EXHIBIT 99.2
(CNA LOGO)
CNA FINANCIAL CORPORATION
SUPPLEMENTAL FINANCIAL INFORMATION
DECEMBER 31, 2004
FINAL
(CNA LOGO)
CNA FINANCIAL CORPORATION
TABLE OF CONTENTS
DECEMBER 31, 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 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 (Twelve Months Ended) 9
Life & Group Non-Core and Corporate & Other Non-Core Segments Results of Operations (Twelve 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
Impact of Catastrophes 15
Life & Group Non-Core Segment - GAAP Results of Operations (Three Months Ended) 16
Life & Group Non-Core Segment - GAAP Results of Operations (Twelve Months Ended) 17
Asbestos Summary by Policyholder Category 18
(CNA LOGO)
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 is 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, 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 Balance Sheet.
The results of operations from separate account business were primarily
classified as other revenue in the Statements 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 are 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
Statements 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 LOGO)
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 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
and interest expense on corporate debt.
- - 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 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 generally had an unfavorable impact on the
loss & loss adjustment expense ratios and a favorable impact on 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 primarily 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 were excluded from 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 Statements of
Operations for the twelve months ended December 31, 2004. As a result of the
sale, income statement results for the fourth quarter and year-to-date 2004
are not comparable to the corresponding 2003 results.
- - All amounts are in millions, except for per share and ratio information.
- - Certain immaterial differences are due to rounding.
ii
(CNA LOGO)
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. The non-GAAP measures are provided to enhance the understanding of
the Company's results and should not be used in place of GAAP measures, such as
net income (loss). 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, including evaluation of financial results,
product pricing, and resource allocation. The Company's investment portfolio is
monitored through analysis of various quantitative and qualitative factors, and
certain decisions are made related to the sale or impairment of investments that
will 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,
underwriting expenses and dividend expenses. Management uses underwriting
results and operating ratios to monitor its insurance operations' results
without the impact of certain factors, including investment income, other
revenues, other expenses, minority interest, income tax benefit (expense) and
net realized investment gains or losses. Examples of the types of amounts
categorized as other revenues and expenses include non-risk bearing insurance
activities, such as claims handling for third parties, and transactional foreign
exchange gains and 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, underwriting
expenses and dividend 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 (NAIC) 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 (CNA LOGO)
FINANCIAL SUPPLEMENT
STATEMENTS OF OPERATIONS
PERIOD ENDED DECEMBER 31 THREE MONTHS TWELVE MONTHS
FAV / FAV /
(UNFAV) (UNFAV)
(In millions) 2004 2003 % CHANGE 2004 2003 % CHANGE
- ------------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
Revenues:
Net earned premiums $ 1,988 $ 2,510 (21)% $ 8,209 $ 9,214 (11)%
Net investment income 462 436 6 1,674 1,647 2
Realized investment gains (losses), net of
participating policyholders' and minority interests 167 (6) N/A (248) 460 (154)
Other revenues 68 107 (36) 295 395 (25)
-------- -------- -------- --------
Total revenues 2,685 3,047 (12) 9,930 11,716 (15)
-------- -------- -------- --------
Claims, benefits and expenses:
Insurance claims and policyholders' benefits 1,587 1,967 19 6,446 10,287 37
Other operating expenses 649 803 19 2,863 3,651 22
Interest 30 30 -- 124 130 5
-------- -------- -------- --------
Total claims, benefits and expenses 2,266 2,800 19 9,433 14,068 33
-------- -------- -------- --------
Income (loss) before income tax and minority interest 419 247 70 497 (2,352) 121
Income tax (expense) benefit (106) (70) (51) (29) 913 (103)
Minority interest (8) (3) (167) (27) 6 N/A
-------- -------- -------- --------
Net income (loss) $ 305 $ 174 75 % $ 441 $ (1,433) 131 %
======== ======== ======== ========
1
CNA FINANCIAL CORPORATION (CNA LOGO)
FINANCIAL SUPPLEMENT
COMPONENTS OF NET INCOME AND PER SHARE DATA
PERIOD ENDED DECEMBER 31 THREE MONTHS TWELVE MONTHS
FAV / FAV /
(UNFAV) (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) $ 201 $ 194 4 % $ 594 $(1,718) 135 %
Net realized investment gains (losses), net of
participating policyholders' and minority interests 104 (20) N/A (153) 285 (154)
------- ------- ------- -------
Net income (loss) $ 305 $ 174 75 % $ 441 $(1,433) 131 %
======= ======= ======= =======
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
------- ------- ------- -------
Basic and diluted earnings (loss) per share available to
common stockholders (1) $ 1.12 $ 0.67 67 % $ 1.47 $ (6.58) 122 %
======= ======= ======= =======
Weighted average outstanding common stock and common stock 256.0 237.0 256.0 227.0
equivalents (2)
(1) The three and twelve months ended December 31, 2004 per share results
available to common stockholders are reduced by $17 million and $65
million, or $0.06 per share and $0.25 per share, of undeclared preferred
stock dividends. The three and twelve months ended December 31, 2003 per
share results available to common stockholders are reduced by $15 million
and $60 million, or $0.06 per share and $0.27 per share, of undeclared
preferred stock dividends.
(2) Included in the weighted average shares of common stock are the effects
of additional common stock equivalents related to the November of 2003
sale of shares to Loews Corporation. The effect of the preferred shares
has been included in weighted average shares since issuance. The
preferred shares were converted into 32.3 million shares of CNA common
stock on April 20, 2004.
2
CNA FINANCIAL CORPORATION (CNA LOGO)
FINANCIAL SUPPLEMENT
SELECTED BALANCE SHEET DATA AND STATEMENTS OF CASH FLOWS DATA
(In millions, except per share data) DECEMBER 31, 2004 DECEMBER 31, 2003
- --------------------------------------------------------------------------------------------------------------
Total assets $ 62,500 $ 68,612
Insurance reserves 43,650 45,492
Debt 2,257 1,904
Total liabilities 53,018 59,404
Minority interest 275 256
Accumulated other comprehensive income 650 841
Total stockholders' equity 9,207 8,952
Book value per common share $ 32.55 $ 31.80
Book value per common share excluding unrealized
gain or loss on fixed maturity securities $ 29.85 $ 28.98
Outstanding shares of common stock (in millions of shares) (1) 256.0 255.9
THREE MONTHS ENDED
DECEMBER 31
(In millions) 2004 2003
- ---------------------------------------------------------------------------------------------------
Net cash flows provided by operating activities $ 348 $ 278
Net cash flows used by investing activities (870) (863)
Net cash flows provided by financing activities 546 546
-------- --------
Net cash flows $ 24 $ (39)
======== ========
TWELVE MONTHS ENDED
DECEMBER 31
(In millions) 2004 2003
- ---------------------------------------------------------------------------------------------------
Net cash flows provided by operating activities $ 1,607 $ 1,760
Net cash flows used by investing activities (2,019) (2,133)
Net cash flows provided by financing activities 368 386
------- -------
Net cash flows $ (44) $ 13
======= =======
(1) Included in the outstanding shares of common stock 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
effect of the preferred shares has been included in weighted average
shares since issuance. The preferred shares were converted into 32.3
million shares of CNA common stock on April 20, 2004.
3
CNA FINANCIAL CORPORATION (CNA LOGO)
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 December 31, 2004
Gross $14,302 $ 4,860 $19,162
Ceded 4,999 1,627 6,626
------- ------- -------
Net 9,303 3,233 12,536
------- ------- -------
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)
(In millions)
LIFE & GROUP NON-CORE (1) CORPORATE & OTHER NON-CORE TOTAL OPERATIONS
- --------------------------------------------------------------------------------------------------------------
As of December 31, 2004
Gross $ 3,680 $ 8,678 $31,520
Ceded 1,856 5,502 13,984
------- ------- -------
Net 1,824 3,176 17,536
------- ------- -------
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 December 31, 2004 and December 31, 2003 include $319
million and $448 million of life company reserves, which are primarily
related to accident and health business. Net reserves as of December 31,
2004 and December 31, 2003 include $123 million and $230 million of life
company reserves, which are primarily related to accident and health
business.
4
CNA FINANCIAL CORPORATION (CNA LOGO)
FINANCIAL SUPPLEMENT
PROPERTY & CASUALTY INSURANCE
CLAIM & CLAIM ADJUSTMENT EXPENSE RESERVE ROLLFORWARD (1)
PERIOD ENDED DECEMBER 31 THREE MONTHS TWELVE MONTHS
ENDED ENDED
(In millions)
- --------------------------------------------------------------------------------------------------
Claim & claim adjustment expense reserves, beginning of period
Gross $ 31,495 $ 31,730
Ceded 14,038 14,216
-------- --------
Net 17,457 17,514
-------- --------
Net incurred claim & claim adjustment expenses 1,535 6,438
Net claim & claim adjustment expense payments (1,456) (6,374)
Reduction of net reserves due to life sale (2) -- (42)
-------- --------
Claim & claim adjustment expense reserves, end of period
Net 17,536 17,536
Ceded 13,984 13,984
-------- --------
Gross $ 31,520 $ 31,520
======== ========
(1) Gross reserves as of December 31, 2004 and December 31, 2003 include $319
million and $448 million of life company reserves, which are primarily
related to accident and health business. Net reserves as of December 31,
2004 and December 31, 2003 include $123 million and $230 million of life
company reserves, which are primarily related to accident and health
business.
(2) On April 30, 2004, CNA completed the sale of its individual Life & Annuity
business to Swiss Re. As a result of the sale, net claim and claim
adjustment reserves were reduced by $42 million.
5
CNA FINANCIAL CORPORATION (CNA LOGO)
FINANCIAL SUPPLEMENT
INVESTMENTS BY SEGMENT AGGREGATION
DECEMBER 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 $15,072 $15,346 $11,623 $11,893
Fixed Maturities - Tax Exempt 7,680 7,800 6,848 7,004
Equities 232 351 225 448
Short-term 3,599 3,600 6,689 6,689
Limited Partnership Investments 1,195 1,195 1,113 1,113
Mortgage Loans & Other 34 26 48 58
------- ------- ------- -------
Subtotal 27,812 28,318 26,546 27,205
Securities Lending Collateral 904 904 307 307
------- ------- ------- -------
TOTAL INVESTMENTS $28,716 $29,222 $26,853 $27,512
------- ------- ------- -------
LIFE & GROUP NON-CORE (1):
Fixed Maturities - Taxable $ 6,495 $ 7,124 $ 8,155 $ 8,815
Fixed Maturities - Tax Exempt 1,019 1,057 939 966
Equities 88 105 68 79
Short-term 1,345 1,345 419 419
Limited Partnership Investments 354 354 4 4
Mortgage Loans & Other 23 10 197 182
------- ------- ------- -------
Subtotal 9,324 9,995 9,782 10,465
Securities Lending Collateral 14 14 123 123
------- ------- ------- -------
TOTAL INVESTMENTS $ 9,338 $10,009 $ 9,905 $10,588
------- ------- ------- -------
TOTAL INVESTMENTS $38,054 $39,231 $36,758 $38,100
======= ======= ======= =======
(1) As a result of SOP 03-01, the following investment securities, previously
classified as separate account assets, have been reclassified to the
general account in 2004. 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; details of the December
31, 2003 balances are presented below. Refer to page i for further
discussion on SOP 03-01.
BOOK VALUE FAIR VALUE
---------- ----------
Fixed Maturities - Taxable $1,048 $1,147
Equities 43 47
Short-term 475 476
Limited Partnership Investments 351 351
Mortgage Loans & Other 2 2
------ ------
TOTAL INVESTMENTS $1,919 $2,023
====== ======
6
CNA FINANCIAL CORPORATION (CNA LOGO)
FINANCIAL SUPPLEMENT
PROPERTY & CASUALTY RESULTS OF OPERATIONS
STANDARD LINES SPECIALTY LINES P&C OPERATIONS
THREE MONTHS ENDED --------------------------------- ----------------------------- ---------------------------------
DECEMBER 31 FAV / (UNFAV) FAV / (UNFAV) FAV / (UNFAV)
(In millions) 2004 2003 % CHANGE 2004 2003 % CHANGE 2004 2003 % CHANGE
- -----------------------------------------------------------------------------------------------------------------------------------
Gross written premiums $ 1,441 $ 1,575 (9)% $ 733 $ 670 9% $ 2,174 $ 2,245 (3)%
Net written premiums 1,062 1,173 (9) 619 547 13 1,681 1,720 (2)
Net earned premiums 1,161 1,292 (10) 605 502 21 1,766 1,794 (2)
Claim and claim adjustment
expenses 777 872 11 382 339 (13) 1,159 1,211 4
Acquisition expenses 249 257 3 111 77 (44) 360 334 (8)
Underwriting expenses 145 164 12 40 44 9 185 208 11
Policyholders' dividends 7 14 50 -- 1 N/A 7 15 53
------- ------- ----- ----- ------- -------
Underwriting income (loss) (17) (15) (13) 72 41 76 55 26 112
------- ------- ----- ----- ------- -------
Net investment income 113 118 (4) 64 52 23 177 170 4
Other revenues 27 33 (18) 28 34 (18) 55 67 (18)
Other expenses 10 39 74 29 33 12 39 72 46
------- ------- ----- ----- ------- -------
Income before income tax,
minority interest and net
realized investment gains 113 97 16 135 94 44 248 191 30
Income tax expense (26) (8) N/A (43) (29) (48) (69) (37) (86)
Minority interest (4) (3) (33) (4) -- N/A (8) (3) (167)
------- ------- ----- ----- ------- -------
Income before net realized
investment gains 83 86 (3) 88 65 35 171 151 13
Realized investment gains 118 112 5 47 33 42 165 145 14
Income tax expense on realized
investment gains (44) (39) (13) (16) (11) (45) (60) (50) (20)
------- ------- ----- ----- ------- -------
Net income $ 157 $ 159 (1)% $ 119 $ 87 37% $ 276 $ 246 12%
======= ======= ===== ===== ======= =======
FINANCIAL RATIOS
Loss & LAE 66.9% 67.5% 63.0% 67.7% 65.6% 67.5%
Acquisition expense 21.5 19.9 18.3 15.3 20.4 18.6
Underwriting expense 12.5 12.7 7.0 8.8 10.5 11.7
Dividends 0.6 1.1 (0.1) 0.2 0.4 0.8
------- ------- ----- ----- ------- -------
Expense ratio, including
dividends 34.6 33.7 25.2 24.3 31.3 31.1
------- ------- ----- ----- ------- -------
Combined ratio 101.5% 101.2% 88.2% 92.0% 96.9% 98.6%
======= ======= ===== ===== ======= =======
7
CNA FINANCIAL CORPORATION (CNA LOGO)
FINANCIAL SUPPLEMENT
LIFE & GROUP NON-CORE AND CORPORATE & OTHER NON-CORE SEGMENTS RESULTS OF
OPERATIONS
P&C OPERATIONS LIFE & GROUP NON-CORE CORPORATE & OTHER NON-CORE
THREE MONTHS ENDED ----------------- ----------------------------- -----------------------------
DECEMBER 31 FAV / (UNFAV) FAV / (UNFAV)
(In millions) 2004 2003 2004 2003 % CHANGE 2004 2003 % CHANGE
- -----------------------------------------------------------------------------------------------------------------
Net earned premiums $ 1,766 $ 1,794 $ 211 $ 576 (63)% $ 11 $ 140 (92)%
Insurance claims &
policyholders' benefits 1,159 1,211 391 600 35 32 138 77
Policyholders' dividends 7 15 (2) 3 167 -- -- N/A
Insurance related expenses 545 542 79 177 55 (16) 9 N/A
Net investment income 177 170 235 203 16 50 63 (21)
Other revenues 55 67 19 53 (64) (6) (13) 54
Other expenses 39 72 18 -- N/A 14 33 58
------- ------- ----- ----- ----- -----
Income (loss) before income
tax, minority interest
and net realized
investment gains (losses) 248 191 (21) 52 (140) 25 10 150
Income tax (expense) benefit (69) (37) 12 (15) 180 14 (4) N/A
Minority interest (8) (3) -- -- N/A -- -- N/A
------- ------- ----- ----- ----- -----
Income (loss) before net
realized investment gains
(losses) 171 151 (9) 37 (124) 39 6 N/A
Realized investment gains
(losses) 165 145 1 (150) 101 1 (1) 200
Income tax (expense) benefit
on realized investment gains
(losses) (60) (50) (1) 36 (103) (2) -- N/A
------- ------- ----- ----- ----- -----
Net income (loss) $ 276 $ 246 $ (9) $ (77) 88% $ 38 $ 5 N/A%
======= ======= ===== ===== ===== =====
TOTAL OPERATIONS
THREE MONTHS ENDED ---------------------------------
DECEMBER 31 FAV / (UNFAV)
(In millions) 2004 2003 % CHANGE
- -----------------------------------------------------------------
Net earned premiums $ 1,988 $ 2,510 (21)%
Insurance claims &
policyholders' benefits 1,582 1,949 19
Policyholders' dividends 5 18 72
Insurance related expenses 608 728 16
Net investment income 462 436 6
Other revenues 68 107 (36)
Other expenses 71 105 32
------- -------
Income (loss) before income
tax, minority interest
and net realized
investment gains (losses) 252 253 --
Income tax (expense) benefit (43) (56) 23
Minority interest (8) (3) (167)
------- -------
Income (loss) before net
realized investment gains
(losses) 201 194 4
Realized investment gains
(losses) 167 (6) N/A
Income tax (expense) benefit
on realized investment gains
(losses) (63) (14) N/A
------- -------
Net income (loss) $ 305 $ 174 75%
======= =======
OTHER FINANCIAL DATA P&C OPERATIONS LIFE & GROUP NON-CORE CORPORATE & OTHER NON-CORE
Property & Casualty Company ----------------- ----------------------------- -----------------------------
Information FAV / (UNFAV) FAV / (UNFAV)
2004 2003 2004 2003 % CHANGE 2004 2003 % CHANGE
- ----------------------------------------------------------------------------------------------------------------
Gross written premiums $ 2,174 $ 2,245 $ 265 $ 307 (14)% $ 358 $ 477 (25)%
Net written premiums 1,681 1,720 161 128 26 7 39 (82)
Net earned premiums 1,766 1,794 167 130 28 10 163 (94)
Underwriting income (loss) 55 26 (108) (119) 9 (5) (5) --
FINANCIAL RATIOS
Loss & LAE 65.6% 67.5% 127.7% 166.3% N/M% N/M%
Acquisition expense 20.4 18.6 14.5 19.1 N/M N/M
Underwriting expense 10.5 11.7 22.8 5.5 N/M N/M
Dividends 0.4 0.8 -- -- N/M N/M
----- ---- ----- ----- ---- ----
Expense ratio, including
dividends 31.3 31.1 37.3 24.6 N/M N/M
----- ---- ----- ----- ---- ----
Combined ratio 96.9% 98.6% 165.0% 190.9% N/M% N/M%
===== ==== ===== ===== ==== ====
OTHER FINANCIAL DATA TOTAL OPERATIONS
Property & Casualty Company --------------------------------
Information FAV / (UNFAV)
2004 2003 % CHANGE
- ----------------------------------------------------------------
Gross written premiums $ 2,797 $ 3,029 (8)%
Net written premiums 1,849 1,887 (2)
Net earned premiums 1,943 2,087 (7)
Underwriting income (loss) (58) (98) 41
FINANCIAL RATIOS
Loss & LAE 72.2% 76.1%
Acquisition expense 20.0 18.3
Underwriting expense 10.5 9.7
Dividends 0.3 0.7
------- ----
Expense ratio, including
dividends 30.8 28.7
------- ----
Combined ratio 103.0% 104.8%
======= ====
N/M = Not Meaningful
8
CNA FINANCIAL CORPORATION (CNA LOGO)
FINANCIAL SUPPLEMENT
PROPERTY & CASUALTY RESULTS OF OPERATIONS
STANDARD LINES SPECIALTY LINES P&C OPERATIONS
TWELVE MONTHS ENDED --------------------------------- --------------------------------- --------------------------------
DECEMBER 31 FAV / (UNFAV) FAV / (UNFAV) FAV / (UNFAV)
(In millions) 2004 2003 % CHANGE 2004 2003 % CHANGE 2004 2003 % CHANGE
- ------------------------------------------------------------------------------------------------------------------------------------
Gross written premiums $ 5,936 $ 6,486 (8)% $ 2,825 $ 2,629 7% $ 8,761 $ 9,115 (4)%
Net written premiums 4,582 4,561 -- 2,391 2,038 17 6,973 6,599 6
Net earned premiums 4,917 4,530 9 2,277 1,840 24 7,194 6,370 13
Claim and claim adjustment
expenses 3,478 4,442 22 1,441 1,648 13 4,919 6,090 19
Acquisition expenses 1,109 1,260 12 429 332 (29) 1,538 1,592 3
Underwriting expenses 593 676 12 165 176 6 758 852 11
Policyholders' dividends 9 100 91 5 3 (67) 14 103 86
------- ------- ------- ------- ------- -------
Underwriting income (loss) (272) (1,948) 86 237 (319) 174 (35) (2,267) 98
------- ------- ------- ------- ------- -------
Net investment income 495 407 22 246 201 22 741 608 22
Other revenues 129 199 (35) 121 116 4 250 315 (21)
Other expenses 94 197 52 113 101 (12) 207 298 31
------- ------- ------- ------- ------- -------
Income (loss) before income
tax, minority interest
and net realized investment
gains 258 (1,539) 117 491 (103) N/A 749 (1,642) 146
Income tax (expense) benefit (27) 592 (105) (150) 59 N/A (177) 651 (127)
Minority interest (10) (4) (150) (17) 10 N/A (27) 6 N/A
------- ------- ------- ------- ------- -------
Income (loss) before net
realized investment gains 221 (951) 123 324 (34) N/A 545 (985) 155
Realized investment gains 219 361 (39) 84 114 (26) 303 475 (36)
Income tax expense on
realized investment gains (80) (127) 37 (30) (40) 25 (110) (167) 34
------- ------- ------- ------- ------- -------
Net income (loss) $ 360 $ (717) 150% $ 378 $ 40 N/A% $ 738 $ (677) N/A%
======= ======= ======= ======= ======= =======
FINANCIAL RATIOS
Loss & LAE 70.7% 98.1% 63.3% 89.6% 68.4% 95.6%
Acquisition expense 22.6 27.7 18.8 18.0 21.4 25.0
Underwriting expense 12.0 15.0 7.3 9.6 10.5 13.4
Dividends 0.2 2.2 0.2 0.2 0.2 1.6
------- ------- ------- ------- ------- -------
Expense ratio, including
dividends 34.8 44.9 26.3 27.8 32.1 40.0
------- ------- ------- ------- ------- -------
Combined ratio 105.5% 143.0% 89.6% 117.4% 100.5% 135.6%
======= ======= ======= ======= ======= =======
9
CNA FINANCIAL CORPORATION (CNA LOGO)
FINANCIAL SUPPLEMENT
LIFE & GROUP NON-CORE AND CORPORATE & OTHER NON-CORE SEGMENTS RESULTS OF
OPERATIONS
TWELVE MONTHS ENDED P&C OPERATIONS LIFE & GROUP NON-CORE CORPORATE & OTHER NON-CORE TOTAL OPERATIONS
DECEMBER 31
FAV / FAV / FAV /
(UNFAV) (UNFAV) (UNFAV)
(In millions) 2004 2003 2004 2003 % CHANGE 2004 2003 % CHANGE 2004 2003 % CHANGE
- -----------------------------------------------------------------------------------------------------------------------------------
s
Net earned premiums $7,194 $ 6,370 $ 921 $2,376 (61)% $ 94 $ 468 (80)% $8,209 $ 9,214 (11)%
Insurance claims &
policyholders' benefits 4,919 6,090 1,372 2,384 42 144 1,699 92 6,435 10,173 37
Policyholders' dividends 14 103 (3) 10 130 -- 1 N/A 11 114 90
Insurance related expenses 2,296 2,444 327 754 57 26 178 85 2,649 3,376 22
Net investment income 741 608 692 821 (16) 241 218 11 1,674 1,647 (2)
Other revenues 250 315 91 163 (44) (46) (83) 45 295 395 (25)
Other expenses 207 298 76 66 (15) 55 41 (34) 338 405 17
------ -------- ------ ------ ----- ------- ------ -------
Income (loss) before
income tax, minority
interest and
net realized
investment gains (losses) 749 (1,642) (68) 146 (147) 64 (1,316) 105 745 (2,812) 126
Income tax (expense)
benefit (177) 651 39 (33) N/A 14 470 (97) (124) 1,088 (111)
Minority interest (27) 6 -- -- N/A -- -- N/A (27) 6 N/A
------ -------- ------ ------ ----- ------- ------ -------
Income (loss) before
net realized investment
gains (losses) 545 (985) (29) 113 (126) 78 (846) 109 594 (1,718) 135
Realized investment
gains (losses) 303 475 (615) (141) N/A 64 126 (49) (248) 460 (154)
Income tax (expense)
benefit on realized
investment gains (losses) (110) (167) 230 33 N/A (25) (41) 39 95 (175) 154
------ -------- ------ ------ ----- ------- ------ -------
Net income (loss) $ 738 $ (677) $ (414) $ 5 N/A% $ 117 $ (761) 115% $ 441 $(1,433) 131%
====== ======== ====== ====== ===== ======= ====== =======
OTHER FINANCIAL DATA P&C OPERATIONS LIFE & GROUP NON-CORE CORPORATE & OTHER NON-CORE TOTAL OPERATIONS
Property & Casualty
Company Information
FAV / FAV / FAV /
(UNFAV) (UNFAV) (UNFAV)
2004 2003 2004 2003 % CHANGE 2004 2003 % CHANGE 2004 2003 % CHANGE
- ------------------------------------------------------------------------------------------------------------------------------------
Gross written premiums $ 8,761 $ 9,115 $ 1,102 $ 1,296 (15)% $ 1,921 $ 2,598 (26)% $11,784 $ 13,009 (9)%
Net written premiums 6,973 6,599 633 524 21 (12) 480 (103) 7,594 7,603 --
Net earned premiums 7,194 6,370 621 520 19 110 565 (81) 7,925 7,455 6
Underwriting loss (35) (2,267) (392) (350) (12) (76) (1,421) 95 (503) (4,038) 88
FINANCIAL RATIOS
Loss & LAE 68.4% 95.6% 134.4% 139.3% 145.1% 317.8% 74.6% 115.4%
Acquisition expense 21.4 25.0 10.5 18.1 25.5 26.1 20.6 24.6
Underwriting expense 10.5 13.4 18.2 9.8 (1.7) 7.5 10.9 12.8
Dividends 0.2 1.6 -- -- -- -- 0.2 1.4
----- ----- ----- ----- ----- ----- ----- -----
Expense ratio,
including dividends 32.1 40.0 28.7 27.9 23.8 33.6 31.7 38.8
----- ----- ----- ----- ----- ----- ----- -----
Combined ratio 100.5% 135.6% 163.1% 167.2% 168.9% 351.4% 106.3% 154.2%
===== ===== ===== ===== ===== ===== ===== =====
10
CNA FINANCIAL CORPORATION (CNA LOGO)
FINANCIAL SUPPLEMENT
PROPERTY & CASUALTY OPERATIONS AND CORPORATE & OTHER NON-CORE SEGMENT -
CATASTROPHE LOSSES
CATASTROPHE LOSSES (PRETAX) CORPORATE &
(In millions) STANDARD LINES SPECIALTY LINES P&C OPERATIONS OTHER NON-CORE TOTAL (1)
- --------------------------------------------------------------------------------------------------------------------------
Three months ended December 31, 2004 $ 5 $ 2 $ 7 $ - $ 7
Twelve months ended December 31, 2004 260 15 275 3 278
Three months ended December 31, 2003 $ 2 $ 1 $ 3 $ 8 $ 11
Twelve months ended December 31, 2003 110 4 114 29 143
CATASTROPHE LOSSES (AFTER-TAX) CORPORATE &
(In millions) STANDARD LINES SPECIALTY LINES P&C OPERATIONS OTHER NON-CORE TOTAL (1)
- ------------------------------------------------------------------------------------------------------------------------
Three months ended December 31, 2004 $ 3 $ 1 $ 4 $ - $ 4
Twelve months ended December 31, 2004 169 10 179 2 181
Three months ended December 31, 2003 $ 1 $ 1 $ 2 $ 5 $ 7
Twelve months ended December 31, 2003 71 3 74 19 93
(1) For the three and twelve months ended December 31, 2004, the above
amounts exclude $3 million pretax ($2 million after-tax) and $8 million
pretax ($5 million after-tax) of reinstatement premium related to the
third quarter 2004 hurricanes. For the twelve months ended December 31,
2004, the above amounts exclude $15 million pretax ($10 million
after-tax) of estimated assessments related to the third quarter 2004
hurricanes. For the twelve months ended December 31, 2004, the above
amounts include losses of $250 million pretax ($163 million after-tax)
related to Hurricanes Charley, Frances, Ivan and Jeanne.
11
CNA FINANCIAL CORPORATION (CNA LOGO)
FINANCIAL SUPPLEMENT
ANALYSIS OF PRETAX NET INVESTMENT INCOME
- ---------------------------------------------------------------------------------------------------------------------------------
(In millions) STANDARD LINES
- ---------------------------------------------------------------------------------------------------------------------------------
1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04 2Q04 3Q04 4Q04 YTD 2004
---- ---- ---- ---- -------- ---- ---- ---- ---- --------
Limited partnership income $ 13 $ 43 $ 35 $ 35 $ 126 $ 37 $ 13 $ 12 $ 39 $ 101
Interest on funds withheld and other deposits (34) (77) (115) (43) (269) (38) (43) (44) (70) (195)
Income from trading securities -- -- -- -- -- -- -- -- 1 1
Other investment income 150 139 135 126 550 139 149 157 143 588
----------------------------------------------------------------------------------
Net investment income $ 129 $ 105 $ 55 $ 118 $ 407 $ 138 $ 119 $ 125 $ 113 $ 495
==================================================================================
- ---------------------------------------------------------------------------------------------------------------------------------
(In millions) SPECIALTY LINES
- ---------------------------------------------------------------------------------------------------------------------------------
1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04 2Q04 3Q04 4Q04 YTD 2004
---- ---- ---- ---- -------- ---- ---- ---- ---- --------
Limited partnership income $ 4 $ 14 $ 11 $ 11 $ 40 $ 13 $ 5 $ 4 $ 14 $ 36
Interest on funds withheld and other deposits (5) (7) (11) (2) (25) (2) (2) (3) (7) (14)
Income from trading securities - - - - - - - - - -
Other investment income 50 46 47 43 186 51 56 60 57 224
----------------------------------------------------------------------------------
Net investment income $ 49 $ 53 $ 47 $ 52 $ 201 $ 62 $ 59 $ 61 $ 64 $ 246
==================================================================================
- ---------------------------------------------------------------------------------------------------------------------------------
(In millions) P&C OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04 2Q04 3Q04 4Q04 YTD 2004
---- ---- ---- ---- -------- ---- ---- ---- ---- --------
Limited partnership income $ 17 $ 57 $ 46 $ 46 $ 166 $ 50 $ 18 $ 16 $ 53 $ 137
Interest on funds withheld and other deposits (39) (84) (126) (45) (294) (40) (45) (47) (77) (209)
Income from trading securities - - - - - - - - 1 1
Other investment income 200 185 182 169 736 190 205 217 200 812
----------------------------------------------------------------------------------
Net investment income $ 178 $ 158 $ 102 $ 170 $ 608 $ 200 $ 178 $ 186 $ 177 $ 741
==================================================================================
- ---------------------------------------------------------------------------------------------------------------------------------
(In millions) LIFE & GROUP NON-CORE
- ---------------------------------------------------------------------------------------------------------------------------------
1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04 2Q04 3Q04 4Q04 YTD 2004
---- ---- ---- ---- -------- ---- ---- ---- ---- --------
Limited partnership income $ 1 $ - $ 1 $ 1 $ 3 $ 1 $ - $ 2 $ - $ 3
Interest on funds withheld and other deposits - - - - - - - - - -
Income from trading securities (1) (2) - - - - - 28 19 (19) 107 135
Other investment income 202 211 203 202 818 177 123 126 128 554
----------------------------------------------------------------------------------
Net investment income (1) $ 203 $ 211 $ 204 $ 203 $ 821 $ 206 $ 142 $ 109 $ 235 $ 692
==================================================================================
- ---------------------------------------------------------------------------------------------------------------------------------
(In millions) CORPORATE & OTHER NON-CORE
- ---------------------------------------------------------------------------------------------------------------------------------
1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04 2Q04 3Q04 4Q04 YTD 2004
---- ---- ---- ---- -------- ---- ---- ---- ---- --------
Limited partnership income $ 5 $ 18 $ 14 $ 15 $ 52 $ 16 $ 6 $ 6 $ 18 $ 46
Interest on funds withheld and other deposits (8) (9) (22) (11) (50) (10) (11) (8) (29) (58)
Income from trading securities - - - - - - - - - -
Other investment income 54 49 54 59 216 61 65 66 61 253
----------------------------------------------------------------------------------
Net investment income $ 51 $ 58 $ 46 $ 63 $ 218 $ 67 $ 60 $ 64 $ 50 $ 241
==================================================================================
- ---------------------------------------------------------------------------------------------------------------------------------
(In millions) TOTAL OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
1Q03 2Q03 3Q03 4Q03 YTD 2003 1Q04 2Q04 3Q04 4Q04 YTD 2004
---- ---- ---- ---- -------- ---- ---- ---- ---- --------
Limited partnership income $ 23 $ 75 $ 61 $ 62 $ 221 $ 67 $ 24 $ 24 $ 71 $ 186
Interest on funds withheld and other deposits (47) (93) (148) (56) (344) (50) (56) (55) (106) (267)
Income from trading securities (1) (2) - - - - - 28 19 (19) 108 136
Other investment income 456 445 439 430 1,770 428 393 409 389 1,619
----------------------------------------------------------------------------------
Net investment income (1) $ 432 $ 427 $ 352 $ 436 $1,647 $ 473 $ 380 $ 359 $ 462 $1,674
==================================================================================
(1) Net investment income in 2004 includes income from trading securities. See
Accounting Pronouncements on page ii for the discussion of SOP 03-01.
(2) Includes $8 million, $6 million, $1 million, and $11 million for the first
quarter, second quarter, third quarter and fourth quarter of 2004 related
to limited partnership investment income that supports indexed group
annuity contracts.
12
\CNA FINANCIAL CORPORATION [CNA LOGO]
FINANCIAL SUPPLEMENT
STATUTORY DATA - PRELIMINARY
PERIOD ENDED DECEMBER 31 THREE MONTHS TWELVE MONTHS
Income Statement (Preliminary) FAV / (UNFAV) (Preliminary) FAV / (UNFAV)
(In millions) 2004 2003 % CHANGE 2004 2003 % CHANGE
- -------------------------------------------------------------------------------------------------------------------------------
PROPERTY & CASUALTY COMPANIES
Gross written premiums $ 2,431 $ 3,875 (37)% $ 9,514 $ 13,387 (29)%
Net written premiums 1,702 1,778 (4) 7,087 6,992 1
Net earned premiums 1,637 1,279 (28) 6,702 5,907 (13)
Claim and claim adjustment expenses 1,213 866 (40) 5,237 6,979 25
Acquisition expenses 246 228 (8) 1,162 1,290 10
Underwriting expenses 196 91 (115) 773 1,129 32
Policyholders' dividends 11 17 35 43 68 37
---------- --------- ----------- ---------
Underwriting Loss (29) 77 (138) (513) (3,559) 86
Net investment income 363 878 (59) 1,326 1,726 (23)
Other revenues/expenses (143) (111) (29) (466) (383) (22)
Income tax (expense) benefit (59) (38) (55) (244) 674 (136)
Net realized gains (losses) 174 (404) 143 462 58 N/A
---------- --------- ----------- ---------
Net income (loss) $ 306 $ 402 (24)% $ 565 $ (1,484) 138 %
========== ========= =========== =========
FINANCIAL RATIOS
Loss and LAE 74.1% 67.7% 78.1% 118.1%
Acquisition expense 14.5 12.8 16.4 18.5
Underwriting expense 11.4 5.1 11.0 16.1
Policyholders' dividends 0.7 1.4 0.6 1.2
---------- --------- ----------- ---------
Expense ratio 26.6 19.3 28.0 35.8
---------- --------- ----------- ---------
Combined ratio 100.7% 87.0% 106.1% 153.9%
========== ========= =========== =========
LIFE COMPANIES
Earned premium $ 45 $ 440 $ 324 $ 1,916
SUPPLEMENTAL STATUTORY DATA
(PRELIMINARY)
(In millions) DECEMBER 31, 2004 DECEMBER 31, 2003
- --------------------------------------------------------------------------------
PROPERTY & CASUALTY COMPANIES
Statutory surplus (1) $ 7,097 $ 6,170
LIFE COMPANIES
Statutory surplus $ 1,178 $ 707
Gross life insurance in force 56,645 388,968
(1) Surplus includes the Property & Casualty Companies' equity ownership of
the life insurance subsidiaries.
13
CNA FINANCIAL CORPORATION [CNA LOGO]
FINANCIAL SUPPLEMENT
PROPERTY & CASUALTY OPERATIONS
LOSS AND LAE RATIO ANALYSIS
STANDARD LINES
-----------------------------------------------------------------
2004 YTD 2003 FY 2003 FY
EVALUATED AT EVALUATED AT EVALUATED AT
12/31/04 12/31/03 12/31/04
-----------------------------------------------------------------
Gross Accident Year 67.2% 65.4% 62.1%
Impact of Reinsurance 2.0 2.4 1.9
------------------ ------------------ ------------------
Net Accident Year 69.2 67.8 64.0%
==================
Impact of Corporate Covers (0.2) (6.4)
Impact of Development & Change
in Allowance for Uncollectible Reinsurance 1.7 36.7
------------------ ------------------
Net Calendar Year 70.7% 98.1%
================== ==================
SPECIALTY LINES
-----------------------------------------------------------------
2004 YTD 2003 FY 2003 FY
EVALUATED AT EVALUATED AT EVALUATED AT
12/31/04 12/31/03 12/31/04
-----------------------------------------------------------------
Gross Accident Year 64.1% 67.1% 65.0%
Impact of Reinsurance (0.6) 1.8 (0.1)
------------------ ------------------ ------------------
Net Accident Year 63.5 68.9 64.9%
==================
Impact of Corporate Covers 0.9 (1.9)
Impact of Development & Change
in Allowance for Uncollectible Reinsurance (1.1) 22.6
------------------ ------------------
Net Calendar Year 63.3% 89.6%
================== ==================
P&C OPERATIONS
-----------------------------------------------------------------
2004 YTD 2003 FY 2003 FY
EVALUATED AT EVALUATED AT EVALUATED AT
12/31/04 12/31/03 12/31/04
-----------------------------------------------------------------
Gross Accident Year 66.3% 65.9% 63.0%
Impact of Reinsurance 1.1 2.2 1.3
------------------ ------------------ ------------------
Net Accident Year 67.4 68.1 64.3%
==================
Impact of Corporate Covers 0.2 (5.1)
Impact of Development & Change
in Allowance for Uncollectible Reinsurance 0.8 32.6
------------------ ------------------
Net Calendar Year 68.4% 95.6%
================== ==================
14
CNA FINANCIAL CORPORATION [CNA LOGO]
FINANCIAL SUPPLEMENT
IMPACT OF CATASTROPHES
TWELVE MONTHS ENDED STANDARD LINES SPECIALTY LINES
-------------- ---------------
DECEMBER 31, 2004
2004 RESULTS 2004 RESULTS
BEFORE IMPACT OF BEFORE IMPACT OF
(In millions) CATASTROPHES CATASTROPHES 2004 RESULTS CATASTROPHES CATASTROPHES 2004 RESULTS
------------ ------------ ------------ ------------ ------------ ------------
Net earned premiums $ 4,925 $ (8) $ 4,917 $ 2,277 $ - $ 2,277
Claim and claim adjustment expenses 3,218 260 3,478 1,426 15 1,441
Acquisition expenses 1,095 14 1,109 428 1 429
Underwriting expenses 593 -- 593 165 -- 165
Policyholders' dividends 9 -- 9 5 -- 5
------------ ------------ ------------ ------------ ------------ ------------
Underwriting income (loss) 10 (282) (272) 253 (16) 237
------------ ------------ ------------ ------------ ------------ ------------
Net investment income 495 -- 495 246 -- 246
Other revenues 129 -- 129 121 -- 121
Other expenses 94 -- 94 113 -- 113
------------ ------------ ------------ ------------ ------------ ------------
Income (loss) before income tax,
minority interest and net realized
investment gains 540 (282) 258 507 (16) 491
Income tax (expense) benefit (126) 99 (27) (155) 5 (150)
Minority interest (10) -- (10) (17) -- (17)
------------ ------------ ------------ ------------ ------------ ------------
Income (loss) before net realized
investment gains 404 (183) 221 335 (11) 324
Realized investment gains 219 -- 219 84 -- 84
Income tax expense on realized
investment gains (80) -- (80) (30) -- (30)
------------ ------------ ------------ ------------ ------------ ------------
Net income (loss) $ 543 $ (183) $ 360 $ 389 $ (11) $ 378
============ ============ ============ ============ ============ ============
FINANCIAL RATIOS
Loss & LAE 65.4% 70.7% 62.6% 63.3%
Acquisition expense 22.2 22.6 18.8 18.8
Underwriting expense 12.0 12.0 7.3 7.3
Dividends 0.2 0.2 0.2 0.2
------------ ------------ ------------ ------------
Expense ratio, including dividends 34.4 34.8 26.3 26.3
------------ ------------ ------------ ------------
Combined ratio 99.8% 105.5% 88.9% 89.6%
============ ============ ============ ============
TWELVE MONTHS ENDED P&C OPERATIONS
--------------
DECEMBER 31, 2004
2004 RESULTS
BEFORE IMPACT OF
(In millions) CATASTROPHES CATASTROPHES 2004 RESULTS
------------ ------------ ------------
Net earned premiums $ 7,202 $ (8) $ 7,194
Claim and claim adjustment expenses 4,644 275 4,919
Acquisition expenses 1,523 15 1,538
Underwriting expenses 758 -- 758
Policyholders' dividends 14 -- 14
------------ ------------ ------------
Underwriting income (loss) 263 (298) (35)
------------ ------------ ------------
Net investment income 741 -- 741
Other revenues 250 -- 250
Other expenses 207 -- 207
------------ ------------ ------------
Income (loss) before income tax,
minority interest and net realized
investment gains 1,047 (298) 749
Income tax (expense) benefit (281) 104 (177)
Minority interest (27) -- (27)
------------ ------------ ------------
Income (loss) before net realized
investment gains 739 (194) 545
Realized investment gains 303 -- 303
Income tax expense on realized
investment gains (110) -- (110)
------------ ------------ ------------
Net income (loss) $ 932 $ (194) $ 738
============ ============ ============
FINANCIAL RATIOS
Loss & LAE 64.5% 68.4%
Acquisition expense 21.2 21.4
Underwriting expense 10.5 10.5
Dividends 0.2 0.2
------------ ------------
Expense ratio, including dividends 31.9 32.1
------------ ------------
Combined ratio 96.4% 100.5%
============ ============
TWELVE MONTHS ENDED STANDARD LINES SPECIALTY LINES
-------------- ---------------
DECEMBER 31, 2003
2003 RESULTS 2003 RESULTS
BEFORE IMPACT OF BEFORE IMPACT OF
(In millions) CATASTROPHES CATASTROPHES 2003 RESULTS CATASTROPHES CATASTROPHES 2003 RESULTS
------------ ------------ ------------ ------------ ------------ ------------
Net earned premiums $ 4,530 $ -- $ 4,530 $ 1,840 $ - $ 1,840
Claim and claim adjustment expenses 4,332 110 4,442 1,644 4 1,648
Acquisition expenses 1,260 -- 1,260 332 -- 332
Underwriting expenses 676 -- 676 176 -- 176
Policyholders' dividends 100 -- 100 3 -- 3
------------ ------------ ------------ ------------ ------------ ------------
Underwriting loss (1,838) (110) (1,948) (315) (4) (319)
------------ ------------ ------------ ------------ ------------ ------------
Net investment income 407 -- 407 201 -- 201
Other revenues 199 -- 199 116 -- 116
Other expenses 197 -- 197 101 -- 101
------------ ------------ ------------ ------------ ------------ ------------
Loss before income tax, minority
interest and net realized
investment gains (1,429) (110) (1,539) (99) (4) (103)
Income tax benefit 553 39 592 58 1 59
Minority interest (4) -- (4) 10 -- 10
------------ ------------ ------------ ------------ ------------- ------------
Loss before net realized
investment gains (880) (71) (951) (31) (3) (34)
Realized investment gains 361 -- 361 114 -- 114
Income tax expense on realized
investment gains (127) -- (127) (40) -- (40)
------------ ------------ ------------ ------------ ------------ ------------
Net income (loss) $ (646) $ (71) $ (717) $ 43 $ (3) $ 40
============ ============ ============ ============ ============ ============
FINANCIAL RATIOS
Loss & LAE 95.7% 98.1% 89.3% 89.6%
Acquisition expense 27.7 27.7 18.0 18.0
Underwriting expense 15.0 15.0 9.6 9.6
Dividends 2.2 2.2 0.2 0.2
------------ ------------ ------------ ------------
Expense ratio, including dividends 44.9 44.9 27.8 27.8
------------ ------------ ------------ ------------
Combined ratio 140.6% 143.0% 117.1% 117.4%
============ ============ ============ ============
TWELVE MONTHS ENDED P&C OPERATIONS
--------------
DECEMBER 31, 2003
2003 RESULTS
BEFORE IMPACT OF
(In millions) CATASTROPHES CATASTROPHES 2003 RESULTS
------------ ------------ ------------
Net earned premiums $ 6,370 $ - $ 6,370
Claim and claim adjustment expenses 5,976 114 6,090
Acquisition expenses 1,592 -- 1,592
Underwriting expenses 852 -- 852
Policyholders' dividends 103 -- 103
------------ ------------ ------------
Underwriting loss (2,153) (114) (2,267)
------------ ------------ ------------
Net investment income 608 -- 608
Other revenues 315 -- 315
Other expenses 298 -- 298
------------ ------------ ------------
Loss before income tax, minority
interest and net realized
investment gains (1,528) (114) (1,642)
Income tax benefit 611 40 651
Minority interest 6 -- 6
------------ ------------ ------------
Loss before net realized
investment gains (911) (74) (985)
Realized investment gains 475 -- 475
Income tax expense on realized
investment gains (167) -- (167)
------------ ------------ ------------
Net income (loss) $ (603) $ (74) $ (677)
============ ============ ============
FINANCIAL RATIOS
Loss & LAE 93.8% 95.6%
Acquisition expense 25.0 25.0
Underwriting expense 13.4 13.4
Dividends 1.6 1.6
------------ ------------
Expense ratio, including dividends 40.0 40.0
------------ ------------
Combined ratio 133.8% 135.6%
============ ============
15
CNA FINANCIAL CORPORATION [CNA LOGO]
FINANCIAL SUPPLEMENT
LIFE & GROUP NON-CORE SEGMENT - GAAP RESULTS OF OPERATIONS
THREE MONTHS ENDED
DECEMBER 31, 2004 LIFE & GROUP NON-CORE
EXCLUDING BUSINESSES LIFE & GROUP NON-CORE TOTAL LIFE & GROUP
(In millions) SOLD (1) BUSINESSES SOLD (3) NON-CORE AS REPORTED
- ------------------------------------------------------------------------------------------------------------------------------------
Net earned premiums $ 211 $ - $ 211
Insurance claims & policyholders' benefits 387 4 391
Policyholders' dividends (3) 1 (2)
Insurance related expenses 58 21 79
Net investment income 233 2 235
Other revenues 17 2 19
Other expenses 14 4 18
------------------ ---------------- ------------------
Income (loss) before income tax and net realized
investment gains (losses) 5 (26) (21)
Income tax (expense) benefit (2) 14 12
------------------ ---------------- ------------------
Income (loss) before net realized investment gains (losses) 3 (12) (9)
Realized investment gains - 1 1
Income tax benefit on realized investment gains (losses) (1) - (1)
------------------ ---------------- ------------------
Net income (loss) $ 2 $ (11) $ (9)
================== ================ ==================
THREE MONTHS ENDED
DECEMBER 31, 2003 LIFE & GROUP NON-CORE
EXCLUDING BUSINESSES LIFE & GROUP NON-CORE TOTAL LIFE & GROUP
(In millions) SOLD (1) BUSINESSES SOLD(2)(3) NON-CORE AS REPORTED
- ------------------------------------------------------------------------------------------------------------------------------------
Net earned premiums $ 223 $ 353 $ 576
Insurance claims & policyholders' benefits 329 271 600
Policyholders' dividends (1) 4 3
Insurance related expenses 53 124 177
Net investment income 120 83 203
Other revenues 41 12 53
Other expenses (10) 10 -
------------------ ---------------- ------------------
Income before income tax and net realized investment gains 13 39 52
Income tax expense 2 (17) (15)
------------------ ---------------- ------------------
Income before net realized investment gains 15 22 37
Realized investment gains (losses) 5 (155) (150)
Income tax (expense) benefit on realized investment
gains (losses) (1) 37 36
------------------ ---------------- ------------------
Net income (loss) $ 19 $ (96) $ (77)
================== ================ ==================
- ----------
(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 December 31, 2003, net realized investment
losses for Life & Group Non-Core businesses sold include a pretax loss of
$176 million ($130 million after-tax), related to the group business.
(3) Life and group businesses 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 (CNA LOGO)
FINANCIAL SUPPLEMENT
LIFE & GROUP NON-CORE SEGMENT - GAAP RESULTS OF OPERATIONS
TWELVE MONTHS ENDED
DECEMBER 31, 2004 LIFE & GROUP NON-CORE
EXCLUDING BUSINESSES LIFE & GROUP NON-CORE TOTAL LIFE & GROUP
(In millions) SOLD (1) BUSINESSES SOLD (2)(3) NON-CORE AS REPORTED
- ------------------------------------------------------------------------------------------------------------------------------------
Net earned premiums $ 806 $ 115 $ 921
Insurance claims & policyholders' benefits 1,239 133 1,372
Policyholders' dividends (7) 4 (3)
Insurance related expenses 222 105 327
Net investment income 637 55 692
Other revenues 59 32 91
Other expenses 54 22 76
------- ------- -------
Loss before income tax and net realized investment gains
(losses) (6) (62) (68)
Income tax benefit 17 22 39
------- ------- -------
Income (loss) before net realized investment gains (losses) 11 (40) (29)
Realized investment gains (losses) 3 (618) (615)
Income tax (expense) benefit on realized investment gains
(losses) (1) 231 230
------- ------- -------
Net income (loss) $ 13 $ (427) $ (414)
======= ======= =======
TWELVE MONTHS ENDED
DECEMBER 31, 2003 LIFE & GROUP NON-CORE
EXCLUDING BUSINESSES LIFE & GROUP NON-CORE TOTAL LIFE & GROUP
(In millions) SOLD (1) BUSINESSES SOLD (2)(3) NON-CORE AS REPORTED
- ------------------------------------------------------------------------------------------------------------------------------------
Net earned premiums $ 917 $ 1,459 $ 2,376
Insurance claims & policyholders' benefits 1,213 1,171 2,384
Policyholders' dividends (8) 18 10
Insurance related expenses 244 510 754
Net investment income 478 343 821
Other revenues 110 53 163
Other expenses 24 42 66
------- ------- -------
Income before income tax and net realized investment gains
(losses) 32 114 146
Income tax (expense) benefit 7 (40) (33)
------- ------- -------
Income before net realized investment gains (losses) 39 74 113
Realized investment gains (losses) 3 (144) (141)
Income tax benefit on realized investment gains (losses) (1) 34 33
------- ------- -------
Net income (loss) $ 41 $ (36) $ 5
======= ======= =======
(1) Retained life and group businesses principally include group and
individual long term care, structured settlements, institutional markets
and specialty medical.
(2) For the twelve months ended December 31, 2004, net realized investment
losses for Life & Group Non-Core businesses sold include a pretax loss of
$613 million ($384 million after-tax), related to the individual life
business and CNA Trust. For the twelve months ended December 31, 2003, net
realized investment losses for Life & Group Non-Core businesses sold
include a pretax loss of $176 million ($130 million after-tax), related to
the group business.
(3) Life and group businesses 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.
17
CNA FINANCIAL CORPORATION (CNA LOGO)
FINANCIAL SUPPLEMENT
ASBESTOS SUMMARY BY POLICYHOLDER CATEGORY
DECEMBER 31, 2004 PERCENT OF
NET PAID NET ASBESTOS
NUMBER OF LOSSES IN ASBESTOS NET
(In millions) POLICYHOLDERS 2004 RESERVES RESERVES
- -------------------------------------------------------------------------------------------------------------------------
POLICYHOLDERS WITH SETTLEMENT AGREEMENTS
Structured Settlements 11 $ 39 $ 175 10%
Wellington 4 4 17 1
Coverage in Place 33 14 76 5
Fibreboard 1 -- 54 3
------ ------ ------ ------
TOTAL WITH SETTLEMENT AGREEMENTS 49 57 322 19
OTHER POLICYHOLDERS WITH ACTIVE ACCOUNTS
Large Asbestos Accounts 180 47 368 22
Small Asbestos Accounts 1,109 23 141 8
------ ------ ------ ------
TOTAL OTHER POLICYHOLDERS 1,289 70 509 30
ASSUMED REINSURANCE & POOLS -- 8 148 9
UNASSIGNED IBNR (1) -- -- 707 42
------ ------ ------ ------
TOTAL 1,338 $ 135 $1,686 100%
====== ====== ====== ======
(1) IBNR includes claims that are incurred but not reported.
18