EX-99.2 3 c92100exv99w2.txt FINANCIAL SUPPLEMENT EXHIBIT 99.2 (CNA LOGO) CNA FINANCIAL CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION DECEMBER 31, 2004 FINAL (CNA LOGO) CNA FINANCIAL CORPORATION TABLE OF CONTENTS DECEMBER 31, 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 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 (Twelve Months Ended) 9 Life & Group Non-Core and Corporate & Other Non-Core Segments Results of Operations (Twelve 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 Life & Group Non-Core Segment - GAAP Results of Operations (Three Months Ended) 16 Life & Group Non-Core Segment - GAAP Results of Operations (Twelve Months Ended) 17 Asbestos Summary by Policyholder Category 18
(CNA LOGO) 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, 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 Balance Sheet. The results of operations from separate account business were primarily classified as other revenue in the Statements 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 Statements 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 LOGO) 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 and interest expense on corporate debt. - 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 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 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 primarily 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 twelve months ended December 31, 2004. As a result of the sale, income statement results for the fourth 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 LOGO) CNA FINANCIAL CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION NON-GAAP FINANCIAL MEASURES This financial supplement presents certain GAAP and non-GAAP financial measures to provide information used by management to monitor the Company's operating performance. The non-GAAP measures are provided to enhance the understanding of the Company's results and should not be used in place of GAAP measures, such as net income (loss). 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, including evaluation of financial results, product pricing, and resource allocation. The Company's investment portfolio is monitored through analysis of various quantitative and qualitative factors, and certain decisions are made related to the sale or impairment of investments that will 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, underwriting expenses and dividend expenses. Management uses underwriting results and operating ratios to monitor its insurance operations' results without the impact of certain factors, including investment income, other revenues, other expenses, minority interest, income tax benefit (expense) and net realized investment gains or losses. Examples of the types of amounts categorized as other revenues and expenses include non-risk bearing insurance activities, such as claims handling for third parties, and transactional foreign exchange gains and 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, underwriting expenses and dividend 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 (NAIC) 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 (CNA LOGO) FINANCIAL SUPPLEMENT STATEMENTS OF OPERATIONS
PERIOD ENDED DECEMBER 31 THREE MONTHS TWELVE MONTHS FAV / FAV / (UNFAV) (UNFAV) (In millions) 2004 2003 % CHANGE 2004 2003 % CHANGE ------------------------------------------------------------------------------------------------------------------------------------ STATEMENTS OF OPERATIONS Revenues: Net earned premiums $ 1,988 $ 2,510 (21)% $ 8,209 $ 9,214 (11)% Net investment income 462 436 6 1,674 1,647 2 Realized investment gains (losses), net of participating policyholders' and minority interests 167 (6) N/A (248) 460 (154) Other revenues 68 107 (36) 295 395 (25) -------- -------- -------- -------- Total revenues 2,685 3,047 (12) 9,930 11,716 (15) -------- -------- -------- -------- Claims, benefits and expenses: Insurance claims and policyholders' benefits 1,587 1,967 19 6,446 10,287 37 Other operating expenses 649 803 19 2,863 3,651 22 Interest 30 30 -- 124 130 5 -------- -------- -------- -------- Total claims, benefits and expenses 2,266 2,800 19 9,433 14,068 33 -------- -------- -------- -------- Income (loss) before income tax and minority interest 419 247 70 497 (2,352) 121 Income tax (expense) benefit (106) (70) (51) (29) 913 (103) Minority interest (8) (3) (167) (27) 6 N/A -------- -------- -------- -------- Net income (loss) $ 305 $ 174 75 % $ 441 $ (1,433) 131 % ======== ======== ======== ========
1 CNA FINANCIAL CORPORATION (CNA LOGO) FINANCIAL SUPPLEMENT COMPONENTS OF NET INCOME AND PER SHARE DATA
PERIOD ENDED DECEMBER 31 THREE MONTHS TWELVE MONTHS FAV / FAV / (UNFAV) (UNFAV) (In millions, except per share data) 2004 2003 % CHANGE 2004 2003 % CHANGE ------------------------------------------------------------------------------------------------------------------------------------ COMPONENTS OF NET INCOME Income (loss) before net realized investment gains (losses) $ 201 $ 194 4 % $ 594 $(1,718) 135 % Net realized investment gains (losses), net of participating policyholders' and minority interests 104 (20) N/A (153) 285 (154) ------- ------- ------- ------- Net income (loss) $ 305 $ 174 75 % $ 441 $(1,433) 131 % ======= ======= ======= ======= BASIC AND DILUTED EARNINGS (LOSS) PER SHARE ------- ------- ------- ------- Basic and diluted earnings (loss) per share available to common stockholders (1) $ 1.12 $ 0.67 67 % $ 1.47 $ (6.58) 122 % ======= ======= ======= ======= Weighted average outstanding common stock and common stock 256.0 237.0 256.0 227.0 equivalents (2)
(1) The three and twelve months ended December 31, 2004 per share results available to common stockholders are reduced by $17 million and $65 million, or $0.06 per share and $0.25 per share, of undeclared preferred stock dividends. The three and twelve months ended December 31, 2003 per share results available to common stockholders are reduced by $15 million and $60 million, or $0.06 per share and $0.27 per share, of undeclared preferred stock dividends. (2) Included in the weighted average shares of common stock are the effects of additional common stock equivalents related to the November of 2003 sale of shares to Loews Corporation. The effect of the preferred shares has been included in weighted average shares since issuance. The preferred shares were converted into 32.3 million shares of CNA common stock on April 20, 2004. 2 CNA FINANCIAL CORPORATION (CNA LOGO) FINANCIAL SUPPLEMENT SELECTED BALANCE SHEET DATA AND STATEMENTS OF CASH FLOWS DATA
(In millions, except per share data) DECEMBER 31, 2004 DECEMBER 31, 2003 -------------------------------------------------------------------------------------------------------------- Total assets $ 62,500 $ 68,612 Insurance reserves 43,650 45,492 Debt 2,257 1,904 Total liabilities 53,018 59,404 Minority interest 275 256 Accumulated other comprehensive income 650 841 Total stockholders' equity 9,207 8,952 Book value per common share $ 32.55 $ 31.80 Book value per common share excluding unrealized gain or loss on fixed maturity securities $ 29.85 $ 28.98 Outstanding shares of common stock (in millions of shares) (1) 256.0 255.9
THREE MONTHS ENDED DECEMBER 31 (In millions) 2004 2003 --------------------------------------------------------------------------------------------------- Net cash flows provided by operating activities $ 348 $ 278 Net cash flows used by investing activities (870) (863) Net cash flows provided by financing activities 546 546 -------- -------- Net cash flows $ 24 $ (39) ======== ========
TWELVE MONTHS ENDED DECEMBER 31 (In millions) 2004 2003 --------------------------------------------------------------------------------------------------- Net cash flows provided by operating activities $ 1,607 $ 1,760 Net cash flows used by investing activities (2,019) (2,133) Net cash flows provided by financing activities 368 386 ------- ------- Net cash flows $ (44) $ 13 ======= =======
(1) Included in the outstanding shares of common stock 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 effect of the preferred shares has been included in weighted average shares since issuance. The preferred shares were converted into 32.3 million shares of CNA common stock on April 20, 2004. 3 CNA FINANCIAL CORPORATION (CNA LOGO) 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 December 31, 2004 Gross $14,302 $ 4,860 $19,162 Ceded 4,999 1,627 6,626 ------- ------- ------- Net 9,303 3,233 12,536 ------- ------- ------- 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) (In millions) LIFE & GROUP NON-CORE (1) CORPORATE & OTHER NON-CORE TOTAL OPERATIONS -------------------------------------------------------------------------------------------------------------- As of December 31, 2004 Gross $ 3,680 $ 8,678 $31,520 Ceded 1,856 5,502 13,984 ------- ------- ------- Net 1,824 3,176 17,536 ------- ------- ------- 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 December 31, 2004 and December 31, 2003 include $319 million and $448 million of life company reserves, which are primarily related to accident and health business. Net reserves as of December 31, 2004 and December 31, 2003 include $123 million and $230 million of life company reserves, which are primarily related to accident and health business. 4 CNA FINANCIAL CORPORATION (CNA LOGO) FINANCIAL SUPPLEMENT PROPERTY & CASUALTY INSURANCE CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVE ROLLFORWARD (1)
PERIOD ENDED DECEMBER 31 THREE MONTHS TWELVE MONTHS ENDED ENDED (In millions) -------------------------------------------------------------------------------------------------- Claim & claim adjustment expense reserves, beginning of period Gross $ 31,495 $ 31,730 Ceded 14,038 14,216 -------- -------- Net 17,457 17,514 -------- -------- Net incurred claim & claim adjustment expenses 1,535 6,438 Net claim & claim adjustment expense payments (1,456) (6,374) Reduction of net reserves due to life sale (2) -- (42) -------- -------- Claim & claim adjustment expense reserves, end of period Net 17,536 17,536 Ceded 13,984 13,984 -------- -------- Gross $ 31,520 $ 31,520 ======== ========
(1) Gross reserves as of December 31, 2004 and December 31, 2003 include $319 million and $448 million of life company reserves, which are primarily related to accident and health business. Net reserves as of December 31, 2004 and December 31, 2003 include $123 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 (CNA LOGO) FINANCIAL SUPPLEMENT INVESTMENTS BY SEGMENT AGGREGATION
DECEMBER 31, 2004 DECEMBER 31, 2003 (In millions) BOOK VALUE FAIR VALUE BOOK VALUE FAIR VALUE -------------------------------------------------------------------------------------------------------- PROPERTY & CASUALTY AND CORPORATE & OTHER NON-CORE: Fixed Maturities - Taxable $15,072 $15,346 $11,623 $11,893 Fixed Maturities - Tax Exempt 7,680 7,800 6,848 7,004 Equities 232 351 225 448 Short-term 3,599 3,600 6,689 6,689 Limited Partnership Investments 1,195 1,195 1,113 1,113 Mortgage Loans & Other 34 26 48 58 ------- ------- ------- ------- Subtotal 27,812 28,318 26,546 27,205 Securities Lending Collateral 904 904 307 307 ------- ------- ------- ------- TOTAL INVESTMENTS $28,716 $29,222 $26,853 $27,512 ------- ------- ------- ------- LIFE & GROUP NON-CORE (1): Fixed Maturities - Taxable $ 6,495 $ 7,124 $ 8,155 $ 8,815 Fixed Maturities - Tax Exempt 1,019 1,057 939 966 Equities 88 105 68 79 Short-term 1,345 1,345 419 419 Limited Partnership Investments 354 354 4 4 Mortgage Loans & Other 23 10 197 182 ------- ------- ------- ------- Subtotal 9,324 9,995 9,782 10,465 Securities Lending Collateral 14 14 123 123 ------- ------- ------- ------- TOTAL INVESTMENTS $ 9,338 $10,009 $ 9,905 $10,588 ------- ------- ------- ------- TOTAL INVESTMENTS $38,054 $39,231 $36,758 $38,100 ======= ======= ======= =======
(1) As a result of SOP 03-01, the following investment securities, previously classified as separate account assets, have been reclassified to the general account in 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; details of the December 31, 2003 balances are presented below. Refer to page i for further discussion on SOP 03-01.
BOOK VALUE FAIR VALUE ---------- ---------- Fixed Maturities - Taxable $1,048 $1,147 Equities 43 47 Short-term 475 476 Limited Partnership Investments 351 351 Mortgage Loans & Other 2 2 ------ ------ TOTAL INVESTMENTS $1,919 $2,023 ====== ======
6 CNA FINANCIAL CORPORATION (CNA LOGO) FINANCIAL SUPPLEMENT PROPERTY & CASUALTY RESULTS OF OPERATIONS
STANDARD LINES SPECIALTY LINES P&C OPERATIONS THREE MONTHS ENDED --------------------------------- ----------------------------- --------------------------------- DECEMBER 31 FAV / (UNFAV) FAV / (UNFAV) FAV / (UNFAV) (In millions) 2004 2003 % CHANGE 2004 2003 % CHANGE 2004 2003 % CHANGE ----------------------------------------------------------------------------------------------------------------------------------- Gross written premiums $ 1,441 $ 1,575 (9)% $ 733 $ 670 9% $ 2,174 $ 2,245 (3)% Net written premiums 1,062 1,173 (9) 619 547 13 1,681 1,720 (2) Net earned premiums 1,161 1,292 (10) 605 502 21 1,766 1,794 (2) Claim and claim adjustment expenses 777 872 11 382 339 (13) 1,159 1,211 4 Acquisition expenses 249 257 3 111 77 (44) 360 334 (8) Underwriting expenses 145 164 12 40 44 9 185 208 11 Policyholders' dividends 7 14 50 -- 1 N/A 7 15 53 ------- ------- ----- ----- ------- ------- Underwriting income (loss) (17) (15) (13) 72 41 76 55 26 112 ------- ------- ----- ----- ------- ------- Net investment income 113 118 (4) 64 52 23 177 170 4 Other revenues 27 33 (18) 28 34 (18) 55 67 (18) Other expenses 10 39 74 29 33 12 39 72 46 ------- ------- ----- ----- ------- ------- Income before income tax, minority interest and net realized investment gains 113 97 16 135 94 44 248 191 30 Income tax expense (26) (8) N/A (43) (29) (48) (69) (37) (86) Minority interest (4) (3) (33) (4) -- N/A (8) (3) (167) ------- ------- ----- ----- ------- ------- Income before net realized investment gains 83 86 (3) 88 65 35 171 151 13 Realized investment gains 118 112 5 47 33 42 165 145 14 Income tax expense on realized investment gains (44) (39) (13) (16) (11) (45) (60) (50) (20) ------- ------- ----- ----- ------- ------- Net income $ 157 $ 159 (1)% $ 119 $ 87 37% $ 276 $ 246 12% ======= ======= ===== ===== ======= ======= FINANCIAL RATIOS Loss & LAE 66.9% 67.5% 63.0% 67.7% 65.6% 67.5% Acquisition expense 21.5 19.9 18.3 15.3 20.4 18.6 Underwriting expense 12.5 12.7 7.0 8.8 10.5 11.7 Dividends 0.6 1.1 (0.1) 0.2 0.4 0.8 ------- ------- ----- ----- ------- ------- Expense ratio, including dividends 34.6 33.7 25.2 24.3 31.3 31.1 ------- ------- ----- ----- ------- ------- Combined ratio 101.5% 101.2% 88.2% 92.0% 96.9% 98.6% ======= ======= ===== ===== ======= =======
7 CNA FINANCIAL CORPORATION (CNA LOGO) FINANCIAL SUPPLEMENT LIFE & GROUP NON-CORE AND CORPORATE & OTHER NON-CORE SEGMENTS RESULTS OF OPERATIONS
P&C OPERATIONS LIFE & GROUP NON-CORE CORPORATE & OTHER NON-CORE THREE MONTHS ENDED ----------------- ----------------------------- ----------------------------- DECEMBER 31 FAV / (UNFAV) FAV / (UNFAV) (In millions) 2004 2003 2004 2003 % CHANGE 2004 2003 % CHANGE ----------------------------------------------------------------------------------------------------------------- Net earned premiums $ 1,766 $ 1,794 $ 211 $ 576 (63)% $ 11 $ 140 (92)% Insurance claims & policyholders' benefits 1,159 1,211 391 600 35 32 138 77 Policyholders' dividends 7 15 (2) 3 167 -- -- N/A Insurance related expenses 545 542 79 177 55 (16) 9 N/A Net investment income 177 170 235 203 16 50 63 (21) Other revenues 55 67 19 53 (64) (6) (13) 54 Other expenses 39 72 18 -- N/A 14 33 58 ------- ------- ----- ----- ----- ----- Income (loss) before income tax, minority interest and net realized investment gains (losses) 248 191 (21) 52 (140) 25 10 150 Income tax (expense) benefit (69) (37) 12 (15) 180 14 (4) N/A Minority interest (8) (3) -- -- N/A -- -- N/A ------- ------- ----- ----- ----- ----- Income (loss) before net realized investment gains (losses) 171 151 (9) 37 (124) 39 6 N/A Realized investment gains (losses) 165 145 1 (150) 101 1 (1) 200 Income tax (expense) benefit on realized investment gains (losses) (60) (50) (1) 36 (103) (2) -- N/A ------- ------- ----- ----- ----- ----- Net income (loss) $ 276 $ 246 $ (9) $ (77) 88% $ 38 $ 5 N/A% ======= ======= ===== ===== ===== =====
TOTAL OPERATIONS THREE MONTHS ENDED --------------------------------- DECEMBER 31 FAV / (UNFAV) (In millions) 2004 2003 % CHANGE ----------------------------------------------------------------- Net earned premiums $ 1,988 $ 2,510 (21)% Insurance claims & policyholders' benefits 1,582 1,949 19 Policyholders' dividends 5 18 72 Insurance related expenses 608 728 16 Net investment income 462 436 6 Other revenues 68 107 (36) Other expenses 71 105 32 ------- ------- Income (loss) before income tax, minority interest and net realized investment gains (losses) 252 253 -- Income tax (expense) benefit (43) (56) 23 Minority interest (8) (3) (167) ------- ------- Income (loss) before net realized investment gains (losses) 201 194 4 Realized investment gains (losses) 167 (6) N/A Income tax (expense) benefit on realized investment gains (losses) (63) (14) N/A ------- ------- Net income (loss) $ 305 $ 174 75% ======= =======
OTHER FINANCIAL DATA P&C OPERATIONS LIFE & GROUP NON-CORE CORPORATE & OTHER NON-CORE Property & Casualty Company ----------------- ----------------------------- ----------------------------- Information FAV / (UNFAV) FAV / (UNFAV) 2004 2003 2004 2003 % CHANGE 2004 2003 % CHANGE ---------------------------------------------------------------------------------------------------------------- Gross written premiums $ 2,174 $ 2,245 $ 265 $ 307 (14)% $ 358 $ 477 (25)% Net written premiums 1,681 1,720 161 128 26 7 39 (82) Net earned premiums 1,766 1,794 167 130 28 10 163 (94) Underwriting income (loss) 55 26 (108) (119) 9 (5) (5) -- FINANCIAL RATIOS Loss & LAE 65.6% 67.5% 127.7% 166.3% N/M% N/M% Acquisition expense 20.4 18.6 14.5 19.1 N/M N/M Underwriting expense 10.5 11.7 22.8 5.5 N/M N/M Dividends 0.4 0.8 -- -- N/M N/M ----- ---- ----- ----- ---- ---- Expense ratio, including dividends 31.3 31.1 37.3 24.6 N/M N/M ----- ---- ----- ----- ---- ---- Combined ratio 96.9% 98.6% 165.0% 190.9% N/M% N/M% ===== ==== ===== ===== ==== ====
OTHER FINANCIAL DATA TOTAL OPERATIONS Property & Casualty Company -------------------------------- Information FAV / (UNFAV) 2004 2003 % CHANGE ---------------------------------------------------------------- Gross written premiums $ 2,797 $ 3,029 (8)% Net written premiums 1,849 1,887 (2) Net earned premiums 1,943 2,087 (7) Underwriting income (loss) (58) (98) 41 FINANCIAL RATIOS Loss & LAE 72.2% 76.1% Acquisition expense 20.0 18.3 Underwriting expense 10.5 9.7 Dividends 0.3 0.7 ------- ---- Expense ratio, including dividends 30.8 28.7 ------- ---- Combined ratio 103.0% 104.8% ======= ====
N/M = Not Meaningful 8 CNA FINANCIAL CORPORATION (CNA LOGO) FINANCIAL SUPPLEMENT PROPERTY & CASUALTY RESULTS OF OPERATIONS
STANDARD LINES SPECIALTY LINES P&C OPERATIONS TWELVE MONTHS ENDED --------------------------------- --------------------------------- -------------------------------- DECEMBER 31 FAV / (UNFAV) FAV / (UNFAV) FAV / (UNFAV) (In millions) 2004 2003 % CHANGE 2004 2003 % CHANGE 2004 2003 % CHANGE ------------------------------------------------------------------------------------------------------------------------------------ Gross written premiums $ 5,936 $ 6,486 (8)% $ 2,825 $ 2,629 7% $ 8,761 $ 9,115 (4)% Net written premiums 4,582 4,561 -- 2,391 2,038 17 6,973 6,599 6 Net earned premiums 4,917 4,530 9 2,277 1,840 24 7,194 6,370 13 Claim and claim adjustment expenses 3,478 4,442 22 1,441 1,648 13 4,919 6,090 19 Acquisition expenses 1,109 1,260 12 429 332 (29) 1,538 1,592 3 Underwriting expenses 593 676 12 165 176 6 758 852 11 Policyholders' dividends 9 100 91 5 3 (67) 14 103 86 ------- ------- ------- ------- ------- ------- Underwriting income (loss) (272) (1,948) 86 237 (319) 174 (35) (2,267) 98 ------- ------- ------- ------- ------- ------- Net investment income 495 407 22 246 201 22 741 608 22 Other revenues 129 199 (35) 121 116 4 250 315 (21) Other expenses 94 197 52 113 101 (12) 207 298 31 ------- ------- ------- ------- ------- ------- Income (loss) before income tax, minority interest and net realized investment gains 258 (1,539) 117 491 (103) N/A 749 (1,642) 146 Income tax (expense) benefit (27) 592 (105) (150) 59 N/A (177) 651 (127) Minority interest (10) (4) (150) (17) 10 N/A (27) 6 N/A ------- ------- ------- ------- ------- ------- Income (loss) before net realized investment gains 221 (951) 123 324 (34) N/A 545 (985) 155 Realized investment gains 219 361 (39) 84 114 (26) 303 475 (36) Income tax expense on realized investment gains (80) (127) 37 (30) (40) 25 (110) (167) 34 ------- ------- ------- ------- ------- ------- Net income (loss) $ 360 $ (717) 150% $ 378 $ 40 N/A% $ 738 $ (677) N/A% ======= ======= ======= ======= ======= ======= FINANCIAL RATIOS Loss & LAE 70.7% 98.1% 63.3% 89.6% 68.4% 95.6% Acquisition expense 22.6 27.7 18.8 18.0 21.4 25.0 Underwriting expense 12.0 15.0 7.3 9.6 10.5 13.4 Dividends 0.2 2.2 0.2 0.2 0.2 1.6 ------- ------- ------- ------- ------- ------- Expense ratio, including dividends 34.8 44.9 26.3 27.8 32.1 40.0 ------- ------- ------- ------- ------- ------- Combined ratio 105.5% 143.0% 89.6% 117.4% 100.5% 135.6% ======= ======= ======= ======= ======= =======
9 CNA FINANCIAL CORPORATION (CNA LOGO) FINANCIAL SUPPLEMENT LIFE & GROUP NON-CORE AND CORPORATE & OTHER NON-CORE SEGMENTS RESULTS OF OPERATIONS
TWELVE MONTHS ENDED P&C OPERATIONS LIFE & GROUP NON-CORE CORPORATE & OTHER NON-CORE TOTAL OPERATIONS DECEMBER 31 FAV / FAV / FAV / (UNFAV) (UNFAV) (UNFAV) (In millions) 2004 2003 2004 2003 % CHANGE 2004 2003 % CHANGE 2004 2003 % CHANGE ----------------------------------------------------------------------------------------------------------------------------------- s Net earned premiums $7,194 $ 6,370 $ 921 $2,376 (61)% $ 94 $ 468 (80)% $8,209 $ 9,214 (11)% Insurance claims & policyholders' benefits 4,919 6,090 1,372 2,384 42 144 1,699 92 6,435 10,173 37 Policyholders' dividends 14 103 (3) 10 130 -- 1 N/A 11 114 90 Insurance related expenses 2,296 2,444 327 754 57 26 178 85 2,649 3,376 22 Net investment income 741 608 692 821 (16) 241 218 11 1,674 1,647 (2) Other revenues 250 315 91 163 (44) (46) (83) 45 295 395 (25) Other expenses 207 298 76 66 (15) 55 41 (34) 338 405 17 ------ -------- ------ ------ ----- ------- ------ ------- Income (loss) before income tax, minority interest and net realized investment gains (losses) 749 (1,642) (68) 146 (147) 64 (1,316) 105 745 (2,812) 126 Income tax (expense) benefit (177) 651 39 (33) N/A 14 470 (97) (124) 1,088 (111) Minority interest (27) 6 -- -- N/A -- -- N/A (27) 6 N/A ------ -------- ------ ------ ----- ------- ------ ------- Income (loss) before net realized investment gains (losses) 545 (985) (29) 113 (126) 78 (846) 109 594 (1,718) 135 Realized investment gains (losses) 303 475 (615) (141) N/A 64 126 (49) (248) 460 (154) Income tax (expense) benefit on realized investment gains (losses) (110) (167) 230 33 N/A (25) (41) 39 95 (175) 154 ------ -------- ------ ------ ----- ------- ------ ------- Net income (loss) $ 738 $ (677) $ (414) $ 5 N/A% $ 117 $ (761) 115% $ 441 $(1,433) 131% ====== ======== ====== ====== ===== ======= ====== =======
OTHER FINANCIAL DATA P&C OPERATIONS LIFE & GROUP NON-CORE CORPORATE & OTHER NON-CORE TOTAL OPERATIONS Property & Casualty Company Information FAV / FAV / FAV / (UNFAV) (UNFAV) (UNFAV) 2004 2003 2004 2003 % CHANGE 2004 2003 % CHANGE 2004 2003 % CHANGE ------------------------------------------------------------------------------------------------------------------------------------ Gross written premiums $ 8,761 $ 9,115 $ 1,102 $ 1,296 (15)% $ 1,921 $ 2,598 (26)% $11,784 $ 13,009 (9)% Net written premiums 6,973 6,599 633 524 21 (12) 480 (103) 7,594 7,603 -- Net earned premiums 7,194 6,370 621 520 19 110 565 (81) 7,925 7,455 6 Underwriting loss (35) (2,267) (392) (350) (12) (76) (1,421) 95 (503) (4,038) 88 FINANCIAL RATIOS Loss & LAE 68.4% 95.6% 134.4% 139.3% 145.1% 317.8% 74.6% 115.4% Acquisition expense 21.4 25.0 10.5 18.1 25.5 26.1 20.6 24.6 Underwriting expense 10.5 13.4 18.2 9.8 (1.7) 7.5 10.9 12.8 Dividends 0.2 1.6 -- -- -- -- 0.2 1.4 ----- ----- ----- ----- ----- ----- ----- ----- Expense ratio, including dividends 32.1 40.0 28.7 27.9 23.8 33.6 31.7 38.8 ----- ----- ----- ----- ----- ----- ----- ----- Combined ratio 100.5% 135.6% 163.1% 167.2% 168.9% 351.4% 106.3% 154.2% ===== ===== ===== ===== ===== ===== ===== =====
10 CNA FINANCIAL CORPORATION (CNA LOGO) FINANCIAL SUPPLEMENT PROPERTY & CASUALTY OPERATIONS AND CORPORATE & OTHER NON-CORE SEGMENT - CATASTROPHE LOSSES
CATASTROPHE LOSSES (PRETAX) CORPORATE & (In millions) STANDARD LINES SPECIALTY LINES P&C OPERATIONS OTHER NON-CORE TOTAL (1) -------------------------------------------------------------------------------------------------------------------------- Three months ended December 31, 2004 $ 5 $ 2 $ 7 $ - $ 7 Twelve months ended December 31, 2004 260 15 275 3 278 Three months ended December 31, 2003 $ 2 $ 1 $ 3 $ 8 $ 11 Twelve months ended December 31, 2003 110 4 114 29 143
CATASTROPHE LOSSES (AFTER-TAX) CORPORATE & (In millions) STANDARD LINES SPECIALTY LINES P&C OPERATIONS OTHER NON-CORE TOTAL (1) ------------------------------------------------------------------------------------------------------------------------ Three months ended December 31, 2004 $ 3 $ 1 $ 4 $ - $ 4 Twelve months ended December 31, 2004 169 10 179 2 181 Three months ended December 31, 2003 $ 1 $ 1 $ 2 $ 5 $ 7 Twelve months ended December 31, 2003 71 3 74 19 93
(1) For the three and twelve months ended December 31, 2004, the above amounts exclude $3 million pretax ($2 million after-tax) and $8 million pretax ($5 million after-tax) of reinstatement premium related to the third quarter 2004 hurricanes. For the twelve months ended December 31, 2004, the above amounts exclude $15 million pretax ($10 million after-tax) of estimated assessments related to the third quarter 2004 hurricanes. For the twelve months ended December 31, 2004, the above amounts include losses of $250 million pretax ($163 million after-tax) related to Hurricanes Charley, Frances, Ivan and Jeanne. 11 CNA FINANCIAL CORPORATION (CNA LOGO) FINANCIAL SUPPLEMENT ANALYSIS OF PRETAX NET INVESTMENT INCOME
--------------------------------------------------------------------------------------------------------------------------------- (In millions) STANDARD LINES --------------------------------------------------------------------------------------------------------------------------------- 1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04 2Q04 3Q04 4Q04 YTD 2004 ---- ---- ---- ---- -------- ---- ---- ---- ---- -------- Limited partnership income $ 13 $ 43 $ 35 $ 35 $ 126 $ 37 $ 13 $ 12 $ 39 $ 101 Interest on funds withheld and other deposits (34) (77) (115) (43) (269) (38) (43) (44) (70) (195) Income from trading securities -- -- -- -- -- -- -- -- 1 1 Other investment income 150 139 135 126 550 139 149 157 143 588 ---------------------------------------------------------------------------------- Net investment income $ 129 $ 105 $ 55 $ 118 $ 407 $ 138 $ 119 $ 125 $ 113 $ 495 ==================================================================================
--------------------------------------------------------------------------------------------------------------------------------- (In millions) SPECIALTY LINES --------------------------------------------------------------------------------------------------------------------------------- 1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04 2Q04 3Q04 4Q04 YTD 2004 ---- ---- ---- ---- -------- ---- ---- ---- ---- -------- Limited partnership income $ 4 $ 14 $ 11 $ 11 $ 40 $ 13 $ 5 $ 4 $ 14 $ 36 Interest on funds withheld and other deposits (5) (7) (11) (2) (25) (2) (2) (3) (7) (14) Income from trading securities - - - - - - - - - - Other investment income 50 46 47 43 186 51 56 60 57 224 ---------------------------------------------------------------------------------- Net investment income $ 49 $ 53 $ 47 $ 52 $ 201 $ 62 $ 59 $ 61 $ 64 $ 246 ==================================================================================
--------------------------------------------------------------------------------------------------------------------------------- (In millions) P&C OPERATIONS --------------------------------------------------------------------------------------------------------------------------------- 1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04 2Q04 3Q04 4Q04 YTD 2004 ---- ---- ---- ---- -------- ---- ---- ---- ---- -------- Limited partnership income $ 17 $ 57 $ 46 $ 46 $ 166 $ 50 $ 18 $ 16 $ 53 $ 137 Interest on funds withheld and other deposits (39) (84) (126) (45) (294) (40) (45) (47) (77) (209) Income from trading securities - - - - - - - - 1 1 Other investment income 200 185 182 169 736 190 205 217 200 812 ---------------------------------------------------------------------------------- Net investment income $ 178 $ 158 $ 102 $ 170 $ 608 $ 200 $ 178 $ 186 $ 177 $ 741 ==================================================================================
--------------------------------------------------------------------------------------------------------------------------------- (In millions) LIFE & GROUP NON-CORE --------------------------------------------------------------------------------------------------------------------------------- 1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04 2Q04 3Q04 4Q04 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) 107 135 Other investment income 202 211 203 202 818 177 123 126 128 554 ---------------------------------------------------------------------------------- Net investment income (1) $ 203 $ 211 $ 204 $ 203 $ 821 $ 206 $ 142 $ 109 $ 235 $ 692 ==================================================================================
--------------------------------------------------------------------------------------------------------------------------------- (In millions) CORPORATE & OTHER NON-CORE --------------------------------------------------------------------------------------------------------------------------------- 1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04 2Q04 3Q04 4Q04 YTD 2004 ---- ---- ---- ---- -------- ---- ---- ---- ---- -------- Limited partnership income $ 5 $ 18 $ 14 $ 15 $ 52 $ 16 $ 6 $ 6 $ 18 $ 46 Interest on funds withheld and other deposits (8) (9) (22) (11) (50) (10) (11) (8) (29) (58) Income from trading securities - - - - - - - - - - Other investment income 54 49 54 59 216 61 65 66 61 253 ---------------------------------------------------------------------------------- Net investment income $ 51 $ 58 $ 46 $ 63 $ 218 $ 67 $ 60 $ 64 $ 50 $ 241 ==================================================================================
--------------------------------------------------------------------------------------------------------------------------------- (In millions) TOTAL OPERATIONS --------------------------------------------------------------------------------------------------------------------------------- 1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04 2Q04 3Q04 4Q04 YTD 2004 ---- ---- ---- ---- -------- ---- ---- ---- ---- -------- Limited partnership income $ 23 $ 75 $ 61 $ 62 $ 221 $ 67 $ 24 $ 24 $ 71 $ 186 Interest on funds withheld and other deposits (47) (93) (148) (56) (344) (50) (56) (55) (106) (267) Income from trading securities (1) (2) - - - - - 28 19 (19) 108 136 Other investment income 456 445 439 430 1,770 428 393 409 389 1,619 ---------------------------------------------------------------------------------- Net investment income (1) $ 432 $ 427 $ 352 $ 436 $1,647 $ 473 $ 380 $ 359 $ 462 $1,674 ==================================================================================
(1) Net investment income in 2004 includes income from trading securities. See Accounting Pronouncements on page ii for the discussion of SOP 03-01. (2) Includes $8 million, $6 million, $1 million, and $11 million for the first quarter, second quarter, third quarter and fourth quarter of 2004 related to limited partnership investment income that supports indexed group annuity contracts. 12 \CNA FINANCIAL CORPORATION [CNA LOGO] FINANCIAL SUPPLEMENT STATUTORY DATA - PRELIMINARY
PERIOD ENDED DECEMBER 31 THREE MONTHS TWELVE MONTHS Income Statement (Preliminary) FAV / (UNFAV) (Preliminary) FAV / (UNFAV) (In millions) 2004 2003 % CHANGE 2004 2003 % CHANGE ------------------------------------------------------------------------------------------------------------------------------- PROPERTY & CASUALTY COMPANIES Gross written premiums $ 2,431 $ 3,875 (37)% $ 9,514 $ 13,387 (29)% Net written premiums 1,702 1,778 (4) 7,087 6,992 1 Net earned premiums 1,637 1,279 (28) 6,702 5,907 (13) Claim and claim adjustment expenses 1,213 866 (40) 5,237 6,979 25 Acquisition expenses 246 228 (8) 1,162 1,290 10 Underwriting expenses 196 91 (115) 773 1,129 32 Policyholders' dividends 11 17 35 43 68 37 ---------- --------- ----------- --------- Underwriting Loss (29) 77 (138) (513) (3,559) 86 Net investment income 363 878 (59) 1,326 1,726 (23) Other revenues/expenses (143) (111) (29) (466) (383) (22) Income tax (expense) benefit (59) (38) (55) (244) 674 (136) Net realized gains (losses) 174 (404) 143 462 58 N/A ---------- --------- ----------- --------- Net income (loss) $ 306 $ 402 (24)% $ 565 $ (1,484) 138 % ========== ========= =========== ========= FINANCIAL RATIOS Loss and LAE 74.1% 67.7% 78.1% 118.1% Acquisition expense 14.5 12.8 16.4 18.5 Underwriting expense 11.4 5.1 11.0 16.1 Policyholders' dividends 0.7 1.4 0.6 1.2 ---------- --------- ----------- --------- Expense ratio 26.6 19.3 28.0 35.8 ---------- --------- ----------- --------- Combined ratio 100.7% 87.0% 106.1% 153.9% ========== ========= =========== ========= LIFE COMPANIES Earned premium $ 45 $ 440 $ 324 $ 1,916
SUPPLEMENTAL STATUTORY DATA (PRELIMINARY) (In millions) DECEMBER 31, 2004 DECEMBER 31, 2003 -------------------------------------------------------------------------------- PROPERTY & CASUALTY COMPANIES Statutory surplus (1) $ 7,097 $ 6,170 LIFE COMPANIES Statutory surplus $ 1,178 $ 707 Gross life insurance in force 56,645 388,968
(1) Surplus includes the Property & Casualty Companies' equity ownership of the life insurance subsidiaries. 13 CNA FINANCIAL CORPORATION [CNA LOGO] FINANCIAL SUPPLEMENT PROPERTY & CASUALTY OPERATIONS LOSS AND LAE RATIO ANALYSIS
STANDARD LINES ----------------------------------------------------------------- 2004 YTD 2003 FY 2003 FY EVALUATED AT EVALUATED AT EVALUATED AT 12/31/04 12/31/03 12/31/04 ----------------------------------------------------------------- Gross Accident Year 67.2% 65.4% 62.1% Impact of Reinsurance 2.0 2.4 1.9 ------------------ ------------------ ------------------ Net Accident Year 69.2 67.8 64.0% ================== Impact of Corporate Covers (0.2) (6.4) Impact of Development & Change in Allowance for Uncollectible Reinsurance 1.7 36.7 ------------------ ------------------ Net Calendar Year 70.7% 98.1% ================== ==================
SPECIALTY LINES ----------------------------------------------------------------- 2004 YTD 2003 FY 2003 FY EVALUATED AT EVALUATED AT EVALUATED AT 12/31/04 12/31/03 12/31/04 ----------------------------------------------------------------- Gross Accident Year 64.1% 67.1% 65.0% Impact of Reinsurance (0.6) 1.8 (0.1) ------------------ ------------------ ------------------ Net Accident Year 63.5 68.9 64.9% ================== Impact of Corporate Covers 0.9 (1.9) Impact of Development & Change in Allowance for Uncollectible Reinsurance (1.1) 22.6 ------------------ ------------------ Net Calendar Year 63.3% 89.6% ================== ==================
P&C OPERATIONS ----------------------------------------------------------------- 2004 YTD 2003 FY 2003 FY EVALUATED AT EVALUATED AT EVALUATED AT 12/31/04 12/31/03 12/31/04 ----------------------------------------------------------------- Gross Accident Year 66.3% 65.9% 63.0% Impact of Reinsurance 1.1 2.2 1.3 ------------------ ------------------ ------------------ Net Accident Year 67.4 68.1 64.3% ================== Impact of Corporate Covers 0.2 (5.1) Impact of Development & Change in Allowance for Uncollectible Reinsurance 0.8 32.6 ------------------ ------------------ Net Calendar Year 68.4% 95.6% ================== ==================
14 CNA FINANCIAL CORPORATION [CNA LOGO] FINANCIAL SUPPLEMENT IMPACT OF CATASTROPHES
TWELVE MONTHS ENDED STANDARD LINES SPECIALTY LINES -------------- --------------- DECEMBER 31, 2004 2004 RESULTS 2004 RESULTS BEFORE IMPACT OF BEFORE IMPACT OF (In millions) CATASTROPHES CATASTROPHES 2004 RESULTS CATASTROPHES CATASTROPHES 2004 RESULTS ------------ ------------ ------------ ------------ ------------ ------------ Net earned premiums $ 4,925 $ (8) $ 4,917 $ 2,277 $ - $ 2,277 Claim and claim adjustment expenses 3,218 260 3,478 1,426 15 1,441 Acquisition expenses 1,095 14 1,109 428 1 429 Underwriting expenses 593 -- 593 165 -- 165 Policyholders' dividends 9 -- 9 5 -- 5 ------------ ------------ ------------ ------------ ------------ ------------ Underwriting income (loss) 10 (282) (272) 253 (16) 237 ------------ ------------ ------------ ------------ ------------ ------------ Net investment income 495 -- 495 246 -- 246 Other revenues 129 -- 129 121 -- 121 Other expenses 94 -- 94 113 -- 113 ------------ ------------ ------------ ------------ ------------ ------------ Income (loss) before income tax, minority interest and net realized investment gains 540 (282) 258 507 (16) 491 Income tax (expense) benefit (126) 99 (27) (155) 5 (150) Minority interest (10) -- (10) (17) -- (17) ------------ ------------ ------------ ------------ ------------ ------------ Income (loss) before net realized investment gains 404 (183) 221 335 (11) 324 Realized investment gains 219 -- 219 84 -- 84 Income tax expense on realized investment gains (80) -- (80) (30) -- (30) ------------ ------------ ------------ ------------ ------------ ------------ Net income (loss) $ 543 $ (183) $ 360 $ 389 $ (11) $ 378 ============ ============ ============ ============ ============ ============ FINANCIAL RATIOS Loss & LAE 65.4% 70.7% 62.6% 63.3% Acquisition expense 22.2 22.6 18.8 18.8 Underwriting expense 12.0 12.0 7.3 7.3 Dividends 0.2 0.2 0.2 0.2 ------------ ------------ ------------ ------------ Expense ratio, including dividends 34.4 34.8 26.3 26.3 ------------ ------------ ------------ ------------ Combined ratio 99.8% 105.5% 88.9% 89.6% ============ ============ ============ ============
TWELVE MONTHS ENDED P&C OPERATIONS -------------- DECEMBER 31, 2004 2004 RESULTS BEFORE IMPACT OF (In millions) CATASTROPHES CATASTROPHES 2004 RESULTS ------------ ------------ ------------ Net earned premiums $ 7,202 $ (8) $ 7,194 Claim and claim adjustment expenses 4,644 275 4,919 Acquisition expenses 1,523 15 1,538 Underwriting expenses 758 -- 758 Policyholders' dividends 14 -- 14 ------------ ------------ ------------ Underwriting income (loss) 263 (298) (35) ------------ ------------ ------------ Net investment income 741 -- 741 Other revenues 250 -- 250 Other expenses 207 -- 207 ------------ ------------ ------------ Income (loss) before income tax, minority interest and net realized investment gains 1,047 (298) 749 Income tax (expense) benefit (281) 104 (177) Minority interest (27) -- (27) ------------ ------------ ------------ Income (loss) before net realized investment gains 739 (194) 545 Realized investment gains 303 -- 303 Income tax expense on realized investment gains (110) -- (110) ------------ ------------ ------------ Net income (loss) $ 932 $ (194) $ 738 ============ ============ ============ FINANCIAL RATIOS Loss & LAE 64.5% 68.4% Acquisition expense 21.2 21.4 Underwriting expense 10.5 10.5 Dividends 0.2 0.2 ------------ ------------ Expense ratio, including dividends 31.9 32.1 ------------ ------------ Combined ratio 96.4% 100.5% ============ ============
TWELVE MONTHS ENDED STANDARD LINES SPECIALTY LINES -------------- --------------- DECEMBER 31, 2003 2003 RESULTS 2003 RESULTS BEFORE IMPACT OF BEFORE IMPACT OF (In millions) CATASTROPHES CATASTROPHES 2003 RESULTS CATASTROPHES CATASTROPHES 2003 RESULTS ------------ ------------ ------------ ------------ ------------ ------------ Net earned premiums $ 4,530 $ -- $ 4,530 $ 1,840 $ - $ 1,840 Claim and claim adjustment expenses 4,332 110 4,442 1,644 4 1,648 Acquisition expenses 1,260 -- 1,260 332 -- 332 Underwriting expenses 676 -- 676 176 -- 176 Policyholders' dividends 100 -- 100 3 -- 3 ------------ ------------ ------------ ------------ ------------ ------------ Underwriting loss (1,838) (110) (1,948) (315) (4) (319) ------------ ------------ ------------ ------------ ------------ ------------ Net investment income 407 -- 407 201 -- 201 Other revenues 199 -- 199 116 -- 116 Other expenses 197 -- 197 101 -- 101 ------------ ------------ ------------ ------------ ------------ ------------ Loss before income tax, minority interest and net realized investment gains (1,429) (110) (1,539) (99) (4) (103) Income tax benefit 553 39 592 58 1 59 Minority interest (4) -- (4) 10 -- 10 ------------ ------------ ------------ ------------ ------------- ------------ Loss before net realized investment gains (880) (71) (951) (31) (3) (34) Realized investment gains 361 -- 361 114 -- 114 Income tax expense on realized investment gains (127) -- (127) (40) -- (40) ------------ ------------ ------------ ------------ ------------ ------------ Net income (loss) $ (646) $ (71) $ (717) $ 43 $ (3) $ 40 ============ ============ ============ ============ ============ ============ FINANCIAL RATIOS Loss & LAE 95.7% 98.1% 89.3% 89.6% Acquisition expense 27.7 27.7 18.0 18.0 Underwriting expense 15.0 15.0 9.6 9.6 Dividends 2.2 2.2 0.2 0.2 ------------ ------------ ------------ ------------ Expense ratio, including dividends 44.9 44.9 27.8 27.8 ------------ ------------ ------------ ------------ Combined ratio 140.6% 143.0% 117.1% 117.4% ============ ============ ============ ============
TWELVE MONTHS ENDED P&C OPERATIONS -------------- DECEMBER 31, 2003 2003 RESULTS BEFORE IMPACT OF (In millions) CATASTROPHES CATASTROPHES 2003 RESULTS ------------ ------------ ------------ Net earned premiums $ 6,370 $ - $ 6,370 Claim and claim adjustment expenses 5,976 114 6,090 Acquisition expenses 1,592 -- 1,592 Underwriting expenses 852 -- 852 Policyholders' dividends 103 -- 103 ------------ ------------ ------------ Underwriting loss (2,153) (114) (2,267) ------------ ------------ ------------ Net investment income 608 -- 608 Other revenues 315 -- 315 Other expenses 298 -- 298 ------------ ------------ ------------ Loss before income tax, minority interest and net realized investment gains (1,528) (114) (1,642) Income tax benefit 611 40 651 Minority interest 6 -- 6 ------------ ------------ ------------ Loss before net realized investment gains (911) (74) (985) Realized investment gains 475 -- 475 Income tax expense on realized investment gains (167) -- (167) ------------ ------------ ------------ Net income (loss) $ (603) $ (74) $ (677) ============ ============ ============ FINANCIAL RATIOS Loss & LAE 93.8% 95.6% Acquisition expense 25.0 25.0 Underwriting expense 13.4 13.4 Dividends 1.6 1.6 ------------ ------------ Expense ratio, including dividends 40.0 40.0 ------------ ------------ Combined ratio 133.8% 135.6% ============ ============
15 CNA FINANCIAL CORPORATION [CNA LOGO] FINANCIAL SUPPLEMENT LIFE & GROUP NON-CORE SEGMENT - GAAP RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 2004 LIFE & GROUP NON-CORE EXCLUDING BUSINESSES LIFE & GROUP NON-CORE TOTAL LIFE & GROUP (In millions) SOLD (1) BUSINESSES SOLD (3) NON-CORE AS REPORTED ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 211 $ - $ 211 Insurance claims & policyholders' benefits 387 4 391 Policyholders' dividends (3) 1 (2) Insurance related expenses 58 21 79 Net investment income 233 2 235 Other revenues 17 2 19 Other expenses 14 4 18 ------------------ ---------------- ------------------ Income (loss) before income tax and net realized investment gains (losses) 5 (26) (21) Income tax (expense) benefit (2) 14 12 ------------------ ---------------- ------------------ Income (loss) before net realized investment gains (losses) 3 (12) (9) Realized investment gains - 1 1 Income tax benefit on realized investment gains (losses) (1) - (1) ------------------ ---------------- ------------------ Net income (loss) $ 2 $ (11) $ (9) ================== ================ ==================
THREE MONTHS ENDED DECEMBER 31, 2003 LIFE & GROUP NON-CORE EXCLUDING BUSINESSES LIFE & GROUP NON-CORE TOTAL LIFE & GROUP (In millions) SOLD (1) BUSINESSES SOLD(2)(3) NON-CORE AS REPORTED ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 223 $ 353 $ 576 Insurance claims & policyholders' benefits 329 271 600 Policyholders' dividends (1) 4 3 Insurance related expenses 53 124 177 Net investment income 120 83 203 Other revenues 41 12 53 Other expenses (10) 10 - ------------------ ---------------- ------------------ Income before income tax and net realized investment gains 13 39 52 Income tax expense 2 (17) (15) ------------------ ---------------- ------------------ Income before net realized investment gains 15 22 37 Realized investment gains (losses) 5 (155) (150) Income tax (expense) benefit on realized investment gains (losses) (1) 37 36 ------------------ ---------------- ------------------ Net income (loss) $ 19 $ (96) $ (77) ================== ================ ==================
---------- (1) Retained life and group businesses principally include group and individual long term care, structured settlements, institutional markets and specialty medical. (2) For the three months ended December 31, 2003, net realized investment losses for Life & Group Non-Core businesses sold include a pretax loss of $176 million ($130 million after-tax), related to the group business. (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. 16 CNA FINANCIAL CORPORATION (CNA LOGO) FINANCIAL SUPPLEMENT LIFE & GROUP NON-CORE SEGMENT - GAAP RESULTS OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 2004 LIFE & GROUP NON-CORE EXCLUDING BUSINESSES LIFE & GROUP NON-CORE TOTAL LIFE & GROUP (In millions) SOLD (1) BUSINESSES SOLD (2)(3) NON-CORE AS REPORTED ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 806 $ 115 $ 921 Insurance claims & policyholders' benefits 1,239 133 1,372 Policyholders' dividends (7) 4 (3) Insurance related expenses 222 105 327 Net investment income 637 55 692 Other revenues 59 32 91 Other expenses 54 22 76 ------- ------- ------- Loss before income tax and net realized investment gains (losses) (6) (62) (68) Income tax benefit 17 22 39 ------- ------- ------- Income (loss) before net realized investment gains (losses) 11 (40) (29) Realized investment gains (losses) 3 (618) (615) Income tax (expense) benefit on realized investment gains (losses) (1) 231 230 ------- ------- ------- Net income (loss) $ 13 $ (427) $ (414) ======= ======= =======
TWELVE MONTHS ENDED DECEMBER 31, 2003 LIFE & GROUP NON-CORE EXCLUDING BUSINESSES LIFE & GROUP NON-CORE TOTAL LIFE & GROUP (In millions) SOLD (1) BUSINESSES SOLD (2)(3) NON-CORE AS REPORTED ------------------------------------------------------------------------------------------------------------------------------------ Net earned premiums $ 917 $ 1,459 $ 2,376 Insurance claims & policyholders' benefits 1,213 1,171 2,384 Policyholders' dividends (8) 18 10 Insurance related expenses 244 510 754 Net investment income 478 343 821 Other revenues 110 53 163 Other expenses 24 42 66 ------- ------- ------- Income before income tax and net realized investment gains (losses) 32 114 146 Income tax (expense) benefit 7 (40) (33) ------- ------- ------- Income before net realized investment gains (losses) 39 74 113 Realized investment gains (losses) 3 (144) (141) Income tax benefit on realized investment gains (losses) (1) 34 33 ------- ------- ------- Net income (loss) $ 41 $ (36) $ 5 ======= ======= =======
(1) Retained life and group businesses principally include group and individual long term care, structured settlements, institutional markets and specialty medical. (2) For the twelve months ended December 31, 2004, net realized investment losses for Life & Group Non-Core businesses sold include a pretax loss of $613 million ($384 million after-tax), related to the individual life business and CNA Trust. For the twelve months ended December 31, 2003, net realized investment losses for Life & Group Non-Core businesses sold include a pretax loss of $176 million ($130 million after-tax), related to the group business. (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. 17 CNA FINANCIAL CORPORATION (CNA LOGO) FINANCIAL SUPPLEMENT ASBESTOS SUMMARY BY POLICYHOLDER CATEGORY
DECEMBER 31, 2004 PERCENT OF NET PAID NET ASBESTOS NUMBER OF LOSSES IN ASBESTOS NET (In millions) POLICYHOLDERS 2004 RESERVES RESERVES ------------------------------------------------------------------------------------------------------------------------- POLICYHOLDERS WITH SETTLEMENT AGREEMENTS Structured Settlements 11 $ 39 $ 175 10% Wellington 4 4 17 1 Coverage in Place 33 14 76 5 Fibreboard 1 -- 54 3 ------ ------ ------ ------ TOTAL WITH SETTLEMENT AGREEMENTS 49 57 322 19 OTHER POLICYHOLDERS WITH ACTIVE ACCOUNTS Large Asbestos Accounts 180 47 368 22 Small Asbestos Accounts 1,109 23 141 8 ------ ------ ------ ------ TOTAL OTHER POLICYHOLDERS 1,289 70 509 30 ASSUMED REINSURANCE & POOLS -- 8 148 9 UNASSIGNED IBNR (1) -- -- 707 42 ------ ------ ------ ------ TOTAL 1,338 $ 135 $1,686 100% ====== ====== ====== ======
(1) IBNR includes claims that are incurred but not reported. 18