EX-99.2 3 c89165exv99w2.txt FINANCIAL SUPPLEMENT EXHIBIT 99.2 CNA FINANCIAL CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION SEPTEMBER 30, 2004 . . . CNA FINANCIAL CORPORATION TABLE OF CONTENTS SEPTEMBER 30, 2004
PAGE ---- Supplemental Financial Information i-iii 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 Segment Aggregation 6 Property & Casualty Results of Operations (Three Months Ended) 7 Life & Group Non-Core and Corporate & Other Non-Core Segments Results of Operations (Three Months Ended) 8 Property & Casualty Results of Operations (Nine Months Ended) 9 Life & Group Non-Core and Corporate & Other Non-Core Segments Results of Operations (Nine Months Ended) 10 Property & Casualty Operations and Corporate & Other Non-Core Segment - Catastrophe Losses 11 Analysis of Pretax Net Investment Income 12 Statutory Data - Preliminary 13 Property & Casualty Operations Loss and LAE Ratio Analysis 14 Impact of Catastrophes 15-16 Life & Group Non-Core Segment - GAAP Results of Operations (Three Months Ended) 17 Life & Group Non-Core Segment - GAAP Results of Operations (Nine Months Ended) 18 Asbestos Summary by Policyholder Category 19
CNA FINANCIAL CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION SEGMENT CHANGES 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. CNA now manages its Property & Casualty Operations in two operating segments which represent CNA's core operations: Standard Lines and Specialty Lines. The non-core operations are now managed in the Life & Group Non-Core and Corporate & Other Non-Core segments. 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. Specialty Lines provides a broad array of professional, financial and specialty property and casualty products and services. Life & Group Non-Core primarily includes the results of the life and group lines of business that have been sold or placed in run-off. The Group Benefits business was sold on December 31, 2003 and the Individual Life business was sold on April 30, 2004. Corporate & Other Non-Core contains certain corporate expenses such as interest on corporate debt and losses and expenses related to the centralized adjusting and settlement of asbestos, environmental pollution and mass tort (APMT) claims. In addition, this segment includes the results of certain property and casualty insurance run-off operations including CNA Re (formerly a stand-alone property and casualty operating segment). Prior period segment disclosures have been conformed to the current year presentation. These segment disclosures, provided in the Supplemental Financial Information Appendix, are available on the company's website, for the years ended December 31, 2002 and 2003, including all quarters. The changes made to CNA's reportable segments were as follows: - CNA Global, which consists of marine and global standard lines, is now included in Standard Lines (formerly included in Specialty Lines). - CNA Guaranty and Credit is currently in run-off and is now included in the Corporate & Other Non-Core segment (formerly included in Specialty Lines). - CNA Re is currently in run-off and is also now included in the Corporate & Other Non-Core segment (CNA Re was formerly a stand-alone property and casualty operating segment). - Group Operations & Life Operations (formerly separate operating segments) have now been combined into one reportable segment where the run-off of the retained group and life products is managed. - Certain run-off life and group operations previously included in the Corporate & Other Non-Core segment are now included in the Life & Group Non-Core segment. ACCOUNTING PRONOUNCEMENTS - In July of 2003, the Accounting Standards Executive Committee (AcSEC) of the American Institute of Certified Public Accountants (AICPA) issued Statement of Position 03-01, Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts (SOP 03-01). SOP 03-01 provides guidance on accounting and reporting by insurance enterprises for certain nontraditional long-duration contracts and for separate accounts. SOP 03-01 is effective for financial statements for fiscal years beginning after December 15, 2003. SOP 03-01 may not be applied retroactively to prior years' financial statements, and initial application should be as of the beginning of an entity's fiscal year, therefore prior year amounts have not been conformed to the current year presentation. CNA adopted SOP 03-01 as of January 1, 2004. The assets and liabilities of certain guaranteed investment contracts and indexed group annuity contracts that were previously segregated and reported as separate accounts no longer qualify for separate account presentation. Prior to the adoption of SOP 03-01, the asset and liability presentation of these affected contracts were categorized as separate account assets and liabilities in the Condensed Consolidated Balance Sheet. The results of operations from separate account business were primarily classified as other revenue in the Consolidated Statement of Operations. In accordance with the provisions of SOP 03-01, the classification and presentation of certain balance sheet and income statement items have been modified within these financial statements. Accordingly, the investment securities previously classified as separate account assets have now been reclassified to the general account and are reported based on their investment classification whether available-for-sale or trading securities. The investment portfolio for the indexed group annuity contracts is classified as held for trading purposes and is carried at fair value, with both the net realized and unrealized gains (losses) included within net investment income in the Condensed Consolidated Statement of Operations. CNA continues to have contracts that meet the criteria for separate account presentation. The assets and liabilities of these contracts are legally segregated and reported as assets and liabilities of the separate account business. Substantially all assets of the separate account business are carried at fair value. Separate account liabilities are carried at contract values. i CNA FINANCIAL CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION DEFINITIONS AND PRESENTATION - P&C OPERATIONS includes Standard Lines and Specialty Lines. - LIFE & GROUP NON-CORE segment primarily includes the results of the life and group lines of business that have been sold or placed in run-off. - CORPORATE & OTHER NON-CORE segment includes the results of certain property and casualty lines of business placed in run-off, including CNA Re (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 & loss adjustment expense (LAE) ratio represents claim and claim adjustment expenses, including the expenses incurred related to uncollectible reinsurance, as a percentage of net earned premiums. In the second quarter of 2004, the expenses incurred related to uncollectible reinsurance receivables were reclassified from "Other operating expenses" to "Insurance claims and policyholders' benefits" on the Statements of Operations. Prior period amounts and ratios have been reclassified to conform to the current year presentation. This reclassification had no impact on net income (loss) or the combined ratios in any period; however, this change generally had an unfavorable impact on the loss & loss adjustment expense ratios and a favorable impact on the the expense ratios. - 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. - As a result of the sale of the Group Benefits business on December 31, 2003, income statement results for 2004 are not comparable to 2003. - On April 30, 2004, CNA completed the sale of its individual life insurance business. The business sold included term, universal and permanent life insurance policies and individual annuity products. CNA's individual long term care and structured settlement businesses were excluded from the sale. Consideration from the sale was approximately $700 million, resulting in an after-tax realized investment loss on the sale of $389 million. The results of the business sold through the sale date are included in the Statements of Operations for the three and nine months ended September 30, 2004. As a result of the sale, income statement results for the third quarter and year-to-date 2004 are not comparable to the corresponding 2003 results. - All amounts are in millions, except for per share and ratio information. - Certain immaterial differences are due to rounding. ii 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 (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. iii CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT STATEMENTS OF OPERATIONS
FAV / FAV / PERIOD ENDED SEPTEMBER 30 THREE MONTHS (UNFAV) NINE MONTHS (UNFAV) (In millions) 2004 2003 % CHANGE 2004 2003 % CHANGE ------------------------------------------------------------------------------------------------------------------------------------ STATEMENTS OF OPERATIONS Revenues: Net earned premiums $ 1,947 $ 2,126 (8)% $ 6,221 $ 6,704 (7)% Net investment income 359 352 2 1,212 1,211 - Realized investment gains (losses), net of participating policyholders' and minority interests (62) 164 (138) (415) 466 (189) Other revenues 73 83 (12) 227 288 (21) ------------ -------- ----------- -------- Total revenues 2,317 2,725 (15) 7,245 8,669 (16) ------------ -------- ----------- -------- Claims, benefits and expenses: Insurance claims and policyholders' benefits 1,596 4,342 63 4,859 8,320 42 Other operating expenses 767 1,130 32 2,214 2,848 22 Interest 28 33 15 94 100 6 ------------ -------- ----------- -------- Total claims, benefits and expenses 2,391 5,505 57 7,167 11,268 36 ------------ -------- ----------- -------- Income (loss) before income tax and minority interest (74) (2,780) 97 78 (2,599) 103 Income tax benefit 52 1,006 (95) 77 983 (92) Minority interest (6) 14 (143) (19) 9 N/A ------------ -------- ----------- -------- Net income (loss) $ (28) $ (1,760) 98 % $ 136 $ (1,607) 108 % ============ ======== =========== ========
1 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT COMPONENTS OF NET INCOME AND PER SHARE DATA
FAV / FAV / PERIOD ENDED SEPTEMBER 30 THREE MONTHS (UNFAV) NINE MONTHS (UNFAV) (In millions, except per share data) 2004 2003 % CHANGE 2004 2003 % CHANGE ---------------------------------------------------------------------------------------------------------------------------- COMPONENTS OF NET INCOME Income (loss) before net realized investment gains (losses) $ 14 $(1,865) 101 % $ 393 $ (1,912) 121 % Net realized investment gains (losses), net of participating policyholders' and minority interests (42) 105 (140)% (257) 305 (184)% ---------- ------- ------ -------- Net income (loss) $ (28) $(1,760) 98 % $ 136 $ (1,607) 108 % ========== ======= ====== ======== BASIC AND DILUTED EARNINGS (LOSS) PER SHARE Basic and diluted earnings (loss) per share available to common stockholders (1) $ (0.17) $ (7.94) 98 % $ 0.35 $ (7.39) 105 % ========== ======= ====== ======== Weighted average outstanding common stock and common stock equivalents 256.0 223.6 256.0 223.6
(1) The three and nine months ended September 30, 2004 per share results available to common stockholders are reduced by $16 million and $48 million, or $0.06 per share and $0.19 per share, of undeclared preferred stock dividends. The three and nine months ended September 30, 2003 per share results available to common stockholders are reduced by $15 million and $45 million, or $0.07 per share and $0.20 per share, of undeclared preferred stock dividends. 2 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT SELECTED BALANCE SHEET DATA AND CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS DATA
(In millions, except per share data) SEPTEMBER 30, 2004 DECEMBER 31, 2003 ------------------------------------------------------------------------------------------------------ Total assets $ 61,421 $ 68,503 Insurance reserves 43,387 45,383 Debt 1,713 1,904 Total liabilities 52,249 59,295 Minority interest 270 256 Accumulated other comprehensive income 652 841 Total stockholders' equity 8,902 8,952 Book value per common share $ 31.42 $ 31.80 Book value per common share excluding unrealized gain or loss on fixed maturity securities $ 28.75 $ 28.98 Outstanding shares of common stock (in millions of shares) (1) 256.0 255.9
THREE MONTHS ENDED SEPTEMBER 30 (In millions) 2004 2003 ------------------------------------------------------------------------------------------------------ Net cash flows provided by operating activities $ 576 $ 1,367 Net cash flows used by investing activities (607) (1,318) Net cash flows used by financing activities (1) (11) ------------------ ----------------- Net cash flows $ (32) $ 38 ================== =================
NINE MONTHS ENDED SEPTEMBER 30 (In millions) 2004 2003 ------------------------------------------------------------------------------------------------------ Net cash flows provided by operating activities $ 1,259 $ 1,482 Net cash flows used by investing activities (1,149) (1,270) Net cash flows used by financing activities (178) (160) ------------------ ----------------- Net cash flows $ (68) $ 52 ================== =================
(1) Included in the outstanding shares of common stock for the 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 were converted into 32.3 million shares of CNA common stock on April 20, 2004. 3 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY INSURANCE CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVE DATA
CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVES (1) (In millions) STANDARD LINES SPECIALTY LINES P&C OPERATIONS ---------------------------------------------------------------------------------------------- As of September 30, 2004 Gross $ 14,370 $ 4,658 $ 19,028 Ceded 5,134 1,517 6,651 Net 9,236 3,141 12,377 As of December 31, 2003 Gross $ 14,282 $ 4,200 $ 18,482 Ceded 5,315 1,281 6,596 Net 8,967 2,919 11,886
CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVES (1) LIFE & GROUP CORPORATE & (In millions) NON-CORE (1) OTHER NON-CORE TOTAL OPERATIONS ----------------------------------------------------------------------------------------------- As of September 30, 2004 Gross $ 3,707 $ 8,760 $ 31,495 Ceded 1,904 5,483 14,038 Net 1,803 3,277 17,457 As of December 31, 2003 Gross $ 3,576 $ 9,672 $ 31,730 Ceded 1,685 5,935 14,216 Net 1,891 3,737 17,514
(1) Gross reserves as of September 30, 2004 and December 31, 2003 include $368 million and $448 million of life company reserves, which are primarily related to accident and health business. Net reserves as of September 30, 2004 and December 31, 2003 include $115 million and $230 million of life company reserves, which are primarily related to accident and health business. 4 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY INSURANCE CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVE ROLLFORWARD (1)
PERIOD ENDED SEPTEMBER 30, 2004 THREE MONTHS NINE MONTHS (In millions) ENDED ENDED ----------------------------------------------------------------------------------------------- Claim & claim adjustment expense reserves, beginning of period Gross $ 31,563 $ 31,730 Ceded 14,135 14,216 ------------- ------------ Net 17,428 17,514 ------------- ------------ Net incurred claim & claim adjustment expenses 1,663 4,904 Net claim & claim adjustment expense payments (1,634) (4,919) Reduction of net reserves due to life sale (2) - (42) ------------- ------------ Claim & claim adjustment expense reserves, end of period Net 17,457 17,457 Ceded 14,038 14,038 ------------- ------------ Gross $ 31,495 $ 31,495 ============= ============
(1) Gross reserves as of September 30, 2004 and December 31, 2003 include $368 million and $448 million of life company reserves, which are primarily related to accident and health business. Net reserves as of September 30, 2004 and December 31, 2003 include $115 million and $230 million of life company reserves, which are primarily related to accident and health business. (2) On April 30, 2004, CNA completed the sale of its individual Life & Annuity business to Swiss Re. As a result of the sale, net claim and claim adjustment reserves were reduced by $42 million. 5 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT INVESTMENTS BY SEGMENT AGGREGATION
SEPTEMBER 30, 2004 DECEMBER 31, 2003 (In millions) BOOK VALUE FAIR VALUE BOOK VALUE FAIR VALUE ------------------------------------------------------------------------------------------------------------------------------- PROPERTY & CASUALTY AND CORPORATE & OTHER NON-CORE: Fixed Maturities - Taxable $ 15,258 $ 15,601 $ 11,623 $ 11,893 Fixed Maturities - Tax Exempt 7,840 8,000 6,848 7,004 Equities 204 282 225 448 Short-term 2,948 2,948 6,689 6,689 Limited Partnership Investments 1,258 1,258 1,113 1,113 Mortgage Loans & Other 16 20 48 58 ---------------- ------------------ --------------- -------------- Subtotal 27,524 28,109 26,546 27,205 Securities Lending Collateral 80 80 307 307 ---------------- ------------------ --------------- -------------- TOTAL INVESTMENTS $ 27,604 $ 28,189 $ 26,853 $ 27,512 ---------------- ------------------ --------------- -------------- LIFE & GROUP NON-CORE (1): Fixed Maturities - Taxable $ 6,569 $ 7,097 $ 8,155 $ 8,815 Fixed Maturities - Tax Exempt 1,000 1,022 939 966 Equities 49 61 68 79 Short-term 1,092 1,092 419 419 Limited Partnership Investments 457 457 4 4 Mortgage Loans & Other 23 10 197 182 ---------------- ------------------ --------------- -------------- Subtotal 9,190 9,739 9,782 10,465 Securities Lending Collateral 22 22 123 123 ---------------- ------------------ --------------- -------------- TOTAL INVESTMENTS $ 9,212 $ 9,761 $ 9,905 $ 10,588 ---------------- ------------------ --------------- -------------- TOTAL INVESTMENTS $ 36,816 $ 37,950 $ 36,758 $ 38,100 ================ ================== =============== ==============
(1) As a result of SOP 03-01, the following investments are included in Life & Group Non-Core in the above data for September 30, 2004. As of December 31, 2003, the investments were reflected within separate accounts in the Balance Sheet and are not included in the December 31, 2003 column above. In accordance with the requirements of SOP 03-01, the December 31, 2003 column has not been conformed to reflect this change. Refer to page i for further discussion on SOP 03-01.
BOOK VALUE FAIR VALUE ---------------- -------------- Fixed Maturities - Taxable $ 1,110 $ 1,211 Equities 4 4 Short-term 399 399 Limited Partnership Investments 454 454 ---------------- -------------- TOTAL INVESTMENTS $ 1,967 $ 2,068 ================ ==============
6 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY RESULTS OF OPERATIONS
THREE MONTHS ENDED STANDARD LINES SPECIALTY LINES SEPTEMBER 30 FAV / (UNFAV) FAV / (UNFAV) (In millions) 2004 2003 % CHANGE 2004 2003 % CHANGE ---------------------------------------------------------------------------------------------------------------------- Gross written premiums $ 1,421 $ 1,626 (13)% $ 706 $ 717 (2)% Net written premiums 1,046 1,028 2 599 528 13 Net earned premiums 1,183 1,001 18 576 451 28 Claim and claim adjustment expenses 951 1,781 47 361 623 42 Acquisition expenses 331 499 34 115 93 (24) Underwriting expenses 155 180 14 43 44 2 Policyholders' dividends 8 60 87 2 1 (100) ------- ------- ------ ------- Underwriting income (loss) (262) (1,519) 83 55 (310) 118 ------- ------- ------ ------- Net investment income 125 55 127 61 47 30 Other revenues 32 34 (6) 36 35 3 Other expenses 25 35 29 29 30 3 ------- ------- ------ ------- Income (loss) before income tax, minority interest and net realized investment gains (losses) (130) (1,465) 91 123 (258) 148 Income tax (expense) benefit 58 520 (89) (39) 103 (138) Minority interest (2) (2) - (4) 15 (127) ------- ------- ------ ------- Income (loss) before net realized investment gains (74) (947) 92 80 (140) 157 Realized investment gains (losses) (33) 58 (157) (13) 19 (168) Income tax (expense) benefit on realized investment gains (losses) 10 (22) 145 5 (7) 171 ------- ------- ------ ------- Net income (loss) $ (97) $ (911) 89 % $ 72 $ (128) 156 % ======= ======= ====== ======= FINANCIAL RATIOS Loss & LAE 80.4 % 177.9 % 62.8 % 138.1 % Acquisition expense 27.9 49.8 20.1 20.5 Underwriting expense 13.2 18.0 7.1 9.8 Dividends 0.7 6.0 0.4 0.3 ------- ------- ------ ------- Expense ratio, including dividends 41.8 73.8 27.6 30.6 ------- ------- ------ ------- Combined ratio 122.2 % 251.7 % 90.4 % 168.7 % ======= ======= ====== ======= THREE MONTHS ENDED P&C OPERATIONS SEPTEMBER 30 FAV / (UNFAV) (In millions) 2004 2003 % CHANGE --------------------------------------------------------------------------------------- Gross written premiums $ 2,127 $ 2,343 (9)% Net written premiums 1,645 1,556 6 Net earned premiums 1,759 1,452 21 Claim and claim adjustment expenses 1,312 2,404 45 Acquisition expenses 446 592 25 Underwriting expenses 198 224 12 Policyholders' dividends 10 61 84 ------- -------- Underwriting income (loss) (207) (1,829) 89 ------- -------- Net investment income 186 102 82 Other revenues 68 69 (1) Other expenses 54 65 17 ------- -------- Income (loss) before income tax, minority interest and net realized investment gains (losses) (7) (1,723) 100 Income tax (expense) benefit 19 623 (97) Minority interest (6) 13 (146) ------- -------- Income (loss) before net realized investment gains 6 (1,087) 101 Realized investment gains (losses) (46) 77 (160) Income tax (expense) benefit on realized investment gains (losses) 15 (29) 152 ------- -------- Net income (loss) $ (25) $ (1,039) 98 % ======= ======== FINANCIAL RATIOS Loss & LAE 74.6 % 165.6 % Acquisition expense 25.4 40.6 Underwriting expense 11.2 15.5 Dividends 0.6 4.2 ------- -------- Expense ratio, including dividends 37.2 60.3 ------- -------- Combined ratio 111.8 % 225.9 % ======= ========
7 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT LIFE & GROUP NON-CORE AND CORPORATE & OTHER NON-CORE SEGMENTS RESULTS OF OPERATIONS
THREE MONTHS ENDED P&C OPERATIONS LIFE & GROUP NON-CORE SEPTEMBER 30 FAV / (UNFAV) (In millions) 2004 2003 2004 2003 % CHANGE ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 1,759 $ 1,452 $ 182 $ 611 (70) % Insurance claims & policyholders' benefits 1,312 2,404 245 643 62 Policyholders' dividends 10 61 (4) 3 N/A Insurance related expenses 644 816 72 184 61 Net investment income 186 102 109 204 (47) Other revenues 68 69 12 34 (65) Other expenses 54 65 17 21 19 ---------- ------------- --------- ------------- Income (loss) before income tax, minority interest and net realized investment gains (losses) (7) (1,723) (27) (2) N/A Income tax (expense) benefit 19 623 14 11 27 Minority interest (6) 13 - - N/A ---------- ------------- --------- ------------- Income (loss) before net realized investment gains (losses) 6 (1,087) (13) 9 N/A Realized investment gains (losses) (46) 77 2 60 (97) Income tax (expense) benefit on realized investment gains (losses) 15 (29) - (21) N/A ---------- ------------- --------- ------------- Net income (loss) $ (25) $ (1,039) $ (11) $ 48 (123) % ========== ============= ========= ============= THREE MONTHS ENDED CORPORATE & OTHER NON-CORE TOTAL OPERATIONS SEPTEMBER 30 FAV / (UNFAV) FAV / (UNFAV) (In millions) 2004 2003 % CHANGE 2004 2003 % CHANGE --------------------------------------------------------------------------------------------------------------------------------- Net earned premiums $ 6 $ 63 (90)% $ 1,947 $ 2,126 (8)% Insurance claims & policyholders' benefits 34 1,230 97 1,591 4,277 63 Policyholders' dividends (1) 1 200 5 65 92 Insurance related expenses (8) 76 111 708 1,076 34 Net investment income 64 46 39 359 352 2 Other revenues (7) (20) 65 73 83 (12) Other expenses 16 1 N/A 87 87 - -------- -------- --------- -------- Income (loss) before income tax, minority interest and net realized investment gains (losses) 22 (1,219) 102 (12) (2,944) 100 Income tax (expense) benefit (1) 431 (100) 32 1,065 (97) Minority interest - 1 N/A (6) 14 (143) -------- -------- --------- -------- Income (loss) before net realized investment gains (losses) 21 (787) 103 14 (1,865) 101 Realized investment gains (losses) (18) 27 (167) (62) 164 (138) Income tax (expense) benefit on realized investment gains (losses) 5 (9) 156 20 (59) 134 -------- -------- --------- -------- Net income (loss) $ 8 $ (769) 101 % $ (28) $ (1,760) 98 % ======== ======== ========= ========
P&C OPERATIONS LIFE & GROUP NON-CORE OTHER FINANCIAL DATA FAV / (UNFAV) PROPERTY & CASUALTY COMPANY INFORMATION 2004 2003 2004 2003 % CHANGE ------------------------------------------------------------------------------------------------------------------------------------ Gross written premiums $ 2,127 $ 2,343 $ 225 $ 312 (28) % Net written premiums 1,645 1,556 133 127 5 Net earned premiums 1,759 1,452 138 128 8 Underwriting loss (207) (1,829) (99) (102) 3 % FINANCIAL RATIOS Loss & LAE 74.6 % 165.6 % 136.7 % 150.9 % Acquisition expense 25.4 40.6 12.4 20.8 Underwriting expense 11.2 15.5 22.0 7.8 Dividends 0.6 4.2 - - ---------- ------------- --------- ------------- Expense ratio, including dividends 37.2 60.3 34.4 28.6 ---------- ------------- --------- ------------- Combined ratio 111.8 % 225.9 % 171.1 % 179.5 % ========== ============= ========= ============= CORPORATE & OTHER NON-CORE TOTAL OPERATIONS OTHER FINANCIAL DATA FAV / (UNFAV) FAV / (UNFAV) PROPERTY & CASUALTY COMPANY INFORMATION 2004 2003 % CHANGE 2004 2003 % CHANGE ----------------------------------------------------------------------------------------------------------------------------------- Gross written premiums $ 478 $ 647 (26)% $ 2,830 $ 3,302 (14)% Net written premiums 1 107 (99) 1,779 1,790 (1) Net earned premiums 6 92 (93) 1,903 1,672 14 Underwriting loss (26) (1,257) 98 % (332) (3,188) 90 % FINANCIAL RATIOS Loss & LAE N/A % N/A % 80.6 % 230.6 % Acquisition expense 29.8 56.8 24.4 40.1 Underwriting expense (18.4) 42.4 12.0 16.3 Dividends - - 0.5 3.7 -------- -------- --------- --------- Expense ratio, including dividends 11.4 99.2 36.9 60.1 -------- -------- --------- --------- Combined ratio N/A % N/A % 117.5 % 290.7 % ======== ======== ========= =========
8 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY RESULTS OF OPERATIONS
NINE MONTHS ENDED STANDARD LINES SPECIALTY LINES P&C OPERATIONS SEPTEMBER 30 FAV / (UNFAV) FAV / (UNFAV) FAV / (UNFAV) (In millions) 2004 2003 % CHANGE 2004 2003 % CHANGE 2004 2003 % CHANGE -------------------------------------- ------- -------- ------------- ------- ------- ------------- ------- -------- ------------- Gross written premiums $4,494 $ 4,911 (8)% $2,092 $1,959 7% $6,586 $ 6,870 (4)% Net written premiums 3,520 3,388 4 1,772 1,491 19 5,292 4,879 8 Net earned premiums 3,756 3,238 16 1,672 1,338 25 5,428 4,576 19 Claim and claim adjustment expenses 2,701 3,570 24 1,059 1,309 19 3,760 4,879 23 Acquisition expenses 860 1,003 14 318 255 (25) 1,178 1,258 6 Underwriting expenses 448 512 13 125 132 5 573 644 11 Policyholders' dividends 2 86 98 5 2 (150) 7 88 92 ------ ------- ------ ------ ------ ------- Underwriting income (loss) (255) (1,933) 87 165 (360) 146 (90) (2,293) 96 ------ ------- ------ ------ ------ ------- Net investment income 382 289 32 182 149 22 564 438 29 Other revenues 102 166 (39) 93 82 13 195 248 (21) Other expenses 84 158 47 84 68 (24) 168 226 26 ------ ------- ------ ------ ------ ------- Income (loss) before income tax, minority interest and net realized investment gains 145 (1,636) 109 356 (197) N/A 501 (1,833) 127 Income tax (expense) benefit (1) 600 (100) (107) 88 N/A (108) 688 (116) Minority interest (6) (1) N/A (13) 10 N/A (19) 9 N/A ------ ------- ------ ------ ------ ------- Income (loss) before net realized investment gains 138 (1,037) 113 236 (99) N/A 374 (1,136) 133 Realized investment gains 101 249 (59) 37 81 (54) 138 330 (58) Income tax expense on realized investment gains (36) (88) 59 (14) (29) 52 (50) (117) 57 ------ ------- ------ ------ ------ ------- Net income (loss) $ 203 $ (876) 123% $ 259 $ (47) N/A% $ 462 $ (923) 150% ====== ======= ====== ====== ====== ======= FINANCIAL RATIOS Loss & LAE 71.9% 110.2% 63.4% 97.8% 69.3% 106.6% Acquisition expense 22.9 31.1 19.0 19.0 21.7 27.4 Underwriting expense 11.9 15.7 7.4 9.9 10.6 14.2 Dividends 0.1 2.7 0.3 0.2 0.1 1.9 ------ ------- ------ ------ ------ ------- Expense ratio, including dividends 34.9 49.5 26.7 29.1 32.4 43.5 ------ ------- ------ ------ ------ ------- Combined ratio 106.8% 159.7% 90.1% 126.9% 101.7% 150.1% ====== ======= ====== ====== ====== =======
9 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT LIFE & GROUP NON-CORE AND CORPORATE & OTHER NON-CORE SEGMENTS RESULTS OF OPERATIONS
NINE MONTHS ENDED P&C OPERATIONS LIFE & GROUP NON-CORE SEPTEMBER 30 FAV / (UNFAV) (In millions) 2004 2003 2004 2003 % CHANGE -------------------------------------- ------- -------- ------ ------- ------------- Net earned premiums $5,428 $ 4,576 $ 710 $1,800 (61)% Insurance claims & policyholders' benefits 3,760 4,879 981 1,784 45 Policyholders' dividends 7 88 (1) 7 114 Insurance related expenses 1,751 1,902 248 577 57 Net investment income 564 438 457 618 (26) Other revenues 195 248 72 110 (35) Other expenses 168 226 58 66 12 ------ ------- ----- ------ Income (loss) before income tax, minority interest and net realized investment gains (losses) 501 (1,833) (47) 94 (150) Income tax (expense) benefit (108) 688 27 (18) N/A Minority interest (19) 9 - - N/A ------ ------- ----- ------ Income (loss) before net realized investment gains (losses) 374 (1,136) (20) 76 (126) Realized investment gains (losses) 138 330 (616) 9 N/A Income tax (expense) benefit on realized investment gains (losses) (50) (117) 231 (3) N/A ------ ------- ----- ------ Net income (loss) $ 462 $ (923) $(405) $ 82 N/A% ====== ======= ===== ====== NINE MONTHS ENDED CORPORATE & OTHER NON-CORE TOTAL OPERATIONS SEPTEMBER 30 FAV / (UNFAV) FAV / (UNFAV) (In millions) 2004 2003 % CHANGE 2004 2003 % CHANGE -------------------------------------- ------ -------- ------------- ------- -------- ------------- Net earned premiums $ 83 $ 328 (75)% $6,221 $ 6,704 (7)% Insurance claims & policyholders' benefits 112 1,561 93 4,853 8,224 41 Policyholders' dividends - 1 N/A 6 96 94 Insurance related expenses 42 169 75 2,041 2,648 23 Net investment income 191 155 23 1,212 1,211 - Other revenues (40) (70) 43 227 288 (21) Other expenses 41 8 N/A 267 300 11 ----- ------- ------ ------- Income (loss) before income tax, minority interest and net realized investment gains (losses) 39 (1,326) 103 493 (3,065) 116 Income tax (expense) benefit - 474 N/A (81) 1,144 (107) Minority interest - - N/A (19) 9 N/A ----- ------- ------ ------- Income (loss) before net realized investment gains (losses) 39 (852) 105 393 (1,912) 121 Realized investment gains (losses) 63 127 (50) (415) 466 (189) Income tax (expense) benefit on realized investment gains (losses) (23) (41) 44 158 (161) 198 ----- ------- ------ ------- Net income (loss) $ 79 $ (766) 110% $ 136 $(1,607) 108% ===== ======= ====== =======
P&C OPERATIONS LIFE & GROUP NON-CORE OTHER FINANCIAL DATA FAV / (UNFAV) PROPERTY & CASUALTY COMPANY INFORMATION 2004 2003 2004 2003 % CHANGE --------------------------------------- ------- -------- ------- ------- ------------- Gross written premiums $6,586 $ 6,870 $ 837 $ 989 (15)% Net written premiums 5,292 4,879 472 396 19 Net earned premiums 5,428 4,576 454 390 16 Underwriting loss (90) (2,293) (284) (231) (23)% FINANCIAL RATIOS Loss & LAE 69.3% 106.6% 136.8% 130.2% Acquisition expense 21.7 27.4 9.0 17.7 Underwriting expense 10.6 14.2 16.6 11.4 Dividends 0.1 1.9 - - ------ ------- ------ ------ Expense ratio, including dividends 32.4 43.5 25.6 29.1 ------ ------- ------ ------ Combined ratio 101.7% 150.1% 162.4% 159.3% ====== ======= ====== ====== CORPORATE & OTHER NON-CORE TOTAL OPERATIONS OTHER FINANCIAL DATA FAV / (UNFAV) FAV / (UNFAV) Property & Casualty Company Information 2004 2003 % CHANGE 2004 2003 % CHANGE --------------------------------------- ------- -------- ------------- -------- -------- ------------ Gross written premiums $1,596 $ 2,121 (25)% $ 9,019 $ 9,980 (10)% Net written premiums (19) 441 (104) 5,745 5,716 1 Net earned premiums 100 402 (75) 5,982 5,368 11 Underwriting loss (71) (1,416) 95% (445) (3,940) 89% FINANCIAL RATIOS Loss & LAE 127.7% 407.5% 75.4% 130.8% Acquisition expense 24.6 31.7 20.8 27.1 Underwriting expense 19.4 13.7 11.1 13.8 Dividends - - 0.1 1.7 ------ ------- ------- ------- Expense ratio, including dividends 44.0 45.4 32.0 42.6 ------ ------- ------- ------- Combined ratio 171.7% 452.9% 107.4% 173.4% ====== ======= ======= =======
10 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY OPERATIONS AND CORPORATE & OTHER NON-CORE SEGMENT - CATASTROPHE LOSSES
CATASTROPHE LOSSES (PRETAX) CORPORATE & OTHER (In millions) STANDARD LINES SPECIALTY LINES P&C OPERATIONS NON-CORE TOTAL (1) ------------------------------------- -------------- --------------- -------------- ----------------- --------- Three months ended September 30, 2004 $ 245 $ 10 $ 255 $ 3 $ 258 Nine months ended September 30, 2004 255 13 268 3 271 Three months ended September 30, 2003 $ 46 $ 1 $ 47 $ 10 $ 57 Nine months ended September 30, 2003 108 3 111 21 132
CATASTROPHE LOSSES (AFTER-TAX) CORPORATE & OTHER (In millions) STANDARD LINES SPECIALTY LINES P&C OPERATIONS NON-CORE TOTAL (1) ------------------------------------- -------------- --------------- -------------- ----------------- --------- Three months ended September 30, 2004 $ 159 $ 7 $ 166 $ 2 $ 168 Nine months ended September 30, 2004 166 8 174 2 176 Three months ended September 30, 2003 $ 29 $ 1 $ 30 $ 7 $ 37 Nine months ended September 30, 2003 70 2 72 14 86
(1) For the three and nine months ended September 30, 2004, the above amounts exclude $5 million pretax ($3 million after-tax) of reinstatement premium and $15 million pretax ($10 million after-tax) of estimated assessments related to the third quarter 2004 hurricanes. For the three and nine months ended September 30, 2004, the above amounts include losses of $248 million pretax ($161 million after-tax) related to Hurricanes Charley, Frances, Ivan and Jeanne. 11 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT ANALYSIS OF PRETAX NET INVESTMENT INCOME
STANDARD LINES ------------------------------------------------------------------------------------ (In millions) 1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04 2Q04 3Q04 YTD 2004 --------------------------------------------- ------ ------ ------- ------ -------- ------ ------ ---- -------- Limited partnership income $ 13 $ 43 $ 35 $ 35 $ 126 $ 37 $ 13 12 $ 62 Interest on funds withheld and other deposits (34) (77) (115) (43) (269) (38) (43) (44) (125) Other investment income 150 139 135 126 550 139 149 157 445 ----- ----- ------ ----- ----- ----- ----- --- ----- Net investment income $ 129 $ 105 $ 55 $ 118 $ 407 $ 138 $ 119 125 $ 382 ===== ===== ====== ===== ===== ===== ===== === =====
SPECIALTY LINES ------------------------------------------------------------------------------------ 1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04 2Q04 3Q04 YTD 2004 ------ ------ ------- ------ -------- ------ ------ ---- -------- Limited partnership income $ 4 $ 14 $ 11 $ 11 $ 40 $ 13 $ 5 4 $ 22 Interest on funds withheld and other deposits (5) (7) (11) (2) (25) (2) (2) (3) (7) Other investment income 50 46 47 43 186 51 56 60 167 ----- ----- ------ ----- ----- ----- ----- --- ----- Net investment income $ 49 $ 53 $ 47 $ 52 $ 201 $ 62 $ 59 61 $ 182 ===== ===== ====== ===== ===== ===== ===== === =====
P&C OPERATIONS ------------------------------------------------------------------------------------ 1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04 2Q04 3Q04 YTD 2004 ------ ------ ------- ------ -------- ------ ------ ---- -------- Limited partnership income $ 17 $ 57 $ 46 $ 46 $ 166 $ 50 $ 18 16 $ 84 Interest on funds withheld and other deposits (39) (84) (126) (45) (294) (40) (45) (47) (132) Other investment income 200 185 182 169 736 190 205 217 612 ----- ----- ------ ----- ----- ----- ----- --- ----- Net investment income $ 178 $ 158 $ 102 $ 170 $ 608 $ 200 $ 178 186 $ 564 ===== ===== ====== ===== ====== ===== ===== === =====
LIFE & GROUP NON-CORE ------------------------------------------------------------------------------------ 1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04 2Q04 3Q04 YTD 2004 ------ ------ ------- ------ -------- ------ ------ ---- -------- Limited partnership income $ 1 $ - $ 1 $ 1 $ 3 $ 1 $ - 2 $ 3 Interest on funds withheld and other deposits - - - - - - - - - Income from trading securities (1) (2) - - - - - 28 19 (19) 28 Other investment income 202 211 203 202 818 177 123 126 426 ----- ------ ------ ----- ----- ----- ----- --- ----- Net investment income (2) $ 203 $ 211 $ 204 $ 203 $ 821 $ 206 $ 142 109 $ 457 ===== ====== ====== ===== ===== ===== ===== === =====
CORPORATE & OTHER NON-CORE ------------------------------------------------------------------------------------ 1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04 2Q04 3Q04 YTD 2004 ------ ------ ------- ------ -------- ------ ------ ---- -------- Limited partnership income $ 5 $ 18 $ 14 $ 15 $ 52 $ 16 $ 6 6 $ 28 Interest on funds withheld and other deposits (8) (9) (22) (11) (50) (10) (11) (8) (29) Other investment income 54 49 54 59 216 61 65 66 192 ----- ----- ------ ----- ------ ----- ----- --- ----- Net investment income $ 51 $ 58 $ 46 $ 63 $ 218 $ 67 $ 60 64 $ 191 ===== ===== ====== ===== ====== ===== ===== === =====
TOTAL OPERATIONS ------------------------------------------------------------------------------------ 1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04 2Q04 3Q04 YTD 2004 ------ ------ ------- ------ -------- ------ ------ ---- -------- Limited partnership income $ 23 $ 75 $ 61 $ 62 $ 221 $ 67 $ 24 24 $ 115 Interest on funds withheld and other deposits (47) (93) (148) (56) (344) (50) (56) (55) (161) Income from trading securities (1)(2) - - - - - 28 19 (19) 28 Other investment income 456 445 439 430 1,770 428 393 409 1,230 ----- ----- ------ ----- ----- ----- ----- --- ------- Net investment income (2) $ 432 $427 $ 352 $ 436 $1,647 $ 473 $ 380 359 $ 1,212 ===== ===== ====== ===== ====== ===== ===== === =======
(1) Includes $8 million, $6 million and $1 million for the first quarter, second quarter and third quarter of 2004 related to limited partnership investment income that supports indexed group annuity contracts. (2) Net investment income in 2004 includes income from trading securities. See Accounting Pronouncements on page ii for the discussion of SOP 03-01. 12 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT STATUTORY DATA - PRELIMINARY
PERIOD ENDED SEPTEMBER 30 THREE MONTHS NINE MONTHS INCOME STATEMENT (PRELIMINARY) FAV / (UNFAV) (PRELIMINARY) FAV / (UNFAV) (In millions) 2004 2003 % CHANGE 2004 2003 % CHANGE ------------------------------------- ------------- -------- ------------- ------------- -------- ------------- PROPERTY & CASUALTY COMPANIES Gross written premiums $2,287 $ 3,141 (27)% $ 7,083 $ 9,512 (26)% Net written premiums 1,697 1,628 4 5,385 5,214 3 Net earned premiums 1,603 1,412 (14) 5,065 4,628 (9) Claim and claim adjustment expenses 1,326 3,288 60 4,024 6,113 34 Acquisition expenses 279 350 20 916 1,062 14 Underwriting expenses 231 596 61 577 1,038 44 Policyholders' dividends 11 11 - 32 51 37 ------ ------- ------- ------- Underwriting Loss (244) (2,833) 91 (484) (3,636) 87 Net investment income 328 288 14 963 848 14 Other revenues/expenses (191) (145) (32) (323) (272) (19) Income tax (expense) benefit 2 658 (100) (185) 712 (126) Net realized gains (losses) (27) 146 (118) 288 462 (38) ------ ------- ------- ------- Net income (loss) $ (132) $(1,886) 93% $ 259 $(1,886) 114% ====== ======= ======= ======= FINANCIAL RATIOS Loss and LAE 82.7% 232.9% 79.4% 132.1% Acquisition expense 16.5 21.5 17.0 20.4 Underwriting expense 13.6 36.6 10.8 19.9 Policyholders' dividends 0.7 0.8 0.6 1.1 ------ ------- ------- ------- Expense ratio 30.8 58.9 28.4 41.4 ------ ------- ------- ------- Combined ratio 113.5% 291.8% 107.8% 173.5% ====== ======= ======= ======= LIFE COMPANIES (2) Earned premium $ 43 $ 496 $ 278 $ 1,476
SUPPLEMENTAL STATUTORY DATA (PRELIMINARY) (In millions) SEPTEMBER 30, 2004 DECEMBER 31, 2003 ------------------------------ ------------------ ----------------- PROPERTY & CASUALTY COMPANIES Statutory surplus (1) $ 6,603 $ 6,170 LIFE COMPANIES Statutory surplus $ 1,255 $ 707 Gross life insurance in force 61,432 388,968
(1) Surplus includes the Property & Casualty Companies' equity ownership of the life insurance subsidiaries. (2) Life Companies are CAC/VFL 13 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT PROPERTY & CASUALTY OPERATIONS LOSS AND LAE RATIO ANALYSIS
STANDARD LINES -------------------------------------------- 2004 YTD 2003 FY 2003 FY EVALUATED AT EVALUATED AT EVALUATED AT 9/30/04 12/31/03 9/30/04 ------------ ------------ ------------ Gross Accident Year 69.4% 65.4% 63.3% Impact of Other Reinsurance 0.7 2.4 2.7 ---- ---- ---- Net Accident Year 70.1 67.8 66.0% ==== Impact of Corporate Covers (0.1) (6.4) Impact of Development & Change in Allowance for Uncollectible Reinsurance 1.9 36.7 ---- ---- Net Calendar Year 71.9% 98.1% ==== ====
SPECIALTY LINES -------------------------------------------- 2004 YTD 2003 FY 2003 FY EVALUATED AT EVALUATED AT EVALUATED AT 9/30/04 12/31/03 9/30/04 ------------ ------------ ------------ Gross Accident Year 64.2% 67.1% 64.9% Impact of Other Reinsurance (1.0) 1.8 0.1 ---- ---- ---- Net Accident Year 63.2 68.9 65.0% ==== Impact of Corporate Covers 0.7 (1.9) Impact of Development & Change in Allowance for Uncollectible Reinsurance (0.5) 22.6 ---- ---- Net Calendar Year 63.4% 89.6% ==== ====
P&C OPERATIONS -------------------------------------------- 2004 YTD 2003 FY 2003 FY EVALUATED AT EVALUATED AT EVALUATED AT 9/30/04 12/31/03 9/30/04 ------------ ------------ ------------ Gross Accident Year 67.8% 65.9% 63.8% Impact of Other Reinsurance 0.1 2.2 1.9 ---- ---- ---- Net Accident Year 67.9 68.1 65.7% ==== Impact of Corporate Covers 0.1 (5.1) Impact of Development & Change in Allowance for Uncollectible Reinsurance 1.3 32.6 ---- ---- Net Calendar Year 69.3% 95.6% ==== ====
14 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT IMPACT OF CATASTROPHES
STANDARD LINES SPECIALTY LINES THREE MONTHS ENDED 2004 RESULTS 2004 RESULTS SEPTEMBER 30, 2004 BEFORE IMPACT OF BEFORE IMPACT OF (In millions) CATASTROPHES CATASTROPHES 2004 RESULTS CATASTROPHES CATASTROPHES 2004 RESULTS -------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------ Net earned premiums $ 1,188 $ (5) $ 1,183 $ 576 $ - $ 576 Claim and claim adjustment expenses 706 245 951 351 10 361 Acquisition expenses 317 14 331 114 1 115 Underwriting expenses 155 - 155 43 - 43 Policyholders' dividends 8 - 8 2 - 2 ------------ ------------ ------------ ------------ ------------ ------------ Underwriting income (loss) 2 (264) (262) 66 (11) 55 ------------ ------------ ------------ ------------ ------------ ------------ Net investment income 125 - 125 61 - 61 Other revenues 32 - 32 36 - 36 Other expenses 25 - 25 29 - 29 ------------ ------------ ------------ ------------ ------------ ------------ Income (loss) before income tax, minority interest and net realized investment gains 134 (264) (130) 134 (11) 123 Income tax (expense) benefit (34) 92 58 (43) 4 (39) Minority interest (2) - (2) (4) - (4) ------------ ------------ ------------ ------------ ------------ ------------ Income (loss) before net realized investment losses 98 (172) (74) 87 (7) 80 Realized investment losses (33) - (33) (13) - (13) Income tax benefit on realized investment losses 10 - 10 5 - 5 ------------ ------------ ------------ ------------ ------------ ------------ Net income (loss) $ 75 $ (172) $ (97) $ 79 $ (7) $ 72 ============ ============ ============ ============ ============ ============ FINANCIAL RATIOS Loss & LAE 59.4% 80.4% 61.1% 62.8% Acquisition expense 26.6 27.9 19.9 20.1 Underwriting expense 13.2 13.2 7.1 7.1 Dividends 0.7 0.7 0.4 0.4 ------------ ------------ ------------ ------------ Expense ratio, including dividends 40.5 41.8 27.4 27.6 ------------ ------------ ------------ ------------ Combined ratio 99.9% 122.2% 88.5% 90.4% ============ ============ ============ ============ P&C OPERATIONS THREE MONTHS ENDED 2004 RESULTS SEPTEMBER 30, 2004 BEFORE IMPACT OF (In millions) CATASTROPHES CATASTROPHES 2004 RESULTS -------------------------------------- ------------ ------------ ------------ Net earned premiums $ 1,764 $ (5) $ 1,759 Claim and claim adjustment expenses 1,057 255 1,312 Acquisition expenses 431 15 446 Underwriting expenses 198 - 198 Policyholders' dividends 10 - 10 ------------ ------------ ------------ Underwriting income (loss) 68 (275) (207) ------------ ------------ ------------ Net investment income 186 - 186 Other revenues 68 - 68 Other expenses 54 - 54 ------------ ------------ ------------ Income (loss) before income tax, minority interest and net realized investment gains 268 (275) (7) Income tax (expense) benefit (77) 96 19 Minority interest (6) - (6) ------------ ------------ ------------ Income (loss) before net realized investment losses 185 (179) 6 Realized investment losses (46) - (46) Income tax benefit on realized investment losses 15 - 15 ------------ ------------ ------------ Net income (loss) $ 154 $ (179) $ (25) ============ ============ ============ FINANCIAL RATIOS Loss & LAE 59.9% 74.6% Acquisition expense 24.4 25.4 Underwriting expense 11.2 11.2 Dividends 0.6 0.6 ------------ ------------ Expense ratio, including dividends 36.2 37.2 ------------ ------------ Combined ratio 96.1% 111.8% ============ ============
STANDARD LINES SPECIALTY LINES THREE MONTHS ENDED 2003 RESULTS 2003 RESULTS SEPTEMBER 30, 2003 BEFORE IMPACT OF BEFORE IMPACT OF (In millions) CATASTROPHES CATASTROPHES 2003 RESULTS CATASTROPHES CATASTROPHES 2003 RESULTS ----------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------ Net earned premiums $ 1,001 $ - $ 1,001 $ 451 $ - $ 451 Claim and claim adjustment expenses 1,735 46 1,781 622 1 623 Acquisition expenses 499 - 499 93 - 93 Underwriting expenses 180 - 180 44 - 44 Policyholders' dividends 60 - 60 1 - 1 ------------ ------------ ------------ ------------ ------------ ------------ Underwriting loss (1,473) (46) (1,519) (309) (1) (310) ------------ ------------ ------------ ------------ ------------ ------------ Net investment income 55 - 55 47 - 47 Other revenues 34 - 34 35 - 35 Other expenses 35 - 35 30 - 30 ------------ ------------ ------------ ------------ ------------ ------------ Loss before income tax, minority interest and net realized investment gains (1,419) (46) (1,465) (257) (1) (258) Income tax benefit 503 17 520 103 - 103 Minority interest (2) - (2) 15 - 15 ------------ ------------ ------------ ------------ ------------ ------------ Loss before net realized investment gains (918) (29) (947) (139) (1) (140) Realized investment gains 58 - 58 19 - 19 Income tax expense on realized investment gains (22) - (22) (7) - (7) ------------ ------------ ------------ ------------ ------------ ------------ Net loss $ (882) $ (29) $ (911) $ (127) $ (1) $ (128) ============ ============ ============ ============ ============ ============ FINANCIAL RATIOS Loss & LAE 173.3% 177.9% 137.9% 138.1% Acquisition expense 49.8 49.8 20.5 20.5 Underwriting expense 18.0 18.0 9.8 9.8 Dividends 6.0 6.0 0.3 0.3 ------------ ------------ ------------ ------------ Expense ratio, including dividends 73.8 73.8 30.6 30.6 ------------ ------------ ------------ ------------ Combined ratio 247.1% 251.7% 168.5% 168.7% ============ ============ ============ ============ P&C OPERATIONS THREE MONTHS ENDED 2003 RESULTS SEPTEMBER 30, 2003 BEFORE IMPACT OF (In millions) CATASTROPHES CATASTROPHES 2003 RESULTS ----------------------------------------- ------------ ------------ ------------ Net earned premiums $ 1,452 $ - $ 1,452 Claim and claim adjustment expenses 2,357 47 2,404 Acquisition expenses 592 - 592 Underwriting expenses 224 - 224 Policyholders' dividends 61 - 61 ------------ ------------ ------------ Underwriting loss (1,782) (47) (1,829) ------------ ------------ ------------ Net investment income 102 - 102 Other revenues 69 - 69 Other expenses 65 - 65 ------------ ------------ ------------ Loss before income tax, minority interest and net realized investment gains (1,676) (47) (1,723) Income tax benefit 606 17 623 Minority interest 13 - 13 ------------ ------------ ------------ Loss before net realized investment gains (1,057) (30) (1,087) Realized investment gains 77 - 77 Income tax expense on realized investment gains (29) - (29) ------------ ------------ ------------ Net loss $ (1,009) $ (30) $ (1,039) ============ ============ ============ FINANCIAL RATIOS Loss & LAE 162.4% 165.6% Acquisition expense 40.6 40.6 Underwriting expense 15.5 15.5 Dividends 4.2 4.2 ------------ ------------ Expense ratio, including dividends 60.3 60.3 ------------ ------------ Combined ratio 222.7% 225.9% ============ ============
15 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT IMPACT OF CATASTROPHES
STANDARD LINES SPECIALTY LINES NINE MONTHS ENDED 2004 RESULTS 2004 RESULTS SEPTEMBER 30, 2004 BEFORE IMPACT OF BEFORE IMPACT OF (In millions) CATASTROPHES CATASTROPHES 2004 RESULTS CATASTROPHES CATASTROPHES 2004 RESULTS -------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------ Net earned premiums $ 3,761 $ (5) $ 3,756 $ 1,672 $ - $ 1,672 Claim and claim adjustment expenses 2,446 255 2,701 1,046 13 1,059 Acquisition expenses 846 14 860 317 1 318 Underwriting expenses 448 - 448 125 - 125 Policyholders' dividends 2 - 2 5 - 5 ------------ ------------ ------------ ------------ ------------ ------------ Underwriting income (loss) 19 (274) (255) 179 (14) 165 ------------ ------------ ------------ ------------ ------------ ------------ Net investment income 382 - 382 182 - 182 Other revenues 102 - 102 93 - 93 Other expenses 84 - 84 84 - 84 ------------ ------------ ------------ ------------ ------------ ------------ Income (loss) before income tax, minority interest and net realized investment gains 419 (274) 145 370 (14) 356 Income tax (expense) benefit (97) 96 (1) (112) 5 (107) Minority interest (6) - (6) (13) - (13) ------------ ------------ ------------ ------------ ------------ ------------ Income (loss) before net realized investment gains 316 (178) 138 245 (9) 236 Realized investment gains 101 - 101 37 - 37 Income tax expense on realized investment gains (36) - (36) (14) - (14) ------------ ------------ ------------ ------------ ------------ ------------ Net income (loss) $ 381 $ (178) $ 203 $ 268 $ (9) $ 259 ============ ============ ============ ============ ============ ============ FINANCIAL RATIOS Loss & LAE 65.0% 71.9% 62.6% 63.4% Acquisition expense 22.5 22.9 19.0 19.0 Underwriting expense 11.9 11.9 7.4 7.4 Dividends 0.1 0.1 0.3 0.3 ------------ ------------ ------------ ------------ Expense ratio, including dividends 34.5 34.9 26.7 26.7 ------------ ------------ ------------ ------------ Combined ratio 99.5% 106.8% 89.3% 90.1% ============ ============ ============ ============ P&C OPERATIONS NINE MONTHS ENDED 2004 RESULTS SEPTEMBER 30, 2004 BEFORE IMPACT OF (In millions) CATASTROPHES CATASTROPHES 2004 RESULTS -------------------------------------- ------------ ------------ ------------ Net earned premiums $ 5,433 $ (5) $ 5,428 Claim and claim adjustment expenses 3,492 268 3,760 Acquisition expenses 1,163 15 1,178 Underwriting expenses 573 - 573 Policyholders' dividends 7 - 7 ------------ ------------ ------------ Underwriting income (loss) 198 (288) (90) ------------ ------------ ------------ Net investment income 564 - 564 Other revenues 195 - 195 Other expenses 168 - 168 ------------ ------------ ------------ Income (loss) before income tax, minority interest and net realized investment gains 789 (288) 501 Income tax (expense) benefit (209) 101 (108) Minority interest (19) - (19) ------------ ------------ ------------ Income (loss) before net realized investment gains 561 (187) 374 Realized investment gains 138 - 138 Income tax expense on realized investment gains (50) - (50) ------------ ------------ ------------ Net income (loss) $ 649 $ (187) $ 462 ============ ============ ============ FINANCIAL RATIOS Loss & LAE 64.3% 69.3% Acquisition expense 21.4 21.7 Underwriting expense 10.6 10.6 Dividends 0.1 0.1 ------------ ------------ Expense ratio, including dividends 32.1 32.4 ------------ ------------ Combined ratio 96.4% 101.7% ============ ============
STANDARD LINES SPECIALTY LINES NINE MONTHS ENDED 2003 RESULTS 2003 RESULTS SEPTEMBER 30, 2003 BEFORE IMPACT OF BEFORE IMPACT OF (In millions) CATASTROPHES CATASTROPHES 2003 RESULTS CATASTROPHES CATASTROPHES 2003 RESULTS ----------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------ Net earned premiums $ 3,238 $ - $ 3,238 $ 1,338 $ - $ 1,338 Claim and claim adjustment expenses 3,462 108 3,570 1,306 3 1,309 Acquisition expenses 1,003 - 1,003 255 - 255 Underwriting expenses 512 - 512 132 - 132 Policyholders' dividends 86 - 86 2 - 2 ------------ ------------ ------------ ------------ ------------ ------------ Underwriting loss (1,825) (108) (1,933) (357) (3) (360) ------------ ------------ ------------ ------------ ------------ ------------ Net investment income 289 - 289 149 - 149 Other revenues 166 - 166 82 - 82 Other expenses 158 - 158 68 - 68 ------------ ------------ ------------ ------------ ------------ ------------ Loss before income tax, minority interest and net realized investment gains (1,528) (108) (1,636) (194) (3) (197) Income tax benefit 562 38 600 87 1 88 Minority interest (1) - (1) 10 - 10 ------------ ------------ ------------ ------------ ------------ ------------ Loss before net realized investment gains (967) (70) (1,037) (97) (2) (99) Realized investment gains 249 - 249 81 - 81 Income tax expense on realized investment gains (88) - (88) (29) - (29) ------------ ------------ ------------ ------------ ------------ ------------ Net loss $ (806) $ (70) $ (876) $ (45) $ (2) $ (47) ============ ============ ============ ============ ============ ============ FINANCIAL RATIOS Loss & LAE 106.9% 110.2% 97.6% 97.8% Acquisition expense 31.1 31.1 19.0 19.0 Underwriting expense 15.7 15.7 9.9 9.9 Dividends 2.7 2.7 0.2 0.2 ------------ ------------ ------------ ------------ Expense ratio, including dividends 49.5 49.5 29.1 29.1 ------------ ------------ ------------ ------------ Combined ratio 156.4% 159.7% 126.7% 126.9% ============ ============ ============ ============ P&C OPERATIONS NINE MONTHS ENDED 2003 RESULTS SEPTEMBER 30, 2003 BEFORE IMPACT OF (In millions) CATASTROPHES CATASTROPHES 2003 RESULTS ----------------------------------------- ------------ ------------ ------------ Net earned premiums $ 4,576 $ - $ 4,576 Claim and claim adjustment expenses 4,768 111 4,879 Acquisition expenses 1,258 - 1,258 Underwriting expenses 644 - 644 Policyholders' dividends 88 - 88 ------------ ------------ ------------ Underwriting loss (2,182) (111) (2,293) ------------ ------------ ------------ Net investment income 438 - 438 Other revenues 248 - 248 Other expenses 226 - 226 ------------ ------------ ------------ Loss before income tax, minority interest and net realized investment gains (1,722) (111) (1,833) Income tax benefit 649 39 688 Minority interest 9 - 9 ------------ ------------ ------------ Loss before net realized investment gains (1,064) (72) (1,136) Realized investment gains 330 - 330 Income tax expense on realized investment gains (117) - (117) ------------ ------------ ------------ Net loss $ (851) $ (72) $ (923) ============ ============ ============ FINANCIAL RATIOS Loss & LAE 104.2% 106.6% Acquisition expense 27.4 27.4 Underwriting expense 14.2 14.2 Dividends 1.9 1.9 ------------ ------------ Expense ratio, including dividends 43.5 43.5 ------------ ------------ Combined ratio 147.7% 150.1% ============ ============
16 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT LIFE & GROUP NON-CORE SEGMENT - GAAP RESULTS OF OPERATIONS
THREE MONTHS ENDED LIFE & GROUP NON-CORE SEPTEMBER 30, 2004 EXCLUDING BUSINESSES LIFE & GROUP NON-CORE TOTAL LIFE & GROUP (In millions) SOLD (1) BUSINESSES SOLD (2) NON-CORE AS REPORTED --------------------------------------------------------- --------------------- --------------------- -------------------- Net earned premiums $ 182 $ - $ 182 Insurance claims & policyholders' benefits 234 11 245 Policyholders' dividends (5) 1 (4) Insurance related expenses 54 18 72 Net investment income 107 2 109 Other revenues 9 3 12 Other expenses 15 2 17 ----- ---- ----- Loss before income tax and net realized investment gains (losses) - (27) (27) Income tax benefit 8 6 14 ----- ---- ----- Income before net realized investment gains (losses) 8 (21) (13) Realized investment gains (losses) (10) 12 2 Income tax (expense) benefit on realized investment gains (losses) 5 (5) - ----- ---- ----- Net income (loss) $ 3 $(14) $ (11) ===== ==== =====
THREE MONTHS ENDED LIFE & GROUP NON-CORE SEPTEMBER 30, 2003 EXCLUDING BUSINESSES LIFE & GROUP NON-CORE TOTAL LIFE & GROUP (In millions) SOLD (1) BUSINESSES SOLD (2) NON-CORE AS REPORTED ----------------------------------------------------------- --------------------- --------------------- -------------------- Net earned premiums $ 239 $ 372 $ 611 Insurance claims & policyholders' benefits 336 307 643 Policyholders' dividends (1) 4 3 Insurance related expenses 64 120 184 Net investment income 119 85 204 Other revenues 23 11 34 Other expenses 10 11 21 ----- ----- ----- Income (loss) before income tax and net realized investment gains (28) 26 (2) Income tax (expense) benefit 20 (9) 11 ----- ----- ----- Income before net realized investment gains (8) 17 9 Realized investment gains 36 24 60 Income tax expense on realized investment gains (14) (7) (21) ----- ----- ----- Net income $ 14 $ 34 $ 48 ===== ===== =====
(1) Retained life and group businesses principally include group and individual long term care, structured settlements, institutional markets and specialty medical. (2) Life and group businesses sold include group business, individual life business and CNA Trust. Included in this column are the effects of shared corporate overhead expenses which continue to be allocated to the sold businesses. 17 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT LIFE & GROUP NON-CORE SEGMENT - GAAP RESULTS OF OPERATIONS
NINE MONTHS ENDED LIFE & GROUP NON-CORE SEPTEMBER 30, 2004 EXCLUDING BUSINESSES LIFE & GROUP NON-CORE TOTAL LIFE & GROUP (In millions) SOLD (1) BUSINESSES SOLD (2) (3) NON-CORE AS REPORTED -------------------------------------------------------- --------------------- ----------------------- -------------------- Net earned premiums $ 595 $ 115 $ 710 Insurance claims & policyholders' benefits 852 129 981 Policyholders' dividends (4) 3 (1) Insurance related expenses 164 84 248 Net investment income 404 53 457 Other revenues 42 30 72 Other expenses 40 18 58 ----- ----- ----- Loss before income tax and net realized investment gains (losses) (11) (36) (47) Income tax benefit 19 8 27 ----- ----- ----- Income (loss) before net realized investment gains (losses) 8 (28) (20) Realized investment gains (losses) 3 (619) (616) Income tax benefit on realized investment gains (losses) - 231 231 ----- ----- ----- Net income (loss) $ 11 $(416) $(405) ===== ===== =====
NINE MONTHS ENDED LIFE & GROUP NON-CORE SEPTEMBER 30, 2003 EXCLUDING BUSINESSES LIFE & GROUP NON-CORE TOTAL LIFE & GROUP (In millions) SOLD (1) BUSINESSES SOLD (2) (3) NON-CORE AS REPORTED --------------------------------------------------------- --------------------- ----------------------- -------------------- Net earned premiums $ 697 $ 1,103 $ 1,800 Insurance claims & policyholders' benefits 885 899 1,784 Policyholders' dividends (7) 14 7 Insurance related expenses 192 385 577 Net investment income 358 260 618 Other revenues 69 41 110 Other expenses 34 32 66 ----- ------- ------- Income before income tax and net realized investment gains (losses) 20 74 94 Income tax (expense) benefit 5 (23) (18) ----- ------- ------- Income before net realized investment losses 25 51 76 Realized investment gains (losses) (2) 11 9 Income tax (expense) benefit on realized investment gains (losses) 5 (8) (3) ----- ------- ------- Net income $ 28 $ 54 $ 82 ===== ======= =======
(1) Retained life and group businesses principally include group and individual long term care, structured settlements, institutional markets and specialty medical. (2) For the nine months ended September 30, 2004, net realized investment losses for Life & Group Non-Core businesses sold include a pretax impairment loss of $613 million ($384 million after-tax), related to the individual life business and CNA Trust. (3) Life and group businesses sold include group business, individual life business and CNA Trust. Included in this column are the effects of shared corporate overhead expenses which continue to be allocated to the sold businesses. 18 CNA FINANCIAL CORPORATION FINANCIAL SUPPLEMENT ASBESTOS SUMMARY BY POLICYHOLDER CATEGORY
PERCENT OF SEPTEMBER 30, 2004 NUMBER OF NET PAID NET ASBESTOS ASBESTOS NET (In millions) POLICYHOLDERS LOSSES IN 2004 RESERVES RESERVES ---------------------------------------- ------------- -------------- ------------ ------------ POLICYHOLDERS WITH SETTLEMENT AGREEMENTS Structured Settlements 11 $ 39 $ 179 11% Wellington 4 4 19 1 Coverage in Place 31 8 81 5 Fibreboard 1 - 54 3 ----- ---- ------ --- TOTAL WITH SETTLEMENT AGREEMENTS 47 51 333 20 OTHER POLICYHOLDERS WITH ACTIVE ACCOUNTS Large Asbestos Accounts 180 35 369 21 Small Asbestos Accounts 1,095 15 153 9 ----- ---- ------ --- TOTAL OTHER POLICYHOLDERS 1,275 50 522 30 ASSUMED REINSURANCE & POOLS - 3 156 9 UNASSIGNED IBNR (1) - - 696 41 ----- ---- ------ --- TOTAL 1,322 $104 $1,707 100% ===== ==== ====== ===
(1) IBNR includes claims that are incurred but not reported. 19