EXHIBIT 99.2
CNA FINANCIAL CORPORATION
SUPPLEMENTAL FINANCIAL INFORMATION
JUNE 30, 2003
CNA FINANCIAL CORPORATION
TABLE OF CONTENTS
JUNE 30, 2003
PAGE
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Supplemental Financial Information i-ii
Statements of Operations 1
Components of Net Income and Per Share Data 2
Selected Balance Sheet Data and Condensed Consolidated Statement of Cash Flows Data 3
Property & Casualty Insurance Claim & Claim Adjustment Expense Reserve Data 4
Property & Casualty Insurance Claim & Claim Adjustment Expense Reserve Rollforward 5
Investments by Asset Class 6
Operating Results and Other Financial Data by Segment:
Property & Casualty Segments 7-10
Catastrophe Losses 11
Group & Life Segments and Corporate & Other 12-13
Analysis of Pretax Net Investment Income 14-15
Statutory Data - Preliminary 16
Property & Casualty Segments Loss and LAE Ratio Analysis 17
Impact of Prior Year Development 18-25
Summary of Development by Segment and Line of Business 26
Gross Loss and ALAE Ratios by Segment and Line of Business 27
Net Loss and ALAE Ratios by Segment and Line of Business 28
CNA FINANCIAL CORPORATION
SUPPLEMENTAL FINANCIAL INFORMATION
DEFINITIONS AND PRESENTATION
o P&C OPERATIONS includes Standard Lines and Specialty Lines.
o P&C SEGMENTS includes Standard Lines, Specialty Lines and CNA Re.
o CORPORATE & OTHER is comprised primarily of losses and expenses related to
the centralized adjusting and settlement of asbestos, environmental
pollution and mass tort claims, certain run-off insurance and non-insurance
operations. The Corporate & Other segment results also include interest
expense on corporate borrowings.
o P&C COMPANIES includes Standard Lines, Specialty Lines, CNA Re and P&C
business written in Group Operations, Life Operations and Corporate &
Other.
o The results from discontinued operations relate to CNA Vida, CNA's
Chilean-based life insurer, which was sold in the first quarter of 2002.
CNA Vida's results of operations, including the loss on sale, are reported
as discontinued operations in all periods presented as required by SFAS
144.
o Underwriting results are net earned premiums less net incurred claims, the
costs incurred to settle claims, acquisition expenses and underwriting
expenses.
o The Loss & LAE ratio represents claim and claim adjustment expenses as a
percentage of net earned premiums.
o The expense ratio is the percentage of underwriting expenses, acquisition
expenses and dividends, including the amortization of deferred acquisition
costs, to net earned premiums.
o The dividend ratio is the ratio of dividends incurred to net earned
premiums.
o Limited partnerships (LP's) are a relatively small portion of CNA's overall
investment portfolio. The majority of the LP's invest in a substantial
number of securities that are readily marketable. CNA is a passive investor
in such partnerships and does not have influence over the partnerships'
management, who are committed to operate them according to established
guidelines and strategies. These strategies may include the use of leverage
and hedging techniques that potentially introduce more volatility and risk
to the partnerships.
o All amounts are in millions, except for per share and ratio information.
o Certain immaterial differences are due to rounding.
ACCOUNTING PRONOUNCEMENTS
o During the third quarter of 2002, the Company completed its initial
goodwill impairment testing under SFAS 142, Goodwill and Other Intangible
Assets, and recorded a $57 million after-tax impairment charge. The
impairment was recorded as a cumulative effect of a change in accounting
principle as of January 1, 2002, primarily in Specialty Lines, Life
Operations and Corporate & Other.
i
CNA FINANCIAL CORPORATION
SUPPLEMENTAL FINANCIAL INFORMATION
NON-GAAP FINANCIAL MEASURES
This financial supplement presents certain GAAP and non-GAAP financial measures
to provide information used by management to monitor the Company's operating
performance. Management utilizes various financial measures to monitor the
Company's insurance operations and investment portfolio. Underwriting results,
which are derived from certain income statement amounts, are considered non-GAAP
financial measures and are used by management to monitor performance of the
Company's insurance operations. The Company's investment portfolio is monitored
through analysis of various quantitative and qualitative factors and certain
decisions related to the sale or impairment of investments produce realized
gains and losses. Net realized investment gains and losses, which are comprised
of after-tax realized investment gains and losses net of participating
policyholders' and minority interest are a non-GAAP financial measure.
Underwriting results are computed as net earned premiums less net incurred
claims and the cost incurred to settle these claims, acquisition expenses and
underwriting expenses. Management uses underwriting results and operating ratios
to monitor insurance operations' results without the impact of certain factors,
including investment income, other revenues, other expenses, minority interest,
income tax benefit (expense) and net realized investment gains or losses.
Management excludes these factors in order to analyze the direct relationship
between the net earned premiums and the related claims and the cost incurred to
settle these claims, acquisition expenses and underwriting expenses.
Management excludes after-tax net realized investment gains or losses when
analyzing the insurance operations because net realized investment gains or
losses related to the Company's available-for-sale investment portfolio are
largely discretionary, except for losses related to other-than-temporary
impairments, and are generally driven by economic factors that are not
necessarily consistent with key drivers of underwriting performance.
Operating ratios are calculated using insurance results and are used by the
insurance industry and regulators such as state departments of insurance and the
National Association of Insurance Commissioners for financial regulation and as
a basis of comparison among companies. The ratios presented in this financial
supplement are calculated using GAAP financial results and include the loss and
loss adjustment expense ratio (loss ratio) as well as the expense, dividend and
combined ratios. The loss ratio is the percentage of net incurred claim and
claim adjustment expenses to net earned premiums. The expense ratio is the
percentage of underwriting and acquisition expenses, including the amortization
of deferred acquisition costs, to net earned premiums. The dividend ratio is the
ratio of dividends incurred to net earned premiums. The combined ratio is the
sum of the loss, expense and dividend ratios.
The Company's investment portfolio is monitored by management through analyses
of various factors including unrealized gains and losses on securities,
portfolio duration and exposure to interest rate, market and credit risk. Based
on such analyses, the Company may impair an investment security in accordance
with its policy, or sell a security. Such activities will produce realized gains
and losses.
While management uses various non-GAAP financial measures to monitor various
aspects of the Company's performance, relying on any measure other than net
income, which is the most directly comparable GAAP measure to underwriting
results and realized gains and losses, is not a complete representation of
financial performance. Management believes that its process of evaluating
performance through the use of these non-GAAP financial measures provides a
basis for understanding the operations and the impact to net income as a whole.
Management also believes that investors find these non-GAAP financial measures
described above useful to help interpret the underlying trends and performance,
as well as to provide visibility into the significant components of net income.
ii
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
STATEMENTS OF OPERATIONS
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PERIOD ENDED JUNE 30 THREE MONTHS SIX MONTHS
FAV / FAV /
(UNFAV) (UNFAV)
(In millions) 2003 2002 (1) % CHANGE 2003 2002 (1) % CHANGE
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STATEMENTS OF OPERATIONS
Revenues:
Net earned premiums $ 2,197 $ 2,826 (22)% $ 4,578 $ 5,663 (19)%
Net investment income 427 502 (15) 859 928 (7)
Realized investment gains (losses), net of participating
policyholders' and minority interests 378 (162) N/A 302 (161) N/A
Other revenues 97 146 (34) 205 328 (38)
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Total revenues 3,099 3,312 (6) 5,944 6,758 (12)
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Claims, benefits and expenses:
Insurance claims and policyholders' benefits 2,067 2,382 13 3,937 4,692 16
Other operating expenses 922 854 (8) 1,759 1,785 1
Interest 33 38 13 67 75 11
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Total claims, benefits and expenses 3,022 3,274 8 5,763 6,552 12
------- ------- ------- -------
Income from continuing operations before income tax
and minority interest 77 38 103 181 206 (12)
Income tax expense (5) (2) (150) (23) (53) 57
Minority interest (2) (5) 60 (5) (10) 50
------- ------- ------- -------
Income from continuing operations before cumulative
effect of a change in accounting principle 70 31 126 153 143 7
Loss from discontinued operations, net of tax - - N/A - (35) N/A
Cumulative effect of a change in accounting principle,
net of tax - - N/A - (57) N/A
------- ------- ------- -------
Net income $ 70 $ 31 126 % $ 153 $ 51 200 %
======= ======= ======= =======
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(1) The three months and six months ended June 30, 2002 results have been
restated to reflect an adjustment to the Company's historical accounting
for CNA's life settlement contracts and the related revenue recognition.
Refer to CNA's 2002 Form 10-K for further information related to this
restatement.
1
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
COMPONENTS OF NET INCOME AND PER SHARE DATA
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PERIOD ENDED JUNE 30 THREE MONTHS SIX MONTHS
FAV / FAV /
(UNFAV) (UNFAV)
(In millions, except per share data) 2003 2002 (1) % CHANGE 2003 2002 (1) % CHANGE
- ------------------------------------------------------------------------------------------------------------------------------------
COMPONENTS OF NET INCOME
(Loss) income before net realized investment gains (losses) $(179) $ 136 N/A % $ (47) $ 246 (119)%
Net realized investment gains (losses), net of
participating policyholders' and minority interests 249 (105) N/A 200 (103) N/A
----- ----- ----- -----
Income from continuing operations 70 31 126 153 143 7
Loss from discontinued operations, net of tax - - N/A - (35) N/A
Cumulative effect of a change in accounting principle, net of tax - - N/A - (57) N/A
----- ----- ----- -----
Net income $ 70 $ 31 126 % $ 153 $ 51 200 %
===== ===== ===== =====
BASIC AND DILUTED EARNINGS PER SHARE
Income from continuing operations (2) $0.25 $0.14 79 $0.55 $0.65 (15)
Loss from discontinued operations, net of tax - - N/A - (0.16) N/A
Cumulative effect of a change in accounting principle, net of tax - - N/A - (0.26) N/A
----- ----- ----- -----
Basic and diluted earnings per share available to common stockholders $0.25 $0.14 79 % $0.55 $0.23 139 %
===== ===== ===== =====
Weighted average outstanding common stock and common stock
equivalents 223.6 223.6 223.6 223.6
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(1) The three months and six months ended June 30, 2002 results have been
restated to reflect an adjustment to the Company's historical accounting
for CNA's life settlement contracts and the related revenue recognition.
Refer to CNA's 2002 Form 10-K for further information related to this
restatement.
(2) The per share results available to common stockholders for the three
months and six months ended June 30, 2003 were reduced by $15 million and
$30 million, or $0.07 per share and $0.13 per share, of accumulated but
undeclared preferred stock dividends.
2
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
SELECTED BALANCE SHEET DATA AND CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
DATA
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JUNE 30, DECEMBER 31,
(In millions, except per share data) 2003 2002
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Total assets $65,324 $61,731
Insurance reserves 41,451 40,179
Debt 2,158 2,292
Total liabilities 54,741 52,074
Minority interest 265 256
Accumulated other comprehensive income 1,370 604
Total stockholders' equity 10,318 9,401
Book value per common share $ 42.65 $ 38.68
Book value per common share excluding unrealized
gain or loss on fixed maturity securities $ 37.43 $ 36.53
Outstanding shares of common stock (in millions of shares) 223.6 223.6
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THREE MONTHS ENDED
JUNE 30
(In millions) 2003 2002
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Net cash flows provided by operating activities $ 70 $ 513
Net cash flows used by investing activities (84) (445)
Net cash flows used by financing activities (12) (17)
----- -----
Net cash flows $ (26) $ 51
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SIX MONTHS ENDED
JUNE 30
(In millions) 2003 2002
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Net cash flows provided by operating activities $ 115 $ 435
Net cash flows provided (used) by investing activities 48 (410)
Net cash flows used by financing activities (149) (22)
----- -----
Net cash flows $ 14 $ 3
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3
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
PROPERTY & CASUALTY INSURANCE
CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVE DATA
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CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVES (1) TOTAL P&C
(In millions) STANDARD LINES SPECIALTY LINES P&C OPERATIONS CNA RE SEGMENTS
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As of June 30, 2003
Gross $11,793 $ 6,085 $17,878 $2,064 $19,942
Ceded 4,666 2,618 7,284 847 8,131
Net 7,127 3,467 10,594 1,217 11,811
As of December 31, 2002
Gross $11,576 $ 5,874 $17,450 $2,264 $19,714
Ceded 4,314 2,501 6,815 902 7,717
Net 7,262 3,373 10,635 1,362 11,997
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CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVES (1)
(In millions) GROUP OPERATIONS LIFE OPERATIONS CORPORATE & OTHER TOTAL OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------
As of June 30, 2003
Gross $ 1,468 $ 1,457 $ 5,077 $27,944
Ceded 89 84 3,181 11,485
Net 1,379 1,373 1,896 16,459
As of December 31, 2002
Gross $ 1,400 $ 1,409 $ 4,847 $27,370
Ceded 85 80 2,845 10,727
Net 1,315 1,329 2,002 16,643
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(1) Gross reserves as of June 30, 2003 and December 31, 2002 include $1,762
million ($1,415 million in Group Operations, $141 million in Life
Operations and $206 million in Corporate & Other) and $1,722 million
($1,350 million in Group Operations, $133 million in Life Operations and
$239 million in Corporate & Other) of Life & Group company reserves, which
are primarily related to accident and health business. Net reserves as of
June 30, 2003 and December 31, 2002 include $1,622 million ($1,402 million
in Group Operations, $61 million in Life Operations and $159 million in
Corporate & Other) and $1,578 million ($1,337 million in Group Operations,
$56 million in Life Operations and $185 million in Corporate & Other) of
Life & Group company reserves, which are primarily related to accident and
health business.
4
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
PROPERTY & CASUALTY INSURANCE
CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVE ROLLFORWARD (1)
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THREE MONTHS SIX MONTHS
ENDED ENDED
(In millions) JUNE 30, 2003 JUNE 30, 2003
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Claim & claim adjustment expense reserves, beginning of period
Gross $ 27,446 $ 27,370
Ceded 11,217 10,727
-------- --------
Net 16,229 16,643
-------- --------
Net incurred claim & claim adjustment expenses 1,935 3,661
Net claim & claim adjustment expense payments (1,705) (3,845)
Claim & claim adjustment expense reserves, end of period
Net 16,459 16,459
Ceded 11,485 11,485
-------- --------
Gross $ 27,944 $ 27,944
======== ========
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(1) Gross reserves as of June 30, 2003 and December 31, 2002 include $1,762
million and $1,722 million of Life & Group company reserves, which are
primarily related to accident and health business. Net reserves as of June
30, 2003 and December 31, 2002 include $1,622 million and $1,578 million
of Life & Group company reserves, which are primarily related to accident
and health business.
5
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
INVESTMENTS BY ASSET CLASS
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JUNE 30, 2003 DECEMBER 31, 2002
BOOK MARKET BOOK MARKET
(In millions) VALUE VALUE VALUE VALUE
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PROPERTY & CASUALTY AND OTHER COMPANIES
Investments:
Fixed maturity securities $20,131 $21,148 $17,673 $18,172
Equity securities 368 577 467 614
Short-term investments 3,921 3,923 5,780 5,778
Limited partnership investments 1,141 1,141 1,055 1,055
Mortgage loans and other invested assets 50 38 61 73
------- ------- ------- -------
Subtotal 25,611 26,827 25,036 25,692
Securities lending collateral 611 611 399 399
------- ------- ------- -------
Total investments $26,222 $27,438 $25,435 $26,091
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LIFE AND GROUP COMPANIES
Investments:
Fixed maturity securities $ 8,560 $ 9,339 $ 7,860 $ 8,103
Equity securities 58 70 52 52
Short-term investments 436 436 686 686
Limited partnership investments 5 5 5 5
Mortgage loans, policy loans and other invested assets 197 193 210 211
------- ------- ------- -------
Subtotal 9,256 10,043 8,813 9,057
Securities lending collateral 365 365 145 145
------- ------- ------- -------
Total investments $ 9,621 $10,408 $ 8,958 $ 9,202
------- ------- ------- -------
TOTAL INVESTMENTS $35,843 $37,846 $34,393 $35,293
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6
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
PROPERTY & CASUALTY SEGMENTS - OPERATING RESULTS
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THREE MONTHS ENDED STANDARD LINES SPECIALTY LINES P&C OPERATIONS
JUNE 30 FAV / (UNFAV) FAV / (UNFAV) FAV / (UNFAV)
(In millions) 2003 2002 % CHANGE 2003 2002 % CHANGE 2003 2002 % CHANGE
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Gross written premiums $ 1,422 $ 1,194 19 % $ 863 $ 729 18 % $ 2,285 $ 1,923 19 %
Net written premiums 890 1,056 (16) 681 572 19 1,571 1,628 (4)
Net earned premiums 823 1,032 (20) 664 535 24 1,487 1,567 (5)
Claim and claim adjustment
expenses 773 805 4 616 377 (63) 1,389 1,182 (18)
Acquisition expenses 222 186 (19) 137 109 (26) 359 295 (22)
Underwriting expenses 143 121 (18) 73 63 (16) 216 184 (17)
Policyholders' dividends 11 15 27 - 1 N/A 11 16 31
------- ------- ----- ------- ------- -------
Underwriting loss (326) (95) N/A (162) (15) N/A (488) (110) N/A
------- ------- ----- ------- ------- -------
Net investment income 84 134 (37) 79 75 5 163 209 (22)
Other revenues 59 80 (26) 26 33 (21) 85 113 (25)
Other expenses 57 70 19 27 25 (8) 84 95 12
------- ------- ----- ------- ------- -------
(Loss) income before income tax,
minority interest and net
realized investment gains
(losses) (240) 49 N/A (84) 68 N/A (324) 117 N/A
Income tax benefit (expense) 96 (9) N/A 28 (23) N/A 124 (32) N/A
Minority interest - - N/A (2) (5) 60 (2) (5) 60
------- ------- ----- ------- ------- -------
(Loss) income before net realized
investment gains (losses) (144) 40 N/A (58) 40 N/A (202) 80 N/A
Realized investment gains (losses) 169 (31) N/A 79 (26) N/A 248 (57) N/A
Income tax (expense) benefit on
realized investment gains (losses) (59) 10 N/A (24) 9 N/A (83) 19 N/A
------- ------- ----- ------- ------- -------
(Loss) income from continuing
operations (34) 19 N/A (3) 23 (113) (37) 42 (188)
Cumulative effect of a change in
accounting principle - - N/A - - N/A - - N/A
------- ------- ----- ------- ------- -------
Net (loss) income $ (34) $ 19 N/A % $ (3) $ 23 (113)% $ (37) $ 42 (188)%
======= ======= ===== ======= ======= =======
FINANCIAL RATIOS
Loss & LAE 93.9 % 78.1 % 92.7 % 70.3 % 93.4 % 75.5 %
Acquisition expense 26.9 18.0 20.7 20.3 24.1 18.8
Underwriting expense 17.5 11.7 10.9 12.1 14.5 11.8
Dividends 1.3 1.5 0.1 0.1 0.8 1.0
------- ------- ----- ------- ------- -------
Expense ratio, including dividends 45.7 31.2 31.7 32.5 39.4 31.6
------- ------- ----- ------- ------- -------
Combined ratio 139.6 % 109.3 % 124.4 % 102.8 % 132.8 % 107.1 %
======= ======= ===== ======= ======= =======
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7
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
PROPERTY & CASUALTY SEGMENTS - OPERATING RESULTS
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THREE MONTHS ENDED CNA RE TOTAL P&C SEGMENTS
JUNE 30 FAV / (UNFAV) FAV / (UNFAV)
(In millions) 2003 2002 % CHANGE 2003 2002 % CHANGE
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Gross written premiums $ 148 $ 171 (13)% $ 2,433 $ 2,094 16 %
Net written premiums 123 160 (23) 1,694 1,788 (5)
Net earned premiums 134 168 (20) 1,621 1,735 (7)
Claim and claim adjustment expenses 95 138 31 1,484 1,320 (12)
Acquisition expenses 29 31 6 388 326 (19)
Underwriting expenses 15 14 (7) 231 198 (17)
Policyholders' dividends - - N/A 11 16 31
------- ------- ------- -------
Underwriting loss (5) (15) 67 (493) (125) N/A
------- ------- ------- -------
Net investment income 22 48 (54) 185 257 (28)
Other revenues - - N/A 85 113 (25)
Other expenses - - N/A 84 95 12
------- ------- ------- -------
Income (loss) before income tax, minority interest
and net realized investment gains (losses) 17 33 (48) (307) 150 N/A
Income tax (expense) benefit (4) (9) 56 120 (41) N/A
Minority interest - - N/A (2) (5) 60
------- ------- ------- -------
Income (loss) before net realized investment gains (losses) 13 24 (46) (189) 104 N/A
Realized investment gains (losses) 33 (6) N/A 281 (63) N/A
Income tax (expense) benefit on realized
investment gains (losses) (11) 2 N/A (94) 21 N/A
------- ------- ------- -------
Income (loss) from continuing operations 35 20 75 (2) 62 (103)
Cumulative effect of a change in accounting principle - - N/A - - N/A
------- ------- ------- -------
Net income (loss) $ 35 $ 20 75 % $ (2) $ 62 (103)%
======= ======= ======= =======
FINANCIAL RATIOS
Loss & LAE 71.4 % 81.6 % 91.6 % 76.0 %
Acquisition expense 21.9 18.2 23.9 18.7
Underwriting expense 10.5 9.1 14.2 11.6
Dividends - - 0.7 0.9
------- ------- ------- -------
Expense ratio, including dividends 32.4 27.3 38.8 31.2
------- ------- ------- -------
Combined ratio 103.8 % 108.9 % 130.4 % 107.2 %
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8
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
PROPERTY & CASUALTY SEGMENTS - OPERATING RESULTS
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SIX MONTHS ENDED STANDARD LINES SPECIALTY LINES P&C OPERATIONS
JUNE 30 FAV / (UNFAV) FAV / (UNFAV) FAV / (UNFAV)
(In millions) 2003 2002 % CHANGE 2003 2002 % CHANGE 2003 2002 % CHANGE
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Gross written premiums $ 2,859 $ 2,804 2 % $ 1,843 $ 1,595 16 % $ 4,702 $ 4,399 7 %
Net written premiums 1,994 2,139 (7) 1,345 1,112 21 3,339 3,251 3
Net earned premiums 1,862 2,048 (9) 1,288 1,043 23 3,150 3,091 2
Claim and claim adjustment expenses 1,542 1,589 3 1,049 739 (42) 2,591 2,328 (11)
Acquisition expenses 420 385 (9) 265 211 (26) 685 596 (15)
Underwriting expenses 280 247 (13) 141 126 (12) 421 373 (13)
Policyholders' dividends 26 31 16 1 2 50 27 33 18
------- ------- ------- ------- ------- -------
Underwriting loss (406) (204) (99) (168) (35) N/A (574) (239) (140)
------- ------- ------- ------- ------- -------
Net investment income 194 237 (18) 149 135 10 343 372 (8)
Other revenues 130 163 (20) 46 87 (47) 176 250 (30)
Other expenses 117 141 17 44 56 21 161 197 18
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(Loss) income before income tax,
minority interest and net
realized investment gains (losses) (199) 55 N/A (17) 131 (113) (216) 186 N/A
Income tax benefit (expense) 90 (5) N/A 10 (47) 121 100 (52) N/A
Minority interest - - N/A (5) (10) 50 (5) (10) 50
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(Loss) income before net realized
investment gains (losses) (109) 50 N/A (12) 74 (116) (121) 124 (198)
Realized investment gains (losses) 182 (24) N/A 66 (31) N/A 248 (55) N/A
Income tax (expense) benefit on
realized investment gains (losses) (64) 8 N/A (22) 10 N/A (86) 18 N/A
------- ------- ------- ------- ------- -------
Income from continuing operations 9 34 (74) 32 53 (40) 41 87 (53)
Cumulative effect of a change in
accounting principle - - N/A - (48) N/A - (48) N/A
------- ------- ------- ------- ------- -------
Net income $ 9 $ 34 (74)% $ 32 $ 5 N/A % $ 41 $ 39 5 %
======= ======= ======= ======= ======= =======
FINANCIAL RATIOS
Loss & LAE 82.8 % 77.6 % 81.4 % 70.8 % 82.3 % 75.3 %
Acquisition expense 22.5 18.8 20.6 20.2 21.7 19.3
Underwriting expense 15.1 12.1 10.9 12.2 13.3 12.0
Dividends 1.4 1.5 0.1 0.1 0.9 1.1
------- ------- ------- ------- ------- -------
Expense ratio, including dividends 39.0 32.4 31.6 32.5 35.9 32.4
------- ------- ------- ------- ------- -------
Combined ratio 121.8 % 110.0 % 113.0 % 103.3 % 118.2 % 107.7 %
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9
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
PROPERTY & CASUALTY SEGMENTS - OPERATING RESULTS
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SIX MONTHS ENDED CNA RE TOTAL P&C SEGMENTS
JUNE 30 FAV / (UNFAV) FAV / (UNFAV)
(In millions) 2003 2002 % CHANGE 2003 2002 % CHANGE
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Gross written premiums $ 378 $ 399 (5)% $ 5,080 $ 4,798 6 %
Net written premiums 328 327 0 3,667 3,578 2
Net earned premiums 287 305 (6) 3,437 3,396 1
Claim and claim adjustment expenses 193 194 1 2,784 2,522 (10)
Acquisition expenses 61 69 12 746 665 (12)
Underwriting expenses 27 32 16 448 405 (11)
Policyholders' dividends - - N/A 27 33 18
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Underwriting income (loss) 6 10 (40) (568) (229) (148)
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Net investment income 46 81 (43) 389 453 (14)
Other revenues 1 1 0 177 251 (29)
Other expenses - - N/A 161 197 18
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Income (loss) before income tax, minority interest
and net realized investment gains (losses) 53 92 (42) (163) 278 (159)
Income tax (expense) benefit (15) (28) 46 85 (80) N/A
Minority interest - - N/A (5) (10) 50
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Income (loss) before net realized investment gains (losses) 38 64 (41) (83) 188 (144)
Realized investment gains (losses) 42 3 N/A 290 (52) N/A
Income tax (expense) benefit on realized
investment gains (losses) (11) 1 N/A (97) 19 N/A
------- ------- ------- -------
Income from continuing operations 69 68 1 110 155 (29)
Cumulative effect of a change in accounting principle - - N/A - (48) N/A
------- ------- ------- -------
Net income $ 69 $ 68 1 % $ 110 $ 107 3 %
======= ======= ======= =======
FINANCIAL RATIOS
Loss & LAE 67.4 % 63.6 % 81.0 % 74.3 %
Acquisition expense 21.3 22.6 21.7 19.6
Underwriting expense 9.2 10.5 13.0 11.9
Dividends - - 0.8 1.0
------- ------- ------- -------
Expense ratio, including dividends 30.5 33.1 35.5 32.5
------- ------- ------- -------
Combined ratio 97.9 % 96.7 % 116.5 % 106.8 %
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10
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
PROPERTY & CASUALTY SEGMENTS - CATASTROPHE LOSSES
- --------------------------------------------------------------------------------------------------------------------------
CATASTROPHE LOSSES (PRETAX)
(In millions) STANDARD LINES SPECIALTY LINES P&C OPERATIONS CNA RE TOTAL P&C SEGMENTS
- --------------------------------------------------------------------------------------------------------------------------
Three months ended June 30, 2003 $48 $ 1 $49 $11 $60
Six months ended June 30, 2003 61 3 64 11 75
Three months ended June 30, 2002 $ 6 $ 2 $ 8 $ - $ 8
Six months ended June 30, 2002 9 2 11 - 11
- --------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
CATASTROPHE LOSSES (AFTER-TAX)
(In millions) STANDARD LINES SPECIALTY LINES P&C OPERATIONS CNA RE TOTAL P&C SEGMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
Three months ended June 30, 2003 $31 $ 1 $32 $ 7 $39
Six months ended June 30, 2003 40 2 42 7 49
Three months ended June 30, 2002 $ 4 $ 1 $ 5 $ - $ 5
Six months ended June 30, 2002 6 1 7 - 7
- -----------------------------------------------------------------------------------------------------------------------------------
11
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
GROUP & LIFE AND CORPORATE & OTHER SEGMENTS - OPERATING RESULTS
- ------------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED TOTAL P&C GROUP LIFE CORPORATE & TOTAL
JUNE 30 SEGMENTS OPERATIONS (1) OPERATIONS (3) OTHER OPERATIONS (3)
(In millions) 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Net earned premiums $1,621 $1,735 $329 $820 $263 $ 234 $(16) $ 37 $2,197 $2,826
Insurance claims & policyholders' benefits 1,484 1,320 254 724 301 266 15 54 2,054 2,364
Policyholders' dividends 11 16 - - 6 5 (4) (3) 13 18
Insurance related expenses 619 524 115 137 71 65 40 (2) 845 724
Net investment income 185 257 70 62 133 137 39 46 427 502
Other revenues 85 113 15 26 19 25 (22) (18) 97 146
Other expenses 84 95 8 10 14 18 4 45 110 168
------ ------ ---- ---- ---- ----- ---- ---- ------ ------
(Loss) income before income tax, minority
interest and net realized investment
gains (losses) (307) 150 37 37 23 42 (54) (29) (301) 200
Income tax benefit (expense) 120 (41) (11) (12) (6) (15) 21 9 124 (59)
Minority interest (2) (5) - - - - - - (2) (5)
------ ------ ---- ---- ---- ----- ---- ---- ------ ------
(Loss) income before net realized investment
gains (losses) (189) 104 26 25 17 27 (33) (20) (179) 136
Realized investment gains (losses) 281 (63) 20 (27) 28 (53) 49 (19) 378 (162)
Income tax (expense) benefit on realized
investment gains (losses) (94) 21 (7) 9 (10) 18 (18) 9 (129) 57
------ ------ ---- ---- ---- ----- ---- ---- ------ ------
(Loss) income from continuing operations (2) 62 39 7 35 (8) (2) (30) 70 31
Loss from discontinued operations - - - - - - - - - -
Cumulative effect of a change in accounting
principle - - - - - - - - - -
------ ------ ---- ---- ---- ----- ---- ---- ------ ------
Net (loss) income $ (2) $ 62 $ 39 $ 7 $ 35 $ (8) $ (2) $(30) $ 70 $ 31
====== ====== ==== ==== ==== ===== ==== ==== ====== ======
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER FINANCIAL DATA TOTAL P&C SEGMENTS GROUP LIFE OPERATIONS CORPORATE & OTHER TOTAL OPERATIONS
PROPERTY & CASUALTY OPERATIONS(1)(2)
COMPANY INFORMATION 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Gross written premiums $ 2,433 $ 2,094 $ 193 $ 741 $ 131 $ 123 $ 505 $ 482 $ 3,262 $ 3,440
Net written premiums 1,694 1,788 - 535 131 122 1 - 1,826 2,445
Net earned premiums 1,621 1,735 - 535 130 118 (3) 2 1,748 2,390
Underwriting (loss) income (493) (125) (1) 3 (61) (39) (61) (39) (616) (200)
FINANCIAL RATIOS
Loss & LAE 91.6 % 76.0 % N/A % 89.5 % 121.7 % 109.8 % N/A % N/A % 95.1 % 81.5 %
Acquisition expense 23.9 18.7 N/A 0.6 14.2 13.8 N/A N/A 25.5 14.4
Underwriting expense 14.2 11.6 N/A 9.2 10.6 9.9 N/A N/A 14.0 11.8
Dividends 0.7 0.9 N/A - - - N/A N/A 0.6 0.7
-------- -------- ------ ----- ----- ----- ------- ------ -------- --------
Expense ratio, including
dividends 38.8 31.2 N/A 9.8 24.8 23.7 N/A N/A 40.1 26.9
-------- -------- ------ ----- ----- ----- ------- ------ -------- --------
Combined ratio 130.4 % 107.2 % N/A % 99.3 % 146.5 % 133.5 % N/A % N/A % 135.2 % 108.4 %
======== ======== ====== ===== ===== ===== ======= ====== ======== ========
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Included in gross written, net written and earned premiums for 2002 is
$535 million relating to the National Postal Mail Handlers Union
contract, which was transferred on July 1, 2002.
(2) Included in gross written premiums for 2003 and 2002 is $185 million
and $195 million of business ceded to CNA Group Life Assurance Company.
(3) The three months ended June 30, 2002 results have been restated to
reflect an adjustment to the Company's historical accounting for CNA's
life settlement contracts and the related revenue recognition. Refer to
CNA's 2002 Form 10-K for further information related to this
restatement.
12
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
GROUP & LIFE AND CORPORATE & OTHER SEGMENTS - OPERATING RESULTS
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED TOTAL P&C GROUP LIFE CORPORATE TOTAL
JUNE 30 SEGMENTS OPERATIONS (1) OPERATIONS (3) & OTHER OPERATIONS (3)
(In millions) 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Net earned premiums $3,437 $3,396 $644 $1,725 $519 $474 $(22) $ 68 $4,578 $5,663
Insurance claims & policyholders' benefits 2,784 2,522 498 1,499 596 539 28 97 3,906 4,657
Policyholders' dividends 27 33 - - 9 6 (5) (4) 31 35
Insurance related expenses 1,194 1,070 231 314 152 128 36 (7) 1,613 1,505
Net investment income 389 453 133 123 264 271 73 81 859 928
Other revenues 177 251 33 45 43 55 (48) (23) 205 328
Other expenses 161 197 15 16 31 37 6 105 213 355
------ ------ ---- ------ ---- ---- ---- ---- ------ ------
(Loss) income before income tax, minority
interest and net realized investment
gains (losses) (163) 278 66 64 38 90 (62) (65) (121) 367
Income tax benefit (expense) 85 (80) (21) (21) (11) (32) 26 22 79 (111)
Minority interest (5) (10) - - - - - - (5) (10)
------ ------ ---- ------ ---- ---- ---- ---- ------ ------
(Loss) income before net realized investment
gains (losses) (83) 188 45 43 27 58 (36) (43) (47) 246
Realized investment gains (losses) 290 (52) (32) (17) (23) (42) 67 (50) 302 (161)
Income tax (expense) benefit on realized
investment gains (losses) (97) 19 11 5 8 15 (24) 19 (102) 58
------ ------ ---- ------ ---- ---- ---- ---- ------ ------
Income (loss) from continuing operations 110 155 24 31 12 31 7 (74) 153 143
Loss from discontinued operations - - - - - (35) - - - (35)
Cumulative effect of a change in accounting
principle - (48) - - - (8) - (1) - (57)
------ ------ ---- ------ ---- ---- ---- ---- ------ ------
Net income (loss) $ 110 $ 107 $ 24 $ 31 $ 12 $(12) $ 7 $(75) $ 153 $ 51
====== ====== ==== ====== ==== ==== ==== ==== ====== ======
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER FINANCIAL DATA TOTAL P&C SEGMENTS GROUP LIFE OPERATIONS CORPORATE & OTHER TOTAL OPERATIONS
PROPERTY & CASUALTY OPERATIONS(1)(2)
COMPANY INFORMATION 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Gross written premiums $ 5,080 $4,798 $ 404 $1,569 $ 268 $ 247 $ 926 $ 501 $ 6,678 $ 7,115
Net written premiums 3,667 3,578 - 1,151 267 246 (8) 3 3,926 4,978
Net earned premiums 3,437 3,396 - 1,151 260 234 (1) 6 3,696 4,787
Underwriting (loss) income (568) (229) 1 8 (115) (79) (70) (79) (752) (379)
FINANCIAL RATIOS
Loss & LAE 81.0 % 74.3 % N/A % 87.9 % 117.8 % 108.7 % N/A % N/A % 84.5 % 79.9 %
Acquisition expense 21.7 19.6 N/A 0.2 14.9 15.0 N/A N/A 22.3 14.7
Underwriting expense 13.0 11.9 N/A 11.2 11.4 10.0 N/A N/A 12.8 12.6
Dividends 0.8 1.0 N/A - - - N/A N/A 0.7 0.7
-------- ------ ----- ------ ------ ------ ----- ----- ------- -------
Expense ratio, including dividends 35.5 32.5 N/A 11.4 26.3 25.0 N/A N/A 35.8 28.0
-------- ------ ----- ------ ------ ------ ----- ----- ------- -------
Combined ratio 116.5 % 106.8 % N/A % 99.3 % 144.1 % 133.7 % N/A % N/A % 120.3 % 107.9 %
======== ====== ===== ====== ====== ====== ===== ===== ======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Included in gross written, net written and earned premiums for 2002 is
$1,151 million relating to the National Postal Mail Handlers Union
contract, which was transferred on July 1, 2002.
(2) Included in gross written premiums for 2003 and 2002 is $385 million
and $394 million of business ceded to CNA Group Life Assurance Company.
(3) The six months ended June 30, 2002 results have been restated to
reflect an adjustment to the Company's historical accounting for CNA's
life settlement contracts and the related revenue recognition. Refer to
CNA's 2002 Form 10-K for further information related to this
restatement.
13
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
ANALYSIS OF PRETAX NET INVESTMENT INCOME
- ---------------------------------------------------------------------------------------------------------------------
(In millions) STANDARD LINES
- ---------------------------------------------------------------------------------------------------------------------
1Q02 2Q02 3Q02 4Q02 2002 1Q03 2Q03 YTD 2003
---- ---- ---- ---- ---- ---- ---- --------
Limited partnership income $ 3 $ 20 $ (39) $ (2) $ (18) $ 13 $ 40 $ 53
Interest on funds withheld and other deposits (38) (44) (36) (56) (174) (34) (76) (110)
Other investment income 138 158 142 152 590 131 120 251
--------------------------------------------------------------------
Net investment income $ 103 $ 134 $ 67 $ 94 $ 398 $ 110 $ 84 $ 194
====================================================================
----------------------------------------------------------------------
SPECIALTY LINES
----------------------------------------------------------------------
1Q02 2Q02 3Q02 4Q02 2002 1Q03 2Q03 YTD 2003
---- ---- ---- ---- ---- ---- ---- --------
Limited partnership income $ 1 $ 8 $ (14) $ (1) $ (6) $ 5 $ 17 $ 22
Interest on funds withheld and other deposits (9) (7) (11) (7) (34) (6) (7) (13)
Other investment income 68 74 74 77 293 71 69 140
--------------------------------------------------------------------
Net investment income $ 60 $ 75 $ 49 $ 69 $ 253 70 $ 79 $ 149
====================================================================
----------------------------------------------------------------------
P&C OPERATIONS
----------------------------------------------------------------------
1Q02 2Q02 3Q02 4Q02 2002 1Q03 2Q03 YTD 2003
---- ---- ---- ---- ---- ---- ---- --------
Limited partnership income $ 4 $ 28 $ (53) $ (3) $ (24) $ 18 $ 57 $ 75
Interest on funds withheld and other deposits (47) (51) (47) (63) (208) (40) (83) (123)
Other investment income 206 232 216 229 883 202 189 391
--------------------------------------------------------------------
Net investment income $ 163 $ 209 $ 116 $ 163 $ 651 $ 180 $ 163 $ 343
====================================================================
----------------------------------------------------------------------
CNA RE
----------------------------------------------------------------------
1Q02 2Q02 3Q02 4Q02 2002 1Q03 2Q03 YTD 2003
---- ---- ---- ---- ---- ---- ---- --------
Limited partnership income $ 1 $ 5 $ (9) $ (1) $ (4) $ 2 $ 8 $ 10
Interest on funds withheld and other deposits (11) (6) (6) (6) (29) (6) (10) (16)
Other investment income 43 49 43 42 177 28 24 52
--------------------------------------------------------------------
Net investment income $ 33 $ 48 $ 28 $ 35 $ 144 $ 24 $ 22 $ 46
====================================================================
----------------------------------------------------------------------
TOTAL P&C SEGMENTS
----------------------------------------------------------------------
1Q02 2Q02 3Q02 4Q02 2002 1Q03 2Q03 YTD 2003
---- ---- ---- ---- ---- ---- ---- --------
Limited partnership income $ 5 $ 33 $ (62) $ (4) $ (28) $ 20 $ 65 $ 85
Interest on funds withheld and other deposits (58) (57) (53) (69) (237) (46) (93) (139)
Other investment income 249 281 259 271 1,060 230 213 443
--------------------------------------------------------------------
Net investment income $ 196 $ 257 $ 144 $ 198 $ 795 $ 204 $ 185 $ 389
====================================================================
14
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
ANALYSIS OF PRETAX NET INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------------------------------------
(In millions) TOTAL P&C SEGMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 YTD 2003
---- ---- ---- ---- -------- ---- ---- --------
Limited partnership income $ 5 $ 33 $ (62) $ (4) $ (28) $ 20 $ 65 $ 85
Interest on funds withheld and other deposits (58) (57) (53) (69) (237) (46) (93) (139)
Other investment income 249 281 259 271 1,060 230 213 443
-----------------------------------------------------------------------------------
Net investment income $ 196 $ 257 $ 144 $ 198 $ 795 $ 204 $ 185 $ 389
===================================================================================
-----------------------------------------------------------------------
GROUP OPERATIONS
-----------------------------------------------------------------------
1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 YTD 2003
---- ---- ---- ---- -------- ---- ---- --------
Limited partnership income $ - $ - $ - $ - $ - $ - $ - $ -
Interest on funds withheld and other deposits - - - - - - - -
Other investment income 61 62 65 64 252 63 70 133
---------------------------------------------------------------------
Net investment income $ 61 $ 62 $ 65 $ 64 $252 $ 63 $ 70 $133
=====================================================================
------------------------------------------------------------------
LIFE OPERATIONS
------------------------------------------------------------------
1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 YTD 2003
---- ---- ---- ---- -------- ---- ---- --------
Limited partnership income $ - $ - $ (1) $ (1) $ (2) $ - $ - $ -
Interest on funds withheld and other deposits - - - - - - - -
Other investment income 134 137 132 139 542 131 133 264
----------------------------------------------------------------
Net investment income $ 134 $137 $ 131 $ 138 $ 540 $131 $ 133 $ 264
================================================================
----------------------------------------------------------------
CORPORATE & OTHER
----------------------------------------------------------------
1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 YTD 2003
---- ---- ---- ---- -------- ---- ---- --------
Limited partnership income $ 2 $ 5 $ (10) $ (1) $ (4) $ 3 $ 10 $ 13
Interest on funds withheld and other deposits - - - (2) (2) (1) - (1)
Other investment income 33 41 34 41 149 32 29 61
----------------------------------------------------------------
Net investment income $ 35 $ 46 $ 24 $ 38 $ 143 $ 34 $ 39 $ 73
================================================================
-------------------------------------------------------------------
TOTAL OPERATIONS
-------------------------------------------------------------------
1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 YTD 2003
---- ---- ---- ---- -------- ---- ---- --------
Limited partnership income $ 7 $ 38 $ (73) $ (6) $ (34) $ 23 $ 75 $ 98
Interest on funds withheld and other deposits (58) (57) (53) (71) (239) (47) (93) (140)
Other investment income 477 521 490 515 2,003 456 445 901
------------------------------------------------------------------
Net investment income $ 426 $ 502 $ 364 $ 438 $1,730 $ 432 $ 427 $ 859
==================================================================
15
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
STATUTORY DATA - PRELIMINARY
- --------------------------------------------------------------------------------------------------------------------------
PERIOD ENDED JUNE 30 THREE MONTHS SIX MONTHS
INCOME STATEMENT (PRELIMINARY) FAV / (UNFAV) (PRELIMINARY) FAV / (UNFAV)
(In millions) 2003 2002 % CHANGE 2003 2002 % CHANGE
- --------------------------------------------------------------------------------------------------------------------------
PROPERTY & CASUALTY COMPANIES
Gross written premiums $ 3,486 $ 3,553 (2)% $ 7,131 $ 8,043 (11)%
Net written premiums 1,820 2,433 (25) 3,891 4,933 (21)
Net earned premiums 1,655 2,306 (28) 3,522 4,632 (24)
Claim and claim adjustment expenses 1,581 1,881 16 2,972 3,697 20
Acquisition expenses 358 392 9 770 780 1
Underwriting expenses 294 258 (14) 544 587 7
Policyholders' dividends 15 11 (36) 41 35 (17)
Restructuring and other related costs - - N/A - - N/A
------- ------- ------- -------
Underwriting loss (593) (236) (151) (805) (467) (72)
Net investment income 296 360 (18) 594 706 (16)
Other revenue (87) (56) (55) (124) (111) (12)
Income tax benefit (expense) 54 (15) N/A 46 (25) N/A
Net realized gains (losses) 287 (10) N/A 304 25 N/A
------- ------- ------- -------
Net (loss) income $ (43) $ 43 (200)% $ 15 $ 128 (88)%
======= ======= ======= =======
FINANCIAL RATIOS
Loss and LAE 95.5 % 81.6 % 84.4 % 79.8 %
Acquisition expense 19.6 16.1 19.8 15.8
Underwriting expense 16.2 10.5 13.9 11.9
Policyholders' dividends 0.9 0.5 1.2 0.8
------- ------- ------- -------
Expense ratio 36.7 27.1 34.9 28.5
------- ------- ------- -------
Combined ratio 132.2 % 108.7 % 119.3 % 108.3 %
======= ======= ======= =======
LIFE COMPANIES
Premium income 488 466 980 962
- --------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
SUPPLEMENTAL STATUTORY DATA (PRELIMINARY)
(In millions) JUNE 30, 2003 DECEMBER 31, 2002
- ------------------------------------------------------------------------------------------------
PROPERTY & CASUALTY COMPANIES
Statutory surplus (1) $ 6,995 $ 6,836
LIFE COMPANIES
Statutory surplus $ 1,529 $ 1,645
Gross life insurance in force 434,781 437,751
- ------------------------------------------------------------------------------------------------
(1) Surplus includes the Property & Casualty Companies' equity ownership of
the life insurance subsidiaries.
16
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
PROPERTY & CASUALTY SEGMENTS
LOSS AND LAE RATIO ANALYSIS
-------------------------------------------- ---------------------------------------------
STANDARD LINES CNA RE
-------------------------------------------- ---------------------------------------------
2003 YTD 2002 YTD 2002 FY 2003 YTD 2002 YTD 2002 FY
EVALUATED AT EVALUATED AT EVALUATED AT EVALUATED AT EVALUATED AT EVALUATED AT
6/30/03 12/31/02 6/30/03 6/30/03 12/31/02 6/30/03
------------ ------------ ------------ ------------ ------------ ------------
Gross Accident Year 64.2 % 74.6 % 71.5 % 59.9 % 64.2 % 63.2 %
Impact of Finite Reinsurance - (0.1) 0.0 - 0.2 0.1
Impact of Other Reinsurance 4.0 0.8 3.0 3.6 4.9 5.7
---------- ---------- ------- ------- ------- ------
Net Accident Year 68.2 75.3 74.5 % 63.5 69.3 69.0 %
======= ======
Impact of Corporate Covers (5.6) - (5.5) (6.4)
Impact of World Trade Center - - - 1.3
Impact of Development 20.2 (3.3) 9.4 14.1
---------- ---------- ------- -------
Net Calendar Year 82.8 % 72.0 % 67.4 % 78.3 %
========== ========== ======= =======
-------------------------------------------- ---------------------------------------------
-------------------------------------------- ---------------------------------------------
SPECIALTY LINES P&C SEGMENTS
-------------------------------------------- ---------------------------------------------
2003 YTD 2002 YTD 2002 FY 2003 YTD 2002 YTD 2002 FY
EVALUATED AT EVALUATED AT EVALUATED AT EVALUATED AT EVALUATED AT EVALUATED AT
6/30/03 12/31/02 6/30/03 6/30/03 12/31/02 6/30/03
------------ ------------ ------------ ------------ ------------ ------------
Gross Accident Year 64.9 % 68.1 % 69.4 % 64.2 % 71.5 % 70.2 %
Impact of Finite Reinsurance - - - - - -
Impact of Other Reinsurance 1.4 3.6 3.1 3.0 2.1 3.2
---------- ---------- ------- ------- ------- ------
Net Accident Year 66.3 71.7 72.5 % 67.2 73.6 73.4 %
======= ======
Impact of Corporate Covers - (1.2) (3.6) (1.1)
Impact of World Trade Center - - - 0.1
Impact of Development 15.1 6.6 17.4 1.5
---------- ---------- ------- -------
Net Calendar Year 81.4 % 77.1 % 81.0 % 74.1 %
========== ========== ======= =======
-------------------------------------------- ---------------------------------------------
--------------------------------------------
P&C OPERATIONS
--------------------------------------------
2003 YTD 2002 YTD 2002 FY
EVALUATED AT EVALUATED AT EVALUATED AT
6/30/03 12/31/02 6/30/03
------------ ------------ ------------
Gross Accident Year 64.5 % 72.1 % 70.8 %
Impact of Finite Reinsurance - - 0.0
Impact of Other Reinsurance 3.0 2.0 3.0
---------- ---------- -------
Net Accident Year 67.5 74.1 73.8 %
=======
Impact of Corporate Covers (3.4) (0.4)
Impact of World Trade Center - -
Impact of Development 18.2 0.2
---------- ----------
Net Calendar Year 82.3 % 73.9 %
========== ==========
--------------------------------------------
17
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
IMPACT OF PRIOR YEAR DEVELOPMENT (1)
- ------------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED STANDARD LINES SPECIALTY LINES
JUNE 30, 2003
2003 RESULTS 2003 RESULTS
BEFORE PRIOR PREMIUM CORPORATE BEFORE PRIOR PREMIUM CORPORATE
YEAR AND LOSS AGGREGATE 2003 YEAR AND LOSS AGGREGATE 2003
(In millions) DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS
- ------------------------------------------------------------------------------------------------------------------------------------
Net earned premiums $ 1,044 $ (116) $ (105) $ 823 $ 672 $ (8) $ - $ 664
Claim and claim adjustment
expenses 710 243 (180) 773 434 182 - 616
Acquisition expenses 222 - - 222 137 - - 137
Underwriting expenses 143 - - 143 73 - - 73
Policyholders' dividends 11 - - 11 - - - -
------- ------- ------- ------- ------- ------- ----- -------
Underwriting (loss) income (42) (359) 75 (326) 28 (190) - (162)
------- ------- ------- ------- ------- ------- ----- -------
Net investment income (loss) 108 - (24) 84 79 - - 79
Other revenues 59 - - 59 26 - - 26
Other expenses 57 - - 57 27 - - 27
------- ------- ------- ------- ------- ------- ----- -------
Income (loss) before income tax,
minority interest and net
realized investment gains 68 (359) 51 (240) 106 (190) - (84)
Income tax (expense) benefit (12) 126 (18) 96 (39) 67 - 28
Minority interest - - - - (2) - - (2)
------- ------- ------- ------- ------- ------- ----- -------
Income (loss) before net realized
investment gains 56 (233) 33 (144) 65 (123) - (58)
Realized investment gains 169 - - 169 79 - - 79
Income tax expense on realized
investment gains (59) - - (59) (24) - - (24)
------- ------- ------- ------- ------- ------- ----- -------
Income (loss) from continuing
operations 166 (233) 33 (34) 120 (123) - (3)
Cumulative effect of a change in
accounting principle - - - - - - - -
------- ------- ------- ------- ------- ------- ----- -------
Net income (loss) $ 166 $ (233) $ 33 $ (34) $ 120 $ (123) $ - $ (3)
======= ======= ======= ======= ======= ======= ===== =======
FINANCIAL RATIOS
Loss & LAE 93.9% 92.7%
Acquisition expense 26.9 20.7
Underwriting expense 17.5 10.9
Dividends 1.3 0.1
------ -------
Expense ratio, including dividends 45.7 31.7
------ -------
Combined ratio 139.6% 124.4%
====== =======
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
P&C OPERATIONS
2003 RESULTS
BEFORE PRIOR PREMIUM CORPORATE
YEAR AND LOSS AGGREGATE 2003
DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS
- ------------------------------------------------------------------------------------------------------------------------------------
Net earned premiums $1,716 $ (124) $ (105) $1,487
Claim and claim adjustment expenses 1,144 425 (180) 1,389
Acquisition expenses 359 - - 359
Underwriting expenses 216 - - 216
Policyholders' dividends 11 - - 11
------ ------ ------ ------
Underwriting (loss) income (14) (549) 75 (488)
------ ------ ------ ------
Net investment income (loss) 187 - (24) 163
Other revenues 85 - - 85
Other expenses 84 - - 84
------ ------ ------ ------
Income (loss) before income tax, minority interest
and net realized investment gains 174 (549) 51 (324)
Income tax (expense) benefit (51) 193 (18) 124
Minority interest (2) - - (2)
------ ------ ------ ------
Income (loss) before net realized investment gains 121 (356) 33 (202)
Realized investment gains 248 - - 248
Income tax expense on realized
investment gains (83) - - (83)
------ ------ ------ ------
Income (loss) from continuing operations 286 (356) 33 (37)
Cumulative effect of a change in accounting principle - - - -
------ ------ ------ ------
Net income (loss) $ 286 $ (356) $ 33 $ (37)
====== ====== ====== ======
FINANCIAL RATIOS
Loss & LAE 93.4 %
Acquisition expense 24.1
Underwriting expense 14.5
Dividends 0.8
------
Expense ratio, including dividends 39.4
------
Combined ratio 132.8 %
======
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Total development for the Property & Casualty Segments is comprised of
Premium and Loss Development and the impact of the Corporate Aggregate
Covers.
(2) Pretax benefit of Aggregate Corporate Covers represents the current
period ceded premiums and losses and associated interest expense.
Interest expense on the funds withheld related to prior cessions to the
Corporate Aggregate Covers is not presented on this schedule, but is
included in the Analysis of Pretax Net Investment Income on pages 14
and 15.
18
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
IMPACT OF PRIOR YEAR DEVELOPMENT (1)
- ------------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED CNA RE TOTAL P&C SEGMENTS
JUNE 30, 2003
2003 RESULTS 2003 RESULTS
BEFORE PRIOR PREMIUM CORPORATE BEFORE PRIOR PREMIUM CORPORATE
YEAR AND LOSS AGGREGATE 2003 YEAR AND LOSS AGGREGATE 2003
(In millions) DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS
- ------------------------------------------------------------------------------------------------------------------------------------
Net earned premiums $ 136 $ 12 $ (14) $ 134 $ 1,852 $ (112) $ (119) $ 1,621
Claim and claim adjustment
expenses 86 33 (24) 95 1,230 458 (204) 1,484
Acquisition expenses 29 - - 29 388 - - 388
Underwriting expenses 15 - - 15 231 - - 231
Policyholders' dividends - - - - 11 - - 11
------- ------- ------- ------- ------- ------- ------- -------
Underwriting income (loss) 6 (21) 10 (5) (8) (570) 85 (493)
------- ------- ------- ------- ------- ------- ------- -------
Net investment income (loss) 25 - (3) 22 212 - (27) 185
Other revenues - - - - 85 - - 85
Other expenses - - - - 84 - - 84
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before income tax,
minority interest and net
realized investment gains 31 (21) 7 17 205 (570) 58 (307)
Income tax (expense) benefit (10) 8 (2) (4) (61) 201 (20) 120
Minority interest - - - - (2) - - (2)
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before net realized
investment gains 21 (13) 5 13 142 (369) 38 (189)
Realized investment gains 33 - - 33 281 - - 281
Income tax expense on realized
investment gains (11) - - (11) (94) - - (94)
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from continuing
operations 43 (13) 5 35 329 (369) 38 (2)
Cumulative effect of a change in
accounting principle - - - - - - - -
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss) $ 43 $ (13) $ 5 $ 35 $ 329 $ (369) $ 38 $ (2)
======= ======= ======= ======= ======= ======= ======= =======
FINANCIAL RATIOS
Loss & LAE 71.4 % 91.6%
Acquisition expense 21.9 23.9
Underwriting expense 10.5 14.2
Dividends - 0.7
------- -------
Expense ratio, including dividends 32.4 38.8
------- -------
Combined ratio 103.8 % 130.4%
======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Total development for the Property & Casualty Segments is comprised of
Premium and Loss Development and the impact of the Corporate Aggregate
Covers.
(2) Pretax benefit of Aggregate Corporate Covers represents the current
period ceded premiums and losses and associated interest expense.
Interest expense on the funds withheld related to prior cessions to the
Corporate Aggregate Covers is not presented on this schedule, but is
included in the Analysis of Pretax Net Investment Income on pages 14
and 15.
19
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
IMPACT OF PRIOR YEAR DEVELOPMENT (1)
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED STANDARD LINES SPECIALTY LINES
JUNE 30, 2003
2003 RESULTS 2003 RESULTS
BEFORE PRIOR PREMIUM CORPORATE BEFORE PRIOR PREMIUM CORPORATE
YEAR AND LOSS AGGREGATE 2003 YEAR AND LOSS AGGREGATE 2003
(In millions) DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS
- ------------------------------------------------------------------------------------------------------------------------------------
Net earned premiums $ 2,046 $ (79) $ (105) $ 1,862 $ 1,273 $ 15 $ - $ 1,288
Claim and claim adjustment
expenses 1,414 308 (180) 1,542 844 205 - 1,049
Acquisition expenses 420 - - 420 265 - - 265
Underwriting expenses 280 - - 280 141 - - 141
Policyholders' dividends 26 - - 26 1 - - 1
------- ------- ------- ------- ------- ------- ------ -------
Underwriting (loss) income (94) (387) 75 (406) 22 (190) - (168)
------- ------- ------- ------- ------- ------- ------ -------
Net investment income (loss) 218 - (24) 194 149 - - 149
Other revenues 130 - - 130 46 - - 46
Other expenses 117 - - 117 44 - - 44
------- ------- ------- ------- ------- ------- ------ -------
Income (loss) before income
tax, minority interest
and net realized investment
gains 137 (387) 51 (199) 173 (190) - (17)
Income tax (expense) benefit (27) 135 (18) 90 (54) 64 - 10
Minority interest - - - - (5) - - (5)
------- ------- ------- ------- ------- ------- ------ -------
Income (loss) before net realized
investment gains 110 (252) 33 (109) 114 (126) - (12)
Realized investment gains 182 - - 182 66 - - 66
Income tax expense on realized
investment gains (64) - - (64) (22) - - (22)
------- ------- ------- ------- ------- ------- ------ -------
Income (loss) from continuing
operations 228 (252) 33 9 158 (126) - 32
Cumulative effect of a change in
accounting principle - - - - - - - -
------- ------- ------- ------- ------- ------- ------ -------
Net income (loss) $ 228 $ (252) $ 33 $ 9 $ 158 $ (126) $ - $ 32
======= ======= ======= ======= ======= ======= ====== =======
FINANCIAL RATIOS
Loss & LAE 82.8 % 81.4%
Acquisition expense 22.5 20.6
Underwriting expense 15.1 10.9
Dividends 1.4 0.1
------- -------
Expense ratio, including dividends 39.0 31.6
------- -------
Combined ratio 121.8 % 113.0%
======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
P&C OPERATIONS
2003 RESULTS
BEFORE PRIOR PREMIUM CORPORATE
YEAR AND LOSS AGGREGATE 2003
DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS
- ------------------------------------------------------------------------------------------------------------------------------------
Net earned premiums $ 3,319 $ (64) $ (105) $ 3,150
Claim and claim adjustment expenses 2,258 513 (180) 2,591
Acquisition expenses 685 - - 685
Underwriting expenses 421 - - 421
Policyholders' dividends 27 - - 27
------- ------- ------- -------
Underwriting (loss) income (72) (577) 75 (574)
------- ------- ------- -------
Net investment income (loss) 367 - (24) 343
Other revenues 176 - - 176
Other expenses 161 - - 161
------- ------- ------- -------
Income (loss) before income tax, minority interest
and net realized investment gains 310 (577) 51 (216)
Income tax (expense) benefit (81) 199 (18) 100
Minority interest (5) - - (5)
------- ------- ------- -------
Income (loss) before net realized investment gains 224 (378) 33 (121)
Realized investment gains 248 - - 248
Income tax expense on realized
investment gains (86) - - (86)
------- ------- ------- -------
Income (loss) from continuing operations 386 (378) 33 41
Cumulative effect of a change in accounting principle - - - -
------- ------- ------- -------
Net income (loss) $ 386 $ (378) $ 33 $ 41
======= ======= ======= =======
FINANCIAL RATIOS
Loss & LAE 82.3 %
Acquisition expense 21.7
Underwriting expense 13.3
Dividends 0.9
-------
Expense ratio, including dividends 35.9
-------
Combined ratio 118.2 %
=======
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Total development for the Property & Casualty Segments is comprised of
Premium and Loss Development and the impact of the Corporate Aggregate
Covers.
(2) Pretax benefit of Aggregate Corporate Covers represents the current
period ceded premiums and losses and associated interest expense.
Interest expense on the funds withheld related to prior cessions to the
Corporate Aggregate Covers is not presented on this schedule, but is
included in the Analysis of Pretax Net Investment Income on pages 14
and 15.
20
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
IMPACT OF PRIOR YEAR DEVELOPMENT (1)
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED CNA RE TOTAL P&C SEGMENTS
JUNE 30, 2003
2003 RESULTS 2003 RESULTS
BEFORE PRIOR PREMIUM CORPORATE BEFORE PRIOR PREMIUM CORPORATE
YEAR AND LOSS AGGREGATE 2003 YEAR AND LOSS AGGREGATE 2003
(In millions) DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS
- ------------------------------------------------------------------------------------------------------------------------------------
Net earned premiums $ 289 $ 12 $ (14) $ 287 $ 3,608 $ (52) $ (119) $ 3,437
Claim and claim adjustment
expenses 183 34 (24) 193 2,441 547 (204) 2,784
Acquisition expenses 61 - - 61 746 - - 746
Underwriting expenses 27 - - 27 448 - - 448
Policyholders' dividends - - - - 27 - - 27
------- ------- ------- ------- ------- ------- ------- -------
Underwriting income (loss) 18 (22) 10 6 (54) (599) 85 (568)
------- ------- ------- ------- ------- ------- ------- -------
Net investment income (loss) 49 - (3) 46 416 - (27) 389
Other revenues 1 - - 1 177 - - 177
Other expenses - - - - 161 - - 161
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before income
tax, minority interest
and net realized investment
gains 68 (22) 7 53 378 (599) 58 (163)
Income tax (expense) benefit (21) 8 (2) (15) (102) 207 (20) 85
Minority interest - - - - (5) - - (5)
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before net realized
investment gains 47 (14) 5 38 271 (392) 38 (83)
Realized investment gains 42 - - 42 290 - - 290
Income tax expense on realized
investment gains (11) - - (11) (97) - - (97)
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from continuing
operations 78 (14) 5 69 464 (392) 38 110
Cumulative effect of a change in
accounting principle - - - - - - - -
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss) $ 78 $ (14) $ 5 $ 69 $ 464 $ (392) $ 38 $ 110
======= ======= ======= ======= ======= ======= ======= =======
FINANCIAL RATIOS
Loss & LAE 67.4 % 81.0 %
Acquisition expense 21.3 21.7
Underwriting expense 9.2 13.0
Dividends - 0.8
------- -------
Expense ratio, including dividends 30.5 35.5
------- -------
Combined ratio 97.9 % 116.5 %
======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Total development for the Property & Casualty Segments is comprised of
Premium and Loss Development and the impact of the Corporate Aggregate
Covers.
(2) Pretax benefit of Aggregate Corporate Covers represents the current
period ceded premiums and losses and associated interest expense.
Interest expense on the funds withheld related to prior cessions to the
Corporate Aggregate Covers is not presented on this schedule, but is
included in the Analysis of Pretax Net Investment Income on pages 14
and 15.
21
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
IMPACT OF PRIOR YEAR DEVELOPMENT (1)
- ------------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED STANDARD LINES SPECIALTY LINES
JUNE 30, 2002
2002 RESULTS 2002 RESULTS
BEFORE PRIOR PREMIUM CORPORATE BEFORE PRIOR PREMIUM CORPORATE
YEAR AND LOSS AGGREGATE 2002 YEAR AND LOSS AGGREGATE 2002
(In millions) DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS
- ------------------------------------------------------------------------------------------------------------------------------------
Net earned premiums $ 1,034 $ (2) $ - $ 1,032 $ 539 $ (4) $ - $ 535
Claim and claim adjustment
expenses 775 30 - 805 381 (4) - 377
Acquisition expenses 186 - - 186 109 - - 109
Underwriting expenses 121 - - 121 63 - - 63
Policyholders' dividends 15 - - 15 1 - - 1
------- ------- ------- ------- ------- ------- ---------- -------
Underwriting loss (63) (32) - (95) (15) - - (15)
------- ------- ------- ------- ------- ------- ---------- -------
Net investment income 134 - - 134 75 - - 75
Other revenues 80 - - 80 33 - - 33
Other expenses 70 - - 70 25 - - 25
------- ------- ------- ------- ------- ------- ---------- -------
Income (loss) before income
tax, minority interest
and net realized investment
losses 81 (32) - 49 68 - - 68
Income tax (expense) benefit (20) 11 - (9) (23) - - (23)
Minority interest - - - - (5) - - (5)
------- ------- ------- ------- ------- ------- ---------- -------
Income (loss) before net realized
investment losses 61 (21) - 40 40 - - 40
Realized investment losses (31) - - (31) (26) - - (26)
Income tax benefit on realized
investment losses 10 - - 10 9 - - 9
------- ------- ------- ------- ------- ------- ---------- -------
Income (loss) from continuing
operations 40 (21) - 19 23 - - 23
Cumulative effect of a change in
accounting principle - - - - - - - -
------- ------- ------- ------- ------- ------- ---------- -------
Net income (loss) $ 40 $ (21) $ - $ 19 $ 23 $ - $ - $ 23
======= ======= ======= ======= ======= ======= ========== =======
FINANCIAL RATIOS
Loss & LAE 78.1 % 70.3 %
Acquisition expense 18.0 20.3
Underwriting expense 11.7 12.1
Dividends 1.5 0.1
------- -------
Expense ratio, including dividends 31.2 32.5
------- -------
Combined ratio 109.3 % 102.8 %
======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
P&C OPERATIONS
2002 RESULTS
BEFORE PRIOR PREMIUM CORPORATE
YEAR AND LOSS AGGREGATE 2002
DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS
- ------------------------------------------------------------------------------------------------------------------------------------
Net earned premiums $ 1,573 $ (6) $ - $ 1,567
Claim and claim adjustment expenses 1,156 26 - 1,182
Acquisition expenses 295 - - 295
Underwriting expenses 184 - - 184
Policyholders' dividends 16 - - 16
------- ------- -------- -------
Underwriting loss (78) (32) - (110)
------- ------- -------- -------
Net investment income 209 - - 209
Other revenues 113 - - 113
Other expenses 95 - - 95
------- ------- -------- -------
Income (loss) before income tax, minority interest
and net realized investment losses 149 (32) - 117
Income tax (expense) benefit (43) 11 - (32)
Minority interest (5) - - (5)
------- ------- -------- -------
Income (loss) before net realized investment losses 101 (21) - 80
Realized investment losses (57) - - (57)
Income tax benefit on realized
investment losses 19 - - 19
------- ------- -------- -------
Income (loss) from continuing operations 63 (21) - 42
Cumulative effect of a change in accounting principle - - - -
------- ------- -------- -------
Net income (loss) $ 63 $ (21) $ - $ 42
======= ======= ======== =======
FINANCIAL RATIOS
Loss & LAE 75.5 %
Acquisition expense 18.8
Underwriting expense 11.8
Dividends 1.0
-------
Expense ratio, including dividends 31.6
-------
Combined ratio 107.1 %
=======
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Total development for the Property & Casualty Segments is comprised of
Premium and Loss Development and the impact of the Corporate Aggregate
Covers.
(2) Pretax benefit of Aggregate Corporate Covers represents the current
period ceded premiums and losses and associated interest expense.
Interest expense on the funds withheld related to prior cessions to the
Corporate Aggregate Covers is not presented on this schedule, but is
included in the Analysis of Pretax Net Investment Income on pages 14
and 15.
22
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
IMPACT OF PRIOR YEAR DEVELOPMENT (1)
- ------------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED CNA RE TOTAL P&C SEGMENTS
JUNE 30, 2002
2002 RESULTS 2002 RESULTS
BEFORE PRIOR PREMIUM CORPORATE BEFORE PRIOR PREMIUM CORPORATE
YEAR AND LOSS AGGREGATE 2002 YEAR AND LOSS AGGREGATE 2002
(In millions) DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS
- ------------------------------------------------------------------------------------------------------------------------------------
Net earned premiums $ 160 $ 8 $ - $ 168 $ 1,733 $ 2 $ - $ 1,735
Claim and claim adjustment
expenses 113 25 - 138 1,269 51 - 1,320
Acquisition expenses 31 - - 31 326 - - 326
Underwriting expenses 14 - - 14 198 - - 198
Policyholders' dividends - - - - 16 - - 16
------- ------- ---- ------- ------- ------- --------- -------
Underwriting income (loss) 2 (17) - (15) (76) (49) - (125)
------- ------- ---- ------- ------- ------- --------- -------
Net investment income 48 - - 48 257 - - 257
Other revenues - - - - 113 - - 113
Other expenses - - - - 95 - - 95
------- ------- ---- ------- ------- ------- --------- -------
Income (loss) before income
tax, minority interest
and net realized investment
losses 50 (17) - 33 199 (49) - 150
Income tax (expense) benefit (3) (6) - (9) (46) 5 - (41)
Minority interest - - - - (5) - - (5)
------- ------- ---- ------- ------- ------- --------- -------
Income (loss) before net realized
investment losses 47 (23) - 24 148 (44) - 104
Realized investment losses (6) - - (6) (63) - - (63)
Income tax benefit on realized
investment losses 2 - - 2 21 - - 21
------- ------- ---- ------- ------- ------- --------- -------
Income (loss) from continuing
operations 43 (23) - 20 106 (44) - 62
Cumulative effect of a change in
accounting principle - - - - - - - -
------- ------- ---- ------- ------- ------- --------- -------
Net income (loss) $ 43 $ (23) $ - $ 20 $ 106 $ (44) $ - $ 62
======= ======= ==== ======= ======= ======= ========= =======
FINANCIAL RATIOS
Loss & LAE 81.6 % 76.0%
Acquisition expense 18.2 18.7
Underwriting expense 9.1 11.6
Dividends - 0.9
------- -------
Expense ratio, including dividends 27.3 31.2
------- -------
Combined ratio 108.9 % 107.2%
======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Total development for the Property & Casualty Segments is comprised of
Premium and Loss Development and the impact of the Corporate Aggregate
Covers.
(2) Pretax benefit of Aggregate Corporate Covers represents the current
period ceded premiums and losses and associated interest expense.
Interest expense on the funds withheld related to prior cessions to the
Corporate Aggregate Covers is not presented on this schedule, but is
included in the Analysis of Pretax Net Investment Income on pages 14
and 15.
23
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
IMPACT OF PRIOR YEAR DEVELOPMENT (1)
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED STANDARD LINES SPECIALTY LINES
JUNE 30, 2002
2002 RESULTS 2002 RESULTS
BEFORE PRIOR PREMIUM CORPORATE BEFORE PRIOR PREMIUM CORPORATE
YEAR AND LOSS AGGREGATE 2002 YEAR AND LOSS AGGREGATE 2002
(In millions) DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS
- ------------------------------------------------------------------------------------------------------------------------------------
Net earned premiums $ 2,052 $ (4) $ - $ 2,048 $ 1,053 $ (10) $ - $ 1,043
Claim and claim adjustment
expenses 1,560 29 - 1,589 747 (8) - 739
Acquisition expenses 385 - - 385 211 - - 211
Underwriting expenses 247 - - 247 126 - - 126
Policyholders' dividends 31 - - 31 2 - - 2
------- ------- ----- ------- ------- ------- ------- -------
Underwriting loss (171) (33) - (204) (33) (2) - (35)
------- ------- ----- ------- ------- ------- ------- -------
Net investment income 237 - - 237 135 - - 135
Other revenues 163 - - 163 87 - - 87
Other expenses 141 - - 141 56 - - 56
------- ------- ----- ------- ------- ------- ------- -------
Income (loss) before income
tax, minority interest
and net realized investment
losses 88 (33) - 55 133 (2) - 131
Income tax (expense) benefit (17) 12 - (5) (48) 1 - (47)
Minority interest - - - - (10) - - (10)
------- ------- ----- ------- ------- ------- ------- -------
Income (loss) before net realized
investment losses 71 (21) - 50 75 (1) - 74
Realized investment losses (24) - - (24) (31) - - (31)
Income tax benefit on realized
investment losses 8 - - 8 10 - - 10
------- ------- ----- ------- ------- ------- ------- -------
Income (loss) from continuing
operations 55 (21) - 34 54 (1) - 53
Cumulative effect of a change in
accounting principle - - - - (48) - - (48)
------- ------- ----- ------- ------- ------- ------- -------
Net income (loss) $ 55 $ (21) $ - $ 34 $ 6 $ (1) $ - $ 5
======= ======= ===== ======= ======= ======= ======= =======
FINANCIAL RATIOS
Loss & LAE 77.6 % 70.8 %
Acquisition expense 18.8 20.2
Underwriting expense 12.1 12.2
Dividends 1.5 0.1
-------- -------
Expense ratio, including dividends 32.4 32.5
-------- -------
Combined ratio 110.0 % 103.3 %
======== =======
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
P&C OPERATIONS
2002 RESULTS
BEFORE PRIOR PREMIUM CORPORATE
YEAR AND LOSS AGGREGATE 2002
DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS
- ------------------------------------------------------------------------------------------------------------------------------------
Net earned premiums $ 3,105 $ (14) $ - $ 3,091
Claim and claim adjustment expenses 2,307 21 - 2,328
Acquisition expenses 596 - - 596
Underwriting expenses 373 - - 373
Policyholders' dividends 33 - - 33
------- ------- -------- -------
Underwriting loss (204) (35) - (239)
------- ------- -------- -------
Net investment income 372 - - 372
Other revenues 250 - - 250
Other expenses 197 - - 197
------- ------- -------- -------
Income (loss) before income tax, minority interest
and net realized investment losses 221 (35) - 186
Income tax (expense) benefit (65) 13 - (52)
Minority interest (10) - - (10)
------- ------- -------- -------
Income (loss) before net realized investment losses 146 (22) - 124
Realized investment losses (55) - - (55)
Income tax benefit on realized
investment losses 18 - - 18
------- ------- -------- -------
Income (loss) from continuing operations 109 (22) - 87
Cumulative effect of a change in accounting principle (48) - - (48)
------- ------- -------- -------
Net income (loss) $ 61 $ (22) $ - $ 39
======= ======= ======== =======
FINANCIAL RATIOS
Loss & LAE 75.3 %
Acquisition expense 19.3
Underwriting expense 12.0
Dividends 1.1
-------
Expense ratio, including dividends 32.4
-------
Combined ratio 107.7 %
=======
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Total development for the Property & Casualty Segments is comprised of
Premium and Loss Development and the impact of the Corporate Aggregate
Covers.
(2) Pretax benefit of Aggregate Corporate Covers represents the current
period ceded premiums and losses and associated interest expense.
Interest expense on the funds withheld related to prior cessions to the
Corporate Aggregate Covers is not presented on this schedule, but is
included in the Analysis of Pretax Net Investment Income on pages 14
and 15.
24
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
IMPACT OF PRIOR YEAR DEVELOPMENT (1)
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED CNA RE TOTAL P&C SEGMENTS
JUNE 30, 2002
2002 RESULTS 2002 RESULTS
BEFORE PRIOR PREMIUM CORPORATE BEFORE PRIOR PREMIUM CORPORATE
YEAR AND LOSS AGGREGATE 2002 YEAR AND LOSS AGGREGATE 2002
(In millions) DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS DEVELOPMENT DEVELOPMENT COVERS (2) RESULTS
- ------------------------------------------------------------------------------------------------------------------------------------
Net earned premiums $ 288 $ 78 $ (61) $ 305 $ 3,393 $ 64 $ (61) $ 3,396
Claim and claim adjustment
expenses 202 85 (93) 194 2,509 106 (93) 2,522
Acquisition expenses 69 - - 69 665 - - 665
Underwriting expenses 32 - - 32 405 - - 405
Policyholders' dividends - - - - 33 - - 33
------- ------- ------- ------- ------- ------- ------- -------
Underwriting (loss) income (15) (7) 32 10 (219) (42) 32 (229)
------- ------- ------- ------- ------- ------- ------- -------
Net investment income (loss) 86 - (5) 81 458 - (5) 453
Other revenues 1 - - 1 251 - - 251
Other expenses - - - - 197 - - 197
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before income tax,
minority interest and net
realized investment gains
(losses) 72 (7) 27 92 293 (42) 27 278
Income tax (expense) benefit (21) 2 (9) (28) (86) 15 (9) (80)
Minority interest - - - - (10) - - (10)
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before net realized
investment gains (losses) 51 (5) 18 64 197 (27) 18 188
Realized investment gains (losses) 3 - - 3 (52) - - (52)
Income tax benefit on realized
investment gains (losses) 1 - - 1 19 - - 19
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from continuing
operations 55 (5) 18 68 164 (27) 18 155
Cumulative effect of a change in
accounting principle - - - - (48) - - (48)
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss) $ 55 $ (5) $ 18 $ 68 $ 116 $ (27) $ 18 $ 107
======= ======= ======= ======= ======= ======= ======= =======
FINANCIAL RATIOS
Loss & LAE 63.6 % 74.3 %
Acquisition expense 22.6 19.6
Underwriting expense 10.5 11.9
Dividends - 1.0
------- -------
Expense ratio, including dividends 33.1 32.5
------- -------
Combined ratio 96.7 % 106.8 %
======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Total development for the Property & Casualty Segments is comprised of
Premium and Loss Development and the impact of the Corporate Aggregate
Covers.
(2) Pretax benefit of Aggregate Corporate Covers represents the current
period ceded premiums and losses and associated interest expense.
Interest expense on the funds withheld related to prior cessions to the
Corporate Aggregate Covers is not presented on this schedule, but is
included in the Analysis of Pretax Net Investment Income on pages 14
and 15.
25
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
PROPERTY AND CASUALTY BUSINESS
SUMMARY OF DEVELOPMENT
BY SEGMENT AND LINE OF BUSINESS
- ------------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED ACCIDENT YEAR
JUNE 30
(In millions) 2002 2001 2000 1999 1998 & P TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
BY SEGMENT
Standard Lines (1) $ 5 $ (51) $ (51) $ (95) $(102) $(294)
Specialty Lines (24) (21) (29) (52) (64) (190)
CNA Re 12 (18) (13) 10 (3) (12)
Corporate & Other - - - 1 (8) (7)
----- ----- ----- ----- ----- -----
Total $ (7) $ (90) $ (93) $(136) $(177) $(503)
===== ===== ===== ===== ===== =====
BY LINE OF BUSINESS
Commercial Automobile Liability $ 27 $ (32) $ 5 $ (30) $ 7 $ (23)
Workers Compensation (1) 11 (12) (51) (85) (94) (231)
Commercial Multiple-Peril (2) 5 9 (19) (16) (23)
Medical Malpractice 3 (10) 4 (12) 9 (6)
Special Liability 2 1 (7) 4 (10) (10)
Other Liability (63) (23) (38) 45 41 (38)
Special Property - (8) 2 (1) (77) (84)
Fidelity/Surety (2) 1 9 (19) 4 (7)
Reinsurance A, B, C 15 (11) (20) (13) (28) (57)
Products Liability (1) (1) (9) (8) (12) (31)
Other 3 - 3 2 (1) 7
----- ----- ----- ----- ----- -----
Total $ (7) $ (90) $ (93) $(136) $(177) $(503)
===== ===== ===== ===== ===== =====
Total development before corporate cover impact $ (7) $(126) $(142) $(136) $(177) $(588)
===== ===== ===== ===== ===== =====
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Includes $10 million of interest accretion.
26
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
GROSS LOSS AND ALAE RATIOS
BY SEGMENT AND LINE OF BUSINESS
CCC, CIC AND GALWAY
- ------------------------------------------------------------------------------------------------------------------------------
JUNE 30, 2003 ACCIDENT YEAR
2003 2002 2001 2000 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
BY SEGMENT
Standard Lines 59 % 66 % 87 % 90 % 105 % 90 % 78 % 72 %
Specialty Lines 64 69 112 100 97 89 86 74
CNA Re 61 63 166 81 117 122 87 80
P&C Segments 61 67 100 92 104 92 80 73
Corporate & Other 77 68 67 84 73 79 58 72
Total 64 % 67 % 92 % 90 % 98 % 89 % 76 % 73 %
BY LINE OF BUSINESS
Commercial Automobile Liability 62 % 73 % 94 % 99 % 101 % 93 % 89 % 74 %
Workers Compensation 64 69 83 85 103 89 72 63
Commercial Multiple-Peril 61 67 77 88 103 85 75 79
Medical Malpractice 63 68 94 120 129 115 129 117
Special Liability 60 60 156 95 97 71 78 75
Other Liability 67 73 89 104 126 124 88 71
Special Property 45 56 91 59 65 75 59 76
Auto Physical Damage 63 55 64 75 69 67 62 65
Reinsurance A, B and C 60 68 228 87 125 110 68 72
Other 75 70 80 94 72 69 63 71
Total 64 % 67 % 92 % 90 % 98 % 89 % 76 % 73 %
- ------------------------------------------------------------------------------------------------------------------------------
27
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
NET LOSS AND ALAE RATIOS
BY SEGMENT AND LINE OF BUSINESS
CCC, CIC AND GALWAY
- ------------------------------------------------------------------------------------------------------------------------------
JUNE 30, 2003 ACCIDENT YEAR
2003 2002 2001 2000 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
BY SEGMENT
Standard Lines 62 % 68 % 61 % 76 % 90 % 89 % 77 % 73 %
Specialty Lines 67 74 84 98 105 97 84 77
CNA Re 65 66 91 82 115 126 92 86
P&C Segments 63 69 69 82 96 94 80 75
Corporate & Other (1) N/A N/A N/A N/A 77 79 67 71
Total 63 % 69 % 69 % 81 % 93 % 91 % 77 % 74 %
BY LINE OF BUSINESS
Commercial Automobile Liability 64 % 70 % 85 % 85 % 96 % 96 % 92 % 80 %
Workers Compensation 65 70 39 65 91 90 72 63
Commercial Multiple-Peril 63 70 67 81 95 87 80 81
Medical Malpractice 61 66 90 124 145 125 134 120
Special Liability 58 63 70 89 81 69 76 62
Other Liability 69 75 63 88 106 115 86 75
Special Property 46 53 112 63 60 76 64 81
Auto Physical Damage 53 54 68 71 70 73 64 66
Reinsurance A, B and C 65 73 175 91 128 113 74 80
Other 56 61 98 107 81 74 62 70
Total 63 % 69 % 69 % 81 % 93 % 91 % 77 % 74 %
- ------------------------------------------------------------------------------------------------------------------------------
(1) Ratios subsequent to 1999 are not meaningful.
28