CNA Financial (CNA) 8-K Cna Financial Announces Second Quarter 2015 Results

CNA Financial Corporation

Supplemental Financial Information

June 30, 2015

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
Specialty............................................................................................................................................................................................................................	5
Commercial.......................................................................................................................................................................................................................	6
International.......................................................................................................................................................................................................................	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
Definitions and Presentation..............................................................................................................................................................................................	17

Statements of Operations

Periods ended June 30	Three Months									Six Months
(In millions)	2015			2014			Change			2015			2014			Change
Revenues:
Net earned premiums	$	1,735		$	1,811		(4	)	%	$	3,422		$	3,617		(5	)	%
Net investment income	500			550			(9	)		1,058			1,076			(2	)
Net realized investment gains (losses):
Other-than-temporary impairment (OTTI) losses	(31		)	(5		)				(43		)	(7		)
Portion of OTTI recognized in Other comprehensive income (loss)	—			—						—			—
Net OTTI losses recognized in earnings	(31		)	(5		)				(43		)	(7		)
Other net realized investment gains (losses)	31			(9		)				53			39
Net realized investment gains (losses)	—			(14		)				10			32
Other revenues	92			93						189			178
Total revenues	2,327			2,440			(5	)		4,679			4,903			(5	)
Claims, Benefits and Expenses:
Insurance claims and policyholders' benefits	1,469			1,441						2,808			2,887
Amortization of deferred acquisition costs	314			335						617			664
Other operating expenses	341			254						699			600
Interest	39			46						78			90
Total claims, benefits and expenses	2,163			2,076			(4	)		4,202			4,241			1
Income (loss) before income tax	164			364						477			662
Income tax (expense) benefit	(26		)	(103		)				(106		)	(181		)
Income (loss) from continuing operations	138			261			(47	)		371			481			(23	)
Income (loss) from discontinued operations, net of tax	—			6						—			(201		)
Net income (loss)	$	138		$	267		(48	)	%	$	371		$	280		33		%

1

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

Periods ended June 30	Three Months							Six Months
(In millions, except per share data)	2015			2014				2015			2014
Components of Income (Loss)
Net operating income (loss)	$	132		$	272			$	357		$	462
Net realized investment gains (losses), after tax	6			(11		)		14			19
Income (loss) from continuing operations	138			261				371			481
Income (loss) from discontinued operations, net of tax	—			6				—			(201		)
Net income (loss)	$	138		$	267			$	371		$	280
Diluted Earnings (Loss) Per Share
Net operating income (loss)	$	0.49		$	1.00			$	1.32		$	1.71		��
Net realized investment gains (losses), after tax	0.02			(0.03		)		0.05			0.07
Income (loss) from continuing operations	0.51			0.97				1.37			1.78
Income (loss) from discontinued operations, net of tax	—			0.01				—			(0.75		)
Diluted earnings (loss) per share	$	0.51		$	0.98			$	1.37		$	1.03
Weighted Average Outstanding Common Stock and Common Stock Equivalents
Basic	270.3			269.9				270.2			269.9
Diluted	270.7			270.6				270.7			270.5
Return on Equity
Net income (loss) (1)	4.5		%	8.3			%	5.9		%	4.4			%
Net operating income (loss) (2)	4.4			9.0				5.8			7.6

(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⁽¹⁾ 

(In millions, except per share data)	June 30, 2015		December 31, 2014
Total investments	$	45,332	$	46,262
Reinsurance receivables, net of allowance for uncollectible receivables	4,654		4,694
Total assets	55,022		55,566
Insurance reserves	36,368		36,380
Debt	2,560		2,559
Total liabilities	42,788		42,772
Accumulated other comprehensive income (loss) (2)	143		400
Total stockholders' equity	12,234		12,794
Book value	$	45.27	$	47.39
Book value excluding AOCI	$	44.73	$	45.91
Outstanding shares of common stock	270.3		270.0
Statutory capital and surplus - Combined Continental Casualty Companies (3)	$	10,870	$	11,155

Three months ended June 30	2015			2014
Net cash flows provided (used) by operating activities	$	446		$	419
Net cash flows provided (used) by investing activities	(439		)	(380		)
Net cash flows provided (used) by financing activities	(67		)	(47		)
Net cash flows provided (used) by operating, investing and financing activities	$	(60	)	$	(8	)

Six months ended June 30	2015			2014
Net cash flows provided (used) by operating activities	$	540		$	587
Net cash flows provided (used) by investing activities	87			(734		)
Net cash flows provided (used) by financing activities	(670		)	163
Net cash flows provided (used) by operating, investing and financing activities	$	(43	)	$	16

(1) On August 1, 2014, CNA completed the sale of the common stock of Continental Assurance Company (CAC), CNA's former life insurance subsidiary. CNA elected to include CAC cash flow data in the comparative period.

(2) As of June 30, 2015 and December 31, 2014, the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $1,022 million and $1,288 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) Statutory capital and surplus as of June 30, 2015 is preliminary.

3

Property & Casualty - Results of Operations

Periods ended June 30	Three Months											Six Months
(In millions)	2015				2014				Change			2015				2014				Change
Gross written premiums	$	2,567			$	2,410			7		%	$	5,103			$	4,904			4		%
Net written premiums	1,638				1,654				(1	)		3,307				3,421				(3	)
Net earned premiums	1,599				1,672				(4	)		3,148				3,340				(6	)
Net investment income	316				370							689				720
Other revenues	89				82							176				160
Total operating revenues	2,004				2,124				(6	)		4,013				4,220				(5	)
Insurance claims and policyholders' benefits	1,040				1,136							2,043				2,279
Amortization of deferred acquisition costs	308				328							604				649
Other insurance related expenses	227				228							460				459
Other expenses	69				77							149				153
Total claims, benefits and expenses	1,644				1,769				7			3,256				3,540				8
Operating income (loss) before income tax	360				355							757				680
Income tax (expense) benefit on operating income (loss)	(123		)		(119		)					(256		)		(225		)
Net operating income (loss)	$	237			$	236			—		%	$	501			$	455			10		%
Other Performance Metrics
Underwriting gain (loss)	$	24			$	(20	)		N/M		%	$	41			$	(47	)		187		%
Loss & LAE	64.8			%	67.8			%	3.0		pts	64.7			%	68.0			%	3.3		pts
Acquisition expense	18.8				19.3				0.5			19.1				19.4				0.3
Underwriting expense	14.6				14.0				(0.6	)		14.6				13.8				(0.8	)
Expense	33.4				33.3				(0.1	)		33.7				33.2				(0.5	)
Dividend	0.2				0.2				—			0.2				0.2				—
Combined ratio	98.4			%	101.3			%	2.9			98.6			%	101.4			%	2.8
Combined ratio excluding catastrophes and development	95.3			%	96.3			%	1.0		pts	95.9			%	96.8			%	0.9		pts
Pretax net accident year catastrophe losses incurred	$	60			$	56						$	89			$	130
Effect on loss & LAE ratio	3.8			%	3.4			%	(0.4	)	pts	2.8			%	3.9			%	1.1		pts
Pretax net prior year development and other: (favorable) / unfavorable	$	(15	)		$	28						$	(7	)		$	15
Effect on loss & LAE ratio	(0.7		)	%	1.6			%	2.3		pts	(0.1		)	%	0.7			%	0.8		pts
Rate	1			%	3			%	(2	)	pts	1			%	3			%	(2	)	pts
Retention	80			%	76			%	4		pts	80			%	78			%	2		pts
New Business	$	237			$	230			3		%	$	486			$	499			(3	)	%

4

Specialty - Results of Operations

Periods ended June 30	Three Months											Six Months
(In millions)	2015				2014				Change			2015				2014				Change
Gross written premiums	$	1,526			$	1,388			10		%	$	3,015			$	2,751			10		%
Net written premiums	672				701				(4	)		1,370				1,414				(3	)
Net earned premiums	689				709				(3	)		1,369				1,401				(2	)
Net investment income	134				153							289				297
Other revenues	81				74							159				142
Total operating revenues	904				936				(3	)		1,817				1,840				(1	)
Insurance claims and policyholders' benefits	417				405							847				848
Amortization of deferred acquisition costs	146				148							290				291
Other insurance related expenses	66				67							135				132
Other expenses	69				65							136				126
Total claims, benefits and expenses	698				685				(2	)		1,408				1,397				(1	)
Operating income (loss) before income tax	206				251							409				443
Income tax (expense) benefit on operating income (loss)	(69		)		(84		)					(137		)		(147		)
Net operating income (loss)	$	137			$	167			(18	)	%	$	272			$	296			(8	)	%
Other Performance Metrics
Underwriting gain (loss)	$	60			$	89			(33	)	%	$	97			$	130			(25	)	%
Loss & LAE	60.3			%	57.0			%	(3.3	)	pts	61.7			%	60.4			%	(1.3	)	pts
Acquisition expense	19.6				19.9				0.3			19.7				19.8				0.1
Underwriting expense	11.1				10.4				(0.7	)		11.3				10.4				(0.9	)
Expense	30.7				30.3				(0.4	)		31.0				30.2				(0.8	)
Dividend	0.2				0.2				—			0.2				0.2				—
Combined ratio	91.2			%	87.5			%	(3.7	)		92.9			%	90.8			%	(2.1	)
Combined ratio excluding catastrophes and development	92.6			%	92.8			%	0.2		pts	93.2			%	93.1			%	(0.1	)	pts
Pretax net accident year catastrophe losses incurred	$	5			$	5						$	12			$	16
Effect on loss & LAE ratio	0.7			%	0.6			%	(0.1	)	pts	0.9			%	1.2			%	0.3		pts
Pretax net prior year development and other: (favorable) / unfavorable	$	(15	)		$	(43	)					$	(19	)		$	(52	)
Effect on loss & LAE ratio	(2.1		)	%	(5.9		)	%	(3.8	)	pts	(1.2		)	%	(3.5		)	%	(2.3	)	pts
Rate	1			%	3			%	(2	)	pts	1			%	3			%	(2	)	pts
Retention	85			%	87			%	(2	)	pts	86			%	87			%	(1	)	pts
New Business	$	63			$	71			(11	)	%	$	139			$	152			(9	)	%

5

Commercial - Results of Operations

Periods ended June 30	Three Months											Six Months
(In millions)	2015				2014				Change			2015				2014				Change
Gross written premiums	$	781			$	747			5		%	$	1,567			$	1,573			—		%
Net written premiums	717				692				4			1,476				1,499				(2	)
Net earned premiums	703				732				(4	)		1,381				1,467				(6	)
Net investment income	169				201							373				392
Other revenues	9				8							18				18
Total operating revenues	881				941				(6	)		1,772				1,877				(6	)
Insurance claims and policyholders' benefits	509				613							966				1,183
Amortization of deferred acquisition costs	117				126							234				249
Other insurance related expenses	130				125							257				251
Other expenses	5				7							13				15
Total claims, benefits and expenses	761				871				13			1,470				1,698				13
Operating income (loss) before income tax	120				70							302				179
Income tax (expense) benefit on operating income (loss)	(42		)		(21		)					(104		)		(56		)
Net operating income (loss)	$	78			$	49			59		%	$	198			$	123			61		%
Other Performance Metrics
Underwriting gain (loss)	$	(53	)		$	(132	)		60		%	$	(76	)		$	(216	)		65		%
Loss & LAE	72.1			%	83.7			%	11.6		pts	69.6			%	80.4			%	10.8		pts
Acquisition expense	17.3				17.5				0.2			17.7				17.6				(0.1	)
Underwriting expense	17.6				16.6				(1.0	)		17.7				16.4				(1.3	)
Expense	34.9				34.1				(0.8	)		35.4				34.0				(1.4	)
Dividend	0.2				0.3				0.1			0.3				0.3				—
Combined ratio	107.2			%	118.1			%	10.9			105.3			%	114.7			%	9.4
Combined ratio excluding catastrophes and development	97.7			%	99.3			%	1.6		pts	99.0			%	100.4			%	1.4		pts
Pretax net accident year catastrophe losses incurred	$	54			$	47						$	73			$	107
Effect on loss & LAE ratio	7.7			%	6.4			%	(1.3	)	pts	5.3			%	7.4			%	2.1		pts
Pretax net prior year development and other: (favorable) / unfavorable	$	10			$	90						$	10			$	96
Effect on loss & LAE ratio	1.8			%	12.4			%	10.6		pts	1.0			%	6.9			%	5.9		pts
Rate	2			%	5			%	(3	)	pts	2			%	5			%	(3	)	pts
Retention	79			%	69			%	10		pts	77			%	72			%	5		pts
New Business	$	149			$	133			12		%	$	287			$	280			3		%

6

International - Results of Operations

Periods ended June 30	Three Months											Six Months
(In millions)	2015				2014				Change			2015				2014				Change
Gross written premiums	$	260			$	275			(5	)	%	$	521			$	580			(10	)	%
Net written premiums	249				261				(5	)		461				508				(9	)
Net earned premiums	207				231				(10	)		398				472				(16	)
Net investment income	13				16							27				31
Other revenues	(1		)		—							(1		)		—
Total operating revenues	219				247				(11	)		424				503				(16	)
Insurance claims and policyholders' benefits	114				118							230				248
Amortization of deferred acquisition costs	45				54							80				109
Other insurance related expenses	31				36							68				76
Other expenses	(5		)		5							—				12
Total claims, benefits and expenses	185				213				13			378				445				15
Operating income (loss) before income tax	34				34							46				58
Income tax (expense) benefit on operating income (loss)	(12		)		(14		)					(15		)		(22		)
Net operating income (loss)	$	22			$	20			10		%	$	31			$	36			(14	)	%
Other Performance Metrics
Underwriting gain (loss)	$	17			$	23			(26	)	%	$	20			$	39			(49	)	%
Loss & LAE	55.0			%	50.8			%	(4.2	)	pts	57.7			%	52.5			%	(5.2	)	pts
Acquisition expense	21.5				23.2				1.7			21.5				23.5				2.0
Underwriting expense	15.7				15.9				0.2			15.9				15.7				(0.2	)
Expense	37.2				39.1				1.9			37.4				39.2				1.8
Dividend	—				—				—			—				—				—
Combined ratio	92.2			%	89.9			%	(2.3	)		95.1			%	91.7			%	(3.4	)
Combined ratio excluding catastrophes and development	95.8			%	97.3			%	1.5		pts	95.1			%	96.2			%	1.1		pts
Pretax net accident year catastrophe losses incurred	$	1			$	4						$	4			$	7
Effect on loss & LAE ratio	0.8			%	1.8			%	1.0		pts	1.0			%	1.6			%	0.6		pts
Pretax net prior year development and other: (favorable) / unfavorable	$	(10	)		$	(19	)					$	2			$	(29	)
Effect on loss & LAE ratio	(4.4		)	%	(9.2		)	%	(4.8	)	pts	(1.0		)	%	(6.1		)	%	(5.1	)	pts
Rate	(1		)	%	(3		)	%	2		pts	(1		)	%	(1		)	%	—		pts
Retention	71			%	74			%	(3	)	pts	74			%	78			%	(4	)	pts
New Business	$	25			$	26			(4	)	%	$	60			$	67			(10	)	%

7

Life & Group Non-Core - Results of Operations

Periods ended June 30	Three Months									Six Months
(In millions)	2015			2014			Change			2015			2014			Change
Net earned premiums	$	137		$	139		(1	)	%	$	275		$	278		(1	)	%
Net investment income	179			173						358			344
Other revenues	—			8						9			13
Total operating revenues	316			320			(1	)		642			635			1
Insurance claims and policyholders' benefits	344			304						684			610
Amortization of deferred acquisition costs	6			7						13			15
Other insurance related expenses	34			31						69			63
Other expenses	5			(3		)				9			(2		)
Total claims, benefits and expenses	389			339			(15	)		775			686			(13	)
Operating income (loss) before income tax	(73		)	(19		)				(133		)	(51		)
Income tax (expense) benefit on operating income (loss)	49			28						92			58
Net operating income (loss)	$	(24	)	$	9		N/M		%	$	(41	)	$	7		N/M		%

8

Corporate & Other Non-Core - Results of Operations

Periods ended June 30	Three Months									Six Months
(In millions)	2015			2014			Change			2015			2014			Change
Net earned premiums	$	(1	)	$	—					$	(1	)	$	(1	)
Net investment income	5			7						11			12
Other revenues	3			3						4			5
Total operating revenues	7			10			(30	)	%	14			16			(13	)	%
Insurance claims and policyholders' benefits	85			1						81			(2		)
Amortization of deferred acquisition costs	—			—						—			—
Other insurance related expenses	(2		)	—						(2		)	(1		)
Other expenses	47			(33		)				92			18
Total claims, benefits and expenses	130			(32		)	N/M			171			15			N/M
Operating income (loss) before income tax	(123		)	42						(157		)	1
Income tax (expense) benefit on operating income (loss)	42			(15		)				54			(1		)
Net operating income (loss)	$	(81	)	$	27		N/M		%	$	(103	)	$	—		N/M		%

9

Investment Summary - Consolidated

	June 30, 2015					March 31, 2015					December 31, 2014
(In millions)	Carrying Value			Net Unrealized Gains (Losses)		Carrying Value			Net Unrealized Gains (Losses)		Carrying Value			Net Unrealized Gains (Losses)
Fixed maturity securities:
Corporate and other bonds	$	18,127		$	1,249	$	18,552		$	1,824	$	18,889		$	1,660
States, municipalities and political subdivisions:
Tax-exempt	9,837			765		9,822			1,029		9,802			988
Taxable	3,016			381		3,141			498		2,938			467
Total states, municipalities and political subdivisions	12,853			1,146		12,963			1,527		12,740			1,455
Asset-backed:
RMBS	5,100			160		5,226			228		5,233			205
CMBS	2,251			65		2,260			109		2,144			88
Other ABS	1,055			11		1,123			14		1,235			1
Total asset-backed	8,406			236		8,609			351		8,612			294
U.S. Treasury and obligations of government-sponsored enterprises	29			5		30			6		31			5
Foreign government	399			12		409			19		454			16
Redeemable preferred stock	35			2		42			3		42			3
Total fixed maturity securities	39,849			2,650		40,605			3,730		40,768			3,433
Equities	216			8		225			12		222			12
Limited partnership investments	2,930			—		2,967			—		2,937			—
Other invested assets	43			—		43			—		41			—
Mortgage loans	622			—		586			—		588			—
Short term investments	1,672			—		1,506			—		1,706			(1		)
Total investments	$	45,332		$	2,658	$	45,932		$	3,742	$	46,262		$	3,444
Net receivable/(payable) on investment activity	$	(75	)			$	(57	)			$	(58	)
Effective portfolio duration (in years)	6.6					6.3					6.3
Weighted average rating of fixed maturity securities	A					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

	June 30, 2015						March 31, 2015					December 31, 2014
(In millions)	Carrying Value			Net Unrealized Gains (Losses)			Carrying Value			Net Unrealized Gains (Losses)		Carrying Value		Net Unrealized Gains (Losses)
Fixed maturity securities:
Corporate and other bonds	$	12,796		$	400		$	13,020		$	656	$	13,444	$	542
States, municipalities and political subdivisions:
Tax-exempt	2,589			82			2,499			130		2,561		127
Taxable	1,587			142			1,636			184		1,454		169
Total states, municipalities and political subdivisions	4,176			224			4,135			314		4,015		296
Asset-backed:
RMBS	4,974			151			5,093			218		5,101		196
CMBS	2,081			57			2,095			97		1,985		78
Other ABS	971			11			1,029			14		1,144		2
Total asset-backed	8,026			219			8,217			329		8,230		276
U.S. Treasury and obligations of government-sponsored enterprises	4			—			5			—		7		(1		)
Foreign government	397			12			404			17		449		15
Redeemable preferred stock	13			1			13			1		13		2
Total fixed maturity securities	25,412			856			25,794			1,317		26,158		1,130
Equities	99			5			88			7		87		9
Limited partnership investments	2,930			—			2,967			—		2,937		—
Other invested assets	43			—			43			—		41		—
Mortgage loans	566			—			529			—		531		—
Short term investments	1,561			(1		)	1,385			—		1,586		(1		)
Total investments	$	30,611		$	860		$	30,806		$	1,324	$	31,340	$	1,138
Net receivable/(payable) on investment activity	$	(67	)				$	(53	)			$	4
Effective portfolio duration (in years)	4.4						4.1					4.0
Weighted average rating of fixed maturity securities	A						A					A

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Investment Summary - Life & Group Non-Core

	June 30, 2015					March 31, 2015					December 31, 2014
(In millions)	Carrying Value			Net Unrealized Gains (Losses)		Carrying Value			Net Unrealized Gains (Losses)		Carrying Value			Net Unrealized Gains (Losses)
Fixed maturity securities:
Corporate and other bonds	$	5,331		$	849	$	5,532		$	1,168	$	5,445		$	1,118
States, municipalities and political subdivisions:
Tax-exempt	7,248			683		7,323			899		7,241			861
Taxable	1,429			239		1,505			314		1,484			298
Total states, municipalities and political subdivisions	8,677			922		8,828			1,213		8,725			1,159
Asset-backed:
RMBS	126			9		133			10		132			9
CMBS	170			8		165			12		159			10
Other ABS	84			—		94			—		91			(1		)
Total asset-backed	380			17		392			22		382			18
U.S. Treasury and obligations of government-sponsored enterprises	25			5		25			6		24			6
Foreign government	2			—		5			2		5			1
Redeemable preferred stock	22			1		29			2		29			1
Total fixed maturity securities	14,437			1,794		14,811			2,413		14,610			2,303
Equities	117			3		137			5		135			3
Limited partnership investments	—			—		—			—		—			—
Other invested assets	—			—		—			—		—			—
Mortgage loans	56			—		57			—		57			—
Short term investments	111			1		121			—		120			—
Total investments	$	14,721		$	1,798	$	15,126		$	2,418	$	14,922		$	2,306
Net receivable/(payable) on investment activity	$	(8	)			$	(4	)			$	(62	)
Effective portfolio duration (in years)	10.5					10.3					10.5
Weighted average rating of fixed maturity securities	A+					A+					A+

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Investments - Fixed Maturity Securities by Credit Rating

June 30, 2015	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	$	—		$	—	$	167		$	5	$	977		$	56	$	4,988		$	513		$	10,320		$	627	$	1,675		$	48	$	18,127		$	1,249
States, municipalities and political subdivisions:
Tax-exempt	—			—		1,126			91		5,493			463		2,999			208			132			1		87			2		9,837			765
Taxable	—			—		403			43		2,141			265		472			73			—			—		—			—		3,016			381
Total states, municipalities and political subdivisions	—			—		1,529			134		7,634			728		3,471			281			132			1		87			2		12,853			1,146
Asset-backed:
RMBS	3,621			103		126			1		68			—		197			(1		)	93			2		995			55		5,100			160
CMBS	72			1		526			14		474			21		400			12			515			11		264			6		2,251			65
Other ABS	—			—		241			2		58			—		522			8			234			1		—			—		1,055			11
Total asset-backed	3,693			104		893			17		600			21		1,119			19			842			14		1,259			61		8,406			236
U.S. Treasury and obligations of government-sponsored enterprises	29			5		—			—		—			—		—			—			—			—		—			—		29			5
Foreign government	—			—		108			4		129			3		162			5			—			—		—			—		399			12
Redeemable preferred stock	—			—		—			—		—			—		—			—			11			1		24			1		35			2
Total fixed maturity securities	$	3,722		$	109	$	2,697		$	160	$	9,340		$	808	$	9,740		$	818		$	11,305		$	643	$	3,045		$	112	$	39,849		$	2,650
Percentage of total fixed maturity securities	9		%			7		%			23		%			25		%				28		%			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.

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Components of Net Investment Income

	Consolidated
Periods ended June 30	Three Months						Six Months
(In millions)	2015			2014			2015			2014
Taxable fixed maturities	$	352		$	350		$	694		$	702
Tax-exempt fixed maturities	100			101			201			201
Total fixed maturity securities	452			451			895			903
Limited partnership investments	48			97			162			170
Other, net of investment expense	—			2			1			3
Pretax net investment income	$	500		$	550		$	1,058		$	1,076
After-tax fixed maturity securities	$	324		$	325		$	642		$	649
After-tax net investment income	356			391			750			762
Effective income yield for the fixed maturity securities portfolio, pretax (1)	4.9		%	4.9		%	4.8		%	4.9		%
Effective income yield for the fixed maturity securities portfolio, after tax (1)	3.5			3.5			3.5			3.5

	Property & Casualty and Corporate & Other Non-Core
Periods ended June 30	Three Months						Six Months
(In millions)	2015			2014			2015			2014
Taxable fixed maturities	$	249		$	249		$	491		$	496
Tax-exempt fixed maturities	21			28			43			61
Total fixed maturity securities	270			277			534			557
Limited partnership investments	48			97			162			170
Other, net of investment expense	3			3			4			5
Pretax net investment income	$	321		$	377		$	700		$	732
After-tax fixed maturity securities	$	183		$	190		$	362		$	382
After-tax net investment income	216			254			471			495
Effective income yield for the fixed maturity securities portfolio, pretax (1)	4.4		%	4.4		%	4.4		%	4.4		%
Effective income yield for the fixed maturity securities portfolio, after tax (1)	3.0			3.0			3.0			3.0

	Life & Group Non-Core
Periods ended June 30	Three Months								Six Months
(In millions)	2015				2014				2015				2014
Taxable fixed maturities	$	103			$	101			$	203			$	206
Tax-exempt fixed maturities	79				73				158				140
Total fixed maturity securities	182				174				361				346
Limited partnership investments	—				—				—				—
Other, net of investment expense	(3		)		(1		)		(3		)		(2		)
Pretax net investment income	$	179			$	173			$	358			$	344
After-tax fixed maturity securities	$	141			$	135			$	280			$	267
After-tax net investment income	140				137				279				267
Effective income yield for the fixed maturity securities portfolio, pretax (1)	5.8			%	5.9			%	5.8			%	6.0			%
Effective income yield for the fixed maturity securities portfolio, after tax (1)	4.5				4.6				4.5				4.6

(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 June 30, 2015 (In millions)	Specialty			Commercial			International			P&C Operations			Life & Group Non-Core			Corporate & Other Non-Core			Total Operations
Claim & claim adjustment expense reserves, beginning of period
Gross	$	6,352		$	9,441		$	1,377		$	17,170		$	3,237		$	2,841		$	23,248
Ceded	668			650			172			1,490			334			2,532			4,356
Net	5,684			8,791			1,205			15,680			2,903			309			18,892
Net incurred claim & claim adjustment expenses	416			507			113			1,036			229			1			1,266
Net claim & claim adjustment expense payments	(422		)	(542		)	(105		)	(1,069		)	(181		)	(7		)	(1,257		)
Foreign currency translation adjustment and other	—			—			34			34			(27		)	1			8
Claim & claim adjustment expense reserves, end of period
Net	5,678			8,756			1,247			15,681			2,924			304			18,909
Ceded	687			635			154			1,476			324			2,484			4,284
Gross	$	6,365		$	9,391		$	1,401		$	17,157		$	3,248		$	2,788		$	23,193

Six months ended June 30, 2015 (In millions)	Specialty			Commercial			International			P&C Operations			Life & Group Non-Core			Corporate & Other Non-Core			Total Operations
Claim & claim adjustment expense reserves, beginning of period
Gross	$	6,229		$	9,514		$	1,441		$	17,184		$	3,183		$	2,904		$	23,271
Ceded	574			661			180			1,415			340			2,589			4,344
Net	5,655			8,853			1,261			15,769			2,843			315			18,927
Net incurred claim & claim adjustment expenses	845			961			229			2,035			465			2			2,502
Net claim & claim adjustment expense payments	(822		)	(1,058		)	(189		)	(2,069		)	(361		)	(12		)	(2,442		)
Foreign currency translation adjustment and other	—			—			(54		)	(54		)	(23		)	(1		)	(78		)
Claim & claim adjustment expense reserves, end of period
Net	5,678			8,756			1,247			15,681			2,924			304			18,909
Ceded	687			635			154			1,476			324			2,484			4,284
Gross	$	6,365		$	9,391		$	1,401		$	17,157		$	3,248		$	2,788		$	23,193

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Life & Group Non-Core Policyholder Reserves

June 30, 2015
(In millions)	Claim and claim adjustment expenses		Future policy benefits		Total
Long term care	$	2,189	$	8,001	$	10,190
Structured settlement annuities	592		—		592
Other	21		—		21
Total	2,802		8,001		10,803
Shadow adjustments (1)	122		1,150		1,272
Ceded reserves	324		209		533
Total gross reserves	$	3,248	$	9,360	$	12,608

December 31, 2014
(In millions)	Claim and claim adjustment expenses		Future policy benefits		Total
Long term care	$	2,064	$	7,782	$	9,846
Structured settlement annuities	606		—		606
Other	28		1		29
Total	2,698		7,783		10,481
Shadow adjustments (1)	145		1,522		1,667
Ceded reserves	340		185		525
Total gross reserves	$	3,183	$	9,490	$	12,673

(1) The Shadow adjustments presented above do not include $301 million and $314 million related to Deferred acquisition costs as of June 30, 2015 and December 31, 2014.

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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 includes Specialty, Commercial and International.

• Life & Group Non-Core segment primarily includes the results of long term care businesses that are in run-off.

• 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 uses the net operating income (loss) financial measure to monitor the Company’s operations. Please refer to Note P to the Condensed Consolidated Financial Statements within the December 31, 2014 Form 10-K for further discussion of this measure.

• Management uses underwriting results to monitor insurance operations. Underwriting results are pretax and are calculated as net earned premiums less total insurance expenses, which includes insurance claims and policyholders' benefits, amortization of deferred acquisition costs and other insurance related expenses.

• In the evaluation of the results of Specialty, Commercial and International, management uses 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.

• Pretax net prior year development and other includes the effects of interest accretion and change in allowance for uncollectible reinsurance and deductible amounts.

• The majority of our limited partnership investments employ hedge fund strategies that generate returns primarily through investing in marketable securities in the public 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

17