (2) PROVISION DEBT PROVISION 2003 RESULTS ----------------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 515 $ (14) $ 1 $ - $ - $ 502 Claim and claim adjustment expenses 345 (9) 3 - - 339 Acquisition expenses 77 - - - - 77 Underwriting expenses 44 - - - - 44 Policyholders' dividends 1 - - - - 1 Restructuring & other related costs - - - - - - -------- -------- -------- -------- -------- -------- Underwriting (loss) income 48 (5) (2) - - 41 -------- -------- -------- -------- -------- -------- Net investment income 52 - - - - 52 Other revenues 33 - - - - 33 Other expenses 32 - - - - 32 Non-insurance restructuring & other related costs - - - - - - -------- -------- -------- -------- -------- -------- Income (loss) before income tax, minority interest and net realized investment gains 101 (5) (2) - - 94 Income tax (expense) benefit (32) 2 1 - - (29) Minority interest - - - - - - -------- -------- -------- -------- -------- -------- Income (loss) before net realized investment gains 69 (3) (1) - - 65 Realized investment gains 33 - - - - 33 Income tax expense on realized investment gains (11) - - - - (11) -------- -------- -------- -------- -------- -------- Income (loss) from continuing operations 91 (3) (1) - - 87 Cumulative effect of a change in accounting principle - - - - - - -------- -------- -------- -------- -------- -------- Net income (loss) $ 91 $ (3) $ (1) $ - $ - $ 87 ======== ======== ======== ======== ======== ======== FINANCIAL RATIOS Loss & LAE 67.7% Acquisition expense 15.3 Underwriting expense 8.8 Dividends 0.2 -------- Expense ratio, including dividends 24.3 -------- Combined ratio 92.0% ========
THREE MONTHS ENDED P&C OPERATIONS DECEMBER 31, 2003 2003 RESULTS BEFORE CORPORATE REINSURANCE SIGNIFICANT AGGREGATE BAD DEBT INSURANCE BAD (In millions) ITEMS DEVELOPMENT (1) COVERS (2) PROVISION DEBT PROVISION 2003 RESULTS ----------------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 1,819 $ (22) $ (3) $ - $ - $ 1,794 Claim and claim adjustment expenses 1,235 (22) (2) - - 1,211 Acquisition expenses 339 - - - - 339 Underwriting expenses 208 - - - - 208 Policyholders' dividends 15 - - - - 15 Restructuring & other related costs - - - - - - -------- -------- -------- -------- -------- -------- Underwriting income (loss) 22 - (1) - - 21 -------- -------- -------- -------- -------- -------- Net investment income 170 - - - - 170 Other revenues 66 - - - - 66 Other expenses 66 - - - - 66 Non-insurance restructuring & other related costs - - - - - - -------- -------- -------- -------- -------- -------- Income (loss) before income tax, minority interest and net realized investment gains 192 - (1) - - 191 Income tax expense (38) - 1 - - (37) Minority interest (3) - - - - (3) -------- -------- -------- -------- -------- -------- Income (loss) before net realized investment gains 151 - - - - 151 Realized investment gains 145 - - - - 145 Income tax expense on realized investment gains (50) - - - - (50) -------- -------- -------- -------- -------- -------- Income (loss) from continuing operations 246 - - - - 246 Cumulative effect of a change in accounting principle - - - - - - -------- -------- -------- -------- -------- -------- Net income (loss) $ 246 $ - $ - $ - $ - $ 246 ======== ======== ======== ======== ======== ======== FINANCIAL RATIOS Loss & LAE 67.5% Acquisition expense 18.9 Underwriting expense 11.7 Dividends 0.8 -------- Expense ratio, including dividends 31.4 -------- Combined ratio 98.9% ========
(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 page 10 of the March 31, 2004 Financial Supplement. 19 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT APPENDIX IMPACT OF SIGNIFICANT ITEMS
TWELVE MONTHS ENDED STANDARD LINES DECEMBER 31, 2003 2003 RESULTS BEFORE CORPORATE REINSURANCE SIGNIFICANT AGGREGATE BAD DEBT INSURANCE BAD (In millions) ITEMS DEVELOPMENT (1) COVERS (2) PROVISION DEBT PROVISION 2003 RESULTS ----------------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 5,010 $ (211) $ (269) $ - $ - $ 4,530 Claim and claim adjustment expenses 3,436 1,436 (485) - - 4,387 Acquisition expenses 1,023 - - 55 242 1,320 Underwriting expenses 676 - - - - 676 Policyholders' dividends 54 46 - - - 100 Restructuring & other related costs - - - - - - -------- -------- -------- -------- -------- -------- Underwriting (loss) income (179) (1,693) 216 (55) (242) (1,953) -------- -------- -------- -------- -------- -------- Net investment income 484 - (77) - - 407 Other revenues 199 - - - - 199 Other expenses 192 - - - - 192 Non-insurance restructuring & other related costs - - - - - - -------- -------- -------- -------- -------- -------- Income (loss) before income tax, minority interest and net realized investment gains 312 (1,693) 139 (55) (242) (1,539) Income tax (expense) benefit (57) 594 (49) 19 85 592 Minority interest (3) (1) - - - (4) -------- -------- -------- -------- -------- -------- Income (loss) before net realized investment gains 252 (1,100) 90 (36) (157) (951) Realized investment gains 361 - - - - 361 Income tax expense on realized investment gains (127) - - - - (127) -------- -------- -------- -------- -------- -------- Income (loss) from continuing operations 486 (1,100) 90 (36) (157) (717) Cumulative effect of a change in accounting principle - - - - - - -------- -------- -------- -------- -------- -------- Net income (loss) $ 486 $ (1,100) $ 90 $ (36) $ (157) $ (717) ======== ======== ======== ======== ======== ======== FINANCIAL RATIOS Loss & LAE 96.8% Acquisition expense 29.1 Underwriting expense 15.0 Dividends 2.2 -------- Expense ratio, including dividends 46.3 -------- Combined ratio 143.1% ========
TWELVE MONTHS ENDED SPECIALTY LINES DECEMBER 31, 2003 2003 RESULTS BEFORE CORPORATE REINSURANCE SIGNIFICANT AGGREGATE BAD DEBT INSURANCE BAD (In millions) ITEMS DEVELOPMENT (1) COVERS (2) PROVISION DEBT PROVISION 2003 RESULTS ----------------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 1,877 $ (6) $ (31) $ - $ - $ 1,840 Claim and claim adjustment expenses 1,294 334 (56) - - 1,572 Acquisition expenses 332 - - 76 - 408 Underwriting expenses 176 - - - - 176 Policyholders' dividends 3 - - - - 3 Restructuring & other related costs - - - - - - -------- -------- -------- -------- -------- -------- Underwriting (loss) income 72 (340) 25 (76) - (319) -------- -------- -------- -------- -------- -------- Net investment income 211 - (10) - - 201 Other revenues 115 - - - - 115 Other expenses 100 - - - - 100 Non-insurance restructuring & other related costs - - - - - - -------- -------- -------- -------- -------- -------- Income (loss) before income tax, minority interest and net realized investment gains 298 (340) 15 (76) - (103) Income tax (expense) benefit (82) 119 (5) 27 - 59 Minority interest (1) 11 - - - 10 -------- -------- -------- -------- -------- -------- Income (loss) before net realized investment gains 215 (210) 10 (49) - (34) Realized investment gains 114 - - - - 114 Income tax expense on realized investment gains (40) - - - - (40) -------- -------- -------- -------- -------- -------- Income (loss) from continuing operations 289 (210) 10 (49) - 40 Cumulative effect of a change in accounting principle - - - - - - -------- -------- -------- -------- -------- -------- Net income (loss) $ 289 $ (210) $ 10 $ (49) $ - $ 40 ======== ======== ======== ======== ======== ======== FINANCIAL RATIOS Loss & LAE 85.4% Acquisition expense 22.2 Underwriting expense 9.6 Dividends 0.2 -------- Expense ratio, including dividends 32.0 -------- Combined ratio 117.4% ========
TWELVE MONTHS ENDED P&C OPERATIONS DECEMBER 31, 2003 2003 RESULTS BEFORE CORPORATE REINSURANCE SIGNIFICANT AGGREGATE BAD DEBT INSURANCE BAD (In millions) ITEMS DEVELOPMENT (1) COVERS (2) PROVISION DEBT PROVISION 2003 RESULTS ----------------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 6,887 $ (217) $ (300) $ - $ - $ 6,370 Claim and claim adjustment expenses 4,730 1,770 (541) - - 5,959 Acquisition expenses 1,355 - - 131 242 1,728 Underwriting expenses 852 - - - - 852 Policyholders' dividends 57 46 - - - 103 Restructuring & other related costs - - - - - - -------- -------- -------- -------- -------- -------- Underwriting (loss) income (107) (2,033) 241 (131) (242) (2,272) -------- -------- -------- -------- -------- -------- Net investment income 695 - (87) - - 608 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 610 (2,033) 154 (131) (242) (1,642) Income tax (expense) benefit (139) 713 (54) 46 85 651 Minority interest (4) 10 - - - 6 -------- -------- -------- -------- -------- -------- Income (loss) before net realized investment gains 467 (1,310) 100 (85) (157) (985) Realized investment gains 475 - - - - 475 Income tax expense on realized investment gains (167) - - - - (167) -------- -------- -------- -------- -------- -------- Income (loss) from continuing operations 775 (1,310) 100 (85) (157) (677) Cumulative effect of a change in accounting principle - - - - - - -------- -------- -------- -------- -------- -------- Net income (loss) $ 775 $ (1,310) $ 100 $ (85) $ (157) $ (677) ======== ======== ======== ======== ======== ======== FINANCIAL RATIOS Loss & LAE 93.6% Acquisition expense 27.1 Underwriting expense 13.4 Dividends 1.6 -------- Expense ratio, including dividends 42.1 -------- Combined ratio 135.7% ========
(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 page 10 of the March 31, 2004 Financial Supplement. 20 2002 & 2003 HISTORICAL PROPERTY & CASUALTY INSURANCE CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVE DATA CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT APPENDIX PROPERTY & CASUALTY INSURANCE CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVE DATA
CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVES LIFE & GROUP CORPORATE & OTHER (In millions) STANDARD LINES SPECIALTY LINES P&C OPERATIONS NON-CORE NON-CORE TOTAL OPERATIONS ----------------------------------------------------------------------------------------------------------------------------------- As of March 31, 2002 Gross $ 13,663 $ 3,480 $ 17,143 $ 3,541 $ 10,196 $ 30,880 Ceded 5,262 963 6,225 401 5,435 12,061 Net 8,401 2,517 10,918 3,140 4,761 18,819 As of June 30, 2002 Gross $ 13,313 $ 3,500 $ 16,813 $ 3,484 $ 10,089 $ 30,386 Ceded 4,981 1,036 6,017 368 5,393 11,778 Net 8,332 2,464 10,796 3,116 4,696 18,608 As of September 30, 2002 Gross $ 13,019 $ 3,650 $ 16,669 $ 3,206 $ 9,850 $ 29,725 Ceded 4,896 1,167 6,063 351 5,215 11,629 Net 8,123 2,483 10,606 2,855 4,635 18,096 As of December 31, 2002 Gross $ 12,779 $ 3,629 $ 16,408 $ 3,456 $ 7,506 $ 27,370 Ceded 4,731 1,210 5,941 472 4,314 10,727 Net 8,048 2,419 10,467 2,984 3,192 16,643 -------------------------------------------------------------------------------------------------------------------------------
21 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT APPENDIX PROPERTY & CASUALTY INSURANCE CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVE DATA
CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVES LIFE & GROUP CORPORATE & OTHER (In millions) STANDARD LINES SPECIALTY LINES P&C OPERATIONS NON-CORE NON-CORE TOTAL OPERATIONS ----------------------------------------------------------------------------------------------------------------------------------- As of March 31, 2003 Gross $ 12,626 $ 3,555 $ 16,181 $ 3,504 $ 7,761 $ 27,446 Ceded 4,663 1,367 6,030 520 4,667 11,217 Net 7,963 2,188 10,151 2,984 3,094 16,229 As of June 30, 2003 Gross $ 12,997 $ 3,745 $ 16,742 $ 3,561 $ 7,641 $ 27,944 Ceded 5,091 1,231 6,322 491 4,672 11,485 Net 7,906 2,514 10,420 3,070 2,969 16,459 As of September 30, 2003 Gross $ 14,431 $ 4,115 $ 18,546 $ 3,644 $ 10,074 $ 32,264 Ceded 5,419 1,185 6,604 488 6,217 13,309 Net 9,012 2,930 11,942 3,156 3,857 18,955 As of December 31, 2003 Gross $ 14,282 $ 4,200 $ 18,482 $ 3,576 $ 9,672 $ 31,730 Ceded 5,315 1,281 6,596 1,685 5,935 14,216 Net 8,967 2,919 11,886 1,891 3,737 17,514 -------------------------------------------------------------------------------------------------------------------------------
22