CNA Financial (CNA) 8-K Cna Financial Announces First Quarter 2014 Results

CNA Financial Corporation

Supplemental Financial Information

March 31, 2014

This report is for informational purposes only and includes consolidated financial statements and financial exhibits that are unaudited. This report should be read in conjunction with documents filed with the U.S. Securities and Exchange Commission, including the most recent Annual Report on Form 10-K.

Table of Contents

	Page
Consolidated Results
Statements of Operations..................................................................................................................................................................................................	1
Components of Income (Loss), Per Share Data and Return on Equity.............................................................................................................................	2
Selected Balance Sheets Data and Statements of Cash Flows Data...............................................................................................................................	3
Property & Casualty - Results of Operations
Property & Casualty...........................................................................................................................................................................................................	4
CNA Specialty....................................................................................................................................................................................................................	5
CNA Commercial...............................................................................................................................................................................................................	6
Hardy.................................................................................................................................................................................................................................	7
Non-Core - Results of Operations
Life & Group Non-Core......................................................................................................................................................................................................	8
Corporate & Other Non-Core.............................................................................................................................................................................................	9
Investment Information
Investment Summary - Consolidated................................................................................................................................................................................	10
Investment Summary - Property & Casualty and Corporate & Other Non-Core...............................................................................................................	11
Investment Summary - Life & Group Non-Core.................................................................................................................................................................	12
Investments - Fixed Maturity Securities by Credit Rating..................................................................................................................................................	13
Components of Net Investment Income............................................................................................................................................................................	14
Other
Claim & Claim Adjustment Expense Reserve Rollforward................................................................................................................................................	15
Life & Group Non-Core Policyholder Reserves.................................................................................................................................................................	16
Statutory Data - Combined Continental Casualty Companies - Preliminary......................................................................................................................	17
Definitions and Presentation..............................................................................................................................................................................................	18

Sale of Continental Assurance Company (CAC)

On February 10, 2014, the Company entered into a definitive agreement to sell the majority of its run-off annuity and pension deposit business through the sale of the common stock of CAC. The business being sold, which was previously reported within the Life &Group Non-Core segment, is now reported as discontinued operations and assets and liabilities held for sale.

In connection with the pending sale of CAC, the Company recorded an estimated after-tax impairment loss of $214 million, which is reflected in Income (loss) from discontinued operations.

i

Statements of Operations

Three months ended March 31
(In millions)	2014			2013			Change
Revenues:
Net earned premiums	$	1,806		$	1,764		2		%
Net investment income	526			591			(11	)
Net realized investment gains (losses):
Other-than-temporary impairment (OTTI) losses	(2		)	(18		)
Portion of OTTI recognized in Other comprehensive income (loss)	—			—
Net OTTI losses recognized in earnings	(2		)	(18		)
Other net realized investment gains (losses)	48			41
Net realized investment gains (losses)	46			23
Other revenues	85			77
Total revenues	2,463			2,455			—
Claims, Benefits and Expenses:
Insurance claims and policyholders' benefits	1,446			1,396
Amortization of deferred acquisition costs	329			328
Other operating expenses	346			340
Interest	44			42
Total claims, benefits and expenses	2,165			2,106			(3	)
Income (loss) from continuing operations before income tax	298			349			(15	)
Income tax (expense) benefit	(78		)	(108		)
Income (loss) from continuing operations	220			241			(9	)
Income (loss) from discontinued operations, net of tax	(207		)	9
Net income (loss)	$	13		$	250		(95	)	%

1

Components of Income (Loss), Per Share Data and Return on Equity

Three months ended March 31
(In millions, except per share data)	2014				2013
Components of Income (Loss)
Net operating income (loss)	$	190			$	225
Net realized investment gains (losses)	30				16
Income (loss) from continuing operations	220				241
Income (loss) from discontinued operations	(207		)		9
Net income (loss)	$	13			$	250
Diluted Earnings (Loss) Per Common Share
Net operating income (loss)	$	0.70			$	0.83
Net realized investment gains (losses)	0.11				0.06
Income (loss) from continuing operations	0.81				0.89
Income (loss) from discontinued operations	(0.76		)		0.04
Diluted earnings (loss) per share	$	0.05			$	0.93
Weighted Average Outstanding Common Stock and Common Stock Equivalents
Basic	269.8				269.5
Diluted	270.5				269.9
Return on Equity
Net income (loss) (1)	0.4			%	8.1		%
Net operating income (loss) (2)	6.3				7.8

(1) Annualized net income (loss) divided by the average stockholders' equity including accumulated other comprehensive income (loss) (AOCI) for the period. Average equity including AOCI is calculated using a simple average of the beginning and ending balances for the period.

(2) Annualized net operating income (loss) divided by the average stockholders' equity excluding AOCI for the period. Average equity excluding AOCI is calculated using a simple average of the beginning and ending balances for the period.

2

Selected Balance Sheets Data and Statements of Cash Flows Data

(In millions, except per share data)	March 31, 2014		December 31, 2013
Total assets	$	58,224	$	57,194
Insurance reserves	36,051		38,394
Debt	3,107		2,560
Total liabilities	45,642		44,543
Accumulated other comprehensive income (loss) (1)	692		442
Total stockholders' equity	12,582		12,651
Book value per common share	$	46.61	$	46.91
Book value per common share excluding AOCI	$	44.05	$	45.26
Outstanding shares of common stock (in millions of shares)	269.9		269.7

Three months ended March 31	2014			2013
Net cash flows provided (used) by operating activities	$	168		$	191
Net cash flows provided (used) by investing activities	(354		)	(161		)
Net cash flows provided (used) by financing activities	210			(56		)
Net cash flows provided (used) by operating, investing and financing activities	$	24		$	(26	)

(1) At March 31, 2014 and December 31, 2013, the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $712 million and $532 million. To the extent that unrealized gains on fixed income securities supporting certain products within the Life & Group Non-Core segment would result in a premium deficiency if realized, a related decrease in Deferred acquisition costs and/or increase in Insurance reserves are recorded, net of tax, as a reduction of net unrealized gains through Other comprehensive income (loss) (Shadow Adjustments).

3

Property & Casualty - Results of Operations

Three months ended March 31
(In millions)	2014				2013				Change
Gross written premiums	$	2,494			$	2,384			5		%
Net written premiums	1,767				1,776				(1	)
Net earned premiums	1,668				1,624				3
Net investment income	350				421
Other revenues	78				71
Total operating revenues	2,096				2,116				(1	)
Insurance claims and policyholders' benefits	1,143				1,099
Amortization of deferred acquisition costs	321				320
Other insurance related expenses	231				230
Other expenses	76				70
Total claims, benefits and expenses	1,771				1,719				(3	)
Operating income (loss) before income tax	325				397				(18	)
Income tax (expense) benefit on operating income (loss)	(106		)		(140		)
Net operating income (loss)	$	219			$	257			(15	)	%
Loss & LAE	68.3			%	67.5			%	(0.8	)	pts
Acquisition expense	19.4				19.4				—
Underwriting expense	13.7				14.4				0.7
Expense	33.1				33.8				0.7
Dividend	0.2				0.2				—
Combined ratio	101.6				101.5				(0.1	)
Combined ratio excluding catastrophes and development	97.2			%	101.0			%	3.8		pts
Pretax net accident year catastrophe losses incurred	$	74			$	39
Impact on loss & LAE ratio	4.5			%	2.4			%	(2.1	)	pts
Pretax net prior year development and other (1): (favorable) / unfavorable	$	(13	)		$	(35	)
Impact on loss & LAE ratio	(0.1		)	%	(1.9		)	%	(1.8	)	pts
Rate	4			%	8			%	(4	)	pts
Retention	79			%	81			%	(2	)	pts
New Business (CNA Specialty and CNA Commercial only)	$	269			$	308			(13	)	%

(1) Other includes the impacts of interest accretion and change in allowance for uncollectible reinsurance and deductible amounts.

4

CNA Specialty - Results of Operations

Three months ended March 31
(In millions)	2014				2013				Change
Gross written premiums	$	1,447			$	1,317			10		%
Net written premiums	796				803				(1	)
Net earned premiums	748				723				3
Net investment income	151				170
Other revenues	68				60
Total operating revenues	967				953				1
Insurance claims and policyholders' benefits	481				466
Amortization of deferred acquisition costs	153				150
Other insurance related expenses	72				71
Other expenses	61				54
Total claims, benefits and expenses	767				741				(4	)
Operating income (loss) before income tax	200				212				(6	)
Income tax (expense) benefit on operating income (loss)	(66		)		(72		)
Net operating income (loss)	$	134			$	140			(4	)	%
Loss & LAE	64.2			%	64.3			%	0.1		pts
Acquisition expense	19.7				19.8				0.1
Underwriting expense	10.4				10.7				0.3
Expense	30.1				30.5				0.4
Dividend	0.1				0.2				0.1
Combined ratio	94.4				95.0				0.6
Combined ratio excluding catastrophes and development	93.9			%	97.7			%	3.8		pts
Pretax net accident year catastrophe losses incurred	$	11			$	1
Impact on loss & LAE ratio	1.4			%	0.2			%	(1.2	)	pts
Pretax net prior year development and other (1): (favorable) / unfavorable	$	(10	)		$	(23	)
Impact on loss & LAE ratio	(0.9		)	%	(2.9		)	%	(2.0	)	pts
Rate	4			%	7			%	(3	)	pts
Retention	85			%	86			%	(1	)	pts
New Business	$	102			$	100			2		%

(1) Other includes the impacts of interest accretion and change in allowance for uncollectible reinsurance and deductible amounts.

5

CNA Commercial - Results of Operations

Three months ended March 31
(In millions)	2014				2013				Change
Gross written premiums	$	925			$	960			(4	)	%
Net written premiums	899				918				(2	)
Net earned premiums	822				837				(2	)
Net investment income	198				250
Other revenues	9				10
Total operating revenues	1,029				1,097				(6	)
Insurance claims and policyholders' benefits	624				602
Amortization of deferred acquisition costs	140				149
Other insurance related expenses	139				143
Other expenses	11				9
Total claims, benefits and expenses	914				903				(1	)
Operating income (loss) before income tax	115				194				(41	)
Income tax (expense) benefit on operating income (loss)	(37		)		(69		)
Net operating income (loss)	$	78			$	125			(38	)	%
Loss & LAE	75.5			%	71.7			%	(3.8	)	pts
Acquisition expense	17.9				18.3				0.4
Underwriting expense	16.1				16.7				0.6
Expense	34.0				35.0				1.0
Dividend	0.3				0.1				(0.2	)
Combined ratio	109.8				106.8				(3.0	)
Combined ratio excluding catastrophes and development	101.2			%	103.7			%	2.5		pts
Pretax net accident year catastrophe losses incurred	$	60			$	38
Impact on loss & LAE ratio	7.5			%	4.6			%	(2.9	)	pts
Pretax net prior year development and other (1): (favorable) / unfavorable	$	4			$	(15	)
Impact on loss & LAE ratio	1.1			%	(1.5		)	%	(2.6	)	pts
Rate	6			%	9			%	(3	)	pts
Retention	75			%	78			%	(3	)	pts
New Business	$	167			$	208			(20	)	%

(1) Other includes the impacts of interest accretion and change in allowance for uncollectible reinsurance and deductible amounts.

6

Hardy - Results of Operations

Three months ended March 31
(In millions)	2014				2013				Change
Gross written premiums	$	122			$	107			14		%
Net written premiums	72				55				31
Net earned premiums	98				64				53
Net investment income	1				1
Other revenues	1				1
Total operating revenues	100				66				52
Insurance claims and policyholders' benefits	38				31
Amortization of deferred acquisition costs	28				21
Other insurance related expenses	20				16
Other expenses	4				7
Total claims, benefits and expenses	90				75				(20	)
Operating income (loss) before income tax	10				(9		)		N/M
Income tax (expense) benefit on operating income (loss)	(3		)		1
Net operating income (loss)	$	7			$	(8	)		188		%
Loss & LAE	38.8			%	48.7			%	9.9		pts
Acquisition expense	29.4				30.7				1.3
Underwriting expense	18.9				26.1				7.2
Expense	48.3				56.8				8.5
Dividend	—				—				—
Combined ratio	87.1				105.5				18.4
Combined ratio excluding catastrophes and development	88.6			%	104.1			%	15.5		pts
Pretax net accident year catastrophe losses incurred	$	3			$	—
Impact on loss & LAE ratio	3.2			%	—			%	(3.2	)	pts
Pretax net prior year development and other (1): (favorable) / unfavorable	$	(7	)		$	3
Impact on loss & LAE ratio	(4.7		)	%	1.4			%	6.1		pts
Rate	(3		)	%	1			%	(4	)	pts
Retention	77			%	71			%	6		pts

(1) Other includes the impacts of interest accretion and change in allowance for uncollectible reinsurance and deductible amounts.

7

Life & Group Non-Core - Results of Operations

Three months ended March 31
(In millions)	2014			2013			Change
Net earned premiums	$	139		$	141		(1	)	%
Net investment income	171			162			6
Other revenues	5			3
Total operating revenues	315			306			3
Insurance claims and policyholders' benefits	306			293
Amortization of deferred acquisition costs	8			8
Other insurance related expenses	32			32
Other expenses	1			5
Total claims, benefits and expenses	347			338			(3	)
Operating income (loss) before income tax	(32		)	(32		)	—
Income tax (expense) benefit on operating income (loss)	30			26
Net operating income (loss)	$	(2	)	$	(6	)	67		%

8

Corporate & Other Non-Core - Results of Operations

Three months ended March 31
(In millions)	2014			2013			Change
Net earned premiums	$	(1	)	$	(1	)
Net investment income	5			8
Other revenues	2			3
Total operating revenues	6			10			(40	)	%
Insurance claims and policyholders' benefits	(3		)	4
Amortization of deferred acquisition costs	—			—
Other insurance related expenses	(1		)	(1		)
Other expenses	51			46
Total claims, benefits and expenses	47			49			4
Operating income (loss) before income tax	(41		)	(39		)	(5	)
Income tax (expense) benefit on operating income (loss)	14			13
Net operating income (loss)	$	(27	)	$	(26	)	(4	)	%

9

Investment Summary - Consolidated

	March 31, 2014					December 31, 2013
(In millions)	Carrying Value			Net Unrealized Gains (Losses)		Carrying Value		Net Unrealized Gains (Losses)
Fixed maturity securities:
Corporate and other bonds	$	18,836		$	1,556	$	20,898	$	1,510
States, municipalities and political subdivisions:
Tax-exempt	9,009			427		8,432		41
Taxable	2,846			315		3,125		235
Total states, municipalities and political subdivisions	11,855			742		11,557		276
Asset-backed:
RMBS	4,944			90		4,971		31
CMBS	2,053			79		2,063		68
Other ABS	976			10		955		10
Total asset-backed	7,973			179		7,989		109
U.S. Treasury and obligations of government-sponsored enterprises	141			6		144		5
Foreign government	576			17		543		12
Redeemable preferred stock	34			2		102		10
Total fixed maturity securities	39,415			2,502		41,233		1,922
Equities	174			11		185		6
Limited partnership investments	2,799			—		2,720		—
Other invested assets	55			—		54		—
Mortgage loans	495			—		508		—
Short term investments	2,070			—		1,407		(1		)
Total investments	$	45,008		$	2,513	$	46,107	$	1,927
Net receivable/(payable) on investment activity	$	(294	)	$	—	$	135	$	—
Effective portfolio duration (in years)	6.6					6.9
Weighted average rating of fixed maturity securities	A					A

RMBS - Residential mortgage-backed securities

CMBS - Commercial mortgage-backed securities

Other ABS - Other asset-backed securities

10

Investment Summary - Property & Casualty and Corporate & Other Non-Core

	March 31, 2014					December 31, 2013
(In millions)	Carrying Value			Net Unrealized Gains (Losses)		Carrying Value		Net Unrealized Gains (Losses)
Fixed maturity securities:
Corporate and other bonds	$	13,429		$	606	$	13,590	$	509
States, municipalities and political subdivisions:
Tax-exempt	3,169			112		3,176		36
Taxable	1,573			137		1,570		89
Total states, municipalities and political subdivisions	4,742			249		4,746		125
Asset-backed:
RMBS	4,676			78		4,641		22
CMBS	1,898			69		1,793		54
Other ABS	881			9		853		9
Total asset-backed	7,455			156		7,287		85
U.S. Treasury and obligations of government-sponsored enterprises	118			—		121		(1		)
Foreign government	571			16		538		11
Redeemable preferred stock	6			1		5		—
Total fixed maturity securities	26,321			1,028		26,287		729
Equities	61			9		61		9
Limited partnership investments	2,799			—		2,720		—
Other invested assets	55			—		54		—
Mortgage loans	476			—		489		—
Short term investments	1,979			—		1,339		(1		)
Total investments	$	31,691		$	1,037	$	30,950	$	737
Net receivable/(payable) on investment activity	$	(283	)	$	—	$	140	$	—
Effective portfolio duration (in years)	4.3					4.4
Weighted average rating of fixed maturity securities	A					A

11

Investment Summary - Life & Group Non-Core

	March 31, 2014					December 31, 2013
(In millions)	Carrying Value			Net Unrealized Gains (Losses)		Carrying Value			Net Unrealized Gains (Losses)
Fixed maturity securities:
Corporate and other bonds	$	5,407		$	950	$	7,308		$	1,001
States, municipalities and political subdivisions:
Tax-exempt	5,840			315		5,256			5
Taxable	1,273			178		1,555			146
Total states, municipalities and political subdivisions	7,113			493		6,811			151
Asset-backed:
RMBS	268			12		330			9
CMBS	155			10		270			14
Other ABS	95			1		102			1
Total asset-backed	518			23		702			24
U.S. Treasury and obligations of government-sponsored enterprises	23			6		23			6
Foreign government	5			1		5			1
Redeemable preferred stock	28			1		97			10
Total fixed maturity securities	13,094			1,474		14,946			1,193
Equities	113			2		124			(3		)
Limited partnership investments	—			—		—			—
Other invested assets	—			—		—			—
Mortgage loans	19			—		19			—
Short term investments	91			—		68			—
Total investments	$	13,317		$	1,476	$	15,157		$	1,190
Net receivable/(payable) on investment activity	$	(11	)	$	—	$	(5	)	$	—
Effective portfolio duration (in years)	11.5					11.3
Weighted average rating of fixed maturity securities	A					A

12

Investments - Fixed Maturity Securities by Credit Rating

March 31, 2014	U.S. Government, Government agencies and Government-sponsored enterprises					AAA						AA					A					BBB					Non-investment grade						Total
(In millions)	Fair Value			Net Unrealized Gains (Losses)		Fair Value			Net Unrealized Gains (Losses)			Fair Value			Net Unrealized Gains (Losses)		Fair Value			Net Unrealized Gains (Losses)		Fair Value			Net Unrealized Gains (Losses)		Fair Value			Net Unrealized Gains (Losses)			Fair Value			Net Unrealized Gains (Losses)
Corporate and other bonds	$	—		$	—	$	237		$	7		$	1,342		$	74	$	6,037		$	613	$	9,618		$	767	$	1,602		$	95		$	18,836		$	1,556
States, municipalities and political subdivisions:
Tax-exempt	—			—		1,039			74			5,031			226		2,852			128		52			—		35			(1		)	9,009			427
Taxable	—			—		380			34			1,912			201		554			80		—			—		—			—			2,846			315
Total states, municipalities and political subdivisions	—			—		1,419			108			6,943			427		3,406			208		52			—		35			(1		)	11,855			742
Asset-backed:
RMBS	3,400			30		155			(2		)	120			—		189			2		94			2		986			58			4,944			90
CMBS	79			1		501			16			375			19		374			13		404			14		320			16			2,053			79
Other ABS	—			—		326			4			198			3		376			2		76			1		—			—			976			10
Total asset-backed	3,479			31		982			18			693			22		939			17		574			17		1,306			74			7,973			179
U.S. Treasury and obligations of government-sponsored enterprises	141			6		—			—			—			—		—			—		—			—		—			—			141			6
Foreign government	—			—		193			8			227			4		156			5		—			—		—			—			576			17
Redeemable preferred stock	—			—		—			—			—			—		—			—		18			1		16			1			34			2
Total fixed maturity securities	$	3,620		$	37	$	2,831		$	141		$	9,205		$	527	$	10,538		$	843	$	10,262		$	785	$	2,959		$	169		$	39,415		$	2,502
Percentage of total fixed maturity securities	9		%			7		%				23		%			27		%			26		%			8		%				100		%

The ratings presented are based on a ratings methodology that takes into account ratings from Standard & Poor's and Moody's Investors Services, Inc. in that order of preference. If a security is not rated by these rating agencies, an internal rating is formulated. For securities with credit support from third party guarantees, the rating reflects the greater of the underlying rating of the issuer or the insured rating.

13

Components of Net Investment Income

Three months ended March 31	Consolidated
(In millions)	2014			2013
Taxable fixed maturities	$	352		$	388
Tax-exempt fixed maturities	100			69
Total fixed maturity securities	452			457
Limited partnership investments	73			131
Other, net of investment expense	1			3
Pretax net investment income	$	526		$	591
After-tax fixed maturity securities	$	324		$	317
After-tax net investment income	$	371		$	405
Effective income yield for the fixed maturity securities portfolio, pretax (1)	4.9		%	5.0		%
Effective income yield for the fixed maturity securities portfolio, after tax (1)	3.5		%	3.5		%

	Property & Casualty and Corporate & Other Non-Core
Three months ended March 31
(In millions)	2014			2013
Taxable fixed maturities	$	247		$	276
Tax-exempt fixed maturities	33			20
Total fixed maturity securities	280			296
Limited partnership investments	73			131
Other, net of investment expense	2			2
Pretax net investment income	$	355		$	429
After-tax fixed maturity securities	$	192		$	198
After-tax net investment income	$	241		$	285
Effective income yield for the fixed maturity securities portfolio, pretax (1)	4.4		%	4.6		%
Effective income yield for the fixed maturity securities portfolio, after tax (1)	3.0		%	3.1		%

Three months ended March 31	Life & Group Non-Core
(In millions)	2014				2013
Taxable fixed maturities	$	105			$	112
Tax-exempt fixed maturities	67				49
Total fixed maturity securities	172				161
Limited partnership investments	—				—
Other, net of investment expense	(1		)		1
Pretax net investment income	$	171			$	162
After-tax fixed maturity securities	$	132			$	119
After-tax net investment income	$	130			$	120
Effective income yield for the fixed maturity securities portfolio, pretax (1)	6.0			%	6.1		%
Effective income yield for the fixed maturity securities portfolio, after tax (1)	4.6			%	4.5		%

(1) Annualized yields based on the average amortized cost of the fixed maturity securities portfolio.

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Claim & Claim Adjustment Expense Reserve Rollforward

Three months ended March 31, 2014 (In millions)	CNA Specialty			CNA Commercial			Hardy			P&C Operations			Life & Group Non-Core			Corporate & Other Non-Core			Total Operations
Claim & claim adjustment expense reserves, beginning of period
Gross	$	6,689		$	10,649		$	386		$	17,724		$	3,058		$	3,307		$	24,089
Ceded	523			1,022			152			1,697			435			2,840			4,972
Net	6,166			9,627			234			16,027			2,623			467			19,117
Net incurred claim & claim adjustment expenses	480			622			51			1,153			201			—			1,354
Net claim & claim adjustment expense payments	(402		)	(666		)	(44		)	(1,112		)	(160		)	(126		)	(1,398		)
Foreign currency translation adjustment and other	(7		)	(7		)	—			(14		)	20			—			6
Claim & claim adjustment expense reserves, end of period
Net	6,237			9,576			241			16,054			2,684			341			19,079
Ceded	549			998			136			1,683			401			2,770			4,854
Gross	$	6,786		$	10,574		$	377		$	17,737		$	3,085		$	3,111		$	23,933

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Life & Group Non-Core Policyholder Reserves

March 31, 2014	Claim and claim adjustment expenses		Future policy benefits		Policyholders' funds		Separate account business		Total
(In millions)
Long term care	$	1,935	$	7,436	$	—	$	—	$	9,371
Annuities, including structured settlements	601		184		—		—		785
Institutional markets	—		—		—		—		—
Other	37		—		—		—		37
Total	2,573		7,620		—		—		10,193
Shadow adjustments (1)	111		634		—		—		745
Ceded reserves	401		—		—		—		401
Total gross reserves	$	3,085	$	8,254	$	—	$	—	$	11,339

December 31, 2013	Claim and claim adjustment expenses		Future policy benefits		Policyholders' funds		Separate account business		Total
(In millions)
Long term care	$	1,889	$	7,329	$	—	$	—	$	9,218
Annuities, including structured settlements	613		1,990		—		—		2,603
Institutional markets	1		9		57		181		248
Other	37		4		—		—		41
Total	2,540		9,332		57		181		12,110
Shadow adjustments (1)	83		406		—		—		489
Ceded reserves	435		733		35		—		1,203
Total gross reserves	$	3,058	$	10,471	$	92	$	181	$	13,802

(1) To the extent that unrealized gains on fixed income securities supporting long term care products and payout annuity contracts would result in a premium deficiency if those gains were realized, a related decrease in Deferred acquisition costs and/or increase in Insurance reserves are recorded, net of tax, as a reduction of net unrealized gains through Other comprehensive income (loss) (Shadow Adjustments). The Shadow adjustments presented above do not include $334 million and $342 million related to Deferred acquisition costs at March 31, 2014 and December 31, 2013.

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Statutory Data - Combined Continental Casualty Companies - Preliminary

Three months ended March 31
Income Statements	(Preliminary)								Change
(In millions)	2014				2013
Gross written premiums	$	2,290			$	2,213			3		%
Net written premiums	1,621				1,663				(3	)
Net earned premiums	1,374				1,367				1
Claim and claim adjustment expenses	1,219				1,171
Acquisition expenses	278				290
Underwriting expenses	203				210
Policyholders' dividends	—				2
Underwriting income (loss)	(326		)		(306		)		(7	)
Net investment income	598				432
Other income (loss)	(3		)		5
Income tax (expense) benefit	(2		)		(3		)
Net realized gains (losses)	46				14
Net income (loss)	$	313			$	142			120		%
Financial Ratios
Loss and LAE	88.8			%	85.6			%
Acquisition expense	17.1				17.4
Underwriting expense	12.5				12.8
Expense	29.6				30.2
Dividend	—				0.1
Combined ratio	118.4			%	115.9			%

Supplemental Statutory Data
(In billions)	(Preliminary)
	March 31, 2014		December 31, 2013
Statutory surplus	$	11.0	$	11.1

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Definitions and Presentation

• Collectively, CNA Financial Corporation (CNAF) and its subsidiaries are referred to as CNA or the Company.

• P&C Operations include CNA Specialty, CNA Commercial and Hardy.

• The Life & Group Non-Core segment primarily includes the results of our individual and group long term care business, as well as closed blocks of structured settlement liabilities, group accident and health reinsurance and life settlement contracts. These businesses are being managed as a run-off operation. Our group long term care business, while considered non-core, continues to accept new employees in existing groups.

• Corporate & Other Non-Core segment primarily includes certain corporate expenses including interest on corporate debt and the results of certain property and casualty business in run-off, including CNA Re and asbestos and environmental pollution. Intersegment eliminations are also included in this segment.

• Management utilizes the net operating income financial measure to monitor the Company’s operations. Please refer to Note O to the Consolidated Financial Statements within the 2013 Form 10-K for further discussion of this measure.

• In the evaluation of the results of CNA Specialty, CNA Commercial and Hardy, management utilizes the loss ratio, the expense ratio, the dividend ratio and the combined ratio. These ratios are calculated using financial results prepared in accordance with accounting principles generally accepted in the United States of America. 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. The statutory expense ratio reported on page 17 is the percentage of acquisition and underwriting expenses to net written premiums in accordance with statutory accounting practices.

• The majority of our limited partnership investments employ hedge fund strategies that generate returns primarily through investing in the fixed income and equity markets. While the Company generally does not invest in highly leveraged partnerships, there are risks which may result in losses due to short-selling, derivatives or other speculative investment practices. The use of leverage increases volatility generated by the underlying investment strategies.

• Certain immaterial differences are due to rounding.

• N/M = Not Meaningful

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