Exhibit 99.2
a
CNA FINANCIAL CORPORATION
SUPPLEMENTAL FINANCIAL INFORMATION
MARCH 31, 2004
a
CNA FINANCIAL CORPORATION
TABLE OF CONTENTS
MARCH 31, 2004
PAGE
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Supplemental Financial Information i-iii
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 Segment Aggregation 6
Property & Casualty Results of Operations 7
Life & Group Non-Core and Corporate & Other Non-Core Segments Results of Operations 8
Property & Casualty Operations and Corporate & Other Non-Core Segment Catastrophe Losses 9
Analysis of Pretax Net Investment Income 10
Statutory Data - Preliminary 11
Property & Casualty Operations Loss and LAE Ratio Analysis 12
Life & Group Non-Core Segment - GAAP Results of Operations 13
Asbestos Summary by Policyholder Category 14
a
CNA FINANCIAL CORPORATION
SUPPLEMENTAL FINANCIAL INFORMATION
SEGMENT CHANGES
In the first quarter of 2004, CNA revised its reportable segment structure to
reflect changes in how it manages its core operations and makes business
decisions. CNA now manages its Property & Casualty Operations in two operating
segments which represent CNA's core operations: Standard Lines and Specialty
Lines. The non-core operations are now managed in the Life & Group Non-Core and
Corporate & Other Non-Core segments. Standard Lines includes standard property
and casualty coverages sold to small and middle market commercial businesses
primarily through an independent agency distribution system, and excess and
surplus lines, as well as insurance and risk management products sold to large
corporations. These services are provided to customers in the U.S. as well as
globally. Specialty Lines provides a broad array of professional, financial and
specialty property and casualty products and services. Life & Group Non-Core
primarily includes the results of the life and group lines of business that have
been sold or placed in run-off. Corporate & Other Non-Core contains certain
corporate expenses such as interest on corporate debt and losses and expenses
related to the centralized adjusting and settlement of asbestos, environmental
pollution and mass tort (APMT) claims. In addition, this segment includes the
results of certain property and casualty insurance run-off operations including
CNA Re (formerly a stand-alone property and casualty operating segment). Prior
period segment disclosures have been conformed to the current year presentation.
These segment disclosures, provided in the Supplemental Financial Information
Appendix, are available on the company's website, for the years ended December
31, 2002 and 2003, including all quarters.
The changes made to CNA's reportable segments were as follows:
- - CNA Global which consists of marine and global standard lines is now
included in Standard Lines (formerly included in Specialty Lines).
- - CNA Guaranty and Credit is currently in run-off and is now included in
the Corporate & Other Non-Core segment (formerly included in Specialty
Lines).
- - CNA Re is currently in run-off and is also now included in the
Corporate & Other Non-Core segment (CNA Re was formerly a stand-alone
property and casualty operating segment).
- - Group Operations & Life Operations (formerly separate operating
segments) have now been combined into one reportable segment where the
run-off of the retained group and life products will be managed.
- - Certain run-off life and group operations previously included in the
Corporate & Other Non-Core segment are now included in the Life & Group
Non-Core segment.
ACCOUNTING PRONOUNCEMENTS
- - In July of 2003, the Accounting Standards Executive Committee (AcSEC)
of the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position 03-01, Accounting and Reporting by
Insurance Enterprises for Certain Nontraditional Long-Duration
Contracts and for Separate Accounts (SOP 03-01). SOP 03-01 provides
guidance on accounting and reporting by insurance enterprises for
certain nontraditional long-duration contracts and for separate
accounts. SOP 03-01 is effective for financial statements for fiscal
years beginning after December 15, 2003. SOP 03-01 may not be applied
retroactively to prior years' financial statements, and initial
application should be as of the beginning of an entity's fiscal year,
therefore prior year amounts have not been conformed to the current
year presentation.
CNA adopted SOP 03-01 as of January 1, 2004. The assets and liabilities
of certain guaranteed investment contracts and indexed group annuity
contracts that were previously segregated and reported as separate
accounts no longer qualify for separate account presentation. Prior to
the adoption of SOP 03-01, the asset and liability presentation of
these affected contracts were categorized as separate account assets
and liabilities in the Condensed Consolidated Balance Sheet. The
results of operations from separate account business were primarily
classified as other revenue in the Consolidated Statement of
Operations. In accordance with the provisions of SOP 03-01, the
classification and presentation of certain balance sheet and income
statement items have been modified within these financial statements.
Accordingly, the investment securities previously classified as
separate account assets have now been reclassified to the general
account and will be reported based on their investment classification
whether available-for-sale or trading securities. The investment
portfolio for the indexed group annuity contracts is classified as held
for trading purposes and is carried at fair value, with both the net
realized and unrealized gains (losses) included within net investment
income in the Condensed Consolidated Statement of Operations.
CNA continues to have contracts that meet the criteria for separate
account presentation. The assets and liabilities of these contracts are
legally segregated and reported as assets and liabilities of the
separate account business. Substantially all assets of the separate
account business are carried at fair value. Separate account
liabilities are carried at contract values.
i
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CNA FINANCIAL CORPORATION
SUPPLEMENTAL FINANCIAL INFORMATION
DEFINITIONS AND PRESENTATION
- - P&C OPERATIONS includes Standard Lines and Specialty Lines.
- - LIFE & GROUP NON-CORE segment primarily includes the results of the
life and group lines of business that are held for sale, or have been
sold or placed in run-off.
- - CORPORATE & OTHER NON-CORE segment includes the results of certain
property and casualty lines of business placed in run-off, including
CNA Re (formerly a stand-alone property and casualty segment). This
segment also includes the results related to the centralized adjusting
and settlement of APMT claims.
- - P&C COMPANIES includes Standard Lines, Specialty Lines and P&C business
written in the Life & Group Non-Core and Corporate & Other Non-Core
segments.
- - Underwriting results are net earned premiums less net incurred claims,
the costs incurred to settle claims, acquisition expenses and
underwriting expenses.
- - The Loss & loss adjustment expense (LAE) ratio represents claim and
claim adjustment expenses as a percentage of net earned premiums.
- - The expense ratio is the percentage of underwriting expenses,
acquisition expenses and dividends, including the amortization of
deferred acquisition costs, to net earned premiums.
- - The dividend ratio is the ratio of dividends incurred to net earned
premiums.
- - Limited partnerships (LPs) are a relatively small portion of CNA's
overall investment portfolio. The majority of the LPs 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.
- - As a result of the sale of the Group Benefits business in the 4th
quarter of 2003, income statement results for 2004 are not comparable
to 2003.
- - In February of 2004, CNA entered into a definitive agreement
to sell its individual life insurance business. The business sold
includes term, universal and permanent life insurance policies and
individual annuity products. CNA's individual long term care and
structured settlement businesses are excluded from the sale. The
transaction, which is subject to certain customary closing conditions,
is expected to be completed on April 30, 2004. As a result of the
pending sale, CNA has classified the assets and liabilities of the
individual life insurance business as held for sale at March 31, 2004,
and has recorded a related impairment loss of $569 million.
- - CNA has initiated a plan to sell CNA Trust, its limited operations bank
located in Costa Mesa, California. As a result, CNA has classified the
assets and liabilities of its limited operations bank as held for sale
at March 31, 2004. The estimated fair value of the assets and
liabilities exceeds their carrying value, and therefore no impairment
charge was recorded.
- - All amounts are in millions, except for per share and ratio
information.
- - Certain immaterial differences are due to rounding.
ii
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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 (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.
iii
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CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
STATEMENTS OF OPERATIONS
FAV /
PERIOD ENDED MARCH 31 THREE MONTHS (UNFAV)
(In millions) 2004 2003 % CHANGE
- --------------------------------------------------------------------------------- ---------- ---------- -----------
STATEMENTS OF OPERATIONS
Revenues:
Net earned premiums $ 2,168 $ 2,381 (9)%
Net investment income 473 432 9
Realized investment losses, net of
participating policyholders' and minority interests (458) (76) N/A
Other revenues 82 108 (24)
---------- ----------
Total revenues 2,265 2,845 (20)
---------- ----------
Claims, benefits and expenses:
Insurance claims and policyholders' benefits 1,620 1,870 13
Other operating expenses 783 837 6
Interest 35 34 (3)
---------- ----------
Total claims, benefits and expenses 2,438 2,741 11
---------- ----------
(Loss) income from continuing operations before income tax and minority interest (173) 104 N/A
Income tax benefit (expense) 54 (18) N/A
Minority interest (6) (3) (100)
---------- ----------
Net (loss) income $ (125) $ 83 N/A%
========== ==========
1
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CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
COMPONENTS OF NET INCOME AND PER SHARE DATA
THREE MONTHS
FAV /
PERIOD ENDED MARCH 31 (UNFAV)
(In millions, except per share data) 2004 2003 % CHANGE
- --------------------------------------------------------------------------- ---------- ---------- -----------
COMPONENTS OF NET (LOSS) INCOME
Income before net realized investment (losses) gains $ 208 $ 132 58%
Net realized investment losses, net of
participating policyholders' and minority interests (333) (49) N/A
---------- ----------
Net (loss) income $ (125) $ 83 N/A%
========== ==========
BASIC AND DILUTED (LOSS) EARNINGS PER SHARE
---------- ----------
Basic and diluted (loss) earnings per share available to common stockholders $ (0.55) $ 0.30 N/A%
========== ==========
Weighted average outstanding common stock and common stock
equivalents 255.9 223.6
2
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CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
SELECTED BALANCE SHEET DATA AND CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
DATA
MARCH 31, DECEMBER 31,
(In millions, except per share data) 2004 2003
------------------------------------ ----------- -----------
Assets related to businesses held for sale $ 6,291 $ -
Total assets 67,560 68,503
Insurance reserves 42,372 45,383
Debt 2,244 1,904
Liabilities related to businesses held for sale 5,471 -
Total liabilities 58,387 59,295
Minority interest 263 256
Accumulated other comprehensive income 924 841
Total stockholders' equity 8,910 8,952
Book value per common share $ 31.58 $ 31.80
Book value per common share excluding unrealized
gain or loss on fixed maturity securities $ 28.38 $ 28.98
Outstanding shares of common stock (in millions of shares) (1) 255.9 255.9
THREE MONTHS ENDED
MARCH 31
(In millions) 2004 2003
------------------- ---------- ----------
Net cash flows provided by operating activities $ 37 $ 45
Net cash flows (used) provided by investing activities (441) 132
Net cash flows provided (used) by financing activities 346 (137)
---------- ----------
Net cash flows $ (58) $ 40
========== ==========
(1) Included in the outstanding shares of common stock for the three months
ended March 31, 2004 are the effects of additional common stock equivalents
related to the November of 2003 sale of $750 million of convertible
preferred shares to Loews Corporation. The preferred shares are convertible
into 32.3 million shares of CNA common stock. The conversion occurred on
April 20, 2004.
3
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CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
PROPERTY & CASUALTY INSURANCE
CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVE DATA
CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVES (1) STANDARD LINES SPECIALTY LINES P&C OPERATIONS
(In millions) --------------------------------------------------------------
As of March 31, 2004
Gross $ 14,134 $ 4,287 $ 18,421
Ceded 5,231 1,311 6,542
Net 8,903 2,976 11,879
As of December 31, 2003
Gross $ 14,282 $ 4,200 $ 18,482
Ceded 5,315 1,281 6,596
Net 8,967 2,919 11,886
CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVES (1) LIFE & GROUP CORPORATE & OTHER
(In millions) NON-CORE (1) (2) NON-CORE TOTAL OPERATIONS
--------------------------------------------------------------
As of March 31, 2004
Gross $ 3,460 $ 9,302 $ 31,183
Ceded 1,653 5,798 13,993
Net 1,807 3,504 17,190
As of December 31, 2003
Gross $ 3,576 $ 9,672 $ 31,730
Ceded 1,685 5,935 14,216
Net 1,891 3,737 17,514
(1) Gross reserves as of March 31, 2004 and December 31, 2003 include $321
million and $448 million of life company reserves, which are primarily
related to accident and health business. Net reserves as of March 31,
2004 and December 31, 2003 include $118 million and $230 million of life
company reserves, which are primarily related to accident and health
business.
(2) In February of 2004, CNA entered into a definitive agreement to sell its
individual life insurance business. As a result of the pending sale, $64
million of net claim & claim adjustment expense reserves in life
companies have been reclassified on the Condensed Consolidated Balance
Sheet to liabilities related to businesses held for sale.
4
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CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
PROPERTY & CASUALTY INSURANCE
CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVE ROLLFORWARD (1)
PERIOD ENDED MARCH 31, 2004 THREE MONTHS
(In millions) ENDED
------------------------------ ------------
Claim & claim adjustment expense reserves, beginning of period
Gross $ 31,730
Ceded 14,216
---------
Net 17,514
---------
Net incurred claim & claim adjustment expenses 1,514
Net claim & claim adjustment expense payments (1,774)
Net reserves transferred to liabilities related to businesses held for sale (2) (64)
Claim & claim adjustment expense reserves, end of period
Net 17,190
Ceded 13,993
---------
Gross $ 31,183
=========
(1) Gross reserves as of March 31, 2004 and December 31, 2003 include $321
million and $448 million of life company reserves, which are primarily
related to accident and health business. Net reserves as of March 31, 2004
and December 31, 2003 include $118 million and $230 million of life
company reserves, which are primarily related to accident and health
business.
(2) In February of 2004, CNA entered into a definitive agreement to sell its
individual life insurance business. As a result of the pending sale, $64
million of net claim & claim adjustment expense reserves in life companies
have been reclassified on the Condensed Consolidated Balance Sheet to
liabilities related to businesses held for sale.
5
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CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
INVESTMENTS BY SEGMENT AGGREGATION
MARCH 31, 2004 DECEMBER 31, 2003
(In millions) BOOK VALUE FAIR VALUE BOOK VALUE FAIR VALUE
---------------- ------------- ------------- ------------- -------------
PROPERTY & CASUALTY AND CORPORATE & OTHER NON-CORE:
Fixed Maturities - Taxable $ 11,842 $ 12,241 $ 11,623 $ 11,893
Fixed Maturities - Tax Exempt 8,058 8,223 6,848 7,004
Equities 191 444 225 448
Short-term 5,252 5,253 6,689 6,689
Limited Partnership Investments 1,194 1,194 1,113 1,113
Mortgage Loans & Other 21 29 48 58
------------- ------------- ------------- -------------
Subtotal 26,558 27,384 26,546 27,205
Securities Lending Collateral 295 295 307 307
------------- ------------- ------------- -------------
TOTAL INVESTMENTS $ 26,853 $ 27,679 $ 26,853 $ 27,512
------------- ------------- ------------- -------------
LIFE & GROUP NON-CORE (1) (2):
Fixed Maturities - Taxable $ 6,564 $ 7,223 $ 8,155 $ 8,815
Fixed Maturities - Tax Exempt 968 1,004 939 966
Equities 48 60 68 79
Short-term 518 518 419 419
Limited Partnership Investments 465 465 4 4
Mortgage Loans & Other 23 11 197 182
------------- ------------- ------------- -------------
Subtotal 8,586 9,281 9,782 10,465
Securities Lending Collateral 61 61 123 123
------------- ------------- ------------- -------------
TOTAL INVESTMENTS $ 8,647 $ 9,342 $ 9,905 $ 10,588
------------- ------------- ------------- -------------
TOTAL INVESTMENTS $ 35,500 $ 37,021 $ 36,758 $ 38,100
============= ============= ============= =============
(1) As a result of SOP 03-01, the following investments are included in Life &
Group Non-Core as of March 31, 2004 and are included in the March 31, 2004
column above. As of December 31, 2003, the investments were reflected
within separate accounts in the Condensed Consolidated Balance Sheet and
are not included in the December 31, 2003 column above. In accordance with
the requirements of SOP 03-01, the December 31, 2003 column has not been
conformed to reflect this change. Refer to page i for further discussion
on SOP 03-01.
MARCH 31, 2004 BOOK VALUE FAIR VALUE
----------- ----------
Fixed Maturities - Taxable $ 1,457 1,584
Equities 5 4
Short-term 417 417
Limited Partnership Investments 463 463
----------- ---------
TOTAL INVESTMENTS $ 2,342 2,468
=========== =========
(2) The following balances have been transferred to assets related to
businesses held for sale as of March 31, 2004 and are not included in the
March 31, 2004 column above. As of December 31, 2003, the balances were
reflected within investments in the Condensed Consolidated Balance Sheet
and are included in the December 31, 2003 column above. Refer to page ii
for further discussion on the pending life sale.
MARCH 31, 2004 BOOK VALUE FAIR VALUE
----------- ----------
Fixed Maturities - Taxable $ 3,425 $ 3,701
Equities 10 13
Short-term 234 234
Mortgage Loans & Other 172 172
----------- ---------
TOTAL INVESTMENTS $ 3,841 $ 4,120
=========== =========
6
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CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
PROPERTY & CASUALTY RESULTS OF OPERATIONS
THREE MONTHS ENDED STANDARD LINES SPECIALTY LINES
March 31 FAV/(UNFAV) FAV/(UNFAV)
(In millions) 2004 2003 % CHANGE 2004 2003 % CHANGE
- ---------------------------------------------------------------------------------------------------------------------------
Gross written premiums $ 1,565 $ 1,634 (4)% $ 710 $ 628 13%
Net written premiums 1,265 1,273 (1) 581 476 22
Net earned premiums 1,258 1,219 3 529 428 24
Claim and claim adjustment expenses 823 893 8 334 284 (18)
Acquisition expenses 271 238 (14) 97 79 (23)
Underwriting expenses 152 160 5 43 43 -
Policyholders' dividends 9 15 40 2 1 (100)
--------- --------- --------- ---------
Underwriting income (loss) 3 (87) 103 53 21 152
--------- --------- --------- ---------
Net investment income 138 129 7 62 49 27
Other revenues 40 71 (44) 25 17 47
Other expenses 31 63 51 27 13 (108)
--------- --------- --------- ---------
Income before income tax, minority interest
and net realized investment gains 150 50 200 113 74 53
Income tax expense (34) (5) N/A (34) (24) (42)
Minority interest (2) (1) (100) (4) (2) (100)
--------- --------- --------- ---------
Income before net realized investment gains 114 44 159 75 48 56
Realized investment gains 57 7 N/A 20 3 N/A
Income tax expense on realized
investment gains (19) (4) N/A (7) (1) N/A
--------- --------- --------- ---------
Net income $ 152 $ 47 N/A% $ 88 $ 50 76%
========= ========= ========= =========
FINANCIAL RATIOS
Loss & LAE 65.5 % 73.3 % 63.1 % 66.3 %
Acquisition expense 21.6 19.5 18.4 18.4
Underwriting expense 11.9 13.2 8.0 10.2
Dividends 0.7 1.2 0.4 0.1
--------- --------- --------- ---------
Expense ratio, including dividends 34.2 33.9 26.8 28.7
--------- --------- --------- ---------
Combined ratio 99.7 % 107.2 % 89.9 % 95.0 %
========= ========= ========= =========
THREE MONTHS ENDED P&C OPERATIONS
MARCH 31 FAV/(UNFAV)
(In millions) 2004 2003 % CHANGE
- ----------------------------------------------------------------------------------
Gross written premiums $ 2,275 $ 2,262 1%
Net written premiums 1,846 1,749 6
Net earned premiums 1,787 1,647 9
Claim and claim adjustment expenses 1,157 1,177 2
Acquisition expenses 368 317 (16)
Underwriting expenses 195 203 4
Policyholders' dividends 11 16 31
--------- ---------
Underwriting income (loss) 56 (66) 185
--------- ---------
Net investment income 200 178 12
Other revenues 65 88 (26)
Other expenses 58 76 24
--------- ---------
Income before income tax, minority interest
and net realized investment gains 263 124 112
Income tax expense (68) (29) (134)
Minority interest (6) (3) (100)
--------- ---------
Income before net realized investment gains 189 92 105
Realized investment gains 77 10 N/A
Income tax expense on realized
investment gains (26) (5) N/A
--------- ---------
Net income $ 240 $ 97 147%
========= =========
FINANCIAL RATIOS
Loss & LAE 64.8 % 71.5 %
Acquisition expense 20.6 19.2
Underwriting expense 10.8 12.3
Dividends 0.6 1.0
--------- ---------
Expense ratio, including dividends 32.0 32.5
--------- ---------
Combined ratio 96.8 % 104.0 %
========= =========
7
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CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
LIFE & GROUP NON-CORE AND CORPORATE & OTHER NON-CORE SEGMENTS RESULTS OF
OPERATIONS
THREE MONTHS ENDED LIFE & GROUP NON-CORE
MARCH 31 P&C OPERATIONS FAV/(UNFAV)
(In millions) 2004 2003 2004 2003 % CHANGE
------- ------- ------- ------- -------
Net earned premiums $ 1,787 $ 1,647 $ 326 $ 586 (44)%
Insurance claims & policyholders' benefits 1,157 1,177 407 561 27
Policyholders' dividends 11 16 6 2 (200)
Insurance related expenses 563 520 108 200 46
Net investment income 200 178 206 203 1
Other revenues 65 88 34 41 (17)
Other expenses 58 76 21 24 13
------- ------- ------- -------
Income (loss) before income tax, minority interest
and net realized investment gains (losses) 263 124 24 43 (44)
Income tax (expense) benefit (68) (29) (5) (14) 64
Minority interest (6) (3) -- -- N/A
------- ------- ------- -------
Income before net realized investment gains (losses) 189 92 19 29 (34)
Realized investment gains (losses) 77 10 (562) (104) N/A
Income tax (expense) benefit on realized
investment gains (losses) (26) (5) 161 36 N/A
------- ------- ------- -------
Net income (loss) $ 240 $ 97 $ (382) $ (39) N/A%
======= ======= ======= =======
THREE MONTHS ENDED CORPORATE & OTHER NON-CORE TOTAL OPERATIONS
MARCH 31 FAV/(UNFAV) FAV/(UNFAV)
(In millions) 2004 2003 % CHANGE 2004 2003 % CHANGE
------- ------- ------- ------- ------- --------
Net earned premiums $ 55 $ 148 (63)% $ 2,168 $ 2,381 (9)%
Insurance claims & policyholders' benefits 39 114 66 1,603 1,852 13
Policyholders' dividends 1 -- N/A 18 18 --
Insurance related expenses 45 48 6 716 768 7
Net investment income 67 51 31 473 432 9
Other revenues (17) (21) 19 82 108 (24)
Other expenses 22 3 N/A 101 103 2
------- ------- ------- -------
Income (loss) before income tax, minority interest
and net realized investment gains (losses) (2) 13 (115) 285 180 58
Income tax (expense) benefit 2 (2) 200 (71) (45) (58)
Minority interest -- -- N/A (6) (3) (100)
------- ------- ------- -------
Income before net realized investment gains (losses) -- 11 N/A 208 132 58
Realized investment gains (losses) 27 18 50 (458) (76) N/A
Income tax (expense) benefit on realized
investment gains (losses) (10) (4) (150) 125 27 N/A
------- ------- ------- -------
Net income (loss) $ 17 $ 25 (32)% $ (125) $ 83 N/A%
======= ======= ======= =======
OTHER FINANCIAL DATA LIFE & GROUP NON-CORE
PROPERTY & CASUALTY COMPANY INFORMATION P&C OPERATIONS FAV/(UNFAV)
2004 2003 2004 2003 % CHANGE
------- ------- ------- ------- --------
Gross written premiums $ 2,275 $ 2,262 $ 319 $ 351 (9)%
Net written premiums 1,846 1,749 176 137 28
Net earned premiums 1,787 1,647 166 130 28
Underwriting income (loss) 56 (66) (101) (58) (74)%
FINANCIAL RATIOS
Loss & LAE 64.8% 71.5 % 128.5% 114.6%
Acquisition expense 20.6 19.2 17.3 16.2
Underwriting expense 10.8 12.3 15.0 14.1
Dividends 0.6 1.0 -- --
------- ------ ------ -------
Expense ratio, including dividends 32.0 32.5 32.3 30.3
------- ------ ------ -------
Combined ratio 96.8% 104.0 % 160.8% 144.9%
======= ====== ====== =======
OTHER FINANCIAL DATA CORPORATE & OTHER NON-CORE TOTAL OPERATIONS
PROPERTY & CASUALTY COMPANY INFORMATION FAV/(UNFAV) FAV/(UNFAV)
2004 2003 % CHANGE 2004 2003 % CHANGE
------- ------- -------- ------- ------- --------
Gross written premiums $ 637 $ 803 (21)% $ 3,231 $ 3,416 (5)%
Net written premiums (16) 214 (107) 2,006 2,100 (4)
Net earned premiums 71 171 (58) 2,024 1,948 4
Underwriting income (loss) (29) (12) (142)% (74) (136) 46%
FINANCIAL RATIOS
Loss & LAE 77.3% 79.7% 70.4% 75.1%
Acquisition expense 55.0 24.9 21.6 19.5
Underwriting expense 9.3 2.5 11.0 11.6
Dividends -- -- 0.6 0.8
------ ------- ------- -------
Expense ratio, including dividends 64.3 27.4 33.2 31.9
------ ------- ------- -------
Combined ratio 141.6% 107.1% 103.6% 107.0%
====== ======= ======= =======
8
a
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
PROPERTY & CASUALTY OPERATIONS AND CORPORATE & OTHER NON-CORE SEGMENT -
CATASTROPHE LOSSES
- --------------------------------------------------------------------------------------------------------------------------------
CATASTROPHE LOSSES (PRETAX) CORPORATE & OTHER
(In millions) STANDARD LINES SPECIALTY LINES P&C OPERATIONS NON-CORE TOTAL
- --------------------------------------------------------------------------------------------------------------------------------
Three months ended March 31, 2004 $ 6 $ 2 $ 8 $ - $ 8
Three months ended March 31, 2003 $ 14 $ 1 $ 15 $ - $ 15
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
CATASTROPHE LOSSES (AFTER-TAX) CORPORATE & OTHER
(In millions) STANDARD LINES SPECIALTY LINES P&C OPERATIONS NON-CORE TOTAL
- --------------------------------------------------------------------------------------------------------------------------------
Three months ended March 31, 2004 $ 4 $ 1 $ 5 $ - $ 5
Three months ended March 31, 2003 $ 9 $ 1 $ 10 $ - $ 10
- --------------------------------------------------------------------------------------------------------------------------------
9
a
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
ANALYSIS OF PRETAX NET INVESTMENT INCOME
(In millions) STANDARD LINES
- ----------------------------------------------------------------------------------------------------------------------------------
1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04
---- ---- ---- ---- -------- ---- ---- ---- ---- -------- ----
Limited partnership income $ 4 $ 21 $ (41) $ (3) $ (19) $ 13 $ 43 $ 35 $ 35 $ 126 $ 37
Interest on funds withheld
and other deposits (39) (45) (38) (57) (179) (34) (77) (115) (43) (269) (38)
Other investment income 154 178 165 176 673 150 139 135 126 550 139
-----------------------------------------------------------------------------------------------
Net investment income $ 119 $ 154 $ 86 $ 116 $ 475 $ 129 $ 105 $ 55 $ 118 $ 407 $ 138
===============================================================================================
SPECIALTY LINES
-----------------------------------------------------------------------------------------------
1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04
---- ---- ---- ---- -------- ---- ---- ---- ---- -------- ----
Limited partnership income $ 1 $ 6 $ (12) $ - $ (5) $ 4 $ 14 $ 11 $ 11 $ 40 $ 13
Interest on funds withheld
and other deposits (8) (6) (9) (6) (29) (5) (7) (11) (2) (25) (2)
Other investment income 49 54 51 52 206 50 46 47 43 186 51
-----------------------------------------------------------------------------------------------
Net investment income $ 42 $ 54 $ 30 $ 46 $ 172 $ 49 $ 53 $ 47 $ 52 $ 201 $ 62
===============================================================================================
P&C OPERATIONS
-----------------------------------------------------------------------------------------------
1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04
---- ---- ---- ---- -------- ---- ---- ---- ---- -------- ----
Limited partnership income $ 5 $ 27 $ (53) $ (3) $ (24) $ 17 $ 57 $ 46 $ 46 $ 166 $ 50
Interest on funds withheld
and other deposits (47) (51) (47) (63) (208) (39) (84) (126) (45) (294) (40)
Other investment income 203 232 216 228 879 200 185 182 169 736 190
-----------------------------------------------------------------------------------------------
Net investment income $ 161 $ 208 $ 116 $ 162 $ 647 $ 178 $ 158 $ 102 $ 170 $ 608 $ 200
===============================================================================================
LIFE & GROUP NON-CORE
-----------------------------------------------------------------------------------------------
1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04
---- ---- ---- ---- -------- ---- ---- ---- ---- -------- ----
Limited partnership income $ - $ 1 $ (2) $ (2) $ (3) $ 1 $ - $ 1 $ 1 $ 3 $ 1
Interest on funds withheld and
other deposits - - - - - - - - - - -
Income from trading
securities (1) - - - - - - - - - - 28
Other investment income 202 205 205 212 824 202 211 203 202 818 177
-----------------------------------------------------------------------------------------------
Net investment income (2) $ 202 $ 206 $ 203 $ 210 $ 821 $ 203 $ 211 $ 204 $ 203 $ 821 $ 206
===============================================================================================
CORPORATE & OTHER NON-CORE
-----------------------------------------------------------------------------------------------
1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04
---- ---- ---- ---- -------- ---- ---- ---- ---- -------- ----
Limited partnership income $ 2 $ 9 $ (17) $ (1) $ (7) $ 5 $ 18 $ 14 $ 15 $ 52 $ 16
Interest on funds withheld
and other deposits (11) (6) (6) (9) (32) (8) (9) (22) (11) (50) (10)
Other investment income 72 85 68 76 301 54 49 54 59 216 61
-----------------------------------------------------------------------------------------------
Net investment income $ 63 $ 88 $ 45 $ 66 $ 262 $ 51 $ 58 $ 46 $ 63 $ 218 $ 67
===============================================================================================
TOTAL OPERATIONS
-----------------------------------------------------------------------------------------------
1Q02 2Q02 3Q02 4Q02 YTD 2002 1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04
---- ---- ---- ---- -------- ---- ---- ---- ---- -------- ----
Limited partnership income $ 7 $ 37 $ (72) $ (6) $ (34) $ 23 $ 75 $ 61 $ 62 $ 221 $ 67
Interest on funds withheld
and other deposits (58) (57) (53) (72) (240) (47) (93) (148) (56) (344) (50)
Income from trading
securities (1) - - - - - - - - - - 28
Other investment income 477 522 489 516 2,004 456 445 439 430 1,770 428
-----------------------------------------------------------------------------------------------
Net investment income (2) $ 426 $ 502 $ 364 $ 438 $ 1,730 $ 432 $ 427 $ 352 $ 436 $ 1,647 $ 473
===============================================================================================
(1) Includes $8 million related to limited partnership investment income that
supports indexed group annuity contracts.
(2) Net investment income at March 31, 2004 includes income from trading
securities. See Accounting Pronouncements for the discussion of SOP 03-01 on
page i.
10
a
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
STATUTORY DATA - PRELIMINARY
PERIOD ENDED MARCH 31 THREE MONTHS
INCOME STATEMENT (PRELIMINARY) FAV / (UNFAV)
(In millions) 2004 2003 % CHANGE
- -----------------------------------------------------------------------------------------------------
PROPERTY & CASUALTY COMPANIES
Gross written premiums $ 3,691 $ 4,593 (20)%
Net written premiums 1,822 1,918 (5)
Net earned premiums 1,702 1,722 -
Claim and claim adjustment expenses 1,272 1,328 4
Acquisition expenses 324 369 12
Underwriting expenses 215 218 1
Policyholders' dividends 12 25 52
Restructuring and other related costs - - N/A
-------- --------
Underwriting loss (121) (218) 44
Net investment income 303 282 7
Other expense (59) (37) (59)
Income tax expense (112) (5) N/A
Net realized gains 165 37 N/A
-------- --------
Net income $ 176 $ 59 198%
======== ========
FINANCIAL RATIOS
Loss and LAE 74.7% 77.1%
Acquisition expense 17.8 19.2
Underwriting expense 11.8 11.5
Policyholders' dividends 0.7 1.4
-------- --------
Expense ratio 30.3 32.1
-------- --------
Combined ratio 105.0% 109.2%
======== ========
LIFE COMPANIES
Earned premium $ 179 $ 492
SUPPLEMENTAL STATUTORY DATA
(PRELIMINARY)
(In millions) MARCH 31, 2004 DECEMBER 31, 2003
- ---------------------------------------------------------------------------------------------
PROPERTY & CASUALTY COMPANIES
Statutory surplus (1) $ 6,606 $ 6,170
LIFE COMPANIES
Statutory surplus $ 719 $ 707
Gross life insurance in force 378,858 388,968
(1) Surplus includes the Property & Casualty Companies' equity ownership of the
life insurance subsidiaries.
11
a
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
PROPERTY & CASUALTY OPERATIONS
LOSS AND LAE RATIO ANALYSIS
STANDARD LINES
------------------------------------------------------
2004 YTD 2003 FY 2003 FY
EVALUATED AT EVALUATED AT EVALUATED AT
3/31/04 12/31/03 3/31/04
------------ -------------- ------------
Gross Accident Year 62.8% 65.4% 64.3%
Impact of Other Reinsurance 2.9 2.4 2.8
-------- -------- -------
Net Accident Year 65.7 67.8 67.1%
=======
Impact of Corporate Covers - (6.4)
Impact of Development (0.2) 35.4
-------- --------
Net Calendar Year 65.5% 96.8%
======== ========
SPECIALTY LINES
------------------------------------------------------
2004 YTD 2003 FY 2003 FY
EVALUATED AT EVALUATED AT EVALUATED AT
3/31/04 12/31/03 3/31/04
------------ -------------- ------------
Gross Accident Year 62.0% 67.1% 65.8%
Impact of Other Reinsurance 1.0 1.8 1.9
-------- -------- -------
Net Accident Year 63.0 68.9 67.7%
=======
Impact of Corporate Covers - (1.9)
Impact of Development 0.1 18.4
-------- --------
Net Calendar Year 63.1% 85.4%
======== ========
P&C OPERATIONS
------------------------------------------------------
2004 YTD 2003 FY 2003 FY
EVALUATED AT EVALUATED AT EVALUATED AT
3/31/04 12/31/03 3/31/04
------------ -------------- ------------
Gross Accident Year 62.6% 65.9% 64.7%
Impact of Other Reinsurance 2.3 2.2 2.6
-------- -------- -------
Net Accident Year 64.9 68.1 67.3%
=======
Impact of Corporate Covers - (5.1)
Impact of Development (0.1) 30.6
-------- --------
Net Calendar Year 64.8% 93.6%
======== ========
12
a
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
LIFE & GROUP NON-CORE SEGMENT - GAAP RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2004 LIFE & GROUP NON-CORE LIFE & GROUP NON-CORE TOTAL LIFE & GROUP
EXCLUDING BUSINESSES BUSINESSES TO BE SOLD NON-CORE
(In millions) TO BE SOLD (1) (2) (3) AS REPORTED
- ---------------------------------------------------------------------------------------------------------------------------------
Net earned premiums $ 221 $ 105 $ 326
Insurance claims & policyholders' benefits 301 106 407
Policyholders' dividends - 6 6
Insurance related expenses 73 35 108
Net investment income 154 52 206
Other revenues 25 9 34
Other expenses 13 8 21
---------- -------- -----
Income before income tax and net realized investment
gains (losses) 13 11 24
Income tax expense (1) (4) (5)
---------- -------- -----
Income before net realized investment gains (losses) 12 7 19
Realized investment gains (losses) 6 (568) (562)
Income tax (expense) benefit on realized investment
gains (losses) (2) 163 161
---------- -------- -----
Net income (loss) $ 16 $ (398) $(382)
========== ======== =====
THREE MONTHS ENDED MARCH 31, 2003 LIFE & GROUP NON-CORE LIFE & GROUP NON-CORE TOTAL LIFE & GROUP
EXCLUDING BUSINESSES BUSINESSES NON-CORE
(In millions) TO BE SOLD (1) TO BE SOLD AS REPORTED
- ---------------------------------------------------------------------------------------------------------------------------------
Net earned premiums $ 223 $ 363 $ 586
Insurance claims & policyholders' benefits 261 300 561
Policyholders' dividends (2) 4 2
Insurance related expenses 65 135 200
Net investment income 117 86 203
Other revenues 26 15 41
Other expenses 15 9 24
--------- ------- -----
Income before income tax and net realized investment
losses 27 16 43
Income tax expense (8) (6) (14)
--------- ------- -----
Income before net realized investment losses 19 10 29
Realized investment losses (64) (40) (104)
Income tax benefit on realized investment losses 26 10 36
--------- ------- -----
Net (loss) income $ (19) $ (20) $ (39)
========= ======= =====
(1) Retained life and group businesses principally include group and
individual long term care, structured settlements, institutional markets
and specialty medical.
(2) For three months ended March 31, 2004, net realized investment losses for
Life & Group Non-Core businesses to be sold include an estimated pretax
impairment loss of $569 million ($406 million after-tax), related to the
individual life business.
(3) Life and group businesses to be sold include individual life business and
CNA Trust.
13
a
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
ASBESTOS SUMMARY BY POLICYHOLDER CATEGORY
MARCH 31, 2004 PERCENT OF
NUMBER OF NET PAID NET ASBESTOS ASBESTOS NET
(In millions) POLICYHOLDERS LOSSES IN 2004 RESERVES RESERVES
- ---------------------------------------------------------------------------------------------------------------------
POLICYHOLDERS WITH SETTLEMENT AGREEMENTS
Structured Settlements 10 $ 41 $ 175 10%
Wellington 5 6 17 1
Coverage in Place 34 10 109 7
Fibreboard 1 - 54 3
----- ------ ------ ----
TOTAL WITH SETTLEMENT AGREEMENTS 50 57 355 21
OTHER POLICYHOLDERS WITH ACTIVE ACCOUNTS
Large Asbestos Accounts 163 4 418 24
Small Asbestos Accounts 1,081 3 158 9
----- ------ ------ ----
TOTAL OTHER POLICYHOLDERS 1,244 7 576 33
ASSUMED REINSURANCE & POOLS - - 156 9
UNASSIGNED IBNR (1) - - 625 37
----- ------ ------ ----
TOTAL 1,294 $ 64 $1,712 100%
===== ====== ====== ====
(1) IBNR includes claims that are incurred but not reported.
14