EXHIBIT 99.2
A
CNA FINANCIAL CORPORATION
SUPPLEMENTAL FINANCIAL INFORMATION
JUNE 30, 2004
CNA FINANCIAL CORPORATION
TABLE OF CONTENTS
JUNE 30, 2004
PAGE
----
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 Statements 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 (Three Months Ended) 7
Life & Group Non-Core and Corporate & Other Non-Core Segments Results of Operations (Three Months Ended) 8
Property & Casualty Results of Operations (Six Months Ended) 9
Life & Group Non-Core and Corporate & Other Non-Core Segments Results of Operations (Six Months Ended) 10
Property & Casualty Operations and Corporate & Other Non-Core Segment - Catastrophe Losses 11
Analysis of Pretax Net Investment Income 12
Statutory Data - Preliminary 13
Property & Casualty Operations Loss and LAE Ratio Analysis 14
Life & Group Non-Core Segment - GAAP Results of Operations (Three Months Ended) 15
Life & Group Non-Core Segment - GAAP Results of Operations (Six Months Ended) 16
Asbestos Summary by Policyholder Category 17
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. 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. The Group Benefits business was sold on December
31, 2003 and the Individual Life business was sold on April 30, 2004. 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
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, including the expenses incurred related to
uncollectible reinsurance, as a percentage of net earned premiums. In the
second quarter of 2004, the expenses incurred related to uncollectible
reinsurance receivables were reclassified from "Other operating expenses"
to "Insurance claims and policyholders' benefits" on the Statements of
Operations. Prior period amounts and ratios have been reclassified to
conform to the current year presentation. This reclassification had no
impact on net income (loss) or the combined ratios in any period; however,
this change will generally have an unfavorable impact on the loss & loss
adjustment expense ratios and a favorable impact on the the expense
ratios.
- - 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 on December 31,
2003, income statement results for 2004 are not comparable to 2003.
- - On April 30, 2004, CNA completed the sale of its individual life insurance
business. The business sold included 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.
Additionally, the Nashville, Tennessee insurance servicing and
administration building was transferred as part of the sale. Consideration
from the sale was approximately $700 million, resulting in an after-tax
realized investment loss on the sale of $389 million. The results of the
business sold through the sale date are included in the statement of
operations for the three and six months ended June 30, 2004. As a result
of the sale, income statement results for the second quarter of 2004 are
not comparable to the corresponding 2003 results.
- - 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
June 30, 2004. The estimated fair value of the assets and liabilities
exceeds their carrying value; therefore, the gain from the sale will be
recorded at closing.
- - All amounts are in millions, except for per share and ratio information.
- - Certain immaterial differences are due to rounding.
ii
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
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
STATEMENTS OF OPERATIONS
FAV / FAV /
PERIOD ENDED JUNE 30 THREE MONTHS (UNFAV) SIX MONTHS (UNFAV)
(In millions) 2004 2003 % CHANGE 2004 2003 % CHANGE
- -------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
Revenues:
Net earned premiums $ 2,106 $ 2,197 (4)% $ 4,274 $ 4,578 (7)%
Net investment income 380 427 (11) 853 859 (1)
Realized investment gains (losses), net of
participating policyholders' and minority interests 105 378 (72) (353) 302 N/A
Other revenues 72 97 (26) 154 205 (25)
------- ------- ------- -------
Total revenues 2,663 3,099 (14) 4,928 5,944 (17)
------- ------- ------- -------
Claims, benefits and expenses:
Insurance claims and policyholders' benefits 1,625 2,108 23 3,263 3,978 18
Other operating expenses 682 881 23 1,447 1,718 16
Interest 31 33 6 66 67 1
------- ------- ------- -------
Total claims, benefits and expenses 2,338 3,022 23 4,776 5,763 17
------- ------- ------- -------
Income from continuing operations before income
tax and minority interest 325 77 N/A 152 181 (16)
Income tax (expense) benefit (29) (5) N/A 25 (23) N/A
Minority interest (7) (2) N/A (13) (5) (160)
------- ------- ------- -------
Net income $ 289 $ 70 N/A% $ 164 $ 153 7%
======= ======= ======= =======
1
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
COMPONENTS OF NET INCOME AND PER SHARE DATA
FAV / FAV /
PERIOD ENDED JUNE 30 THREE MONTHS (UNFAV) SIX MONTHS (UNFAV)
(In millions, except per share data) 2004 2003 % CHANGE 2004 2003 % CHANGE
- ------------------------------------------------------------------------------------------------------------------------------
COMPONENTS OF NET INCOME
Income (loss) before net realized investment gains (losses) $ 171 $ (179) 196% $ 379 $ (47) N/A%
Net realized investment gains (losses), net of
participating policyholders' and minority interests 118 249 (53) (215) 200 N/A
------ ------ ------ ------
Net income $ 289 $ 70 N/A% $ 164 $ 153 7%
====== ====== ====== ======
BASIC AND DILUTED EARNINGS PER SHARE
------ ------ ------ ------
Basic and diluted earnings per share available to common stockholders $ 1.07 $ 0.25 N/A% $ 0.52 $ 0.55 (5)%
====== ====== ====== ======
Weighted average outstanding common stock and common stock
equivalents 255.9 223.6 255.9 223.6
2
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
SELECTED BALANCE SHEET DATA AND CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS DATA
(In millions, except per share data) JUNE 30, 2004 DECEMBER 31, 2003
- ---------------------------------------------------------------------------------------------------
Assets related to businesses held for sale $ 200 $ -
Total assets 61,185 68,503
Insurance reserves 43,594 45,383
Debt 1,714 1,904
Liabilities related to businesses held for sale 170 -
Total liabilities 52,592 59,295
Minority interest 263 256
Accumulated other comprehensive income 52 841
Total stockholders' equity 8,330 8,952
Book value per common share $ 29.25 $ 31.80
Book value per common share excluding unrealized
gain or loss on fixed maturity securities $ 28.91 $ 28.98
Outstanding shares of common stock (in millions of shares) (1) 255.9 255.9
THREE MONTHS ENDED
JUNE 30
(In millions) 2004 2003
- ------------------------------------------------------------------------------------------------
Net cash flows provided by operating activities $ 646 $ 70
Net cash flows used by investing activities (101) (84)
Net cash flows used by financing activities (523) (12)
----------- -----------
Net cash flows $ 22 $ (26)
=========== ===========
SIX MONTHS ENDED
JUNE 30
(In millions) 2004 2003
- ------------------------------------------------------------------------------------------------
Net cash flows provided by operating activities $ 683 $ 115
Net cash flows provided (used) by investing activities (542) 48
Net cash flows used by financing activities (177) (149)
----------- -----------
Net cash flows $ (36) $ 14
=========== ===========
(1) Included in the outstanding shares of common stock for the year ended
December 31, 2003 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 were converted
into 32.3 million shares of CNA common stock on April 20, 2004.
3
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
PROPERTY & CASUALTY INSURANCE
CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVE DATA
CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVES (1)
(In millions) STANDARD LINES SPECIALTY LINES P&C OPERATIONS
- -------------------------------------------------------------------------------------------------------
As of June 30, 2004
Gross $ 14,275 $ 4,576 $ 18,851
Ceded 5,192 1,446 6,638
Net 9,083 3,130 12,213
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) NON-CORE TOTAL OPERATIONS
- ---------------------------------------------------------------------------------------------------------
As of June 30, 2004
Gross $ 3,733 $ 8,979 $ 31,563
Ceded 1,909 5,588 14,135
Net 1,824 3,391 17,428
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 June 30, 2004 and December 31, 2003 include $364
million and $448 million of life company reserves, which are primarily
related to accident and health business. Net reserves as of June 30, 2004
and December 31, 2003 include $120 million and $230 million of life
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)
PERIOD ENDED JUNE 30, 2004 THREE MONTHS SIX MONTHS
(In millions) ENDED ENDED
- -------------------------------------------------------------------------------------------------
Claim & claim adjustment expense reserves, beginning of period
Gross $ 31,183 $ 31,730
Ceded 13,993 14,216
------------ ----------
Net 17,190 17,514
------------ ----------
Net incurred claim & claim adjustment expenses 1,757 3,240
Net claim & claim adjustment expense payments (1,515) (3,284)
Reduction of net reserves due to life sale (2) (4) (42)
------------ ----------
Claim & claim adjustment expense reserves, end of period
Net 17,428 17,428
Ceded 14,135 14,135
------------ ----------
Gross $ 31,563 $ 31,563
============ ==========
(1) Gross reserves as of June 30, 2004 and December 31, 2003 include $364
million and $448 million of life company reserves, which are primarily
related to accident and health business. Net reserves as of June 30, 2004
and December 31, 2003 include $120 million and $230 million of life
company reserves, which are primarily related to accident and health
business.
(2) Net reserves were reduced as a result of the sale of the Individual Life
business on April 30, 2004.
5
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
INVESTMENTS BY SEGMENT AGGREGATION
JUNE 30, 2004 DECEMBER 31, 2003
(In millions) BOOK VALUE FAIR VALUE BOOK VALUE FAIR VALUE
- -----------------------------------------------------------------------------------------------------------
PROPERTY & CASUALTY AND CORPORATE & OTHER NON-CORE:
Fixed Maturities - Taxable $ 14,432 $ 14,425 $ 11,623 $ 11,893
Fixed Maturities - Tax Exempt 8,011 7,922 6,848 7,004
Equities 168 241 225 448
Short-term 2,597 2,597 6,689 6,689
Limited Partnership Investments 1,216 1,216 1,113 1,113
Mortgage Loans & Other 18 19 48 58
---------- ---------- ---------- ----------
Subtotal 26,442 26,420 26,546 27,205
Securities Lending Collateral 151 151 307 307
---------- ---------- ---------- ----------
TOTAL INVESTMENTS $ 26,593 $ 26,571 $ 26,853 $ 27,512
---------- ---------- ---------- ----------
LIFE & GROUP NON-CORE (1) (2):
Fixed Maturities - Taxable $ 6,591 $ 6,861 $ 8,155 $ 8,815
Fixed Maturities - Tax Exempt 978 935 939 966
Equities 50 59 68 79
Short-term 1,052 1,052 419 419
Limited Partnership Investments 470 470 4 4
Mortgage Loans & Other 23 10 197 182
---------- ---------- ---------- ----------
Subtotal 9,164 9,387 9,782 10,465
Securities Lending Collateral 53 53 123 123
---------- ---------- ---------- ----------
TOTAL INVESTMENTS $ 9,217 $ 9,440 $ 9,905 $ 10,588
---------- ---------- ---------- ----------
TOTAL INVESTMENTS $ 35,810 $ 36,011 $ 36,758 $ 38,100
========== ========== ========== ==========
(1) As a result of SOP 03-01, the following investments are included in Life &
Group Non-Core as of June 30, 2004 and are included in the June 30, 2004
column above. As of December 31, 2003, the investments were reflected
within separate accounts in the 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.
BOOK VALUE FAIR VALUE
---------- ----------
Fixed Maturities - Taxable $ 1,215 $ 1,287
Equities 5 4
Short-term 325 325
Limited Partnership Investments 468 468
---------- ----------
TOTAL INVESTMENTS $ 2,013 $ 2,084
========== ==========
(2) Investments of $185 million for CNA Trust have been transferred to assets
related to businesses held for sale and are not included in the June 30,
2004 column above. As of December 31, 2003, the balances were reflected
within investments in the Balance Sheet and are included in the December
31, 2003 column above.
6
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
PROPERTY & CASUALTY RESULTS OF OPERATIONS
THREE MONTHS ENDED STANDARD LINES SPECIALTY LINES P&C OPERATIONS
JUNE 30 FAV/(UNFAV) FAV/(UNFAV) FAV/(UNFAV)
(In millions) 2004 2003 % CHANGE 2004 2003 % CHANGE 2004 2003 % CHANGE
- ----------------------------------------------------------------------------------------------------------------------------------
Gross written premiums $1,508 $1,651 (9)% $ 676 $ 614 10% $2,184 $2,265 (4)%
Net written premiums 1,209 1,087 11 592 487 22 1,801 1,574 14
Net earned premiums 1,315 1,018 29 567 459 24 1,882 1,477 27
Claim and claim adjustment expenses 927 896 (3) 364 402 9 1,291 1,298 1
Acquisition expenses 258 266 3 106 83 (28) 364 349 (4)
Underwriting expenses 141 172 18 39 45 13 180 217 17
Policyholders' dividends (15) 11 N/A 1 -- N/A (14) 11 N/A
------ ------ ----- ------ ------ ------
Underwriting income (loss) 4 (327) 101 57 (71) 180 61 (398) 115
------ ------ ----- ------ ------ ------
Net investment income 119 105 13 59 53 11 178 158 13
Other revenues 30 61 (51) 32 30 7 62 91 (32)
Other expenses 28 60 53 28 25 (12) 56 85 34
------ ------ ----- ------ ------ ------
Income (loss) before income tax, minority
interest and net realized investment gains 125 (221) 157 120 (13) N/A 245 (234) N/A
Income tax (expense) benefit (25) 85 (129) (34) 9 N/A (59) 94 (163)
Minority interest (2) 2 (200) (5) (3) (67) (7) (1) N/A
------ ------ ----- ------ ------ ------
Income (loss) before net realized investment
gains 98 (134) 173 81 (7) N/A 179 (141) N/A
Realized investment gains 77 184 (58) 30 59 (49) 107 243 (56)
Income tax expense on realized
investment gains (27) (62) 56 (12) (21) 43 (39) (83) 53
------ ------ ----- ------ ------ ------
Net income (loss) $ 148 $ (12) N/A% $ 99 $ 31 N/A% $ 247 $ 19 N/A%
====== ====== ===== ====== ====== ======
FINANCIAL RATIOS
Loss & LAE 70.5% 88.0% 64.2% 87.5% 68.6% 87.8%
Acquisition expense 19.6 26.1 18.6 18.2 19.3 23.7
Underwriting expense 10.7 16.9 7.0 9.7 9.6 14.6
Dividends (1.1) 1.1 0.2 0.1 (0.7) 0.8
------ ------ ----- ------ ------ ------
Expense ratio, including dividends 29.2 44.1 25.8 28.0 28.2 39.1
------ ------ ----- ------ ------ ------
Combined ratio 99.7% 132.1% 90.0% 115.5% 96.8% 126.9%
====== ====== ===== ====== ====== ======
7
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
LIFE & GROUP NON-CORE AND CORPORATE & OTHER NON-CORE SEGMENTS RESULTS
OF OPERATIONS
THREE MONTHS ENDED P&C OPERATIONS LIFE & GROUP NON-CORE
JUNE 30 FAV/(UNFAV)
(In millions) 2004 2003 2004 2003 % CHANGE
- --------------------------------------------------------------------------------------------------------------------------
Net earned premiums $ 1,882 $ 1,477 $ 202 $ 603 (67)%
Insurance claims & policyholders' benefits 1,291 1,298 329 580 43
Policyholders' dividends (14) 11 (3) 2 N/A
Insurance related expenses 544 566 68 193 65
Net investment income 178 158 142 211 (33)
Other revenues 62 91 26 35 (26)
Other expenses 56 85 20 21 5
------- ------- ------- -------
Income (loss) before income tax, minority interest
and net realized investment gains (losses) 245 (234) (44) 53 (183)
Income tax (expense) benefit (59) 94 18 (15) N/A
Minority interest (7) (1) - - N/A
------- ------- ------- -------
Income (loss) before net realized investment gains (losses) 179 (141) (26) 38 (168)
Realized investment gains (losses) 107 243 (56) 53 N/A
Income tax (expense) benefit on realized
investment gains (losses) (39) (83) 70 (18) N/A
------- ------- ------- -------
Net income (loss) $ 247 $ 19 $ (12) $ 73 (116)%
======= ======= ======= =======
THREE MONTHS ENDED CORPORATE & OTHER NON-CORE TOTAL OPERATIONS
JUNE 30 FAV/(UNFAV) FAV/(UNFAV)
(In millions) 2004 2003 % CHANGE 2004 2003 % CHANGE
- -----------------------------------------------------------------------------------------------------------------------------------
Net earned premiums $ 22 $ 117 (81)% $ 2,106 $ 2,197 (4)%
Insurance claims & policyholders' benefits 21 217 90 1,641 2,095 22
Policyholders' dividends - - N/A (17) 13 N/A
Insurance related expenses 23 45 49 635 804 21
Net investment income 60 58 3 380 427 (11)
Other revenues (16) (29) 45 72 97 (26)
Other expenses 3 4 25 79 110 28
------ ------- ------- -------
Income (loss) before income tax, minority interest
and net realized investment gains (losses) 19 (120) 116 220 (301) 173
Income tax (expense) benefit (1) 45 (102) (42) 124 (134)
Minority interest - (1) N/A (7) (2) N/A
------ ------- ------- -------
Income (loss) before net realized investment gains (losses) 18 (76) 124 171 (179) 196
Realized investment gains (losses) 54 82 (34) 105 378 (72)
Income tax (expense) benefit on realized
investment gains (losses) (18) (28) 36 13 (129) 110
------ ------- ------- -------
Net income (loss) $ 54 $ (22) N/A% $ 289 $ 70 N/A%
====== ======= ======= =======
P&C OPERATIONS LIFE & GROUP NON-CORE CORPORATE & OTHER NON-CORE
OTHER FINANCIAL DATA FAV/(UNFAV) FAV/(UNFAV)
PROPERTY & CASUALTY COMPANY INFORMATION 2004 2003 2004 2003 % CHANGE 2004 2003 % CHANGE
- ---------------------------------------------------------------------------------------------------------------------------
Gross written premiums $ 2,184 $ 2,265 $ 293 $ 326 (10)% $ 481 $ 671 (28)%
Net written premiums 1,801 1,574 163 132 23 (4) 120 (103)
Net earned premiums 1,882 1,477 150 132 14 23 139 (83)
Underwriting income (loss) 61 (398) (84) (71) (18)% (16) (147) 89%
FINANCIAL RATIOS
Loss & LAE 68.6% 87.8% 146.1% 125.4% 96.6% 172.3%
Acquisition expense 19.3 23.7 (3.3) 16.2 6.4 24.2
Underwriting expense 9.6 14.6 13.4 12.3 64.6 8.8
Dividends (0.7) 0.8 - - - -
------- ------- ------ ------ ------ ------
Expense ratio, including dividends 28.2 39.1 10.1 28.5 71.0 33.0
------- ------- ------ ------ ------ ------
Combined ratio 96.8% 126.9% 156.2% 153.9% 167.6% 205.3%
======= ======= ====== ====== ====== ======
TOTAL OPERATIONS
OTHER FINANCIAL DATA FAV/(UNFAV)
PROPERTY & CASUALTY COMPANY INFORMATION 2004 2003 % CHANGE
- --------------------------------------------------------------------------
Gross written premiums $ 2,958 $ 3,262 (9)%
Net written premiums 1,960 1,826 7
Net earned premiums 2,055 1,748 18
Underwriting income (loss) (39) (616) 94%
FINANCIAL RATIOS
Loss & LAE 74.6% 97.4%
Acquisition expense 17.5 23.2
Underwriting expense 10.5 14.0
Dividends (0.7) 0.6
------- -------
Expense ratio, including dividends 27.3 37.8
------- -------
Combined ratio 101.9% 135.2%
======= =======
8
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
PROPERTY & CASUALTY RESULTS OF OPERATIONS
SIX MONTHS ENDED STANDARD LINES SPECIALTY LINES P&C OPERATIONS
JUNE 30 FAV/(UNFAV) FAV/(UNFAV) FAV/(UNFAV)
(In millions) 2004 2003 % CHANGE 2004 2003 % CHANGE 2004 2003 % CHANGE
- -----------------------------------------------------------------------------------------------------------------------------------
Gross written premiums $ 3,073 $ 3,285 (6)% $ 1,386 $ 1,242 12% $ 4,459 $ 4,527 (2)%
Net written premiums 2,474 2,360 5 1,173 963 22 3,647 3,323 10
Net earned premiums 2,573 2,237 15 1,096 887 24 3,669 3,124 17
Claim and claim adjustment expenses 1,750 1,789 2 698 686 (2) 2,448 2,475 1
Acquisition expenses 529 504 (5) 203 162 (25) 732 666 (10)
Underwriting expenses 293 332 12 82 88 7 375 420 11
Policyholders' dividends (6) 26 123 3 1 (200) (3) 27 111
------- ------- ------- ------- ------- -------
Underwriting income (loss) 7 (414) 102 110 (50) N/A 117 (464) 125
------- ------- ------- ------- ------- -------
Net investment income 257 234 10 121 102 19 378 336 13
Other revenues 70 132 (47) 57 47 21 127 179 (29)
Other expenses 59 123 52 55 38 (45) 114 161 29
------- ------- ------- ------- ------- -------
Income (loss) before income tax,
minority interest and net realized
investment gains 275 (171) N/A 233 61 N/A 508 (110) N/A
Income tax (expense) benefit (59) 80 (174) (68) (15) N/A (127) 65 N/A
Minority interest (4) 1 N/A (9) (5) (80) (13) (4) N/A
------- ------- ------- ------- ------- -------
Income (loss) before net realized
investment gains 212 (90) N/A 156 41 N/A 368 (49) N/A
Realized investment gains 134 191 (30) 50 62 (19) 184 253 (27)
Income tax expense on realized
investment gains (46) (66) 30 (19) (22) 14 (65) (88) 26
------- ------- ------- ------- ------- -------
Net income $ 300 $ 35 N/A% $ 187 $ 81 131% $ 487 $ 116 N/A%
======= ======= ======= ======= ======= =======
FINANCIAL RATIOS
Loss & LAE 68.0% 80.0% 63.6% 77.3% 66.7% 79.2%
Acquisition expense 20.6 22.5 18.5 18.3 19.9 21.3
Underwriting expense 11.3 14.8 7.6 9.9 10.3 13.4
Dividends (0.2) 1.2 0.3 0.1 (0.1) 0.9
------- ------- ------- ------- ------- -------
Expense ratio, including dividends 31.7 38.5 26.4 28.3 30.1 35.6
------- ------- ------- ------- ------- -------
Combined ratio 99.7% 118.5% 90.0% 105.6% 96.8% 114.8%
======= ======= ======= ======= ======= =======
9
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
LIFE & GROUP NON-CORE AND CORPORATE & OTHER NON-CORE SEGMENTS RESULTS
OF OPERATIONS
SIX MONTHS ENDED P&C OPERATIONS LIFE & GROUP NON-CORE
JUNE 30 FAV/(UNFAV)
(In millions) 2004 2003 2004 2003 % CHANGE
- -------------------------------------------------------------------------------------------------------------------------
Net earned premiums $ 3,669 $ 3,124 $ 528 $ 1,189 (56)%
Insurance claims & policyholders' benefits 2,448 2,475 736 1,141 35
Policyholders' dividends (3) 27 3 4 25
Insurance related expenses 1,107 1,086 176 393 55
Net investment income 378 336 348 414 (16)
Other revenues 127 179 60 76 (21)
Other expenses 114 161 41 45 9
------- ------- ------- -------
Income (loss) before income tax, minority interest
and net realized investment gains (losses) 508 (110) (20) 96 (121)
Income tax (expense) benefit (127) 65 13 (29) 145
Minority interest (13) (4) - - N/A
------- ------- ------- -------
Income (loss) before net realized investment gains (losses) 368 (49) (7) 67 (110)
Realized investment gains (losses) 184 253 (618) (51) N/A
Income tax (expense) benefit on realized
investment gains (losses) (65) (88) 231 18 N/A
------- ------- ------- -------
Net income (loss) $ 487 $ 116 $ (394) $ 34 N/A%
======= ======= ======= =======
SIX MONTHS ENDED CORPORATE & OTHER NON-CORE TOTAL OPERATIONS
JUNE 30 FAV/(UNFAV) FAV/(UNFAV)
(In millions) 2004 2003 % CHANGE 2004 2003 % CHANGE
- ------------------------------------------------------------------------------------------------------------------------------------
Net earned premiums $ 77 $ 265 (71)% $ 4,274 $ 4,578 (7)%
Insurance claims & policyholders' benefits 78 331 76 3,262 3,947 17
Policyholders' dividends 1 - N/A 1 31 97
Insurance related expenses 50 93 46 1,333 1,572 15
Net investment income 127 109 17 853 859 (1)
Other revenues (33) (50) 34 154 205 (25)
Other expenses 25 7 N/A 180 213 15
------- ------- ------- -------
Income (loss) before income tax, minority interest
and net realized investment gains (losses) 17 (107) 116 505 (121) N/A
Income tax (expense) benefit 1 43 (98) (113) 79 N/A
Minority interest - (1) N/A (13) (5) (160)
------- ------- ------- -------
Income (loss) before net realized investment gains (losses) 18 (65) 128 379 (47) N/A
Realized investment gains (losses) 81 100 (19) (353) 302 N/A
Income tax (expense) benefit on realized
investment gains (losses) (28) (32) 13 138 (102) N/A
------- ------- ------- -------
Net income (loss) $ 71 $ 3 N/A% $ 164 $ 153 7%
======= ======= ======= =======
P&C OPERATIONS LIFE & GROUP NON-CORE
OTHER FINANCIAL DATA FAV/(UNFAV)
PROPERTY & CASUALTY COMPANY INFORMATION 2004 2003 2004 2003 % CHANGE
- -----------------------------------------------------------------------------------------------------------
Gross written premiums $ 4,459 $ 4,527 $ 612 $ 677 (10)%
Net written premiums 3,647 3,323 339 269 26
Net earned premiums 3,669 3,124 316 262 21
Underwriting income (loss) 117 (464) (185) (129) (43)%
FINANCIAL RATIOS
Loss & LAE 66.7% 79.2% 136.9% 120.1%
Acquisition expense 19.9 21.3 7.5 16.2
Underwriting expense 10.3 13.4 14.2 13.1
Dividends (0.1) 0.9 - -
--------- --------- ------- -------
Expense ratio, including dividends 30.1 35.6 21.7 29.3
--------- --------- ------- -------
Combined ratio 96.8% 114.8% 158.6% 149.4%
========= ========= ======= =======
CORPORATE & OTHER NON-CORE TOTAL OPERATIONS
OTHER FINANCIAL DATA FAV/(UNFAV) FAV/(UNFAV)
PROPERTY & CASUALTY COMPANY INFORMATION 2004 2003 % CHANGE 2004 2003 % CHANGE
- --------------------------------------------------------------------------------------------------------------------
Gross written premiums $ 1,118 $ 1,474 (24)% $ 6,189 $ 6,678 (7)%
Net written premiums (20) 334 (106) 3,966 3,926 1
Net earned premiums 94 310 (70) 4,079 3,696 10
Underwriting income (loss) (45) (159) 72% (113) (752) 85%
FINANCIAL RATIOS
Loss & LAE 101.2% 121.6% 73.0% 85.7%
Acquisition expense 24.2 24.5 19.1 21.2
Underwriting expense 22.3 5.2 10.8 12.7
Dividends - - (0.1) 0.7
------- ------- ------- --------
Expense ratio, including dividends 46.5 29.7 29.8 34.6
------- ------- ------- --------
Combined ratio 147.7% 151.3% 102.8% 120.3%
======= ======= ======= ========
10
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 June 30, 2004 $ 4 $ 1 $ 5 $ - $ 5
Six months ended June 30, 2004 10 3 13 - 13
Three months ended June 30, 2003 $ 48 $ 1 $ 49 $ 11 $ 60
Six months ended June 30, 2003 62 2 64 11 75
CATASTROPHE LOSSES (AFTER-TAX) CORPORATE & OTHER
(In millions) STANDARD LINES SPECIALTY LINES P&C OPERATIONS NON-CORE TOTAL
- -----------------------------------------------------------------------------------------------------------------------
Three months ended June 30, 2004 $ 3 $ 1 $ 4 $ - $ 4
Six months ended June 30, 2004 7 2 9 - 9
Three months ended June 30, 2003 $ 31 $ 1 $ 32 $ 7 $ 39
Six months ended June 30, 2003 40 1 41 7 48
11
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
ANALYSIS OF PRETAX NET INVESTMENT INCOME
(In millions) STANDARD LINES
- --------------------------------------------- -------------------------------------------------------------------------
1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04 2Q04 YTD 2004
------ ------ ------ ------ -------- ------ ------ --------
Limited partnership income $ 13 $ 43 $ 35 $ 35 $ 126 $ 37 $ 13 $ 50
Interest on funds withheld and other deposits (34) (77) (115) (43) (269) (38) (43) (81)
Other investment income 150 139 135 126 550 139 149 288
------ ------ ------ ------ -------- ------ ------ --------
Net investment income $ 129 $ 105 $ 55 $ 118 $ 407 $ 138 $ 119 $ 257
====== ====== ====== ====== ======== ====== ====== ========
SPECIALTY LINES
-------------------------------------------------------------------------
1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04 2Q04 YTD 2004
------ ------ ------ ------ -------- ------ ------ --------
Limited partnership income $ 4 $ 14 $ 11 $ 11 $ 40 $ 13 $ 5 $ 18
Interest on funds withheld and other deposits (5) (7) (11) (2) (25) (2) (2) (4)
Other investment income 50 46 47 43 186 51 56 107
------ ------ ------ ------ -------- ------ ------ --------
Net investment income $ 49 $ 53 $ 47 $ 52 $ 201 $ 62 $ 59 $ 121
====== ====== ====== ====== ======== ====== ====== ========
P&C OPERATIONS
-------------------------------------------------------------------------
1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04 2Q04 YTD 2004
------ ------ ------ ------ -------- ------ ------ --------
Limited partnership income $ 17 $ 57 $ 46 $ 46 $ 166 $ 50 $ 18 $ 68
Interest on funds withheld and other deposits (39) (84) (126) (45) (294) (40) (45) (85)
Other investment income 200 185 182 169 736 190 205 395
------ ------ ------ ------ -------- ------ ------ --------
Net investment income $ 178 $ 158 $ 102 $ 170 $ 608 $ 200 $ 178 $ 378
====== ====== ====== ====== ======== ====== ====== ========
LIFE & GROUP NON-CORE
-------------------------------------------------------------------------
1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04 2Q04 YTD 2004
------ ------ ------ ------ -------- ------ ------ --------
Limited partnership income $ 1 $ - $ 1 $ 1 $ 3 $ 1 $ - $ 1
Interest on funds withheld and other deposits - - - - - - - -
Income from trading securities (1) - - - - - 28 19 47
Other investment income 202 211 203 202 818 177 123 300
------ ------ ------ ------ -------- ------ ------ --------
Net investment income (2) $ 203 $ 211 $ 204 $ 203 $ 821 $ 206 $ 142 $ 348
====== ====== ====== ====== ======== ====== ====== ========
CORPORATE & OTHER NON-CORE
-------------------------------------------------------------------------
1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04 2Q04 YTD 2004
------ ------ ------ ------ -------- ------ ------ --------
Limited partnership income $ 5 $ 18 $ 14 $ 15 $ 52 $ 16 $ 6 $ 22
Interest on funds withheld and other deposits (8) (9) (22) (11) (50) (10) (11) (21)
Other investment income 54 49 54 59 216 61 65 126
------ ------ ------ ------ -------- ------ ------ --------
Net investment income $ 51 $ 58 $ 46 $ 63 $ 218 $ 67 $ 60 $ 127
====== ====== ====== ====== ======== ====== ====== ========
TOTAL OPERATIONS
-------------------------------------------------------------------------
1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04 2Q04 YTD 2004
------ ------ ------ ------ -------- ------ ------ --------
Limited partnership income $ 23 $ 75 $ 61 $ 62 $ 221 $ 67 $ 24 $ 91
Interest on funds withheld and other deposits (47) (93) (148) (56) (344) (50) (56) (106)
Income from trading securities (1) - - - - - 28 19 47
Other investment income 456 445 439 430 1,770 428 393 821
------ ------ ------ ------ -------- ------ ------ --------
Net investment income (2) $ 432 $ 427 $ 352 $ 436 $ 1,647 $ 473 $ 380 $ 853
====== ====== ====== ====== ======== ====== ====== ========
(1) Includes $8 million for first quarter of 2004 and $6 million for second
quarter of 2004 related to limited partnership investment income that
supports indexed group annuity contracts.
(2) Net investment income in 2004 includes income from trading securities. See
Accounting Pronouncements at page ii for the discussion of SOP 03-01.
12
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) 2004 2003 % CHANGE 2004 2003 % CHANGE
- ------------------------------------ ------------- ------- ------------- ------------- -------- -------------
PROPERTY & CASUALTY COMPANIES
Gross written premiums $ 3,077 $ 3,480 (12)% $ 6,349 $ 7,131 (11)%
Net written premiums 1,865 1,668 12 3,688 3,586 3
Net earned premiums 1,760 1,494 (18) 3,462 3,216 (8)
Claim and claim adjustment expenses 1,426 1,497 5 2,698 2,825 4
Acquisition expenses 305 341 11 637 712 11
Underwriting expenses 222 225 1 429 442 3
Policyholders' dividends 9 15 40 21 40 48
------------- ------- ------------- --------
Underwriting Loss (202) (584) 65 (323) (803) 60
Net investment income 332 277 20 636 560 14
Other income/expense (52) (90) 42 (49) (127) 61
Income tax (expense) benefit (75) 58 N/A (188) 54 N/A
Net realized gains 136 280 (51) 301 316 (5)
------------- ------- ------------- --------
Net income (loss) $ 139 $ (59) N/A% $ 377 $ - N/A%
============= ======= ============= ========
FINANCIAL RATIOS
Loss and LAE 81.0% 100.2% 77.9% 87.8%
Acquisition expense 16.4 20.4 17.3 19.9
Underwriting expense 11.9 13.5 11.6 12.4
Policyholders' dividends 0.5 1.0 0.6 1.2
------------- ------- ------------- --------
Expense ratio 28.8 34.9 29.5 33.5
------------- ------- ------------- --------
Combined ratio 109.8% 135.1% 107.4% 121.3%
============= ======= ============= ========
LIFE COMPANIES (2)
Earned premium $ 56 $ 488 $ 236 $ 980
SUPPLEMENTAL STATUTORY DATA
(PRELIMINARY)
(In millions) JUNE 30, 2004 DECEMBER 31, 2003
- ------------------------------------ ------------- -----------------
PROPERTY & CASUALTY COMPANIES
Statutory surplus (1) $ 6,638 $ 6,170
LIFE COMPANIES
Statutory surplus $ 1,238 $ 707
Gross life insurance in force 61,793 388,968
(1) Surplus includes the Property & Casualty Companies' equity ownership of
the life insurance subsidiaries.
13
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
6/30/04 12/31/03 6/30/04
------------ ------------ ------------
Gross Accident Year 66.0% 65.4% 63.9%
Impact of Other Reinsurance - 2.4 2.8
------------ ------------ ------------
Net Accident Year 66.0 67.8 66.7%
============
Impact of Corporate Covers 0.1 (6.4)
Impact of Development & Change
in Allowance for Uncollectible Reinsurance 1.9 36.7
------------ ------------
Net Calendar Year 68.0% 98.1%
============ ============
SPECIALTY LINES
------------------------------------------
2004 YTD 2003 FY 2003 FY
EVALUATED AT EVALUATED AT EVALUATED AT
6/30/04 12/31/03 6/30/04
------------ ------------ ------------
Gross Accident Year 63.6% 67.1% 65.6%
Impact of Other Reinsurance (0.5) 1.8 0.2
------------ ------------ ------------
Net Accident Year 63.1 68.9 65.8%
============
Impact of Corporate Covers - (1.9)
Impact of Development & Change
in Allowance for Uncollectible Reinsurance 0.5 22.6
------------ ------------
Net Calendar Year 63.6% 89.6%
============ ============
P&C OPERATIONS
------------------------------------------
2004 YTD 2003 FY 2003 FY
EVALUATED AT EVALUATED AT EVALUATED AT
6/30/04 12/31/03 6/30/04
------------ ------------ ------------
Gross Accident Year 65.3% 65.9% 64.4%
Impact of Other Reinsurance (0.2) 2.2 2.1
------------ ------------ ------------
Net Accident Year 65.1 68.1 66.5%
============
Impact of Corporate Covers - (5.1)
Impact of Development & Change
in Allowance for Uncollectible Reinsurance 1.6 32.6
------------ ------------
Net Calendar Year 66.7% 95.6%
============ ============
14
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
LIFE & GROUP NON-CORE SEGMENT - GAAP RESULTS OF OPERATIONS
LIFE & GROUP NON-CORE LIFE & GROUP NON-CORE TOTAL LIFE & GROUP
THREE MONTHS ENDED JUNE 30, 2004 EXCLUDING BUSINESSES BUSINESSES SOLD/TO BE NON-CORE
(In millions) SOLD/TO BE SOLD (1) SOLD (2) (3) AS REPORTED
- ---------------------------------------------------------- --------------------- --------------------- ------------------
Net earned premiums $ 192 $ 10 $ 202
Insurance claims & policyholders' benefits 321 8 329
Policyholders' dividends 1 (4) (3)
Insurance related expenses 50 18 68
Net investment income 143 (1) 142
Other revenues 17 9 26
Other expenses 12 8 20
--------------------- --------------------- ------------------
Loss before income tax and net realized investment gains
(losses) (32) (12) (44)
Income tax benefit 15 3 18
--------------------- --------------------- ------------------
Loss before net realized investment gains (losses) (17) (9) (26)
Realized investment gains (losses) 8 (64) (56)
Income tax (expense) benefit on realized investment gains
(losses) (3) 73 70
--------------------- --------------------- ------------------
Net income (loss) $ (12) $ - $ (12)
===================== ===================== ==================
THREE MONTHS ENDED JUNE 30, 2003
LIFE & GROUP NON-CORE LIFE & GROUP NON-CORE TOTAL LIFE & GROUP
THREE MONTHS ENDED JUNE 30, 2003 EXCLUDING BUSINESSES BUSINESSES SOLD/TO BE NON-CORE
(In millions) SOLD/TO BE SOLD (1) SOLD (2) (3) AS REPORTED
- ---------------------------------------------------------- --------------------- --------------------- ------------------
Net earned premiums $ 235 $ 368 $ 603
Insurance claims & policyholders' benefits 288 292 580
Policyholders' dividends (4) 6 2
Insurance related expenses 63 130 193
Net investment income 122 89 211
Other revenues 20 15 35
Other expenses 9 12 21
--------------------- --------------------- ------------------
Income before income tax and net realized investment gains 21 32 53
Income tax expense (7) (8) (15)
--------------------- --------------------- ------------------
Income before net realized investment gains 14 24 38
Realized investment gains 26 27 53
Income tax expense on realized investment gains (7) (11) (18)
--------------------- --------------------- ------------------
Net income $ 33 $ 40 $ 73
===================== ===================== ==================
(1) Retained life and group businesses principally include group and
individual long term care, structured settlements, institutional markets
and specialty medical.
(2) For the three months ended June 30, 2004, net realized investment losses
for Life & Group Non-Core businesses sold/to be sold include a pretax loss
of $53 million ($17 million gain after-tax), related to the individual
life business. The disproportionate tax provision, on the loss related to
the life sale for the three months ended June 30, 2004, arises from a
change in estimate related to the estimated tax benefit recorded at March
31, 2004. The change in estimate is due to the completion of a formal
study of the outside tax basis of Valley Forge Life Insurance Company. The
total loss related to the life sale was $622 million pretax ($389 million
after-tax), as reflected in the Life & Group Non-Core results for the six
months ended June 30, 2004.
(3) Life and group businesses sold/to be sold include group business,
individual life business and CNA Trust. Included in this column are the
effects of shared corporate overhead expenses which continue to be
allocated to the sold businesses.
15
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
LIFE & GROUP NON-CORE SEGMENT - GAAP RESULTS OF OPERATIONS
LIFE & GROUP NON-CORE LIFE & GROUP NON-CORE TOTAL LIFE & GROUP
SIX MONTHS ENDED JUNE 30, 2004 EXCLUDING BUSINESSES BUSINESSES SOLD/TO BE NON-CORE
(In millions) SOLD/TO BE SOLD (1) SOLD (2) (3) AS REPORTED
- ---------------------------------------------------------- --------------------- --------------------- ------------------
Net earned premiums $ 413 $ 115 $ 528
Insurance claims & policyholders' benefits 618 118 736
Policyholders' dividends 1 2 3
Insurance related expenses 110 66 176
Net investment income 297 51 348
Other revenues 33 27 60
Other expenses 25 16 41
--------------------- --------------------- ------------------
Loss before income tax and net realized investment gains
(losses) (11) (9) (20)
Income tax benefit 11 2 13
--------------------- --------------------- ------------------
Income (loss) before net realized investment gains
(losses) - (7) (7)
Realized investment gains (losses) 13 (631) (618)
Income tax (expense) benefit on realized investment gains
(losses) (5) 236 231
--------------------- --------------------- ------------------
Net income (loss) $ 8 $ (402) $ (394)
===================== ===================== ==================
LIFE & GROUP NON-CORE LIFE & GROUP NON-CORE TOTAL LIFE & GROUP
SIX MONTHS ENDED JUNE 30, 2003 EXCLUDING BUSINESSES BUSINESSES SOLD/TO BE NON-CORE
(In millions) SOLD/TO BE SOLD (1) SOLD (2) (3) AS REPORTED
- ---------------------------------------------------------- --------------------- --------------------- ------------------
Net earned premiums $ 458 $ 731 $ 1,189
Insurance claims & policyholders' benefits 549 592 1,141
Policyholders' dividends (6) 10 4
Insurance related expenses 128 265 393
Net investment income 239 175 414
Other revenues 46 30 76
Other expenses 24 21 45
--------------------- --------------------- ------------------
Income before income tax and net realized investment
losses 48 48 96
Income tax expense (15) (14) (29)
--------------------- --------------------- ------------------
Income before net realized investment losses 33 34 67
Realized investment losses (38) (13) (51)
Income tax (expense) benefit on realized investment losses 19 (1) 18
--------------------- --------------------- ------------------
Net income $ 14 $ 20 $ 34
===================== ===================== ==================
(1) Retained life and group businesses principally include group and
individual long term care, structured settlements, institutional markets
and specialty medical.
(2) For the six months ended June 30, 2004, net realized investment losses for
Life & Group Non-Core businesses sold/to be sold include a pretax
impairment loss of $622 million ($389 million after-tax), related to the
individual life business.
(3) Life and group businesses sold/to be sold include group business,
individual life business and CNA Trust. Included in this column are the
effects of shared corporate overhead expenses which continue to be
allocated to the sold businesses.
16
CNA FINANCIAL CORPORATION
FINANCIAL SUPPLEMENT
ASBESTOS SUMMARY BY POLICYHOLDER CATEGORY
PERCENT OF
JUNE 30, 2004 NUMBER OF NET PAID NET ASBESTOS ASBESTOS NET
(In millions) POLICYHOLDERS LOSSES IN 2004 RESERVES RESERVES
- ---------------------------------------- ------------- -------------- ------------ ------------
POLICYHOLDERS WITH SETTLEMENT AGREEMENTS
Structured Settlements 11 $ 28 $ 180 11%
Wellington 4 4 19 1
Coverage in Place 31 2 90 5
Fibreboard 1 - 54 3
------------- -------------- ------------ ------------
TOTAL WITH SETTLEMENT AGREEMENTS 47 34 343 20
OTHER POLICYHOLDERS WITH ACTIVE ACCOUNTS
Large Asbestos Accounts 174 19 393 23
Small Asbestos Accounts 1,117 12 162 9
------------- -------------- ------------ ------------
TOTAL OTHER POLICYHOLDERS 1,291 31 555 32
ASSUMED REINSURANCE & POOLS - 1 156 9
UNASSIGNED IBNR (1) - - 687 39
------------- -------------- ------------ ------------
TOTAL 1,338 $ 66 $ 1,741 100%
============= ============== ============ ============
(1) IBNR includes claims that are incurred but not reported.
17