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SECURITIES AND EXCHANGE COMMISSION
þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 36-6169860 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
CNA Center | ||
Chicago, Illinois | 60685 | |
(Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on | ||
Title of each class | which registered | |
Common Stock with a par value of $2.50 per share | New York Stock Exchange Chicago Stock Exchange Pacific Exchange |
None
Yes... Noü
Yes... Noü
Yesü No...
Yes... Noü
BY REFERENCE:
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Item | Page | |||||||
Number | Number | |||||||
1. | 3 | |||||||
1A. | 9 | |||||||
1B. | 16 | |||||||
2. | 16 | |||||||
3. | 16 | |||||||
4. | 16 | |||||||
5. | 17 | |||||||
6. | 18 | |||||||
7. | 19 | |||||||
7A. | 66 | |||||||
8. | 71 | |||||||
9. | 158 | |||||||
9A. | 158 | |||||||
9B. | 159 | |||||||
10. | 160 | |||||||
11. | 160 | |||||||
12. | 161 | |||||||
13. | 161 | |||||||
14. | 161 | |||||||
15. | 162 | |||||||
Consent of Independent Registered Public Accounting Firm | ||||||||
Section 302 Certification | ||||||||
Seection 302 Certification | ||||||||
Section 1350 Certification | ||||||||
Section 1350 Certification |
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Years ended December 31 | 2005 | 2004 | 2003 | |||||||||
(In millions, except ratio information) | ||||||||||||
Trade Ratios – GAAP basis (a) | ||||||||||||
Loss and loss adjustment expense ratio | 89.4 | % | 74.6 | % | 111.8 | % | ||||||
Expense ratio | 31.2 | 31.5 | 37.3 | |||||||||
Dividend ratio | 0.3 | 0.2 | 1.4 | |||||||||
Combined ratio | 120.9 | % | 106.3 | % | 150.5 | % | ||||||
Trade Ratios – Statutory basis (a) | ||||||||||||
Loss and loss adjustment expense ratio | 92.2 | % | 78.1 | % | 118.1 | % | ||||||
Expense ratio | 31.0 | 27.2 | 34.6 | |||||||||
Dividend ratio | 0.5 | 0.6 | 1.2 | |||||||||
Combined Ratio | 123.7 | % | 105.9 | % | 153.9 | % | ||||||
Individual Life and Group Life Insurance Inforce (b) | ||||||||||||
Individual life | $ | 10,711 | $ | 11,566 | $ | 330,805 | ||||||
Group life | 9,838 | 45,079 | 58,163 | |||||||||
Total | $ | 20,549 | $ | 56,645 | $ | 388,968 | ||||||
Other Data – Statutory basis (c) | ||||||||||||
Property and casualty companies’ capital and surplus (d) | $ | 6,940 | $ | 6,998 | $ | 6,170 | ||||||
Life and group company(ies)’ capital and surplus | 627 | 1,177 | 707 | |||||||||
Property and casualty companies’ written premiums to surplus ratio | 1.0 | 1.0 | 1.1 | |||||||||
Life companies’ capital and surplus-percent to total liabilities | 33.1 | % | 56.0 | % | 13.0 | % | ||||||
Participating policyholders-percent of gross life insurance inforce | 3.5 | % | 1.4 | % | 0.5 | % |
(a) | Trade ratios reflect the results of our property and casualty insurance subsidiaries. Trade ratios are industry measures of property and casualty underwriting results. The loss and loss adjustment expense ratio is the percentage of net incurred claim and claim adjustment expenses and the expenses incurred related to uncollectible reinsurance receivables to net earned premiums. The primary difference in this ratio between accounting principles generally accepted in the United States of America (GAAP) and statutory accounting practices (SAP) is related to the treatment of active life reserves (ALR) related to long term care insurance products written in property and casualty insurance subsidiaries. For GAAP, ALR is classified as claim and claim adjustment expense reserves whereas for SAP, ALR is classified as unearned premium reserves. The expense ratio, using amounts determined in accordance with GAAP, is the percentage of underwriting and acquisition expenses (including the amortization of deferred acquisition expenses) to net earned premiums. The expense ratio, using amounts determined in accordance with SAP, is the percentage of acquisition and underwriting expenses (with no deferral of acquisition expenses) to net written premiums. The dividend ratio, using amounts determined in accordance with GAAP, is the ratio of dividends incurred to net earned premiums. The dividend ratio, using amounts determined in accordance with SAP, is the ratio of dividends paid to net earned premiums. The combined ratio is the sum of the loss and loss adjustment expense, expense and dividend ratios. | |
(b) | The decline in gross inforce is attributable to the sales of the group benefits and the individual life businesses. See Note H of the Consolidated Financial Statements included under Item 8 for additional inforce information. | |
(c) | Other data is determined in accordance with SAP. Life and group statutory capital and surplus as a percent of total liabilities is determined after excluding separate account liabilities and reclassifying the statutorily required Asset Valuation Reserve to surplus. | |
(d) | Surplus includes the property and casualty companies’ equity ownership of the life and group company(ies)’ capital and surplus. |
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Percent of Total | ||||||||||||
Years ended December 31 | 2005 | 2004 | 2003 | |||||||||
California | 9.0 | % | 9.3 | % | 8.5 | % | ||||||
New York | 7.9 | 7.9 | 7.3 | |||||||||
Florida | 7.1 | 7.1 | 7.6 | |||||||||
Texas | 5.7 | 5.4 | 5.7 | |||||||||
Illinois | 4.2 | 5.1 | 9.3 | |||||||||
Pennsylvania | 4.2 | 4.7 | 4.2 | |||||||||
New Jersey | 3.8 | 5.3 | 4.5 | |||||||||
Massachusetts | 3.3 | 3.2 | 3.1 | |||||||||
All other states, countries or political subdivisions (a) | 54.8 | 52.0 | 49.8 | |||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
(a) | No other individual state, country or political subdivision accounts for more than 3.0% of gross written premiums. |
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Calendar Year Ended | 1995 (a) | 1996 | 1997 | 1998 | 1999 (b) | 2000 | 2001 (c) | 2002 (d) | 2003 | 2004 | 2005 | |||||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||||||||||
Originally reported gross reserves for unpaid claim and claim adjustment expenses | $ | 31,296 | $ | 29,559 | $ | 28,731 | $ | 28,506 | $ | 26,850 | $ | 26,510 | $ | 29,649 | $ | 25,719 | $ | 31,284 | $ | 31,204 | $ | 30,694 | ||||||||||||||||||||||
Originally reported ceded recoverable | 5,784 | 5,385 | 5,056 | 5,182 | 6,091 | 7,333 | 11,703 | 10,490 | 13,847 | 13,682 | 10,438 | |||||||||||||||||||||||||||||||||
Originally reported net reserves for unpaid claim and claim adjustment expenses | $ | 25,512 | $ | 24,174 | $ | 23,675 | $ | 23,324 | $ | 20,759 | $ | 19,177 | $ | 17,946 | $ | 15,229 | $ | 17,437 | $ | 17,522 | $ | 20,256 | ||||||||||||||||||||||
Cumulative net paid as of: | ||||||||||||||||||||||||||||||||||||||||||||
One year later | $ | 6,594 | $ | 5,851 | $ | 5,954 | $ | 7,321 | $ | 6,547 | $ | 7,686 | $ | 5,981 | $ | 5,373 | $ | 4,382 | $ | 2,651 | $ | – | ||||||||||||||||||||||
Two years later | 10,635 | 9,796 | 11,394 | 12,241 | 11,937 | 11,992 | 10,355 | 8,768 | 6,104 | – | – | |||||||||||||||||||||||||||||||||
Three years later | 13,516 | 13,602 | 14,423 | 16,020 | 15,256 | 15,291 | 12,954 | 9,747 | – | – | – | |||||||||||||||||||||||||||||||||
Four years later | 16,454 | 15,793 | 17,042 | 18,271 | 18,151 | 17,333 | 13,244 | – | – | – | – | |||||||||||||||||||||||||||||||||
Five years later | 18,179 | 17,736 | 18,568 | 20,779 | 19,686 | 17,775 | – | – | – | – | – | |||||||||||||||||||||||||||||||||
Six years later | 19,697 | 18,878 | 20,723 | 21,970 | 20,206 | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
Seven years later | 20,642 | 20,828 | 21,649 | 22,564 | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
Eight years later | 22,469 | 21,609 | 22,077 | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
Nine years later | 23,156 | 21,986 | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
Ten years later | 23,459 | – | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
Net reserves re-estimated as of: | ||||||||||||||||||||||||||||||||||||||||||||
End of initial year | $ | 25,512 | $ | 24,174 | $ | 23,675 | $ | 23,324 | $ | 20,759 | $ | 19,177 | $ | 17,946 | $ | 15,229 | $ | 17,437 | $ | 17,522 | $ | 20,256 | ||||||||||||||||||||||
One year later | 25,388 | 23,970 | 23,904 | 24,306 | 21,163 | 21,502 | 17,980 | 17,650 | 17,671 | 18,513 | – | |||||||||||||||||||||||||||||||||
Two years later | 24,859 | 23,610 | 24,106 | 24,134 | 23,217 | 21,555 | 20,533 | 18,248 | 19,120 | – | – | |||||||||||||||||||||||||||||||||
Three years later | 24,363 | 23,735 | 23,776 | 26,038 | 23,081 | 24,058 | 21,109 | 19,814 | – | – | – | |||||||||||||||||||||||||||||||||
Four years later | 24,597 | 23,417 | 25,067 | 25,711 | 25,590 | 24,587 | 22,547 | – | – | – | – | |||||||||||||||||||||||||||||||||
Five years later | 24,344 | 24,499 | 24,636 | 27,754 | 26,000 | 25,594 | – | – | – | – | – | |||||||||||||||||||||||||||||||||
Six years later | 25,345 | 24,120 | 26,338 | 28,078 | 26,625 | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
Seven years later | 25,086 | 25,629 | 26,537 | 28,437 | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
Eight years later | 26,475 | 25,813 | 26,770 | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
Nine years later | 26,618 | 26,072 | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
Ten years later | 26,848 | – | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
Total net (deficiency) redundancy | $ | (1,336 | ) | $ | (1,898 | ) | $ | (3,095 | ) | $ | (5,113 | ) | $ | (5,866 | ) | $ | (6,417 | ) | $ | (4,601 | ) | $ | (4,585 | ) | $ | (1,683 | ) | $ | (991 | ) | $ | – | ||||||||||||
Reconciliation to gross re-estimated reserves: | ||||||||||||||||||||||||||||||||||||||||||||
Net reserves re-estimated | $ | 26,848 | $ | 26,072 | $ | 26,770 | $ | 28,437 | $ | 26,625 | $ | 25,594 | $ | 22,547 | $ | 19,814 | $ | 19,120 | $ | 18,513 | $ | – | ||||||||||||||||||||||
Re-estimated ceded recoverable | 8,459 | 7,626 | 6,967 | 7,440 | 9,671 | 10,447 | 16,043 | 15,451 | 13,908 | 12,840 | – | |||||||||||||||||||||||||||||||||
Total gross re-estimated reserves | $ | 35,307 | $ | 33,698 | $ | 33,737 | $ | 35,877 | $ | 36,296 | $ | 36,041 | $ | 38,590 | $ | 35,265 | $ | 33,028 | $ | 31,353 | $ | – | ||||||||||||||||||||||
Net (deficiency) redundancy related to: | ||||||||||||||||||||||||||||||||||||||||||||
Asbestos claims | $ | (2,361 | ) | $ | (2,463 | ) | $ | (2,362 | ) | $ | (2,120 | ) | $ | (1,543 | ) | $ | (1,478 | ) | $ | (706 | ) | $ | (705 | ) | $ | (64 | ) | $ | (10 | ) | $ | – | ||||||||||||
Environmental and mass tort claims | (802 | ) | (749 | ) | (776 | ) | (561 | ) | (663 | ) | (654 | ) | (193 | ) | (200 | ) | (52 | ) | (53 | ) | – | |||||||||||||||||||||||
Total asbestos, environmental and mass tort | (3,163 | ) | (3,212 | ) | (3,138 | ) | (2,681 | ) | (2,206 | ) | (2,132 | ) | (899 | ) | (905 | ) | (116 | ) | (63 | ) | – | |||||||||||||||||||||||
Other claims | 1,827 | 1,314 | 43 | (2,432 | ) | (3,660 | ) | (4,285 | ) | (3,702 | ) | (3,680 | ) | (1,567 | ) | (928 | ) | – | ||||||||||||||||||||||||||
Total net (deficiency) redundancy | $ | (1,336 | ) | $ | (1,898 | ) | $ | (3,095 | ) | $ | (5,113 | ) | $ | (5,866 | ) | $ | (6,417 | ) | $ | (4,601 | ) | $ | (4,585 | ) | $ | (1,683 | ) | $ | (991 | ) | $ | – | ||||||||||||
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(a) | Includes gross reserves of $9,713 million and net reserves of $6,063 million for CIC and its insurance affiliates, which were acquired on May 10, 1995 (the Acquisition Date) and subsequent development thereon. | |
(b) | Ceded recoverable includes reserves transferred under retroactive reinsurance agreements of $784 million as of December 31, 1999. | |
(c) | Effective January 1, 2001, we established a new life insurance company, CNA Group Life Assurance Company (CNAGLA). Further, on January 1, 2001 approximately $1,055 million of reserves were transferred from CCC to CNAGLA. | |
(d) | Effective October 31, 2002, we sold CNA Reinsurance Company Limited (CNA Re U.K.). As a result of the sale, net reserves were reduced by approximately $1,316 million. |
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• | increases in the number and size of claims relating to injuries from medical products and exposure to lead; | |
• | the effects of accounting and financial reporting scandals and other major corporate governance failures which have resulted in an increase in the number and size of claims, including director and officer and errors and omissions insurance claims; | |
• | increases in the volume of class action litigation challenging a range of industry practices including claims handling; | |
• | increases in the number of construction defect claims, including claims for a broad range of additional insured endorsements on policies; and | |
• | increases in the number of claims alleging abuse by members of the clergy, including passage of legislation to reopen or extend various statutes of limitations. |
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• | coverage issues including whether certain costs are covered under the policies and whether policy limits apply; | |
• | inconsistent court decisions and developing legal theories; | |
• | increasingly aggressive tactics of plaintiffs’ lawyers; | |
• | the risks and lack of predictability inherent in major litigation; | |
• | changes in the volume of asbestos, environmental pollution and mass tort claims which cannot now be anticipated; | |
• | continued increases in mass tort claims relating to silica and silica-containing products; | |
• | the impact of the exhaustion of primary limits and the resulting increase in claims on any umbrella or excess policies we have issued; | |
• | the number and outcome of direct actions against us; | |
• | our ability to recover reinsurance for these claims; and | |
• | changes in the legal and legislative environment in which we operate. |
• | whether cleanup costs are considered damages under the policies (and accordingly whether we would be liable for these costs); | |
• | the trigger of coverage and the allocation of liability among triggered policies; | |
• | the applicability of pollution exclusions and owned property exclusions; | |
• | the potential for joint and several liability; and | |
• | the definition of an occurrence. |
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• | inconsistency of court decisions and jury attitudes, as well as future court decisions; | |
• | specific policy provisions; | |
• | allocation of liability among insurers and insureds; | |
• | missing policies and proof of coverage; | |
• | the proliferation of bankruptcy proceedings and attendant uncertainties; | |
• | novel theories asserted by policyholders and their legal counsel; | |
• | the targeting of a broader range of businesses and entities as defendants; | |
• | uncertainties in predicting the number of future claims and which other insureds may be targeted in the future; | |
• | volatility in claim numbers and settlement demands; | |
• | increases in the number of non-impaired claimants and the extent to which they can be precluded from making claims; | |
• | the efforts by insureds to obtain coverage that is not subject to aggregate limits; | |
• | the long latency period between asbestos exposure and disease manifestation, as well as the resulting potential for involvement of multiple policy periods for individual claims; | |
• | medical inflation trends; | |
• | the mix of asbestos-related diseases presented; and | |
• | the ability to recover reinsurance. |
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• | standards of solvency including risk-based capital measurements; | |
• | restrictions on the nature, quality and concentration of investments; | |
• | restrictions on our ability to withdraw from unprofitable lines of insurance; | |
• | the required use of certain methods of accounting and reporting; | |
• | the establishment of reserves for unearned premiums, losses and other purposes; | |
• | potential assessments for funds necessary to settle covered claims against impaired, insolvent or failed insurance companies; | |
• | licensing of insurers and agents; | |
• | approval of policy forms; and | |
• | limitations on the ability of our insurance subsidiaries to pay dividends to us. |
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Amount (Square Feet) of Building | ||||||||
Owned and Occupied or Leased | ||||||||
Location | and Occupied by CNA | Principal Usage | ||||||
CNA Center, 333 S. Wabash, Chicago, Illinois | 904,990 | Principal executive offices of CNAF | ||||||
401 Penn Street, Reading, Pennsylvania | 171,406 | Property and casualty insurance offices | ||||||
2405 Lucien Way, Maitland, Florida | 150,825 | Property and casualty insurance offices | ||||||
40 Wall Street, New York, New York | 124,482 | Property and casualty insurance offices | ||||||
1111 E. Broad Street, Columbus, Ohio | 97,276 | Property and casualty insurance offices | ||||||
675 Placentia Avenue, Brea, California | 78,655 | Property and casualty insurance offices | ||||||
600 N. Pearl Street, Dallas, Texas | 76,666 | Property and casualty insurance offices | ||||||
405 Howard Street, San Francisco, California | 47,667 | Property and casualty insurance offices | ||||||
1100 Cornwall Road, Monmouth Junction, New Jersey | 41,767 | Property and casualty insurance offices | ||||||
100 CNA Drive, Nashville, Tennessee | 35,653 | Property and casualty insurance offices |
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2005 | 2004 | |||||||||||||||
High | Low | High | Low | |||||||||||||
Quarter: | ||||||||||||||||
Fourth | $ | 34.91 | $ | 28.52 | $ | 27.06 | $ | 22.17 | ||||||||
Third | 30.46 | 28.40 | 29.54 | 23.98 | ||||||||||||
Second | 28.90 | 26.21 | 30.49 | 26.32 | ||||||||||||
First | 29.79 | 25.84 | 28.65 | 24.52 |
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As of and for the Years Ended December 31 | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||||||
(In millions, except per share data and ratios) | Restated (a) | Restated (a) | Restated (a) | Restated (a) | ||||||||||||||||
Results of Operations: | ||||||||||||||||||||
Revenues | $ | 9,862 | $ | 9,924 | $ | 11,715 | $ | 12,293 | $ | 13,097 | ||||||||||
Income (loss) from continuing operations | $ | 243 | $ | 446 | $ | (1,419 | ) | $ | 263 | $ | (1,550 | ) | ||||||||
Income (loss) from discontinued operations, net of tax | 21 | (21 | ) | 2 | (43 | ) | 6 | |||||||||||||
Cumulative effects of changes in accounting principles, net of tax | — | — | — | (57 | ) | (61 | ) | |||||||||||||
Net income (loss) | $ | 264 | $ | 425 | $ | (1,417 | ) | $ | 163 | $ | (1,605 | ) | ||||||||
Earnings (loss) per Share: | ||||||||||||||||||||
Income (loss) from continuing operations | $ | 0.68 | $ | 1.49 | $ | (6.52 | ) | $ | 1.18 | $ | (7.99 | ) | ||||||||
Income (loss) from discontinued operations, net of tax | 0.08 | (0.09 | ) | 0.01 | (0.20 | ) | 0.04 | |||||||||||||
Cumulative effects of changes in accounting principles, net of tax | — | — | — | (0.26 | ) | (0.32 | ) | |||||||||||||
Earnings (loss) per share available to common stockholders | $ | 0.76 | $ | 1.40 | $ | (6.51 | ) | $ | 0.72 | $ | (8.27 | ) | ||||||||
Financial Condition: | ||||||||||||||||||||
Total investments | $ | 39,695 | $ | 39,231 | $ | 38,100 | $ | 35,293 | $ | 35,826 | ||||||||||
Total assets | 58,786 | 62,496 | 68,296 | 61,426 | 65,425 | |||||||||||||||
Insurance reserves | 42,436 | 43,653 | 45,494 | 40,250 | 43,721 | |||||||||||||||
Long and short term debt | 1,690 | 2,257 | 1,904 | 2,292 | 2,567 | |||||||||||||||
Stockholders’ equity | 8,950 | 8,974 | 8,735 | 9,139 | 7,839 | |||||||||||||||
Book value per share | $ | 31.26 | $ | 31.63 | $ | 30.95 | $ | 37.51 | $ | 35.06 | ||||||||||
Statutory Surplus: | ||||||||||||||||||||
Property and casualty companies (b) | $ | 6,940 | $ | 6,998 | $ | 6,170 | $ | 6,836 | $ | 6,241 | ||||||||||
Life and group insurance company(ies) | 627 | 1,177 | 707 | 1,645 | 1,752 |
(a) | See Note T of the Consolidated Financial Statements included under Item 8 for further discussion. | |
(b) | Surplus includes the property and casualty companies’ equity ownership of the life and group company(ies)’ capital and surplus. |
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Page No. | ||||
Consolidated Operations | 21 | |||
Net Prior Year Development | 23 | |||
Critical Accounting Estimates | 26 | |||
Reserves – Estimates and Uncertainties | 28 | |||
Reinsurance | 30 | |||
Terrorism Insurance | 32 | |||
Restructuring | 32 | |||
Segment Results | 33 | |||
Standard Lines | 33 | |||
Specialty Lines | 37 | |||
Life and Group Non-Core | 40 | |||
Corporate and Other Non-Core | 41 | |||
Asbestos and Environmental Pollution and Mass Tort (APMT) Reserves | 43 | |||
Investments | 49 | |||
Net Investment Income | 49 | |||
Net Realized Investment Gains (Losses) | 51 | |||
Valuation and Impairment of Investments | 54 | |||
Liquidity and Capital Resources | 57 | |||
Cash Flows | 57 | |||
Commitments, Contingencies, and Guarantees | 58 | |||
Regulatory Matters | 59 | |||
Ratings | 60 | |||
Dividends from Subsidiaries | 61 | |||
Loews | 62 | |||
Accounting Pronouncements | 62 | |||
Forward-Looking Statements | 63 |
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Years ended December 31 (In millions, except per share data) | 2005 | 2004 | 2003 | |||||||||
Revenues: | ||||||||||||
Net earned premiums | $ | 7,569 | $ | 8,209 | $ | 9,216 | ||||||
Net investment income | 1,892 | 1,680 | 1,656 | |||||||||
Other revenues | 411 | 283 | 383 | |||||||||
Total operating revenues | 9,872 | 10,172 | 11,255 | |||||||||
Claims, Benefits and Expenses: | ||||||||||||
Net incurred claims and benefits | 6,975 | 6,434 | 10,163 | |||||||||
Policyholders’ dividends | 24 | 11 | 114 | |||||||||
Amortization of deferred acquisition costs | 1,543 | 1,680 | 1,965 | |||||||||
Other insurance related expenses | 829 | 969 | 1,411 | |||||||||
Other expenses | 329 | 326 | 393 | |||||||||
Total claims, benefits and expenses | 9,700 | 9,420 | 14,046 | |||||||||
Operating income (loss) before income tax and minority interest | 172 | 752 | (2,791 | ) | ||||||||
Income tax (expense) benefit on operating income (loss) | 105 | (126 | ) | 1,081 | ||||||||
Minority interest | (24 | ) | (27 | ) | 6 | |||||||
Net operating income (loss) | 253 | 599 | (1,704 | ) | ||||||||
Realized investment gains (losses), net of participating policyholders’ and minority interests | (10 | ) | (248 | ) | 460 | |||||||
Income tax (expense) benefit on realized investment gains (losses) | – | 95 | (175 | ) | ||||||||
Income (loss) from continuing operations | 243 | 446 | (1,419 | ) | ||||||||
Income (loss) from discontinued operations, net of tax of $(2), $(1) and $(11) | 21 | (21 | ) | 2 | ||||||||
Net income (loss) | $ | 264 | $ | 425 | $ | (1,417 | ) | |||||
Basic and Diluted Earnings (Loss) per Share: | ||||||||||||
Income (loss) from continuing operations | $ | 0.68 | $ | 1.49 | $ | (6.52 | ) | |||||
Income (loss) from discontinued operations, net of tax | 0.08 | (0.09 | ) | 0.01 | ||||||||
Basic and diluted earnings (loss) per share available to common stockholders | $ | 0.76 | $ | 1.40 | $ | (6.51 | ) | |||||
Weighted Average Outstanding Common Stock and Common Stock Equivalents | 256.0 | 256.0 | 227.0 | |||||||||
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Corporate | ||||||||||||||||
Standard | Specialty | and Other | ||||||||||||||
Lines | Lines | Non-Core | Total | |||||||||||||
(In millions) | ||||||||||||||||
Pretax unfavorable net prior year claim and allocated claim adjustment expense development excluding the impact of corporate aggregate reinsurance treaties: | ||||||||||||||||
Core (Non-APMT) | $ | 376 | $ | 42 | $ | 171 | $ | 589 | ||||||||
APMT | – | – | 63 | 63 | ||||||||||||
Total | 376 | 42 | 234 | 652 | ||||||||||||
Ceded losses related to corporate aggregate reinsurance treaties | 183 | 5 | 57 | 245 | ||||||||||||
Pretax unfavorable net prior year development before impact of premium development | 559 | 47 | 291 | 897 | ||||||||||||
Unfavorable (favorable) premium development, excluding impact of corporate aggregate reinsurance treaties | (101 | ) | (12 | ) | 11 | (102 | ) | |||||||||
Ceded premiums related to corporate aggregate reinsurance treaties | (6 | ) | 19 | 4 | 17 | |||||||||||
Total premium development | (107 | ) | 7 | 15 | (85 | ) | ||||||||||
Total 2005 unfavorable net prior year development (pretax) | $ | 452 | $ | 54 | $ | 306 | $ | 812 | ||||||||
Total 2005 unfavorable net prior year development (after-tax) | $ | 294 | $ | 35 | $ | 199 | $ | 528 | ||||||||
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Corporate | ||||||||||||||||
Standard | Specialty | and Other | ||||||||||||||
(In millions) | Lines | Lines | Non-Core | Total | ||||||||||||
Pretax unfavorable net prior year claim and allocated claim adjustment expense development excluding the impact of corporate aggregate reinsurance treaties: | ||||||||||||||||
Core (Non-APMT) | $ | 107 | $ | 75 | $ | 20 | $ | 202 | ||||||||
APMT | – | – | 55 | 55 | ||||||||||||
Total | 107 | 75 | 75 | 257 | ||||||||||||
Ceded losses related to corporate aggregate reinsurance treaties | 8 | (17 | ) | 9 | – | |||||||||||
Pretax unfavorable net prior year development before impact of premium development | 115 | 58 | 84 | 257 | ||||||||||||
Unfavorable (favorable) premium development, excluding impact of corporate aggregate reinsurance treaties | (96 | ) | (33 | ) | 12 | (117 | ) | |||||||||
Ceded premiums related to corporate aggregate reinsurance treaties | (1 | ) | 5 | (3 | ) | 1 | ||||||||||
Total premium development | (97 | ) | (28 | ) | 9 | (116 | ) | |||||||||
Total 2004 unfavorable net prior year development (pretax) | $ | 18 | $ | 30 | $ | 93 | $ | 141 | ||||||||
Total 2004 unfavorable net prior year development (after-tax) | $ | 12 | $ | 20 | $ | 60 | $ | 92 | ||||||||
Corporate | ||||||||||||||||
Standard | Specialty | and Other | ||||||||||||||
Lines | Lines | Non-Core | Total | |||||||||||||
(In millions) | ||||||||||||||||
Pretax unfavorable net prior year claim and allocated claim adjustment expense development excluding the impact of corporate aggregate reinsurance treaties: | ||||||||||||||||
Core (Non-APMT) | $ | 1,423 | $ | 313 | $ | 346 | $ | 2,082 | ||||||||
APMT | – | – | 795 | 795 | ||||||||||||
Total | 1,423 | 313 | 1,141 | 2,877 | ||||||||||||
Ceded losses related to corporate aggregate reinsurance treaties | (485 | ) | (56 | ) | (102 | ) | (643 | ) | ||||||||
Pretax unfavorable net prior year development before impact of premium development | 938 | 257 | 1,039 | 2,234 | ||||||||||||
Unfavorable (favorable) premium development, excluding impact of corporate aggregate reinsurance treaties | 209 | 6 | (32 | ) | 183 | |||||||||||
Ceded premiums related to corporate aggregate reinsurance treaties | 269 | 31 | 58 | 358 | ||||||||||||
Total premium development | 478 | 37 | 26 | 541 | ||||||||||||
Total 2003 unfavorable net prior year development (pretax) | $ | 1,416 | $ | 294 | $ | 1,065 | $ | 2,775 | ||||||||
Total 2003 unfavorable net prior year development (after-tax) | $ | 920 | $ | 191 | $ | 692 | $ | 1,803 | ||||||||
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• | increases in the number and size of claims relating to injuries from medical products, and exposure to lead; | |
• | the effects of accounting and financial reporting scandals and other major corporate governance failures, which have resulted in an increase in the number and size of claims, including director and officer and errors and omissions insurance claims; | |
• | class action litigation relating to claims handling and other practices; | |
• | construction defect claims, including claims for a broad range of additional insured endorsements on policies; and | |
• | increases in the number of claims alleging abuse by members of the clergy, including passage of legislation to reopen or extend various statutes of limitations. |
• | coverage issues, including whether certain costs are covered under the policies and whether policy limits apply; |
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• | inconsistent court decisions and developing legal theories; | |
• | increasingly aggressive tactics of plaintiffs’ lawyers; | |
• | the risks and lack of predictability inherent in major litigation; | |
• | changes in the volume of asbestos and environmental pollution and mass tort claims which cannot now be anticipated; | |
• | continued increase in mass tort claims relating to silica and silica-containing products; | |
• | the impact of the exhaustion of primary limits and the resulting increase in claims on any umbrella or excess policies we have issued; | |
• | the number and outcome of direct actions against us; and | |
• | our ability to recover reinsurance for asbestos and environmental pollution and mass tort claims. |
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Gross | ||||||||
Carried | Estimated | |||||||
Loss | Volatility in | |||||||
December 31, 2005 (In millions) | Reserves | Reserves | ||||||
Standard Lines | $ | 15,084 | +/- 7 | % | ||||
Specialty Lines | 5,205 | +/- 7 | % | |||||
Corporate and Other Non-Core | 7,372 | +/- 25 | % |
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Components of reinsurance receivables (In millions) | December 31, 2005 | December 31, 2004 | ||||||
Reinsurance receivables related to insurance reserves: | ||||||||
Ceded claim and claim adjustment expense | $ | 10,605 | $ | 13,879 | ||||
Ceded future policy benefits | 1,193 | 1,260 | ||||||
Ceded policyholders’ funds | 56 | 65 | ||||||
Billed reinsurance receivables | 582 | 684 | ||||||
Reinsurance receivables | 12,436 | 15,888 | ||||||
Allowance for uncollectible reinsurance | (519 | ) | (546 | ) | ||||
Reinsurance receivables, net of allowance for uncollectible reinsurance | $ | 11,917 | $ | 15,342 | ||||
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Years ended December 31 (In millions) | 2005 | 2004 | 2003 | |||||||||
Net written premiums | $ | 4,382 | $ | 4,582 | $ | 4,563 | ||||||
Net earned premiums | 4,410 | 4,917 | 4,532 | |||||||||
Net investment income | 767 | 496 | 408 | |||||||||
Net operating income (loss) | (41 | ) | 220 | (948 | ) | |||||||
Net realized investment gains | 9 | 139 | 234 | |||||||||
Net income (loss) | (32 | ) | 359 | (714 | ) | |||||||
Ratios | ||||||||||||
Loss and loss adjustment expense | 87.5 | % | 70.8 | % | 98.0 | % | ||||||
Expense | 32.4 | 34.6 | 42.7 | |||||||||
Dividend | 0.4 | 0.2 | 2.2 | |||||||||
Combined | 120.3 | % | 105.6 | % | 142.9 | % | ||||||
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Claim and Claim Adjustment Expense Reserves
December 31, (In millions) | 2005 | 2004 | ||||||
Gross Case Reserves | $ | 7,033 | $ | 6,904 | ||||
Gross IBNR Reserves | 8,051 | 7,398 | ||||||
Total Gross Carried Claim and Claim Adjustment Expense Reserves | $ | 15,084 | $ | 14,302 | ||||
Net Case Reserves | $ | 5,165 | $ | 4,761 | ||||
Net IBNR Reserves | 6,081 | 4,547 | ||||||
Total Net Carried Claim and Claim Adjustment Expense Reserves | $ | 11,246 | $ | 9,308 | ||||
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Years ended December 31 (In millions) | 2005 | 2004 | 2003 | |||||||||
Net written premiums | $ | 2,463 | $ | 2,391 | $ | 2,038 | ||||||
Net earned premiums | 2,475 | 2,277 | 1,840 | |||||||||
Net investment income | 281 | 246 | 201 | |||||||||
Net operating income (loss) | 336 | 324 | (34 | ) | ||||||||
Net realized investment gains | 12 | 54 | 74 | |||||||||
Net income | 348 | 378 | 40 | |||||||||
Ratios | ||||||||||||
Loss and loss adjustment expense | 65.3 | % | 63.3 | % | 89.6 | % | ||||||
Expense | 26.1 | 26.1 | 27.6 | |||||||||
Dividend | 0.2 | 0.2 | 0.2 | |||||||||
Combined | 91.6 | % | 89.6 | % | 117.4 | % | ||||||
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December 31, (In millions) | 2005 | 2004 | ||||||
Gross Case Reserves | $ | 1,907 | $ | 1,659 | ||||
Gross IBNR Reserves | 3,298 | 3,201 | ||||||
Total Gross Carried Claim and Claim Adjustment Expense Reserves | $ | 5,205 | $ | 4,860 | ||||
Net Case Reserves | $ | 1,442 | $ | 1,191 | ||||
Net IBNR Reserves | 2,352 | 2,042 | ||||||
Total Net Carried Claim and Claim Adjustment Expense Reserves | $ | 3,794 | $ | 3,233 | ||||
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Years ended December 31 | 2005 | 2004 | 2003 | |||||||||
(In millions) | ||||||||||||
Net earned premiums | $ | 704 | $ | 921 | $ | 2,376 | ||||||
Net investment income | 593 | 692 | 821 | |||||||||
Net operating income (loss) | (51 | ) | (29 | ) | 113 | |||||||
Net realized investment losses | (19 | ) | (385 | ) | (108 | ) | ||||||
Net income (loss) | (70 | ) | (414 | ) | 5 |
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Years ended December 31 | 2005 | 2004 | 2003 | |||||||||
(In millions) | ||||||||||||
Net investment income | $ | 251 | $ | 246 | $ | 226 | ||||||
Revenues | 311 | 358 | 737 | |||||||||
Net operating income (loss) | 9 | 84 | (835 | ) | ||||||||
Net realized investment gains (losses) | (12 | ) | 39 | 85 | ||||||||
Net income (loss) | (3 | ) | 123 | (750 | ) |
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Claim and Claim Adjustment Expense Reserves
December 31, | 2005 | 2004 | ||||||
(In millions) | ||||||||
Gross Case Reserves | $ | 3,297 | $ | 3,806 | ||||
Gross IBNR Reserves | 4,075 | 4,875 | ||||||
Total Gross Carried Claim and Claim Adjustment Expense Reserves | $ | 7,372 | $ | 8,681 | ||||
Net Case Reserves | $ | 1,554 | $ | 1,588 | ||||
Net IBNR Reserves | 1,902 | 1,691 | ||||||
Total Net Carried Claim and Claim Adjustment Expense Reserves | $ | 3,456 | $ | 3,279 | ||||
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December 31, 2005 | December 31, 2004 | |||||||||||||||
Environmental | Environmental | |||||||||||||||
Pollution and | Pollution and | |||||||||||||||
Asbestos | Mass Tort | Asbestos | Mass Tort | |||||||||||||
(In millions) | ||||||||||||||||
Gross reserves | $ | 2,992 | $ | 680 | $ | 3,218 | $ | 755 | ||||||||
Ceded reserves | (1,438 | ) | (257 | ) | (1,532 | ) | (258 | ) | ||||||||
Net reserves | $ | 1,554 | $ | 423 | $ | 1,686 | $ | 497 | ||||||||
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Net Paid Losses | Net Asbestos | Percent of | ||||||||||||||
Number of | in 2005 | Reserves | Asbestos | |||||||||||||
Policyholders | (In millions) | (In millions) | Net Reserves | |||||||||||||
Policyholders with settlement agreements | ||||||||||||||||
Structured Settlements | 13 | $ | 30 | $ | 167 | 11 | % | |||||||||
Wellington | 4 | 2 | 15 | 1 | ||||||||||||
Coverage in place | 34 | 13 | 58 | 4 | ||||||||||||
Fibreboard | 1 | – | 54 | 3 | ||||||||||||
Total with settlement agreements | 52 | 45 | 294 | 19 | ||||||||||||
Other policyholders with active accounts | ||||||||||||||||
Large asbestos accounts | 199 | 68 | 273 | 17 | ||||||||||||
Small asbestos accounts | 1,073 | 23 | 135 | 9 | ||||||||||||
Total other policyholders | 1,272 | 91 | 408 | 26 | ||||||||||||
Assumed reinsurance and pools | – | 6 | 143 | 9 | ||||||||||||
Unassigned IBNR | – | – | 709 | 46 | ||||||||||||
Total | 1,324 | $ | 142 | $ | 1,554 | 100 | % | |||||||||
Net Paid Losses | Net Asbestos | Percent of | ||||||||||||||
Number of | in 2004 | Reserves | Asbestos | |||||||||||||
Policyholders | (In millions) | (In millions) | Net Reserves | |||||||||||||
Policyholders with settlement agreements | ||||||||||||||||
Structured Settlements | 11 | $ | 39 | $ | 175 | 10 | % | |||||||||
Wellington | 4 | 4 | 17 | 1 | ||||||||||||
Coverage in place | 33 | 14 | 76 | 5 | ||||||||||||
Fibreboard | 1 | – | 54 | 3 | ||||||||||||
Total with settlement agreements | 49 | 57 | 322 | 19 | ||||||||||||
Other policyholders with active accounts | ||||||||||||||||
Large asbestos accounts | 180 | 47 | 368 | 22 | ||||||||||||
Small asbestos accounts | 1,109 | 23 | 141 | 8 | ||||||||||||
Total other policyholders | 1,289 | 70 | 509 | 30 | ||||||||||||
Assumed reinsurance and pools | – | 8 | 148 | 9 | ||||||||||||
Unassigned IBNR | – | – | 707 | 42 | ||||||||||||
Total | 1,338 | $ | 135 | $ | 1,686 | 100 | % | |||||||||
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Net | ||||||||||||||||
Environmental | Percent of | |||||||||||||||
Net Paid Losses | Pollution | Environmental | ||||||||||||||
Number of | in 2005 | Reserves | Pollution Net | |||||||||||||
Policyholders | (In millions) | (In millions) | Reserve | |||||||||||||
Policyholders with Settlement Agreements | ||||||||||||||||
Structured settlements | 6 | $ | 10 | $ | 17 | 5 | % | |||||||||
Coverage in place | 16 | 10 | 23 | 7 | ||||||||||||
Total with Settlement Agreements | 22 | 20 | 40 | 12 | ||||||||||||
Other Policyholders with Active Accounts | ||||||||||||||||
Large pollution accounts | 120 | 18 | 63 | 19 | ||||||||||||
Small pollution accounts | 362 | 15 | 50 | 15 | ||||||||||||
Total Other Policyholders | 482 | 33 | 113 | 34 | ||||||||||||
Assumed Reinsurance & Pools | – | 3 | 33 | 10 | ||||||||||||
Unassigned IBNR | – | – | 150 | 44 | ||||||||||||
Total | 504 | $ | 56 | $ | 336 | 100 | % | |||||||||
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Net | ||||||||||||||||
Environmental | Percent of | |||||||||||||||
Net Paid Losses | Pollution | Environmental | ||||||||||||||
Number of | in 2004 | Reserves | Pollution Net | |||||||||||||
Policyholders | (In millions) | (In millions) | Reserve | |||||||||||||
Policyholders with Settlement Agreements | ||||||||||||||||
Structured settlements | 2 | $ | 14 | $ | 5 | 1 | % | |||||||||
Coverage in place | 15 | 5 | 16 | 5 | ||||||||||||
Total with Settlement Agreements | 17 | 19 | 21 | 6 | ||||||||||||
Other Policyholders with Active Accounts | ||||||||||||||||
Large pollution accounts | 134 | 18 | 75 | 22 | ||||||||||||
Small pollution accounts | 405 | 14 | 47 | 14 | ||||||||||||
Total Other Policyholders | 539 | 32 | 122 | 36 | ||||||||||||
Assumed Reinsurance & Pools | – | 2 | 36 | 10 | ||||||||||||
Unassigned IBNR | – | – | 163 | 48 | ||||||||||||
Total | 556 | $ | 53 | $ | 342 | 100 | % | |||||||||
Years ended December 31 | 2005 | 2004 | 2003 | |||||||||
(In millions) | ||||||||||||
Fixed maturity securities | $ | 1,608 | $ | 1,571 | $ | 1,651 | ||||||
Short term investments | 147 | 56 | 63 | |||||||||
Limited partnerships | 254 | 212 | 221 | |||||||||
Equity securities | 25 | 14 | 19 | |||||||||
Income from trading portfolio (a) | 47 | 110 | – | |||||||||
Interest on funds withheld and other deposits | (166 | ) | (261 | ) | (335 | ) | ||||||
Other | 20 | 18 | 85 | |||||||||
Gross investment income | 1,935 | 1,720 | 1,704 | |||||||||
Investment expense | (43 | ) | (40 | ) | (48 | ) | ||||||
Net investment income | $ | 1,892 | $ | 1,680 | $ | 1,656 | ||||||
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Years ended December 31 | 2005 | 2004 | 2003 | |||||||||
(In millions) | ||||||||||||
Realized investment gains (losses): | ||||||||||||
Fixed maturity securities: | ||||||||||||
U.S. Government bonds | $ | (33 | ) | $ | 10 | $ | (70 | ) | ||||
Corporate and other taxable bonds | (86 | ) | 123 | 380 | ||||||||
Tax-exempt bonds | 12 | 42 | 97 | |||||||||
Asset-backed bonds | 14 | 53 | 42 | |||||||||
Redeemable preferred stock | 3 | 19 | (12 | ) | ||||||||
Total fixed maturity securities | (90 | ) | 247 | 437 | ||||||||
Equity securities | 38 | 202 | 114 | |||||||||
Derivative securities | 49 | (84 | ) | 78 | ||||||||
Short-term investments | – | (3 | ) | 3 | ||||||||
Other, including dispositions of businesses, net of participating policyholders’ interest | (10 | ) | (601 | ) | (168 | ) | ||||||
Realized investment gains (losses) before allocation to participating policyholders’ and minority interests | (13 | ) | (239 | ) | 464 | |||||||
Allocated to participating policyholders’ and minority interests | 3 | (9 | ) | (4 | ) | |||||||
Income tax (expense) benefit | — | 95 | (175 | ) | ||||||||
Net realized investment gains (losses), net of participating policyholders’ and minority interests | $ | (10 | ) | $ | (153 | ) | $ | 285 | ||||
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Years ended December 31 | 2005 | 2004 | 2003 | |||||||||
(In millions) | ||||||||||||
Net realized gains (losses) on fixed maturity securities and equity securities: | ||||||||||||
Fixed maturity securities: | ||||||||||||
Gross realized gains | $ | 361 | $ | 704 | $ | 1,244 | ||||||
Gross realized losses | (451 | ) | (457 | ) | (807 | ) | ||||||
Net realized gains (losses) on fixed maturity securities | (90 | ) | 247 | 437 | ||||||||
Equity securities: | ||||||||||||
Gross realized gains | 73 | 225 | 143 | |||||||||
Gross realized losses | (35 | ) | (23 | ) | (29 | ) | ||||||
Net realized gains on equity securities | 38 | 202 | 114 | |||||||||
Net realized gains (losses) on fixed maturity and equity securities | $ | (52 | ) | $ | 449 | $ | 551 | |||||
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Fair | Months in | |||||||||||
Year ended December 31, 2005 | Value | 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. Volatility of interest rates prompted movement to other asset classes. | $ | 16,716 | $ | 92 | 0-12+ | |||||||
Manufactures and sells vehicles worldwide under various brand names. The company also has financing and insurance operations. The company is experiencing inventory capacity issues. Losses relate to trades that took place to reduce issuer exposure. | 356 | 45 | 0-12+ | |||||||||
Agency issued security that is secured by a pool of federally insured and conventional mortgages. Specific pools were sold and replaced with non-agency pools to enhance yield. | 1,326 | 9 | 0-12 | |||||||||
Issuer of high grade state revenue bonds. Loss was incurred as a result of unfavorable interest rate change. | 242 | 6 | 0-12+ | |||||||||
Large retail food-drug chain. Company was soliciting bidders, but failed to be acquired. Sold securities to reduce issuer exposure. | 40 | 6 | 0-6 | |||||||||
Manufactures and sells vehicles worldwide under various brand names. The company also has financing operations. The company has been downgraded. Losses relate to trades that took place to reduce issuer exposure. | 27 | 6 | 0-12 | |||||||||
Large media company that was downgraded to below investment grade. Losses relate to trades that took place to reduce issuer exposure. | 74 | 5 | 0-12+ | |||||||||
Issuer of municipal general obligation bonds. Loss was incurred as a result of unfavorable interest rate change. | 418 | 5 | 0-6 | |||||||||
Issuer of high grade state general obligation bonds. Loss was incurred as a result of unfavorable interest rate change. | 244 | 5 | 0-12 | |||||||||
Large domestic passenger and freight airline that filed for bankruptcy during third quarter 2005. Losses relate to trades that took place to reduce issuer exposure. | 12 | 5 | 0-6 | |||||||||
$ | 19,455 | $ | 184 | |||||||||
(a) | Represents the range of consecutive months the various positions were in an unrealized loss prior to sale. 0-12+ means certain positions were less than 12 months, while others were greater than 12 months. |
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December 31, | December 31, | |||||||||||||||
2005 | % | 2004 | % | |||||||||||||
(In millions) | ||||||||||||||||
General account investments: | ||||||||||||||||
Fixed maturity securities available-for-sale: | ||||||||||||||||
U.S. Treasury securities and obligations of government agencies | $ | 1,469 | 4 | % | $ | 4,346 | 11 | % | ||||||||
Asset-backed securities | 12,859 | 32 | 7,788 | 20 | ||||||||||||
States, municipalities and political subdivisions – tax-exempt | 9,209 | 23 | 8,857 | 22 | ||||||||||||
Corporate securities | 6,165 | 15 | 6,513 | 17 | ||||||||||||
Other debt securities | 3,044 | 8 | 3,053 | 8 | ||||||||||||
Redeemable preferred stock | 216 | 1 | 146 | – | ||||||||||||
Options embedded in convertible debt securities | 1 | – | 234 | 1 | ||||||||||||
Total fixed maturity securities available-for-sale | 32,963 | 83 | 30,937 | 79 | ||||||||||||
Fixed maturity securities trading: | ||||||||||||||||
U.S. Treasury securities and obligations of government agencies | 4 | – | 27 | – | ||||||||||||
Asset-backed securities | 87 | – | 125 | – | ||||||||||||
Corporate securities | 154 | 1 | 199 | 1 | ||||||||||||
Other debt securities | 26 | – | 35 | – | ||||||||||||
Redeemable preferred stock | – | – | 4 | – | ||||||||||||
Total fixed maturity securities trading | 271 | 1 | 390 | 1 | ||||||||||||
Equity securities available-for-sale: | ||||||||||||||||
Common stock | 289 | 1 | 260 | 1 | ||||||||||||
Preferred stock | 343 | 1 | 150 | – | ||||||||||||
Total equity securities available-for-sale | 632 | 2 | 410 | 1 | ||||||||||||
Total equity securities trading | 49 | – | 46 | – | ||||||||||||
Short term investments available-for-sale | 3,870 | 9 | 5,404 | 14 | ||||||||||||
Short term investments trading | 368 | 1 | 459 | 1 | ||||||||||||
Limited partnerships | 1,509 | 4 | 1,549 | 4 | ||||||||||||
Other investments | 33 | – | 36 | – | ||||||||||||
Total general account investments | $ | 39,695 | 100 | % | $ | 39,231 | 100 | % | ||||||||
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Percent of | Percent of | |||||||
Market | Unrealized | |||||||
Value | Loss | |||||||
Due in one year or less | 4 | % | 1 | % | ||||
Due after one year through five years | 6 | 5 | ||||||
Due after five years through ten years | 7 | 14 | ||||||
Due after ten years | 22 | 23 | ||||||
Asset-backed securities | 61 | 57 | ||||||
Total | 100 | % | 100 | % | ||||
Fair Value as a Percentage of Book Value | ||||||||||||||||||||||||
Estimated | Gross Unrealized | |||||||||||||||||||||||
December 31, 2005 | Fair Value | 90-99% | 80-89% | 70-79% | <70% | Loss | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||
Non-investment grade: | ||||||||||||||||||||||||
0-6 months | $ | 632 | $ | 20 | $ | 8 | $ | 1 | $ | – | $ | 29 | ||||||||||||
7-12 months | 118 | 4 | 6 | – | – | 10 | ||||||||||||||||||
13-24 months | 122 | 3 | – | – | – | 3 | ||||||||||||||||||
Greater than 24 months | 2 | – | – | – | – | – | ||||||||||||||||||
Total non-investment grade | $ | 874 | $ | 27 | $ | 14 | $ | 1 | $ | – | $ | 42 | ||||||||||||
Fair Value as a Percentage of Book Value | ||||||||||||||||||||||||
Estimated | Gross Unrealized | |||||||||||||||||||||||
December 31, 2004 | Fair Value | 90-99% | 80-89% | 70-79% | <70% | Loss | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||
Non-investment grade: | ||||||||||||||||||||||||
0-6 months | $ | 188 | $ | 6 | $ | 1 | $ | – | $ | – | $ | 7 | ||||||||||||
7-12 months | 69 | 3 | 1 | – | – | 4 | ||||||||||||||||||
13-24 months | 20 | 1 | 1 | – | – | 2 | ||||||||||||||||||
Greater than 24 months | – | – | – | – | – | – | ||||||||||||||||||
Total non-investment grade | $ | 277 | $ | 10 | $ | 3 | $ | – | $ | – | $ | 13 | ||||||||||||
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December 31 | 2005 | % | 2004 | % | ||||||||||||
(In millions) | ||||||||||||||||
U.S. Government and affiliated agency securities | $ | 1,628 | 5 | % | $ | 4,640 | 15 | % | ||||||||
Other AAA rated | 18,233 | 55 | 14,628 | 47 | ||||||||||||
AA and A rated | 6,046 | 18 | 5,597 | 18 | ||||||||||||
BBB rated | 4,499 | 14 | 4,072 | 13 | ||||||||||||
Non investment-grade | 2,612 | 8 | 2,240 | 7 | ||||||||||||
Total | $ | 33,018 | 100 | % | $ | 31,177 | 100 | % | ||||||||
December 31 | 2005 | % | 2004 | % | ||||||||||||
(In millions) | ||||||||||||||||
U.S. Government and affiliated agency securities | $ | – | – | % | $ | – | – | % | ||||||||
Other AAA rated | 120 | 26 | 156 | 32 | ||||||||||||
AA and A rated | 193 | 41 | 184 | 38 | ||||||||||||
BBB rated | 142 | 31 | 117 | 24 | ||||||||||||
Non investment-grade | 11 | 2 | 29 | 6 | ||||||||||||
Total | $ | 466 | 100 | % | $ | 486 | 100 | % | ||||||||
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December 31, | December 31, | |||||||
2005 | 2004 | |||||||
(In millions) | ||||||||
Short-term investments available-for-sale: | ||||||||
Commercial paper | $ | 1,906 | $ | 1,655 | ||||
U.S. Treasury securities | 251 | 2,382 | ||||||
Money market funds | 294 | 174 | ||||||
Other | 1,419 | 1,193 | ||||||
Total short-term investments available-for-sale | 3,870 | 5,404 | ||||||
Short-term investments trading: | ||||||||
Commercial paper | 94 | 46 | ||||||
U.S. Treasury securities | 64 | 300 | ||||||
Money market funds | 200 | 99 | ||||||
Other | 10 | 14 | ||||||
Total short-term investments trading | 368 | 459 | ||||||
Total short-term investments | $ | 4,238 | $ | 5,863 | ||||
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December 31, 2005 | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||||||
(In millions) | ||||||||||||||||||||
Debt (a) | $ | 2,636 | $ | 357 | $ | 570 | $ | 143 | $ | 1,566 | ||||||||||
Lease obligations | 261 | 53 | 82 | 56 | 70 | |||||||||||||||
Claim and claim expense reserves (b) | 32,861 | 7,522 | 9,610 | 4,969 | 10,760 | |||||||||||||||
Future policy benefits reserves (c) | 10,010 | 200 | 362 | 349 | 9,099 | |||||||||||||||
Policyholder funds reserves (c) | 1,489 | 960 | 285 | 95 | 149 | |||||||||||||||
Guaranteed payment contracts (d) | 22 | 15 | 7 | – | – | |||||||||||||||
Total | $ | 47,279 | $ | 9,107 | $ | 10,916 | $ | 5,612 | $ | 21,644 | ||||||||||
(a) | Includes estimated future interest payments, but does not include original issue discount. | ||
(b) | Claim and claim adjustment expense reserves are not discounted and represent our estimate of the amount and timing of the ultimate settlement and administration of claims based on our assessment of facts and circumstances known as of December 31, 2005. See the Reserves – Estimates and Uncertainties section of this MD&A for further information. Claim and claim adjustment expense reserves of $15 million related to business which has been 100% ceded to unaffiliated parties in connection with the individual life sale are not included. | ||
(c) | Future policy benefits and policyholder funds reserves are not discounted and represent our estimate of the ultimate amount and timing of the settlement of benefits based on our assessment of facts and circumstances known as of December 31, 2005. Future policy benefit reserves of $968 million and policyholder fund reserves of $51 million related to business which has been 100% ceded to unaffiliated parties in connection with the individual life sale are not included. Additional information on future policy benefits and policyholder funds reserves is included in Note A of the Consolidated Financial Statements included under Item 8. | ||
(d) | Primarily relating to telecommunications and software services. |
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Insurance Financial Strength Ratings | Debt Ratings | |||||||||||||||||||
Property & Casualty (a) | Life (b) | CNAF | Continental | |||||||||||||||||
CCC | CIC | Senior | Senior | |||||||||||||||||
Group | Group | CAC | Debt | Debt | ||||||||||||||||
A.M. Best | A | A | A- | bbb | Not rated | |||||||||||||||
Fitch | A- | A- | A- | BBB- | BBB- | |||||||||||||||
Moody’s | A3 | A3 | Baa1 | Baa3 | Baa3 | |||||||||||||||
S&P | A- | A- | BBB+ | BBB- | BBB- |
(a) | Fitch and Moody’s outlook for the Property & Casualty companies’ financial strength and holding company debt ratings are stable. All others are negative. | |
(b) | A.M. Best, Fitch and Moody’s have a stable outlook while S&P has a negative outlook on the CAC rating. |
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• | In September of 2001, Loews purchased 38.3 million of our common shares for $957 million in a rights offering; | |
• | In December of 2002, Loews purchased shares of our newly issued Series H Cumulative Preferred Issue (Series H Issue) for $750 million, which shares remain outstanding; | |
• | In November of 2003, Loews purchased shares of our newly issued participating convertible preferred stock for $750 million, which shares converted into 32,327,015 shares of our common stock in April 2004 in accordance with their terms; and | |
• | In February of 2004, Loews purchased $346 million of surplus notes of our subsidiary, CCC, in connection with the sales of CCC’s individual life and group benefits businesses, which notes were repaid during 2004. |
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• | general economic and business conditions, including inflationary pressures on medical care costs, construction costs and other economic sectors that increase the severity of claims; |
• | changes in financial markets such as fluctuations in interest rates, long-term periods of low interest rates, credit conditions and currency, commodity and stock prices; |
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• | the effects of corporate bankruptcies, such as Enron and WorldCom, on capital markets, and on the markets for directors and officers and errors and omissions coverages; |
• | 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 and other mandatory pooling arrangements; |
• | 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; |
• | 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 the availability of bank credit facilities; | |
• | 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, as well as of natural disasters such as hurricanes and earthquakes; |
• | 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 until 2007 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, mass tort, and construction defect claims; |
• | whether a national privately financed trust to replace litigation of asbestos claims with payments to claimants from the trust will be established or approved through federal legislation, or, if established and approved, whether it will contain funding requirements in excess of our established loss reserves or carried loss reserves; |
• | 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 Reserves – Estimates and Uncertainties section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations; |
• | the level of success in integrating acquired businesses and operations, and in consolidating, or selling existing ones; |
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• | the possibility of further 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. |
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Increase (Decrease) | ||||||||||||||||
Market | Interest | Currency | Equity | |||||||||||||
December 31, 2005 | Value | Rate Risk | Risk | Risk | ||||||||||||
(In millions) | ||||||||||||||||
General account: | ||||||||||||||||
Fixed maturity securities available-for-sale | $ | 32,963 | $ | (1,897 | ) | $ | (89 | ) | $ | (22 | ) | |||||
Fixed maturity securities trading | 271 | (2 | ) | (1 | ) | (2 | ) | |||||||||
Equity securities available-for-sale | 632 | – | (6 | ) | (63 | ) | ||||||||||
Equity securities trading | 49 | – | – | (5 | ) | |||||||||||
Short term investments available-for-sale | 3,870 | (4 | ) | (37 | ) | – | ||||||||||
Short term investments trading | 368 | – | – | – | ||||||||||||
Limited partnerships | 1,509 | 1 | – | (29 | ) | |||||||||||
Other invested assets | 30 | – | – | – | ||||||||||||
Interest rate swaps | – | 66 | – | – | ||||||||||||
Equity index futures for trading securities | – | 2 | – | (102 | ) | |||||||||||
Other derivative securities | 3 | 3 | 10 | – | ||||||||||||
Total general account | 39,695 | (1,831 | ) | (123 | ) | (223 | ) | |||||||||
Separate accounts: | ||||||||||||||||
Fixed maturity securities | 466 | (23 | ) | – | – | |||||||||||
Equity securities | 44 | – | – | (4 | ) | |||||||||||
Short term investments | 36 | – | – | – | ||||||||||||
Total separate accounts | 546 | (23 | ) | – | (4 | ) | ||||||||||
Total securities | $ | 40,241 | $ | (1,854 | ) | $ | (123 | ) | $ | (227 | ) | |||||
Debt (carrying value) | $ | 1,690 | $ | (92 | ) | $ | – | $ | – | |||||||
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Increase (Decrease) | ||||||||||||||||
Market | Interest | Currency | Equity | |||||||||||||
December 31, 2004 | Value | Rate Risk | Risk | Risk | ||||||||||||
(In millions) | ||||||||||||||||
General account: | ||||||||||||||||
Fixed maturity securities available-for-sale | $ | 30,937 | $ | (1,824 | ) | $ | (88 | ) | $ | (26 | ) | |||||
Fixed maturity securities trading | 390 | (4 | ) | (1 | ) | (3 | ) | |||||||||
Equity securities available-for-sale | 410 | – | (9 | ) | (41 | ) | ||||||||||
Equity securities trading | 46 | – | – | (5 | ) | |||||||||||
Short term investments available-for-sale | 5,404 | (7 | ) | (10 | ) | – | ||||||||||
Short term investments trading | 459 | – | – | – | ||||||||||||
Limited partnerships | 1,549 | 6 | – | (18 | ) | |||||||||||
Other invested assets | 42 | – | – | – | ||||||||||||
Interest rate swaps | (8 | ) | 8 | – | – | |||||||||||
Equity index futures for trading securities | – | 2 | – | (116 | ) | |||||||||||
Other derivative securities | 2 | 7 | (21 | ) | – | |||||||||||
Total general account | 39,231 | (1,812 | ) | (129 | ) | (209 | ) | |||||||||
Separate accounts: | ||||||||||||||||
Fixed maturity securities | 486 | (24 | ) | – | – | |||||||||||
Equity securities | 55 | – | – | (5 | ) | |||||||||||
Short term investments | 20 | – | – | – | ||||||||||||
Total separate accounts | 561 | (24 | ) | – | (5 | ) | ||||||||||
Total securities | $ | 39,792 | $ | (1,836 | ) | $ | (129 | ) | $ | (214 | ) | |||||
Debt (carrying value) | $ | 2,257 | $ | (97 | ) | $ | – | $ | – | |||||||
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Increase (Decrease) | ||||||||||||||||
Market | Interest | Currency | Equity | |||||||||||||
December 31, 2005 | Value | Rate Risk | Risk | Risk | ||||||||||||
(In millions) | ||||||||||||||||
General account: | ||||||||||||||||
Fixed maturity securities available-for-sale | $ | 32,963 | $ | (2,827 | ) | $ | (178 | ) | $ | (54 | ) | |||||
Fixed maturity securities trading | 271 | (4 | ) | (1 | ) | (4 | ) | |||||||||
Equity securities available-for-sale | 632 | – | (11 | ) | (158 | ) | ||||||||||
Equity securities trading | 49 | – | – | (12 | ) | |||||||||||
Short term investments available-for-sale | 3,870 | (6 | ) | (74 | ) | – | ||||||||||
Short term investments trading | 368 | – | – | – | ||||||||||||
Limited partnerships | 1,509 | 1 | – | (72 | ) | |||||||||||
Other invested assets | 30 | – | – | – | ||||||||||||
Interest rate swaps | – | 95 | – | – | ||||||||||||
Equity index futures for trading | – | 3 | (1 | ) | (255 | ) | ||||||||||
Other derivative securities | 3 | 5 | 20 | (1 | ) | |||||||||||
Total general account | 39,695 | (2,733 | ) | (245 | ) | (556 | ) | |||||||||
Separate accounts: | ||||||||||||||||
Fixed maturity securities | 466 | (34 | ) | – | – | |||||||||||
Equity securities | 44 | – | – | (11 | ) | |||||||||||
Short term investments | 36 | – | – | – | ||||||||||||
Total separate accounts | 546 | (34 | ) | – | (11 | ) | ||||||||||
Total securities | $ | 40,241 | $ | (2,767 | ) | $ | (245 | ) | $ | (567 | ) | |||||
Debt (carrying value) | $ | 1,690 | $ | (135 | ) | $ | – | $ | – | |||||||
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Increase (Decrease) | ||||||||||||||||
Market | Interest | Currency | Equity | |||||||||||||
December 31, 2004 (In millions) | Value | Rate Risk | Risk | Risk | ||||||||||||
General account: | ||||||||||||||||
Fixed maturity securities available-for-sale | $ | 30,937 | $ | (2,703 | ) | $ | (177 | ) | $ | (63 | ) | |||||
Fixed maturity securities trading | 390 | (6 | ) | (1 | ) | (8 | ) | |||||||||
Equity securities available-for-sale | 410 | – | (18 | ) | (103 | ) | ||||||||||
Equity securities trading | 46 | – | – | (11 | ) | |||||||||||
Short term investments available-for-sale | 5,404 | (11 | ) | (20 | ) | – | ||||||||||
Short term investments trading | 459 | – | – | – | ||||||||||||
Limited partnerships | 1,549 | 9 | – | (46 | ) | |||||||||||
Other invested assets | 42 | – | – | – | ||||||||||||
Interest rate swaps | (8 | ) | 12 | – | – | |||||||||||
Equity index futures for trading | – | 3 | – | (289 | ) | |||||||||||
Other derivative securities | 2 | 10 | (38 | ) | – | |||||||||||
Total general account | 39,231 | (2,686 | ) | (254 | ) | (520 | ) | |||||||||
Separate accounts: | ||||||||||||||||
Fixed maturity securities | 486 | (35 | ) | – | – | |||||||||||
Equity securities | 55 | – | – | (14 | ) | |||||||||||
Short term investments | 20 | – | – | – | ||||||||||||
Total separate accounts | 561 | (35 | ) | – | (14 | ) | ||||||||||
Total securities | $ | 39,792 | $ | (2,721 | ) | $ | (254 | ) | $ | (534 | ) | |||||
Debt (carrying value) | $ | 2,257 | $ | (141 | ) | $ | – | $ | – | |||||||
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2005 | 2004 | 2003 | ||||||||||
Years ended December 31 (In millions, except per share data) | Restated See Note T | Restated See Note T | ||||||||||
Revenues: | ||||||||||||
Net earned premiums | $ | 7,569 | $ | 8,209 | $ | 9,216 | ||||||
Net investment income | 1,892 | 1,680 | 1,656 | |||||||||
Realized investment gains (losses), net of participating policyholders’ and minority interests | (10 | ) | (248 | ) | 460 | |||||||
Other revenues | 411 | 283 | 383 | |||||||||
Total revenues | 9,862 | 9,924 | 11,715 | |||||||||
Claims, Benefits and Expenses: | ||||||||||||
Insurance claims and policyholders’ benefits | 6,999 | 6,445 | 10,277 | |||||||||
Amortization of deferred acquisition costs | 1,543 | 1,680 | 1,965 | |||||||||
Other operating expenses | 1,034 | 1,171 | 1,674 | |||||||||
Interest | 124 | 124 | 130 | |||||||||
Total claims, benefits and expenses | 9,700 | 9,420 | 14,046 | |||||||||
Income (loss) before income tax and minority interest | 162 | 504 | (2,331 | ) | ||||||||
Income tax (expense) benefit | 105 | (31 | ) | 906 | ||||||||
Minority interest | (24 | ) | (27 | ) | 6 | |||||||
Income (loss) from continuing operations | 243 | 446 | (1,419 | ) | ||||||||
Income (loss) from discontinued operations, net of tax of $(2), $(1) and $(11) | 21 | (21 | ) | 2 | ||||||||
Net income (loss) | $ | 264 | $ | 425 | $ | (1,417 | ) | |||||
Basic and diluted earnings (loss) per share: | ||||||||||||
Income (loss) from continuing operations | $ | 0.68 | $ | 1.49 | $ | (6.52 | ) | |||||
Income (loss) from discontinued operations | 0.08 | (0.09 | ) | 0.01 | ||||||||
Basic and diluted earnings (loss) per share available to common stockholders | $ | 0.76 | $ | 1.40 | $ | (6.51 | ) | |||||
Weighted average outstanding common stock and common stock equivalents | 256.0 | 256.0 | 227.0 | |||||||||
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2005 | 2004 | |||||||
December 31 | Restated | |||||||
(In millions, except share data) | See Note T | |||||||
Assets | ||||||||
Investments: | ||||||||
Fixed maturity securities at fair value (amortized cost of $32,616 and $30,266) | $ | 33,234 | $ | 31,327 | ||||
Equity securities at fair value (cost of $511 and $320) | 681 | 456 | ||||||
Limited partnership investments | 1,509 | 1,549 | ||||||
Other invested assets | 33 | 36 | ||||||
Short-term investments at cost, which approximates fair value | 4,238 | 5,863 | ||||||
Total investments | 39,695 | 39,231 | ||||||
Cash | 96 | 95 | ||||||
Reinsurance receivables (less allowance for uncollectible receivables of $519 and $546) | 11,917 | 15,342 | ||||||
Insurance receivables (less allowance for doubtful accounts of $445 and $502) | 1,866 | 2,202 | ||||||
Accrued investment income | 312 | 297 | ||||||
Receivables for securities sold | 565 | 496 | ||||||
Deferred acquisition costs | 1,197 | 1,268 | ||||||
Prepaid reinsurance premiums | 340 | 1,128 | ||||||
Federal income taxes recoverable (includes $68 and $6 due from Loews Corporation) | 62 | — | ||||||
Deferred income taxes | 1,105 | 712 | ||||||
Property and equipment at cost (less accumulated depreciation of $546 and $524) | 197 | 235 | ||||||
Goodwill and other intangible assets | 146 | 162 | ||||||
Other assets | 737 | 760 | ||||||
Separate account business | 551 | 568 | ||||||
Total assets | $ | 58,786 | $ | 62,496 | ||||
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2005 | 2004 | |||||||
Restated | ||||||||
See Note T | ||||||||
Liabilities and Stockholders’ Equity | ||||||||
Liabilities: | ||||||||
Insurance reserves: | ||||||||
Claim and claim adjustment expenses | $ | 30,938 | $ | 31,523 | ||||
Unearned premiums | 3,706 | 4,522 | ||||||
Future policy benefits | 6,297 | 5,883 | ||||||
Policyholders’ funds | 1,495 | 1,725 | ||||||
Collateral on loaned securities | 767 | 918 | ||||||
Payables for securities purchased | 129 | 288 | ||||||
Participating policyholders’ funds | 53 | 63 | ||||||
Short term debt | 252 | 531 | ||||||
Long term debt | 1,438 | 1,726 | ||||||
Reinsurance balances payable | 1,636 | 2,980 | ||||||
Other liabilities | 2,283 | 2,520 | ||||||
Separate account business | 551 | 568 | ||||||
Total liabilities | 49,545 | 53,247 | ||||||
Commitments and contingencies (Notes F, G, I and K) | ||||||||
Minority interest | 291 | 275 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock (12,500,000 shares authorized) | ||||||||
Series H Issue (no par value; $100,000 stated value; 7,500 shares issued; held by Loews Corporation) | 750 | 750 | ||||||
Common stock ($2.50 par value; 500,000,000 shares authorized; 258,177,285 shares issued; and 256,001,968 and 255,953,958 shares outstanding) | 645 | 645 | ||||||
Additional paid-in capital | 1,701 | 1,701 | ||||||
Retained earnings | 5,621 | 5,357 | ||||||
Accumulated other comprehensive income | 359 | 661 | ||||||
Treasury stock (2,175,317 and 2,223,327 shares), at cost | (67 | ) | (69 | ) | ||||
9,009 | 9,045 | |||||||
Notes receivable for the issuance of common stock | (59 | ) | (71 | ) | ||||
Total stockholders’ equity | 8,950 | 8,974 | ||||||
Total liabilities and stockholders’ equity | $ | 58,786 | $ | 62,496 | ||||
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2005 | 2004 | 2003 | ||||||||||
Years ended December 31 | Restated | Restated | ||||||||||
(In millions) | See Note T | See Note T | ||||||||||
Cash Flows from Operating Activities: | ||||||||||||
Net income (loss) | $ | 264 | $ | 425 | $ | (1,417 | ) | |||||
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities: | ||||||||||||
(Income) loss from discontinued operations | (21 | ) | 21 | (2 | ) | |||||||
Bad debt provision for insurance and reinsurance receivables | 50 | 87 | 602 | |||||||||
Loss (gain) on disposal of property and equipment | (1 | ) | 36 | 22 | ||||||||
Minority interest | 24 | 27 | (6 | ) | ||||||||
Deferred income tax provision | (220 | ) | 37 | 74 | ||||||||
Trading securities | 164 | (93 | ) | – | ||||||||
Realized investment (gains) losses, net of participating policyholders’ and minority interests | 10 | 248 | (460 | ) | ||||||||
Undistributed earnings of equity method investees | (45 | ) | (67 | ) | (61 | ) | ||||||
Amortization of bond (discount) premium | (153 | ) | 9 | (79 | ) | |||||||
Depreciation | 54 | 75 | 86 | |||||||||
Changes in: | ||||||||||||
Receivables, net | 3,711 | (632 | ) | (3,478 | ) | |||||||
Deferred acquisition costs | 71 | 194 | (62 | ) | ||||||||
Accrued investment income | (15 | ) | (12 | ) | (49 | ) | ||||||
Federal income taxes recoverable/payable | (62 | ) | 596 | (642 | ) | |||||||
Prepaid reinsurance premiums | 788 | 233 | (15 | ) | ||||||||
Reinsurance balances payable | (1,344 | ) | (318 | ) | 661 | |||||||
Insurance reserves | (943 | ) | 1,075 | 6,813 | ||||||||
Other, net | (116 | ) | 43 | 79 | ||||||||
Total adjustments | 1,952 | 1,559 | 3,483 | |||||||||
Net cash flows provided by operating activities-continuing operations | $ | 2,216 | $ | 1,984 | $ | 2,066 | ||||||
Net cash flows used by operating activities-discontinued operations | $ | (47 | ) | $ | (16 | ) | $ | (28 | ) | |||
Net cash flows provided by operating activities-total | $ | 2,169 | $ | 1,968 | $ | 2,038 | ||||||
Cash Flows from Investing Activities: | ||||||||||||
Purchases of fixed maturity securities | $ | (62,990 | ) | $ | (58,379 | ) | $ | (61,456 | ) | |||
Proceeds from fixed maturity securities: | ||||||||||||
Sales | 55,611 | 48,427 | 52,790 | |||||||||
Maturities, calls and redemptions | 4,579 | 4,800 | 6,435 | |||||||||
Purchases of equity securities | (482 | ) | (351 | ) | (282 | ) | ||||||
Proceeds from sales of equity securities | 316 | 522 | 589 | |||||||||
Purchases of mortgage loans and real estate | – | (27 | ) | – | ||||||||
Change in short-term investments | 1,627 | 2,021 | (842 | ) | ||||||||
Change in collateral on loaned securities and derivatives | (151 | ) | 476 | (111 | ) | |||||||
Change in other investments | 86 | (30 | ) | 133 | ||||||||
Purchases of property and equipment | (45 | ) | (41 | ) | (65 | ) | ||||||
Dispositions | 57 | 647 | 418 | |||||||||
Other, net | 56 | (167 | ) | 3 | ||||||||
Net cash flows used by investing activities-continuing operations | $ | (1,336 | ) | $ | (2,102 | ) | $ | (2,388 | ) | |||
Net cash flows provided (used) by investing activities-discontinued operations | $ | 20 | $ | 18 | $ | (4 | ) | |||||
Net cash flows used by investing activities-total | $ | (1,316 | ) | $ | (2,084 | ) | $ | (2,392 | ) | |||
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2005 | 2004 | 2003 | ||||||||||
Restated | Restated | |||||||||||
See Note T | See Note T | |||||||||||
Cash Flows from Financing Activities: | ||||||||||||
Issuance of preferred stock | $ | – | $ | – | $ | 750 | ||||||
Principal payments on debt | (568 | ) | (618 | ) | (387 | ) | ||||||
Proceeds from issuance of debt | – | 972 | – | |||||||||
Return of investment contract account balances | (281 | ) | (479 | ) | (288 | ) | ||||||
Receipts of investment contract account balances | 7 | 181 | 250 | |||||||||
Other, net | 5 | 5 | (3 | ) | ||||||||
Net cash flows provided (used) by financing activities-continuing operations | $ | (837 | ) | $ | 61 | $ | 322 | |||||
Net cash flows provided by financing activities-discontinued operations | $ | – | $ | – | $ | – | ||||||
Net cash flows provided (used) by financing activities-total | $ | (837 | ) | $ | 61 | $ | 322 | |||||
Net change in cash | 16 | (55 | ) | (32 | ) | |||||||
Net cash transactions from continuing operations to discontinued operations | (42 | ) | 13 | 13 | ||||||||
Net cash transactions from discontinued operations to continuing operations | 42 | (13 | ) | (13 | ) | |||||||
Cash, beginning of year | 109 | 164 | 196 | |||||||||
Cash, end of year | $ | 125 | $ | 109 | $ | 164 | ||||||
Cash-continuing operations | $ | 96 | $ | 95 | $ | 139 | ||||||
Cash-discontinued operations | 29 | 14 | 25 | |||||||||
Cash-total | 125 | 109 | 164 |
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Accumulated | Notes | |||||||||||||||||||||||||||||||
Additional | Other | Receivable | Total | |||||||||||||||||||||||||||||
Preferred | Common | Paid-in | Retained | Comprehensive | Treasury | Related to | Stockholders’ | |||||||||||||||||||||||||
(In millions) | Stock | Stock | Capital | Earnings | Income (Loss) | Stock | Common Stock | Equity | ||||||||||||||||||||||||
Balance, January 1, 2003 (As previously reported) | $ | 750 | $ | 565 | $ | 1,031 | $ | 6,545 | $ | 604 | $ | (70 | ) | $ | (72 | ) | $ | 9,353 | ||||||||||||||
Prior period adjustment (See Note T) | – | – | – | (196 | ) | (18 | ) | – | – | (214 | ) | |||||||||||||||||||||
Balance, January 1, 2003(Restated See Note T) | $ | 750 | $ | 565 | $ | 1,031 | $ | 6,349 | $ | 586 | $ | (70 | ) | $ | (72 | ) | $ | 9,139 | ||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||
Net loss (Restated See Note T) | – | – | – | (1,417 | ) | – | – | – | (1,417 | ) | ||||||||||||||||||||||
Other comprehensive income (Restated See Note T) | – | – | – | – | 266 | – | – | 266 | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
Total comprehensive loss (Restated See Note T) | (1,151 | ) | ||||||||||||||||||||||||||||||
Issuance of Series I preferred stock | 750 | – | – | – | – | – | – | 750 | ||||||||||||||||||||||||
Stock options exercised | – | – | – | – | – | 1 | 1 | |||||||||||||||||||||||||
Increase in notes receivable related to common stock | – | – | – | – | – | – | (4 | ) | (4 | ) | ||||||||||||||||||||||
Balance, December 31, 2003(Restated See Note T) | 1,500 | 565 | 1,031 | 4,932 | 852 | (69 | ) | (76 | ) | 8,735 | ||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||
Net income (Restated See Note T) | – | – | – | 425 | – | – | – | 425 | ||||||||||||||||||||||||
Other comprehensive loss | – | – | – | – | (191 | ) | – | – | (191 | ) | ||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
Total comprehensive income (Restated See Note T) | 234 | |||||||||||||||||||||||||||||||
Conversion of Series I preferred stock to common stock | (750 | ) | 80 | 670 | – | – | – | – | – | |||||||||||||||||||||||
Decrease in notes receivable related to common stock | – | – | – | – | – | – | 5 | 5 | ||||||||||||||||||||||||
Balance, December 31, 2004(Restated See Note T) | 750 | 645 | 1,701 | 5,357 | 661 | (69 | ) | (71 | ) | 8,974 | ||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||
Net income | – | – | – | 264 | – | – | – | 264 | ||||||||||||||||||||||||
Other comprehensive loss | – | – | – | – | (302 | ) | – | – | (302 | ) | ||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
Total comprehensive loss | (38 | ) | ||||||||||||||||||||||||||||||
Stock options exercised | – | – | – | – | – | 2 | – | 2 | ||||||||||||||||||||||||
Decrease in notes receivable related to common stock | – | – | – | – | – | – | 12 | 12 | ||||||||||||||||||||||||
Balance, December 31, 2005 | $ | 750 | $ | 645 | $ | 1,701 | $ | 5,621 | $ | 359 | $ | (67 | ) | $ | (59 | ) | $ | 8,950 | ||||||||||||||
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Nature of Hedge Designation | Derivative’s Change in Fair Value Reflected In: | |
No hedge designation | Realized investment gains or losses | |
Fair value designation | Realized investment gains or losses, along with the change in fair value of the hedged asset or liability that are attributable to the hedged risk | |
Cash flow designation | Other comprehensive income, with subsequent reclassification to earnings when the hedged transaction, asset or liability impacts earnings | |
Foreign currency designation | Consistent with fair value or cash flow above, depending on the nature of the hedging relationship |
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Years ended December 31 (In millions, except per share amounts) | 2005 | 2004 | 2003 | |||||||||
Income (loss) from continuing operations | $ | 243 | $ | 446 | $ | (1,419 | ) | |||||
Less: undeclared preferred stock dividend | (70 | ) | (65 | ) | (60 | ) | ||||||
Income (loss) from continuing operations available to common stockholders | $ | 173 | $ | 381 | $ | (1,479 | ) | |||||
Weighted average outstanding common stock and common stock equivalents | 256.0 | 256.0 | 227.0 | |||||||||
Effect of dilutive securities, employee stock options | – | – | – | |||||||||
Adjusted weighted average outstanding common stock and common stock equivalents assuming conversions | 256.0 | 256.0 | 227.0 | |||||||||
Basic and diluted earnings (loss) per share from continuing operations available to common stockholders | $ | 0.68 | $ | 1.49 | $ | (6.52 | ) | |||||
Years ended December 31 (In millions, except per share amounts) | 2005 | 2004 | 2003 | |||||||||
Income (loss) from continuing operations | $ | 243 | $ | 446 | $ | (1,419 | ) | |||||
Less: undeclared preferred stock dividend | (70 | ) | (65 | ) | (60 | ) | ||||||
Income (loss) from continuing operations available to common stockholders | 173 | 381 | (1,479 | ) | ||||||||
Income (loss) from discontinued operations, net of tax | 21 | (21 | ) | 2 | ||||||||
Net income (loss) available to common stockholders | 194 | 360 | (1,477 | ) | ||||||||
Less: Total stock-based compensation cost determined under the fair value method, net of tax | (2 | ) | (2 | ) | (2 | ) | ||||||
Pro forma net income (loss) available to common stockholders | $ | 192 | $ | 358 | $ | (1,479 | ) | |||||
Basic and diluted earnings (loss) per share, as reported | $ | 0.76 | $ | 1.40 | $ | (6.51 | ) | |||||
Basic and diluted earnings (loss) per share, pro forma | $ | 0.75 | $ | 1.39 | $ | (6.52 | ) | |||||
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Years ended December 31 (In millions) | 2005 | 2004 | 2003 | |||||||||
Fixed maturity securities | $ | 1,608 | $ | 1,571 | $ | 1,651 | ||||||
Short term investments | 147 | 56 | 63 | |||||||||
Limited partnerships | 254 | 212 | 221 | |||||||||
Equity securities | 25 | 14 | 19 | |||||||||
Income from trading portfolio (a) | 47 | 110 | — | |||||||||
Interest on funds withheld and other deposits | (166 | ) | (261 | ) | (335 | ) | ||||||
Other | 20 | 18 | 85 | |||||||||
Gross investment income | 1,935 | 1,720 | 1,704 | |||||||||
Investment expenses | (43 | ) | (40 | ) | (48 | ) | ||||||
Net investment income | $ | 1,892 | $ | 1,680 | $ | 1,656 | ||||||
(a) | The change in net unrealized gains (losses) on trading securities included in net investment income was $(7) million and $2 million for the years ended December 31, 2005 and 2004. |
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Years ended December 31 (In millions) | 2005 | 2004 | 2003 | |||||||||
Net realized investment gains (losses): | ||||||||||||
Fixed maturity securities: | ||||||||||||
Gross realized gains | $ | 361 | $ | 704 | $ | 1,244 | ||||||
Gross realized losses | (451 | ) | (457 | ) | (807 | ) | ||||||
Net realized gains (losses) on fixed maturity securities | (90 | ) | 247 | 437 | ||||||||
Equity securities: | ||||||||||||
Gross realized gains | 73 | 225 | 143 | |||||||||
Gross realized losses | (35 | ) | (23 | ) | (29 | ) | ||||||
Net realized gains on equity securities | 38 | 202 | 114 | |||||||||
Other, including disposition of businesses, net of participating policyholders’ interest | 39 | (688 | ) | (87 | ) | |||||||
Net realized investment gains (losses) before allocation to participating policyholders’ and minority interests | (13 | ) | (239 | ) | 464 | |||||||
Allocation to participating policyholders’ and minority interests | 3 | (9 | ) | (4 | ) | |||||||
Net realized investment gains (losses) | (10 | ) | (248 | ) | 460 | |||||||
Net change in unrealized appreciation (depreciation) in general account investments: | ||||||||||||
Fixed maturity securities | (443 | ) | (53 | ) | 372 | |||||||
Equity securities | 34 | (98 | ) | 87 | ||||||||
Other | (1 | ) | – | 2 | ||||||||
Total net change in unrealized appreciation (depreciation) in general account investments | (410 | ) | (151 | ) | 461 | |||||||
Net change in unrealized appreciation (depreciation) on other | (12 | ) | (70 | ) | 6 | |||||||
Allocation to participating policyholders’ and minority interests | 18 | 19 | (7 | ) | ||||||||
Deferred income tax (expense) benefit | 158 | 55 | (159 | ) | ||||||||
Net change in unrealized appreciation (depreciation) in investments | (246 | ) | (147 | ) | 301 | |||||||
Net realized gains (losses) and change in unrealized appreciation (depreciation) in investments | $ | (256 | ) | $ | (395 | ) | $ | 761 | ||||
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Cost or | Gross | Gross Unrealized Losses | Estimated | |||||||||||||||||
Amortized | Unrealized | Less than | Greater than | Fair | ||||||||||||||||
December 31, 2005 (In millions) | Cost | Gains | 12 Months | 12 Months | Value | |||||||||||||||
Fixed maturity securities available-for-sale: | ||||||||||||||||||||
U.S. Treasury securities and obligations of government agencies | $ | 1,355 | $ | 119 | $ | 4 | $ | 1 | $ | 1,469 | ||||||||||
Asset-backed securities | 12,986 | 43 | 137 | 33 | 12,859 | |||||||||||||||
States, municipalities and political subdivisions – tax-exempt | 9,054 | 193 | 31 | 7 | 9,209 | |||||||||||||||
Corporate securities | 5,906 | 322 | 52 | 11 | 6,165 | |||||||||||||||
Other debt securities | 2,830 | 234 | 18 | 2 | 3,044 | |||||||||||||||
Redeemable preferred stock | 213 | 4 | – | 1 | 216 | |||||||||||||||
Options embedded in convertible debt securities | 1 | – | – | – | 1 | |||||||||||||||
Total fixed maturity securities available-for-sale | 32,345 | 915 | 242 | 55 | 32,963 | |||||||||||||||
Total fixed maturity securities trading | 271 | – | – | – | 271 | |||||||||||||||
Equity securities available-for-sale: | ||||||||||||||||||||
Common stock | 140 | 150 | 1 | – | 289 | |||||||||||||||
Preferred stock | 322 | 22 | 1 | – | 343 | |||||||||||||||
Total equity securities available-for-sale | 462 | 172 | 2 | – | 632 | |||||||||||||||
Total equity securities trading | 49 | – | – | – | 49 | |||||||||||||||
Total | $ | 33,127 | $ | 1,087 | $ | 244 | $ | 55 | $ | 33,915 | ||||||||||
Cost or | Gross | Gross Unrealized Losses | Estimated | |||||||||||||||||
Amortized | Unrealized | Less than | Greater than | Fair | ||||||||||||||||
December 31, 2004 (In millions) | Cost | Gains | 12 Months | 12 Months | Value | |||||||||||||||
Fixed maturity securities available-for-sale: | ||||||||||||||||||||
U.S. Treasury securities and obligations of government agencies | $ | 4,233 | $ | 126 | $ | 13 | $ | – | $ | 4,346 | ||||||||||
Asset-backed securities | 7,706 | 105 | 19 | 4 | 7,788 | |||||||||||||||
States, municipalities and political subdivisions – tax-exempt | 8,699 | 189 | 28 | 3 | 8,857 | |||||||||||||||
Corporate securities | 6,093 | 477 | 52 | 5 | 6,513 | |||||||||||||||
Other debt securities | 2,769 | 295 | 11 | – | 3,053 | |||||||||||||||
Redeemable preferred stock | 142 | 6 | – | 2 | 146 | |||||||||||||||
Options embedded in convertible debt securities | 234 | – | – | – | 234 | |||||||||||||||
Total fixed maturity securities available-for-sale | 29,876 | 1,198 | 123 | 14 | 30,937 | |||||||||||||||
Total fixed maturity securities trading | 390 | – | – | – | 390 | |||||||||||||||
Equity securities available-for-sale: | ||||||||||||||||||||
Common stock | 148 | 112 | – | – | 260 | |||||||||||||||
Preferred stock | 126 | 24 | – | – | 150 | |||||||||||||||
Total equity securities available-for-sale | 274 | 136 | – | – | 410 | |||||||||||||||
Total equity securities trading | 46 | – | – | – | 46 | |||||||||||||||
Total | $ | 30,586 | $ | 1,334 | $ | 123 | $ | 14 | $ | 31,783 | ||||||||||
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December 31, 2005 | December 31, 2004 | |||||||||||||||
Gross | Gross | |||||||||||||||
Estimated | Unrealized | Estimated | Unrealized | |||||||||||||
(In millions) | Fair Value | Loss | Fair Value | Loss | ||||||||||||
Fixed maturity securities: | ||||||||||||||||
Investment grade: | ||||||||||||||||
0-6 months | $ | 9,976 | $ | 142 | $ | 7,742 | $ | 53 | ||||||||
7-12 months | 2,739 | 61 | 2,448 | 59 | ||||||||||||
13-24 months | 1,400 | 45 | 368 | 12 | ||||||||||||
Greater than 24 months | 219 | 7 | 2 | – | ||||||||||||
Total investment grade | 14,334 | 255 | 10,560 | 124 | ||||||||||||
Non-investment grade: | ||||||||||||||||
0-6 months | 632 | 29 | 188 | 7 | ||||||||||||
7-12 months | 118 | 10 | 69 | 4 | ||||||||||||
13-24 months | 122 | 3 | 20 | 2 | ||||||||||||
Greater than 24 months | 2 | – | – | – | ||||||||||||
Total non-investment grade | 874 | 42 | 277 | 13 | ||||||||||||
Total fixed maturity securities | 15,208 | 297 | 10,837 | 137 | ||||||||||||
Equity securities: | ||||||||||||||||
0-6 months | 49 | 2 | 4 | – | ||||||||||||
7-12 months | 1 | – | 1 | – | ||||||||||||
13-24 months | – | – | 1 | – | ||||||||||||
Greater than 24 months | 3 | – | 3 | – | ||||||||||||
Total equity securities | 53 | 2 | 9 | – | ||||||||||||
Total fixed maturity and equity securities | $ | 15,261 | $ | 299 | $ | 10,846 | $ | 137 | ||||||||
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December 31, 2005 | December 31, 2004 | |||||||||||||||
Cost or | Estimated | Cost or | Estimated | |||||||||||||
Amortized | Fair | Amortized | Fair | |||||||||||||
(In millions) | Cost | Value | Cost | Value | ||||||||||||
Due in one year or less | $ | 804 | $ | 806 | $ | 1,048 | $ | 1,054 | ||||||||
Due after one year through five years | 2,166 | 2,202 | 4,433 | 4,480 | ||||||||||||
Due after five years through ten years | 3,417 | 3,523 | 9,238 | 9,577 | ||||||||||||
Due after ten years | 12,972 | 13,573 | 7,451 | 8,038 | ||||||||||||
Asset-backed securities | 12,986 | 12,859 | 7,706 | 7,788 | ||||||||||||
Total | $ | 32,345 | $ | 32,963 | $ | 29,876 | $ | 30,937 | ||||||||
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Contractual/ | Estimated | Estimated | Recognized | |||||||||||||
Notional | Fair Value | Fair Value | Gains | |||||||||||||
As of and for the year ended December 31, 2005 | Amount | Asset | (Liability) | (Losses) | ||||||||||||
(In millions) | ||||||||||||||||
General account | ||||||||||||||||
With hedge designation | ||||||||||||||||
Swaps | $ | 265 | $ | – | $ | (1 | ) | $ | (1 | ) | ||||||
Without hedge designation | ||||||||||||||||
Swaps | 756 | – | (8 | ) | 46 | |||||||||||
Futures sold, not yet purchased | – | – | – | 2 | ||||||||||||
Currency forwards | 15 | – | – | 2 | ||||||||||||
Equity warrants | 6 | 2 | – | – | ||||||||||||
Options embedded in convertible debt securities | 12 | 1 | – | (33 | ) | |||||||||||
Trading activities | ||||||||||||||||
Futures purchased | 1,058 | – | (4 | ) | 18 | |||||||||||
Futures sold, not yet purchased | 166 | – | – | 2 | ||||||||||||
Currency forwards | 59 | – | (1 | ) | (1 | ) | ||||||||||
Commitments to purchase mortgage backed securities | 21 | – | – | – | ||||||||||||
Options purchased | 20 | – | – | (2 | ) | |||||||||||
Options written | 21 | – | – | 2 | ||||||||||||
Total general account | $ | 2,399 | $ | 3 | $ | (14 | ) | $ | 35 | |||||||
Separate accounts | ||||||||||||||||
Options written | $ | 7 | $ | – | $ | – | $ | – | ||||||||
Total | $ | 7 | $ | – | $ | – | $ | – | ||||||||
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Contractual/ | Estimated | Estimated | Recognized | |||||||||||||
Notional | Fair Value | Fair Value | Gains | |||||||||||||
As of and for the year ended December 31, 2004 (In millions) | Amount | Asset | (Liability) | (Losses) | ||||||||||||
General account | ||||||||||||||||
Without hedge designation | ||||||||||||||||
Swaps | $ | 489 | $ | – | $ | (8 | ) | $ | 23 | |||||||
Futures sold, not yet purchased | 12 | – | – | (113 | ) | |||||||||||
Currency forwards | 95 | – | – | 10 | ||||||||||||
Commitments to purchase mortgage backed securities | – | – | – | (12 | ) | |||||||||||
Equity warrants | 11 | 1 | – | – | ||||||||||||
Options purchased | 2 | – | – | – | ||||||||||||
Options written | – | – | – | 3 | ||||||||||||
Collateralized debt obligation liabilities | – | – | – | 5 | ||||||||||||
Options embedded in convertible debt securities | 701 | 234 | – | 24 | ||||||||||||
Trading activities | ||||||||||||||||
Futures purchased | 1,230 | – | (1 | ) | 96 | |||||||||||
Futures sold, not yet purchased | 112 | – | – | – | ||||||||||||
Currency forwards | 53 | 1 | – | – | ||||||||||||
Commitments to purchase mortgage backed securities | 25 | – | – | – | ||||||||||||
Options purchased | 101 | 1 | – | (1 | ) | |||||||||||
Options written | 102 | – | – | 1 | ||||||||||||
Total general account | $ | 2,933 | $ | 237 | $ | (9 | ) | $ | 36 | |||||||
Separate accounts | ||||||||||||||||
Options written | $ | 9 | $ | – | $ | – | $ | 1 | ||||||||
Total | $ | 9 | $ | – | $ | – | $ | 1 | ||||||||
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2005 | 2004 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
December 31 (In millions) | Amount | Value | Amount | Value | ||||||||||||
Financial assets | ||||||||||||||||
Investments: | ||||||||||||||||
Fixed maturity securities | $ | 33,234 | $ | 33,234 | $ | 31,327 | $ | 31,327 | ||||||||
Equity securities | 681 | 681 | 456 | 456 | ||||||||||||
Mortgage loans | – | – | – | 1 | ||||||||||||
Policy loans | – | – | 1 | 1 | ||||||||||||
Limited partnership investments | 1,509 | 1,509 | 1,549 | 1,549 | ||||||||||||
Other invested assets | 3 | 3 | (4 | ) | (4 | ) | ||||||||||
Separate account business: | ||||||||||||||||
Fixed maturity securities | 466 | 466 | 486 | 486 | ||||||||||||
Equity securities | 44 | 44 | 55 | 55 | ||||||||||||
Notes receivable for the issuance of common stock | 59 | 59 | 71 | 76 | ||||||||||||
Financial liabilities | ||||||||||||||||
Premium deposits and annuity contracts | $ | 1,363 | $ | 1,359 | $ | 1,563 | $ | 1,565 | ||||||||
Long term debt | 1,438 | 1,507 | 1,726 | 1,820 | ||||||||||||
Short-term debt | 252 | 252 | 531 | 531 | ||||||||||||
Financial guarantee contracts | 7 | 7 | 45 | 45 | ||||||||||||
Separate account business: | ||||||||||||||||
Variable separate accounts | 53 | 53 | 64 | 64 | ||||||||||||
Other | 491 | 491 | 499 | 499 |
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Years ended December 31 (In millions) | 2005 | 2004 | 2003 | |||||||||
Income tax (expense) benefit at statutory rates | $ | (57 | ) | $ | (176 | ) | $ | 816 | ||||
Tax benefit from tax exempt income | 116 | 111 | 101 | |||||||||
Other (expense) benefit, including IRS settlements | 46 | 34 | (11 | ) | ||||||||
Effective income tax (expense) benefit | $ | 105 | $ | (31 | ) | $ | 906 | |||||
Years ended December 31 (In millions) | 2005 | 2004 | 2003 | |||||||||
Current tax (expense) benefit | $ | (115 | ) | $ | 6 | $ | 980 | |||||
Deferred tax (expense) benefit | 220 | (37 | ) | (74 | ) | |||||||
Total income tax (expense) benefit | $ | 105 | $ | (31 | ) | $ | 906 | |||||
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December 31 | 2005 | 2004 | ||||||
(In millions) | ||||||||
Deferred Tax Assets: | ||||||||
Insurance reserves: | ||||||||
Property and casualty claim and claim adjustment expense reserves | $ | 807 | $ | 718 | ||||
Unearned premium reserves | 232 | 233 | ||||||
Life reserves | 187 | 192 | ||||||
Other insurance reserves | 24 | 28 | ||||||
Receivables | 292 | 309 | ||||||
Employee benefits | 214 | 218 | ||||||
Life settlement contracts | 102 | 100 | ||||||
Investment valuation differences | 130 | 149 | ||||||
Net operating loss carried forward | 38 | 41 | ||||||
Other assets | 194 | 218 | ||||||
Gross deferred tax assets | 2,220 | 2,206 | ||||||
Valuation allowance | (30 | ) | (33 | ) | ||||
Deferred tax assets after valuation allowance | 2,190 | 2,173 | ||||||
Deferred Tax Liabilities: | ||||||||
Deferred acquisition costs | (651 | ) | (691 | ) | ||||
Net unrealized gains | (274 | ) | (429 | ) | ||||
Foreign and other affiliate(s) | (15 | ) | (207 | ) | ||||
Other liabilities | (145 | ) | (134 | ) | ||||
Gross deferred tax liabilities | (1,085 | ) | (1,461 | ) | ||||
Net deferred tax asset | $ | 1,105 | $ | 712 | ||||
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As of and for the years ended December 31 | 2005 | 2004 | 2003 | |||||||||
(In millions) | ||||||||||||
Reserves, beginning of year: | ||||||||||||
Gross | $ | 31,523 | $ | 31,732 | $ | 27,441 | ||||||
Ceded | 13,879 | 14,066 | 10,634 | |||||||||
Net reserves, beginning of year | 17,644 | 17,666 | 16,807 | |||||||||
Reduction of net reserves (a) | — | — | (1,309 | ) | ||||||||
Reduction of net reserves (b) | — | (42 | ) | — | ||||||||
Net incurred claim and claim adjustment expenses: | ||||||||||||
Provision for insured events of current year | 5,516 | 6,062 | 6,745 | |||||||||
Increase in provision for insured events of prior years | 1,100 | 240 | 2,398 | |||||||||
Amortization of discount | 115 | 135 | 115 | |||||||||
Total net incurred (c) | 6,731 | 6,437 | 9,258 | |||||||||
Net payments attributable to: | ||||||||||||
Current year events (d) | 1,341 | 1,936 | 2,192 | |||||||||
Prior year events | 2,711 | 4,522 | 4,937 | |||||||||
Reinsurance recoverable against net reserve transferred under retroactive reinsurance agreements | (10 | ) | (41 | ) | (39 | ) | ||||||
Total net payments | 4,042 | 6,417 | 7,090 | |||||||||
Net reserves, end of year | 20,333 | 17,644 | 17,666 | |||||||||
Ceded reserves, end of year | 10,605 | 13,879 | 14,066 | |||||||||
Gross reserves, end of year | $ | 30,938 | $ | 31,523 | $ | 31,732 | ||||||
(a) | In 2003, the net reserves were reduced by $1,309 million as a result of the sale of CNAGLA. See Note P for further discussion of this sale. | ||
(b) | In 2004, the net reserves were reduced by $42 million as a result of the sale of the individual life insurance business. See Note P for further discussion of this sale. | ||
(c) | Total net incurred above does not agree to insurance claims and policyholders’ benefit as reflected in the Consolidated Statements of Operations due to expenses incurred related to uncollectible reinsurance receivables and benefit expenses related to future policy benefits and policyholders’ funds which are not reflected in the table above. | ||
(d) | In 2005, net payments were decreased by $1,581 million due to the impact of three significant commutations. See Note H for further discussion related to commutations. |
Years ended December 31 | 2005 | 2004 | 2003 | |||||||||
(In millions) | ||||||||||||
Environmental pollution and mass tort | $ | 53 | $ | 1 | $ | 153 | ||||||
Asbestos | 10 | 54 | 642 | |||||||||
Other | 1,037 | 185 | 1,603 | |||||||||
Total | $ | 1,100 | $ | 240 | $ | 2,398 | ||||||
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Claim and Claim Adjustment Expense Reserves
Life and | Corporate | |||||||||||||||||||
Standard | Specialty | Group | and Other | |||||||||||||||||
Lines | Lines | Non-Core | Non-Core | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Gross Case Reserves | $ | 7,033 | $ | 1,907 | $ | 2,542 | $ | 3,297 | $ | 14,779 | ||||||||||
Gross IBNR Reserves | 8,051 | 3,298 | 735 | 4,075 | 16,159 | |||||||||||||||
Total Gross Carried Claim and Claim Adjustment Expense Reserves | $ | 15,084 | $ | 5,205 | $ | 3,277 | $ | 7,372 | $ | 30,938 | ||||||||||
Net Case Reserves | $ | 5,165 | $ | 1,442 | $ | 1,456 | $ | 1,554 | $ | 9,617 | ||||||||||
Net IBNR Reserves | 6,081 | 2,352 | 381 | 1,902 | 10,716 | |||||||||||||||
Total Net Carried Claim and Claim Adjustment Expense Reserves | $ | 11,246 | $ | 3,794 | $ | 1,837 | $ | 3,456 | $ | 20,333 | ||||||||||
Claim and Claim Adjustment Expense Reserves
Life and | Corporate | |||||||||||||||||||
Standard | Specialty | Group | and Other | |||||||||||||||||
Lines | Lines | Non-Core | Non-Core | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Gross Case Reserves | $ | 6,904 | $ | 1,659 | $ | 2,800 | $ | 3,806 | $ | 15,169 | ||||||||||
Gross IBNR Reserves | 7,398 | 3,201 | 880 | 4,875 | 16,354 | |||||||||||||||
Total Gross Carried Claim and Claim Adjustment Expense Reserves | $ | 14,302 | $ | 4,860 | $ | 3,680 | $ | 8,681 | $ | 31,523 | ||||||||||
Net Case Reserves | $ | 4,761 | $ | 1,191 | $ | 1,394 | $ | 1,588 | $ | 8,934 | ||||||||||
Net IBNR Reserves | 4,547 | 2,042 | 430 | 1,691 | 8,710 | |||||||||||||||
Total Net Carried Claim and Claim Adjustment Expense Reserves | $ | 9,308 | $ | 3,233 | $ | 1,824 | $ | 3,279 | $ | 17,644 | ||||||||||
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December 31, 2005 | December 31, 2004 | |||||||||||||||
Environmental | Environmental | |||||||||||||||
Pollution and | Pollution and | |||||||||||||||
(In millions) | Asbestos | Mass Tort | Asbestos | Mass Tort | ||||||||||||
Gross reserves | $ | 2,992 | $ | 680 | $ | 3,218 | $ | 755 | ||||||||
Ceded reserves | (1,438 | ) | (257 | ) | (1,532 | ) | (258 | ) | ||||||||
Net reserves | $ | 1,554 | $ | 423 | $ | 1,686 | $ | 497 | ||||||||
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Corporate | ||||||||||||||||
Standard | Specialty | and Other | ||||||||||||||
Lines | Lines | Non-Core | Total | |||||||||||||
(In millions) | ||||||||||||||||
Pretax unfavorable net prior year claim and allocated claim adjustment expense development excluding the impact of corporate aggregate reinsurance treaties: | ||||||||||||||||
Core (Non-APMT) | $ | 376 | $ | 42 | $ | 171 | $ | 589 | ||||||||
APMT | – | – | 63 | 63 | ||||||||||||
Total | 376 | 42 | 234 | 652 | ||||||||||||
Ceded losses related to corporate aggregate reinsurance treaties | 183 | 5 | 57 | 245 | ||||||||||||
Pretax unfavorable net prior year development before impact of premium development | 559 | 47 | 291 | 897 | ||||||||||||
Unfavorable (favorable) premium development, excluding impact of corporate aggregate reinsurance treaties | (101 | ) | (12 | ) | 11 | (102 | ) | |||||||||
Ceded premiums related to corporate aggregate reinsurance treaties | (6 | ) | 19 | 4 | 17 | |||||||||||
Total premium development | (107 | ) | 7 | 15 | (85 | ) | ||||||||||
Total 2005 unfavorable net prior year development (pretax) | $ | 452 | $ | 54 | $ | 306 | $ | 812 | ||||||||
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Corporate | ||||||||||||||||
Standard | Specialty | and Other | ||||||||||||||
Lines | Lines | Non-Core | Total | |||||||||||||
(In millions) | ||||||||||||||||
Pretax unfavorable net prior year claim and allocated claim adjustment expense development excluding the impact of corporate aggregate reinsurance treaties: | ||||||||||||||||
Core (Non-APMT) | $ | 107 | $ | 75 | $ | 20 | $ | 202 | ||||||||
APMT | – | – | 55 | 55 | ||||||||||||
Total | 107 | 75 | 75 | 257 | ||||||||||||
Ceded losses related to corporate aggregate reinsurance treaties | 8 | (17 | ) | 9 | – | |||||||||||
Pretax unfavorable net prior year development before impact of premium development | 115 | 58 | 84 | 257 | ||||||||||||
Unfavorable (favorable) premium development, excluding impact of corporate aggregate reinsurance treaties | (96 | ) | (33 | ) | 12 | (117 | ) | |||||||||
Ceded premiums related to corporate aggregate reinsurance treaties | (1 | ) | 5 | (3 | ) | 1 | ||||||||||
Total premium development | (97 | ) | (28 | ) | 9 | (116 | ) | |||||||||
Total 2004 unfavorable net prior year development (pretax) | $ | 18 | $ | 30 | $ | 93 | $ | 141 | ||||||||
Corporate | ||||||||||||||||
Standard | Specialty | and Other | ||||||||||||||
Lines | Lines | Non-Core | Total | |||||||||||||
(In millions) | ||||||||||||||||
Pretax unfavorable net prior year claim and allocated claim adjustment expense development excluding the impact of corporate aggregate reinsurance treaties: | ||||||||||||||||
Core (Non-APMT) | $ | 1,423 | $ | 313 | $ | 346 | $ | 2,082 | ||||||||
APMT | – | – | 795 | 795 | ||||||||||||
Total | 1,423 | 313 | 1,141 | 2,877 | ||||||||||||
Ceded losses related to corporate aggregate reinsurance treaties | (485 | ) | (56 | ) | (102 | ) | (643 | ) | ||||||||
Pretax unfavorable net prior year development before impact of premium development | 938 | 257 | 1,039 | 2,234 | ||||||||||||
Unfavorable (favorable) premium development, excluding impact of corporate aggregate reinsurance treaties | 209 | 6 | (32 | ) | 183 | |||||||||||
Ceded premiums related to corporate aggregate reinsurance treaties | 269 | 31 | 58 | 358 | ||||||||||||
Pretax unfavorable premium development | 478 | 37 | 26 | 541 | ||||||||||||
Total 2003 unfavorable net prior year development (pretax) | $ | 1,416 | $ | 294 | $ | 1,065 | $ | 2,775 | ||||||||
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December 31, 2005 | December 31, 2004 | |||||||
(In millions) | ||||||||
Reinsurance receivables related to insurance reserves: | ||||||||
Ceded claim and claim adjustment expense | $ | 10,605 | $ | 13,879 | ||||
Ceded future policy benefits | 1,193 | 1,260 | ||||||
Ceded policyholders’ funds | 56 | 65 | ||||||
Billed reinsurance receivables | 582 | 684 | ||||||
Reinsurance receivables | 12,436 | 15,888 | ||||||
Allowance for uncollectible reinsurance | (519 | ) | (546 | ) | ||||
Reinsurance receivables, net of allowance for uncollectible reinsurance | $ | 11,917 | $ | 15,342 | ||||
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Assumed/ | ||||||||||||||||||||
Direct | Assumed | Ceded | Net | Net % | ||||||||||||||||
(In millions) | ||||||||||||||||||||
2005 Earned Premiums | ||||||||||||||||||||
Property and casualty | $ | 10,354 | $ | 186 | $ | 3,675 | $ | 6,865 | 2.7 | % | ||||||||||
Accident and health | 1,040 | 60 | 400 | 700 | 8.6 | |||||||||||||||
Life | 140 | – | 136 | 4 | – | |||||||||||||||
Total earned premiums | $ | 11,534 | $ | 246 | $ | 4,211 | $ | 7,569 | 3.3 | % | ||||||||||
2004 Earned Premiums | ||||||||||||||||||||
Property and casualty | $ | 10,739 | $ | 199 | $ | 3,634 | $ | 7,304 | 2.7 | % | ||||||||||
Accident and health | 1,228 | 63 | 507 | 784 | 8.0 | |||||||||||||||
Life | 419 | – | 298 | 121 | – | |||||||||||||||
Total earned premiums | $ | 12,386 | $ | 262 | $ | 4,439 | $ | 8,209 | 3.2 | % | ||||||||||
2003 Earned Premiums | ||||||||||||||||||||
Property and casualty | $ | 10,661 | $ | 726 | $ | 4,450 | $ | 6,937 | 10.5 | % | ||||||||||
Accident and health | 1,602 | 92 | 59 | 1,635 | 5.6 | |||||||||||||||
Life | 1,102 | 7 | 465 | 644 | 1.0 | |||||||||||||||
Total earned premiums | $ | 13,365 | $ | 825 | $ | 4,974 | $ | 9,216 | 9.0 | % | ||||||||||
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Assumed/ | ||||||||||||||||||||
Direct | Assumed | Ceded | Net | Net % | ||||||||||||||||
(In millions) | ||||||||||||||||||||
2005 Written Premiums | ||||||||||||||||||||
Property and casualty | $ | 9,546 | $ | 203 | $ | 2,934 | $ | 6,815 | 3.0 | % | ||||||||||
Accident and health | 1,037 | 58 | 395 | 700 | 8.3 | |||||||||||||||
Life | 136 | – | 132 | 4 | – | |||||||||||||||
Total written premiums | $ | 10,719 | $ | 261 | $ | 3,461 | $ | 7,519 | 3.5 | % | ||||||||||
2004 Written Premiums | ||||||||||||||||||||
Property and casualty | $ | 10,289 | $ | 48 | $ | 3,375 | $ | 6,962 | 0.7 | % | ||||||||||
Accident and health | 1,241 | 62 | 508 | 795 | 7.8 | |||||||||||||||
Life | 427 | – | 305 | 122 | – | |||||||||||||||
Total written premiums | $ | 11,957 | $ | 110 | $ | 4,188 | $ | 7,879 | 1.4 | % | ||||||||||
2003 Written Premiums | ||||||||||||||||||||
Property and casualty | $ | 10,880 | $ | 649 | $ | 4,448 | $ | 7,081 | 9.2 | % | ||||||||||
Accident and health | 1,601 | 92 | 59 | 1,634 | 5.6 | |||||||||||||||
Life | 1,098 | 6 | 465 | 639 | 1.0 | |||||||||||||||
Total written premiums | $ | 13,579 | $ | 747 | $ | 4,972 | $ | 9,354 | 8.0 | % | ||||||||||
Direct | Assumed | Ceded | Net | |||||||||||||
(In millions) | ||||||||||||||||
2005 | $ | 20,548 | $ | 1 | $ | 20,528 | $ | 21 | ||||||||
2004(a) | 56,610 | 35 | 54,486 | 2,159 | ||||||||||||
2003 | 388,380 | 588 | 295,659 | 93,309 |
(a) | The decline in gross inforce is attributable to the sales of the group benefits and the individual life businesses. |
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Years ended December 31 | Aggregate Cover | CCC Cover | All Other | Total | ||||||||||||
(In millions) | ||||||||||||||||
2005 | ||||||||||||||||
Ceded earned premium | $ | (17 | ) | $ | – | $ | 48 | $ | 31 | |||||||
Ceded claim and claim adjustment expense | (244 | ) | – | (154 | ) | (398 | ) | |||||||||
Ceding commissions | – | – | (27 | ) | (27 | ) | ||||||||||
Interest charges | (57 | ) | (66 | ) | (34 | ) | (157 | ) | ||||||||
Pretax expense | $ | (318 | ) | $ | (66 | ) | $ | (167 | ) | $ | (551 | ) | ||||
2004 | ||||||||||||||||
Ceded earned premium | $ | (1 | ) | $ | – | $ | (19 | ) | $ | (20 | ) | |||||
Ceded claim and claim adjustment expense | – | – | 15 | 15 | ||||||||||||
Ceding commissions | – | – | 2 | 2 | ||||||||||||
Interest charges | (82 | ) | (91 | ) | (72 | ) | (245 | ) | ||||||||
Pretax expense | $ | (83 | ) | $ | (91 | ) | $ | (74 | ) | $ | (248 | ) | ||||
2003 | ||||||||||||||||
Ceded earned premium | $ | (258 | ) | $ | (100 | ) | $ | (172 | ) | $ | (530 | ) | ||||
Ceded claim and claim adjustment expense | 500 | 143 | 222 | 865 | ||||||||||||
Ceding commissions | – | – | 18 | 18 | ||||||||||||
Interest charges | (147 | ) | (59 | ) | (127 | ) | (333 | ) | ||||||||
Pretax benefit (expense) | $ | 95 | $ | (16 | ) | $ | (59 | ) | $ | 20 | ||||||
Period ended December 31 | 2005 | 2004 | 2003 | |||||||||
(In millions) | ||||||||||||
Standard Lines | $ | (399 | ) | $ | (185 | ) | $ | 10 | ||||
Specialty Lines | (41 | ) | (1 | ) | 6 | |||||||
Corporate and Other | (111 | ) | (62 | ) | 4 | |||||||
Pretax benefit (expense) | $ | (551 | ) | $ | (248 | ) | $ | 20 | ||||
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December 31 | 2005 | 2004 | ||||||
(In millions) | ||||||||
Variable rate debt: | ||||||||
Credit facility – CNA Surety, due June 30, 2008 | $ | 20 | $ | – | ||||
Debenture – CNA Surety, face amount of $31, due April 29, 2034 | 31 | 30 | ||||||
Credit facility – CNA Surety, due September 30, 2005 | – | 25 | ||||||
Term loan – CNA Surety, due through September 30, 2005 | – | 10 | ||||||
Senior notes: | ||||||||
6.500%, face amount of $493, due April 15, 2005 | – | 493 | ||||||
6.750%, face amount of $250, due November 15, 2006 | 250 | 249 | ||||||
6.450%, face amount of $150, due January 15, 2008 | 149 | 149 | ||||||
6.600%, face amount of $200, due December 15, 2008 | 199 | 199 | ||||||
8.375%, face amount of $70, due August 15, 2012 | 69 | 69 | ||||||
5.850%, face amount of $549, due December 15, 2014 | 546 | 546 | ||||||
6.950%, face amount of $150, due January 15, 2018 | 149 | 149 | ||||||
Debenture, 7.250%, face amount of $243, due November 15, 2023 | 241 | 241 | ||||||
Other debt, 1.000%-11.500%, due through 2019 | 36 | 47 | ||||||
Surplus notes: | ||||||||
Encompass Insurance Company of America (EICA) surplus note, face amount of $50, due March 31, 2006 | – | 50 | ||||||
Total debt | $ | 1,690 | $ | 2,257 | ||||
Short term debt | $ | 252 | $ | 531 | ||||
Long term debt | 1,438 | 1,726 | ||||||
Total debt | $ | 1,690 | $ | 2,257 | ||||
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(In millions) | ||||
2006 | $ | 253 | ||
2007 | 11 | |||
2008 | 373 | |||
2009 | 3 | |||
2010 | 4 | |||
Thereafter | 1,055 | |||
Less original issue discount | (9 | ) | ||
Total | $ | 1,690 | ||
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Pension Benefits | Postretirement Benefits | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
(In millions) | ||||||||||||||||
Benefit obligation at January 1 | $ | 2,527 | $ | 2,403 | $ | 180 | $ | 345 | ||||||||
Changes in benefit obligation: | ||||||||||||||||
Service cost | 27 | 31 | 3 | 4 | ||||||||||||
Interest cost | 145 | 145 | 10 | 17 | ||||||||||||
Participants’ contributions | – | – | 8 | 9 | ||||||||||||
Plan amendments | 1 | – | – | (138 | ) | |||||||||||
Actuarial loss (gain) | 87 | 104 | 21 | (26 | ) | |||||||||||
Curtailment/settlement | – | 2 | – | – | ||||||||||||
Benefits paid | (146 | ) | (164 | ) | (12 | ) | (31 | ) | ||||||||
Foreign currency translation | (5 | ) | 6 | – | – | |||||||||||
Benefit obligations at December 31 | 2,636 | 2,527 | 210 | 180 | ||||||||||||
Fair value of plan assets at January 1 | 2,029 | 1,988 | – | – | ||||||||||||
Change in plan assets: | ||||||||||||||||
Actual return on plan assets | 161 | 164 | – | – | ||||||||||||
Company contributions | 67 | 37 | 4 | 22 | ||||||||||||
Participants’ contributions | – | – | 8 | 9 | ||||||||||||
Curtailment/settlement | – | (1 | ) | – | – | |||||||||||
Benefits paid | (146 | ) | (164 | ) | (12 | ) | (31 | ) | ||||||||
Foreign currency translation | (4 | ) | 5 | – | – | |||||||||||
Fair value of plan assets at December 31 | 2,107 | 2,029 | – | – | ||||||||||||
Funded status | (529 | ) | (498 | ) | (210 | ) | (180 | ) | ||||||||
Unrecognized net actuarial loss | 528 | 468 | 94 | 77 | ||||||||||||
Unrecognized net transition (asset) obligation | (1 | ) | – | – | – | |||||||||||
Unrecognized prior service cost (benefit) | 9 | 9 | (174 | ) | (202 | ) | ||||||||||
Prepaid (accrued) benefit cost | $ | 7 | $ | (21 | ) | $ | (290 | ) | $ | (305 | ) | |||||
Amounts recognized in the Consolidated Balance Sheets: | ||||||||||||||||
Prepaid benefit cost | $ | 20 | $ | 21 | $ | – | $ | – | ||||||||
Accrued benefit liability | (372 | ) | (352 | ) | (290 | ) | (305 | ) | ||||||||
Intangible assets | 9 | 11 | – | – | ||||||||||||
Accumulated other comprehensive income | 350 | 299 | – | – | ||||||||||||
Net amount recognized | $ | 7 | $ | (21 | ) | $ | (290 | ) | $ | (305 | ) | |||||
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Years ended December 31 (In millions) | 2005 | 2004 | 2003 | |||||||||
Pension benefits | ||||||||||||
Service cost | $ | 27 | $ | 31 | $ | 33 | ||||||
Interest cost on projected benefit obligation | 145 | 145 | 146 | |||||||||
Expected return on plan assets | (156 | ) | (152 | ) | (146 | ) | ||||||
Prior service cost amortization | 2 | 2 | 3 | |||||||||
Actuarial loss | 21 | 13 | 8 | |||||||||
Settlement loss | — | 5 | 8 | |||||||||
Net periodic pension cost | $ | 39 | $ | 44 | $ | 52 | ||||||
Postretirement benefits | ||||||||||||
Service cost | $ | 3 | $ | 4 | $ | 6 | ||||||
Interest cost on projected benefit obligation | 10 | 17 | 22 | |||||||||
Prior service cost amortization | (28 | ) | (20 | ) | (16 | ) | ||||||
Actuarial loss | 4 | 3 | 4 | |||||||||
Net periodic postretirement (benefit) cost | $ | (11 | ) | $ | 4 | $ | 16 | |||||
Pension benefits | ||||||||||||
Increase in minimum liability included in other comprehensive income | $ | 51 | $ | 101 | $ | 176 |
December 31 | 2005 | 2004 | 2003 | |||||||||
Pension benefits | ||||||||||||
Discount rate | 5.625 | % | 5.875 | % | 6.25 | % | ||||||
Expected return on plan assets | 8.00 | 8.00 | 8.00 | |||||||||
Rate of compensation increases | 5.83 | 5.83 | 5.83 | |||||||||
Postretirement benefits | ||||||||||||
Discount rate | 5.5 | % | 5.875 | % | 6.25 | % |
December 31 | 2005 | 2004 | 2003 | |||||||||
Pension benefits | ||||||||||||
Discount rate | 5.875 | % | 6.22 | % | 6.75 | % | ||||||
Expected return on plan assets | 8.00 | 8.00 | 8.00 | |||||||||
Rate of compensation increases | 5.83 | 5.83 | 5.83 | |||||||||
Postretirement benefits | ||||||||||||
Discount rate | 5.875 | % | 6.19 | % | 6.75 | % |
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Percentage of Plan Assets | ||||||||
December 31, | ||||||||
2005 | 2004 | |||||||
Asset Category | ||||||||
Fixed maturity securities | 24 | % | 47 | % | ||||
Equity securities | 25 | 17 | ||||||
Limited Partnerships | 15 | 15 | ||||||
Short term investments | 33 | 21 | ||||||
Other | 3 | – | ||||||
Total | 100 | % | 100 | % | ||||
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Pension | Postretirement | |||||||
(In millions) | Benefits | Benefits | ||||||
2006 | $ | 138 | $ | 15 | ||||
2007 | 140 | 15 | ||||||
2008 | 142 | 16 | ||||||
2009 | 146 | 16 | ||||||
2010 | 149 | 17 | ||||||
Thereafter | 811 | 88 | ||||||
Total | $ | 1,526 | $ | 167 | ||||
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2005 | 2004 | 2003 | ||||||||||||||||||||||
Weighted- | �� | Weighted- | Weighted- | |||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
Option | Option | Option | ||||||||||||||||||||||
Number | Price per | Number | Price per | Number | Price per | |||||||||||||||||||
Of Shares | Share | Of Shares | Share | Of Shares | Share | |||||||||||||||||||
Balance at January 1 | 1,474,000 | $ | 29.17 | 1,434,800 | $ | 29.97 | 1,146,850 | $ | 31.80 | |||||||||||||||
Options granted | 328,800 | 27.27 | 350,400 | 26.30 | 384,000 | 24.61 | ||||||||||||||||||
Options exercised | (42,050 | ) | 28.60 | (2,900 | ) | 26.28 | – | – | ||||||||||||||||
Options forfeited | (132,150 | ) | 30.38 | (308,300 | ) | 29.63 | (96,050 | ) | 30.51 | |||||||||||||||
Balance at December 31 | 1,628,600 | $ | 28.71 | 1,474,000 | $ | 29.17 | 1,434,800 | $ | 29.97 | |||||||||||||||
Options exercisable at December 31 | 963,650 | $ | 30.17 | 827,450 | $ | 31.16 | 551,575 | $ | 32.73 | |||||||||||||||
Weighted-average fair value per share of options granted | $ | 7.48 | $ | 7.74 | $ | 5.43 | ||||||||||||||||||
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Future | Future | |||||||
Minimum | Minimum | |||||||
Lease | Sublease | |||||||
(In millions) | Payments | Receipts | ||||||
2006 | $ | 53 | $ | 3 | ||||
2007 | 44 | 2 | ||||||
2008 | 38 | 1 | ||||||
2009 | 30 | 1 | ||||||
2010 | 26 | 1 | ||||||
Thereafter | 70 | 4 | ||||||
Total | $ | 261 | $ | 12 | ||||
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December 31 | 2005 | 2004 | ||||||
Preferred stock, without par value, non-voting | ||||||||
Authorized | 12,500,000 | 12,500,000 | ||||||
Issued and outstanding: | ||||||||
Series H (stated value $100,000 per share, held by Loews) | 7,500 | 7,500 | ||||||
Common stock, par value $2.50 | ||||||||
Authorized | 500,000,000 | 500,000,000 | ||||||
Issued | 258,177,285 | 258,177,285 | ||||||
Outstanding | 256,001,968 | 255,953,958 | ||||||
Treasury stock | 2,175,317 | 2,223,327 |
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Statutory Capital and Surplus | Statutory Net (Loss) Income | |||||||||||||||||||
December 31 (a) | Years Ended December 31 | |||||||||||||||||||
(In millions) | 2005 | 2004 | 2005 | 2004 | 2003 | |||||||||||||||
Property and casualty companies | $ | 6,940 | $ | 6,998 | $ | 550 | $ | 694 | $ | (1,484 | ) | |||||||||
Life and group insurance companies | 627 | 1,177 | 65 | 334 | 115 |
Years ended December 31 (In millions) | 2005 | 2004 | 2003 | |||||||||
Net income (loss) | $ | 264 | $ | 425 | $ | (1,417 | ) | |||||
Other comprehensive income (loss): | ||||||||||||
Change in unrealized gains/losses on general account investments: | ||||||||||||
Holding gains/losses arising during the period, net of tax benefit (expense) of $72, $(170) and $(91) | (136 | ) | 316 | 171 | ||||||||
Net unrealized gains/losses at beginning of period included in realized gains/losses during the period, net of tax benefit (expense) of $71, $223 and $(70) | (131 | ) | (414 | ) | 129 | |||||||
Net change in unrealized gains/losses on general account investments, net of tax benefit (expense) of $143, $53 and $(161) | (267 | ) | (98 | ) | 300 | |||||||
Net change in unrealized gains/losses on discontinued operations, separate accounts and other, net of tax benefit of $16, $0 and $3 | 4 | (68 | ) | 8 | ||||||||
Foreign currency translation adjustment | (24 | ) | 24 | 80 | ||||||||
Net change in derivative instruments designated as cash flow hedge, net of tax benefit of $0, $1 and $0 | – | (3 | ) | – | ||||||||
Net change in minimum pension liability, net of tax benefit of $18, $36 and $61 | (33 | ) | (65 | ) | (115 | ) | ||||||
Allocation to participating policyholders’ and minority interests | 18 | 19 | (7 | ) | ||||||||
Other comprehensive income (loss), net of tax (expense) benefit of $177, $90 and $(97) | (302 | ) | (191 | ) | 266 | |||||||
Total comprehensive income (loss) | $ | (38 | ) | $ | 234 | $ | (1,151 | ) | ||||
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December 31 (In millions) | 2005 | 2004 | ||||||
Cumulative foreign currency translation adjustment | $ | 51 | $ | 75 | ||||
Minimum pension liability, net of tax of $123 and $105 | (227 | ) | (194 | ) | ||||
Net unrealized gains on investments and other, net of tax of $271 and $430 | 535 | 780 | ||||||
Accumulated other comprehensive income | $ | 359 | $ | 661 | ||||
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Corporate | ||||||||||||||||||||||||
Standard | Specialty | Life and Group | and Other | |||||||||||||||||||||
Year ended December 31, 2005 | Lines | Lines | Non-Core | Non-Core | Eliminations | Total | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Net earned premiums | $ | 4,410 | $ | 2,475 | $ | 704 | $ | (8 | ) | $ | (12 | ) | $ | 7,569 | ||||||||||
Net investment income | 767 | 281 | 593 | 251 | – | 1,892 | ||||||||||||||||||
Other revenues | 98 | 124 | 95 | 159 | (65 | ) | 411 | |||||||||||||||||
Total operating revenues | 5,275 | 2,880 | 1,392 | 402 | (77 | ) | 9,872 | |||||||||||||||||
Claims, benefits and expenses: | ||||||||||||||||||||||||
Net incurred claims and benefits | 3,857 | 1,617 | 1,160 | 343 | (2 | ) | 6,975 | |||||||||||||||||
Policyholders’ dividends | 19 | 4 | 1 | – | – | 24 | ||||||||||||||||||
Amortization of deferred acquisition costs | 986 | 532 | 22 | 3 | – | 1,543 | ||||||||||||||||||
Other insurance related expenses | 444 | 115 | 257 | 23 | (10 | ) | 829 | |||||||||||||||||
Other expenses | 110 | 108 | 61 | 115 | (65 | ) | 329 | |||||||||||||||||
Total claims, benefits and expenses | 5,416 | 2,376 | 1,501 | 484 | (77 | ) | 9,700 | |||||||||||||||||
Operating income (loss) from continuing operations before income tax and minority interest | (141 | ) | 504 | (109 | ) | (82 | ) | – | 172 | |||||||||||||||
Income tax (expense) benefit on operating income (loss) | 110 | (154 | ) | 58 | 91 | – | 105 | |||||||||||||||||
Minority interest | (10 | ) | (14 | ) | – | – | – | (24 | ) | |||||||||||||||
Net operating income (loss) from continuing operations | (41 | ) | 336 | (51 | ) | 9 | – | 253 | ||||||||||||||||
Realized investment gains (losses), net of participating policyholders’ and minority interests | 20 | 14 | (30 | ) | (14 | ) | – | (10 | ) | |||||||||||||||
Income tax (expense) benefit on realized investment gains (losses) | (11 | ) | (2 | ) | 11 | 2 | – | – | ||||||||||||||||
Net income (loss) from continuing operations | $ | (32 | ) | $ | 348 | $ | (70 | ) | $ | (3 | ) | $ | – | $ | 243 | |||||||||
Reinsurance receivables | $ | 3,968 | $ | 1,493 | $ | 2,707 | $ | 4,268 | $ | – | $ | 12,436 | ||||||||||||
Insurance receivables | $ | 1,826 | $ | 375 | $ | 105 | $ | 5 | $ | – | $ | 2,311 | ||||||||||||
Insurance reserves: | ||||||||||||||||||||||||
Claim and claim adjustment expense | $ | 15,084 | $ | 5,205 | $ | 3,277 | $ | 7,372 | $ | – | $ | 30,938 | ||||||||||||
Unearned premiums | 1,952 | 1,577 | 168 | 9 | – | 3,706 | ||||||||||||||||||
Future policy benefits | – | – | 6,297 | – | – | 6,297 | ||||||||||||||||||
Policyholders’ funds | 30 | – | 1,465 | – | – | 1,495 | ||||||||||||||||||
Deferred acquisition costs | $ | 408 | $ | 274 | $ | 515 | $ | – | $ | – | $ | 1,197 |
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Corporate | ||||||||||||||||||||||||
Standard | Specialty | Life and Group | and Other | |||||||||||||||||||||
Year ended December 31, 2004 | Lines | Lines | Non-Core | Non-Core | Eliminations | Total | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Net earned premiums | $ | 4,917 | $ | 2,277 | $ | 921 | $ | 128 | $ | (34 | ) | $ | 8,209 | |||||||||||
Net investment income | 496 | 246 | 692 | 246 | – | 1,680 | ||||||||||||||||||
Other revenues | 129 | 109 | 91 | 40 | (86 | ) | 283 | |||||||||||||||||
Total operating revenues | 5,542 | 2,632 | 1,704 | 414 | (120 | ) | 10,172 | |||||||||||||||||
Claims, benefits and expenses: | ||||||||||||||||||||||||
Net incurred claims and benefits | 3,480 | 1,441 | 1,372 | 162 | (21 | ) | 6,434 | |||||||||||||||||
Policyholders’ dividends | 9 | 5 | (3 | ) | – | – | 11 | |||||||||||||||||
Amortization of deferred acquisition costs | 1,109 | 506 | 36 | 29 | – | 1,680 | ||||||||||||||||||
Other insurance related expenses | 593 | 88 | 291 | 10 | (13 | ) | 969 | |||||||||||||||||
Other expenses | 94 | 101 | 76 | 141 | (86 | ) | 326 | |||||||||||||||||
Total claims, benefits and expenses | 5,285 | 2,141 | 1,772 | 342 | (120 | ) | 9,420 | |||||||||||||||||
Operating income (loss) from continuing operations before income tax and minority interest | 257 | 491 | (68 | ) | 72 | – | 752 | |||||||||||||||||
Income tax (expense) benefit on operating income (loss) | (27 | ) | (150 | ) | 39 | 12 | – | (126 | ) | |||||||||||||||
Minority interest | (10 | ) | (17 | ) | – | – | – | (27 | ) | |||||||||||||||
Net operating income (loss) from continuing operations | 220 | 324 | (29 | ) | 84 | – | 599 | |||||||||||||||||
Realized investment gains (losses), net of participating policyholders’ and minority interests | 219 | 84 | (615 | ) | 64 | – | (248 | ) | ||||||||||||||||
Income tax (expense) benefit on realized investment gains (losses) | (80 | ) | (30 | ) | 230 | (25 | ) | – | 95 | |||||||||||||||
�� | ||||||||||||||||||||||||
Net income (loss) from continuing operations | $ | 359 | $ | 378 | $ | (414 | ) | $ | 123 | $ | – | $ | 446 | |||||||||||
Reinsurance receivables | $ | 5,129 | $ | 1,682 | $ | 3,284 | $ | 5,793 | $ | – | $ | 15,888 | ||||||||||||
Insurance receivables | $ | 2,150 | $ | 340 | $ | 153 | $ | 61 | $ | – | $ | 2,704 | ||||||||||||
Insurance reserves: | ||||||||||||||||||||||||
Claim and claim adjustment expense | $ | 14,302 | $ | 4,860 | $ | 3,680 | $ | 8,681 | $ | – | $ | 31,523 | ||||||||||||
Unearned premiums | 1,978 | 1,546 | 164 | 834 | – | 4,522 | ||||||||||||||||||
Future policy benefits | – | – | 5,883 | – | – | 5,883 | ||||||||||||||||||
Policyholders’ funds | 43 | – | 1,682 | – | – | 1,725 | ||||||||||||||||||
Deferred acquisition costs | $ | 444 | $ | 285 | $ | 537 | $ | 2 | $ | – | $ | 1,268 |
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Corporate | ||||||||||||||||||||||||
Standard | Specialty | Life and Group | and Other | Elimi- | ||||||||||||||||||||
Year ended December 31, 2003 | Lines | Lines | Non-Core | Non-Core | nations | Total | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Net earned premiums | $ | 4,532 | $ | 1,840 | $ | 2,376 | $ | 582 | $ | (114 | ) | $ | 9,216 | |||||||||||
Net investment income | 408 | 201 | 821 | 226 | – | 1,656 | ||||||||||||||||||
Other revenues | 199 | 104 | 163 | 36 | (119 | ) | 383 | |||||||||||||||||
Total operating revenues | 5,139 | 2,145 | 3,360 | 844 | (233 | ) | 11,255 | |||||||||||||||||
Claims, benefits and expenses: | ||||||||||||||||||||||||
Net incurred claims and benefits | 4,440 | 1,648 | 2,384 | 1,806 | (115 | ) | 10,163 | |||||||||||||||||
Policyholders’ dividends | 100 | 3 | 10 | 1 | – | 114 | ||||||||||||||||||
Amortization of deferred acquisition costs | 1,195 | 408 | 224 | 138 | – | 1,965 | ||||||||||||||||||
Other insurance related expenses | 741 | 100 | 530 | 40 | – | 1,411 | ||||||||||||||||||
Other expenses | 197 | 89 | 66 | 159 | (118 | ) | 393 | |||||||||||||||||
Total claims, benefits and expenses | 6,673 | 2,248 | 3,214 | 2,144 | (233 | ) | 14,046 | |||||||||||||||||
Operating income (loss) from continuing operations before income tax and minority interest | (1,534 | ) | (103 | ) | 146 | (1,300 | ) | – | (2,791 | ) | ||||||||||||||
Income tax (expense) benefit on operating income (loss) | 590 | 59 | (33 | ) | 465 | – | 1,081 | |||||||||||||||||
Minority interest | (4 | ) | 10 | – | – | – | 6 | |||||||||||||||||
Net operating income (loss) from continuing operations | (948 | ) | (34 | ) | 113 | (835 | ) | – | (1,704 | ) | ||||||||||||||
Realized investment gains (losses), net of participating policyholders’ and minority interests | 361 | 114 | (141 | ) | 126 | – | 460 | |||||||||||||||||
Income tax (expense) benefit on realized investment gains (losses) | (127 | ) | (40 | ) | 33 | (41 | ) | – | (175 | ) | ||||||||||||||
Net income (loss) from continuing operations | $ | (714 | ) | $ | 40 | $ | 5 | $ | (750 | ) | $ | – | $ | (1,419 | ) | |||||||||
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Years ended December 31 | 2005 | 2004 | 2003 | |||||||||
(In millions) | ||||||||||||
Standard Lines | ||||||||||||
Property | $ | 622 | $ | 664 | $ | 668 | ||||||
Casualty | 3,780 | 4,196 | 3,947 | |||||||||
CNA Global | 893 | 901 | 885 | |||||||||
Standard Lines revenue | 5,295 | 5,761 | 5,500 | |||||||||
Specialty Lines | ||||||||||||
Professional Liability Insurance (CNA Pro) | 2,205 | 2,053 | 1,612 | |||||||||
Surety | 393 | 361 | 346 | |||||||||
Warranty | 296 | 302 | 301 | |||||||||
Specialty Lines revenue | 2,894 | 2,716 | 2,259 | |||||||||
Life and Group Non-Core | ||||||||||||
Life & Annuity | 326 | (45 | ) | 1,030 | ||||||||
Health | 903 | 1,053 | 2,026 | |||||||||
Other | 133 | 81 | 163 | |||||||||
Life and Group Non-Core revenue | 1,362 | 1,089 | 3,219 | |||||||||
Corporate and Other Non-Core revenue | ||||||||||||
CNA Re | 71 | 225 | 696 | |||||||||
Other | 317 | 253 | 274 | |||||||||
Corporate and Other Non-Core revenue | 388 | 478 | 970 | |||||||||
Eliminations | (77 | ) | (120 | ) | (233 | ) | ||||||
Total revenue | $ | 9,862 | $ | 9,924 | $ | 11,715 | ||||||
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Year ended December 31 | 2005 | 2004 | 2003 | |||||||||
(In millions) | ||||||||||||
Revenues: | ||||||||||||
Net investment income | $ | 15 | $ | 17 | $ | 20 | ||||||
Other | 7 | (7 | ) | 4 | ||||||||
Total revenues | 22 | 10 | 24 | |||||||||
Insurance related (expenses) benefits | 1 | (30 | ) | (11 | ) | |||||||
Income (loss) before income taxes | 23 | (20 | ) | 13 | ||||||||
Income tax (expense) benefit | (2 | ) | (1 | ) | (11 | ) | ||||||
Net income (loss) from discontinued operations | $ | 21 | $ | (21 | ) | $ | 2 | |||||
December 31 | 2005 | 2004 | ||||||
(In millions) | ||||||||
Assets: | ||||||||
Investments | $ | 358 | $ | 370 | ||||
Reinsurance receivables | 78 | 91 | ||||||
Cash | 29 | 14 | ||||||
Other assets | 5 | 26 | ||||||
Total assets | 470 | 501 | ||||||
Liabilities: | ||||||||
Insurance reserves | (338 | ) | (401 | ) | ||||
Other liabilities | (19 | ) | (27 | ) | ||||
Total liabilities | (357 | ) | (428 | ) | ||||
Net assets of discontinued operations | $ | 113 | $ | 73 | ||||
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Full | ||||||||||||||||||||
First | Second | Third | Fourth | Year | ||||||||||||||||
(In millions, except per share data) | Restated (a) | Restated (a) | Restated (a) | |||||||||||||||||
2005 | ||||||||||||||||||||
Revenues | $ | 2,364 | $ | 2,570 | $ | 2,520 | $ | 2,408 | $ | 9,862 | ||||||||||
Income (loss) from continuing operations before income tax | $ | 234 | $ | 336 | $ | (48 | ) | $ | (384 | ) | $ | 138 | ||||||||
Income tax (expense) benefit | (56 | ) | (48 | ) | 51 | 158 | 105 | |||||||||||||
Income (loss) from continuing operations | 178 | 288 | 3 | (226 | ) | 243 | ||||||||||||||
Income from discontinued operations, net of tax | 7 | 2 | 3 | 9 | 21 | |||||||||||||||
Net income (loss) | $ | 185 | $ | 290 | $ | 6 | $ | (217 | ) | $ | 264 | |||||||||
Income (loss) from continuing operations | $ | 0.63 | $ | 1.06 | $ | (0.06 | ) | $ | (0.95 | ) | $ | 0.68 | ||||||||
Income from discontinued operations | 0.03 | – | 0.02 | 0.03 | 0.08 | |||||||||||||||
Basic and diluted earnings (loss) per share available to common stockholders | $ | 0.66 | $ | 1.06 | $ | (0.04 | ) | $ | (0.92 | ) | $ | 0.76 | ||||||||
Full | ||||||||||||||||||||
First | Second | Third | Fourth | Year | ||||||||||||||||
(In millions, except per share data) | Restated (a) | Restated (a) | Restated (a) | Restated (a) | Restated (a) | |||||||||||||||
2004 | ||||||||||||||||||||
Revenues | $ | 2,266 | $ | 2,659 | $ | 2,313 | $ | 2,686 | $ | 9,924 | ||||||||||
Income (loss) from continuing operations before income tax | $ | (177 | ) | $ | 324 | $ | (79 | ) | $ | 409 | $ | 477 | ||||||||
Income tax (expense) benefit | 53 | (31 | ) | 52 | (105 | ) | (31 | ) | ||||||||||||
Income (loss) from continuing operations | (124 | ) | 293 | (27 | ) | 304 | 446 | |||||||||||||
Loss from discontinued operations | (6 | ) | (3 | ) | (11 | ) | (1 | ) | (21 | ) | ||||||||||
Net income (loss) | $ | (130 | ) | $ | 290 | $ | (38 | ) | $ | 303 | $ | 425 | ||||||||
Income (loss) from continuing operations | $ | (0.55 | ) | $ | 1.08 | $ | (0.16 | ) | $ | 1.12 | $ | 1.49 | ||||||||
Loss from discontinued operations | (0.02 | ) | (0.01 | ) | (0.05 | ) | (0.01 | ) | (0.09 | ) | ||||||||||
Basic and diluted earnings (loss) per share available to common stockholders | $ | (0.57 | ) | $ | 1.07 | $ | (0.21 | ) | $ | 1.11 | $ | 1.40 | ||||||||
(a) | As restated, see Note T. |
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(as previously reported) | First | Second | Third | |||||||||
(In millions, except per share data) | ||||||||||||
2005 | ||||||||||||
Revenues | $ | 2,364 | $ | 2,570 | $ | 2,520 | ||||||
Income (loss) from continuing operations before income tax | $ | 234 | $ | 336 | $ | (48 | ) | |||||
Income tax (expense) benefit | (56 | ) | (48 | ) | 51 | |||||||
Net income (loss) | $ | 178 | $ | 288 | $ | 3 | ||||||
Basic and diluted earnings (loss) per share available to common stockholders | $ | 0.63 | $ | 1.06 | $ | (0.06 | ) | |||||
Full | ||||||||||||||||||||
(as previously reported) | First | Second | Third | Fourth | Year | |||||||||||||||
(In millions, except per share data) | ||||||||||||||||||||
2004 | ||||||||||||||||||||
Revenues | $ | 2,267 | $ | 2,664 | $ | 2,318 | $ | 2,687 | $ | 9,936 | ||||||||||
Income (loss) from continuing operations before income tax | $ | (177 | ) | $ | 324 | $ | (79 | ) | $ | 409 | $ | 477 | ||||||||
Income tax (expense) benefit | 53 | (31 | ) | 52 | (105 | ) | (31 | ) | ||||||||||||
Net income (loss) | $ | (124 | ) | $ | 293 | $ | (27 | ) | $ | 304 | $ | 446 | ||||||||
Basic and diluted earnings (loss) per share available to common stockholders | $ | (0.55 | ) | $ | 1.08 | $ | (0.16 | ) | $ | 1.12 | $ | 1.49 | ||||||||
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As Previously | As | As Previously | As | |||||||||||||
Reported | Restated | Reported | Restated | |||||||||||||
(In millions, except per share data) | 2004 | 2004 | ||||||||||||||
As of December 31 | ||||||||||||||||
Consolidated balance sheet: | ||||||||||||||||
Deferred income taxes | $ | 709 | $ | 712 | ||||||||||||
Other assets (a) | 815 | 608 | ||||||||||||||
Retained earnings | 5,572 | 5,357 | ||||||||||||||
Accumulated other comprehensive income | 650 | 661 | ||||||||||||||
2004 | 2004 | 2003 | 2003 | |||||||||||||
For the year ended December 31 | ||||||||||||||||
Consolidated statements of operations: | ||||||||||||||||
Income (loss) from discontinued operations, net of tax expense of $1 and $11 | $ | – | $ | (21 | ) | $ | – | $ | 2 | |||||||
Net income (loss) | 446 | 425 | (1,419 | ) | (1,417 | ) | ||||||||||
Earnings (loss) per share: | ||||||||||||||||
Income (loss) from discontinued operations, net of tax | $ | – | $ | (0.09 | ) | $ | – | $ | 0.01 | |||||||
Basic and diluted earnings (loss) per share available to common stockholders | 1.49 | 1.40 | (6.52 | ) | (6.51 | ) |
(a) | The As Restated amount excludes a reclassification which increased other assets by $152 million. |
• | Net purchases and sales of trading securities and changes in the net receivable/payable from unsettled investment purchases and sales related to trading securities, previously classified within investing activities, have been reclassified to cash flows from operating activities. | |
• | Cash flows from equity method investees were reclassified to distinguish between return on investments, which are reflected within operating cash flows, and return of investments, which are reflected within investing cash flows. Previously, all amounts were reflected within investing cash flows. | |
• | Deposits and withdrawals related to investment contract products issued by the Company have been reflected within financing cash flows. Previously, amounts related to certain investment contracts were reflected within operating cash flows. | |
• | The impact of cumulative translation adjustment, previously reflected within investing activities, is now classified within operating activities. |
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Years ended December 31 (In millions) | 2004 | 2003 | ||||||
Cash flows provided by operating activities-continuing operations | ||||||||
As originally reported | $ | 1,607 | $ | 1,760 | ||||
Impact of restatements | 377 | 306 | ||||||
Revised for restatements | $ | 1,984 | $ | 2,066 | ||||
Cash flows used by investing activities-continuing operations | ||||||||
As originally reported | $ | (2,019 | ) | $ | (2,133 | ) | ||
Impact of restatements | (83 | ) | (255 | ) | ||||
Revised for restatements | $ | (2,102 | ) | $ | (2,388 | ) | ||
Cash flows provided by financing activities-continuing operations | ||||||||
As originally reported | $ | 368 | $ | 386 | ||||
Impact of restatements | (307 | ) | (64 | ) | ||||
Revised for restatements | $ | 61 | $ | 322 | ||||
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CNA Financial Corporation
Chicago, Illinois
March 8, 2006
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Chicago, Illinois
March 8, 2006
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CNA Financial Corporation
Chicago, Illinois
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March 8, 2006
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FIRST BECAME | ||||||||||||
POSITION AND OFFICES | EXECUTIVE OFFICER | |||||||||||
NAME | HELD WITH REGISTRANT | AGE | OF CNA | PRINCIPAL OCCUPATION DURING PAST FIVE YEARS | ||||||||
Stephen W. Lilienthal | Chief Executive Officer, CNA Financial Corporation | 55 | 2001 | Chief Executive Officer of CNA Financial Corporation and subsidiaries since August, 2002. Prior to that, President and Chief Executive Officer, Property and Casualty Operations of the CNA insurance companies since July 2001. From June 1993 to June 1998, senior officer of USF&G Corporation (USF&G). In April 1998, USF&G was acquired by the St. Paul Companies. Mr. Lilienthal was Executive Vice President of the St. Paul Companies until July 2001. | ||||||||
Michael Fusco | Executive Vice President, Chief Actuary, CNA insurance companies | 57 | 2004 | Executive Vice President, Chief Actuary of the CNA insurance companies since March, 2002. Prior to that time, he was Senior Vice President of the CNA insurance companies since November, 2000. From 1988 until November of 2000, Mr. Fusco held various positions at Insurance Services Offices, including Executive Vice President. | ||||||||
Jonathan D. Kantor | Executive Vice President, General Counsel and Secretary | 50 | 1997 | Executive Vice President, General Counsel and Secretary of CNA Financial Corporation since March, 1998. Executive Vice President, General Counsel and Secretary of the CNA insurance companies since April, 1997 to current date. | ||||||||
James R. Lewis | President and Chief Executive Officer, Property and Casualty Operations, CNA insurance companies | 56 | 2002 | President and Chief Executive Officer, Property and Casualty Operations of the CNA insurance companies since August, 2002. From August 2001 to August 2002, Executive Vice President, U.S. Insurance Operations, Property and Casualty Operations of the CNA insurance companies. From November 1992 to August 2001, Senior Vice President of USF&G Corporation. | ||||||||
D. Craig Mense | Executive Vice President & Chief Financial Officer | 54 | 2004 | Executive Vice President and Chief Financial Officer since November, 2004. Prior to that, he served as President and Chief Executive Officer of Global Run-Off Operations at St. Paul Travelers. From May, 2003 to May, 2004, he was Chief Operating Officer of the Gulf Insurance Group at Travelers Property Casualty Corp. Previously, at Travelers Property Casualty Corp., Mr. Mense was Senior Vice President and Chief Financial Officer (Bond) from April, 1996 to July, 2002, and Chief Financial and Administrative Officer (Personal Lines) from July, 2002 to March, 2003. |
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Number of securities | ||||||||||||
Number of securities to | remaining available for | |||||||||||
be issued upon | Weighted-average exercise | future issuance under | ||||||||||
exercise of outstanding | price of outstanding | equity compensation plans | ||||||||||
options, warrants and | options, warrants and | (excluding securities | ||||||||||
rights | rights | reflected in column (a)) | ||||||||||
December 31, 2005 | (a) | (b) | (c) | |||||||||
Plan Category | ||||||||||||
Equity compensation plans approved by security holders | 1,628,600 | $ | 28.71 | 2,314,525 | ||||||||
Equity compensation plans not approved by security holders | – | – | – | |||||||||
Total | 1,628,600 | $ | 28.71 | 2,314,525 | ||||||||
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Page | ||||||||
Number | ||||||||
(a) | 1. | FINANCIAL STATEMENTS: | ||||||
71 | ||||||||
72 | ||||||||
74 | ||||||||
76 | ||||||||
77 | ||||||||
153 | ||||||||
(a) | 2. | FINANCIAL STATEMENT SCHEDULES: | ||||||
165 | ||||||||
166 | ||||||||
174 | ||||||||
175 | ||||||||
175 | ||||||||
176 | ||||||||
(a) | 3. | EXHIBITS: |
Exhibit | ||||||||
Description of Exhibit | Number | |||||||
(3) | Articles of incorporation and by-laws: | |||||||
Certificate of Incorporation of CNA Financial Corporation, as amended May 20, 1999 (Exhibit 3.1 to 1999 Form 10-K incorporated herein by reference.) | 3.1 | |||||||
By-Laws of CNA Financial Corporation, as amended April 28, 2004 (Exhibit 3.2 to 2004 Form 10-K incorporated herein by reference) | 3.2 | |||||||
(4) | Instruments defining the rights of security holders, including indentures: | |||||||
CNA Financial Corporation hereby agrees to furnish to the Commission upon request copies of instruments with respect to long term debt, pursuant to Item 601(b) (4) (iii) of Regulation S-K | 4.1 | |||||||
(10) | Material contracts: | |||||||
Federal Income Tax Allocation Agreement, dated February 29, 1980 between CNA Financial Corporation and Loews Corporation (Exhibit 10.2 to 1987 Form 10-K incorporated herein by reference.) | 10.1 | |||||||
CNA Supplemental Executive Retirement Benefit Plan, as amended through January 1, 2003 (Exhibit 99.2 to Form 8-K filed January 6, 2005 incorporated herein by reference.) | 10.2 |
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Exhibit | ||||||||
Description of Exhibit | Number | |||||||
First Amendment to the CNA Supplemental Executive Retirement Plan, dated February 27, 2004 (Exhibit 99.3 to Form 8-K filed January 6, 2005 incorporated herein by reference.) | 10.3 | |||||||
Second Amendment to the CNA Supplemental Retirement Plan, dated March 23, 2004 (Exhibit 99.4 to Form 8-K filed January 6, 2005 incorporated herein by reference.) | 10.4 | |||||||
Third Amendment to the CNA Supplemental Retirement Plan, dated December 31, 2004 (Exhibit 99.1 to Form 8-K filed January 6, 2005 incorporated herein by reference.) | 10.5 | |||||||
Continental Casualty Company “CNA” Annual Incentive Bonus Plan Provisions (Exhibit 10.1 to 1994 Form 10-K incorporated herein by reference.) | 10.6 | |||||||
CNA Financial Corporation 2000 Long Term Incentive Plan, dated August 4, 1999 (Exhibit 4.1 to 1999 Form S-8 filed August 4, 1999, incorporated herein by reference.) | 10.7 | |||||||
Share Purchase Agreement between CNA and TAWA UK Limited, dated July 15, 2002 for the entire issued share capital of CNA Re Management Company Limited (Exhibit 2.1 to September 30, 2002 Form 10-Q incorporated herein by reference.). | 10.8 | |||||||
Employment Agreement between CNA Financial Corporation and Stephen W. Lilienthal, dated October 26, 2005 (Exhibit 10.22 to October 28, 2005 Form 10-Q incorporated herein by reference) | 10.9 | |||||||
Employment Agreement between Continental Casualty Company and James R. Lewis, dated October 26, 2005 (Exhibit 10.21 to October 28, 2005 Form 10-Q incorporated herein by reference) | 10.10 | |||||||
Employment Agreement between Continental Casualty Company and Jonathan D. Kantor, dated March 16, 2005 (Exhibit 99.1 to June 13, 2005 Form 8-K incorporated herein by reference) | 10.11 | |||||||
Capital Support Agreement among CNA Financial Corporation, Loews Corporation and Continental Casualty Company, dated November 12, 2003 (Exhibit 10.15 to 2003 Form 10-K incorporated herein by reference) | 10.12 | |||||||
Employment Agreement between Continental Casualty Company and D. Craig Mense, dated December 2, 2004 (Exhibit 99.1 to December 8, 2004 Form 8-K incorporated herein by reference) | 10.13 | |||||||
Addendum to Employment Agreement between Continental Casualty Company and D. Craig Mense, dated December 2, 2004 (Exhibit 99.2 to December 8, 2004 Form 8-K incorporated herein by reference) | 10.14 | |||||||
Employment Agreement between Continental Casualty Company and Michael Fusco, dated April 1, 2004 (Exhibit 10.16 to 2004 Form 10-K incorporated herein by reference) | 10.15 |
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Exhibit | ||||||||
Description of Exhibit | Number | |||||||
CNA Supplemental Executive Savings and Capital Accumulation Plan, dated July 1, 2003 (Exhibit 10.17 to 2004 Form 10-K incorporated herein by reference) | 10.16 | |||||||
First Amendment to the CNA Supplemental Executive Savings and Capital Accumulation Plan, dated March 23, 2004 (Exhibit 10.18 to 2004 Form 10-K incorporated herein by reference) | 10.17 | |||||||
Second Amendment to the CNA Supplemental Executive Savings and Capital Accumulation Plan, dated March 23, 2004 (Exhibit 10.19 to 2004 Form 10-K incorporated herein by reference) | 10.18 | |||||||
CNA Financial Board of Directors Term Sheet — Director and Committee Member Fee Schedule — 2004 Annual Retainers (Exhibit 10.20 to 2004 Form 10-K incorporated herein by reference) | 10.19 | |||||||
(21) | Primary Subsidiaries of CNAF (Exhibit 21.1 to 2004 Form 10-K incorporated herein by reference) | 21.1 | ||||||
(23) | Consent of Independent Registered Public Accounting Firm | 23.1 | ||||||
(c) | Exhibits: | |||||||
None. | ||||||||
(d) | Condensed Financial Information of Unconsolidated Subsidiaries: | |||||||
None. |
on file with the Securities and Exchange Commission.
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December 31, 2005 | ||||||||||||
Cost or | Estimated | |||||||||||
Amortized | Fair | Carrying | ||||||||||
(In millions) | Cost | Value | Value | |||||||||
Fixed maturity securities available-for-sale: | ||||||||||||
Bonds: | ||||||||||||
United States Government and government agencies and authorities – taxable | $ | 1,687 | $ | 1,798 | $ | 1,798 | ||||||
States, municipalities and political subdivisions – tax exempt | 9,054 | 9,209 | 9,209 | |||||||||
Foreign governments and political subdivisions | 2,031 | 2,129 | 2,129 | |||||||||
Public utilities | 781 | 894 | 894 | |||||||||
All other corporate bonds | 18,579 | 18,717 | 18,717 | |||||||||
Redeemable preferred stocks | 213 | 216 | 216 | |||||||||
Total fixed maturity securities available-for-sale | 32,345 | 32,963 | 32,963 | |||||||||
Fixed maturity securities trading: | ||||||||||||
Bonds: | ||||||||||||
United States Government and government agencies and authorities – taxable | 4 | 4 | 4 | |||||||||
Foreign governments and political subdivisions | 26 | 26 | 26 | |||||||||
All other corporate bonds | 241 | 241 | 241 | |||||||||
Total fixed maturity securities trading | 271 | 271 | 271 | |||||||||
Equity securities available-for-sale: | ||||||||||||
Common stocks: | ||||||||||||
Banks, trusts and insurance companies | 3 | 5 | 5 | |||||||||
Industrial and other | 137 | 284 | 284 | |||||||||
Non-redeemable preferred stocks | 322 | 343 | 343 | |||||||||
Total equity securities available-for-sale | 462 | 632 | 632 | |||||||||
Equity securities trading: | ||||||||||||
Common stocks: | ||||||||||||
Industrial and other | 48 | 48 | 48 | |||||||||
Non-redeemable preferred stocks | 1 | 1 | 1 | |||||||||
Total equity securities trading | 49 | $ | 49 | 49 | ||||||||
Limited partnership investments | 1,509 | 1,509 | ||||||||||
Other invested assets | 35 | 33 | ||||||||||
Short term investments available-for-sale | 3,871 | 3,870 | ||||||||||
Short term investments trading | 367 | 368 | ||||||||||
Total investments | $ | 38,909 | $ | 39,695 | ||||||||
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Statements of Operations
2005 | 2004 | 2003 | ||||||||||
Years ended December 31 | Restated | Restated | ||||||||||
(In millions) | See Note J | See Note J | ||||||||||
Revenues: | ||||||||||||
Net investment income | $ | 18 | $ | 14 | $ | 16 | ||||||
Realized investment losses | (29 | ) | (62 | ) | (3 | ) | ||||||
Other income | — | 5 | 12 | |||||||||
Total revenues | (11 | ) | (43 | ) | 25 | |||||||
Expenses: | ||||||||||||
Administrative and general | 9 | 5 | 7 | |||||||||
Interest | 110 | 104 | 120 | |||||||||
Total expenses | 119 | 109 | 127 | |||||||||
Loss from operations before income taxes and equity in net income (loss) of subsidiaries | (130 | ) | (152 | ) | (102 | ) | ||||||
Income tax benefit | 46 | 53 | 36 | |||||||||
Loss before equity in net income (loss) of subsidiaries | (84 | ) | (99 | ) | (66 | ) | ||||||
Equity in net income (loss) of subsidiaries | 348 | 524 | (1,351 | ) | ||||||||
Net income (loss) | $ | 264 | $ | 425 | $ | (1,417 | ) | |||||
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Balance Sheets
2005 | 2004 | |||||||
December 31 | Restated | |||||||
(In millions) | See Note J | |||||||
Assets: | ||||||||
Investment in subsidiaries | $ | 10,263 | $ | 10,213 | ||||
Fixed maturity securities available-for-sale, at fair value, (amortized cost of $1 and $23) | 1 | 23 | ||||||
Equity securities available-for-sale, at fair value, (cost of $1 and $1) | 1 | 1 | ||||||
Other invested assets | – | (1 | ) | |||||
Short term investments, at fair value which approximates cost | 198 | 749 | ||||||
Receivables for securities sold | 10 | 3 | ||||||
Amounts due from affiliates | 44 | 70 | ||||||
Total assets | $ | 10,517 | $ | 11,058 | ||||
Liabilities and Stockholders’ Equity: | ||||||||
Liabilities: | ||||||||
Short term debt | 250 | 493 | ||||||
Long term debt | 1,287 | 1,536 | ||||||
Other | 30 | 55 | ||||||
Total liabilities | 1,567 | 2,084 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock (12,500,000 shares authorized) Series H Issue (no par value; $100,000 stated value; 7,500 shares issued; held by Loews Corporation) | 750 | 750 | ||||||
Common stock ($2.50 par value; 500,000,000 shares authorized; 258,177,285 shares issued; and 256,001,968 and 255,953,958 shares outstanding) | 645 | 645 | ||||||
Additional paid-in capital | 1,701 | 1,701 | ||||||
Retained earnings | 5,621 | 5,357 | ||||||
Accumulated other comprehensive income | 359 | 661 | ||||||
Treasury stock (2,175,317 and 2,223,327 shares), at cost | (67 | ) | (69 | ) | ||||
9,009 | 9,045 | |||||||
Notes receivable for the issuance of common stock | (59 | ) | (71 | ) | ||||
Total stockholders’ equity | 8,950 | 8,974 | ||||||
Total liabilities and stockholders’ equity | $ | 10,517 | $ | 11,058 | ||||
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Statements of Cash Flows
2005 | 2004 | 2003 | ||||||||||
Years ended December 31 | Restated | Restated | ||||||||||
(In millions) | See Note J | See Note J | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income (loss) | $ | 264 | $ | 425 | $ | (1,417 | ) | |||||
Adjustments to reconcile net income (loss) to net cash flows from operating activities: | ||||||||||||
(Income) loss of subsidiaries | (348 | ) | (524 | ) | 1,351 | |||||||
Dividends received from subsidiaries | 127 | 307 | 93 | |||||||||
Realized investment losses | 29 | 62 | 3 | |||||||||
Changes in: | ||||||||||||
Federal income taxes recoverable (amounts due to/from affiliates) | – | – | (1 | ) | ||||||||
Other, net | (59 | ) | 233 | 107 | ||||||||
Total adjustments | (251 | ) | 78 | 1,553 | ||||||||
Net cash flows provided by operating activities | 13 | 503 | 136 | |||||||||
Cash flows from investing activities: | ||||||||||||
Sales of fixed maturity securities | 8 | 85 | 235 | |||||||||
Purchases of fixed maturity securities | – | (27 | ) | (335 | ) | |||||||
Purchases of equity securities | – | – | 2 | |||||||||
Change in short term investments | 563 | (710 | ) | 349 | ||||||||
Capital contributions to subsidiaries | (41 | ) | (156 | ) | (1,201 | ) | ||||||
Return of capital from subsidiaries | – | 18 | 5 | |||||||||
Change in notes receivable from affiliates | – | – | 309 | |||||||||
Other, net | (64 | ) | (14 | ) | (2 | ) | ||||||
Net cash flows provided (used) by investing activities | 466 | (804 | ) | (638 | ) | |||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from issuance of debt | – | 546 | – | |||||||||
Principal payments on debt | (493 | ) | (250 | ) | (245 | ) | ||||||
Issuance of cumulative Series H preferred stock | – | – | 750 | |||||||||
Purchase of treasury stock | – | – | 1 | |||||||||
Other, net | 14 | 5 | (4 | ) | ||||||||
Net cash flows provided (used) by financing activities | (479 | ) | 301 | 502 | ||||||||
Net change in cash | – | – | – | |||||||||
Cash, beginning of year | – | – | – | |||||||||
Cash, end of year | $ | – | $ | – | $ | – | ||||||
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December 31 | 2005 | 2004 | ||||||
(In millions) | ||||||||
Senior notes: | ||||||||
6.50%, face amount of $493, due April 15, 2005 | $ | — | $ | 493 | ||||
6.75%, face amount of $250, due November 15, 2006 | 250 | 249 | ||||||
6.45%, face amount of $150, due January 15, 2008 | 149 | 149 | ||||||
6.60%, face amount of $200, due December 15, 2008 | 199 | 199 | ||||||
5.85%, face amount of $549, due December 15, 2014 | 546 | 546 | ||||||
6.95%, face amount of $150, due January 15, 2018 | 149 | 149 | ||||||
Debenture, 7.25%, face amount of $243, due November 15, 2023 | 241 | 241 | ||||||
Urban Development Action Grant, 1.00%, due May 7, 2019 | 3 | 3 | ||||||
Total | $ | 1,537 | $ | 2,029 | ||||
Short term debt | $ | 250 | $ | 493 | ||||
Long term debt | 1,287 | 1,536 | ||||||
Total | $ | 1,537 | $ | 2,029 | ||||
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Years ended December 31 | 2004 | |||
(In millions) | ||||
Cash flows provided by operating activities | ||||
As originally reported | $ | 481 | ||
Impact of restatements | 22 | |||
Revised for restatements | $ | 503 | ||
Cash flows used by investing activities | ||||
As originally reported | $ | (782 | ) | |
Impact of restatements | (22 | ) | ||
Revised for restatements | $ | (804 | ) | |
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Gross Insurance Reserves | ||||||||||||||||||||||||||||||||||||||||||||
Insurance | Amortiz- | |||||||||||||||||||||||||||||||||||||||||||
Claims and | ation | |||||||||||||||||||||||||||||||||||||||||||
Deferred | Claim | Future | Policy- | Net | Policy- | of Deferred | Other | Net | ||||||||||||||||||||||||||||||||||||
Acquisition | And Claim | Policy | Unearned | holders | Net Earned | Investment | holders’ | Acquisition | Operating | Written Pre- | ||||||||||||||||||||||||||||||||||
(In millions) | Costs | Expense | Benefits | Premium | Funds | Premiums | Income (a) | Benefits | Costs | Expenses | miums (b) | |||||||||||||||||||||||||||||||||
December 31, 2005 | ||||||||||||||||||||||||||||||||||||||||||||
Standard Lines | $ | 408 | $ | 15,084 | $ | – | $ | 1,952 | $ | 30 | $ | 4,410 | $ | 767 | $ | 3,876 | $ | 986 | $ | 554 | $ | 4,382 | ||||||||||||||||||||||
Specialty Lines | 274 | 5,205 | – | 1,577 | – | 2,475 | 281 | 1,621 | 532 | 223 | 2,463 | |||||||||||||||||||||||||||||||||
Life and Group Non-Core | 515 | 3,277 | 6,297 | 168 | 1,465 | 704 | 593 | 1,161 | 22 | 318 | 694 | |||||||||||||||||||||||||||||||||
Corporate and Other Non-Core | – | 7,372 | – | 9 | – | (8 | ) | 251 | 343 | 3 | 138 | (19 | ) | |||||||||||||||||||||||||||||||
Eliminations | – | – | – | – | – | (12 | ) | – | (2 | ) | – | (75 | ) | (12 | ) | |||||||||||||||||||||||||||||
Consolidated Operations | $ | 1,197 | $ | 30,938 | $ | 6,297 | $ | 3,706 | $ | 1,495 | $ | 7,569 | $ | 1,892 | $ | 6,999 | $ | 1,543 | $ | 1,158 | $ | 7,508 | ||||||||||||||||||||||
December 31, 2004 | ||||||||||||||||||||||||||||||||||||||||||||
Standard Lines | $ | 444 | $ | 14,302 | $ | – | $ | 1,978 | $ | 43 | $ | 4,917 | $ | 496 | $ | 3,489 | $ | 1,109 | $ | 687 | $ | 4,582 | ||||||||||||||||||||||
Specialty Lines | 285 | 4,860 | – | 1,546 | – | 2,277 | 246 | 1,446 | 506 | 189 | 2,391 | |||||||||||||||||||||||||||||||||
Life and Group Non-Core | 537 | 3,680 | 5,883 | 164 | 1,682 | 921 | 692 | 1,369 | 36 | 367 | 633 | |||||||||||||||||||||||||||||||||
Corporate and Other Non-Core | 2 | 8,681 | – | 834 | – | 128 | 246 | 162 | 29 | 151 | 5 | |||||||||||||||||||||||||||||||||
Eliminations | – | – | – | – | – | (34 | ) | – | (21 | ) | – | (99 | ) | (17 | ) | |||||||||||||||||||||||||||||
Consolidated Operations | $ | 1,268 | $ | 31,523 | $ | 5,883 | $ | 4,522 | $ | 1,725 | $ | 8,209 | $ | 1,680 | $ | 6,445 | $ | 1,680 | $ | 1,295 | $ | 7,594 | ||||||||||||||||||||||
December 31, 2003 | ||||||||||||||||||||||||||||||||||||||||||||
Standard Lines | $ | 4,532 | $ | 408 | $ | 4,540 | $ | 1,195 | $ | 938 | $ | 4,563 | ||||||||||||||||||||||||||||||||
Specialty Lines | 1,840 | 201 | 1,651 | 408 | 189 | 2,038 | ||||||||||||||||||||||||||||||||||||||
Life and Group Non-Core | 2,376 | 821 | 2,394 | 224 | 596 | 538 | ||||||||||||||||||||||||||||||||||||||
Corporate and Other Non-Core | 582 | 226 | 1,807 | 138 | 199 | 496 | ||||||||||||||||||||||||||||||||||||||
Eliminations | (114 | ) | – | (115 | ) | – | (118 | ) | (16 | ) | ||||||||||||||||||||||||||||||||||
Consolidated Operations | $ | 9,216 | $ | 1,656 | $ | 10,277 | $ | 1,965 | $ | 1,804 | $ | 7,619 | ||||||||||||||||||||||||||||||||
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Balance at | Charged to | Charged to | ||||||||||||||||||
Beginning | Costs and | Other | Balance at | |||||||||||||||||
(In millions) | of Period | Expenses | Accounts (a) | Deductions | End of Period | |||||||||||||||
Year ended December 31, 2005 | ||||||||||||||||||||
Deducted from assets: | ||||||||||||||||||||
Allowance for doubtful accounts: | ||||||||||||||||||||
Insurance and reinsurance receivables | $ | 1,048 | $ | 111 | $ | 3 | $ | 198 | $ | 964 | ||||||||||
Valuation allowance: | ||||||||||||||||||||
Deferred income taxes | $ | 33 | $ | (3 | ) | $ | — | $ | — | $ | 30 | |||||||||
Year ended December 31, 2004 | ||||||||||||||||||||
Deducted from assets: | ||||||||||||||||||||
Allowance for doubtful accounts: | ||||||||||||||||||||
Insurance and reinsurance receivables | $ | 948 | $ | 312 | $ | 5 | $ | 217 | $ | 1,048 | ||||||||||
Valuation allowance: | ||||||||||||||||||||
Deferred income taxes | $ | — | $ | 33 | $ | — | $ | — | $ | 33 | ||||||||||
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Consolidated Property and Casualty Operations | ||||||||||||
As of and for the years ended December 31 (In millions) | 2005 | 2004 | 2003 | |||||||||
Deferred acquisition costs | $ | 1,197 | $ | 1,267 | ||||||||
Reserves for unpaid claim and claim adjustment expenses | 30,694 | 31,204 | ||||||||||
Discount deducted from claim and claim adjustment expense reserves above (based on interest rates ranging from 3.5% to 7.5%) | 1,739 | 1,827 | ||||||||||
Unearned premiums | 3,706 | 4,522 | ||||||||||
Net written premiums | 7,509 | 7,594 | $ | 7,619 | ||||||||
Net earned premiums | 7,558 | 7,925 | 7,471 | |||||||||
Net investment income | 1,595 | 1,266 | 1,541 | |||||||||
Incurred claim and claim adjustment expenses related to current year | 5,054 | 5,118 | 4,747 | |||||||||
Incurred claim and claim adjustment expenses related to prior years | 1,107 | 234 | 2,421 | |||||||||
Amortization of deferred acquisition costs | 1,541 | 1,641 | 1,827 | |||||||||
Paid claim and claim adjustment expenses | 3,541 | 5,401 | 5,077 |
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CNA Financial Corporation | ||||
Dated: March 8, 2006 | By | /s/ Stephen W. Lilienthal | ||
Stephen W. Lilienthal | ||||
Chief Executive Officer | ||||
(Principal Executive Officer) | ||||
By | /s/ D. Craig Mense | |||
D. Craig Mense | ||||
Executive Vice President and | ||||
Chief Financial Officer |
Dated: March 8, 2006 | By | /s/ Brenda J. Gaines | ||
(Brenda J. Gaines, Director) | ||||
Dated: March 8, 2006 | By | /s/ Stephen W. Lilienthal | ||
(Stephen W. Lilienthal, Chief Executive Officer | ||||
and Director) | ||||
Dated: March 8, 2006 | By | /s/ Paul J. Liska | ||
(Paul J. Liska, Director) | ||||
Dated: March 8, 2006 | By | /s/ Don M. Randel | ||
(Don M. Randel, Director) |
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Dated: March 8, 2006 | By | /s/ Joseph Rosenberg | ||
(Joseph Rosenberg, Director) | ||||
Dated: March 8, 2006 | By | /s/ Andrew Tisch | ||
(Andrew Tisch, Director) | ||||
Dated: March 8, 2006 | By | /s/ James S. Tisch | ||
(James S. Tisch, Director) | ||||
Dated: March 8, 2006 | By | /s/ Marvin Zonis | ||
(Marvin Zonis, Director) |
178