10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2008

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 1-5823

CNA FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	36-6169860 (I.R.S. Employer Identification No.)
333 S. Wabash
Chicago, Illinois	60604
(Address of principal executive offices)	(Zip Code)

(312) 822-5000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
	(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at October 22, 2008
Common Stock, Par value $2.50	269,019,408

CNA Financial Corporation
Index

Item		Page
Number		Number
PART I. Financial Information
1.	Condensed Consolidated Financial Statements (Unaudited):
	Condensed Consolidated Statements of Operations for the Three and Nine months ended September 30, 2008 and 2007	3
	Condensed Consolidated Balance Sheets at September 30, 2008 and December 31, 2007	4
	Condensed Consolidated Statements of Cash Flows for the Nine months ended September 30, 2008 and 2007	5
	Condensed Consolidated Statements of Stockholders' Equity for the Nine months ended September 30, 2008 and 2007	7
	Notes to Condensed Consolidated Financial Statements	8
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	44
3.	Quantitative and Qualitative Disclosures About Market Risk	75
4.	Controls and Procedures	76
PART II. Other Information
1.	Legal Proceedings	77
1A.	Risk Factors	77
6.	Exhibits	78

CNA Financial Corporation

Part I. Financial Information

Item 1. Condensed Consolidated Financial Statements

Condensed Consolidated Statements of Operations (Unaudited)

Period ended September 30	Three months						Nine months
(In millions, except per share data)	2008			2007			2008			2007
Revenues
Net earned premiums	$	1,799		$	1,882		$	5,386		$	5,617
Net investment income		439			580			1,449			1,859
Realized investment losses, net of participating policyholders’ and minority interests		(651	)		(57	)		(813	)		(217	)
Other revenues		72			79			240			211
Total revenues		1,659			2,484			6,262			7,470
Claims, Benefits and Expenses
Insurance claims and policyholders’ benefits		1,519			1,575			4,380			4,496
Amortization of deferred acquisition costs		355			384			1,083			1,137
Other operating expenses		294			244			724			722
Interest		33			35			100			104
Total claims, benefits and expenses		2,201			2,238			6,287			6,459
Income (loss) before income tax and minority interest		(542	)		246			(25	)		1,011
Income tax (expense) benefit		218			(56	)		92			(279	)
Minority interest		(16	)		(16	)		(40	)		(37	)
Income (loss) from continuing operations		(340	)		174			27			695
Income (loss) from discontinued operations, net of income tax (expense) benefit of $9, $(1), $9 and $0		9			—			10			(8	)
Net income (loss)	$	(331	)	$	174		$	37		$	687
Basic and Diluted Earnings (Loss) Per Share
Income (loss) from continuing operations	$	(1.26	)	$	0.64		$	0.10		$	2.56
Income (loss) from discontinued operations		0.03			—			0.04			(0.03	)
Basic and diluted earnings (loss) per share available to common stockholders	$	(1.23	)	$	0.64		$	0.14		$	2.53
Weighted average outstanding common stock and common stock equivalents
Basic		269.0			271.6			269.6			271.5
Diluted		269.1			271.9			269.6			271.8

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements
(Unaudited).

3

CNA Financial Corporation

Condensed Consolidated Balance Sheets (Unaudited)

	September 30,			December 31,
(In millions, except share data)	2008			2007
Assets
Investments:
Fixed maturity securities at fair value (amortized cost of $32,419 and $34,388)	$	29,176		$	34,257
Equity securities at fair value (cost of $1,109 and $366)		961			568
Limited partnership investments		2,110			2,214
Other invested assets		63			73
Short term investments		4,749			4,677
Total investments		37,059			41,789
Cash		115			94
Reinsurance receivables (less allowance for uncollectible receivables of $387 and $461)		7,611			8,228
Insurance receivables (less allowance for doubtful accounts of $283 and $312)		1,877			1,972
Accrued investment income		384			330
Receivables for securities sold and collateral		999			142
Deferred acquisition costs		1,157			1,161
Prepaid reinsurance premiums		276			270
Federal income tax recoverable (includes $275 and $0 due from Loews Corporation)		274			—
Deferred income taxes		2,409			1,198
Property and equipment at cost (less accumulated depreciation of $634 and $596)		404			378
Goodwill and other intangible assets		142			142
Other assets		571			579
Separate account business		430			476
Total assets	$	53,708		$	56,759
Liabilities and Stockholders’ Equity
Liabilities:
Insurance reserves:
Claim and claim adjustment expenses	$	28,023		$	28,588
Unearned premiums		3,550			3,598
Future policy benefits		7,442			7,106
Policyholders’ funds		453			930
Collateral on loaned securities and derivatives		6			63
Payables for securities purchased		951			353
Participating policyholders’ funds		27			45
Short term debt		200			350
Long term debt		1,807			1,807
Federal income taxes payable (includes $0 and $5 due to Loews Corporation)		—			2
Reinsurance balances payable		367			401
Other liabilities		2,312			2,505
Separate account business		430			476
Total liabilities		45,568			46,224
Commitments and contingencies (Notes D, G, H, and K)
Minority interest		404			385
Stockholders’ equity:
Common stock ($2.50 par value; 500,000,000 shares authorized; 273,040,243 shares issued; and 269,019,408 and 271,662,278 shares outstanding)		683			683
Additional paid-in capital		2,172			2,169
Retained earnings		7,200			7,285
Accumulated other comprehensive income (loss)		(2,163	)		103
Treasury stock (4,020,835 and 1,377,965 shares), at cost		(109	)		(39	)
		7,783			10,201
Notes receivable for the issuance of common stock		(47	)		(51	)
Total stockholders’ equity		7,736			10,150
Total liabilities and stockholders’ equity	$	53,708		$	56,759

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements
(Unaudited).

4

CNA Financial Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)

Nine months ended September 30
(In millions)	2008			2007
Cash Flows from Operating Activities:
Net income	$	37		$	687
Adjustments to reconcile net income to net cash flows provided by operating activities:
(Income) loss from discontinued operations		(10	)		8
Loss on disposal of property and equipment		1			1
Minority interest		40			37
Deferred income tax (benefit) provision		6			(26	)
Trading securities activity		472			(44	)
Realized investment losses, net of participating policyholders’ and minority interests		813			217
Undistributed losses (earnings) of equity method investees		137			(74	)
Net amortization of bond (discount) premium		(217	)		(195	)
Depreciation		56			46
Changes in:
Receivables, net		712			609
Accrued investment income		(54	)		(26	)
Deferred acquisition costs		4			1
Prepaid reinsurance premiums		(6	)		21
Federal income taxes recoverable/payable		(276	)		(35	)
Insurance reserves		(238	)		(272	)
Reinsurance balances payable		(34	)		(56	)
Other assets		(6	)		31
Other liabilities		(174	)		(117	)
Other, net		5			(84	)
Total adjustments		1,231			42
Net cash flows provided by operating activities-continuing operations	$	1,268		$	729
Net cash flows used by operating activities-discontinued operations	$	(7	)	$	(16	)
Net cash flows provided by operating activities-total	$	1,261		$	713
Cash Flows from Investing Activities:
Purchases of fixed maturity securities	$	(39,989	)	$	(53,496	)
Proceeds from fixed maturity securities:
Sales		36,545			53,003
Maturities, calls and redemptions		3,374			3,720
Purchases of equity securities		(170	)		(157	)
Proceeds from sales of equity securities		177			182
Change in short term investments		(165	)		(963	)
Change in collateral on loaned securities and derivatives		(57	)		(2,768	)
Change in other investments		(153	)		(95	)
Purchases of property and equipment		(90	)		(118	)
Other, net		3			(17	)
Net cash flows used by investing activities-continuing operations	$	(525	)	$	(709	)
Net cash flows provided by investing activities-discontinued operations	$	17		$	42
Net cash flows used by investing activities-total	$	(508	)	$	(667	)

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements
(Unaudited).

5

Nine months ended September 30
(In millions)	2008			2007
Cash Flows from Financing Activities:
Dividends paid to stockholders		(122	)		(54	)
Principal payments on debt		(150	)		—
Return of investment contract account balances		(421	)		(59	)
Receipts on investment contract account balances		3			2
Stock options exercised		1			17
Purchase of treasury stock		(70	)		—
Other, net		26			11
Net cash flows used by financing activities-continuing operations	$	(733	)	$	(83	)
Net cash flows provided by financing activities-discontinued operations	$	—		$	—
Net cash flows used by financing activities-total	$	(733	)	$	(83	)
Effect of foreign exchange rate changes on cash-continuing operations		(6	)		—
Net change in cash		14			(37	)
Net cash transactions from continuing operations to discontinued operations		17			59
Net cash transactions from discontinued operations to continuing operations		(17	)		(59	)
Cash, beginning of year		101			124
Cash, end of period	$	115		$	87
Cash-continuing operations	$	115		$	80
Cash-discontinued operations		—			7
Cash-total	$	115		$	87

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements
(Unaudited).

6

CNA Financial Corporation

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

Nine months ended September 30
(In millions)	2008			2007
Common Stock
Balance, beginning and end of period	$	683		$	683
Additional Paid-in Capital
Balance, beginning of period		2,169			2,166
Stock-based compensation		3			2
Balance, end of period		2,172			2,168
Retained Earnings
Balance, beginning of period		7,285			6,486
Adjustment to initially apply FASB Staff Position Technical Bulletin No. 85-4-1, Accounting for Life Settlement Contracts by Third-Party Investors, net of tax		—			38
Adjustment to initially apply FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes an interpretation of FASB No. 109		—			5
Adjusted balance, beginning of period		7,285			6,529
Dividends paid to stockholders		(122	)		(54	)
Net income		37			687
Balance, end of period		7,200			7,162
Accumulated Other Comprehensive Income
Balance, beginning of period		103			549
Other comprehensive loss		(2,266	)		(357	)
Balance, end of period		(2,163	)		192
Treasury Stock
Balance, beginning of period		(39	)		(58	)
Purchase of treasury stock		(70	)		—
Stock options exercised and other		—			19
Balance, end of period		(109	)		(39	)
Notes Receivable for the Issuance of Common Stock
Balance, beginning of period		(51	)		(58	)
Decrease in notes receivable for the issuance of common stock		4			7
Balance, end of period		(47	)		(51	)
Total Stockholders’ Equity	$	7,736		$	10,115

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements
(Unaudited).

7

CNA Financial Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note A. Basis of Presentation

The Condensed Consolidated Financial Statements (Unaudited) include the accounts of CNA Financial Corporation (CNAF) and its controlled subsidiaries. Collectively, CNAF and its subsidiaries are referred to as CNA or the Company. CNA’s property and casualty and the remaining life & group insurance operations are primarily conducted by Continental Casualty Company (CCC), The Continental Insurance Company (CIC) and Continental Assurance Company (CAC). Loews Corporation (Loews) owned approximately 90% of the outstanding common stock of CNAF as of September 30, 2008.

The accompanying Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Certain financial information that is normally included in annual financial statements, including certain financial statement notes, prepared in accordance with GAAP, is not required for interim reporting purposes and has been condensed or omitted. These statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in CNAF’s Form 10-K filed with the Securities and Exchange Commission (SEC) for the year ended December 31, 2007, as amended by Form 10-K/A, which amended Part I, Item 1 of Form 10-K (Form 10-K). The preparation of Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting periods. Actual results may differ from those estimates.

The interim financial data as of September 30, 2008 and for the three and nine months ended September 30, 2008 and 2007 is unaudited. However, in the opinion of management, the interim data includes all adjustments, consisting of normal recurring accruals, necessary for a fair statement of the Company’s results for the interim periods. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. All significant intercompany amounts have been eliminated.

Note B. Accounting Pronouncement

Financial Accounting Standards Board (FASB) Staff Position (FSP) FAS 157-3, Determining the Fair Value of a Financial Asset in a Market That Is Not Active (FSP FAS 157-3)

On October 10, 2008, the FASB issued FSP FAS 157-3, which clarifies the application of Statement of Financial Accounting Standard (SFAS) No. 157, Fair Value Measurement (SFAS 157) in an inactive market. The FSP addresses application issues such as how management’s internal assumptions should be considered when measuring fair value when relevant observable data do not exist; how observable market information in a market that is not active should be considered when measuring fair value and how the use of market quotes should be considered when assessing the relevance of observable and unobservable data available to measure fair value.

FSP FAS 157-3 was effective upon issuance. The Company’s adoption of FSP FAS 157-3 had no impact on the financial condition or results of operations as of or for the three months and nine months ended September 30, 2008.

8

Note C. Earnings (Loss) Per Share

Earnings (loss) per share available to common stockholders is based on weighted average outstanding shares. Basic earnings (loss) per share excludes dilution and is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Approximately 1.4 million and 1.1 million shares, for the three and nine months ended September 30, 2008, and approximately 300 thousand shares, for the three and nine months ended September 30, 2007, attributable to exercises under stock-based employee compensation plans, were excluded from the calculation of diluted earnings per share because they were antidilutive.

The computation of earnings (loss) per share is as follows.

Earnings (Loss) Per Share

Period ended September 30	Three Months					Nine Months
(In millions, except per share amounts)	2008			2007		2008		2007
Income (loss) from continuing operations available to common stockholders	$	(340	)	$	174	$	27	$	695
Weighted average outstanding common stock and common stock equivalents		269.0			271.6		269.6		271.5
Effect of dilutive securities, employee stock options and appreciation rights		0.1			0.3		—		0.3
Adjusted weighted average outstanding common stock and common stock equivalents assuming conversions		269.1			271.9		269.6		271.8
Basic and diluted earnings (loss) per share from continuing operations available to common stockholders	$	(1.26	)	$	0.64	$	0.10	$	2.56
Dividends declared per common share	$	0.15		$	0.10	$	0.45	$	0.20

9

Note D. Investments

The significant components of net investment income are presented in the following table.

Net Investment Income

Period ended September 30	Three Months						Nine Months
(In millions)	2008			2007			2008			2007
Fixed maturity securities	$	501		$	501		$	1,495		$	1,523
Short term investments		29			57			94			146
Limited partnerships		(77	)		19			(70	)		142
Equity securities		18			7			62			18
Income (loss) from trading portfolio (a)		(23	)		(2	)		(104	)		41
Other		3			9			14			31
Gross investment income		451			591			1,491			1,901
Investment expense		(12	)		(11	)		(42	)		(42	)
Net investment income	$	439		$	580		$	1,449		$	1,859

(a) The change in net unrealized losses on trading securities included in net investment income was $(6) million and $(21) million for the three and nine months ended September 30, 2008 and $(12) million and $(9) million for the three and nine months ended September 30, 2007.

The components of realized investment results for available-for-sale securities are presented in the following table.

Realized Investment Gains (Losses)

Period ended September 30	Three Months						Nine Months
(In millions)	2008			2007			2008			2007
Fixed maturity securities:
U.S. Government bonds	$	34		$	131		$	20		$	37
Corporate and other taxable bonds		(289	)		(88	)		(328	)		(113	)
Tax-exempt bonds		1			10			51			(43	)
Asset-backed bonds		(61	)		(81	)		(218	)		(191	)
Redeemable preferred stock		—			(11	)		—			(12	)
Total fixed maturity securities		(315	)		(39	)		(475	)		(322	)
Equity securities		(376	)		16			(405	)		30
Derivative securities		35			(45	)		47			62
Short term investments		4			5			11			5
Other		1			6			9			8
Realized investment losses, net of participating policyholders’ and minority interests	$	(651	)	$	(57	)	$	(813	)	$	(217	)

For the three months ended September 30, 2008, other-than-temporary impairment (OTTI) losses of $584 million were recorded primarily in the non-redeemable preferred equity securities and corporate and other taxable bonds sectors. This compared to OTTI losses for the three months ended September 30, 2007 of $188 million recorded primarily in the corporate and other taxable bonds and asset-backed bonds sectors. The OTTI losses for 2008 were primarily driven by credit issues.

For the three months ended September 30, 2008, the Company recorded realized investment losses, including OTTI losses, of $305 million related to securities issued by Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac), $100 million related to securities issued by Washington Mutual, $96 million related to securities issued by Icelandic banks and $35 million related to securities issued by American International Group.

10

Realized investment losses for the nine months ended September 30, 2008 included OTTI losses of $840 million, recorded primarily in the non-redeemable preferred equity securities, corporate and other taxable bonds and asset-backed bonds sectors. This compared to OTTI losses for the nine months ended September 30, 2007 of $451 million recorded primarily in the corporate and other taxable bonds and asset-backed bonds sectors. The OTTI losses for 2008 were primarily driven by credit issues.

The Company’s investment policies emphasize high credit quality and diversification by industry, issuer and issue. Assets supporting interest rate sensitive liabilities are segmented within the general account to facilitate asset/liability duration management.

The following tables provide a summary of fixed maturity and equity securities investments. In 2008, the Company re-evaluated its classification of preferred stocks between redeemable and non-redeemable and determined that certain securities that were previously classified as redeemable preferred stock have characteristics similar to equities. These securities are presented as preferred stock securities included in Equity securities in the September 30, 2008 Condensed Consolidated Balance Sheet.

Summary of Fixed Maturity and Equity Securities

	Cost or		Gross		Gross Unrealized Losses				Estimated
September 30, 2008	Amortized		Unrealized		Less than		12 Months		Fair
(In millions)	Cost		Gains		12 Months		or Greater		Value
Fixed maturity securities available-for-sale:
U.S. Treasury securities and obligations of government agencies	$	1,431	$	88	$	1	$	—	$	1,518
Asset-backed securities		9,982		27		484		746		8,779
States, municipalities and political subdivisions — tax-exempt securities		7,781		21		596		240		6,966
Corporate bonds		9,495		73		797		352		8,419
Other debt securities		3,618		59		193		103		3,381
Redeemable preferred stock		72		3		2		—		73
Total fixed maturity securities available-for-sale		32,379		271		2,073		1,441		29,136
Total fixed maturity securities trading		40		—		—		—		40
Equity securities available-for-sale:
Common stock		213		187		9		2		389
Preferred stock		896		—		157		167		572
Total equity securities available-for-sale		1,109		187		166		169		961
Total	$	33,528	$	458	$	2,239	$	1,610	$	30,137

11

Summary of Fixed Maturity and Equity Securities

	Cost or		Gross		Gross Unrealized Losses				Estimated
December 31, 2007	Amortized		Unrealized		Less than		12 Months		Fair
(In millions)	Cost		Gains		12 Months		or Greater		Value
Fixed maturity securities available-for-sale:
U.S. Treasury securities and obligations of government agencies	$	594	$	93	$	—	$	—	$	687
Asset-backed securities		11,776		39		223		183		11,409
States, municipalities and political subdivisions — tax-exempt securities		7,615		144		82		2		7,675
Corporate bonds		8,867		246		149		12		8,952
Other debt securities		4,143		208		48		4		4,299
Redeemable preferred stock		1,216		2		160		—		1,058
Total fixed maturity securities available-for-sale		34,211		732		662		201		34,080
Total fixed maturity securities trading		177		—		—		—		177
Equity securities available-for-sale:
Common stock		246		207		1		—		452
Preferred stock		120		7		11		—		116
Total equity securities available-for-sale		366		214		12		—		568
Total	$	34,754	$	946	$	674	$	201	$	34,825

12

The following table summarizes, for available-for-sale fixed income securities, preferred stocks and common stocks in an unrealized loss position at September 30, 2008 and December 31, 2007, the aggregate fair value and gross unrealized loss by length of time those securities have been continuously in an unrealized loss position.

Unrealized Loss Aging

	September 30, 2008				December 31, 2007
			Gross				Gross
	Estimated		Unrealized		Estimated		Unrealized
(In millions)	Fair Value		Loss		Fair Value		Loss
Fixed income securities:
Investment grade:
0-6 months	$	10,068	$	698	$	4,771	$	228
7-12 months		6,269		1,048		1,584		193
13-24 months		2,775		937		690		57
Greater than 24 months		1,880		325		3,869		138
Total investment grade		20,992		3,008		10,914		616
Non-investment grade:
0-6 months		1,037		122		1,527		73
7-12 months		839		203		125		8
13-24 months		798		168		26		4
Greater than 24 months		16		11		9		2
Total non-investment grade		2,690		504		1,687		87
Total fixed income securities		23,682		3,512		12,601		703
Redeemable and non-redeemable preferred stocks:
0-6 months		21		3		893		143
7-12 months		371		156		104		28
13-24 months		172		167		—		—
Greater than 24 months		—		—		—		—
Total preferred stocks		564		326		997		171
Common stocks:
0-6 months		12		9		34		1
7-12 months		1		—		1		—
13-24 months		11		2		—		—
Greater than 24 months		3		—		3		—
Total common stocks		27		11		38		1
Total	$	24,273	$	3,849	$	13,636	$	875

At September 30, 2008, the fair value of the general account fixed maturities was $29,176 million, representing 79% of the total investment portfolio. The unrealized position associated with the fixed maturity portfolio included $3,514 million in gross unrealized losses, consisting of asset-backed securities which represented 35%, corporate bonds which represented 33%, tax-exempt bonds which represented 24%, and all other fixed maturity securities which represented 8%. The gross unrealized loss for any single issuer was no greater than 0.3% of the carrying value of the total general account fixed maturity portfolio. The total fixed maturity portfolio gross unrealized losses included 2,520 securities which were, in aggregate, approximately 13% below amortized cost.

Given the current facts and circumstances, the Company has determined that the securities presented in the above unrealized gain/loss tables were temporarily impaired when evaluated at September 30, 2008 or December 31, 2007, and therefore no related realized losses were recorded. A discussion of some of the factors reviewed in making that determination as of September 30, 2008 is presented below.

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Asset-Backed Securities

The unrealized losses on the Company’s investments in asset-backed securities were caused by a combination of factors related to the market disruption caused by credit concerns surrounding the sub-prime issue, but also extended into other asset-backed securities in the Company’s portfolio.

The majority of the holdings in this category are collateralized mortgage obligations (CMOs) typically collateralized with prime residential mortgages and corporate asset-backed structured securities. The holdings in these sectors include 662 securities in a gross unrealized loss position aggregating $1,226 million. Of these securities in a gross unrealized loss position, 61% are rated AAA, 17% are rated AA, 16% are rated A, 4% are rated BBB and 2% are non-investment grade (rated BB or lower). The aggregate severity of the unrealized loss was approximately 14% of amortized cost. The contractual cash flows on the asset-backed structured securities are passed through, but may be structured into classes of preference. The securities in this category are modeled in order to evaluate the risks of default on the performance of the underlying collateral. Within this analysis multiple factors are analyzed including probable risk of default, loss severity upon a default, payment delinquency, over collateralization and interest coverage triggers, credit support from lower-rated tranches and rating agency actions amongst others. Securities are modeled against base-case and reasonable stress scenarios of probable default activity, given current market conditions, and then analyzed for potential impact to our particular holdings. The structured securities held are generally secured by over collateralization or default protection provided by subordinated tranches. Within this category, securities subject to Emerging Issues Task Force (EITF) Issue No. 99-20, Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets (EITF 99-20), are monitored for significant adverse changes in cash flow projections. If there are adverse changes in cash flows, the amount of accretable yield is prospectively adjusted and an OTTI loss is recognized. As of September 30, 2008, there was no adverse change in estimated cash flows noted for the securities in an unrealized loss position held subject to EITF 99-20, which have a gross unrealized loss of $299 million. For the three and nine months ended September 30, 2008, there were OTTI losses of $30 million and $209 million recorded on asset-backed securities, $14 million and $147 million of which related to specific EITF 99-20 securities for which the most recent evaluation did show an adverse change in cash flows.

The remainder of the holdings in this category includes mortgage-backed securities guaranteed by an agency of the U.S. Government. There were 183 agency mortgage-backed pass-through securities and 2 agency CMOs in an unrealized loss position aggregating $4 million as of September 30, 2008. The cumulative unrealized losses on these securities was approximately 4% of amortized cost. These securities do not tend to be influenced by the credit of the issuer but rather the characteristics and projected cash flows of the underlying collateral.

The Company believes the decline in fair value was primarily attributable to the market disruption caused by sub-prime related issues and other temporary market conditions and is not indicative of the quality of the underlying collateral. Because the Company has the ability and intent to hold these investments until an anticipated recovery of fair value, which may be maturity, the Company considers these investments to be temporarily impaired at September 30, 2008.

States, Municipalities and Political Subdivisions — Tax-Exempt Securities

The unrealized losses on the Company’s investments in tax-exempt municipal securities were caused primarily by changes in credit spreads, and to a lesser extent, changes in interest rates. Market conditions in the tax-exempt sector of the market were driven by significant selling pressure in the market particularly late in the third quarter. This selling pressure was caused by a combination of factors that resulted in forced liquidations of municipal positions that increased supply while demand was decreasing. These conditions increased the yields of the sector far above historical norms sending prices down and increasing the Company’s unrealized losses. The Company invests in tax-exempt municipal securities as an asset class for economic benefits of the returns on the class compared to like after-tax returns on alternative classes. The holdings in this category include 821 securities in a gross unrealized loss position aggregating $836 million with all of these unrealized losses related to investment grade securities (rated BBB- or higher including the impact of mono-line insurance) where the cash flows are supported by the credit of the issuer. The aggregate severity of the unrealized losses was approximately 12% of amortized cost. Because the Company has the ability and intent to hold these investments until an anticipated recovery of fair value, which may be maturity, the Company considers these

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investments to be temporarily impaired at September 30, 2008. For the three and nine months ended September 30, 2008, there were OTTI losses of $1 million recorded on tax-exempt municipal securities.

Corporate Bonds

The holdings in this category include 681 securities in a gross unrealized loss position aggregating $1,149 million. Of the unrealized losses in this category, 62% relate to securities rated as investment grade. The total holdings in this category are diversified across 11 industry sectors. The aggregate severity of the unrealized losses were approximately 14% of amortized cost. Within corporate bonds, the industry sectors with the largest gross unrealized losses were financial, consumer cyclical, communications, consumer non-cyclical and utilities, which as a percentage of total gross unrealized losses were approximately 32%, 19%, 17%, 8% and 8% at September 30, 2008. The decline in fair value was primarily attributable to deterioration and volatility in the broader credit markets that resulted in widening of credit spreads over risk free rates well beyond historical norms and macro conditions in certain sectors that the market viewed as out of favor. The Company monitors the financial performance of the corporate bond issuers for potential factors that may cause a change in outlook and addresses securities that are deemed to be OTTI promptly. Because these declines were not related to any issuer specific credit events, and because the Company has the ability and intent to hold these investments until an anticipated recovery of fair value, which may be maturity, the Company considers these investments to be temporarily impaired at September 30, 2008. For the three and nine months ended September 30, 2008, there were OTTI losses of $105 million and $136 million recorded on corporate bonds.

Preferred Stock

The unrealized losses on the Company’s investments in preferred stock were caused by similar factors as those that affected the Company’s corporate bond portfolio. Approximately 96% of the gross unrealized losses in this category come from securities issued by financial institutions, 3% from utilities and less than 1% from communications. The holdings in this category include 39 securities in a gross unrealized loss position aggregating $326 million. Of these securities in a gross unrealized loss position, 56% are rated A, 40% are rated BBB and 4% are rated lower than BBB. The Company believes the holdings in this category have been adversely impacted by significant credit spread widening brought on by a combination of factors in the capital markets. The majority of the securities in this category are related to the banking and mortgage industries and are experiencing what the Company believes to be temporarily depressed valuations. The Company has recorded other-than-temporary impairment losses on securities of those issuers that have been placed in conservatorship, have been acquired or have shown signs of other-than-temporary credit deterioration. The Company has been monitoring the capital raising efforts of the issuers in this sector, their ability to continue paying dividends and all other relevant news and believes, given current facts and circumstances, the remaining issuers in this sector with unrealized losses are sufficiently capitalized and will recover in value. Because the Company has the ability and intent to hold these investments until an anticipated recovery of fair value, the Company considers these investments to be temporarily impaired at September 30, 2008. This evaluation was made on the basis that these securities possess characteristics similar to debt securities. For the three and nine months ended September 30, 2008, there were OTTI losses of $255 million and $263 million recorded on preferred stock, primarily on Freddie Mac and Fannie Mae.

Investment Commitments

As of September 30, 2008, the Company had committed approximately $331 million to future capital calls from various third-party limited partnership investments in exchange for an ownership interest in the related partnerships.

The Company invests in multiple bank loan participations as part of its overall investment strategy and has committed to additional future purchases and sales. The purchase and sale of these investments are recorded on the date that the legal agreements are finalized and cash settlement is made. As of September 30, 2008, the Company had commitments to purchase $20 million and had no commitments to sell various bank loan participations. When loan participation purchases are settled and recorded they may contain both funded and unfunded amounts. An unfunded loan represents an obligation by the Company to provide additional amounts

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under the terms of the loan participation. The funded portions are reflected on the Condensed Consolidated Balance Sheets, while any unfunded amounts are not recorded until a draw is made under the loan facility. As of September 30, 2008, the Company had obligations on unfunded bank loan participations in the amount of $20 million.

Note E. Derivative Financial Instruments

A summary of the recognized gains (losses) related to derivative financial instruments held at September 30, 2008 and 2007 follows.

Recognized Gains (Losses)

Period ended September 30	Three Months						Nine Months
(In millions)	2008			2007			2008			2007
General account
Without hedge designation
Interest rate swaps	$	4		$	(68	)	$	6		$	30
Credit default swaps — purchased protection		53			47			64			65
Credit default swaps — sold protection		(4	)		(22	)		(13	)		(30	)
Futures purchased		—			7			—			7
Futures sold, not yet purchased		(23	)		(8	)		(12	)		(8	)
Currency forwards		—			(1	)		—			(2	)
Commitments to purchase government and municipal securities (TBAs)		3			(1	)		3			—
Options embedded in convertible debt securities		1			1			1			1
Equity warrants		—			—			(2	)		—
Trading activities
Futures purchased		(18	)		5			(96	)		32
Futures sold, not yet purchased		—			(1	)		1			—
Currency forwards		—			1			1			—
Total	$	16		$	(40	)	$	(47	)	$	95

A summary of the aggregate contractual or notional amounts and gross estimated fair values related to derivative financial instruments follows. The contractual or notional amounts for derivatives are used to calculate the exchange of contractual payments under the agreements and are not representative of the potential for gain or loss on these instruments.

Derivative Financial Instruments

	Contractual/
September 30, 2008	Notional		Estimated Fair Value
(In millions)	Amount		Asset		(Liability)
General account
Without hedge designation
Credit default swaps — purchased protection	$	355	$	55	$	(2	)
Credit default swaps — sold protection		198		—		(44	)
Currency forwards		12		—		—
Commitments to purchase government and municipal securities (TBAs)		95		3		—
Equity warrants		4		—		—
Trading activities
Futures purchased		203		—		—
Total general account	$	867	$	58	$	(46	)

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Derivative Financial Instruments

	Contractual/
December 31, 2007	Notional		Estimated Fair Value
(In millions)	Amount		Asset		(Liability)
General account
Without hedge designation
Interest rate swaps	$	451	$	—	$	(27	)
Credit default swaps — purchased protection		928		61		(4	)
Credit default swaps — sold protection		226		1		(31	)
Equity warrants		4		2		—
Options embedded in convertible debt securities		3		—		—
Trading activities
Futures purchased		791		—		(4	)
Futures sold, not yet purchased		135		—		—
Currency forwards		44		2		(1	)
Total general account	$	2,582	$	66	$	(67	)

The Company does not offset its derivative positions against the fair value of the collateral provided or collateral received. The fair value of cash collateral provided by the Company was $39 million and $64 million at September 30, 2008 and December 31, 2007. The fair value of cash collateral received from counterparties was $6 million and $10 million at September 30, 2008 and December 31, 2007.

Counterparty credit exposure associated with non-performance by the counterparties to derivative instruments is generally limited to the uncollateralized estimated fair value of assets in the above table. The Company mitigates the risk of non-performance by monitoring the creditworthiness of counterparties and diversifying derivatives across multiple counterparties. For over-the-counter derivative transactions, International Swaps and Derivatives Association (ISDA) Master Agreements are in place that allow for the exchange of collateral based on the amount of exposure and credit ratings of the counterparty.

Options embedded in convertible debt securities are classified as Fixed maturity securities on the Condensed Consolidated Balance Sheets, consistent with the host instruments.

Credit Default Swaps

The Company utilizes credit default swaps (CDS), which involve the transfer of credit risk from one party to another in exchange for period payments, to manage credit risk within its overall approach to portfolio management. The Company may purchase CDS protection to mitigate default risk and credit deterioration for fixed income and preferred stock holdings in the investment portfolio. The Company may also sell CDS protection for the purpose of replicating fixed income securities in the cash market where supply is limited in certain issuers or it is more beneficial to transact in the derivative markets. In all cases, the underlying reference obligations for the CDS transactions are single name entities or established indices.

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Note F. Fair Value

Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy is used in selecting inputs, with the highest priority given to Level 1, as these are the most transparent or reliable.

Level 1 — Quoted prices for identical instruments in active markets.

Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.

Level 3 — Valuations derived from valuation techniques in which one or more significant inputs are not observable.

The Company attempts to establish fair value as an exit price in an orderly transaction consistent with normal settlement market conventions. The Company is responsible for the valuation process and seeks to obtain quoted market prices for all securities. When quoted market prices in active markets are not available, the Company uses a number of methodologies to establish fair value estimates including: discounted cash flow models, prices from recently executed transactions of similar securities, or broker/dealer quotes, utilizing market observable information to the extent possible. In conjunction with modeling activities, the Company may use external data as inputs. The modeled inputs are consistent with observable market information, when available, or with the Company’s assumptions as to what market participants would use to value the securities. The Company also uses pricing services as a significant source of data. The Company monitors all the pricing inputs to determine if the markets from which the data is gathered are active. As further validation of the Company’s valuation process, the Company samples its past fair value estimates and compares the valuations to actual transactions executed in the market on similar dates.

Assets and liabilities measured at fair value on a recurring basis are summarized below.

								Total
September 30, 2008								Assets/(Liabilities)
(In millions)	Level 1		Level 2		Level 3			at fair value
Assets
Fixed maturity securities	$	1,581	$	24,613	$	2,982		$	29,176
Equity securities		632		115		214			961
Derivative financial instruments, included in Other invested assets		—		3		55			58
Short term investments		3,496		1,253		—			4,749
Life settlement contracts, included in Other assets		—		—		121			121
Discontinued operations investments, included in Other assets		77		69		20			166
Separate account business		44		338		43			425
Total assets	$	5,830	$	26,391	$	3,435		$	35,656
Liabilities
Derivative financial instruments, included in Other liabilities	$	—	$	—	$	(46	)	$	(46	)
Total liabilities	$	—	$	—	$	(46	)	$	(46	)

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The table below presents a reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3), and presents changes in unrealized gains or losses recorded in net income for the three months ended September 30, 2008 for Level 3 assets and liabilities.

							Net realized											Unrealized
				Net realized			investment gains											gains (losses)
				investment gains			(losses) and net											recorded in
				(losses) and net			change in											net income
				change in			unrealized											on level 3
				unrealized			appreciation			Purchases,								assets and
				appreciation			(depreciation)			sales,								liabilities
				(depreciation)			included in other			issuances			Net transfers			Balance at		held at
Level 3	Balance at			included in net			comprehensive			and			in (out) of			September		September
(In millions)	July 1, 2008			income*			income			settlements			level 3			30, 2008		30, 2008*
Fixed maturity securities	$	3,213		$	(27	)	$	(103	)	$	(152	)	$	51		$	2,982	$	(23	)
Equity securities		261			—			(1	)		(23	)		(23	)		214		—
Derivative financial instruments, net		(67	)		54			—			22			—			9		76
Short term investments		—			—			—			—			—			—		—
Life settlement contracts		118			4			—			(1	)		—			121		3
Discontinued operations investments		23			—			(2	)		(1	)		—			20		—
Separate account business		45			—			(7	)		(1	)		6			43		—
Total	$	3,593		$	31		$	(113	)	$	(156	)	$	34		$	3,389	$	56

The table below presents a reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3), and presents changes in unrealized gains or losses recorded in net income for the nine months ended September 30, 2008 for Level 3 assets and liabilities.

						Net realized											Unrealized
			Net realized			investment gains											gains (losses)
			investment gains			(losses) and net											recorded in
			(losses) and net			change in											net income
			change in			unrealized											on level 3
			unrealized			appreciation			Purchases,								assets and
			appreciation			(depreciation)			sales,								liabilities
	Balance at		(depreciation)			included in other			issuances			Net transfers			Balance at		held at
Level 3	January 1,		included in net			comprehensive			and			in (out) of			September		September
(In millions)	2008		income*			income			settlements			level 3			30, 2008		30, 2008*
Fixed maturity securities	$	2,684	$	(150	)	$	(373	)	$	(68	)	$	889		$	2,982	$	(158	)
Equity securities		196		(2	)		(4	)		25			(1	)		214		(4	)
Derivative financial instruments, net		2		55			—			(48	)		—			9		7
Short term investments		85		—			—			—			(85	)		—		—
Life settlement contracts		115		34			—			(28	)		—			121		8
Discontinued operations investments		42		—			(2	)		(3	)		(17	)		20		—
Separate account business		30		—			(11	)		(2	)		26			43		—
Total	$	3,154	$	(63	)	$	(390	)	$	(124	)	$	812		$	3,389	$	(147	)

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* Net realized and unrealized gains and losses shown above are reported in net income as follows:

Major Category of Assets and Liabilities	Consolidated Statement of Operations Line Items
Fixed maturity securities	Net investment income and Realized investment gains (losses)
Equity securities	Realized investment gains (losses)
Derivative financial instruments (Assets)	Realized investment gains (losses)
Life settlement contracts	Other revenues
Derivative financial instruments (Liabilities)	Realized investment gains (losses)

Securities transferred into Level 3 for the three months ended September 30, 2008 relate primarily to securities for which broker quotes based on unobservable market information have become a significant input to the valuation process. For the nine months ended September 30, 2008, securities transferred into Level 3 relate primarily to tax-exempt auction rate certificates, included within Fixed maturity securities. These were previously valued using observable prices for similar securities, but due to decreased market activity, fair value is determined by cash flow models using market observable and unobservable inputs.

The following section describes the valuation methodologies used to measure different financial instruments at fair value, including an indication of the level in the fair value hierarchy in which the instrument is generally classified.

Fixed Maturity Securities

Level 1 securities include highly liquid government bonds for which quoted market prices are available. The remaining fixed maturity securities are valued using pricing for similar securities, recently executed transactions, cash flow models with yield curves, broker/dealer quotes and other pricing models utilizing observable inputs. The valuation for most fixed income securities, excluding government bonds, is classified as Level 2. Securities within Level 2 include certain corporate bonds, municipal bonds, asset-backed securities, mortgage-backed pass-through securities and redeemable preferred stock. Securities are generally assigned to Level 3 in cases where broker/dealer quotes are significant inputs to the valuation and there is a lack of transparency as to whether these quotes are based on information that is observable in the marketplace. Level 3 securities include certain corporate bonds, asset-backed securities, municipal bonds and redeemable preferred stock.

Equity Securities

Level 1 securities include publicly traded securities valued using quoted market prices. Level 2 securities are primarily non-redeemable preferred securities and common stocks valued using pricing for similar securities, recently executed transactions, broker/dealer quotes and other pricing models utilizing observable inputs.

Level 3 securities include one equity security, which represents 83% of the total, in an entity which is not publicly traded and is valued based on a discounted cash flow analysis model, which is adjusted for the Company’s assumption regarding an inherent lack of liquidity in the security. The remaining non-redeemable preferred stocks and equity securities are primarily valued using inputs including broker/dealer quotes for which there is a lack of transparency as to whether these quotes are based on information that is observable in the marketplace.

Derivative Financial Instruments

Exchange traded derivatives are valued using quoted market prices and are classified within Level 1 of the fair value hierarchy. Level 2 derivatives primarily include currency forwards valued using observable market spot rates. Over-the-counter (OTC) derivatives, principally credit default swaps, currency forwards and options, represent the present value of amounts estimated to be received from or paid to a marketplace participant in settlement of these instruments. OTC derivatives are valued using inputs including broker/dealer quotes and are classified within Level 3 of the valuation hierarchy due to a lack of transparency as to whether these quotes are based on information that is observable in the marketplace.

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Short Term Investments

The valuation of securities that are actively traded or have quoted prices are classified as Level 1. These securities include money market funds and treasury bills. Level 2 includes commercial paper, for which all inputs are observable.

Life Settlement Contracts

The fair values of life settlement contracts are estimated using discounted cash flows based on the Company’s own assumptions for mortality, premium expense, and the rate of return that a buyer would require on the contracts, as no comparable market pricing data is available.

Discontinued Operations Investments

Assets relating to CNA’s discontinued operations include fixed maturity securities and short term investments. The valuation methodologies for these asset types have been described above.

Separate Account Business

Separate account business includes fixed maturity securities, equities and short term investments. The valuation methodologies for these asset types have been described above.

Note G. Claim and Claim Adjustment Expense Reserves

CNA’s property and casualty insurance claim and claim adjustment expense reserves represent the estimated amounts necessary to resolve all outstanding claims, including claims that are incurred but not reported (IBNR) as of the reporting date. The Company’s reserve projections are based primarily on detailed analysis of the facts in each case, CNA’s experience with similar cases and various historical development patterns. Consideration is given to such historical patterns as field reserving trends and claims settlement practices, loss payments, pending levels of unpaid claims and product mix, as well as court decisions, economic conditions and public attitudes. All of these factors can affect the estimation of claim and claim adjustment expense reserves.

Establishing claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves for catastrophic events that have occurred, is an estimation process. Many factors can ultimately affect the final settlement of a claim and, therefore, the necessary reserve. Changes in the law, results of litigation, medical costs, the cost of repair materials and labor rates can all affect ultimate claim costs. In addition, time can be a critical part of reserving determinations since the longer the span between the incidence of a loss and the payment or settlement of the claim, the more variable the ultimate settlement amount can be. Accordingly, short-tail claims, such as property damage claims, tend to be more reasonably estimable than long-tail claims, such as general liability and professional liability claims. Adjustments to prior year reserve estimates, if necessary, are reflected in the results of operations in the period that the need for such adjustments is determined.

Catastrophes are an inherent risk of the property and casualty insurance business and have contributed to material period-to-period fluctuations in the Company’s results of operations and/or equity. Catastrophe losses related to events occurring for the three and nine months ended September 30, 2008, net of reinsurance, were $248 million and $348 million. Catastrophe losses in 2008 related primarily to Hurricanes Gustav and Ike. Catastrophe losses related to events occurring for the three and nine months ended September 30, 2007, net of reinsurance, were $10 million and $54 million. There can be no assurance that CNA’s ultimate cost for catastrophes will not exceed current estimates.

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The following provides discussion of the Company’s Asbestos and Environmental Pollution (A&E) reserves.

A&E Reserves

CNA’s property and casualty insurance subsidiaries have actual and potential exposures related to A&E claims. The following table provides data related to CNA’s A&E claim and claim adjustment expense reserves.

A&E Reserves

	September 30, 2008						December 31, 2007
				Environmental						Environmental
(In millions)	Asbestos			Pollution			Asbestos			Pollution
Gross reserves	$	2,155		$	309		$	2,352		$	367
Ceded reserves		(940	)		(115	)		(1,030	)		(125	)
Net reserves	$	1,215		$	194		$	1,322		$	242

Asbestos

The Company recorded $18 million and $6 million of unfavorable asbestos-related net claim and claim adjustment expense reserve development for the nine months ended September 30, 2008 and 2007. The Company paid asbestos-related claims, net of reinsurance recoveries, of $125 million and $121 million for the nine months ended September 30, 2008 and 2007.

The ultimate cost of reported claims, and in particular A&E claims, is subject to a great many uncertainties, including future developments of various kinds that CNA does not control and that are difficult or impossible to foresee accurately. With respect to the litigation identified below in particular, numerous factual and legal issues remain unresolved. Rulings on those issues by the courts are critical to the evaluation of the ultimate cost to the Company. The outcome of the litigation cannot be predicted with any reliability. Accordingly, the extent of losses beyond any amounts that may be accrued are not readily determinable at this time.

Some asbestos-related defendants have asserted that their insurance policies are not subject to aggregate limits on coverage. CNA has such claims from a number of insureds. Some of these claims involve insureds facing exhaustion of products liability aggregate limits in their policies, who have asserted that their asbestos-related claims fall within so-called “non-products” liability coverage contained within their policies rather than products liability coverage, and that the claimed “non-products” coverage is not subject to any aggregate limit. It is difficult to predict the ultimate size of any of the claims for coverage purportedly not subject to aggregate limits or predict to what extent, if any, the attempts to assert “non-products” claims outside the products liability aggregate will succeed. CNA’s policies also contain other limits applicable to these claims and the Company has additional coverage defenses to certain claims. CNA has attempted to manage its asbestos exposure by aggressively seeking to settle claims on acceptable terms. There can be no assurance that any of these settlement efforts will be successful, or that any such claims can be settled on terms acceptable to CNA. Where the Company cannot settle a claim on acceptable terms, CNA aggressively litigates the claim. However, adverse developments with respect to such matters could have a material adverse effect on the Company’s results of operations and/or equity.

Certain asbestos claim litigation in which CNA is currently engaged is described below:

On February 13, 2003, CNA announced it had resolved asbestos-related coverage litigation and claims involving A.P. Green Industries, A.P. Green Services and Bigelow-Liptak Corporation. Under the agreement, CNA is required to pay $70 million, net of reinsurance recoveries, over a ten year period commencing after the final approval of a bankruptcy plan of reorganization. The settlement received initial bankruptcy court approval on August 18, 2003. The debtor’s plan of reorganization includes an injunction to protect CNA from any future claims. The bankruptcy court issued an opinion on September 24, 2007 recommending confirmation of that plan. Several insurers have appealed that ruling; that appeal is pending at this time.

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CNA is engaged in insurance coverage litigation in New York State Court, filed in 2003, with a defendant class of underlying plaintiffs who have asbestos bodily injury claims against the former Robert A. Keasbey Company (Keasbey) (Continental Casualty Co. v. Employers Ins. of Wausau et al., No. 601037/03 (N.Y. County)). Keasbey, a currently dissolved corporation, was a seller and installer of asbestos-containing insulation products in New York and New Jersey. Thousands of plaintiffs have filed bodily injury claims against Keasbey. However, under New York court rules, asbestos claims are not cognizable unless they meet certain minimum medical impairment standards. Since 2002, when these court rules were adopted, only a small portion of such claims have met medical impairment criteria under New York court rules and as to the remaining claims, Keasbey’s involvement at a number of work sites is a highly contested issue.

CNA issued Keasbey primary policies for 1970-1987 and excess policies for 1971-1978. CNA has paid an amount substantially equal to the policies’ aggregate limits for products and completed operations claims in the confirmed CNA policies. Claimants against Keasbey allege, among other things, that CNA owes coverage under sections of the policies not subject to the aggregate limits, an allegation CNA vigorously contests in the lawsuit. In the litigation, CNA and the claimants seek declaratory relief as to the interpretation of various policy provisions. On May 8, 2007, the Court in the first phase of the trial held that all of CNA’s primary policy products aggregates were exhausted and that past products liability claims could not be recharacterized as operations claims. The Court also found that while operations claims would not be subject to products aggregates, such claims could be made only against the policies in effect when the claimants were exposed to asbestos from Keasbey operations. These holdings limit CNA’s exposure to those instances where Keasbey used asbestos in operations between 1970 and 1987. Keasbey largely ceased using asbestos in its operations in the early 1970’s. CNA noticed an appeal to the Appellate Division to challenge certain aspects of the Court’s ruling. Other insurer parties to the litigation also filed separate notices of appeal to the Court’s ruling. The appeal was fully briefed and was argued on December 6, 2007. Numerous legal issues remain to be resolved on appeal with respect to coverage that are critical to the final result, which cannot be predicted with any reliability. Accordingly, the extent of losses beyond any amounts that may be accrued are not readily determinable at this time.

CNA has insurance coverage disputes related to asbestos bodily injury claims against a bankrupt insured, Burns & Roe Enterprises, Inc. (Burns & Roe). These disputes are currently part of coverage litigation (stayed in view of the bankruptcy) and an adversary proceeding in In re: Burns & Roe Enterprises, Inc., pending in the U.S. Bankruptcy Court for the District of New Jersey, No. 00-41610. Burns & Roe provided engineering and related services in connection with construction projects. At the time of its bankruptcy filing, on December 4, 2000, Burns & Roe asserted that it faced approximately 11,000 claims alleging bodily injury resulting from exposure to asbestos as a result of construction projects in which Burns & Roe was involved. CNA allegedly provided primary liability coverage to Burns & Roe from 1956-1969 and 1971-1974, along with certain project-specific policies from 1964-1970. In September of 2007, CNA entered into an agreement with Burns & Roe, the Official Committee of Unsecured Creditors appointed by the Bankruptcy Court and the Future Claims Representative (the “Addendum”), which provides that claims allegedly covered by CNA policies will be adjudicated in the tort system, with any coverage disputes related to those claims to be decided in coverage litigation. With the approval of the Bankruptcy Court, Burns & Roe included the Addendum as part of its Fourth Amended Plan (the “Plan”), which was filed on June 9, 2008 and which will be the subject of a later confirmation hearing. With respect to both confirmation of the Plan and coverage issues, numerous factual and legal issues remain to be resolved that are critical to the final result, the outcome of which cannot be predicted with any reliability. These factors include, among others: (a) whether the Company has any further responsibility to compensate claimants against Burns & Roe under its policies and, if so, under which; (b) whether the Company’s responsibilities under its policies extend to a particular claimant’s entire claim or only to a limited percentage of the claim; (c) whether the Company’s responsibilities under its policies are limited by the occurrence limits or other provisions of the policies; (d) whether certain exclusions, including professional liability exclusions, in some of the Company’s policies apply to exclude certain claims; (e) the extent to which claimants can establish exposure to asbestos materials as to which Burns & Roe has any responsibility; (f) the legal theories which must be pursued by such claimants to establish the liability of Burns & Roe and whether such theories can, in fact, be established; (g) the diseases and damages alleged by such claimants; (h) the extent that any liability of Burns & Roe would be shared with other potentially responsible parties; (i) whether the Plan, which includes the Addendum, will be approved by the Bankruptcy Court in its current form; and (j) the impact of bankruptcy

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proceedings on claims and coverage issue resolution. Accordingly, the extent of losses beyond any amounts that may be accrued are not readily determinable at this time.

Suits have also been initiated directly against the CNA companies and numerous other insurers in two jurisdictions: Texas and Montana. Approximately 80 lawsuits were filed in Texas beginning in 2002, against two CNA companies and numerous other insurers and non-insurer corporate defendants asserting liability for failing to warn of the dangers of asbestos (e.g. Boson v. Union Carbide Corp., (Nueces County, Texas)). During 2003, several of the Texas suits were dismissed and while certain of the Texas courts’ rulings were appealed, plaintiffs later dismissed their appeals. A different Texas court, however, denied similar motions seeking dismissal. After that court denied a related challenge to jurisdiction, the insurers transferred the case, among others, to a state multi-district litigation court in Harris County charged with handling asbestos cases. In February 2006, the insurers petitioned the appellate court in Houston for an order of mandamus, requiring the multi-district litigation court to dismiss the case on jurisdictional and substantive grounds. On February 29, 2008, the appellate court denied the insurers’ mandamus petition on procedural grounds, but did not reach a decision on the merits of the petition. Instead, the appellate court allowed to stand the multi-district litigation court’s determination that the case remained on its inactive docket and that no further action can be taken unless qualifying reports are filed or the filing of such reports is waived. With respect to the cases that are still pending in Texas, in June 2008, plaintiffs in the only active case dropped the remaining CNA company from that suit, leaving only inactive cases against CNA companies. In those inactive cases, numerous factual and legal issues remain to be resolved that are critical to the final result, the outcome of which cannot be predicted with any reliability. These factors include: (a) the speculative nature and unclear scope of any alleged duties owed to individuals exposed to asbestos and the resulting uncertainty as to the potential pool of potential claimants; (b) the fact that imposing such duties on all insurer and non-insurer corporate defendants would be unprecedented and, therefore, the legal boundaries of recovery are difficult to estimate; (c) the fact that many of the claims brought to date are barred by the Statute of Limitations and it is unclear whether future claims would also be barred; (d) the unclear nature of the required nexus between the acts of the defendants and the right of any particular claimant to recovery; and (e) the existence of hundreds of co-defendants in some of the suits and the applicability of the legal theories pled by the claimants to thousands of potential defendants. Accordingly, the extent of losses beyond any amounts that may be accrued is not readily determinable at this time.

On March 22, 2002, a direct action was filed in Montana (Pennock, et al. v. Maryland Casualty, et al. First Judicial District Court of Lewis & Clark County, Montana) by eight individual plaintiffs (all employees of W.R. Grace & Co. (W.R. Grace)) and their spouses against CNA, Maryland Casualty and the State of Montana. This action alleges that the carriers failed to warn of or otherwise protect W.R. Grace employees from the dangers of asbestos at a W.R. Grace vermiculite mining facility in Libby, Montana. The Montana direct action is currently stayed because of W.R. Grace’s pending bankruptcy. On April 7, 2008, W.R. Grace announced a settlement in principle with the asbestos personal injury claimants committee subject to confirmation of a plan of reorganization by the bankruptcy court. While the confirmation hearing has not been scheduled, W.R. Grace expects the hearing to occur in 2009. The settlement in principle with the asbestos claimants has no present impact on the stay currently imposed on the Montana direct action and with respect to such claims, numerous factual and legal issues remain to be resolved that are critical to the final result, the outcome of which cannot be predicted with any reliability. These factors include: (a) the unclear nature and scope of any alleged duties owed to people exposed to asbestos and the resulting uncertainty as to the potential pool of potential claimants; (b) the potential application of Statutes of Limitation to many of the claims which may be made depending on the nature and scope of the alleged duties; (c) the unclear nature of the required nexus between the acts of the defendants and the right of any particular claimant to recovery; (d) the diseases and damages claimed by such claimants; (e) the extent that such liability would be shared with other potentially responsible parties; and (f) the impact of bankruptcy proceedings on claims resolution. Accordingly, the extent of losses beyond any amounts that may be accrued are not readily determinable at this time.

CNA is vigorously defending these and other cases and believes that it has meritorious defenses to the claims asserted. However, there are numerous factual and legal issues to be resolved in connection with these claims, and it is extremely difficult to predict the outcome or ultimate financial exposure represented by these matters. Adverse developments with respect to any of these matters could have a material adverse effect on CNA’s business, insurer financial strength and debt ratings, results of operations and/or equity.

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Environmental Pollution

The Company recorded $3 million and $1 million of unfavorable environmental pollution net claim and claim adjustment expense reserve development for the nine months ended September 30, 2008 and 2007. The Company paid environmental pollution-related claims, net of reinsurance recoveries, of $51 million and $31 million for the nine months ended September 30, 2008 and 2007.

Net Prior Year Development

The net prior year development presented below includes premium development due to its direct relationship to claim and allocated claim adjustment expense reserve development. The net prior year development presented below excludes the impact of increases or decreases in the allowance for uncollectible reinsurance, but includes the impact of commutations.

Three Month Comparison

Net Prior Year Development
Three months ended September 30, 2008

							Corporate &
	Standard			Specialty			Other Non-
(In millions)	Lines			Lines			Core			Total
Pretax unfavorable (favorable) net prior year claim and allocated claim adjustment expense reserve development:
Core (Non-A&E)	$	(4	)	$	(68	)	$	1		$	(71	)
A&E		—			—			13			13
Pretax unfavorable (favorable) net prior year development before impact of premium development		(4	)		(68	)		14			(58	)
Pretax unfavorable (favorable) premium development		3			(2	)		(3	)		(2	)
Total pretax unfavorable (favorable) net prior year development	$	(1	)	$	(70	)	$	11		$	(60	)

Net Prior Year Development
Three months ended September 30, 2007

							Corporate &
	Standard			Specialty			Other Non-
(In millions)	Lines			Lines			Core			Total
Pretax unfavorable (favorable) net prior year claim and allocated claim adjustment expense reserve development:
Core (Non-A&E)	$	(67	)	$	3		$	4		$	(60	)
A&E		—			—			3			3
Pretax unfavorable (favorable) net prior year development before impact of premium development		(67	)		3			7			(57	)
Pretax unfavorable (favorable) premium development		(5	)		(3	)		(2	)		(10	)
Total pretax unfavorable (favorable) net prior year development	$	(72	)	$	—		$	5		$	(67	)

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2008 Net Prior Year Development

Standard Lines

The favorable claim and allocated claim adjustment expense reserve development was primarily due to favorable experience in general liability and property coverages offset by unfavorable experience in workers’ compensation (including excess workers’ compensation coverages) and large account business.

For general liability excluding construction defect, $228 million in favorable claim and allocated claim adjustment expense reserve development was due to decreased frequency and severity of claims across multiple accident years. The improvement was due to underwriting initiatives and favorable outcomes on individual claims. Favorable development of $207 million associated with construction defect exposures was due to lower severity resulting from various claim handling initiatives and lower than expected frequency of claims, primarily in accident years 1999 and prior. Claims handling initiatives have resulted in an increase in the number of claims closed without payment and increased recoveries from other parties involved in the claims. The lower construction defect frequency is due to underwriting initiatives designed to limit the exposure to future construction defect claims. For property exposures, $31 million of favorable development was primarily the result of decreased frequency and severity in recent years. The remaining favorable development was the result of favorable experience across several miscellaneous coverages in Standard Lines.

Unfavorable development of $248 million for workers’ compensation was primarily the result of the impact of claim cost inflation on lifetime medical and home health care claims in accident years 1999 and prior. The changes were driven by increased life expectancy due to advances in medical care and increasing medical inflation. Unfavorable development of $161 million for large account business was also driven primarily by workers’ compensation claim cost inflation primarily in accident years 2001 and prior. Unfavorable development of $90 million on excess workers’ compensation was due to claims in accident years 2002 and prior. Increasing medical inflation, increased life expectancy resulting from advances in medical care, and reviews of individual claims have resulted in higher cost estimates of existing claims and a higher estimate of the number of claims expected to reach excess layers. The remaining unfavorable development was driven primarily by commercial auto liability coverages in recent accident years due to an increase in frequency.

Specialty Lines

The favorable claim and allocated claim adjustment expense reserve development was primarily due to favorable experience in medical professional liability and surety business, partially offset by unfavorable experience in professional liability coverages.

Favorable claim and allocated claim adjustment expense reserve development of approximately $52 million for medical professional liability was primarily due to better than expected frequency of large losses in accident years 2005 and 2006 for healthcare facilities and medical technology firms. Favorable development of approximately $22 million for surety coverages was due to better than expected frequency in accident years 2002 through 2006. The remaining favorable development was due primarily to favorable outcomes on individual claims in accident years 2004 through 2006 for miscellaneous professional and general liability coverages.

Unfavorable development of approximately $18 million for professional liability coverages was primarily due to an increase in the frequency of large claims in older accident years.

Corporate & Other Non-Core

The unfavorable claim and allocated claim adjustment expense reserve development was primarily related to the commutation of a ceded reinsurance arrangement. The unfavorable development was offset by a release of a previously established allowance for uncollectible reinsurance.

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2007 Net Prior Year Development

Standard Lines

Approximately $42 million of favorable claim and allocated claim adjustment expense reserve development was due to decreased severity on open claims within the general liability exposures in accident years 2003 and prior, as well as lower frequency in accident years 2004 through 2006.

Approximately $25 million of favorable claim and allocated claim adjustment expense development was recorded related to property exposures, primarily due to decreased frequency and severity on claims in accident years 2005 and 2006. The severity change was driven by decreased incurred losses as a result of changes in individual claims reserve estimates.

Nine Month Comparison

Net Prior Year Development
Nine months ended September 30, 2008

							Corporate &
	Standard			Specialty			Other Non-
(In millions)	Lines			Lines			Core			Total
Pretax unfavorable (favorable) net prior year claim and allocated claim adjustment expense reserve development:
Core (Non-A&E)	$	(54	)	$	(50	)	$	9		$	(95	)
A&E		—			—			21			21
Pretax unfavorable (favorable) net prior year development before impact of premium development		(54	)		(50	)		30			(74	)
Pretax unfavorable (favorable) premium development		4			(20	)		(3	)		(19	)
Total pretax unfavorable (favorable) net prior year development	$	(50	)	$	(70	)	$	27		$	(93	)

Net Prior Year Development
Nine months ended September 30, 2007

							Corporate &
	Standard			Specialty			Other Non-
(In millions)	Lines			Lines			Core			Total
Pretax unfavorable (favorable) net prior year claim and allocated claim adjustment expense reserve development:
Core (Non-A&E)	$	(74	)	$	(4	)	$	12		$	(66	)
A&E		—			—			7			7
Pretax unfavorable (favorable) net prior year development before impact of premium development		(74	)		(4	)		19			(59	)
Pretax unfavorable (favorable) premium development		(15	)		(13	)		(5	)		(33	)
Total pretax unfavorable (favorable) net prior year development	$	(89	)	$	(17	)	$	14		$	(92	)

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2008 Net Prior Year Development

Standard Lines

The favorable claim and allocated claim adjustment expense reserve development was primarily due to favorable experience in general liability and property coverages including marine exposures, partially offset by unfavorable experience in workers’ compensation (including excess workers’ compensation coverages) and large account business.

For general liability excluding construction defect, $254 million in favorable claim and allocated claim adjustment expense reserve development was due to decreased frequency and severity of claims across multiple accident years. The improvement was due to underwriting initiatives and favorable outcomes on individual claims. Favorable development of $207 million associated with construction defect exposures was due to lower severity resulting from various claim handling initiatives and lower than expected frequency of claims, primarily in accident years 1999 and prior. Claims handling initiatives have resulted in an increase in the number of claims closed without payment and increased recoveries from other parties involved in the claims. The lower construction defect frequency is due to underwriting initiatives designed to limit the exposure to future construction defect claims. For property coverages including marine exposures, approximately $95 million of favorable development was primarily the result of decreased frequency and severity in recent years. The $95 million of favorable property and marine development includes approximately $29 million due to favorable outcomes on claims relating to catastrophes, primarily in accident year 2005.

Unfavorable development of $248 million for workers’ compensation was primarily the result of the impact of claim cost inflation on lifetime medical and home health care claims in accident years 1999 and prior. The changes were driven by increased life expectancy due to advances in medical care and increasing medical inflation. Unfavorable development of $161 million for large account business was also driven primarily by workers’ compensation claim cost inflation primarily in accident years 2001 and prior. Unfavorable development of $114 million on excess workers’ compensation was due to claims in accident years 2002 and prior. Increasing medical inflation, increased life expectancy resulting from advances in medical care, and reviews of individual claims have resulted in higher cost estimates of existing claims and a higher estimate of the number of claims expected to reach excess layers.

Specialty Lines

The favorable claim and allocated claim adjustment expense reserve development was primarily due to favorable experience in medical professional liability, professional liability coverages in recent years, and surety business, partially offset by unfavorable experience in professional liability coverages in older years.

Favorable claim and allocated claim adjustment expense reserve development of approximately $52 million for medical professional liability was primarily due to better than expected frequency of large losses in accident years 2005 and 2006 for healthcare facilities and medical technology firms. Approximately $22 million of favorable development was recorded for professional liability coverages due primarily to favorable outcomes on individual claims in accident years 2004 through 2006. Favorable development of approximately $14 million for surety coverages was due to better than expected frequency in accident years 2002 through 2006.

Unfavorable development of approximately $33 million for professional liability coverages was primarily due to an increase in the frequency of large claims in older accident years.

The favorable premium development is primarily the result of a change in ultimate premiums within a foreign affiliate’s property and financial lines.

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Corporate & Other Non-Core

The unfavorable claim and allocated claim adjustment expense reserve development was primarily related to commutations of certain ceded reinsurance arrangements. The unfavorable development was offset by a release of a previously established allowance for uncollectible reinsurance.

2007 Net Prior Year Development

Standard Lines

Approximately $42 million of favorable claim and allocated claim adjustment expense reserve development was due to decreased severity on open claims within the general liability exposures in accident years 2003 and prior, as well as lower frequency in accident years 2004 through 2006. In addition, approximately $14 million of unfavorable premium development was taken primarily as a result of favorable claim and allocated claim adjustment expense reserve development on retrospectively rated large account policies relating to the automobile and general liability lines of business in accident years 2001 and subsequent. This favorable claim and allocated claim adjustment expense reserve development was due to lower than anticipated frequency and severity.

Approximately $58 million of favorable claim and allocated claim adjustment expense reserve development was due to decreased frequency and severity on claims related to property exposures, primarily in accident years 2005 and 2006. The change was driven by decreased incurred losses as a result of changes in individual claims reserve estimates.

Approximately $42 million of favorable premium development was recorded mainly as a result of additional premium resulting from audits on recent policies related to workers’ compensation and general liability books of business. This was partially offset by $27 million of unfavorable claim and claim adjustment expense reserve development related to this premium.

Approximately $16 million of unfavorable premium development was recorded due to a change in the estimate of the Company’s exposure related to its participation in involuntary pools. This unfavorable premium development was partially offset by $9 million of favorable claim and allocated claim adjustment expense reserve development.

Additional unfavorable prior year reserve development was recorded in the workers’ compensation line of business as a result of continued claim cost inflation in older accident years, driven by increasing medical inflation and advances in medical care. This unfavorable development was offset by favorable development in commercial auto, monoline general liability and umbrella product lines. This favorable development was due to improved severity in recent accident years.

Specialty Lines

Approximately $9 million of favorable claim and claim adjustment expense reserve development was recorded in the excess and surplus line of business. This favorable development was primarily related to improved frequency and severity on excess general liability claims across several accident years.

Approximately $9 million of favorable premium development was recorded mainly as a result of additional premium resulting from audits on recent policies related primarily to general liability coverages. Unfavorable claim and allocated claim adjustment expense reserve development was recorded related to those premiums.

Corporate & Other Non-Core

Approximately $9 million of unfavorable claim and allocated claim adjustment expense reserve development was related to commutation activity, a portion of which was offset by a release of a previously established allowance for uncollectible reinsurance.

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Note H. Legal Proceedings and Contingent Liabilities

Insurance Brokerage Antitrust Litigation

On August 1, 2005, CNAF and several of its insurance subsidiaries were joined as defendants, along with other insurers and brokers, in multidistrict litigation pending in the United States District Court for the District of New Jersey, In re Insurance Brokerage Antitrust Litigation, Civil No. 04-5184 (FSH). The plaintiffs allege bid rigging and improprieties in the payment of contingent commissions in connection with the sale of insurance that violated federal and state antitrust laws, the federal Racketeer Influenced and Corrupt Organizations (RICO) Act and state common law. After discovery, the District Court dismissed the federal antitrust claims and the RICO claims, and declined to exercise supplemental jurisdiction over the state law claims. The plaintiffs have appealed the dismissal of their complaint to the Third Circuit Court of Appeals. The parties have filed their briefs on the appeal. Oral argument, if granted, will be held on April 20, 2009. The Company believes it has meritorious defenses to this action and intends to defend the case vigorously.

The extent of losses beyond any amounts that may be accrued are not readily determinable at this time. However, based on facts and circumstances presently known, in the opinion of management, an unfavorable outcome will not materially affect the equity of the Company, although results of operations may be adversely affected.

Global Crossing Limited Litigation

CCC has been named as a defendant in an action brought by the bankruptcy estate of Global Crossing Limited (Global Crossing) in the United States Bankruptcy Court for the Southern District of New York, Global Crossing Estate Representative, for itself and as the Liquidating Trustee of the Global Crossing Liquidating Trust v. Gary Winnick, et al., Case No. 04 Civ. 2558 (GEL). In the complaint, plaintiff seeks damages from CCC and the other defendants for alleged fraudulent transfers and alleged breaches of fiduciary duties arising from actions taken by Global Crossing while CCC was a shareholder of Global Crossing. The Court dismissed some of the claims against CCC as a matter of law. Pretrial proceedings are ongoing and no trial date has been set. CCC believes it has meritorious defenses to the claims in this action and continues to defend the case vigorously. However, adverse developments could have a material adverse effect on CNA’s business, results of operations and/or equity.

California Long Term Care Litigation

Shaffer v. Continental Casualty Company, et al., U.S. District Court, Central District of California, CV06-2235 RGK, is a class action on behalf of certain California individual long term health care policyholders, alleging that CCC and CNAF knowingly or negligently used unrealistic actuarial assumptions in pricing these policies. On January 8, 2008, CCC, CNAF and the plaintiffs entered into a binding agreement settling the case on a nationwide basis for the policy forms potentially affected by the allegations of the complaint. Following a fairness hearing, the Court entered an order approving the settlement. This order was appealed to the Ninth Circuit Court of Appeals. The appellants’ brief is due to be filed on December 22, 2008. The Company believes it has meritorious defenses to this appeal and intends to defend the appeal vigorously. The agreement did not have a material impact on the Company’s results of operations, however it still remains subject to the favorable resolution of the appeal.

Asbestos and Environmental Pollution (A&E) Reserves

The Company is also a party to litigation and claims related to A&E cases arising in the ordinary course of business. See Note G for further discussion.

Other Litigation

The Company is also a party to other litigation arising in the ordinary course of business. Based on the facts and circumstances currently known, such other litigation will not, in the opinion of management, materially affect the equity or results of operations of the Company.

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Note I. Reinsurance

CNA cedes insurance to reinsurers to limit its maximum loss, provide greater diversification of risk, minimize exposures on larger risks and to exit certain lines of business. The ceding of insurance does not discharge the primary liability of the Company. Therefore, a credit exposure exists with respect to property and casualty and life reinsurance ceded to the extent that any reinsurer is unable to meet its obligations or to the extent that the reinsurer disputes the liabilities assumed under reinsurance agreements. Property and casualty reinsurance coverages are tailored to the specific risk characteristics of each product line and CNA’s retained amount varies by type of coverage. Reinsurance contracts are purchased to protect specific lines of business such as property and workers’ compensation. Corporate catastrophe reinsurance is also purchased for property and workers’ compensation exposure. Most reinsurance contracts are purchased on an excess of loss basis. CNA also utilizes facultative reinsurance in certain lines. In addition, CNA assumes reinsurance as a member of various reinsurance pools and associations.

The following table summarizes the amounts receivable from reinsurers at September 30, 2008 and December 31, 2007.

Components of reinsurance receivables
(In millions)	September 30, 2008			December 31, 2007
Reinsurance receivables related to insurance reserves:
Ceded claim and claim adjustment expense	$	6,468		$	7,056
Ceded future policy benefits		946			987
Ceded policyholders’ funds		41			43
Reinsurance receivables related to paid losses		543			603
Reinsurance receivables		7,998			8,689
Allowance for uncollectible reinsurance		(387	)		(461	)
Reinsurance receivables, net of allowance for uncollectible reinsurance	$	7,611		$	8,228

The Company has established an allowance for uncollectible reinsurance receivables. During the third quarter of 2008, the Company revised its estimate of the required allowance for uncollectible reinsurance receivables resulting in a release of $42 million. There were no significant changes in the allowance for uncollectible reinsurance for the nine months ended September 30, 2007. Changes in the allowance for uncollectible reinsurance receivables are presented as a component of Insurance claims and policyholders’ benefits in the Condensed Consolidated Statements of Operations.

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Note J. Benefit Plans

Pension and Postretirement Healthcare and Life Insurance Benefit Plans

CNAF and certain subsidiaries sponsor noncontributory pension plans typically covering full-time employees age 21 or over who have completed at least one year of service. In 2000, the CNA Retirement Plan was closed to new participants; instead, retirement benefits are provided to these employees under the Company’s savings plans. While the terms of the pension plans vary, benefits are generally based on years of credited service and the employee’s highest 60 consecutive months of compensation. CNA uses December 31 as the measurement date for all of its plans.

CNA’s funding policy for defined benefit pension plans is to make contributions in accordance with applicable governmental regulatory requirements with consideration of the funded status of the plans. The assets of the plans are invested primarily in U.S. government securities, limited partnerships, equity securities, and short term investments.

CNA provides certain healthcare and life insurance benefits to eligible retired employees, their covered dependents and their beneficiaries. The funding for these plans is generally to pay covered expenses as they are incurred.

The components of net periodic benefit costs are presented in the following table.

Net Periodic Benefit Costs

Period ended September 30	Three Months						Nine Months
(In millions)	2008			2007			2008			2007
Pension benefits
Service cost	$	5		$	5		$	15		$	17
Interest cost on projected benefit obligation		37			36			110			109
Expected return on plan assets		(45	)		(43	)		(134	)		(130	)
Prior service cost amortization		—			—			—			1
Actuarial loss		1			2			3			8
Net periodic pension (benefit) cost	$	(2	)	$	—		$	(6	)	$	5
Postretirement benefits
Service cost	$	—		$	—		$	1		$	1
Interest cost on projected benefit obligation		2			2			6			7
Prior service cost amortization		(3	)		(4	)		(11	)		(13	)
Actuarial loss		—			1			1			2
Net periodic postretirement benefit	$	(1	)	$	(1	)	$	(3	)	$	(3	)

For the nine months ended September 30, 2008, $65 million of contributions have been made to the pension plans and $9 million to the postretirement healthcare and life insurance benefit plans. CNA plans to contribute an additional $1 million to the pension plans and $2 million to the postretirement healthcare and life insurance benefit plans during the remainder of 2008.

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Note K. Operating Leases, Other Commitments and Contingencies, and Guarantees

Operating Leases

The Company is obligated to make future payments totaling approximately $229 million for non-cancelable operating leases primarily for office space. Estimated future minimum payments under these contracts are as follows: $13 million in 2008; $45 million in 2009; $41 million in 2010; $36 million in 2011; $30 million in 2012; and $64 million in 2013 and beyond.

The Company holds an investment in a real estate joint venture. In the normal course of business, CNA, on a joint and several basis with other unrelated insurance company shareholders, has committed to continue funding the operating deficits of this joint venture. Additionally, CNA and the other unrelated shareholders, on a joint and several basis, have guaranteed an operating lease for an office building, which expires in 2016. The guarantee of the operating lease is a parallel guarantee to the commitment to fund operating deficits; consequently, the separate guarantee to the lessor is not expected to be triggered as long as the joint venture continues to be funded by its shareholders and continues to make its annual lease payments.

In the event that the other parties to the joint venture are unable to meet their commitments in funding the operations of this joint venture, the Company would be required to assume the obligation for the entire office building operating lease. The maximum potential future lease payments at September 30, 2008 that the Company could be required to pay under this guarantee are approximately $172 million. If CNA were required to assume the entire lease obligation, the Company would have the right to pursue reimbursement from the other shareholders and would have the right to all sublease revenues.

Other Commitments and Contingencies

In the normal course of business, CNA has provided letters of credit in favor of various unaffiliated insurance companies, regulatory authorities and other entities. At September 30, 2008, there were approximately $6 million of outstanding letters of credit.

The Company has entered into a limited number of guaranteed payment contracts, primarily relating to software and telecommunication services, amounting to approximately $11 million as of September 30, 2008. Estimated future minimum payments under these contracts are $9 million in 2008, $1 million in 2009 and $1 million in 2010.

Guarantees

In the course of selling business entities and assets to third parties, the Company has agreed to indemnify purchasers for losses arising out of breaches of representation and warranties with respect to the business entities or assets being sold, including, in certain cases, losses arising from undisclosed liabilities or certain named litigation. Such indemnification provisions generally survive for periods ranging from nine months following the applicable closing date to the expiration of the relevant statutes of limitation. As of September 30, 2008, the aggregate amount of quantifiable indemnification agreements in effect for sales of business entities, assets and third party loans was $873 million.

In addition, the Company has agreed to provide indemnification to third party purchasers for certain losses associated with sold business entities or assets that are not limited by a contractual monetary amount. As of September 30, 2008, the Company had outstanding unlimited indemnifications in connection with the sales of certain of its business entities or assets that included tax liabilities arising prior to a purchaser’s ownership of an entity or asset, defects in title at the time of sale, employee claims arising prior to closing and in some cases losses arising from certain litigation and undisclosed liabilities. These indemnification agreements survive until the applicable statutes of limitation expire, or until the agreed upon contract terms expire. As of September 30, 2008 and December 31, 2007, the Company has recorded approximately $23 million and $27 million of liabilities related to these indemnification agreements.

33

In connection with the issuance of preferred securities by CNA Surety Capital Trust I, CNA Surety issued a guarantee of $80 million to guarantee the payment by CNA Surety Capital Trust I of annual dividends of $1.9 million over 26 years and redemption of $30 million of preferred securities.

Note L. Comprehensive Income (Loss)

The components of comprehensive income (loss) are shown below.

Comprehensive Income (Loss)

Period ended September 30	Three Months						Nine Months
(In millions)	2008			2007			2008			2007
Net income (loss)	$	(331	)	$	174		$	37		$	687
Other comprehensive income (loss):
Change in unrealized gains (losses) on general account investments:
Holding gains (losses) arising during the period, net of tax (expense) benefit of $677, $10, $1,240 and $156		(1,253	)		(19	)		(2,294	)		(291	)
Reclassification adjustment for (gains) losses included in net income, net of tax expense (benefit) of ($22), $25, ($26) and $58		41			(45	)		48			(107	)
Net change in unrealized gains (losses) on general account investments, net of tax (expense) benefit of $655, $35, $1,214 and $214		(1,212	)		(64	)		(2,246	)		(398	)
Net change in unrealized gains (losses) on discontinued operations and other, net of tax (expense) benefit of $1, $0, $3 and $0		(3	)		1			(3	)		—
Net change in foreign currency translation adjustment		(44	)		24			(53	)		29
Net change related to pensions and postretirement benefits, net of tax (expense) benefit of ($2), $0, $1 and ($1)		(2	)		(2	)		(5	)		1
Allocation to participating policyholders’ and minority interests		19			(2	)		41			11
Other comprehensive income (loss), net of tax (expense) benefit of $654, $35, $1,218 and $213		(1,242	)		(43	)		(2,266	)		(357	)
Total comprehensive income (loss)	$	(1,573	)	$	131		$	(2,229	)	$	330

34

Note M. Business Segments

CNA’s core property and casualty commercial insurance operations are reported in two business segments: Standard Lines and Specialty Lines. CNA’s non-core operations are managed in two segments: Life & Group Non-Core and Corporate & Other Non-Core.

The accounting policies of the segments are the same as those described in Note A of the Consolidated Financial Statements within CNA’s Form 10-K. The Company manages most of its assets on a legal entity basis, while segment operations are conducted across legal entities. As such, only insurance and reinsurance receivables, insurance reserves and deferred acquisition costs are readily identifiable by individual segment. Distinct investment portfolios are not maintained for each segment; accordingly, allocation of assets to each segment is not performed. Therefore, net investment income and realized investment gains or losses are allocated primarily based on each segment’s net carried insurance reserves, as adjusted. Income taxes have been allocated on the basis of the taxable income of the segments.

In the following tables, certain financial measures are presented to provide information used by management to monitor the Company’s operating performance. Management utilizes these financial measures to monitor the Company’s insurance operations and investment portfolio. Net operating income, which is derived from certain income statement amounts, is 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 that produce realized gains and losses. Net realized investment gains and losses are comprised of after-tax realized investment gains and losses net of participating policyholders’ and minority interests.

Net operating income is calculated by excluding from net income the after-tax effects of 1) net realized investment gains or losses, 2) income or loss from discontinued operations and 3) any cumulative effects of changes in accounting principles. In the calculation of net operating income, management excludes after-tax net realized investment gains or losses because net realized investment gains or losses related to the Company’s investment portfolio are largely discretionary, except for losses related to other-than-temporary impairments, are generally driven by economic factors that are not necessarily consistent with key drivers of underwriting performance, and are therefore not an indication of trends in insurance operations.

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.

The significant components of the Company’s continuing operations and selected balance sheet items are presented in the following tables.

35

Three months ended										Corporate
September 30, 2008	Standard			Specialty			Life & Group			& Other
(In millions)	Lines			Lines			Non-Core			Non-Core			Eliminations			Total
Revenues:
Net earned premiums	$	762		$	882		$	154		$	2		$	(1	)	$	1,799
Net investment income		136			121			135			47			—			439
Other revenues		13			59			(1	)		1			—			72
Total operating revenues		911			1,062			288			50			(1	)		2,310
Claims, benefits and expenses:
Net incurred claims and benefits		734			516			294			(19	)		—			1,525
Policyholders’ dividends		(10	)		2			2			—			—			(6	)
Amortization of deferred acquisition costs		174			177			4			—			—			355
Other insurance related expenses		87			79			51			6			(1	)		222
Other expenses		20			52			7			26			—			105
Total claims, benefits and expenses		1,005			826			358			13			(1	)		2,201
Operating income (loss) from continuing operations before income tax and minority interest		(94	)		236			(70	)		37			—			109
Income tax (expense) benefit on operating income (loss)		41			(74	)		34			(11	)		—			(10	)
Minority interest		—			(17	)		—			1			—			(16	)
Net operating income (loss) from continuing operations		(53	)		145			(36	)		27			—			83
Realized investment losses, net of participating policyholders’ and minority interests		(178	)		(116	)		(298	)		(59	)		—			(651	)
Income tax benefit on realized investment losses		63			41			104			20			—			228
Income (loss) from continuing operations	$	(168	)	$	70		$	(230	)	$	(12	)	$	—		$	(340	)

36

Three months ended										Corporate
September 30, 2007		Standard			Specialty			Life & Group			& Other
(In millions)	Lines			Lines			Non-Core			Non-Core			Eliminations			Total
Revenues:
Net earned premiums	$	841		$	885		$	156		$	1		$	(1	)	$	1,882
Net investment income		209			152			145			74			—			580
Other revenues		9			50			16			4			—			79
Total operating revenues		1,059			1,087			317			79			(1	)		2,541
Claims, benefits and expenses:
Net incurred claims and benefits		511			556			463			40			—			1,570
Policyholders’ dividends		4			1			—			—			—			5
Amortization of deferred acquisition costs		190			190			4			—			—			384
Other insurance related expenses		82			45			48			1			(1	)		175
Other expenses		12			44			17			31			—			104
Total claims, benefits and expenses		799			836			532			72			(1	)		2,238
Operating income (loss) from continuing operations before income tax and minority interest		260			251			(215	)		7			—			303
Income tax (expense) benefit on operating income (loss)		(82	)		(82	)		84			5			—			(75	)
Minority interest		—			(16	)		—			—			—			(16	)
Net operating income (loss) from continuing operations		178			153			(131	)		12			—			212
Realized investment losses, net of participating policyholders’ and minority interests		(29	)		(13	)		(9	)		(6	)		—			(57	)
Income tax benefit on realized investment losses		10			4			3			2			—			19
Income (loss) from continuing operations	$	159		$	144		$	(137	)	$	8		$	—		$	174

37

Nine months ended										Corporate
September 30, 2008	Standard			Specialty			Life & Group			& Other
(In millions)	Lines			Lines			Non-Core			Non-Core			Eliminations			Total
Revenues:
Net earned premiums	$	2,313		$	2,614		$	460		$	2		$	(3	)	$	5,386
Net investment income		499			408			376			166			—			1,449
Other revenues		42			166			20			12			—			240
Total operating revenues		2,854			3,188			856			180			(3	)		7,075
Claims, benefits and expenses:
Net incurred claims and benefits		1,877			1,641			822			28			—			4,368
Policyholders’ dividends		(3	)		10			5			—			—			12
Amortization of deferred acquisition costs		528			545			10			—			—			1,083
Other insurance related expenses		193			182			152			8			(3	)		532
Other expenses		44			144			17			87			—			292
Total claims, benefits and expenses		2,639			2,522			1,006			123			(3	)		6,287
Operating income (loss) from continuing operations before income tax and minority interest		215			666			(150	)		57			—			788
Income tax (expense) benefit on operating income (loss)		(49	)		(212	)		81			(14	)		—			(194	)
Minority interest		—			(40	)		—			—			—			(40	)
Net operating income (loss) from continuing operations		166			414			(69	)		43			—			554
Realized investment losses, net of participating policyholders’ and minority interests		(254	)		(154	)		(321	)		(84	)		—			(813	)
Income tax benefit on realized investment losses		89			55			112			30			—			286
Income (loss) from continuing operations	$	1		$	315		$	(278	)	$	(11	)	$	—		$	27
September 30, 2008 (In millions)
Reinsurance receivables	$	2,282		$	1,541		$	2,011		$	2,164		$	—		$	7,998
Insurance receivables	$	1,341		$	785		$	13		$	21		$	—		$	2,160
Insurance reserves:
Claim and claim adjustment expenses	$	12,157		$	8,364		$	2,930		$	4,572		$	—		$	28,023
Unearned premiums		1,470			1,919			159			3			(1	)		3,550
Future policy benefits		—			—			7,442			—			—			7,442
Policyholders’ funds		13			7			433			—			—			453
Deferred acquisition costs	$	309		$	374		$	474		$	—		$	—		$	1,157

38

Nine months ended										Corporate
September 30, 2007	Standard			Specialty			Life & Group			& Other
(In millions)	Lines			Lines			Non-Core			Non-Core			Eliminations			Total
Revenues:
Net earned premiums	$	2,546		$	2,600		$	469		$	5		$	(3	)	$	5,617
Net investment income		664			463			494			238			—			1,859
Other revenues		32			139			34			6			—			211
Total operating revenues		3,242			3,202			997			249			(3	)		7,687
Claims, benefits and expenses:
Net incurred claims and benefits		1,685			1,630			1,062			111			—			4,488
Policyholders’ dividends		3			5			—			—			—			8
Amortization of deferred acquisition costs		575			549			13			—			—			1,137
Other insurance related expenses		243			134			143			16			(3	)		533
Other expenses		36			125			34			98			—			293
Total claims, benefits and expenses		2,542			2,443			1,252			225			(3	)		6,459
Operating income (loss) from continuing operations before income tax and minority interest		700			759			(255	)		24			—			1,228
Income tax (expense) benefit on operating income (loss)		(222	)		(249	)		113			4			—			(354	)
Minority interest		—			(36	)		—			(1	)		—			(37	)
Net operating income (loss) from continuing operations		478			474			(142	)		27			—			837
Realized investment losses, net of participating policyholders’ and minority interests		(116	)		(62	)		(26	)		(13	)		—			(217	)
Income tax benefit on realized investment losses		40			21			9			5			—			75
Income (loss) from continuing operations	$	402		$	433		$	(159	)	$	19		$	—		$	695
December 31, 2007 (In millions)
Reinsurance receivables	$	2,269		$	1,819		$	2,201		$	2,400		$	—		$	8,689
Insurance receivables	$	1,664		$	605		$	26		$	(11	)	$	—		$	2,284
Insurance reserves:
Claim and claim adjustment expenses	$	12,048		$	8,403		$	3,027		$	5,110		$	—		$	28,588
Unearned premiums		1,483			1,948			162			5			—			3,598
Future policy benefits		—			—			7,106			—			—			7,106
Policyholders’ funds		26			1			903			—			—			930
Deferred acquisition costs	$	311		$	365		$	485		$	—		$	—		$	1,161

39

The following table provides revenue by line of business for each reportable segment. Revenues are comprised of operating revenues and realized investment gains and losses, net of participating policyholders’ and minority interests.

Revenue by Line of Business

Period ended September 30	Three Months						Nine Months
(In millions)	2008			2007			2008			2007
Standard Lines
Business Insurance	$	140		$	162		$	450		$	472
Commercial Insurance		593			868			2,150			2,654
Standard Lines revenue		733			1,030			2,600			3,126
Specialty Lines
U.S. Specialty Lines		547			670			1,834			1,990
Surety		121			125			356			352
Warranty		70			75			218			219
CNA Global		208			204			626			579
Specialty Lines revenue		946			1,074			3,034			3,140
Life & Group Non-Core
Life & Annuity		(18	)		47			15			226
Health		11			241			491			693
Other		(3	)		20			29			52
Life & Group Non-Core revenue		(10	)		308			535			971
Corporate & Other Non-Core
CNA Re		—			24			32			96
Other		(9	)		49			64			140
Corporate & Other Non-Core revenue		(9	)		73			96			236
Eliminations		(1	)		(1	)		(3	)		(3	)
Total revenue	$	1,659		$	2,484		$	6,262		$	7,470

Note N. Statutory Accounting Practices

CNAF’s ability to pay dividends and other credit obligations is significantly dependent on receipt of dividends from its subsidiaries. The payment of dividends to CNAF by its insurance subsidiaries without prior approval of the insurance department of each subsidiary’s domiciliary jurisdiction is limited by formula. Dividends in excess of these amounts are subject to prior approval by the respective state insurance departments.

Dividends from CCC are subject to the insurance holding company laws of the State of Illinois, the domiciliary state of CCC. Under these laws, ordinary dividends, or dividends that do not require prior approval of the Illinois Department of Financial and Professional Regulation — Division of Insurance (the Department), may be paid only from earned surplus, which is calculated by removing unrealized gains from unassigned surplus. As of September 30, 2008, CCC is in a negative earned surplus position. Any future dividend payments made during 2008 would be subject to the Department’s prior approval.

CNAF’s domestic insurance subsidiaries are subject to risk-based capital requirements. Risk-based capital is a method developed by the NAIC to determine the minimum amount of statutory capital appropriate for an insurance company to support its overall business operations in consideration of its size and risk profile. The formula for determining the amount of risk-based capital specifies various factors, weighted based on the perceived degree of risk, which are applied to certain financial balances and financial activity. The adequacy of a company’s actual capital is evaluated by a comparison to the risk-based capital results, as determined by the formula. Companies below minimum risk-based capital requirements are classified within certain levels, each of which requires specified corrective action. As of September 30, 2008 and December 31, 2007, all of CNAF’s domestic insurance subsidiaries exceeded the minimum risk-based capital requirements.

40

Combined statutory capital and surplus and net income, determined in accordance with accounting practices prescribed or permitted by insurance regulatory authorities for the property and casualty and the life insurance subsidiaries, were as follows.

Preliminary Statutory Information

	Statutory Capital and Surplus				Statutory Net Income (Loss)						Statutory Net Income (Loss)
					Three months ended September 30						Nine months ended September 30
	September 30, 2008		December 31, 2007		2008			2007			2008		2007
(In millions)
Property and casualty companies (a)	$	7,967	$	8,511	$	(259	)	$	164		$	—	$	570
Life company		514		471		(26	)		(3	)		5		26

(a) Surplus includes the property and casualty companies’ equity ownership of the life company’s capital and surplus.

In conformity with accounting practices prescribed by insurance regulatory authorities, preliminary statutory capital and surplus as of September 30, 2008, presented above, reflects the impact of a $1 billion surplus note, which will be issued subsequent to September 30, 2008 but prior to the filing of CCC’s third quarter statutory statements. See Note P for further discussion.

41

Note O. Discontinued Operations

CNA has discontinued operations, which consist of run-off insurance and reinsurance operations acquired in its merger with The Continental Corporation in 1995. As of September 30, 2008, the remaining run-off business is administered by Continental Reinsurance Corporation International, Ltd., a wholly-owned Bermuda subsidiary. The business consists of facultative property and casualty, treaty excess casualty and treaty pro-rata reinsurance with underlying exposure to a diverse, multi-line domestic and international book of business encompassing property, casualty and marine liabilities.

Results of the discontinued operations were as follows.

Discontinued Operations

Period ended September 30	Three Months					Nine Months
(In millions)	2008		2007			2008		2007
Revenues:
Net investment income	$	2	$	2		$	6	$	11
Realized investment gains and other		1		2			3		4
Total revenues		3		4			9		15
Insurance related expenses		3		3			8		23
Income (loss) before income taxes		—		1			1		(8	)
Income tax (expense) benefit		9		(1	)		9		—
Income (loss) from discontinued operations, net of tax	$	9	$	—		$	10	$	(8	)

In the third quarter of 2008, the Company recognized a change in estimate of the tax benefit related to the 2007 sale of the Company’s United Kingdom discontinued operations subsidiary.

Net assets of discontinued operations, included in Other assets on the Condensed Consolidated Balance Sheets, were as follows.

Discontinued Operations

(In millions)	September 30, 2008		December 31, 2007
Assets:
Investments	$	166	$	185
Reinsurance receivables		6		1
Cash		—		7
Other assets		1		4
Total assets		173		197
Liabilities:
Insurance reserves		168		172
Other liabilities		4		2
Total liabilities		172		174
Net assets of discontinued operations	$	1	$	23

CNA’s accounting and reporting for discontinued operations is in accordance with APB Opinion No. 30, Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. At September 30, 2008 and December 31, 2007, the insurance reserves are net of discount of $76 million and $73 million. The net income (loss) from discontinued operations reported above primarily represents the net investment income, realized investment gains and losses, foreign currency gains and losses, effects of the accretion of the loss reserve discount and re-estimation of the ultimate claim and claim adjustment expense reserve of the discontinued operations.

42

Note P. Subsequent Events

CNAF Preferred Issue and CCC Surplus Note

Under an agreement executed effective on October 27, 2008, CNA will issue, and Loews has agreed to purchase, 12,500 shares of CNAF non-voting cumulative senior preferred stock (Preferred Issue) for $1.25 billion. The terms of the Preferred Issue were approved by a special review committee of independent members of CNAF’s Board of Directors. The principal terms of the Preferred Issue are as follows:

• The Preferred Issue is perpetual and is senior to CNAF’s common stock and any future preferred stock as to the payment of dividends and amounts payable upon any liquidation, dissolution or winding up.

• No dividends may be declared on CNAF’s common stock or any future preferred stock until the Preferred Issue has been paid in full. As such, the Company has suspended its quarterly dividend payment.

• The Preferred Issue is not convertible into any other securities and may only be redeemed upon the mutual agreement of the Company and Loews.

• The Preferred Issue accrues cumulative dividends at an initial rate of 10% per year. On the fifth anniversary of the issuance and every five years thereafter, the dividend rate will increase to the higher of 10% or the then current 10-year U.S. Treasury yield plus 700 basis points.

• Dividends are payable quarterly and any dividends not paid when due will be compounded quarterly.

As a private placement, the Preferred Issue is exempt from registration under Section 4(2) of the Securities Act. CNAF will use the proceeds from the Preferred Issue to increase the statutory surplus of its principal insurance subsidiary, CCC, through the purchase of a $1.0 billion surplus note of CCC. Surplus notes are financial instruments with a stated maturity date and scheduled interest payments, issued by insurance enterprises with the approval of the insurer’s domiciliary state. Surplus notes are treated as capital under statutory accounting. All payments of interest and principal on this note are subject to the prior approval of the Illinois Department of Financial and Professional Regulation — Division of Insurance. The surplus note of CCC will have a term of 20 years and will accrue interest at a rate of 10% per year. In conformity with accounting practices prescribed by insurance regulatory authorities, CCC’s preliminary statutory capital and surplus as of September 30, 2008, presented in Note N, reflects the impact of the surplus note, which will be issued subsequent to September 30, 2008 but prior to the filing of CCC’s third quarter statutory statements.

Limited Partnership Investments

The Company’s limited partnership investments consist of 82 individual partnerships which cover a broad range of investment strategies including fixed income arbitrage, global arbitrage, long/short equity, relative value, multi-strategy and private equity. The investments across partnerships and investment strategies provide for risk diversification within the limited partnership portfolio and the overall investment portfolio. These strategies consist primarily of underlying marketable securities and may include low levels of leverage and the use of derivatives which may potentially introduce more volatility and risk to the partnership returns. The continued disruption and turmoil in the capital markets has had a negative impact on limited partnership returns.

As described in Note A of the Consolidated Financial Statements within CNA’s 2007 Form 10-K, the Company’s carrying value of investments in limited partnerships typically reflects a reporting lag. Subsequent to September 30, 2008, the Company received preliminary September 2008 results from the general partners of certain limited partnership investments indicating a pretax loss of approximately $110 million that will be reflected in the Company’s fourth quarter results due to the reporting lag.

43

CNA Financial Corporation

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The following discussion highlights significant factors impacting the consolidated operations and financial condition of CNA Financial Corporation (CNAF) and its subsidiaries (collectively CNA or the Company). References to “CNA,” “the Company,” “we,” “our,” “us” or like terms refer to the business of CNA and its subsidiaries. Based on 2007 statutory net written premiums, we are the seventh largest commercial insurance writer and the thirteenth largest property and casualty insurance organization in the United States of America.

The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q and Item 1A Risk Factors and Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are included in our Form 10-K filed with the Securities and Exchange Commission (SEC) for the year ended December 31, 2007, as amended by Form 10-K/A which amended Part I, Item 1 of Form 10-K (Form 10-K).

Changes in estimates of claim and allocated claim adjustment expense reserves and premium accruals, net of reinsurance, for prior years are defined as net prior year development within this MD&A. These changes can be favorable or unfavorable. Net prior year development does not include the impact of related acquisition expenses. Further information on our reserves is provided in Note G of the Condensed Consolidated Financial Statements included under Item 1.

44

CONSOLIDATED OPERATIONS

Results of Operations

The following table includes the consolidated results of our operations. For more detailed components of our business operations and the net operating income financial measure, see the segment discussions within this MD&A.

Period ended September 30	Three Months						Nine Months
(In millions, except per share data)	2008			2007			2008			2007
Revenues
Net earned premiums	$	1,799		$	1,882		$	5,386		$	5,617
Net investment income		439			580			1,449			1,859
Other revenues		72			79			240			211
Total operating revenues		2,310			2,541			7,075			7,687
Claims, Benefits and Expenses
Net incurred claims and benefits		1,525			1,570			4,368			4,488
Policyholders’ dividends		(6	)		5			12			8
Amortization of deferred acquisition costs		355			384			1,083			1,137
Other insurance related expenses		222			175			532			533
Other expenses		105			104			292			293
Total claims, benefits and expenses		2,201			2,238			6,287			6,459
Operating income from continuing operations before income tax and minority interest		109			303			788			1,228
Income tax expense on operating income		(10	)		(75	)		(194	)		(354	)
Minority interest		(16	)		(16	)		(40	)		(37	)
Net operating income from continuing operations		83			212			554			837
Realized investment losses, net of participating policyholders’ and minority interests		(651	)		(57	)		(813	)		(217	)
Income tax benefit on realized investment losses		228			19			286			75
Income (loss) from continuing operations		(340	)		174			27			695
Income (loss) from discontinued operations, net of income tax (expense) benefit of $9, $(1), $9 and $0		9			—			10			(8	)
Net income (loss)	$	(331	)	$	174		$	37		$	687
Basic and Diluted Earnings (Loss) Per Share
Income (loss) from continuing operations	$	(1.26	)	$	0.64		$	0.10		$	2.56
Income (loss) from discontinued operations		0.03			—			0.04			(0.03	)
Basic and diluted earnings (loss) per share available to common stockholders	$	(1.23	)	$	0.64		$	0.14		$	2.53
Weighted average outstanding common stock and common stock equivalents
Basic		269.0			271.6			269.6			271.5
Diluted		269.1			271.9			269.6			271.8

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Three Month Comparison

Net results decreased $505 million for the three months ended September 30, 2008 as compared with the same period in 2007. This decrease was primarily due to higher net realized investment losses and decreased net operating income. See the Investments section of this MD&A for further discussion of net realized investment results.

Net operating income from continuing operations for the three months ended September 30, 2008 decreased $129 million as compared with the same period in 2007. This decrease was primarily due to higher catastrophe impacts and lower net investment income. The catastrophe impacts were $168 million after-tax in the third quarter of 2008, which included a $7 million after-tax catastrophe-related insurance assessment, as compared to catastrophe losses of $7 million after-tax in the third quarter of 2007. Partially offsetting these unfavorable impacts was an after-tax loss of $108 million recognized in the third quarter of 2007 in connection with the settlement of an arbitration proceeding (IGI Contingency). In September 2007, we reached agreement to fully and finally settle all exposures under four excess of loss reinsurance treaties issued by CNA Reinsurance Company Limited, a former CNA subsidiary.

Favorable net prior year development of $60 million was recorded for the three months ended September 30, 2008 related to our Standard Lines, Specialty Lines and Corporate & Other Non-core segments. This amount consisted of $58 million of favorable claim and allocated claim adjustment expense reserve development and $2 million of favorable premium development. Favorable net prior year development of $67 million was recorded for the three months ended September 30, 2007 related to our Standard Lines, Specialty Lines and Corporate & Other Non-core segments. This amount consisted of $57 million of favorable claim and allocated claim adjustment expense reserve development and $10 million of favorable premium development. Further information on net prior year development for the three months ended September 30, 2008 and 2007 is included in Note G of the Condensed Consolidated Financial Statements included under Item 1.

Net earned premiums decreased $83 million for the three months ended September 30, 2008 as compared with the same period in 2007, including a $79 million decrease related to Standard Lines and a $3 million decrease related to Specialty Lines. See the Segment Results section of this MD&A for further discussion.

Income from discontinued operations increased $9 million for the three months ended September 30, 2008 as compared to the same period in 2007, primarily driven by the recognition in 2008 of a change in estimate of the tax benefit related to the 2007 sale of our United Kingdom discontinued operations subsidiary.

Nine Month Comparison

Net income decreased $650 million for the nine months ended September 30, 2008 as compared with the same period in 2007. This decrease was primarily due to higher net realized investment losses and decreased net operating income. See the Investments section of this MD&A for further discussion of net realized investment results.

Net operating income from continuing operations for the nine months ended September 30, 2008 decreased $283 million as compared with the same period in 2007. This decrease was primarily due to the same reasons discussed in the three month comparison above. The catastrophe impacts were $233 million after-tax for the nine months ended September 30, 2008, as compared to catastrophe losses of $35 million after-tax for the same period in 2007. Net investment income included a decline in trading portfolio results of $145 million, which was offset by a corresponding decrease in the policyholders’ funds reserves supported by the trading portfolio. See the Investments section of this MD&A for further discussion of net investment income.

Favorable net prior year development of $93 million was recorded for the nine months ended September 30, 2008 related to our Standard Lines, Specialty Lines and Corporate & Other Non-core segments. This amount consisted of $74 million of favorable claim and allocated claim adjustment expense reserve development and $19 million of favorable premium development. Favorable net prior year development of $92 million was recorded for the nine months ended September 30, 2007 related to our Standard Lines, Specialty Lines and Corporate & Other Non-core segments. This amount consisted of $59 million of favorable claim and allocated claim adjustment expense reserve development and $33 million of favorable premium development. Further

46

information on net prior year development for the nine months ended September 30, 2008 and 2007 is included in Note G of the Condensed Consolidated Financial Statements included under Item 1.

Net earned premiums decreased $231 million for the nine months ended September 30, 2008 as compared with the same period in 2007, including a $233 million decrease related to Standard Lines and a $14 million increase related to Specialty Lines. See the Segment Results section of this MD&A for further discussion.

Results from discontinued operations increased $18 million for the nine months ended September 30, 2008 as compared to the same period in 2007. The 2008 results were primarily driven by the tax-related item discussed in the three month comparison above. Results in 2007 were primarily driven by unfavorable net prior year development.

Critical Accounting Estimates

The preparation of the Condensed Consolidated Financial Statements (Unaudited) in conformity with accounting principles generally accepted in the United States of America (GAAP) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the amounts of revenues and expenses reported during the period. Actual results may differ from those estimates.

Our Condensed Consolidated Financial Statements and accompanying notes have been prepared in accordance with GAAP applied on a consistent basis. We continually evaluate the accounting policies and estimates used to prepare the Condensed Consolidated Financial Statements. In general, our estimates are based on historical experience, evaluation of current trends, information from third party professionals and various other assumptions that are believed to be reasonable under the known facts and circumstances.

The accounting estimates below are considered by us to be critical to an understanding of our Condensed Consolidated Financial Statements as their application places the most significant demands on our judgment.

• Insurance Reserves

• Reinsurance

• Valuation of Investments and Impairment of Securities

• Long Term Care Products

• Pension and Postretirement Benefit Obligations

• Legal Proceedings

Due to the inherent uncertainties involved with these types of judgments, actual results could differ significantly from estimates and may have a material adverse impact on our results of operations or equity. See the Critical Accounting Estimates section of our Management’s Discussion and Analysis of Financial Condition and Results of Operations included under Item 7 of our Form 10-K for further information.

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SEGMENT RESULTS

The following discusses the results of continuing operations for our operating segments. We utilize the net operating income financial measure to monitor our operations. Net operating income is calculated by excluding from net income the after-tax effects of 1) net realized investment gains or losses, 2) income or loss from discontinued operations and 3) any cumulative effects of changes in accounting principles. See further discussion regarding how we manage our business in Note M of the Condensed Consolidated Financial Statements included under Item 1. In evaluating the results of our Standard Lines and Specialty Lines segments, we utilize the loss ratio, the expense ratio, the dividend ratio, and the combined ratio. These ratios are calculated using GAAP financial results. 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 insurance underwriting and acquisition expenses, including the amortization of deferred acquisition costs, to net earned premiums. The dividend ratio is the ratio of policyholders’ dividends incurred to net earned premiums. The combined ratio is the sum of the loss, expense and dividend ratios.

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STANDARD LINES

The following table details the results of operations for Standard Lines.

Results of Operations

Period ended September 30	Three Months						Nine Months
(In millions)	2008			2007			2008			2007
Net written premiums	$	723		$	753		$	2,342		$	2,524
Net earned premiums		762			841			2,313			2,546
Net investment income		136			209			499			664
Net operating income (loss)		(53	)		178			166			478
Net realized investment losses, after-tax		(115	)		(19	)		(165	)		(76	)
Net income (loss)		(168	)		159			1			402
Ratios
Loss and loss adjustment expense		96.3	%		60.9	%		81.1	%		66.2	%
Expense		34.4			32.3			31.3			32.1
Dividend		(1.4	)		0.4			(0.2	)		0.1
Combined		129.3	%		93.6	%		112.2	%		98.4	%

Three Month Comparison

Net written premiums for Standard Lines decreased $30 million for the three months ended September 30, 2008 as compared with the same period in 2007, primarily due to decreased production. The competitive market conditions are expected to put ongoing pressure on premium and income levels, and the expense ratio. This unfavorable impact was partially offset by decreased ceded premiums. Net earned premiums decreased $79 million for the three months ended September 30, 2008 as compared with the same period in 2007, consistent with the decreased net written premiums.

Standard Lines averaged rate decreases of 5% for the three months ended September 30, 2008, as compared to decreases of 4% for the three months ended September 30, 2007 for the contracts that renewed during those periods. Retention rates of 80% and 73% were achieved for those contracts that were available for renewal in each period.

Net results decreased $327 million for the three months ended September 30, 2008 as compared with the same period in 2007. This decrease was primarily attributable to decreased net operating results and higher net realized investment losses. See the Investments section of this MD&A for further discussion of the net realized investment results and net investment income.

Net operating results decreased $231 million for the three months ended September 30, 2008 as compared with the same period in 2007. This decrease was primarily driven by higher catastrophe impacts, lower net investment income and less favorable net prior year development. The catastrophe impacts were $160 million after-tax in the third quarter of 2008, which included a $7 million after-tax catastrophe-related insurance assessment, as compared to catastrophe losses of $7 million after-tax in the third quarter of 2007.

The combined ratio increased 35.7 points for the three months ended September 30, 2008 as compared with the same period in 2007. The loss ratio increased 35.4 points primarily due to increased catastrophe losses and lower favorable net prior year development, partially offset by lower current accident year loss ratios across most lines of business. Catastrophes losses had an adverse impact of 31.0 points on the loss ratio for the three months ended September 30, 2008.

During the third quarter of 2008, our ongoing actuarial reviews confirmed various trends in the number and size of claims across certain lines of business, and we recorded favorable and unfavorable development for those lines in the third quarter of 2008. See additional discussion in Note G of the Condensed Consolidated Financial Statements included under Item 1. The trend in recent accident years was generally favorable across several lines of business. Since our estimates for the current accident year partially rely on the trends and results for recent accident years, the current accident year non-catastrophe losses decreased by $53 million as referenced in the loss ratio discussion above.

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The expense ratio increased 2.1 points for the three months ended September 30, 2008 as compared with the same period in 2007. The increase was primarily driven by our estimate of the ultimate assessment from the Texas Windstorm Insurance Association related to catastrophe losses incurred in the third quarter of 2008.

The dividend ratio decreased 1.8 points for the three months ended September 30, 2008 as compared with the same period in 2007, due to favorable dividend development.

Favorable net prior year development of $1 million was recorded for the three months ended September 30, 2008, including $4 million of favorable claim and allocated claim adjustment expense reserve development and $3 million of unfavorable premium development. Favorable net prior year development of $72 million, including $67 million of favorable claim and allocated claim adjustment expense reserve development and $5 million of favorable premium development, was recorded for the three months ended September 30, 2007. Further information on Standard Lines net prior year development for the three months ended September 30, 2008 and 2007 is included in Note G of the Condensed Consolidated Financial Statements included under Item 1.

Nine Month Comparison

Net written premiums for Standard Lines decreased $182 million and net earned premiums decreased $233 million for the nine months ended September 30, 2008 as compared with the same period in 2007, due to the reasons discussed above in the three month comparison.

Standard Lines averaged rate decreases of 6% for the nine months ended September 30, 2008, as compared to decreases of 4% for the nine months ended September 30, 2007 for the contracts that renewed during those periods. Retention rates of 81% and 77% were achieved for those contracts that were available for renewal in each period.

Net income decreased $401 million for the nine months ended September 30, 2008 as compared with the same period in 2007. This decrease was primarily attributable to decreased net operating income and higher net realized investment losses. See the Investments section of this MD&A for further discussion of the net realized investment results and net investment income.

Net operating income decreased $312 million for the nine months ended September 30, 2008 as compared with the same period in 2007. This decrease was primarily driven by the items discussed in the three month comparison above. The catastrophe impacts were $224 million after-tax for the nine months ended September 30, 2008, as compared to catastrophe losses of $34 million after-tax in the same period of 2007.

The combined ratio increased 13.8 points for the nine months ended September 30, 2008 as compared with the same period in 2007. The loss ratio increased 14.9 points primarily due to increased catastrophe losses and higher current accident year loss ratios across certain lines of business. Catastrophes losses related to 2008 events had an adverse impact of 14.5 points on the loss ratio for the nine months ended September 30, 2008. The expense ratio decreased 0.8 points for the nine months ended September 30, 2008 as compared with the same period in 2007.

Favorable net prior year development of $50 million was recorded for the nine months ended September 30, 2008, including $54 million of favorable claim and allocated claim adjustment expense reserve development and $4 million of unfavorable premium development. Favorable net prior year development of $89 million, including $74 million of favorable claim and allocated claim adjustment expense reserve development and $15 million of favorable premium development, was recorded for the nine months ended September 30, 2007. Further information on Standard Lines net prior year development for the nine months ended September 30, 2008 and 2007 is included in Note G of the Condensed Consolidated Financial Statements included under Item 1.

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The following table summarizes the gross and net carried reserves as of September 30, 2008 and December 31, 2007 for Standard Lines.

Gross and Net Carried
Claim and Claim Adjustment Expense Reserves

(In millions)	September 30, 2008		December 31, 2007
Gross Case Reserves	$	6,071	$	5,988
Gross IBNR Reserves		6,086		6,060
Total Gross Carried Claim and Claim Adjustment Expense Reserves	$	12,157	$	12,048
Net Case Reserves	$	4,877	$	4,750
Net IBNR Reserves		5,100		5,170
Total Net Carried Claim and Claim Adjustment Expense Reserves	$	9,977	$	9,920

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SPECIALTY LINES

The following table details the results of operations for Specialty Lines.

Results of Operations

Period ended September 30	Three Months						Nine Months
(In millions)	2008			2007			2008			2007
Net written premiums	$	875		$	886		$	2,583		$	2,619
Net earned premiums		882			885			2,614			2,600
Net investment income		121			152			408			463
Net operating income		145			153			414			474
Net realized investment losses, after-tax		(75	)		(9	)		(99	)		(41	)
Net income		70			144			315			433
Ratios
Loss and loss adjustment expense		58.5	%		62.8	%		62.8	%		62.7	%
Expense		29.0			26.6			27.8			26.3
Dividend		0.3			0.2			0.4			0.2
Combined		87.8	%		89.6	%		91.0	%		89.2	%

Three Month Comparison

Net written premiums for Specialty Lines decreased $11 million for the three months ended September 30, 2008 as compared with the same period in 2007. Premiums written in 2008 were unfavorably impacted by decreased production as compared with the same period in 2007. The competitive market conditions are expected to put ongoing pressure on premium and income levels, and the expense ratio. This unfavorable impact was partially offset by decreased ceded premiums. Net earned premiums decreased $3 million for the three months ended September 30, 2008 as compared with the same period in 2007, consistent with the decrease in net written premiums.

Specialty Lines averaged rate decreases of 3% for the three months ended September 30, 2008 as compared to decreases of 4% for the three months ended September 30, 2007 for the contracts that renewed during those periods. Retention rates of 84% and 82% were achieved for those contracts that were available for renewal in each period.

Net income decreased $74 million for the three months ended September 30, 2008 as compared with the same period in 2007. This decrease was primarily attributable to higher net realized investment losses. See the Investments section of this MD&A for further discussion of the net realized investment results and net investment income.

Net operating income decreased $8 million for the three months ended September 30, 2008 as compared with the same period in 2007. This decrease was primarily driven by lower net investment income, decreased current accident year underwriting results and higher catastrophe losses. These unfavorable results were partially offset by favorable net prior year development. Catastrophe losses were $8 million after-tax in the third quarter of 2008. There were no catastrophe losses in the three months ended September 30, 2007.

The combined ratio improved 1.8 points for the three months ended September 30, 2008 as compared with the same period in 2007. The loss ratio improved 4.3 points, primarily due to favorable net prior year development for the three months ended September 30, 2008. This was partially offset by higher current accident year loss ratios recorded in our errors and omissions (E&O) and directors and officers (D&O) coverages for financial institutions due to the current financial markets credit crisis.

The expense ratio increased 2.4 points for the three months ended September 30, 2008 as compared with the same period in 2007. The increase primarily related to changes in estimates for insurance-related assessments and reduced ceding commissions.

Favorable net prior year development of $70 million, including $68 million of favorable claim and allocated claim adjustment expense reserve development and $2 million of favorable premium development, was

52

recorded for the three months ended September 30, 2008. There was $3 million of unfavorable claim and allocated claim adjustment expense reserve development and $3 million of favorable premium development, resulting in no net prior year development for the three months ended September 30, 2007. Further information on Specialty Lines net prior year development for the three months ended September 30, 2008 and 2007 is included in Note G of the Condensed Consolidated Financial Statements included under Item 1.

Nine Month Comparison

Net written premiums for Specialty Lines decreased $36 million for the nine months ended September 30, 2008 as compared with the same period in 2007. Premiums written in 2008 were unfavorably impacted by decreased production as compared with the same period in 2007. The competitive market conditions are expected to put ongoing pressure on premium and income levels, and the expense ratio. This unfavorable impact was partially offset by decreased ceded premiums. The U.S. Specialty Lines reinsurance structure was primarily quota share reinsurance through April 2007. We elected not to renew this coverage upon its expiration. With our current diversification in the previously reinsured lines of business and our management of the gross limits on the business written, we did not believe the cost of renewing the program was commensurate with its projected benefit. Net earned premiums increased $14 million for the nine months ended September 30, 2008 as compared to the same period in 2007, which reflects the decreased use of reinsurance.

Specialty Lines averaged rate decreases of 3% for each of the nine month periods ended September 30, 2008 and September 30, 2007 for the contracts that renewed during those periods. Retention rates of 84% and 83% were achieved for those contracts that were available for renewal in each period.

Net income decreased $118 million for the nine months ended September 30, 2008 as compared with the same period in 2007. This decrease was primarily attributable to lower net operating income and higher net realized investment losses. See the Investments section of this MD&A for further discussion of the net realized investment results and net investment income.

Net operating income decreased $60 million for the nine months ended September 30, 2008 as compared with the same period in 2007, primarily due to the items discussed in the three month comparison above. Catastrophe losses were $9 million after-tax for the nine months ended September 30, 2008 as compared with $1 million after-tax in the same period in 2007.

The combined ratio increased 1.8 points for the nine months ended September 30, 2008 as compared with the same period in 2007. The loss ratio was favorably impacted by net prior year development, and unfavorably impacted by higher current accident year loss ratios as discussed in the three month comparison above and increased catastrophe losses. The expense ratio increased 1.5 points for the nine months ended September 30, 2008 as compared to the same period in 2007. The increase primarily related to the items discussed in the three month comparison above.

Favorable net prior year development of $70 million, including $50 million of favorable claim and allocated claim adjustment expense reserve development and $20 million of favorable premium development, was recorded for the nine months ended September 30, 2008. Favorable net prior year development of $17 million, including $4 million of favorable claim and allocated claim adjustment expense reserve development and $13 million of favorable premium development, was recorded for the nine months ended September 30, 2007. Further information on Specialty Lines net prior year development for the nine months ended September 30, 2008 and 2007 is included in Note G of the Condensed Consolidated Financial Statements included under Item 1.

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The following table summarizes the gross and net carried reserves as of September 30, 2008 and December 31, 2007 for Specialty Lines.

Gross and Net Carried
Claim and Claim Adjustment Expense Reserves

(In millions)	September 30, 2008		December 31, 2007
Gross Case Reserves	$	2,662	$	2,585
Gross IBNR Reserves		5,702		5,818
Total Gross Carried Claim and Claim Adjustment Expense Reserves	$	8,364	$	8,403
Net Case Reserves	$	2,204	$	2,090
Net IBNR Reserves		4,681		4,527
Total Net Carried Claim and Claim Adjustment Expense Reserves	$	6,885	$	6,617

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LIFE & GROUP NON-CORE

The following table summarizes the results of operations for Life & Group Non-Core.

Results of Operations

Period ended September 30	Three Months						Nine Months
(In millions)	2008			2007			2008			2007
Net earned premiums	$	154		$	156		$	460		$	469
Net investment income		135			145			376			494
Net operating loss		(36	)		(131	)		(69	)		(142	)
Net realized investment losses, after-tax		(194	)		(6	)		(209	)		(17	)
Net loss		(230	)		(137	)		(278	)		(159	)

Three Month Comparison

Net earned premiums for Life & Group Non-Core decreased $2 million for the three months ended September 30, 2008 as compared with the same period in 2007. The net earned premiums relate primarily to the group and individual long term care businesses.

The net loss in 2008 was primarily due to net realized investment losses. See the Investments section of this MD&A for further discussion of the net realized investment results. The results in 2008 were also impacted by adverse investment performance on a portion of our pension deposit business. The net loss in 2007 included an after-tax loss of $108 million related to the settlement of the IGI Contingency.

Nine Month Comparison

Net earned premiums for Life & Group Non-Core decreased $9 million for the nine months ended September 30, 2008 as compared with the same period in 2007.

Net loss increased $119 million for the nine months ended September 30, 2008 as compared with the same period in 2007, primarily due to the reasons discussed above in the three month comparison. The decreased net investment income included a decline of trading portfolio results of $144 million, which was offset by a corresponding decrease in the policyholders’ fund reserves supported by the trading portfolio. The trading portfolio supports the indexed group annuity portion of our pension deposit business.

During the first quarter of 2008, we decided to exit the indexed group annuity portion of our pension deposit business. This business had net results of $(10) million and $(11) million for the nine months ended September 30, 2008 and 2007. The related assets were $222 million and related liabilities were $204 million at September 30, 2008. We expect these liabilities to be settled with the policyholders during the remainder of 2008 with no material impact to results of operations.

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CORPORATE & OTHER NON-CORE

The following table summarizes the results of operations for the Corporate & Other Non-Core segment, including Asbestos and Environmental Pollution (A&E) and intrasegment eliminations.

Results of Operations

Period ended September 30	Three Months						Nine Months
(In millions)	2008			2007			2008			2007
Net investment income	$	47		$	74		$	166		$	238
Revenues		(10	)		72			93			233
Net operating income		27			12			43			27
Net realized investment losses, after-tax		(39	)		(4	)		(54	)		(8	)
Net income (loss)		(12	)		8			(11	)		19

Three Month Comparison

Revenues decreased $82 million for the three months ended September 30, 2008 as compared with the same period in 2007. Revenues were unfavorably impacted by higher net realized investment losses and lower net investment income. See the Investments section of this MD&A for further discussion of net investment income and net realized investment results.

Net results decreased $20 million for the three months ended September 30, 2008 as compared with the same period in 2007. The decrease was primarily due to decreased revenues as discussed above, partially offset by a release from the allowance for uncollectible reinsurance receivables of $27 million arising from a change in estimate as further discussed in Note I of the Condensed Consolidated Financial Statements included under Item 1. In addition, the 2007 results included current accident year losses related to certain mass torts.

Unfavorable net prior year development of $11 million was recorded for the three months ended September 30, 2008, including $14 million of unfavorable claim and allocated claim adjustment expense reserve development and $3 million of favorable premium development. Unfavorable net prior year development of $5 million was recorded for the three months ended September 30, 2007, including $7 million of unfavorable claim and allocated claim adjustment expense reserve development and $2 million of favorable premium development. Further information on Corporate & Other Non-Core net prior year development for the three months ended September 30, 2008 and 2007 is included in Note G of the Condensed Consolidated Financial Statements included under Item 1.

Nine Month Comparison

Revenues decreased $140 million for the nine months ended September 30, 2008 as compared with the same period in 2007. Revenues were unfavorably impacted by lower net investment income and higher net realized investment losses. See the Investments section of this MD&A for further discussion of net investment income and net realized investment results.

Net results decreased $30 million for the nine months ended September 30, 2008 as compared with the same period in 2007, primarily due to the reasons discussed above in the three month comparison.

Unfavorable net prior year development of $27 million was recorded for the nine months ended September 30, 2008, including $30 million of unfavorable claim and allocated claim adjustment expense reserve development and $3 million of favorable premium development. Unfavorable net prior year development of $14 million was recorded for the nine months ended September 30, 2007, including $19 million of unfavorable claim and allocated claim adjustment expense reserve development and $5 million of favorable premium development. Further information on Corporate & Other Non-Core net prior year development for the nine months ended September 30, 2008 and 2007 is included in Note G of the Condensed Consolidated Financial Statements included under Item 1.

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The following table summarizes the gross and net carried reserves as of September 30, 2008 and December 31, 2007 for Corporate & Other Non-Core.

Gross and Net Carried
Claim and Claim Adjustment Expense Reserves

(In millions)	September 30, 2008		December 31, 2007
Gross Case Reserves	$	1,886	$	2,159
Gross IBNR Reserves		2,686		2,951
Total Gross Carried Claim and Claim Adjustment Expense Reserves	$	4,572	$	5,110
Net Case Reserves	$	1,182	$	1,328
Net IBNR Reserves		1,597		1,787
Total Net Carried Claim and Claim Adjustment Expense Reserves	$	2,779	$	3,115

A&E Reserves

Our property and casualty insurance subsidiaries have actual and potential exposures related to asbestos and environmental pollution (A&E) claims. Further information on A&E claim and claim adjustment expense reserves and net prior year development is included in Note G of the Condensed Consolidated Financial Statements included under Item 1.

Asbestos

We have resolved a number of our large asbestos accounts by negotiating settlement agreements. Structured settlement agreements provide for payments over multiple years as set forth in each individual agreement.

In 1985, 47 asbestos producers and their insurers, including The Continental Insurance Company (CIC), executed the Wellington Agreement. The agreement was intended to resolve all issues and litigation related to coverage for asbestos exposures. Under this agreement, signatory insurers committed scheduled policy limits and made the limits available to pay asbestos claims based upon coverage blocks designated by the policyholders in 1985, subject to extension by policyholders. CIC was a signatory insurer to the Wellington Agreement.

We have also used coverage in place agreements to resolve large asbestos exposures. Coverage in place agreements are typically agreements with our policyholders identifying the policies and the terms for payment of asbestos related liabilities. Claim payments are contingent on presentation of documentation supporting the demand for claim payment. Coverage in place agreements may have annual payment caps. Coverage in place agreements are evaluated based on claims filings trends and severities.

We categorize active asbestos accounts as large or small accounts. We define a large account as an active account with more than $100 thousand of cumulative paid losses. We have made resolving large accounts a significant management priority. Small accounts are defined as active accounts with $100 thousand or less of cumulative paid losses. Approximately 81% of our total active asbestos accounts are classified as small accounts at September 30, 2008 and December 31, 2007.

We also evaluate our asbestos liabilities arising from our assumed reinsurance business and our participation in various pools, including Excess & Casualty Reinsurance Association (ECRA).

IBNR reserves relate to potential development on accounts that have not settled and potential future claims from unidentified policyholders.

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The tables below depict our overall pending asbestos accounts and associated reserves at September 30, 2008 and December 31, 2007.

Pending Asbestos Accounts and Associated Reserves

			Net Paid Losses		Net Asbestos		Percent of
	Number of		in 2008		Reserves		Asbestos
September 30, 2008	Policyholders		(In millions)		(In millions)		Net Reserves
Policyholders with settlement agreements
Structured settlements		16	$	16	$	135		11	%
Wellington		3		1		11		1
Coverage in place		36		16		87		7
Total with settlement agreements		55		33		233		19
Other policyholders with active accounts
Large asbestos accounts		233		65		226		19
Small asbestos accounts		994		21		84		7
Total other policyholders		1,227		86		310		26
Assumed reinsurance and pools		—		6		127		10
Unassigned IBNR		—		—		545		45
Total		1,282	$	125	$	1,215		100	%

Pending Asbestos Accounts and Associated Reserves

			Net Paid Losses		Net Asbestos		Percent of
	Number of		in 2007		Reserves		Asbestos
December 31, 2007	Policyholders		(In millions)		(In millions)		Net Reserves
Policyholders with settlement agreements
Structured settlements		14	$	29	$	151		11	%
Wellington		3		1		12		1
Coverage in place		34		38		100		8
Total with settlement agreements		51		68		263		20
Other policyholders with active accounts
Large asbestos accounts		233		45		237		18
Small asbestos accounts		1,005		15		93		7
Total other policyholders		1,238		60		330		25
Assumed reinsurance and pools		—		8		133		10
Unassigned IBNR		—		—		596		45
Total		1,289	$	136	$	1,322		100	%

Some asbestos-related defendants have asserted that their insurance policies are not subject to aggregate limits on coverage. We have such claims from a number of insureds. Some of these claims involve insureds facing exhaustion of products liability aggregate limits in their policies, who have asserted that their asbestos-related claims fall within so-called “non-products” liability coverage contained within their policies rather than products liability coverage, and that the claimed “non-products” coverage is not subject to any aggregate limit. It is difficult to predict the ultimate size of any of the claims for coverage purportedly not subject to aggregate limits or predict to what extent, if any, the attempts to assert “non-products” claims outside the products liability aggregate will succeed. Our policies also contain other limits applicable to these claims and we have additional coverage defenses to certain claims. We have attempted to manage our asbestos exposure by aggressively seeking to settle claims on acceptable terms. There can be no assurance that any of these settlement efforts will

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be successful, or that any such claims can be settled on terms acceptable to us. Where we cannot settle a claim on acceptable terms, we aggressively litigate the claim. However, adverse developments with respect to such matters could have a material adverse effect on our results of operations and/or equity.

We are involved in significant asbestos-related claim litigation, which is described in Note G of the Condensed Consolidated Financial Statements included under Item 1.

Environmental Pollution

We classify our environmental pollution accounts into several categories, which include structured settlements, coverage in place agreements and active accounts. Structured settlement agreements provide for payments over multiple years as set forth in each individual agreement.

We have also used coverage in place agreements to resolve pollution exposures. Coverage in place agreements are typically agreements with our policyholders identifying the policies and the terms for payment of pollution related liabilities. Claim payments are contingent on presentation of adequate documentation of damages during the policy periods and other documentation supporting the demand for claim payment. Coverage in place agreements may have annual payment caps.

We categorize active accounts as large or small accounts in the pollution area. We define a large account as an active account with more than $100 thousand cumulative paid losses. We have made closing large accounts a significant management priority. Small accounts are defined as active accounts with $100 thousand or less of cumulative paid losses. Approximately 74% and 73% of our total active pollution accounts are classified as small accounts as of September 30, 2008 and December 31, 2007.

We also evaluate our environmental pollution exposures arising from our assumed reinsurance and our participation in various pools, including ECRA.

We carry unassigned IBNR reserves for environmental pollution. These reserves relate to potential development on accounts that have not settled and potential future claims from unidentified policyholders.

The tables below depict our overall pending environmental pollution accounts and associated reserves at September 30, 2008 and December 31, 2007.

Pending Environmental Pollution Accounts and Associated Reserves

September 30, 2008

					Net
					Environmental		Percent of
			Net Paid Losses		Pollution		Environmental
	Number of		in 2008		Reserves		Pollution Net
	Policyholders		(In millions)		(In millions)		Reserve
Policyholders with settlement agreements
Structured settlements		11	$	2	$	6		3	%
Coverage in place		16		2		15		8
Total with settlement agreements		27		4		21		11
Other policyholders with active accounts
Large pollution accounts		110		34		49		25
Small pollution accounts		320		11		33		17
Total other policyholders		430		45		82		42
Assumed reinsurance and pools		—		2		29		15
Unassigned IBNR		—		—		62		32
Total		457	$	51	$	194		100	%

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Pending Environmental Pollution Accounts and Associated Reserves

December 31, 2007

					Net
					Environmental		Percent of
			Net Paid Losses		Pollution		Environmental
	Number of		in 2007		Reserves		Pollution Net
	Policyholders		(In millions)		(In millions)		Reserve
Policyholders with settlement agreements
Structured settlements		10	$	9	$	6		2	%
Coverage in place		18		8		14		6
Total with settlement agreements		28		17		20		8
Other policyholders with active accounts
Large pollution accounts		112		17		53		22
Small pollution accounts		298		9		42		17
Total other policyholders		410		26		95		39
Assumed reinsurance and pools		—		1		31		13
Unassigned IBNR		—		—		96		40
Total		438	$	44	$	242		100	%

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INVESTMENTS

Net Investment Income

The significant components of net investment income are presented in the following table.

Net Investment Income

Period ended September 30	Three Months						Nine Months
(In millions)	2008			2007			2008			2007
Fixed maturity securities	$	501		$	501		$	1,495		$	1,523
Short term investments		29			57			94			146
Limited partnerships		(77	)		19			(70	)		142
Equity securities		18			7			62			18
Income (loss) from trading portfolio (a)		(23	)		(2	)		(104	)		41
Other		3			9			14			31
Gross investment income		451			591			1,491			1,901
Investment expense		(12	)		(11	)		(42	)		(42	)
Net investment income	$	439		$	580		$	1,449		$	1,859

(a) The change in net unrealized losses on trading securities included in net investment income, was $(6) million and $(21) million for the three and nine months ended September 30, 2008 and $(12) million and $(9) million for the three and nine months ended September 30, 2007.

Net investment income decreased by $141 million for the three months ended September 30, 2008 compared with the same period in 2007. This decrease was primarily driven by decreased results from limited partnerships, short term investments and the trading portfolio. The decreased returns from short term investments were caused by an overall decrease in rates and a partial shift to lower risk U.S. Treasury Bills and agency discount notes.

Net investment income decreased by $410 million for the nine months ended September 30, 2008 compared with the same period of 2007. The decrease was primarily driven by decreased results from limited partnerships, the trading portfolio and short term investments due to decreased interest rates. The decreased results from the trading portfolio were offset by a corresponding decrease in the policyholders’ funds reserves supported by the trading portfolio, which is included in Insurance claims and policyholders’ benefits on the Condensed Consolidated Statements of Operations.

The continued disruption and turmoil in the capital markets has had a negative impact on limited partnership returns. See additional discussion in Note P of the Condensed Consolidated Financial Statements included under Item 1.

The bond segment of the investment portfolio yielded 5.7% and 5.8% for the nine months ended September 30, 2008 and 2007.

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Net Realized Investment Gains (Losses)

The components of net realized investment results for available-for-sale securities are presented in the following table.

Period ended September 30	Three Months						Nine Months
(In millions)	2008			2007			2008			2007
Fixed maturity securities:
U.S. Government bonds	$	34		$	131		$	20		$	37
Corporate and other taxable bonds		(289	)		(88	)		(328	)		(113	)
Tax-exempt bonds		1			10			51			(43	)
Asset-backed bonds		(61	)		(81	)		(218	)		(191	)
Redeemable preferred stock		—			(11	)		—			(12	)
Total fixed maturity securities		(315	)		(39	)		(475	)		(322	)
Equity securities		(376	)		16			(405	)		30
Derivative securities		35			(45	)		47			62
Short term investments		4			5			11			5
Other		1			6			9			8
Realized investment losses, net of participating policyholders’ and minority interests		(651	)		(57	)		(813	)		(217	)
Income tax benefit		228			19			286			75
Net realized investment losses, net of participating policyholders’ and minority interests	$	(423	)	$	(38	)	$	(527	)	$	(142	)

Net realized investment losses increased $385 million for both the three month and nine month periods ended September 30, 2008 as compared with the same periods in 2007.

For the three months ended September 30, 2008, other-than-temporary impairment (OTTI) losses of $380 million, driven by credit issues, were recorded primarily in the non-redeemable preferred equity securities and corporate and other taxable bonds sectors. For the three months ended September 30, 2007, OTTI losses of $122 million were recorded primarily in the corporate and other taxable bonds and asset-backed bonds sectors.

For the three months ended September 30, 2008, we recorded net realized investment losses, including OTTI losses, of $198 million related to securities issued by Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac), $65 million related to securities issued by Washington Mutual, $63 million related to securities issued by Icelandic banks and $23 million related to securities issued by American International Group.

For the nine months ended September 30, 2008, OTTI losses of $546 million were recorded primarily in the non-redeemable preferred equity securities, corporate and other taxable bonds and asset-backed bonds sectors. For the nine months ended September 30, 2007, OTTI losses of $293 million were recorded primarily in the corporate and other taxable bonds and asset-backed bonds sectors.

The OTTI losses related to securities for which we did not assert an intent to hold until an anticipated recovery in value. The judgment as to whether an impairment is other-than-temporary incorporates many factors including the likelihood of a security recovering to cost, our intent and ability to hold the security until recovery, general market conditions, specific sector views and significant changes in expected cash flows. Our decision to record an OTTI loss is primarily based on whether the security’s fair value is likely to recover to its amortized cost in light of all of the factors considered over the expected holding period. Current factors and market conditions that contributed to recording impairments in 2008 included the takeover of the government sponsored entities Freddie Mac and Fannie Mae, the failure of several financial institutions, continued significant credit spread widening in fixed income sectors, market volatility and uncertainty in capital markets world-wide and the lingering impact from the sub-prime residential mortgage concerns.

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A primary objective in the management of the fixed maturity and equity portfolios is to optimize return relative to underlying liabilities and respective liquidity needs. Our views on the current interest rate environment, tax regulations, asset class valuations, specific security issuer and broader industry segment conditions, and the domestic and global economic conditions, are some of the factors that enter into an investment decision. We also continually monitor exposure to issuers of securities held and broader industry sector exposures and may from time to time adjust such exposures based on our views of a specific issuer or industry sector.

A further consideration in the management of the investment portfolio is the characteristics of the underlying liabilities and the ability to align the duration of the portfolio to those liabilities to meet future liquidity needs, minimize interest rate risk and maintain a level of income sufficient to support the underlying insurance liabilities. For portfolios where future liability cash flows are determinable and typically long term in nature, we segregate investments for asset/liability management purposes.

The segregated investments support liabilities primarily in the Life & Group Non-Core segment including annuities, structured benefit settlements and long term care products. The remaining investments are managed to support the Standard Lines, Specialty Lines and Corporate & Other Non-Core segments.

The effective durations of fixed income securities, short term investments, preferred stocks and interest rate derivatives are presented in the table below. Short term investments are net of securities lending collateral and account payable and receivable amounts for securities purchased and sold, but not yet settled.

Effective Durations

	September 30, 2008				December 31, 2007
			Effective Duration				Effective Duration
(In millions)	Fair Value		(In years)		Fair Value		(In years)
Segregated investments	$	8,182		10.2	$	9,211		10.7
Other interest sensitive investments		26,339		4.1		29,406		3.3
Total	$	34,521		5.6	$	38,617		5.1

The investment portfolio is periodically analyzed for changes in duration and related price change risk. Additionally, we periodically review the sensitivity of the portfolio to the level of foreign exchange rates and other factors that contribute to market price changes. A summary of these risks and specific analysis on changes is included in the Quantitative and Qualitative Disclosures About Market Risk in Item 7A of our Form 10-K.

We invest in certain derivative financial instruments primarily to reduce our exposure to market risk (principally interest rate, equity price and foreign currency risk) and credit risk (risk of nonperformance of underlying obligor). We also may enter into credit default swaps for the purpose of selling credit protection in order to replicate the risk of fixed income securities. Derivative securities are recorded at fair value at the reporting date. Derivatives are also utilized to mitigate market risk by purchasing Standard & Poor’s (S&P) 500 Index futures in a notional amount equal to the contract liability relating to Life & Group Non-Core indexed group annuity contracts. We provided cash collateral to satisfy margin deposits on exchange-traded derivatives totaling $12 million as of September 30, 2008. For over-the-counter derivative transactions we utilize International Swaps and Derivatives Association Master Agreements that specify certain limits over which collateral is exchanged. As of September 30, 2008, we provided $27 million of cash collateral for over-the-counter derivative instruments.

We classify our fixed maturity and equity securities as either available-for-sale or trading, and as such, they are carried at fair value. The amortized cost of fixed maturity securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in Net investment income. Changes in fair value related to available-for-sale securities are reported as a component of Other comprehensive income (loss). Changes in fair value of trading securities are reported within Net investment income. As of January 1, 2008,

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we adopted Statement of Financial Accounting Standard No. 157, Fair Value Measurement. See Note F of the Condensed Consolidated Financial Statements included under Item 1 for further information.

The following table provides further detail of gross realized investment gains and losses, which include OTTI losses, on available-for-sale fixed maturity and equity securities.

Realized Investment Gains (Losses)

Period ended September 30	Three Months						Nine Months
(In millions)	2008			2007			2008			2007
Net realized investment gains (losses) on fixed maturity securities and equity securities:
Fixed maturity securities:
Gross realized gains	$	75		$	181		$	275		$	324
Gross realized losses		(390	)		(220	)		(750	)		(646	)
Net realized investment losses on fixed maturity securities		(315	)		(39	)		(475	)		(322	)
Equity securities:
Gross realized gains		10			30			21			50
Gross realized losses		(386	)		(14	)		(426	)		(20	)
Net realized investment gains (losses) on equity securities		(376	)		16			(405	)		30
Net realized investment losses on fixed maturity and equity securities	$	(691	)	$	(23	)	$	(880	)	$	(292	)

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The following table provides details of the largest realized investment losses from sales of securities aggregated by issuer including the fair value of the securities at date of sale, the amount of the loss recorded and the period of time that the securities had been in an unrealized loss position prior to sale. The period of time that the securities had been in an unrealized loss position prior to sale can vary due to the timing of individual security purchases. Also included is a narrative providing the industry sector along with the facts and circumstances giving rise to the loss.

Largest Realized Investment Losses from Securities Sold at a Loss

	Fair				Months in
Nine months ended September 30, 2008	Value at				Unrealized
	Date of		Loss		Loss Prior
Issuer Description and Discussion	Sale		On Sale		To Sale (a)
(In millions)
Various notes and bonds issued by the United States Treasury. Securities sold due to outlook on interest rates.	$	10,309	$	105		0-6
Non-redeemable preferred stock of Fannie Mae. The company is now in conservatorship.		2		48		7-12
Fixed Income securities of an investment banking firm that filed bankruptcy causing the market value of the securities to decline rapidly.		13		40		0-12
Non-redeemable preferred stock of Freddie Mac. The company is now in conservatorship.		1		23		0-12
Mortgage backed pass-through securities were sold based on deteriorating performance of the underlying loans and the resulting rapid market price decline.		36		18		0-6
Fixed income securities of a provider of wireless and wire line communication services. Securities were sold to reduce exposure because the company announced a significant shortfall in operating results, causing significant credit deterioration which resulted in a rating downgrade.		37		16		0-6
Total	$	10,398	$	250

(a) Represents the range of consecutive months the various positions were in an unrealized loss prior to sale.

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Valuation and Impairment of Investments

The following table details the carrying value of our general account investments.

Carrying Value of General Account Investments

	September 30,					December 31,
(In millions)	2008		%			2007		%
Fixed maturity securities available-for-sale:
U.S. Treasury securities and obligations of government agencies	$	1,518		4	%	$	687		2	%
Asset-backed securities		8,779		24			11,409		27
States, municipalities and political subdivisions – tax-exempt securities		6,966		19			7,675		18
Corporate bonds		8,419		23			8,952		22
Other debt securities		3,381		9			4,299		10
Redeemable preferred stock		73		—			1,058		3
Total fixed maturity securities available-for-sale		29,136		79			34,080		82
Fixed maturity securities trading:
U.S. Treasury securities and obligations of government agencies		—		—			5		—
Asset-backed securities		14		—			31		—
Corporate bonds		24		—			123		—
Other debt securities		2		—			18		—
Total fixed maturity securities trading		40		—			177		—
Equity securities available-for-sale:
Common stock		389		1			452		1
Preferred stock		572		1			116		—
Total equity securities available-for-sale		961		2			568		1
Short term investments available-for-sale		4,728		13			4,497		11
Short term investments trading		21		—			180		1
Limited partnerships		2,110		6			2,214		5
Other investments		63		—			73		—
Total general account investments	$	37,059		100	%	$	41,789		100	%

A significant judgment in the valuation of investments is the determination of when an OTTI has occurred. We analyze securities on at least a quarterly basis. Part of this analysis is to monitor the length of time and severity of the decline below amortized cost for those securities in an unrealized loss position.

Investments in the general account had a net unrealized loss of $3,386 million at September 30, 2008 compared with a net unrealized gain of $74 million at December 31, 2007. The unrealized position at September 30, 2008 was comprised of a net unrealized loss of $3,243 million for fixed maturity securities, a net unrealized loss of $148 million for equity securities and a net unrealized gain of $5 million for short term investments. The unrealized position at December 31, 2007 was comprised of a net unrealized loss of $131 million for fixed maturity securities, a net unrealized gain of $202 million for equity securities and a net unrealized gain of $3 million for short term investments. See Note D of the Condensed Consolidated Financial Statements included under Item 1 for further detail on the unrealized position of our general account investment portfolio.

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The prolonged and severe disruptions in the public debt and equity markets, including among other things, widening of credit spreads, bankruptcies and government intervention in a number of large financial institutions, have resulted in significant realized and unrealized losses in our investment portfolio. For the nine months ended September 30, 2008, we incurred substantial realized and unrealized investment losses. Subsequent to September 30, 2008, through the date of this report, conditions in the public debt and equity markets have continued to deteriorate and pricing levels have continued to decline. As a result, depending on market conditions, we could incur substantial additional realized and unrealized losses in future periods, which could have a material adverse impact on our results of operations, equity, business and insurer financial strength and debt ratings.

The following table provides the composition of fixed maturity securities available-for-sale in a gross unrealized loss position at September 30, 2008 by maturity profile. Securities not due at a single date are allocated based on weighted average life.

Maturity Profile

	Percent of			Percent of
	Market			Unrealized
	Value			Loss
Due in one year or less		1	%		—	%
Due after one year through five years		10			4
Due after five years through ten years		14			11
Due after ten years		75			85
Total		100	%		100	%

Our non-investment grade fixed income securities available-for-sale at September 30, 2008 that were in a gross unrealized loss position had a fair value of $2,690 million. The following tables summarize the fair value and gross unrealized loss of non-investment grade securities categorized by the length of time those securities have been in a continuous unrealized loss position and further categorized by the severity of the unrealized loss position in 10% increments as of September 30, 2008 and December 31, 2007.

Unrealized Loss Aging for Non-investment Grade Securities

					Fair Value as a Percentage of Amortized Cost						Gross
September 30, 2008	Estimated										Unrealized
(In millions)	Fair Value		90-99%		80-89%		70-79%		<70%		Loss
Fixed income securities:
0-6 months	$	1,037	$	40	$	40	$	17	$	25	$	122
7-11 months		839		20		46		55		82		203
12-24 months		798		14		70		38		46		168
Greater than 24 months		16		—		—		4		7		11
Total non-investment grade	$	2,690	$	74	$	156	$	114	$	160	$	504

Unrealized Loss Aging for Non-investment Grade Securities

			Fair Value as a Percentage of Amortized Cost								Gross
December 31, 2007	Estimated										Unrealized
(In millions)	Fair Value		90-99%		80-89%		70-79%		<70%		Loss
Fixed income securities:
0-6 months	$	1,527	$	56	$	14	$	3	$	—	$	73
7-12 months		125		6		2		—		—		8
13-24 months		26		1		1		1		1		4
Greater than 24 months		9		1		1		—		—		2
Total non-investment grade	$	1,687	$	64	$	18	$	4	$	1	$	87

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As part of the ongoing OTTI monitoring process, we evaluated the facts and circumstances based on available information for each of the non-investment grade securities and determined that the securities presented in the above tables were temporarily impaired when evaluated at September 30, 2008 or December 31, 2007. This determination was based on a number of factors that we regularly consider including, but not limited to: the issuers’ ability to meet current and future interest and principal payments, an evaluation of the issuers’ financial condition and near term prospects, our assessment of the sector outlook and estimates of the fair value of any underlying collateral. In all cases where a decline in value is judged to be temporary, we have the intent and ability to hold these securities for a period of time sufficient to recover the amortized cost of our investment through an anticipated recovery in the fair value of such securities or by holding the securities to maturity. In many cases, the securities held are matched to liabilities as part of ongoing asset/liability duration management. As such, we continually assess our ability to hold securities for a time sufficient to recover any temporary loss in value or until maturity. We believe we have sufficient levels of liquidity so as to not impact the asset/liability management process.

Our equity securities classified as available-for-sale as of September 30, 2008 that were in a gross unrealized loss position had a fair value of $563 million and gross unrealized losses of $335 million. Under the same process as followed for fixed maturity securities, we monitor the equity securities for other-than-temporary declines in value. In all cases where a decline in value is judged to be temporary, we have the intent and ability to hold these securities for a period of time sufficient to recover the cost of our investment through an anticipated recovery in the fair value of such securities. The majority of the unrealized losses in this category are related to non-redeemable preferred stock holdings of financial institutions. The holdings in this industry sector have been adversely impacted by significant credit spread widening brought on by the volatility in the capital markets in addition to the government sponsored entities Freddie Mac and Fannie Mae being placed in conservatorship for which we have recognized realized investment losses. The remainder of the holdings in this category are being monitored and we believe, given current facts and circumstances, are sufficiently capitalized and will recover in value.

Invested assets are exposed to various risks, such as interest rate and credit risk. Due to the level of risk associated with certain invested assets and the level of uncertainty related to changes in the value of these assets, it is possible that changes in these risks in the near term, including increases in interest rates and further credit spread widening, could have an adverse material impact on our results of operations or equity.

The general account portfolio consists primarily of high quality bonds, 89% of which were rated as investment grade (rated BBB- or higher) at September 30, 2008 and December 31, 2007. The following table summarizes the ratings of our general account bond portfolio at carrying value.

General Account Bond Ratings

	September 30,					December 31,
(In millions)	2008		%			2007		%
U.S. Government and affiliated agency securities	$	1,515		5	%	$	816		3	%
Other AAA rated		11,477		39			16,728		50
AA and A rated		7,518		26			6,326		19
BBB rated		5,481		19			5,713		17
Non-investment grade		3,112		11			3,616		11
Total	$	29,103		100	%	$	33,199		100	%

At September 30, 2008 and December 31, 2007, approximately 97% and 95% of the general account portfolio was issued by U.S. Government and affiliated agencies or was rated by S&P or Moody’s Investors Service (Moody’s). The remaining bonds were rated by other rating agencies or internally.

Non-investment grade bonds, as presented in the tables above, are primarily high-yield securities rated below BBB- by bond rating agencies, as well as other unrated securities that, according to our analysis, are below investment grade. High-yield securities generally involve a greater degree of risk than investment grade securities. However, expected returns should compensate for the added risk. This risk is also considered in the interest rate assumptions for the underlying insurance products.

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The carrying value of securities that are either subject to trading restrictions or trade in illiquid private placement markets at September 30, 2008 was $392 million, which represents 1.1% of our total investment portfolio. These securities were in a net unrealized gain position of $164 million at September 30, 2008.

Asset-Backed and Sub-prime Mortgage Exposure

Asset-Backed Distribution

				Security Type
																Percent			Percent
September 30, 2008																of Total			of Total
(In millions)	MBS(a)			CMO(b)			ABS(c)			CDO(d)			Total			Security Type			Investments
U.S. Government Agencies	$	448		$	1,061		$	—		$	—		$	1,509			17	%		4	%
AAA		—			4,379			1,929			9			6,317			72			17
AA		—			42			294			25			361			4			1
A		—			1			107			71			179			2			1
BBB		—			33			291			10			334			4			1
Non-investment grade and equity tranches		—			27			43			23			93			1			—
Total Fair Value	$	448		$	5,543		$	2,664		$	138		$	8,793			100	%		24	%
Total Amortized Cost	$	454		$	6,163		$	3,018		$	361		$	9,996
Percent of total fair value by security type		5	%		63	%		30	%		2	%		100	%
Sub-prime (included above)
Fair Value	$	—		$	—		$	1,371		$	7		$	1,378			16	%		4	%
Amortized Cost	$	—		$	—		$	1,535		$	32		$	1,567			16	%		4	%
Alt-A (included above)
Fair Value	$	—		$	1,084		$	—		$	4		$	1,088			12	%		3	%
Amortized Cost	$	—		$	1,268		$	—		$	8		$	1,276			13	%		3	%

(a)	Mortgage-backed securities (MBS)
(b)	Collateralized mortgage obligations (CMO)
(c)	Asset-backed securities (ABS)
(d)	Collateralized debt obligations (CDO)

Included in our fixed maturity securities at September 30, 2008 were $8,793 million of asset-backed securities, at fair value, which represents 24% of total invested assets. Of the total asset-backed securities, 89% were U.S. Government Agency issued or AAA rated. Of the total invested assets, $1,378 million or 4% have exposure to sub-prime residential mortgage (sub-prime) collateral, as measured by the original deal structure, while 3% have exposure to Alternative A (Alt-A) collateral. Of the securities with sub-prime exposure, approximately 97% were rated investment grade, while 98% of the Alt-A securities were rated investment grade. We believe that each of these securities would be rated investment grade even without the benefit of any applicable third-party guarantees. In addition to sub-prime exposure in fixed maturity securities, there is exposure of approximately $41 million through limited partnerships and sold credit default swaps which provide the buyer protection against declines in sub-prime indices.

All asset-backed securities in an unrealized loss position are reviewed as part of the ongoing OTTI process, which resulted in OTTI losses of $19 million and $136 million after-tax for the three and nine months ended September 30, 2008. Included in these OTTI losses were $17 million and $110 million after-tax related to securities with sub-prime and Alt-A exposure. Our review of these securities includes an analysis of cash flow modeling under various default scenarios, the seniority of the specific tranche within the deal structure, the composition of the collateral and the actual default experience. Given current market conditions and the specific facts and circumstances related to our individual sub-prime and Alt-A exposures, we believe that all remaining unrealized losses are temporary in nature. Continued deterioration in these markets beyond our current expectations may cause us to reconsider and record additional OTTI losses.

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Short Term Investments

The carrying value of the components of the general account short term investment portfolio is presented in the following table.

	September 30,		December 31,
(In millions)	2008		2007
Short term investments available-for-sale:
Commercial paper	$	1,035	$	3,040
U.S. Treasury securities		2,192		577
Money market funds		121		72
Other, including collateral held related to securities lending		1,380		808
Total short term investments available-for-sale		4,728		4,497
Short term investments trading:
Commercial paper		—		35
Money market funds		21		139
Other		—		6
Total short term investments trading		21		180
Total short term investments	$	4,749	$	4,677

Securities Lending Activities

We lend securities to unrelated parties, primarily major brokerage firms through two programs: an internally managed program and an external program managed by our lead custodial bank as agent. The securities lending program is for the purpose of enhancing income. We do not lend securities for operating or financing purposes. Borrowers of these securities must deposit and maintain collateral with us of at least 102% of the fair value of the securities loaned, adjusted to fair value daily, regardless of whether the collateral is cash or securities. Only cash collateral is accepted for our internally managed program and is typically invested in the highest quality commercial paper with maturities of less than 7 days. U.S. Government, agencies or Government National Mortgage Association securities are accepted as non-cash collateral for the external program. We maintain effective control over all loaned securities and, therefore, continue to report such securities as Fixed maturity securities in the Condensed Consolidated Balance Sheets.

The lending programs are matched-book programs where the collateral is invested to substantially match the term of the loan which limits risk. In accordance with our lending agreements, securities on loan are returned immediately to us upon notice. The fair value of collateral held related to securities lending, included in other short term investments, was $53 million at December 31, 2007. There was no collateral held at September 30, 2008. The fair value of non-cash collateral was $543 million and $273 million at September 30, 2008 and December 31, 2007.

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LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Our principal operating cash flow sources are premiums and investment income from our insurance subsidiaries. Our primary operating cash flow uses are payments for claims, policy benefits and operating expenses.

For the nine months ended September 30, 2008, net cash provided by operating activities was $1,261 million as compared with $713 million for the same period in 2007. Cash provided by operating activities was favorably impacted by increased net sales of trading securities to fund policyholders’ withdrawals of investment contract products issued by us, decreased loss payments and decreased tax payments. Policyholders’ fund withdrawals are reflected as financing cash flows. Cash provided by operating activities was unfavorably impacted by decreased premium collections and decreased investment income.

Cash flows from investing activities include the purchase and sale of available-for-sale financial instruments, as well as the purchase and sale of businesses, land, buildings, equipment and other assets not generally held for resale.

For the nine months ended September 30, 2008, net cash used by investing activities was $508 million as compared with $667 million for the same period in 2007. Cash flows used by investing activities related principally to purchases of fixed maturity securities. The cash flow from investing activities is impacted by various factors such as the anticipated payment of claims, financing activity, asset/liability management and individual security buy and sell decisions made in the normal course of portfolio management.

Cash flows from financing activities include proceeds from the issuance of debt and equity securities, outflows for dividends or repayment of debt, outlays to reacquire equity instruments, and deposits and withdrawals related to investment contract products issued by us.

For the nine months ended September 30, 2008, net cash used by financing activities was $733 million as compared with $83 million for the same period in 2007. In January 2008, we repaid our $150 million 6.45% senior note. We also purchased outstanding shares of our common stock as discussed below. Additionally, the increase in cash used for financing activities is related to increased policyholders’ fund withdrawals in 2008 as compared to 2007, which are reflected as a Return of investment contract account balances on the Condensed Consolidated Statements of Cash Flows.

Liquidity

We believe that our present cash flows from operations, investing activities and financing activities are sufficient to fund our working capital and debt obligation needs and we do not expect this to change in the near term due to the following factors:

• We do not anticipate changes in our core property and casualty commercial insurance operations which would significantly impact liquidity and we continue to maintain reinsurance contracts which limit the impact of potential catastrophic events.

• We have entered into several settlement agreements and assumed reinsurance contracts that require collateralization of future payment obligations and assumed reserves if our ratings or other specific criteria fall below certain thresholds. The ratings triggers are generally more than one level below our current ratings. A downgrade below our current ratings levels would also result in additional collateral requirements for derivative contracts for which we are in a liability position at any given point in time. At September 30, 2008, the total potential collateralization requirements amount to approximately $90 million.

• As of September 30, 2008, the registrant held short term investments of approximately $710 million.

We have an effective shelf registration statement under which we may issue debt or equity securities.

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Dividends

On August 20, 2008, we paid a quarterly dividend of $0.15 per share, to shareholders of record on August 6, 2008. In October 2008, we suspended our quarterly dividend payment. See the CNAF Preferred Issue and CCC Surplus Note section below for further details.

CNAF Preferred Issue and CCC Surplus Note

In October 2008, we agreed to sell $1.25 billion of CNAF non-voting cumulative preferred stock (Preferred Issue) to Loews. The terms of the Preferred Issue were approved by a special committee of independent members of CNAF’s Board of Directors. We intend to use $1 billion of the proceeds from the Preferred Issue to increase the statutory surplus of our principal insurance subsidiary, Continental Casualty Company. See Note P. of the Condensed Consolidated Financial Statements included under Item I for further details.

Share Repurchases

Our Board of Directors has approved an authorization to purchase, in the open market or through privately negotiated transactions, our outstanding common stock, as our management deems appropriate. In the first quarter of 2008, we repurchased a total of 2,649,621 shares at an average price of $26.53 (including commission) per share. In accordance with the terms of the Preferred Issue discussed above, common stock repurchases are prohibited. No shares of common stock were purchased during the year ended December 31, 2007.

Accounting Pronouncements

Financial Accounting Standards Board (FASB) Staff Position (FSP) FAS 133 and FIN 45-4, Disclosures About Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161 (FSP FAS 133-1 and FIN 45-4)

In September 2008, the FASB issued FSP FAS 133-1 and FIN 45-4, which amends FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, to require disclosures by sellers of credit derivatives regarding the nature, circumstances requiring performance, and current status of performance risk under the derivative. This FSP also requires disclosure of the maximum amount of future payments under the derivatives, the fair value of the derivatives, and the nature of any recourse and collateral under the derivatives. This FSP also amends FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, to require an additional disclosure about the current status of the payment/performance risk of a guarantee. This FSP is effective for financial statements issued for fiscal years and interim periods ending after November 15, 2008. We are currently evaluating the disclosure requirements of FSP FAS 133-1 and FIN 45-4.

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FORWARD-LOOKING STATEMENTS

This report contains a number of forward-looking statements which relate to anticipated future events rather than actual present conditions or historical events. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and generally include words such as “believes,” “expects,” “intends,” “anticipates,” “estimates,” and similar expressions. Forward-looking statements in this report include any and all statements regarding expected developments in our insurance business, including losses and loss reserves for asbestos and environmental pollution and other mass tort claims which are more uncertain, and therefore more difficult to estimate than loss reserves respecting traditional property and casualty exposures; the impact of routine ongoing insurance reserve reviews we are conducting; our expectations concerning our revenues, earnings, expenses and investment activities; expected cost savings and other results from our expense reduction and restructuring activities; and our proposed actions in response to trends in our business. Forward-looking statements, by their nature, are subject to a variety of inherent risks and uncertainties that could cause actual results to differ materially from the results projected in the forward-looking statement. We cannot control many of these risks and uncertainties. Some examples of these risks and uncertainties are:

• general economic and business conditions, including inflationary pressures on medical care costs, construction costs and other economic sectors that increase the severity of claims and a decrease in the size and number of existing and potential insurance customers resulting from a recessionary economic climate;

• changes in financial markets such as illiquidity, changes in credit spreads, lack of price transparency, fluctuations in interest rates, long term periods of low interest rates, credit conditions and currency, commodity and stock prices, correlations among previously uncorrelated asset sectors including the short and long-term effects of losses produced or threatened in relation to sub-prime residential mortgage-backed securities (sub-prime), including claims under directors and officers and errors and omissions coverages in connection with market disruptions recently experienced in relation to the sub-prime crisis and financial markets credit crisis in the U.S. economy;

• the effects of corporate bankruptcies and accounting errors on capital markets, as well as on the markets for directors and officers and errors and omissions coverages, along with the effects of liquidity crises that may impact the types, liquidity and valuation of investments that may be held by insurers and their holding companies;

• changes in foreign or domestic political, social and economic conditions;

• regulatory initiatives and compliance with governmental regulations, judicial decisions, including interpretation of policy provisions, decisions regarding coverage and theories of liability, trends in litigation and the outcome of any litigation involving us, and rulings and changes in tax laws and regulations;

• effects upon insurance markets and upon industry business practices and relationships of current litigation, investigations and regulatory activity by the New York State Attorney General’s office and other authorities concerning contingent commission arrangements with brokers and bid solicitation activities;

• legal and regulatory activities with respect to certain non-traditional and finite-risk insurance products, and possible resulting changes in accounting and financial reporting in relation to such products, including our restatement of financial results in May of 2005 and our relationship with an affiliate, Accord Re Ltd., as disclosed in connection with that restatement;

• regulatory limitations, impositions and restrictions upon us, including the effects of assessments and other surcharges for guaranty funds and second-injury funds, other mandatory pooling arrangements and future assessments levied on insurance companies and other financial industry participants under the Emergency Economic Stabilization Act of 2008 recoupment provisions;

• the impact of competitive products, policies and pricing and the competitive environment in which we operate, including changes in our book of business;

• product and policy availability and demand and market responses, including the level of ability to obtain rate increases and decline or non-renew under priced accounts, to achieve premium targets and profitability and to realize growth and retention estimates;

• development of claims and the impact on loss reserves, including changes in claim settlement policies;

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• the effectiveness of current initiatives by claims management to reduce loss and expense ratios through more efficacious claims handling techniques;

• the performance of reinsurance companies under reinsurance contracts with us;

• results of financing efforts, including a decrease in lenders willing to lend to the financial sector, the availability of bank credit facilities and the dimunition in the number and competition among investment banks and other capital markets providers;

• changes in our composition of operating segments;

• weather and other natural physical events, including the severity and frequency of storms, hail, snowfall and other winter conditions, natural disasters such as hurricanes and earthquakes, as well as climate change, including effects on weather patterns, greenhouse gases, sea, land and air temperatures, sea levels, rain and snow;

• regulatory requirements imposed by coastal state regulators in the wake of hurricanes or other natural disasters, including limitations on the ability to exit markets or to non-renew, cancel or change terms and conditions in policies, as well as mandatory assessments to fund any shortfalls arising from the inability of quasi-governmental insurers to pay claims;

• man-made disasters, including the possible occurrence of terrorist attacks and the effect of the absence or insufficiency of applicable terrorism legislation on coverages;

• the unpredictability of the nature, targets, severity or frequency of potential terrorist events, as well as the uncertainty as to our ability to contain our terrorism exposure effectively, notwithstanding the extension through December 31, 2014 of the Terrorism Risk Insurance Act of 2002;

• the occurrence of epidemics;

• exposure to liabilities due to claims made by insureds and others relating to asbestos remediation and health-based asbestos impairments, as well as exposure to liabilities for environmental pollution, construction defect claims and exposure to liabilities due to claims made by insureds and others relating to lead-based paint and other mass torts;

• the sufficiency of our loss reserves and the possibility of future increases in reserves;

• regulatory limitations and restrictions, including limitations upon our ability to receive dividends from our insurance subsidiaries imposed by state regulatory agencies and minimum risk-based capital standards established by the National Association of Insurance Commissioners;

• the risks and uncertainties associated with our loss reserves as outlined in the Critical Accounting Estimates and the Reserves – Estimates and Uncertainties sections of our Annual Report on Form 10-K;

• the level of success in integrating acquired businesses and operations, and in consolidating, or selling existing ones;

• the possibility of changes in our ratings by ratings agencies, including the inability to access certain markets or distribution channels and the required collateralization of future payment obligations as a result of such changes, and changes in rating agency policies and practices; and

• the actual closing of contemplated transactions and agreements.

Our forward-looking statements speak only as of the date on which they are made and we do not undertake any obligation to update or revise any forward-looking statement to reflect events or circumstances after the date of the statement, even if our expectations or any related events or circumstances change.

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CNA Financial Corporation

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There were no material changes in our market risk components for the nine months ended September 30, 2008. See the Quantitative and Qualitative Disclosures About Market Risk included in Item 7A of our Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2007, as amended by Form 10-K/A which amended Part I, Item 1 for further information. Additional information related to portfolio duration and market conditions is discussed in the Investments section of the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part I, Item 2 and Risk Factors included in Part II, Item 1A.

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CNA Financial Corporation

Item 4. Controls and Procedures

The Company maintains a system of disclosure controls and procedures which are designed to ensure that information required to be disclosed by the Company in reports that it files or submits to the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including this report, is recorded, processed, summarized and reported on a timely basis. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed under the Exchange Act is accumulated and communicated to the Company’s management on a timely basis to allow decisions regarding required disclosure.

As of September 30, 2008, the Company’s management, including the Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO), conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on this evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures are effective.

There has been no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2008 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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CNA Financial Corporation

Part II. Other Information

Item 1. Legal Proceedings

Information on our legal proceedings is set forth in Notes G and H of the Condensed Consolidated Financial Statements included under Part I, Item 1.

Item 1A. Risk Factors

Our Annual Report on Form 10-K for the year ended December 31, 2007, as amended by Form 10-K/A which amended Part I, Item 1 (Form 10-K), includes a detailed discussion of certain material risk factors facing us. The information presented below describes updates and additions to such risk factors and should be read in conjunction with the risk factors and information disclosed in our Form 10-K.

Deterioration in the public debt and equity markets could lead to additional investment losses.

The prolonged and severe disruptions in the public debt and equity markets, including among other things, widening of credit spreads, bankruptcies and government intervention in a number of large financial institutions, have resulted in significant realized and unrealized losses in our investment portfolio. For the nine months ended September 30, 2008, we incurred substantial realized and unrealized investment losses, as described in Management’s Discussion and Analysis of Financial Condition and Results of Operations under Part I, Item 2 of this report. Subsequent to September 30, 2008, through the date of this report, conditions in the public debt and equity markets have continued to deteriorate and pricing levels have continued to decline. As a result, depending on market conditions, we could incur substantial additional realized and unrealized losses in future periods, which could have a material adverse impact on our results of operations, equity, business and insurer financial strength and debt ratings.

The Emergency Economic Stabilization Act of 2008 may impact the fair value determinations of our invested assets and may lead to regulatory limitations, impositions and restrictions upon us.

One of the main features of the Emergency Economic Stabilization Act of 2008 (the Act), which took effect October 3, 2008, is the establishment of the Troubled Assets Relief Program (TARP). Although we are eligible to participate in TARP, we have not yet decided whether to tender our eligible securities. Regardless of our participation decision, several provisions of the Act could affect us. Purchase prices under TARP could impact market-place fair values of similar securities, thereby impacting our fair value determinations. Also, the mandatory plan adopted to recoup the net losses of TARP within the next five years may target financial institutions such as us and may lead to regulatory limitations, impositions and future assessments. All of these factors may have an adverse material impact on our results of operations, equity, business and insurer financial strength and debt ratings.

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CNA Financial Corporation
Part II. Other Information

Item 6. Exhibits

(a) Exhibits

Description of Exhibit	Exhibit Number
Amendment to Employment Agreement, dated as of August 20, 2008, by and between CNA Financial Corporation and Stephen W. Lilienthal		10.1
Employment Agreement, dated as of April 1, 2008, by and between Continental Casualty Company and Jonathan D. Kantor		10.2
Amendment to Employment Agreement, dated as of July 1, 2008, by and between Continental Casualty Company and Larry A. Haefner		10.3
Amendment to Employment Agreement, dated as of July 1, 2008, by and between Continental Casualty Company and D. Craig Mense		10.4
Stock Purchase Agreement, dated as of October 27, 2008, between CNA Financial Corporation and Loews Corporation		10.5
First Amendment to Employment Agreement, dated as of October 24, 2008, by and between CNA Financial Corporation and Thomas F. Motamed		10.6
Certification of Chief Executive Officer		31.1
Certification of Chief Financial Officer		31.2
Written Statement of the Chief Executive Officer of CNA Financial Corporation Pursuant to 18 U.S.C. Section 1350 (As adopted by Section 906 of the Sarbanes-Oxley Act of 2002)		32.1
Written Statement of the Chief Financial Officer of CNA Financial Corporation Pursuant to 18 U.S.C. Section 1350 (As adopted by Section 906 of the Sarbanes-Oxley Act of 2002)		32.2

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CNA Financial Corporation
Part II. Other Information

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CNA Financial Corporation
Dated:  October 27, 2008	By	/s/ D. Craig Mense
		D. Craig Mense Executive Vice President and
		Chief Financial Officer

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EX-10.1

EXHIBIT 10.1

AMENDMENT TO EMPLOYMENT AGREEMENT

     THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the “Amendment”) is made and entered into as of August 20, 2008, by and between CNA Financial Corporation, a Delaware corporation (the “Company”) and Stephen W. Lilienthal (the “Executive”), as an amendment to that certain employment agreement between the Executive and the Company dated as of October 26, 2005 (the “Employment Agreement”):

WITNESSETH:

     WHEREAS, the parties wish to amend the Employment Agreement in certain respects to reflect certain changes in the terms and conditions of Executive’s employment as further provided hereinbelow.

     NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, it is covenanted and agreed by the Executive and the Company as follows:

     1. This Amendment amends the provisions of Section 6 and Section 8 of the Employment Agreement. All capitalized terms not defined herein shall have the meaning set forth in the Employment Agreement and all section references shall refer to sections of the Employment Agreement unless expressly provided otherwise.

     2. Any termination of the Executive’s employment for any reason on or prior to December 31, 2008 shall be governed by the terms of the Employment Agreement as in effect immediately prior to this Amendment (including, without limitation, a termination under Section 6.3 or 6.4 other than because of a CEO Succession (as defined below)); provided that:

          (a) The provisions of Section 6 of this Amendment respecting compliance with section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) shall apply;

          (b) In the event that the Executive’s employment is terminated by the Company without Cause or by the Executive for Good Reason (but not in the event of a resignation before December 31, 2008 pursuant to Section 6.4 unless such resignation is because of a CEO Succession), the Executive shall be entitled to all payments and other entitlements provided under Section 6.3, provided Sections 6.3(a), 6.3(b) and 6.3(c) shall be modified as follows:

          (i) in lieu of Section 6.3(a)(iii), the Executive’s bonus for the 2008 fiscal year shall not be prorated and shall otherwise be paid in accordance with Section 3(b),

          (ii) the post-termination period to exercise the Executive’s vested stock options (and SARs) under Section 6.3(b) shall end on June 8, 2010 (or any earlier date on which such stock options or SARs would have expired had the Executive remained employed with the Company during such period),

          (iii) the Executive’s post-termination benefit continuation period under Section 6.3(c) shall end on June 8, 2012,

          (iv) for avoidance of doubt, the termination payments pursuant to Section 6.3(a)(ii) shall commence on termination of employment, subject to Section 6 of this Amendment, and

          (v) for avoidance of doubt, the determination of amounts owing pursuant to Section 6.3(a)(iv) shall continue to be based on the continuation of employment through December 31, 2008 rather than any subsequent termination date;

          (c) The Executive shall be entitled to his tax return preparation benefit under Section 4 for his 2009 taxable year (as well as his 2008 taxable year); and

          (d) In the event that the Executive’s employment terminates because of a CEO Succession, in addition to the Executive’s entitlements under Section 2(b) and Section 2(c) of this Amendment, payments to the Executive (or his estate in the event of his death) shall continue following such termination:

          (i) in regular payroll installments of his Base Compensation provided under Section 3(a) (as in effect on the date hereof) through December 31, 2008, and

          (ii) from January 1, 2009 until June 8, 2009 in regular payroll installments of base salary in an amount equal to the annual rate of 400% of his Base Compensation provided under Section 3(a) (as in effect on the date hereof).

     3. In lieu of the provisions of Section 6.5:

          (a) In the event that the Executive’s successor commences employment with the Company (or any affiliate) as Chief Executive Officer (a “CEO Succession”) at any time prior to June 8, 2009, the Executive’s employment may continue as provided in this Section 3(a). The Executive may assume the position of “Strategic Advisor to the Chief Executive Officer” and thereupon shall be available to provide such services to the Company as his successor may request and the Executive may agree, as provided below. Such services may include, by way of illustration, advice with respect to (i) general corporate and organization matters, (ii) development and marketing of products, (iii) customer and distribution force relations, (iv) strategic directions and business unit strategies, (v) cost reduction and organizational efficiencies or (vi) insurance industry and trade organizational matters. The Executive shall not be required to perform any specific services, to provide services at any specific location, at any specific time or for any specific duration or frequency, or to be present at the Company’s offices, other than as shall be acceptable to the Executive in his sole discretion and agreeable to his successor. For the avoidance of doubt, the Executive may, at any time while he is Strategic Advisor to the Chief Executive Officer, terminate his employment. If the Executive’s employment terminates for any reason at any time during which he is Strategic Advisor to the Chief Executive Officer, such termination shall be a termination because of a CEO Succession and the Executive shall be entitled to the payments and other entitlements under Section 2(d) (if such termination occurs on

or prior to December 31, 2008) or Section 4 (if such termination occurs after December 31, 2008) of this Amendment.

          (b) Unless the Executive’s employment shall have terminated on or prior to December 31, 2008, effective January 1, 2009 and continuing until the earlier of the date of the Executive’s termination of employment for any reason or June 8, 2009:

          (i) The Executive shall receive a base salary in regular payroll installments during such period of employment at the annual rate of 400% of his annual Base Compensation in effect on the date hereof;

          (ii) The terms of Section 4 and 5 as in effect immediately prior to the date of this Amendment, governing the Executive’s entitlement to benefits, perquisites and expenses during employment, shall continue to apply and shall be in addition to Executive’s base salary under Section 3(b)(i) of this Amendment; and

          (iii) The Executive’s annual Bonus for calendar year 2008 shall not be prorated, and shall otherwise be paid in accordance with Section 3(b);

provided, the Executive shall not be entitled to an annual Bonus, or stock option or equivalent (SARs paid in stock) awards or any other incentive compensation award for performance periods beginning after December 31, 2008.

     4. Any termination of the Executive’s employment for any reason after December 31, 2008 including, without limitation, the Executive’s voluntary termination, shall be regarded as a termination of the Executive’s employment under Section 6.3 and the Executive shall receive all payments and other entitlements provided thereunder and shall be entitled to his tax return preparation benefit under Section 4 for his 2009 taxable year (as well as his 2008 taxable year); provided:

          (a) for avoidance of doubt:

          (i) the termination payments pursuant to Section 6.3(a)(ii) shall commence upon termination of employment (which date may not necessarily be June 8, 2009), subject to Section 6 of this Amendment, and

          (ii) for purposes of Section 6.3(a)(ii), (A) the amount under Section 6.3(a)(ii)(x) shall be based on the Executive’s Base Compensation in effect on the date hereof and (B) the amount under Section 6.3(a)(ii)(y) shall be based on two times the Executive’s target Bonus for 2008 (i.e., two times $1,450,000),

          (b) Section 6.3(a)(iii) shall not apply,

          (c) for avoidance of doubt, the determination of amounts owing pursuant to Section 6.3(a)(iv) shall continue to be based on the continuation of employment through December 31, 2008 rather than any subsequent termination date, and

          (d) if such termination occurs because of a CEO Succession:

          (i) the Executive (or his estate in the event of his death) shall continue to receive the payments and other entitlements until June 8, 2009 under Sections 3(b)(i), (b)(ii) and (b)(iii) of this Amendment notwithstanding such termination, which payments and other entitlements shall be in addition to the Executive’s payments and other entitlements under the above provisions of this Section 4 of this Amendment,

          (ii) the post-termination period to exercise the Executive’s vested stock options (and SARs) under Section 6.3(b) shall end on June 8, 2010 (or any earlier date on which such stock options or SARs would have expired had the Executive remained employed with the Company during such period), and

          (iii) the post-termination benefit continuation period under Section 6.3(c) shall end on June 8, 2012.

     5. In all events, the 24-month Restriction Period under Section 8 shall commence on the first to occur of (a) the date of the Executive’s termination of employment and (b) January 1, 2009.

     6. It is intended that any amounts payable and benefits provided to Executive under this Agreement shall comply with the provisions of Section 409A and the Treasury Regulations relating thereto so as not to subject Executive to the payment of interest and additional tax which may be imposed under Section 409A. In furtherance of this intent, anything to the contrary herein notwithstanding, to the extent that Section 409A is applicable, no amounts shall be payable to Executive before such time as such payment fully complies with the provisions of Section 409A, including any required 6-month postponement of payment that is payable upon a separation from service (in which case any postponed payment shall be paid in a lump sum together with the first scheduled payment due to the Executive upon the expiration of such 6-month period), to the extent required under Section 409A(a)(2)(B)(i) and the Treasury Regulations thereunder. To the extent that any regulations or other guidance issued under Section 409A after the date of this Amendment would result in the Executive being subject to payment of interest and additional tax under Section 409A, the Company and the Executive shall further amend the Employment Agreement to continue to comply with Section 409A. For all purposes under this Amendment and the Employment Agreement, the Executive’s employment shall not be considered to have “terminated” prior to the date on which the Executive incurs a “separation from service” under Treasury Regulation Section 1.409A-1(h). In accordance with Treasury Regulation Section 1.409A-2(b)(2)(iii), the payments due to the Executive pursuant to Section 2(d) and Section 4(d)(i) of this Amendment shall be treated as a right to a series of separate payments for all purposes of Section 409A.

     7. The Company shall pay the Executive’s professional fees incurred to negotiate and prepare this Amendment, grossed up to the extent any amount is taxable to him.

     8. The Employment Agreement is ratified, affirmed and continued as amended by this Amendment.

[Signature Page Follows]

     IN WITNESS WHEREOF, the parties have entered into this Amendment effective as of the date first set forth above.

CNA FINANCIAL CORPORATION

By:	Jonathan D. Kantor
Title:	Executive Vice President and General Counsel

STEPHEN W. LILIENTHAL

/s/ Stephen W. Lilienthal

EX-10.2

EXHIBIT 10.2

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made as of the 1^st day of April, 2008 (the “Effective Date”), by and between Continental Casualty Company, an Illinois insurance company (the “Company”), and Jonathan D. Kantor (“Executive”);

WITNESSETH:

     WHEREAS, the Company wishes to continue to employ Executive as Executive Vice President, General Counsel and Secretary of the Company and of such other of the affiliates or subsidiaries of the Company as the CEO (as defined below) shall in his discretion determine (collectively the “CNA companies’), with senior management level responsibility for the Law Department of the Company, and Executive wishes to accept and agree to such employment under the terms and conditions set forth hereinbelow.

     NOW, THEREFORE, in consideration of the foregoing premises and the promises and covenants herein, the parties hereto agree as follows:

     1. Employment Term. Executive’s term of employment under this Agreement shall be for the period commencing on April 1, 2008 (“Effective Date”) and ending on June 30, 2011, or such earlier date as of which Executive’s employment is terminated in accordance with Section 6 hereof (said period the “Term”). The covenants set forth in Sections 7, 8, 9, 10, 11, 12, 13, and 14 shall survive the employment term of this Agreement.

     2. Duties of Executive.

     (a) Executive shall perform the duties and responsibilities of an Executive Vice President, General Counsel and Secretary (hereinafter “GC”) of the CNA companies as defined and directed by the Company’s Chief Executive Officer (hereinafter “CEO”). Executive shall report to the CEO. Executive may be elected to and shall serve as a member of the Board of Directors of one or more of the CNA companies, and if so elected Executive agrees to serve on such boards in such capacity without additional compensation and Executive further agrees to resign any such position on such Boards upon the termination of his employment with the Company for any reason; provided, however, that nothing in this Agreement shall require that

any CNA companies elect Executive to its board of directors. Executive has also been elected as an executive officer of CNA Financial Corporation (“CNAF”), a public company that is the indirect parent of the Company, and Executive agrees to serve in such capacity for the term of this Agreement without additional compensation; provided, however, that nothing in this Agreement shall require that CNAF maintain Executive in any such position.

     (b) Executive shall diligently and to the best of his abilities continue to assume, perform, and discharge the duties and responsibilities of Executive Vice President, GC, as well as such other specific duties and responsibilities as the CEO shall assign or designate to Executive from time to time not inconsistent with Executive’s status. Executive shall devote substantially all of his working time to the performance of his duties as set forth herein and shall not, without the prior written consent of the CEO, accept other employment or render or perform other services, nor shall he have any direct or indirect ownership interest in any other business which is in competition with the business of the Company or the CNA companies, other than in the form of publicly traded securities constituting less than five percent (5%) of the outstanding securities of a corporation (determined by vote or value) or limited partnership interests constituting less than five percent (5%) of the value of any such partnership. The foregoing shall not preclude Executive from engaging in charitable, professional, and personal investment activities, provided that, in the judgment of the CEO, such activities do not materially interfere with the performance of his duties and responsibilities hereunder.

     3. Compensation.

     (a) During the Term, the Company shall pay to Executive for the period he is employed by the Company hereunder, an annual base salary of $800,000.00 (the “Base Compensation”). The Base Compensation shall be payable not less frequently than in monthly increments. At the discretion of the CEO and/or the Compensation Committee (the “Committee”) of CNAF’s Board of Directors, such salary rate may be increased annually during the term of the Agreement, based on market considerations, responsibilities and performance. In no event shall Executive’s salary rate be reduced to an amount that is less than the amount specified in this Section 3(a) without Executive’s written consent, or to an amount that is less than the amount that he was previously receiving without Executive’s written consent.

     (b) The Executive shall be eligible for an annual incentive cash award (“Bonus”) pursuant to the CNA Financial Corporation 2000 Incentive Compensation Plan (the “Plan”). Subject to the approval of the Committee, the Executive’s maximum Bonus opportunity thereunder shall not exceed 200% of Executive’s annual Base Compensation for each twelve month bonus period. In no event shall the maximum Bonus opportunity be reduced without the Executive’s written consent. The amount of the Bonus shall be based on the Committee’s assessment in its sole discretion of Executive’s performance and the Net Operating Income goals set annually by the Committee, and shall be determined and payable in accordance with the terms of the Plan as set forth in the Plan documents. Provided, further, that the Committee shall have unlimited negative discretion under the Plan to decrease the amount of Executive’s Bonus for any year.

     (c) Subject to the approval of the Committee, Executive shall be eligible to receive a long-term incentive cash award, in accordance with the terms of the Plan, as may be in effect during the Term or such other long term incentive plan as the Company may from time to time adopt for its senior officers. The Executive’s target long-term incentive cash award shall be thirty percent (30%) of his Base Compensation during the three-year performance period as determined by the Company and/or the Committee. In no event shall the target award be reduced without the Executive’s written consent. Actual payout of the long-term incentive cash award may range from 0% to 200% of target, based on the Company’s overall business results and performance as determined by the Committee in its sole discretion, subject to the terms of the Plan.

     (d) Subject to the approval of the Committee, Executive shall be awarded a minimum grant of 30,000 stock appreciation rights paid in stock (“SARs”) of CNA Financial Corporation (“CNAF”) common stock or equivalent stock options annually during the term of Executive’s employment under this Agreement. Such annual grant may be increased at the recommendation of the CEO and upon approval of the Committee, subject to share availability. Executive’s rights with respect to shares awarded hereunder shall be subject to the terms of the Plan, share availability and approval by the Committee.

     (e) Subject to the approval of the Committee and the following conditions, Executive shall be awarded a retention bonus (the “Retention Bonus”) of $800,000, of which amount 50% shall be payable on June 30, 2009 (the “First Payment Date”) and the other 50% on June 30,

2010 (the ”Second Payment Date”). Executive shall not receive any unpaid portion of the Retention Bonus if he voluntarily terminates his employment as provided in Section 6.4 of this Agreement prior to either Payment Date, or if he is terminated for Cause by the Company as provided for in Section 6.2 of this Agreement prior to either Payment Date. If Executive’s employment is terminated by the Company Without Cause, or if he terminates his employment for Good Reason as provided for in Section 6.3 of this Agreement, then the payment dates for any unpaid portion of the Retention Bonus shall be accelerated to the date of such termination.

     (f) For avoidance of doubt respecting awards to Executive under Section 3(b), 3(c) and 3(d) hereof, the provisions of the Plan relating to the deferral of payments to satisfy Section 162(m) of the Internal Revenue Code of 1986 (“Code”) or any successor provision shall apply. The Company will defer until the first tax year in which it reasonably anticipates, or should reasonably anticipate, that deductibility is not limited by said Section 162(m) the payment of all compensation to which Executive is entitled under this Agreement and/or the Plan which the Company reasonably anticipates would be non-deductible under said Section 162(m) or any successor provision with respect to deductibility of executive compensation if paid in the tax year in which it would otherwise be payable; provided that such amounts shall in any event be paid not later than the period beginning on the date on which Executive separates from service (as defined in Section 409A of the Code) and ending on the later of the last day of the year in which the Executive separates from service or the fifteenth day of the third month following the separation from service; and provided further, that if any payment is deferred pursuant to this Section 3(f) until after Executive has separated from service and Executive is a specified employee as defined in Section 409A on the date of the separation from service, the preceding proviso shall be applied by substituting the day that is six months after Executive’s separation from service for the date of separation from service.

     (g) Executive’s pensionable earnings under the CNA Retirement Plan, the CNA Supplemental Executive Retirement Plan (“SERP”), the Savings & Capital Accumulation Plan (“S-CAP”), and the CNA Supplemental Savings & Capital Accumulation Plan (“SES-CAP”) will be calculated and payable as specified in the respective plan documents, as amended from time to time, and also subject to the requirements of any other applicable laws or regulations as interpreted by the Company. Any deferral elections available to Executive with respect to such pensionable earnings shall be made prior to the beginning of the year in which any amounts subject to such elections are earned.

     (h) All payments due under this Agreement shall be subject to withholding or deferral as required by law.

     4. Other Benefits. Executive shall be entitled to continue to participate in the various benefit plans, programs or arrangements established and maintained by the Company from time to time and applicable to senior executives of the Company such as, but not by way of limitation, medical benefits, dental benefits, life insurance, long-term disability insurance, both qualified and supplemental defined contribution plans, and to receive all fringe benefits made available to senior executives of the Company, including relocation assistance, club membership, and tax return preparation. Executive’s entitlement to participate in any such plan, program or arrangement shall, in each case, be subject to the terms and conditions of the Company’s policies with regard to such plans, programs or arrangements as adjusted by the Company from time to time in its sole discretion. Executive shall not be eligible for paid time off (“PTO”) under the Company’s PTO policy. In the event of termination of employment, Executive’s severance shall be determined solely in accordance with Section 6 hereof.

     5. Expense Reimbursement. Executive shall continue to be entitled to reimbursement by the Company for all reasonable and customary travel and other business expenses incurred by Executive in carrying out his duties under this Agreement, in accordance with the general travel and business reimbursement policies adopted by the Company as adjusted from time to time. Executive shall report all such expenditures not less frequently than monthly accompanied by adequate records and such other documentary evidence as required by the Company or by Federal or state tax statutes or regulations governing the substantiation of such expenditures.

     6. Termination of Employment. If Executive’s employment with the Company shall terminate during the term of this Agreement, the following conditions set forth herein shall apply with respect to the Executive’s compensation and benefits hereunder. Either party may terminate Executive’s employment with the Company during the term of this Agreement by written notice to the other party, effective as of the date specified in such notice and Executive’s employment shall automatically terminate in the event of Executive’s death. Upon termination of Executive’s employment during or at the end of the term of this Agreement, the rights of the parties under this Agreement shall be determined pursuant to this Section 6. All payments to be made hereunder shall be made either to Executive or to his personal representatives, heirs or

beneficiaries, as the case may be. In the event of Executive’s termination during the term of this Agreement, unless otherwise specified in this Agreement Executive’s rights, if any, under any of the Company’s defined contribution, benefit, incentive or other plans of any nature shall be governed by the respective terms of such plans.

     6.1 Death and Disability. In the event of the death of Executive or, at the Company’s election, in the event of his Permanent Disability (as defined below) during the term of this Agreement, provided it has not already terminated, Executive’s employment shall terminate; provided, however, that:

     (a) The Company shall pay to Executive or his personal representatives, heirs or beneficiaries as the case may be, an amount equal to his: (i) unpaid base salary and current year’s Bonus calculated at 150% of base salary and CNA long-term incentive cash award prorated to the date of termination; (ii) any previous year’s unpaid Bonus based upon actual or discretionary payouts, if any; and (iii) unpaid cash entitlements, if any, earned by Executive or payable to his beneficiaries as of the date of termination which, pursuant to the terms of any applicable Company plan or program (which unpaid cash entitlements shall not include any unpaid Bonus or any unpaid long-term incentive cash award or other award under the Incentive Compensation Plan), accrued prior to the date of termination.

     (b) For purposes of this Agreement, the term “Permanent Disability” means a physical or mental condition of Executive which, as determined by the CEO based on and consistent with available medical information, is expected to continue beyond 26 weeks and which renders Executive incapable of performing any substantial portion of the services contemplated hereunder with reasonable accommodation compatible with the fulfillment of his duties as described in Section 2 hereinabove.

     6.2 Termination for Cause by the Company. In the event that Executive shall engage in any conduct which the CEO in his sole discretion shall determine to be “Cause,” as defined herein, he shall be subject to termination forthwith. For purposes of this Agreement, Cause shall mean engaging in or committing: (i) any act which would constitute a felony or other act involving fraud, dishonesty, moral turpitude, unlawful conduct or breach of fiduciary duty; (ii) a substantial breach of any material provision of this Agreement; (iii) a willful or reckless material misconduct in the performance of the Executive’s duties; or (iv) the habitual neglect of duties;

provided however, that, for purposes of clauses (iii) and (iv), Cause shall not include any one or more of the following: bad judgment, negligence or any act or omission believed by the Executive in good faith to have been in or not opposed to the interest of the Company (without any intent by the Executive to gain, directly or indirectly, a profit to which he was not legally entitled). If the Executive agrees to resign from his employment with the Company in lieu of being terminated for Cause, he may be deemed to have been terminated for Cause for purposes of this Agreement.

     Upon terminating the Executive for Cause, other than paying the Executive within 30 days of such termination his: (i) unpaid base salary prorated to the date of termination and (ii) unpaid cash entitlements, if any, earned and accrued pursuant to the terms of any applicable Company plan or program (which unpaid cash entitlements shall not include any unpaid Bonus or any unpaid long-term incentive cash award or other award under the Incentive Compensation Plan) prior to the date of the date of termination, the Company shall have no further obligations whatsoever to Executive under this Agreement. In the event of termination for Cause, Executive agrees to continue to be bound by the covenants set forth herein at Sections 7 through 13, subsequent to the date of such termination for such periods of time as provided for in said Sections respectively.

     6.3 Termination by the Company Without Cause / Termination by Executive for Good Reason. In the event Executive’s employment is terminated by the Company “Without Cause” (as that term is defined hereinbelow), or in the event Executive terminates his employment for “Good Reason” (as that term is defined hereinbelow):

     (a) The Company shall pay to Executive severance consisting of an amount equal to $3,600,000. The severance shall be paid over two (2) years in equal monthly installments following such termination. The Company shall also pay the Executive within 30 days of his termination: (i) his unpaid base salary, prorated to the date of termination and (ii) unpaid cash entitlements, if any, earned and accrued pursuant to the terms of any applicable Company plan or program prior to the date of the date of termination (which unpaid cash entitlements under this Section 6.3(a)(ii) shall not include any unpaid Bonus or any unpaid long-term incentive cash award or other award under the Plan for the year in which such termination occurs). Executive agrees to be bound by the covenants set forth herein prior to, as of and subsequent to the termination date. In addition, Executive shall continue to participate, at the active employee rates, in such health benefits plans in which he is enrolled throughout the term of the payments

set forth in this Section 6.3(a), up to a maximum of 18 months, with said period of participation to run concurrently with any period of COBRA coverage to which Executive may be entitled. To the extent such health benefit coverage extends beyond the aforesaid period of COBRA coverage, and to the extent that in such case the difference between the premium paid by Executive for participation in such health benefit plans and the premium that would be payable by an employee receiving COBRA coverage constitutes taxable income to Executive, and deferred compensation, subject to Section 409A of the Code Executive shall not receive any payment or other benefit in lieu of such coverage. Other than as set forth in this Section 6.3 (a), the Company shall have no further obligations to Executive under this Agreement in the event of a termination of Executive’s employment by the Company Without Cause or any termination of Executive’s employment by Executive.

     (b) “Good Reason” as set forth herein is defined as a reduction in the rate of Executive’s base salary, annual incentive maximum opportunity or long-term incentive cash target compensation, a required relocation of his personal residence to another geographical area outside of the geographical area where Executive’s personal residence is currently located without Executive’s consent, a change in Executive’s direct reporting relationship to the CEO or other involuntary loss of position as described herein (other than as a result of a termination by the Company for Cause) or a material diminution in Executive’s duties and responsibilities without Executive’s consent.

     (c) “Without Cause” as set forth herein is defined as a termination of the Executive’s employment by the Company for any reason not described in subsections 6.1 and 6.2.

     Any term or provision in this Agreement to the contrary notwithstanding, the timing and other conditions of any severance or other payments to be made under this Agreement shall be subject to the requirements of all applicable laws and regulations, whether or not they are in existence or in effect when this Agreement is executed by the parties hereto. In the event of any termination of employment as described in this Section 6.3, Executive agrees to continue to be bound by the covenants set forth herein at Sections 7 through 13 subsequent to the date of such termination for such periods of time as provided for in said Sections respectively.

     6.4 Voluntary Resignation by Executive. In the event that Executive’s employment is voluntarily terminated by Executive other than pursuant to subsection 6.3 or as a direct result of

his death or Permanent Disability (as described in subsection 6.1), the Company shall have no further obligations to Executive under this Agreement other than paying the Executive within 30 days of such termination his: (i) unpaid base salary prorated to the date of termination and (ii) unpaid cash entitlements, if any, earned and accrued pursuant to the terms of any applicable Company plan or program (which unpaid cash entitlements shall not include any unpaid Bonus or any unpaid long-term incentive cash award or other award under the Plan) prior to the date of termination. In the event of termination of employment as described in this Section 6.4, Executive agrees to continue to be bound by the covenants set forth herein at Sections 7 through 13 subsequent to the date of such termination for such periods of time as provided for in said Sections respectively.

     6.5 Expiration of Agreement.

     (a) If the Company has not made an offer to Executive by March 31, 2011 to extend his employment with the Company under a compensation structure substantially similar to the one provided for in this Agreement, Executive’s employment shall terminate at close of business on June 30, 2011 and his employment shall be treated as having been terminated in accordance with Section 6.3 of this Agreement (relating to Termination by Company Without Cause/ Termination by Executive for Good Reason), and the sole payments and benefits to which he may be entitled shall be governed by said Paragraph. Other than as set forth in this Section 6.5 (a), the Company shall have no further obligations to Executive under this Agreement in the event of a termination of Executive’s employment by the Company due to its expiration under the terms of this Agreement, except as otherwise set forth in subset (b) of this Section 6.5.

     (b) Notwithstanding the foregoing, if Executive’s employment with the Company terminates following Executive’s rejection of an offer by the Company to extend the term of the Agreement or to enter into a new Agreement prior to termination, with Base Compensation, Bonus and long-term incentive cash award target that are not less than Executive’s Base Compensation, Bonus and long-term incentive cash award target as of the date of the termination or if Executive voluntarily resigns, then his employment shall be treated as having been terminated in accordance with Section 6.4 of this Agreement (relating to Voluntary Resignation), and the sole payments to which he may be entitled shall be governed by said Paragraph. In the event of termination of employment as described in any portion of this Section 6.5, Executive agrees to continue to be bound by the covenants set forth herein at Sections 7

through 14 subsequent to the date of such termination for such periods of time as provided for in said Sections respectively.

     6.6 Other Benefits. In the event that Executive’s employment is terminated pursuant to Sections 6.1, 6.2 or 6.4, Executive’s coverage under the Company’s short-term disability plan, shall end on the date of termination of employment; Executive’s coverage under the Company’s long-term disability plan shall end on the date of termination of employment; and Executive’s coverage under the Company’s non-contributory and contributory life, dependent life and accidental death and dismemberment plans shall end on the last day of the month in which termination occurs. In the event that Executive’s employment is terminated pursuant to Section 6.3, the foregoing shall also apply, except that Executive’s coverage under the Company’s contributory life, dependent life and contributory accidental death and dismemberment plans, if any, shall continue through the end of any applicable severance period, upon payment of the applicable premium.

     6.7 Release. Executive acknowledges that the severance benefits set forth in Section 6 hereof provide significant additional benefits as compared to those available to the Company’s employees in general. As a condition precedent to receiving any payments or other benefits pursuant to Section 6 of this Agreement, Executive agrees to sign a full and complete release acceptable to the Company releasing the Company, its subsidiaries and affiliates and their directors, officers and employees of any and all claims, both known and unknown as of the date of Executive’s termination of employment with the Company. In the absence of Executive’s executing such a release in a form satisfactory to the Company, the Company shall have no obligation to Executive to make any payments or provide any other benefits as provided in said Section 6. The Company shall furnish the release to Executive as soon as practical, but in no event more than ten (10) days after the date on which Executive’s employment is terminated. If Executive executes and delivers such release to the Company prior to March 15 of the year following the year in which his employment is terminated (or, if Executive has the right to revoke such release pursuant to the Age Discrimination in Employment Act or any other applicable law, executes and delivers such release at such time that such revocation period will expire prior to such March 15), then all Payments (as defined in Section 6.8) that would otherwise have been paid prior to the date on which the release is executed and delivered shall be paid to Executive in a lump sum, without interest, as soon as practical after such release is delivered (or such revocation period expires), but not later than such March 15. If Executive fails to execute and

deliver such release prior to the date set forth in the preceding sentence, then the Company shall have no obligation to pay to Executive any Payments that would otherwise have been payable prior to such March 15.

     6.8 Involuntary Termination Rule. Any term or provision of this Section 6 or elsewhere in the Agreement to the contrary notwithstanding, the following provisions shall apply to any payments to be made to Executive pursuant to Section 6.1 on termination by reason of Permanent Disability, Section 6.3, or Section 6.5(a) (collectively the “Payments”):

(a)	Each Payment to be made on a separate date shall be treated as a separate Payment for purposes of §409A of the Code.
(b)	The aggregate amount of all Payments, if any, payable after March 15 of the year following the year that includes the date of such involuntary termination (the “Termination Date”) but before the date that is six months after the Termination Date (increased by any other amounts of taxable compensation paid to the Executive during such period that would not have been paid but for such termination) shall not exceed two times the lesser of (i) Executive’s Base Compensation on the last day of the year immediately prior to the year that includes the Termination Date or (ii) the limit in effect under §401(a)(17) of the Code during the year that includes the Termination Date, as determined by the Company.
(c)	To the extent the Payments payable during the period described in subparagraph (b) above would otherwise exceed the limit of subparagraph (b), such Payments shall be reduced to the extent necessary to satisfy the requirement of subparagraph (b) as determined by the Company, and the amount by which the Payments are reduced will be paid to Executive in a lump sum, without interest, on the first business day that is six months after the Termination Date as determined by the Company. However, if Executive dies during such period, the limits of subparagraph (b) shall not apply to Payments to the Executive’s beneficiaries or estate.
(d)	If Executive’s termination of employment does not constitute a “separation from service” as defined in §409A of the Code, as determined by the Company, then

all Payments that would otherwise be payable after March 15 of the year following the year that includes the Termination Date, and that exceed the limit described in Section 6.8(b), shall be deferred until six months after Executive has incurred a separation from service, as so defined, and all Payments that are so deferred shall be paid in a lump sum, without interest, on the first business day that is at least six months after Executive has incurred a separation from service.

     7. Confidentiality. Executive agrees that while he is employed by the Company, and at all times thereafter, Executive shall not reveal or utilize information, knowledge or data which is confidential as defined in this Agreement and learned during the course of or as a result of his employment which relates to: (a) the Company and/or any other business or entity in which the Company during the course of the Executive’s employment has directly or indirectly held a greater than a 10% equity interest whether voting or non-voting; and (b) the Company’s customers, employees, agents, brokers and vendors. The Executive acknowledges that all such confidential information is commercially valuable and is the property of the Company. Upon the termination of his employment Executive shall return all confidential information and any copies thereof to the Company, whether it exists in written, electronic, computerized or other form.

     8. “Confidential Information” Defined. For purposes of this Agreement “confidential information” includes all information, knowledge or data (whether or not a trade secret or protected by laws pertaining to intellectual property) not generally known outside the Company (unless as a result of a breach of any of the obligations imposed by this Agreement) concerning the business operations, performance and other information of the Company or other entities as described in Section 7 above. Such information may without limitation include information relating to data, finances, marketing, pricing, profit margins, underwriting, claims, loss control, marketing and business plans, renewals, software, processing, vendors, administrators, customers or prospective customers, products, brokers, agents and employees.

     9. Competition. Executive hereby agrees that, while he is employed by the Company, and for a period of 6 months following the date of his termination of employment with the Company for any reason, he will not, directly or indirectly, without the prior written approval of the CEO, enter into any business relationship (either as principal, agent, board member, officer, consultant, stockholder, employee or in any other capacity) with any business or other entity

that at any relevant time is engaged in the business of insurance in direct or indirect competition with the Company or any of its affiliates (a “Competitor”); provided, however, that such prohibited activity shall not include the ownership of less than 5% of the outstanding securities of any publicly traded corporation (determined by vote or value) regardless of the business of such corporation. Upon the written request of Executive, the CEO will determine whether a business or other entity constitutes a “Competitor” for purposes of this Section 9; provided that the CEO may require Executive to provide such information as the CEO determines to be necessary to make such determination; and further provided that the current and continuing effectiveness of such determination may be conditioned on the accuracy of such information, and on such other factors as the CEO may determine.

     10. Solicitation. Executive agrees that while he is employed by the Company, and for a period of 24 months following his termination of employment with the Company for any reason, he will not employ, offer to employ, engage as a consultant, or form an association with any person who is then, or who during the preceding one year was, an employee of the Company or any Subsidiary or Affiliate of the Company or any successor or purchaser of any portion thereof, nor will he assist any other person or entity in soliciting for employment or consultation any person who is then, or who during the preceding one year was, an employee of the Company or any Subsidiary or Affiliate of the Company or any successor or purchaser of any portion thereof.

     11. Non-interference. Executive agrees that while he is employed by the Company, and for a period of 24 months following his termination of employment with the Company for any reason, he will not disturb or attempt to disturb any business relationship or agreement between either the Company or any Subsidiary or Affiliate of the Company or any successor or purchaser of any portion thereof, and any other person or entity.

     12. Assistance with Claims. Executive agrees that, while he is employed by the Company, and for a reasonable period (not less than 60 months from the date of termination) thereafter, he will be available, on a reasonable basis, to assist the Company and its subsidiaries and affiliates in the prosecution or defense of any claims, suits, litigation, arbitrations, investigations, or other proceedings, whether pending or threatened (“Claims”) that may be made or threatened by or against the Company or any of its subsidiaries or affiliates. Executive agrees, unless precluded by law, to promptly inform the Company if he is requested (i) to testify or otherwise become involved in connection with any Claim against the Company or

any subsidiary or affiliate or (ii) to assist or participate in any investigation (whether governmental or private) of the Company or any subsidiary or affiliate or any of their actions, whether or not a lawsuit has been filed against the Company or any of its subsidiaries or affiliates relating thereto. The Company agrees to provide reasonable compensation to Executive for such assistance provided during such period. Nothing in this Section 12 is intended or shall be construed to prevent Executive from cooperating fully with any government investigation or review as required by applicable law or regulation.

     13. Return of Materials. Executive shall, at any time upon the request of the Company, and in any event upon the termination of his employment with the Company for any reason, immediately return and surrender to the Company all originals and all copies, regardless of medium, of property belonging to the Company created or obtained by Executive as a result of or in the course of or in connection with his employment with the Company regardless of whether such items constitute proprietary information, provided that Executive shall be under no obligation to return written materials acquired from third parties which are generally available to the public. Executive acknowledges that all such materials are, and will remain, the exclusive property of the Company.

     14. Scope of Covenants.

     (a) The Executive acknowledges that: (i) as a senior executive of the Company he has and will have access to confidential information concerning not only the business segments for which he may have been responsible (an outline summary of which appears in the Company’s reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission) but the entire range of businesses in which the Company was engaged; (ii) that the businesses segments for which he may have been responsible and the Company’s businesses are conducted nation-wide; and (iii) that the Company’s confidential information, if disclosed or utilized without its authorization would irreparably harm the Company in: (A) obtaining renewals of existing customers; (B) selling new business; (C) maintaining and establishing existing and new relationships with employees, agents, brokers, vendors; and (D) other ways arising out of the conduct of the businesses in which the Company is engaged.

     (b) To protect such information and such existing and prospective relationships, and for other significant business reasons, the Executive agrees that it is reasonable and necessary

that: (i) the scope of this Agreement be national and international; (ii) its breadth include the entire insurance industry; and (iii) the duration of the restrictions upon the Executive be as indicated therein.

     (c) The Executive acknowledges that the Company’s customer, employee and business relationships are long-standing, indeed, near permanent and therefore are of great value to the Company. The Executive agrees that neither any of the provisions in this Agreement nor the Company’s enforcement of it alters or will alter his ability to earn a livelihood for himself and his family and further that both are reasonably necessary to protect the Company’s legitimate business and property interests and relationships, especially those which he was responsible for developing or maintaining. The Executive agrees that his actual or threatened breach of the covenants set forth in Sections 7 through 13 above would cause the Company irreparable harm and that the Company is entitled to an injunction, in addition to whatever other remedies may be available, to restrain such actual or threatened breach. The Executive agrees that if bond is required in order for the Company to obtain such relief, such bond need only be in a nominal amount and that he shall reimburse the Company for all costs of any such suit, including the Company’s reasonable attorneys’ fees. The Executive consents to the filing of any such suit against him in the state or federal courts located in Illinois or any state in which he resides. He further agrees that in the event of such suit or any other action arising out of or relating to this Agreement, the parties shall be bound by and the court shall apply the internal laws of the State of Illinois and irrespective of rules regarding choice of law or conflicts of laws.

     (d) If he has not already done so, Executive agrees to be bound by and to execute the Company’s Confidentiality, Computer Responsibility and Professional Certification Agreement, a copy of which is incorporated by reference herein.

     (e) For purposes of Sections 7 through 14 hereof, the “Company” shall include all subsidiaries and affiliates of the Company and CNAF, as well as the Company.

     15. Effect of Covenants. Nothing in Sections 7 through 14 shall be construed to limit or otherwise adversely affect any rights, remedies or options that the Company would possess in the absence of the provisions of such Sections.

     16. Revision. The parties hereto expressly agree that in the event that any of the provisions, covenants, warranties or agreements in this Agreement are held to be in any respect an unreasonable restriction upon Executive or are otherwise invalid, for whatsoever cause, then the court or arbitrator so holding is hereby authorized to (a) reduce the territory to which said covenant, warranty or agreement pertains, the period of time in which said covenant, warranty or agreement operates or the scope of activity to which said covenant, warranty or agreement pertains or (b) effect any other change to the extent necessary to render any of the restrictions contained in this Agreement enforceable.

     17. Severability. Each of the terms and provisions of this Agreement is to be deemed severable in whole or in part and, if any term or provision of the application thereof in any circumstances should be invalid, illegal or unenforceable, the remaining terms and provisions or the application thereof to circumstances other than those as to which it is held invalid, illegal or unenforceable, shall not be affected thereby and shall remain in full force and effect.

     18. Binding Agreement; Assignment. This Agreement shall be binding upon the parties hereto and their respective heirs, successors, personal representatives and assigns. The Company shall have the right to assign this Agreement to any successor in interest to the business, or any majority part thereof, of the Company or any joint venture or partnership to which the Company is a joint venturer or general partner which conducts substantially all of the Company’s business. Executive shall not assign any of his obligations or duties hereunder and any such attempted assignment shall be null and void.

     19. Controlling Law; Jurisdiction. This Agreement shall be governed by, interpreted and construed according to the laws of the State of Illinois (without regard to choice of law or conflict of laws principles).

     20. Entire Agreement. Except as otherwise expressly set forth herein, this Agreement contains the entire agreement of the parties with regard to the subject matter hereof, supersedes all prior agreements and understandings, written or oral (including without limitation that certain Employment Agreement made as of March 20, 2003 between Executive and CNAF), and may only be amended by an agreement in writing signed by the parties thereto. Any term or provision herein to the contrary notwithstanding, the timing and other conditions of any severance or other payments to be made under this Agreement shall be subject to the

requirements of all applicable laws and regulations as interpreted by the Company, whether or not they are in existence or in effect when this Agreement is executed by the parties hereto.

     21. Additional Documents. Each party hereto shall, from time to time, upon request of the other party, execute any additional documents which shall reasonably be required to effectuate the purposes hereof.

     22. Incorporation. The introductory recitals hereof are incorporated in this Agreement and are binding upon the parties hereto.

     23. Failure to Enforce. The failure to enforce any of the provisions of this Agreement shall not be construed as a waiver of such provisions. Further, any express waiver by any party with respect to any breach of any provision hereunder by any other party shall not constitute a waiver of such party’s right to thereafter fully enforce each and every provision of this Agreement.

     24. Survival. Except as otherwise set forth herein, the obligations contained in this Agreement shall survive the termination, for any reason whatsoever, of Executive’s employment with the Company.

     25. Headings. All numbers and headings contained herein are for reference only and are not intended to qualify, limit or otherwise affect the meaning or interpretation of any provision contained herein.

     26. Notices. Notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid (provided that international mail shall be sent via overnight or two-day delivery), or sent by facsimile or prepaid overnight courier to the parties at the addresses set forth below (or such other addresses as shall be specified by the parties by like notice). Such notices, demands, claims and other communications shall be deemed given:

     (a) in the case of delivery by overnight service with guaranteed next day delivery, the next day or the day designated for delivery;

     (b) in the case of certified or registered U.S. mail, five days after deposit in the U.S. mail; or

     (c) in the case of facsimile, the date upon which the transmitting party received confirmation of receipt by facsimile, telephone or otherwise;

provided, however, that in no event shall any such communications be deemed to be given later than the date they are actually received. Communications that are to be delivered by the U.S. mail or by overnight service or two-day delivery service are to be delivered to the addresses set forth below:

If to the Company:

CONTINENTAL CASUALTY COMPANY
CNA Center
Chicago, IL 60604
Attn: Senior Human Resources Officer

If to Executive:

Jonathan D. Kantor
CNA Center
Chicago, IL 60604

or to such other address as either party shall furnish to the other party in writing in accordance with the provisions of this Section 26.

     27. Gender. The masculine, feminine or neuter pronouns used herein shall be interpreted without regard to gender, and the use of the singular or plural shall be deemed to include the other whenever the context so requires.

     28. Arbitration of All Disputes. Any controversy or claim arising out of or relating to this Agreement (or the breach thereof), except as otherwise indicated hereinbelow, shall be settled by final, binding and non-appealable arbitration in Chicago, Illinois by three arbitrators. Except as otherwise expressly provided in this Section 28, the arbitration shall be conducted in accordance with the rules of the American Arbitration Association (the “Association”) then in effect. One of the arbitrators shall be appointed by the Company, one shall be appointed by Executive, and the third shall be appointed by the first two arbitrators. If the first two arbitrators

cannot agree on the third arbitrator within 30 days of the appointment of the second arbitrator, then the third arbitrator shall be appointed by the Association. This Section 28 shall not be applicable with respect to any subject matter or controversy relating to Sections 7 through 14 of this Agreement.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.

CONTINENTAL CASUALTY COMPANY

By:	/s/ Thomas Pontarelli
Title:	Executive Vice President
Date:	August 19, 2008

/s/ Jonathan D. Kantor   Jonathan D. Kantor August 19, 2008
  Date

EX-10.3

EXHIBIT 10.3

AMENDMENT TO EMPLOYMENT AGREEMENT

     THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the “Amendment”) is made and entered into as of the 1st day of July, 2008, by and between Continental Casualty Company, an Illinois insurance company (the “Company”) and Larry A. Haefner (“Executive”), as an amendment to that certain employment agreement between Executive and the Company signed by Executive on April 7, 2008 and as supplemented by that certain Addendum to Employment Agreement also signed by Executive on April 7, 2008 (said employment agreement as so supplemented the “Employment Agreement”):

WITNESSETH:

WHEREAS, the parties wish to further amend the Employment Agreement in certain respects to reflect certain changes in the terms and conditions of Executive’s employment as further provided hereinbelow;

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, it is covenanted and agreed by the Executive and the Company as follows:

1. The first three lines of the Employment Agreement are hereby amended to read as follows:

“THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made as of the seventh day of April, 2008 (the “Effective Date”), by and between Continental Casualty Company, an Illinois insurance company (the “Company”), and Larry A. Haefner (“Executive”);”

2. Section 1 of the Employment Agreement is hereby amended to read as follows:

“1. Employment Term. The Company and Executive agree that the Company shall employ Executive to perform the duties described hereinbelow for the period commencing on Effective Date and ending on April 30, 2011, or such earlier date as of which Executive’s employment is terminated in accordance with Section 6 hereof (said period the “Term”). The covenants set forth in Sections 7, 8, 9, 10, 11, 12, 13, and 14 shall survive the employment term of this Agreement.”

3. Subsection (a) of Section 2 of the Employment Agreement is hereby amended to read as follows:

“(a) Through April 30, 2008, Executive shall perform the duties and responsibilities of an Executive Vice President of the CNA insurance companies as defined and directed by the Company’s Chief Executive Officer (hereinafter “CEO”). From May 1, 2008 through April 30, 2011 Executive shall perform the duties and responsibilities of an Executive Vice President and Chief Actuary of the CNA insurance companies as defined and directed by the Company’s CEO. Executive shall report to the CEO. Executive may be elected to and shall serve as a member of the Board of Directors of one or more of the CNA insurance companies, and if so elected Executive agrees to serve on such boards in such capacity without additional compensation. Executive further agrees to resign any such position(s) on such Boards upon the termination of his employment with the Company for any reason; provided, however, that nothing in this Agreement shall require that any CNA insurance companies elect Executive to its board of directors. Executive may also be elected as an executive officer of CNA Financial Corporation (“CNAF”), a publicly-traded company that is the indirect parent of the Company, and if so elected Executive agrees to serve in such capacity for the term of this Agreement or any portion thereof without additional compensation; provided, however, that nothing in this Agreement shall require that CNAF elect or maintain Executive in any such position.”

4. Section 3(f) of the Employment Agreement is hereby deleted, and the following language is substituted in its place and stead as Section 3(f) of the Employment Agreement:

“For avoidance of doubt respecting awards to Executive under Section 3(b), 3(c) and 3(d), 3(e) and 3(i) hereof, the provisions of the Plan relating to the deferral of payments to satisfy Section 162(m) of the Internal Revenue Code of 1986 (“Code”) or any successor provision shall apply. The Company will defer until the first tax year in which it reasonably anticipates, or should reasonably anticipate, that deductibility is not limited by said Section 162(m) the payment of all compensation to which Executive is entitled under this Agreement and/or the Plan which the Company reasonably anticipates would be non-deductible under said Section 162(m) or any successor provision with respect to deductibility of executive compensation if paid in the tax year in which it would otherwise be payable; provided that such amounts shall in any event be paid not later than the period beginning on the date on which Executive separates from service (as defined in Section 409A of the Code) and ending on the later of the last day of the year in which the Executive separates from service or the fifteenth day of the third month following the separation from service; and provided further, that if any payment is deferred pursuant to this Section 3(f) until after Executive has separated from service and Executive is a specified employee as defined in Section 409A on the date of the separation from service, the preceding proviso shall be applied by substituting the day that is six months after Executive’s separation from service for the date of separation from service.”

5. The following language is hereby added as Subsection 3(i) of the Employment Agreement:

“Subject to the approval of the Committee and the following conditions, Executive shall be awarded a retention bonus (the “Retention Bonus”) of $500,000, of which amount 50% shall be payable on June 30, 2009 (the “First Payment Date”) and the other 50% on June 30, 2010 (the ”Second Payment Date”). Executive shall not receive any unpaid portion of the Retention Bonus if he voluntarily terminates his employment as provided in Section 6.4 of this Agreement prior to either Payment Date, or if he is terminated for Cause by the Company as provided for in Section 6.2 of this Agreement prior to either Payment Date. If Executive’s employment is terminated by the Company Without Cause, or if he terminates his employment for Good Reason as provided for in Section 6.3 of this Agreement, then the payment dates for any unpaid portion of the Retention Bonus shall be accelerated to the date of such termination.”

6. The following language is added at the end of Section 6.7 of the Employment Agreement:

“The Company shall furnish the release to Executive as soon as practical, but in no event more than ten (10) days after the date on which Executive’s employment is terminated. If Executive executes and delivers such release to the Company prior to March 15 of the year following the year in which his employment is terminated (or, if Executive has the right to revoke such release pursuant to the Age Discrimination in Employment Act or any other applicable law, executes and delivers such release at such time that such revocation period will expire prior to such March 15), then all Payments (as defined in Section 6.8) that would otherwise have been paid prior to the date on which the release is executed and delivered shall be paid to Executive in a lump sum, without interest, as soon as practical after such release is delivered (or such revocation period expires), but not later than such March 15. If Executive fails to execute and deliver such release prior to the date set forth in the preceding sentence, then the

Company shall have no obligation to pay to Executive any Payments that would otherwise have been payable prior to such March 15.”

7. Section 6.8 of the Employment Agreement is hereby deleted, and the following language is hereby substituted in its place and stead as Section 6.8 of the Agreement:

“Involuntary Termination Rule. Any term or provision of this Section 6 or elsewhere in the Agreement to the contrary notwithstanding, the following provisions shall apply to any payments to be made to Executive pursuant to Section 6.1 on termination by reason of Permanent Disability, Section 6.3, or Section 6.5(a) (collectively the “Payments”):

(a) Each Payment to be made on a separate date shall be treated as a separate Payment for purposes of §409A of the Code.

(b) The aggregate amount of all Payments, if any, payable after March 15 of the year following the year that includes the date of such involuntary termination (the “Termination Date”) but before the date that is six months after the Termination Date (increased by any other amounts of taxable compensation paid to the Executive during such period that would not have been paid but for such termination) shall not exceed two times the lesser of (i) Executive’s Base Compensation on the last day of the year immediately prior to the year that includes the Termination Date or (ii) the limit in effect under §401(a)(17) of the Code during the year that includes the Termination Date, as determined by the Company.

(c) To the extent the Payments payable during the period described in subparagraph (b) above would otherwise exceed the limit of subparagraph (b), such Payments shall be reduced to the extent necessary to satisfy the requirement of subparagraph (b) as determined by the Company, and the amount by which the Payments are reduced will be paid to Executive in a lump sum, without interest, on the first business day that is six months after the Termination Date as determined by the Company. However, if Executive dies during such period, the limits of subparagraph (b) shall not apply to Payments to the Executive’s beneficiaries or estate.

(d) If Executive’s termination of employment does not constitute a “separation from service” as defined in §409A of the Code, as determined by the Company, then all Payments that would otherwise be payable after March 15 of the year following the year that includes the Termination Date, and that exceed the limit described in Section 6.8(b), shall be deferred until six months after Executive has incurred a separation from service, as so defined, and all Payments that are so deferred shall be paid in a lump sum, without interest, on the first business day that is at least six months after Executive has incurred a separation from service.”

8. Except as otherwise expressly provided in this Amendment, all terms and provisions of the Employment Agreement remain in full force and effect.

IN WITNESS WHEREOF, the parties have entered into this Amendment effective as of the date set forth hereinabove.

CONTINENTAL CASUALTY COMPANY		LARRY A. HAEFNER
By:	/s/ Thomas Pontarelli
Title:	Executive Vice President	/s/ Larry A. Haefner

EX-10.4

EXHIBIT 10.4

AMENDMENT TO EMPLOYMENT AGREEMENT

     THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the “Amendment”) is made and entered into as of the 1st day of July, 2008, by and between Continental Casualty Company, an Illinois insurance company (the “Company”) and D. Craig Mense (“Executive”), as an amendment to that certain employment agreement between Executive and the Company dated August 1, 2007 (said employment agreement the “Employment Agreement”):

WITNESSETH:

WHEREAS, the parties wish to amend the Employment Agreement in certain respects to reflect the changes provided hereinbelow;

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, it is covenanted and agreed by the Executive and the Company as follows:

1. The following sentence in Paragraph 3(c) of the Employment Agreement is hereby deleted:

“The Executive’s target long-term incentive cash award shall be twenty-five percent (25%) of his Base Compensation during any applicable three year performance period as determined by the Company and/or the Committee, beginning with the 2008 performance year; that is, (a) effective for the 2008 performance year of the 2006-2008 cycle, (b) effective for the 2008 and 2009 performance years of the 2007-2009 cycle and (c) effective for all covered years in each subsequent performance cycle.”

and in its place and stead the following sentence is substituted:

“The Executive’s target long-term incentive cash award shall be twenty-five percent (25%) of his Base Compensation during any applicable three year performance period as determined by the Company and/or the Committee, beginning with the 2007 performance year; that is, (a) effective for the 2007 performance year of the 2005-2007 cycle, (b) effective for the 2007 and 2008 performance years of the 2006-2008 cycle and (c) effective for all covered years in each subsequent performance cycle.”

Executive and the Company acknowledge and agree that, as of the effective date of this Amendment, Executive’s long-term incentive cash award for the 2007 performance year of the 2005-2007 cycle has been paid to Executive at the referenced twenty-five percent (25%) target.

2. Section 3(e) of the Employment Agreement is hereby deleted, and the following language is substituted in its place and stead as Section 3(e) of the Employment Agreement:

“For avoidance of doubt respecting awards to Executive under Section 3(b), 3(c), and 3(d) hereof, the provisions of the Plan relating to the deferral of payments to satisfy Section 162(m) of the Internal Revenue Code of 1986 (“Code”) or any successor provision shall apply. The Company will defer until the first tax year in which it reasonably anticipates, or should reasonably anticipate, that deductibility is not limited by said Section 162(m) the payment of all compensation to which Executive is entitled under this Agreement and/or the Plan which the Company reasonably anticipates would be non-deductible under said Section 162(m) or any successor provision with respect to deductibility of executive compensation if paid in the tax year in which it would otherwise be payable; provided that such amounts shall in any event be paid not later than the

period beginning on the date on which Executive separates from service (as defined in Section 409A of the Code) and ending on the later of the last day of the year in which the Executive separates from service or the fifteenth day of the third month following the separation from service; and provided further, that if any payment is deferred pursuant to this Section 3(e) until after Executive has separated from service and Executive is a specified employee as defined in Section 409A on the date of the separation from service, the preceding proviso shall be applied by substituting the day that is six months after Executive’s separation from service for the date of separation from service.”

3. The following sentences in Paragraph 6.3 (a) of the Employment Agreement are hereby deleted:

“The Company shall pay to Executive severance consisting of an amount equal to the 12 months of the Executive’s Base Compensation and Bonus calculated at 150% of Base Compensation, or the aggregate amount of unpaid base compensation due to Executive under this Agreement, whichever is greater, in effect at the time of termination. The severance shall be paid not less frequently than in equal monthly installments following such termination. The Company shall also pay the Executive (i) aggregate unpaid Base Compensation and current year’s Bonus calculated as 150% of Base Compensation and target CNA long-term incentive cash awards prorated to the date of termination; (ii) any previous year’s unpaid Bonus based upon actual or discretionary payouts, if any; and (iii) within 30 days of his termination, unpaid cash entitlements, if any, earned and accrued pursuant to the terms of any applicable Company plan or program prior to the date of the date of termination (which unpaid cash entitlements under this Section 6.3(a)(ii) shall not include any unpaid Bonus or any unpaid long-term incentive cash awards or other awards under the Plan).”

and in their place and stead the following sentences are substituted:

“The Company shall pay to Executive severance consisting of an amount equal to $3,600,000. The severance shall be paid over two (2) years in equal monthly installments following such termination. The Company shall also pay the Executive within 30 days of his termination: (i) his unpaid base salary, prorated to the date of termination and (ii) unpaid cash entitlements, if any, earned and accrued pursuant to the terms of any applicable Company plan or program prior to the date of the date of termination (which unpaid cash entitlements under this Section 6.3(a)(ii) shall not include any unpaid Bonus or any unpaid long-term incentive cash award or other award under the Plan for the year in which such termination occurs).”

4. The following language is hereby added as Subsection 3(h) of the Employment Agreement:

“Subject to the approval of the Committee and the following conditions, Executive shall be awarded a retention bonus (the “Retention Bonus”) of $800,000, of which amount 50% shall be payable on June 30, 2009 (the “First Payment Date”) and the other 50% on June 30, 2010 (the ”Second Payment Date”). Executive shall not receive any unpaid portion of the Retention Bonus if he voluntarily terminates his employment as provided in Section 6.4 of this Agreement prior to either Payment Date, or if he is terminated for Cause by the Company as provided for in Section 6.2 of this Agreement prior to either Payment Date. If Executive’s employment is terminated by the Company Without Cause, or if he terminates his employment for Good Reason as provided for in Section 6.3 of this Agreement, then the payment dates for any unpaid portion of the Retention Bonus shall be accelerated to the date of such termination.”

5. The following language is added at the end of Section 6.7 of the Employment Agreement:

“The Company shall furnish the release to Executive as soon as practical, but in no event more than ten (10) days after the date on which Executive’s employment is terminated. If Executive executes and delivers such release to the Company prior to March 15 of the year following the year in which his employment is terminated (or, if Executive has the right to revoke such release pursuant to the Age Discrimination in Employment Act or any other applicable law, executes and delivers such release at such time that such revocation period will expire prior to such March 15), then all Payments (as defined in Section 6.8) that would otherwise have been paid prior to the date on which the release is executed and delivered shall be paid to Executive in a lump sum, without interest, as soon as practical after such release is delivered (or such revocation period expires), but not later than such March 15. If Executive fails to execute and deliver such release prior to the date set forth in the preceding sentence, then the Company shall have no obligation to pay to Executive any Payments that would otherwise have been payable prior to such March 15.”

6. Section 6.8 of the Employment Agreement is hereby deleted, and the following language is hereby substituted in its place and stead as Section 6.8 of the Agreement:

“Involuntary Termination Rule. Any term or provision of this Section 6 or elsewhere in the Agreement to the contrary notwithstanding, the following provisions shall apply to any payments to be made to Executive pursuant to Section 6.1 on termination by reason of Permanent Disability, Section 6.3, or Section 6.5(a) (collectively the “Payments”):

(a) Each Payment to be made on a separate date shall be treated as a separate Payment for purposes of §409A of the Code.

(b) The aggregate amount of all Payments, if any, payable after March 15 of the year following the year that includes the date of such involuntary termination (the “Termination Date”) but before the date that is six months after the Termination Date (increased by any other amounts of taxable compensation paid to the Executive during such period that would not have been paid but for such termination) shall not exceed two times the lesser of (i) Executive’s Base Compensation on the last day of the year immediately prior to the year that includes the Termination Date or (ii) the limit in effect under §401(a)(17) of the Code during the year that includes the Termination Date, as determined by the Company.

(c) To the extent the Payments payable during the period described in subparagraph (b) above would otherwise exceed the limit of subparagraph (b), such Payments shall be reduced to the extent necessary to satisfy the requirement of subparagraph (b) as determined by the Company, and the amount by which the Payments are reduced will be paid to Executive in a lump sum, without interest, on the first business day that is six months after the Termination Date as determined by the Company. However, if Executive dies during such period, the limits of subparagraph (b) shall not apply to Payments to the Executive’s beneficiaries or estate.

(d) If Executive’s termination of employment does not constitute a “separation from service” as defined in §409A of the Code, as determined by the Company, then all Payments that would otherwise be payable after March 15 of the year following the year that includes the Termination Date, and that exceed the limit described in Section 6.8(b), shall be deferred until six months after Executive has incurred a separation from service, as so defined, and all Payments that are so deferred shall be paid in a lump sum, without interest, on the first business day that is at least six months after Executive has incurred a separation from service.”

7. Except as otherwise expressly provided in this Amendment, all terms and provisions of the Employment Agreement remain in full force and effect.

IN WITNESS WHEREOF, the parties have entered into this Amendment effective as of the date set forth hereinabove.

CONTINENTAL CASUALTY COMPANY		D. CRAIG MENSE
By:	/s/ Thomas Pontarelli
Title:	Executive Vice President	/s/ D. Craig Mense

EX-10.5

Exhibit 10.5

CNA FINANCIAL CORPORATION

STOCK PURCHASE AGREEMENT

PURCHASE OF THE 2008 SENIOR
PREFERRED STOCK

DATED AS OF OCTOBER 27, 2008

CNA FINANCIAL CORPORATION

STOCK PURCHASE AGREEMENT

PURCHASE OF 2008 SENIOR
PREFERRED STOCK

As of October 27, 2008

Loews Corporation
667 Madison Avenue
New York, New York 10021-8087
Attn: General Counsel

Gentlemen:

     The undersigned, CNA Financial Corporation, a Delaware corporation, hereby confirms its agreement with you as follows:

I.

AUTHORIZATION AND FORM OF STOCK; CLOSING; EXCHANGE OF SHARES

     1.1 Authorization of Stock and Form of 2008 Senior Preferred. The Company proposes to designate, authorize and create a series of its preferred stock, designated the 2008 Senior Preferred Stock, having no par value (the “2008 Senior Preferred”), consisting of 12,500 shares and having the designation, powers, preferences and rights and the qualifications, limitations and restrictions thereof set forth in the certificate of designation with respect to such Series (as validly amended, modified or supplemented from time to time, the “2008 Senior Preferred Certificate”) in the form of Exhibit 1.1 attached hereto and made a part hereof.

     1.2 Closing; Payment. Subject to the terms and conditions of this Agreement, including, without limitation, the valid adoption by the Company of the 2008 Senior Preferred Certificate and the filing thereof with the Secretary of State of Delaware, and upon the basis of the representations and warranties herein contained, on November 7, 2008, or at such earlier or later date as the parties shall agree (the “Closing Date”), the Company hereby agrees to sell to you and issue to you or your nominee, and you agree to purchase from the Company 12,500 shares of 2008 Senior Preferred for an aggregate purchase price of $1,250,000,000. You shall pay $1,250,000,000 in currently available funds to the Company by wire transfer against delivery by the Company of stock certificates evidencing the 2008 Senior Preferred to be purchased by you, registered in your name or that of your nominee, as you may direct. The consummation of the transactions contemplated hereby is hereinafter called the “Closing”. The Closing shall take place on the Closing Date at 10:00 A.M. Central Time at the offices of Mayer Brown LLP, 71 South Wacker Drive, Chicago, Illinois, or at such other time and place as shall be agreed upon by the parties.

II.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     The Company represents and warrants that as of the date hereof and as of the Closing:

     2.1 Organization and Qualification of the Company. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with full corporate power and authority to conduct its business as currently conducted and to own and use its Property and is qualified to do business and in good standing as a foreign corporation in each jurisdiction where the character of its Property or the nature of its activities makes such qualification necessary, except where the failure to so qualify would not have a material adverse effect on the business or Property of the Company and its Subsidiaries (as defined in Section 2.2 below), taken as a whole (a “Material Adverse Effect”).

     2.2 Organization and Qualification of Subsidiaries. Each subsidiary of the Company that is a “significant subsidiary”, as defined in Rule 405 of the regulations under the Securities Act, (each a “Subsidiary”) has been duly incorporated and is validly existing as an insurance company (other than The Continental Corporation, which is validly existing as a New York business corporation) and is authorized to transact its business under the insurance code of its domiciliary state with full corporate power and authority to conduct its business as currently conducted and to own and use the properties owned by it, and is duly licensed to do businesses as a foreign insurer and is authorized to transact its business under the laws of each jurisdiction which requires such licensure where the character of its Property or the nature of its activities makes such qualification necessary, except where the failure to so qualify would not have a Material Adverse Effect.

     2.3 No Conflict. The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby and the 2008 Senior Preferred Certificate do not and will not (1) contravene, conflict with or result in any violation or breach of any provision of the certificate of incorporation or bylaws of the Company; (2) contravene, conflict with or result in a violation or breach of any provision of any law, rule, regulation, judgment, injunction, order or decree applicable to the Company or its subsidiaries, or require any consent, approval or other action by, filing with or notice to any governmental authority (including without limitation any regulatory authority), other than the filing of the 2008 Senior Preferred Certificate with the Secretary of State of the State of Delaware; (3) require any consent or other action by, filing with or notice to, any person under, constitute a default under (or an event that, with or without notice or lapse of time or both, would constitute a default), or cause or permit the termination, cancellation, acceleration, triggering or other change of any right or obligation or the loss of any benefit to which the Company or any of its subsidiaries is entitled under (A) any provision of any agreement or other instrument binding upon the Company or any of its subsidiaries or (B) any license, franchise, permit, certificate, approval or other similar authorization held by, or affecting, or relating to, the assets or business of the Company or any of its subsidiaries; or (4) result in the creation or imposition of any lien or other encumbrance on any asset of the Company or any of its subsidiaries, other than such exceptions in the case of clauses (2), (3) and (4) as would not, individually or in the aggregate, be reasonably expected to materially impair or delay the ability of the Company to consummate the transactions contemplated by this Agreement or the 2008 Senior Preferred Certificate or have a Material Adverse Effect.

     2.4 Litigation, etc. There are no actions, proceedings or investigations pending or, to the knowledge of the Company, threatened against the Company and/or any Subsidiaries before any court or before any administrative agency or administrative officer or executive, which may reasonably be expected to have a Material Adverse Effect on the ability of the Company to perform its obligations under this Agreement or the 2008 Senior Preferred Certificate.

     2.5 Company Authorizations. The 2008 Senior Preferred Certificate and this Agreement will have been duly authorized by the Company on or before the Closing; this Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or other laws affecting the enforcement of creditors rights generally or by equitable principles in any action (legal or equitable).

     2.6 Extent of Offering. Neither the Company nor, to its knowledge, any agent acting on its behalf has sold or offered to sell any or all of the 2008 Senior Preferred or any similar securities so as to bring the issuance or sale of the 2008 Senior Preferred within the provisions of Section 5 of the Securities Act.

     2.7 No Default. To the knowledge of the Company, neither the Company nor any of the Subsidiaries is either (i) in default under any (a) order, judgment, decree or ruling of any court, arbitrator or Governmental Authority, or (b) contract, agreement or instrument to which it is a party or by which it or any of its Property is bound, or (ii) in violation of any applicable law, ordinance, rule or regulation of any Governmental Authority, in neither case, which could reasonably be expected to have a Material Adverse Effect.

     2.8 Capital Stock. Subject to the valid filing of the 2008 Senior Preferred Certificate with the Secretary of State of Delaware, the authorized capital stock of the Company on the Closing Date will consist of 500,000,000 shares of Common Stock, with a par value of $2.50 per share, and 12,500,000 shares of Preferred Stock, with no par value, of which 12,500 are designated 2008 Senior Preferred. No Holder of any Security of the Company (a) will be entitled to any preemptive rights or (b) will have any right of first refusal to purchase any shares of the 2008 Senior Preferred to be issued and sold or otherwise transferred to you pursuant to this Agreement. The shares of the 2008 Senior Preferred to be issued to you at the Closing, shall be, upon issuance, validly issued, fully paid and nonassessable and free and clear of any liens or other encumbrances (other than any liens or encumbrances that may be created as a result of your ownership of the shares of 2008 Senior Preferred).

     2.9 Dividends. The Company has taken no action which would require or permit it to treat the 2008 Senior Preferred as other than equity or dividends declared or paid on the 2008 Senior Preferred as other than dividends on its books or its federal, state or local income tax returns.

     2.10 Periodic Reports. The Company’s Annual Report on Form 10-K for the year ended December 31, 2007 and the Company’s Quarterly Reports on Form 10-Q, for the quarterly periods ending March 31, 2008 and June 30, 2008, when they were filed with the Securities and Exchange Commission, conformed in all material respects to the requirements of the Securities Exchange Act and the rules and regulations of the Securities and Exchange Commission thereunder, and none of

such documents contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading.

     2.11 Absence of Material Adverse Effect. Since December 31, 2007, except as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 and the Company’s Quarterly Reports on Form 10-Q, for the quarterly periods ending March 31, 2008 and June 30, 2008, and except as disclosed to you in writing prior to the date hereof, there have not been any events or developments that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

     2.12 Ratings. As of the date hereof, the Company’s subsidiary Continental Casualty Company maintains insurer financial strength ratings of “A” from A.M. Best Company, A3 from Moody’s Investors Services and A- from Standard & Poor’s.

III.

REPRESENTATIONS AND WARRANTIES OF INVESTOR

     3.1 Investment Intent, etc. You represent and warrant that you are acquiring the 2008 Senior Preferred purchased or otherwise acquired hereunder for your own account for investment and not with a view to, or for sale or other disposition in connection with, any distribution (within the meaning of the Securities Act) thereof, nor with any present intention of selling or otherwise disposing of the same subject, nevertheless, to any requirement of law that the disposition of your Property shall at all times be within your control.

     3.2 Sophistication, Financial Strength, Access, etc. You represent, warrant and acknowledge that you are an accredited investor (as the term is defined in Rule 501 promulgated by the Securities and Exchange Commission under the Securities Act) and that your principal place of business is the address set forth on page one hereof. You acknowledge that you are fully informed that the shares of 2008 Senior Preferred being sold to you hereunder are being sold pursuant to a private offering exemption of the Securities Act and are not being registered under the Securities Act or under the securities or blue sky laws of any state or foreign jurisdiction; that such shares of 2008 Senior Preferred must be held indefinitely unless they are subsequently registered under the Securities Act and any applicable state securities or blue sky laws, or unless an exemption from registration is available thereunder; and that the Company has no obligation to register such shares of the 2008 Senior Preferred. You acknowledge that all documents, records and books pertaining to the investment in the Company contemplated hereby have been made available or delivered to you; that you have had an opportunity to ask questions of and receive answers from the Company and its officers.

     3.3 Organization of Investor. You represent and warrant that you are a corporation duly organized, validly existing and in good standing under the laws of your state of incorporation, and that you have all requisite power and authority to carry out the transactions provided for in, or contemplated by, this Agreement.

     3.4 Authorization. You represent and warrant that as of the Closing, the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated

herein, have been duly authorized by you. The fulfillment of and compliance with the terms of this Agreement by you will not (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under, or (iii) result in a violation of, breach of or default under (a) your certificate of incorporation or bylaws or (b) any law, statute, rule or regulation to which you are subject, or (c) any agreement, instrument, order, judgment or decree to which you are a party, bound or subject.

     3.5 Binding Effect. You represent and warrant that this Agreement constitutes your valid and binding obligation, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or other laws affecting the enforcement of creditors rights generally or by equitable principles in any action (legal or equitable).

IV.

CONDITIONS TO CLOSING

     The Company’s obligations to issue and sell to you the 2008 Senior Preferred at the Closing and to consummate the other transactions contemplated herein, as provided in Article I hereof, shall be subject to the prior approval thereof by the Special Review Committee of the Board of Directors of the Company established by resolution of the Board on October 13, 2008 (the “Special Review Committee”). Your obligation to purchase 2008 Senior Preferred at the Closing and to consummate the other transactions contemplated herein, as provided in Article I hereof, shall be subject to the satisfaction of the following conditions, any of which may be waived by you in writing:

     4.1 Representations and Warranties True at Closing: Non-Occurrence of Default. The representations and warranties contained in Article II hereof shall be true as of the Closing Date, there shall exist no condition, event or fact constituting, or which, with notice or passage of time or both, would constitute a material default in the observance of any of the Company’s undertakings or covenants hereunder, or pursuant to the 2008 Senior Preferred Certificate, no material adverse change shall have occurred in the business, Property, prospects or condition (financial or otherwise) of the Company between the date of this Agreement and the Closing Date, and all conditions precedent to the Closing to be performed by the Company shall have been complied with; and an Executive Vice President or a Senior Vice President of the Company shall deliver to you at the Closing a certificate to such effect, executed by him, dated the Closing Date.

     4.2 Corporate Proceedings. All corporate and other proceedings required to be taken in connection with the transactions contemplated hereby, shall be satisfactory in form and substance to you and your counsel, and you and your counsel shall have received all such counterpart originals or certified or other copies of such documents as you or your counsel shall reasonably request.

     4.3 2008 Senior Preferred Certificate. The Board (and/or a properly authorized committee thereof) shall have adopted the resolution embodied in the 2008 Senior Preferred Certificate; and the 2008 Senior Preferred Certificate shall have been filed with the Secretary of State of Delaware, and its terms shall have become effective, and you shall have received a copy of the 2008 Senior Preferred Certificate, certified by the Secretary of the State of Delaware.

     4.4 Legal Opinion. You shall have received an opinion of counsel from Jonathan D. Kantor, Esq., Executive Vice President, Secretary and General Counsel of the Company, substantially in the form attached hereto and made a part hereof as Exhibit 4.4.

V.

COVENANTS OF THE COMPANY

     5.1 Dividends Received Deduction. The Company covenants and agrees that, except as otherwise provided in this Article V, so long as any shares of the 2008 Senior Preferred actually issued hereunder shall be outstanding, the Company shall:

          (A) Treat the shares of 2008 Senior Preferred as Stock and not as indebtedness, and treat the dividends paid (or accrued) with respect to the shares of 2008 Senior Preferred as distributions within the meaning of Section 301 of the Code, and not as interest.

          (B) Not take any action which could reasonably be expected by it (i) to require or permit the Company to treat the dividends paid with respect to the 2008 Senior Preferred as interest for any purpose, (ii) to cause the 2008 Senior Preferred to be treated as indebtedness for purposes of Section 385 of the Code or any successor provision of the Code and the regulations promulgated thereunder, or (iii) to cause the dividends received deduction under Section 243 of the Code (the “Dividends Received Deduction”) to cease to be available, in whole or in part, with respect to dividends on the 2008 Senior Preferred received by any corporate Holder.

          (C) Without limiting the generality of the foregoing Subsection (B), (i) not claim a deduction for dividends paid on the 2008 Senior Preferred whether as interest or otherwise, in any federal income tax return, claim for refund of federal income tax or other submission to the Internal Revenue Service and (ii) unless required to do so by accounting principles generally accepted in the United States of America, not treat the 2008 Senior Preferred other than as equity capital or the dividends paid thereon other than as dividends paid on capital in any report to stockholders or any governmental body having jurisdiction over the Company or otherwise.

          (D) Not exercise any option or election that may at any time be available under the Code or otherwise to deduct all or part of any dividend paid with respect to the shares of 2008 Senior Preferred if so doing would increase the amount of such dividend includable for federal, state or local income tax purposes in the income of any corporate Holder of shares of the 2008 Senior Preferred.

          (E) At the request of any corporate Holder of 2008 Senior Preferred, join with such Holder in the submission to the Internal Revenue Service of a request for a ruling that dividends paid on the 2008 Senior Preferred will be eligible for the Dividends Received Deduction for federal income tax purposes; in addition, the Company shall cooperate with and support any corporate Holder in any litigation, appeal or other proceeding challenging or contesting any ruling, technical advice, finding or determination of the Internal Revenue Service that dividends paid on the 2008 Senior Preferred are to be treated as indebtedness for purposes of the Code or are not eligible for the Dividends Received Deduction. The cooperation and support required of the Company by the preceding sentence shall be at the expense of such corporate Holder, except that the Company will pay all fees and expenses (whether incurred by it or a corporate Holder) in connection with any such

submission, litigation, appeal or other proceeding necessitated or caused by a breach by the Company of its covenants contained in this Section 5.1.

          (F) Notwithstanding anything herein to the contrary, nothing herein shall limit or otherwise restrict the authority of the Company to take any actions or exercise any options in relation to the 2008 Senior Preferred in accordance with the terms of the 2008 Senior Preferred Certificate.

     5.2 Use of Proceeds. The Company covenants and agrees that it will use $1.0 billion of the proceeds from the sale of the 2008 Senior Preferred to purchase capital surplus notes issued by Continental Casualty Company and the balance of such proceeds for general corporate purposes.

VI.

TRANSFER OF SECURITIES

     The shares of 2008 Senior Preferred shall not be transferable except upon the conditions specified in this Article VI, which conditions are intended to insure compliance with the provisions of the Securities Act and state securities laws in respect of the transfer of any such shares.

     6.1 Restrictive Legends.

          (A) Unless and until otherwise permitted by this Article, each certificate for 2008 Senior Preferred issued to you or your nominee, or to any subsequent transferee shall be stamped or otherwise imprinted with a legend in substantially the following form:

“The shares represented hereby have not been registered under the Securities Act of 1933, as amended, and thus may not be offered for sale, sold, transferred or otherwise disposed of unless registered under the Securities Act of 1933, as amended, or unless an exemption from such registration is available. Further, such transfer is subject to the conditions specified in a Stock Purchase Agreement dated as of [ ], 2008, between Loews Corporation and CNA Financial Corporation (the “Company”), a copy of which Agreement is on file and may be inspected at the principal office of the Company. A copy of such Agreement will be furnished by the Company to the holder hereof upon request and without charge. Under certain circumstances specified in such Agreement, the Company has agreed to deliver to the holder hereof a new certificate, not bearing this legend, for all or part of the number of shares evidenced hereby, as the case may be, registered in the name of such holder or designated nominee.”

          (B) Each certificate for 2008 Senior Preferred shall be stamped or otherwise imprinted with a legend in substantially the following form:

“A statement of the relative rights and preferences of the Company’s Common Stock and each series of preferred stock will be furnished by the Company to the holder hereof upon request and without charge.”

          The Company may stop, or may order its transfer agent for the 2008 Senior Preferred to stop, the transfer of any shares of the 2008 Senior Preferred bearing the legend set forth in Subsection A of this Section 6.1 until the conditions of this Article VI with respect to the transfer of such shares have been satisfied.

     6.2 Notice of Proposed Transfer. If, prior to any transfer or sale of any shares of 2008 Senior Preferred, the Holder desiring to effect such transfer or sale shall deliver a written notice to the Company describing briefly the manner of such transfer or sale and a written opinion of counsel for such Holder (provided that such counsel, and the form and substance of such opinion, are reasonably satisfactory to the Company) to the effect that such transfer or sale may be effected without the registration of such shares under the Securities Act, the Company shall thereupon permit or cause its transfer agent (if any) to permit such transfer or sale to be effected; provided, however, that if in such written notice the transferring Holder represents and warrants to the Company that the transfer or sale is to a purchaser or transferee whom the transferring Holder knows or reasonably believes to be a “qualified institutional buyer”, as that term is defined in Rule 144A promulgated by the Securities and Exchange Commission under the Securities Act (“Rule 144A”), no opinion shall be required.

     6.3 Termination of Restrictions.

          (A) Notwithstanding the foregoing provisions of this Article VI, the restrictions imposed by this Article VI upon the transferability of 2008 Senior Preferred shall terminate as to any particular share of 2008 Senior Preferred when (1) such Security shall have been effectively registered under the Securities Act and sold by the Holder thereof in accordance with such registration, or (2) a written opinion to the effect that such restrictions are no longer required or necessary under any federal or state securities law or regulation have been received from counsel for the Holder thereof (provided that such counsel and the form and substance of such opinion, are reasonably satisfactory to the Company) or counsel for the Company, or (3) such Security shall have been sold without registration under the Securities Act in compliance with Rule 144 promulgated by the Securities and Exchange Commission under the Securities Act (“Rule 144”), or (4) the Company is reasonably satisfied that the Holder of such Security shall, in accordance with the terms of Subsection (b)(1) of Rule 144, be entitled to sell such Security pursuant to such Subsection, or (5) a letter or an order shall have been issued to the Holder thereof by the staff of the Securities and Exchange Commission or such Commission stating that no enforcement action shall be recommended by such staff or taken by such Commission, as the case may be, if such Security is transferred without registration under the Securities Act in accordance with the conditions set forth in such letter or order and such letter or order specifies that no subsequent restrictions on transfer are required.

          (B) Whenever the restrictions imposed by this Article VI shall terminate, as hereinabove provided, the Holder of any particular share of 2008 Senior Preferred then outstanding as to which such restrictions shall have terminated, shall be entitled to receive from the Company,

without expense to such Holder, one or more new certificates for 2008 Senior Preferred not bearing the restrictive legend set forth in Section 6.1(A) hereof.

     6.4 Compliance with Rule 144 and Rule 144A. At the written request of any Holder of 2008 Senior Preferred who proposes to sell any shares of 2008 Senior Preferred in compliance with Rule 144, the Company shall furnish to such Holder, within ten days after receipt of such request, a written statement as to whether or not the Company is in compliance with the filing requirements of the Securities and Exchange Commission as set forth in such Rule. For purposes of effecting compliance with Rule 144A, in connection with any resales of any shares of 2008 Senior Preferred that hereafter may be effected pursuant to the provisions of Rule 144A, any Holder of shares of 2008 Senior Preferred desiring to effect such resale and each prospective institutional purchaser of such shares designated by such Holder shall have the right, at any time the Company is not subject to Section 13 or 15(d) of the Securities and Exchange Act, to obtain from the Company, upon the written request of such Holder and at the Company’s expense the documents specified in Section (d)(4)(i) of Rule 144A, as such rule may be amended from time to time.

     6.5 Non-Applicability of Restrictions on Transfer. Notwithstanding the provisions of Section 6.2 hereof, any record owner of 2008 Senior Preferred may from time to time transfer all or part of such record owner’s 2008 Senior Preferred (i) to a nominee identified in writing to the Company as being the nominee of or for such record owner, and any nominee of or for a beneficial owner of 2008 Senior Preferred identified in writing to the Company as being the nominee of or for such beneficial owner may from time to time transfer all or part of the 2008 Senior Preferred registered in the name of such nominee but held as nominee on behalf of such beneficial owner, to such beneficial owner, or (ii) if such record owner is a partnership or the nominee of a partnership, to a partner, retired partner, or estate of a partner or retired partner, of such partnership, so long as such transfer is in accordance with the transferee’s interest in such partnership and is without consideration; provided, however, that each such transferee shall remain subject to all restrictions on the transfer of shares of 2008 Senior Preferred herein contained.

VII.

DEFINITIONS

     All capitalized terms used herein, but not otherwise defined shall have the meaning set forth in the 2008 Senior Preferred Certificate. For the purposes of this Agreement, the following terms shall have the following meanings:

     “Agreement” shall mean, and the words “herein,” “hereof,” “hereunder” and words of similar import shall refer to this Agreement and any amendment or supplement hereto.

     “Closing” shall have the meaning set forth in Section 1.2 hereof.

     “Closing Date” shall have the meaning set forth in Section 1.2 hereof.

     “Company” shall mean CNA Financial Corporation, a Delaware corporation, and all successor corporations thereof.

     “Dividends Received Deduction” shall have the meaning set forth in Section 5.1(B) hereof.

     “Governmental Authority” shall mean (a) the government of (i) the United States of America or any state or other political subdivision thereof, or (ii) any jurisdiction in which the Company or any Subsidiary conducts all or any part of its business, or (b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government.

     “Holders” shall mean the Persons who shall from time to time, own, of record or beneficially, any shares of 2008 Senior Preferred. The term “Holder” shall mean any one of the Holders.

     “Internal Revenue Service” shall mean the United States Internal Revenue Service or any successor to the functions of such agency.

     “Material Adverse Effect” shall have the meaning set forth in Section 2.1 hereof.

     “Property” shall mean an interest in any kind of property or assets, whether real, personal or mixed, or tangible or intangible.

     “Rule 144” shall have the meaning set forth in Section 6.3(A) hereof.

     “Rule 144A” shall have the meaning set forth in Section 6.2 hereof.

     “Securities Act” shall mean the Securities Act of 1933, as amended prior to or after the date of this Agreement, or any federal statute or statutes which shall be enacted to take the place of such Act, together with all rules and regulations promulgated thereunder.

     “Securities and Exchange Commission” shall mean the United States Securities and Exchange Commission or any successor to the functions of such agency.

     “Securities Exchange Act” shall mean the Securities Exchange Act of 1934, as amended prior to or after the date of this Agreement, or any federal statute or statutes which shall be enacted to take the place of such Act, together with all rules and regulations promulgated thereunder.

     “2008 Senior Preferred” shall mean the Company’s 2008 Senior Preferred Stock, no par value, and any Stock into which such Stock may hereafter be changed.

     “Subsidiary” shall have the meaning set forth in Section 2.2 hereof.

VIII.

MISCELLANEOUS

     8.1 Amendment and Waiver.

          (A) Any term, covenant, agreement or condition contained in this Agreement may be amended, or compliance therewith may be waived (either generally or in particular instances and either retroactively or prospectively), (i) if prior to the Closing, by written instruments signed by you

and the Company, and (ii) if subsequent to the Closing, by written instruments signed by the Company and the Holders of a majority of the then outstanding shares of 2008 Senior Preferred.

          (B) This Agreement shall not be altered, amended or supplemented except by written instruments. Any waiver of any term, covenant, agreement or condition contained in this Agreement shall not be deemed a waiver of any other term, covenant, agreement or condition, and any waiver of any default in any such term, covenant, agreement or condition shall not be deemed a waiver of any later default thereof or of any other term, covenant, agreement or condition. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof.

     8.2 Lost, Etc., Securities. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of any certificate of 2008 Senior Preferred and (in case of loss, theft or destruction) receipt of indemnity satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of such 2008 Senior Preferred certificate, if mutilated, the Company will make, and deliver, in lieu of such 2008 Senior Preferred certificate, a new 2008 Senior Preferred certificate of like tenor. Any 2008 Senior Preferred Certificate made and delivered in accordance with the provisions of this Section 8.2 shall be dated as of the date of the 2008 Senior Preferred certificate in lieu of which such new 2008 Senior Preferred certificate is made and delivered. If you or your affiliate are the beneficial owner of such lost, stolen or destroyed 2008 Senior Preferred certificate, then the affidavit of your or your affiliate’s president (or other chief executive officer) and any vice president or treasurer (if you or your affiliate are a corporation) or your or your affiliate’s general partner (if you or your affiliate are a partnership), setting forth the fact of loss, theft or destruction and your or your affiliate’s beneficial ownership of such 2008 Senior Preferred certificate at the time of such loss, theft or destruction shall be accepted as satisfactory evidence thereof, and, except as required by law, no indemnity shall be required as a condition to execution and delivery of a new 2008 Senior Preferred certificate other than your or your affiliate’s written agreement to indemnify the Company and its directors, officers and agents. The term “outstanding” when used in this Agreement with reference to 2008 Senior Preferred as of any particular time, shall not include 2008 Senior Preferred in lieu of which a new 2008 Senior Preferred certificate has been made and delivered by the Company in accordance with the provisions of this Section 8.2.

     8.3 Survival of Covenants; Termination of Representations and Warranties. All covenants contained herein or made in writing by the Company or by you in connection herewith shall survive the execution and delivery of this Agreement, the issuance and sale or other transfer of 2008 Senior Preferred hereunder; provided, however, that all representations and warranties contained herein or made in writing by the Company or by you in connection herewith shall terminate immediately following the Closing.

     8.4 Severability. In the event that any court or any governmental authority or agency declares all or any part of any Section of this Agreement to be unlawful or invalid, such unlawfulness or invalidity shall not serve to invalidate any other Section of this Agreement, and in the event that only a portion of any Section is so declared to be unlawful or invalid, such unlawfulness or invalidity shall not serve to invalidate the balance of such Section.

     8.5 Successors and Assigns. All representations, warranties, covenants and agreements of the parties contained in this Agreement or made in writing in connection herewith, shall, except as otherwise provided herein, be binding upon and inure to the benefit of their respective nominees, successors and assigns and, in the case of a natural Person, of his heirs and personal representatives.

     8.6 Notices. All communications provided for hereunder shall be in writing and delivered by hand, by express delivery service with confirmed receipt or by first-class or certified mail, postage prepaid, and, if to you or your nominee, addressed to you at the address set forth below your name on the first page hereof or at such other address as you may designate to the Company in writing and if to any Holder of 2008 Senior Preferred other than you or your nominee, addressed to such Holders at their respective addresses as shown on the books of the Company or its transfer agent, and if to the Company, addressed to the Company at its offices at CNA Financial Corporation, 333 South Wabash Street, Chicago, Illinois 60604; Attention: Treasurer or such other place as shall be designated by the Company in writing.

     8.7 Governing Law. The validity, meaning and effect of this Agreement shall be determined in accordance with the domestic laws of the State of Illinois applicable to contracts made and to be performed in that state without giving effect to any choice or conflict of law provision or rule (whether in the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Illinois.

     8.8 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall together constitute one and the same document.

     8.9 Reproduction of Documents. This Agreement and all documents relating hereto, including, without limitation, (a) consents, waivers and modifications which may hereafter be executed, (b) documents received by you at Closing or thereafter (except certificates evidencing shares of 2008 Senior Preferred) and (c) financial statements, certificates and other information previously or hereafter furnished to you, may be reproduced by you by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process and you may destroy any original document so reproduced. The Company agrees and stipulates that any such reproduction, absent evidence of alteration, shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.

     8.10 Transfers. Any transferee to whom shares of 2008 Senior Preferred are transferred in accordance with Article VI hereof shall be entitled to all rights and benefits to which the transferor would be entitled as an original Holder of the 2008 Senior Preferred so transferred.

     8.11 Headings. The headings used herein are solely for the convenience of the parties and shall not constitute a part hereof or serve to modify or interpret the text.

     8.12 Entire Agreement and Exhibits. This Agreement and the Exhibits hereto constitute and encompass the entire agreement and understanding of the parties hereto with regard to the transactions contemplated or provided for herein.

Very truly yours, CNA FINANCIAL CORPORATION
By:	/s/ D. Craig Mense
	Name:	D. Craig Mense
	Title:	Executive Vice President and Chief Financial Officer

The terms of the foregoing Purchase Agreement are approved and accepted by the undersigned as of October 27, 2008. LOEWS CORPORATION
By:	/s/ Peter W. Keegan
	Name:	Peter W. Keegan
	Title:	Senior Vice President and Chief Financial Officer

Exhibit 1.1

CNA FINANCIAL CORPORATION

CERTIFICATE OF DESIGNATION RELATING
TO THE 2008 SENIOR PREFERRED STOCK
WITH NO PAR VALUE OF
CNA FINANCIAL CORPORATION

Pursuant to Section 151 of the
General Corporation Law of the State of Delaware

     CNA Financial Corporation, a Delaware corporation (the “Corporation”), hereby certifies that pursuant to the authority contained in Article FOURTH of the Corporation’s Certificate of Incorporation, and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware (the “DGCL”), the following resolution was duly adopted by the Special Review Committee of the Board of Directors of the Corporation (which was granted authority to designate the terms hereof by resolutions of the Board of Directors of the Corporation), creating a series of its Preferred Stock designated as the 2008 Senior Preferred Stock:

     RESOLVED, that there is hereby created and the Corporation be, and it hereby is, authorized to issue 12,500 shares of a series of its Preferred Stock designated the 2008 Senior Preferred Stock (the “2008 Senior Preferred”) to have the powers, preferences and rights and the qualifications, limitations or restrictions thereof hereinafter set forth in this resolution:

     1. Preference. The preferences of each share of the 2008 Senior Preferred with respect to distributions of the Corporation’s assets as dividends or upon voluntary or involuntary liquidation, dissolution or winding up of the Corporation shall be (i) equal to the preferences of every other share of the 2008 Senior Preferred from time to time outstanding in every respect, (ii) equal to the preferences of all Parity Stock, (iii) senior to the preferences of the Corporation’s common stock and any series of preferred stock expressly made junior to the 2008 Senior Preferred to the extent so provided and (iv) junior to the preferences of any Senior Stock.

     2. Voting Rights. Except as otherwise expressly provided herein, in the Certificate of Incorporation or the By-laws of the Corporation or by law, the Holders of the 2008 Senior Preferred, by virtue of their ownership thereof, shall have no voting rights.

     3. Liquidation Rights.

          (A) Liquidation Amount. If the Corporation shall be voluntarily or involuntarily liquidated, dissolved or wound up, at any time when any 2008 Senior Preferred shall be outstanding, each then outstanding share of the 2008 Senior Preferred shall entitle the Holder thereof to a preference, against the Property of the Corporation available for distribution to the Holders of the

Corporation’s Stock equal to the 2008 Senior Preferred Value plus an amount equal to all unpaid dividends accrued thereon to the date that the Corporation makes the payment available to the Holders.

          (B) No Further Right To Participate. After payment of all amounts payable pursuant to Section 3(A) shall have been made in full to the Holders of the outstanding the 2008 Senior Preferred, or funds necessary for such payment shall have been set aside in trust for the account of the Holders of the 2008 Senior Preferred so as to be, and continue to be, available therefor, the Holders of the 2008 Senior Preferred shall be entitled to no further participation in the distribution of assets of the Corporation.

          (C) Proportionate Distribution. If, upon any liquidation, dissolution or winding-up of the Corporation, the assets of the Corporation, or proceeds thereof available for distribution to the Holders of shares of the 2008 Senior Preferred shall be insufficient to pay in full all amounts to which such Holders are entitled pursuant to paragraph (A) of this Section 3, no such distribution shall be made on account of any shares of Parity Stock unless proportionate distributive amounts shall be paid on account of the shares of the 2008 Senior Preferred, ratably, in proportion to the full distributable amount for which holders of all such shares of Parity Stock and the 2008 Senior Preferred are respectively entitled upon such liquidation, dissolution or winding-up.

          (D) Order of Distributions. All of the preferential amounts to be paid to the Holders of the 2008 Senior Preferred as provided in this Section 3 shall be paid or set apart for payment before the payment or setting apart for payment of any amount for, or the distribution of any Property of the Corporation to, the Holders of any common stock or any series of preferred stock, whether now or hereafter authorized, which ranks junior to the 2008 Senior Preferred upon such liquidation, dissolution or winding-up.

     4. Dividends.

          (A) Accrual of Dividends. The Holders of the 2008 Senior Preferred shall be entitled to receive, when and as declared by the Board out of funds legally available therefor, cumulative dividends payable in cash. Such dividends shall accrue at the Applicable Rate and shall be cumulative with respect to each share of the 2008 Senior Preferred, from the date of issuance of such share, and shall accrue quarterly until paid, whether or not earned, whether or not declared by the Board and whether or not there are funds legally available therefor on the date such dividends are payable. The amount of dividends per share payable on shares of the 2008 Senior Preferred for each full Dividend Period shall be computed by dividing by four the Applicable Rate for such Dividend Period and applying the rate obtained against the 2008 Senior Preferred Dividend Calculation Value per share of the 2008 Senior Preferred as of the relevant Dividend Payment Date. The amount of dividends payable for the initial dividend period or any other period shorter than a full dividend period shall be computed on the basis of a 360-day year of twelve 30-day months.

          (B) Payment of Dividends. Dividends shall be payable in cash to each Holder of the 2008 Senior Preferred in quarterly installments on March 31, June 30, September 30, and December 31 in each year, commencing on December 31, 2008 (each a “Dividend Payment Date”), as declared by the Board out of funds legally available therefor. The Board may fix a record date for the determination of a dividend or distribution declared thereon, which record date shall not be more

than 30 days prior to the date fixed for the payment thereof. Dividends shall cease to accrue on any Stock redeemed as provided herein, or as to the 2008 Senior Preferred upon any liquidation as described herein.

          (C) No Additional Dividends or Interest. Holders of shares of the 2008 Senior Preferred shall not be entitled to any dividend, whether payable in cash, Property or Stock, in excess of full cumulative dividends, as herein provided on the 2008 Senior Preferred. No interest or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the 2008 Senior Preferred which may be in arrears.

          (D) Limitation on Certain Distributions. So long as any shares of the 2008 Senior Preferred are outstanding, no dividend (other than a dividend or distribution paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, common stock or in any other Stock ranking junior to the 2008 Senior Preferred as to dividends and liquidation) shall be declared or paid or set aside for payment or other distribution declared or made upon the common stock or upon any other Stock of the Corporation ranking junior to or on a parity with the 2008 Senior Preferred as to dividends or upon liquidation, nor shall any common stock nor any other Stock of the Corporation ranking junior to or on parity with the 2008 Senior Preferred as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys to be paid to or made available for a sinking fund for the redemption of any shares of any such Stock) by the Corporation (except by conversion into or exchange for Stock of the Corporation ranking junior to the 2008 Senior Preferred as to dividends and upon liquidation).

     5. Redemption.

     Upon the mutual agreement of the Corporation and the Holders of a majority of the outstanding shares of the 2008 Senior Preferred, at any time and from time to time, the outstanding shares of the 2008 Senior Preferred may be redeemed for cash in whole or in part on a pro rata basis at a redemption price per share equal to the 2008 Senior Preferred Value plus all unpaid dividends accrued thereon through and including the date of redemption.

     6. Conversion; Exchange. The 2008 Senior Preferred shall not be convertible into or exchangeable for any other shares of Stock or Property of the Corporation.

     7. Protective Provisions. So long as any shares of the 2008 Senior Preferred remain outstanding, the Corporation shall not, without the affirmative vote or written consent of Holders of at least a majority (or more if required by law) of the outstanding shares of the 2008 Senior Preferred:

          (A) Amend, waive or repeal any provisions of, or add any provision to, this Certificate of Designation; or

          (B) Authorize, create, issue or sell any shares of Senior Stock or Parity Stock.

     8. Notices. All notices provided for hereunder shall be in writing and delivered by hand or by first-class or certified mail, postage prepaid and, if to a Holder of the 2008 Senior Preferred, to such Holder at the address as shown on the books of the Corporation or its transfer agent, if any, and

if to the Corporation to its offices at 333 South Wabash, Chicago, Illinois 60604; Attention: Treasurer, or such other place as shall be designated by the Corporation in a notice delivered to the Holders of the 2008 Senior Preferred.

     9. Definitions. As used in this Certificate of Designation, the following terms have the following meanings:

     “Applicable Rate” shall mean initially 10% per annum. On the fifth anniversary of the date of original issuance of the 2008 Senior Preferred and on each fifth anniversary thereafter (each, a “Reset Date”), the Applicable Rate shall be reset to equal the greater of 10% per annum or the Reset Rate on the applicable Reset Date.

     “Board” shall mean the Board of Directors of the Corporation.

     “Dividend Payment Date” shall have the meaning set forth in Section 4(B) hereof.

     “Dividend Period” shall mean (i) initially the period commencing on the date of the initial issuance of any shares of the 2008 Senior Preferred and ending on December 31, 2008 and (ii) thereafter, the period commencing on the date immediately following a Dividend Payment Date and ending on the next Dividend Payment Date, except that the final Dividend Period with respect to any share of the 2008 Senior Preferred shall end on the date such share is redeemed.

     “Holders” shall mean the Persons who shall, from time to time, own of record or beneficially any shares of the 2008 Senior Preferred. The term “Holder” shall mean one of the Holders.

     “Parity Stock” shall mean any shares of any class or series of Stock of the Corporation having any preference or priority as to dividends or liquidation, dissolution or winding up equal to or pari passu with any such preference or priority of the 2008 Senior Preferred and any instrument or security convertible into or exchangeable for Parity Stock.

     “Person” shall mean an individual, a corporation, a partnership, a limited liability company, a trust, an unincorporated organization or a government organization or an agency or political subdivision thereof.

     “Property” shall mean an interest in any kind of property or assets, whether real, personal or mixed, or tangible or intangible.

     “Reset Rate” shall mean a rate equal to the Treasury Yield plus 700 basis points.

     “Senior Stock” shall mean any shares of any class or series of Stock of the Corporation having any preference or priority as to dividends or liquidation superior to any such preference or priority of the 2008 Senior Preferred and any instrument or security convertible into or exchangeable for Senior Stock.

     “2008 Senior Preferred Dividend Calculation Value” shall mean as of December 31 of each year, the sum of (i) the 2008 Senior Preferred Value and (ii) all accrued and unpaid dividends as of such date.

     “2008 Senior Preferred Value” shall mean $100,000 per share of the 2008 Senior Preferred.

     “Stock” shall include any and all shares, interests or other equivalents (however designated) of, or participations in, corporate stock, including without limitation any Stock redeemed as provided for herein which shall have the status of authorized but unissued shares.

     “Treasury Yield” shall mean the yield to maturity on the applicable Reset Date of United States Treasury securities with a maturity of 10 years (or the maturity closest to 10 years for which yield information is publicly reported), as reported by Bloomberg L.P. (or any successor to Bloomberg L.P.), as of 4:00 p.m., New York City time on the business day immediately preceding the applicable Reset Date, on screen “Govt C4” or another screen hereafter used by Bloomberg L.P. to report on United States Government securities, or if Bloomberg L.P. (or a successor) is no longer publishing such information, then any publicly available source of similar data as determined by the Board.

     IN WITNESS WHEREOF, CNA Financial Corporation has caused this Certificate to be duly executed this ___day of November, 2008.

CNA FINANCIAL CORPORATION
By:
	Its: Executive Vice President and Chief Financial Officer

EXHIBIT 4.4

[CNA LETTERHEAD]

[                    ], 2008

Loews Corporation
667 Madison Avenue
New York, New York 10021-8087

Attn: General Counsel

Gentlemen:

I am providing this opinion as Executive Vice President, Secretary and General Counsel of CNA Financial Corporation, a Delaware corporation (the “Company”), in connection with the transactions contemplated by that certain Stock Purchase Agreement (the “Agreement”), dated as of October 27, 2008, by and between the Company and Loews Corporation (“Loews”), pursuant to which the Company will issue and sell to Loews 12,500 shares (the “Shares”) of its 2008 Senior Preferred Stock, no par value. Capitalized terms used herein, but not otherwise defined, shall have the meanings provided for such terms in the Agreement.

In connection with the foregoing, I have examined the minute books and stock records of the Company; the Certificate of Incorporation and By-Laws of the Company; the 2008 Senior Preferred Certificate; copies of the resolutions of the Board of Directors of the Company appointing a special committee of the Board; and resolutions of such special committee approving the resolution embodied in the 2008 Senior Preferred Certificate and the transactions contemplated by the Agreement. In addition, I have reviewed such other documents and instruments, investigated such matters of law and have conferred with such officers and directors of the Company and have ascertained or verified to my satisfaction, such additional facts with respect to the Company which I have deemed necessary or appropriate for the purposes of rendering this opinion.

I do not express any opinion as to any matters governed by any laws other than the General Corporation Law of the State of Delaware.

Based upon and qualified by the foregoing, I am of the opinion that:

(i)	The Company is a corporation duly organized, validly existing as a corporation in good standing under the laws of the State of Delaware; and
(ii)	The Shares have been duly authorized and will, when issued and sold by the Company in accordance with the terms of the Agreement, be validly issued, fully paid and nonassessable.

This opinion is being furnished pursuant to Section 4.4 of the Agreement and is for the sole benefit of the addressee hereto in connection with the above-described matter. This opinion may not be relied upon by you for any other purpose, or relied upon by any other person, firm or corporation or quoted, filed with any governmental authority or other regulatory agency or otherwise circulated or used for any other purpose without my prior consent. This opinion is limited to the matters set forth herein; no opinion may be inferred or implied beyond the matters expressly stated in this opinion. This opinion is rendered on the date hereof and I have no continuing obligation hereunder to inform you of changes of law or fact subsequent to the date hereof or facts of which I become aware after the date hereof.

Very truly yours

Jonathan D. Kantor

Executive Vice President, Secretary and General Counsel

EX-10.6

Exhibit 10.6

FIRST AMENDMENT TO EMPLOYMENT AGREEMENT

     This First Amendment to Employment Agreement is entered into between CNA Financial Corporation (the “Company”) and Thomas F. Motamed (the “Executive”), as of October 24, 2008 (the “Amendment”).

     WHEREAS, the Company and the Executive previously entered into an Employment Agreement, dated May 22, 2008 (the “Employment Agreement”). Terms not otherwise defined herein shall have the meaning ascribed to them in the Employment Agreement;

     WHEREAS, the Company and the Executive now intend that the Executive shall commence employment with the Company on January 1, 2009, rather than June 8, 2009; and

     WHEREAS, in connection with the Executive’s earlier commencement of employment, the Company and the Executive wish to (i) amend the Employment Agreement in accordance with Section 22(c) of the Employment Agreement, and (ii) agree on certain activities that are to occur between the effective date of this Amendment and the Executive’s Commencement Date, as hereinafter set forth;

     NOW THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements contained in the Employment Agreement, as amended, and for other

1

good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

     1. Section 1 of the Employment Agreement is hereby amended by replacing “Monday, June 8, 2009” with “Thursday, January 1, 2009”.

     2. Because the financial markets are closed on January 1, 2009, however, Sections 3(d) and 3(e)(i) of the Employment Agreement are hereby amended so that the grants of SARs and RSUs thereunder that were to be made on the Commencement Date shall instead be made the first business day following the Commencement Date. In addition, Section 3(e)(ii) of the Employment Agreement is hereby amended so that the grant of RSUs thereunder that was to be made on the Commencement Date (x) shall instead be made in the first calendar quarter of 2009, (y) shall be made on terms and conditions that are consistent with the Employment Agreement (including, without limitation, Section 3(e)(ii) thereof) and otherwise no less favorable to the Executive than those that apply to corresponding grants to other senior executive officers of the Company and (z) in the third sentence the phrase “Commencement Date” shall be replaced with the phrase “date of grant”.

     3. Section 6.3(d) of the Employment Agreement is hereby amended by replacing “June 8, 2009” with “January 1, 2009”.

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     4. From the effective date of this Amendment until December 31, 2008, the Executive agrees to participate in orientation activities at the Executive’s convenience, which may include receiving written materials, meeting with representatives of the CNA Companies at the convenience of the Executive, and similar activities. In connection with such orientation activities, the Company shall not cause the Executive to take any actions that would violate the Restrictive Covenants.

     5. The Executive agrees that, from and after the effective date of this Amendment, he shall not reveal to or utilize for the benefit of, any person or entity other than the CNA Companies or any of their Affiliates, Confidential Information that he acquires during the course of or as a result of his orientation with the Company pursuant to this Amendment and that relates to (x) the CNA Companies and any of their Affiliates or (y) the CNA Companies’ customers, employees, agents, brokers and vendors. The Executive acknowledges that all such Confidential Information is commercially valuable and is the property of the CNA Companies. Notwithstanding the foregoing, however, such Confidential Information may be used and disclosed to the extent permitted under Section 7(a) of the Employment Agreement.

     6. In the third sentence of Section 17(a) of the Employment Agreement, (x) the phrase “(as amended)” shall be replaced with the phrase “(as amended, waived, or released)” wherever it appears, and (y) the phrase “(as amended, waived or released)” shall be added after each of the phrases “March 2, 2008”, “March 1, 2007” and “March 12, 2008”. In the second sentence of Section 17(c) of the Employment Agreement, the phrase “will not at any time

3

violate” shall be replaced with the phrase “will not at any time knowingly or intentionally violate”.

     7. The Executive shall be entitled to indemnification and advancement, in accordance with Section 18 of the Employment Agreement, for any Claim that is based on actions (or inactions) of the Executive on or after the date hereof (x) under Section 4 of this Amendment or (y) in the course of performing services for (or at the request of) the Company or any of its Affiliates, in either case, other than any Claim that is based on an alleged breach by the Executive of the Restrictive Covenants, which breach is finally determined both to have occurred and to have been knowing or intentional. Section 19 of the Employment Agreement shall apply only to the extent that the Executive is not entitled to indemnification and advancement under Section 18 of the Employment Agreement, as amended by the preceding sentence.

     8. Except as modified by this Amendment, the Employment Agreement remains in full force and effect in accordance with its terms, covenants, and conditions, all of which are hereby ratified and confirmed by the Executive and the Company. In addition, this Amendment and the Employment Agreement, as amended by this Amendment contain the entire agreement of the parties with regard to the subject matter hereof, and supersedes all prior agreements and understandings, written or oral, with respect to such subject matter.

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     9. No provision in this Amendment may be amended unless such amendment is set forth in a writing that expressly refers to the provision of this Amendment that is being amended and that is signed by the Executive and an authorized officer of the Company.

     10. This Amendment shall be governed, interpreted, performed and enforced in accordance with its express terms, and otherwise in accordance with the laws of the State of Delaware (without regard to choice of law or conflict of laws principles), to the extent not displaced by federal law.

     11. This Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original copy of this Amendment and all of which, when taken together, shall be deemed to constitute one and the same agreement. Signatures delivered by facsimile shall be deemed effective for all purposes.

[Signatures to follow on subsequent page]

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     IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to Employment Agreement as of the date stated above.

CNA FINANCIAL CORPORATION
By:	/s/ Robert M. Mann
	Name:	Robert M. Mann
	Title:	Senior Vice President & Deputy General Counsel
THOMAS F. MOTAMED
By:	/s/ Thomas F. Motamed

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EX-31.1

EXHIBIT 31.1

SARBANES-OXLEY ACT SECTION 302

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Stephen W. Lilienthal, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of CNA Financial Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:  October 27, 2008	By	/s/ Stephen W. Lilienthal Stephen W. Lilienthal
		Chief Executive Officer

EX-31.2

EXHIBIT 31.2

SARBANES-OXLEY ACT SECTION 302

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, D. Craig Mense, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of CNA Financial Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:  October 27, 2008	By	/s/ D. Craig Mense D. Craig Mense
		Chief Financial Officer

EX-32.1

EXHIBIT 32.1

Written Statement of the Chief Executive Officer
of CNA Financial Corporation
Pursuant to 18 U.S.C. § 1350
(As adopted by Section 906 of the Sarbanes-Oxley Act of 2002)

The undersigned, the Chief Executive Officer of CNA Financial Corporation (the Company), hereby certifies that, to his knowledge:

• the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 filed on the date hereof with the Securities and Exchange Commission (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

• the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: October 27, 2008

/s/ Stephen W. Lilienthal                           
Stephen W. Lilienthal
Chief Executive Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.

EX-32.2

EXHIBIT 32.2

Written Statement of the Chief Financial Officer
of CNA Financial Corporation
Pursuant to 18 U.S.C. § 1350
(As adopted by Section 906 of the Sarbanes-Oxley Act of 2002)

The undersigned, the Chief Financial Officer of CNA Financial Corporation (the Company), hereby certifies that, to his knowledge:

• the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 filed on the date hereof with the Securities and Exchange Commission (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

• the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: October 27, 2008

/s/ D. Craig Mense                           
D. Craig Mense
Chief Financial Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.