Document

0000021175-19-000017.txt : 20190211 0000021175-19-000017.hdr.sgml : 20190211 20190211081543 ACCESSION NUMBER: 0000021175-19-000017 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20190211 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20190211 DATE AS OF CHANGE: 20190211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CNA FINANCIAL CORP CENTRAL INDEX KEY: 0000021175 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 366169860 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05823 FILM NUMBER: 19581970 BUSINESS ADDRESS: STREET 1: CNA STREET 2: 151 N. FRANKLIN CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3128225000 MAIL ADDRESS: STREET 1: CNA STREET 2: 151 N. FRANKLIN CITY: CHICAGO STATE: IL ZIP: 60606 8-K 1 a2018q48k.htm 8-K Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) February 11, 2019

CNA FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)



Delaware	1-5823	36-6169860
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)



151 N. Franklin, Chicago, Illinois		60606
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code (312) 822-5000

NOT APPLICABLE

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On February 11, 2019, the registrant issued a press release and posted on its website (www.cna.com) a financial supplement providing information on its results of operations for the fourth quarter and year ended December 31, 2018. The press release is furnished as Exhibit 99.1 and the financial supplement is furnished as Exhibit 99.2 to this Form 8-K.

The information under Item 2.02 and in Exhibits 99.1 and 99.2 in this Current Report is being furnished and shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information under Item 2.02 and in Exhibits 99.1 and 99.2 in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits:

See Exhibit Index.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



		CNA Financial Corporation
		(Registrant)

Date: February 11, 2019	By	/s/ James M. Anderson
		(Signature)
		James M. Anderson Executive Vice President and Chief Financial Officer

EXHIBIT INDEX



Exhibit No.		Description
99.1		CNA Financial Corporation press release, issued February 11, 2019, providing information on the fourth quarter and year ended December 31, 2018 results of operations.

99.2		CNA Financial Corporation financial supplement, posted on its website February 11, 2019, providing supplemental financial information on the fourth quarter and year ended December 31, 2018.

EX-99.1 2 q4-18exhibit991.htm EXHIBIT 99.1 Exhibit

FOR IMMEDIATE RELEASE

CONTACT:



MEDIA:		ANALYSTS:
Brandon Davis, 312-822-5885		James Anderson, 312-822-7757

CNA FINANCIAL ANNOUNCES FOURTH QUARTER 2018 RESULTS


•	Q4 NET LOSS OF $84M, $(0.31) PER SHARE; Q4 CORE LOSS OF $23M, $(0.08) PER SHARE


•	Q4 P&C COMBINED RATIO OF 105.4%; Q4 P&C UNDERLYING COMBINED RATIO OF 98.0%


•	FULL YEAR 2018 P&C COMBINED RATIO OF 96.7% VS 97.1% FULL YEAR 2017


•	FULL YEAR 2018 P&C UNDERLYING COMBINED RATIO OF 95.4% VS 95.5% FULL YEAR 2017


•	QUARTERLY DIVIDEND OF $0.35 PER SHARE


•	SPECIAL DIVIDEND OF $2.00 PER SHARE

CHICAGO, February 11, 2019 --- CNA Financial Corporation (NYSE: CNA) today announced a fourth quarter 2018 net loss of $84 million, or $(0.31) per share, and a core loss of $23 million, or $(0.08) per share, with catastrophe losses and investment returns from limited partnership and common equities accounting for $(0.82) per diluted share. Property & Casualty Operations combined ratio for the fourth quarter was 105.4% and the underlying combined ratio was 98.0%. Property & Casualty Operations net written premium increased 4% compared with the prior year quarter.

Fourth quarter 2018 core results decreased $309 million from the prior year period. Contributing to this variance was lower investment returns on our limited partnership and common equity portfolios of $143 million, higher net catastrophe losses of $91 million and higher non-catastrophe current accident year losses driven by increased property losses as well as increased professional liability losses in our London operation.

Core income (loss) for our Life & Group and Corporate & Other segments was $7 million and $(46) million, respectively.

CNA Financial declared a quarterly dividend of $0.35 per share and a special dividend of $2.00 per share, payable March 14, 2019 to stockholders of record on February 25, 2019.



	Results for the Three Months Ended December 31					Results for the Year Ended December 31
($ millions, except per share data)	2018			2017		2018		2017
Net (loss) income^(a)	$	(84	)	$	223	$	813	$	899
Core (loss) income^(a)(b)	(23		)	286		845		919

Net (loss) income per diluted share	$	(0.31	)	$	0.82	$	2.98	$	3.30
Core (loss) income per diluted share	(0.08		)	1.05		3.10		3.38



	December 31, 2018		December 31, 2017
Book value per share	$	41.32	$	45.15
Book value per share excluding AOCI		44.55		45.02


(a)	Results in 2018 were impacted by the reduction of the U.S. Federal tax rate from 35% to 21%.


(b)	Management utilizes the core income (loss) financial measure to monitor the Company's operations. Please refer herein to the Reconciliation of GAAP Measures to Non-GAAP Measures section of this press release for further discussion of this non-GAAP measure.

"While the combination of limited partnership investment returns and catastrophe losses drove a loss in the fourth quarter, we made significant progress in 2018,” said Dino E. Robusto, Chairman & Chief Executive Officer of CNA Financial Corporation. “Both our all-in combined ratio and underlying combined ratio improved for the year, we achieved meaningful premium growth, and we are continuing to get needed rate increases.”

Property & Casualty Operations



	Results for the Three Months Ended December 31								Results for the Year Ended December 31
($ millions)	2018				2017				2018				2017
Net written premiums	$	1,659			$	1,601			$	6,822			$	6,534
NWP change (% year over year)	4			%	5			%	4			%	1			%
Net investment income	$	127			$	305			$	996			$	1,232
Core income	16				263				967				959

Loss ratio excluding catastrophes and development	64.4			%	60.7			%	61.8			%	61.0			%
Effect of catastrophe impacts	8.6				2.3				3.7				6.0
Effect of development-related items	(1.2		)		(4.1		)		(2.4		)		(4.4		)
Loss ratio	71.8			%	58.9			%	63.1			%	62.6			%

Expense ratio	33.2			%	34.6			%	33.2			%	34.2			%

Combined ratio	105.4			%	94.0			%	96.7			%	97.1			%
Combined ratio excluding catastrophes and development	98.0			%	95.8			%	95.4			%	95.5			%

•

The fourth quarter combined ratio excluding catastrophes and development increased 2.2 points compared with the prior year quarter driven by a 3.7 point increase in the underlying loss ratio primarily due to elevated property losses and professional liability in our London operation. This was partially offset by a 1.4 point improvement in the expense ratio driven by lower employee costs and higher net earned premiums.

For the full year, the combined ratio excluding catastrophes and development improved 0.1 point compared with the prior year driven by a 1.0 point improvement in the expense ratio primarily due to higher net earned premiums and lower employee costs partially offset by a 0.8 point increase in the underlying loss ratio.

•

The fourth quarter combined ratio increased 11.4 points compared with the prior year quarter. Net catastrophe losses were $146 million, or 8.6 points of the loss ratio in the quarter compared with $38 million, or 2.3 points of the loss ratio, for the prior year quarter. Favorable net prior period development improved the loss ratio by 1.2 points in the quarter compared with a 4.1 point improvement in the prior year quarter.

For the full year, the combined ratio improved 0.4 points compared with the prior year. Net catastrophe losses were $252 million, or 3.7 points of the loss ratio for the full year compared with $380 million, or 6.0 points of the loss ratio, for the prior year. Favorable net prior period development improved the loss ratio by 2.4 points in the current year compared with a 4.4 point improvement in the prior year.


•	Net written premiums grew 4% in the quarter and for the full year.

Business Operating Highlights

Specialty



	Results for the Three Months Ended December 31								Results for the Year Ended December 31
($ millions)	2018				2017				2018				2017
Net written premiums	$	682			$	665			$	2,744			$	2,731
NWP change (% year over year)	3			%	—			%	—			%	—			%
Core income	$	98			$	141			$	629			$	582

Loss ratio excluding catastrophes and development	61.1			%	61.4			%	60.4			%	61.6			%
Effect of catastrophe impacts	0.6				(0.1		)		1.0				1.6
Effect of development-related items	(3.7		)		(5.8		)		(5.5		)		(6.7		)
Loss ratio	58.0			%	55.5			%	55.9			%	56.5			%

Expense ratio	33.0			%	32.9			%	32.1			%	32.0			%

Combined ratio	91.2			%	88.6			%	88.2			%	88.7			%
Combined ratio excluding catastrophes and development	94.3			%	94.5			%	92.7			%	93.8			%


•	The fourth quarter combined ratio excluding catastrophes and development improved 0.2 points compared with the prior year quarter driven by a 0.3 point improvement in the underlying loss ratio. For the full year, the combined ratio excluding catastrophes and development improved 1.1 points.

•

The combined ratio for the fourth quarter of 2018 increased 2.6 points compared with the prior year quarter. Net catastrophe losses were $4 million, or 0.6 points of the loss ratio, for the fourth quarter of 2018 and nil for the prior year quarter. Favorable net prior period development improved the loss ratio by 3.7 points in the quarter compared with a 5.8 point improvement in the prior year quarter. For the full year, the combined ratio improved 0.5 points.


•	Net written premiums for Specialty increased 3% for the fourth quarter of 2018 driven by higher new business and positive renewal premium change partially offset by lower retention. For the full year, net written premiums were consistent with the prior year.

Commercial



	Results for the Three Months Ended December 31								Results for the Year Ended December 31
($ millions)	2018				2017				2018				2017
Net written premiums	$	721			$	719			$	3,060			$	2,922
NWP change (% year over year)	—			%	6			%	5			%	1			%
Core (loss) income	$	(46	)		$	106			$	357			$	369

Loss ratio excluding catastrophes and development	63.9			%	59.9			%	61.2			%	60.2			%
Effect of catastrophe impacts	15.7				4.7				6.4				9.5
Effect of development-related items	0.7				(2.0		)		(0.3		)		(2.7		)
Loss ratio	80.3			%	62.6			%	67.3			%	67.0			%

Expense ratio	32.3			%	34.7			%	33.1			%	35.1			%

Combined ratio	113.3			%	98.2			%	101.1			%	102.7			%
Combined ratio excluding catastrophes and development	96.9			%	95.5			%	95.0			%	95.9			%

•

The fourth quarter combined ratio excluding catastrophes and development increased 1.4 points compared with the prior year quarter driven by a 4.0 point increase in the underlying loss ratio driven by higher frequency of large property losses. This was partially offset by a 2.4 point improvement in the expense ratio primarily due to lower employee costs. For the full year, the combined ratio excluding catastrophes and development improved 0.9 points, or 0.4 points after adjusting for the Small Business premium rate adjustments.

•

The combined ratio for the fourth quarter of 2018 increased 15.1 points compared with the prior year quarter. Net catastrophe losses were $120 million, or 15.7 points of the loss ratio in the fourth quarter of 2018 compared with $34 million, or 4.7 points of the loss ratio, for the prior year quarter. Unfavorable net prior period development increased the loss ratio by 0.7 points in the quarter compared with 2.0 points of favorable development in the prior year quarter. For the full year, the combined ratio improved 1.6 points.


•	Net written premiums for Commercial in the fourth quarter of 2018 were consistent with the prior year quarter as growth in gross written premium was offset by a higher level of ceded reinsurance. For the full year, net written premiums grew 5%, or 3% after adjusting for the Small Business premium rate adjustments.

International



	Results for the Three Months Ended December 31								Results for the Year Ended December 31
($ millions)	2018				2017				2018				2017
Net written premiums	$	256			$	217			$	1,018			$	881
NWP change (% year over year)	18			%	18			%	16			%	7			%
Core (loss) income	$	(36	)		$	16			$	(19	)		$	8

Loss ratio excluding catastrophes and development	74.9			%	61.2			%	66.9			%	61.8			%
Effect of catastrophe impacts	8.2				1.5				3.3				7.9
Effect of development-related items	0.2				(5.5		)		(0.4		)		(2.7		)
Loss ratio	83.3			%	57.2			%	69.8			%	67.0			%

Expense ratio	36.2			%	39.5			%	36.7			%	37.8			%

Combined ratio	119.5			%	96.7			%	106.5			%	104.8			%
Combined ratio excluding catastrophes and development	111.1			%	100.7			%	103.6			%	99.6			%

•

The fourth quarter combined ratio excluding catastrophes and development increased 10.4 points compared with the prior year quarter driven by a 13.7 point increase in the underlying loss ratio driven by elevated property losses and professional liability in our London operation. This was partially offset by a 3.3 point improvement in the expense ratio driven by lower employee costs and higher net earned premiums. For the full year, the combined ratio excluding catastrophes and development increased 4.0 points.

•

The combined ratio for the fourth quarter of 2018 increased 22.8 points compared with the prior year quarter. Net catastrophe losses were $22 million, or 8.2 points of the loss ratio, for the fourth quarter of 2018, compared with $4 million, or 1.5 points for the prior year quarter. Unfavorable net prior year development increased the loss ratio by 0.2 points in the quarter compared with 5.5 points of favorable development in the prior year quarter. For the full year, the combined ratio increased 1.7 points.

•

Net written premiums for International grew 21% excluding currency fluctuations for the fourth quarter of 2018 driven by positive renewal premium change and a favorable change in estimate of ultimate premium partially offset by lower retention and new business. For the full year, net written premiums grew 13% excluding currency fluctuations. As previously announced, underwriting actions are being taken to address profitability within our London-based operation that will drive reduced premiums in the International segment beginning in the first quarter of 2019.

Life & Group



	Results for the Three Months Ended December 31				Results for the Year Ended December 31
($ millions)	2018		2017		2018		2017
Net investment income	$	203	$	195	$	801	$	782
Total operating revenues	337		331		1,333		1,323
Core income	7		31		43		50

Core income decreased $24 million for the fourth quarter of 2018 compared with the prior year quarter. The prior period included a $27 million after-tax reduction of long term care claim reserves resulting from the annual claims experience study. For 2018, the claims experience study was completed in the third quarter. Persistency continues to benefit from a high proportion of policyholders choosing to reduce benefits in lieu of premium rate increases. Morbidity continues to trend in line with expectations. For the full year, Life & Group core income was $43 million

Corporate & Other



	Results for the Three Months Ended December 31						Results for the Year Ended December 31
($ millions)	2018			2017			2018			2017
Net investment income	$	4		$	5		$	20		$	20
Interest expense	34			36			135			152
Core loss	(46		)	(8		)	(165		)	(90		)

Core loss increased $38 million for the fourth quarter of 2018 compared with the prior year quarter. The result of retroactive reinsurance accounting driven by additional cessions to the A&EP Loss Portfolio Transfer in the fourth quarter of 2018 resulted in a $28 million after-tax non-economic charge.

Net Investment Income



	Results for the Three Months Ended December 31				Results for the Year Ended December 31
	2018		2017		2018		2017
Pretax net investment income	$	334	$	505	$	1,817	$	2,034
Net investment income, after tax	279		366		1,500		1,462

Pretax net investment income decreased $171 million for the fourth quarter of 2018 compared with the prior year quarter. The decrease was driven by limited partnership and common stock investments, which returned (5.7)%, or a loss of $138 million for the fourth quarter of 2018 compared with 2.1%, or $50 million in the prior year quarter.

About the Company

CNA is one of the largest U.S. commercial property and casualty insurance companies. CNA provides a broad range of standard and specialized property and casualty insurance products and services for businesses and professionals in the U.S., Canada and Europe backed by 120 years of experience and approximately $45 billion of assets. For more information, please visit CNA at www.cna.com.

Conference Call and Webcast/Presentation Information

A conference call for investors and the professional investment community will be held at 9:00 a.m. (CT) today. On the conference call will be Dino E. Robusto, Chairman and Chief Executive Officer of CNA Financial Corporation, and other members of senior management. Participants can access the call by dialing (800) 289-0571, or for international callers, (720) 543-0206. The call will also be broadcast live on the internet and may be accessed from the Investor Relations page of the CNA website (www.cna.com). A presentation will be posted and available on the CNA website and will provide additional insight into the results.

The call is available to the media, but questions will be restricted to investors and the professional investment community. An online replay will be available on CNA's website following the call. Financial supplement information related to the results is available on the investor relations pages of the CNA website or by contacting investor.relations@cna.com.

Definition of Reported Segments


•	Specialty provides management and professional liability and other coverages through property and casualty products and services using a network of brokers, independent agencies and managing general underwriters.


•	Commercial works with a network of brokers and independent agents to market a broad range of property and casualty insurance products and services to small, middle-market and large businesses.


•	International underwrites property and casualty coverages on a global basis through its U.K.-based insurance company, a branch operation in Canada as well as through its presence at Lloyd’s of London (Hardy).


•	Life & Group primarily includes the results of the individual and group long term care businesses that are in run off.


•	Corporate & Other primarily includes certain corporate expenses, including interest on corporate debt, and the results of certain property and casualty business in run-off, including CNA Re and asbestos and environmental pollution.

Financial Measures

Management utilizes the following metrics in their evaluation of the Property & Casualty Operations. These ratios are calculated using financial results prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).


•	Loss ratio is the percentage of net incurred claim and claim adjustment expenses to net earned premiums.


•	Underlying loss ratio represents the loss ratio excluding catastrophes and development.


•	Expense ratio is the percentage of insurance underwriting and acquisition expenses, including the amortization of deferred acquisition costs, to net earned premiums.


•	Dividend ratio is the ratio of policyholders' dividends incurred to net earned premiums.


•	Combined ratio is the sum of the loss, expense and dividend ratios.


•	Underlying combined ratio is the sum of the underlying loss, expense and dividend ratios.


•	Renewal premium change represents the estimated change in average premium on policies that renew, including rate and exposure changes.


•	Rate represents the average change in price on policies that renew excluding exposure change.


•	Retention represents the percentage of premium dollars renewed in comparison to the expiring premium dollars from policies available to renew.


•	New business represents premiums from policies written with new customers and additional policies written with existing customers.

The Company's investment portfolio is monitored by management through analysis of various factors including unrealized gains and losses on securities, portfolio duration and exposure to market and credit risk.

Reconciliation of GAAP Measures to Non-GAAP Measures

This press release also contains financial measures that are not in accordance with GAAP. Management utilizes these financial measures to monitor the Company's insurance operations and investment portfolio. The Company believes the presentation of these measures provides investors with a better understanding of the significant factors that comprise the Company's operating performance. Reconciliations of these measures to the most comparable GAAP measures follow below.

Reconciliation of Net Income (Loss) to Core Income (Loss)

Core income (loss) is calculated by excluding from net income (loss) the after-tax effects of i) net realized investment gains or losses, ii) income or loss from discontinued operations, iii) any cumulative effects of changes in accounting guidance and iv) deferred tax asset and liability remeasurement as a result of an enacted U.S. Federal tax rate change. The calculation of core income (loss) excludes net realized investment gains or losses because net realized investment gains or losses are generally driven by economic factors that are not necessarily consistent with key drivers of underwriting performance, and are therefore not considered an indication of trends in insurance operations. Management monitors core income (loss) for each business segment to assess segment performance. Presentation of consolidated core income (loss) is deemed to be a non-GAAP financial measure.



	Results for the Three Months Ended December 31						Results for the Year Ended December 31
($ millions)	2018			2017			2018			2017
Net (loss) income	$	(84	)	$	223		$	813		$	899
Less: Net realized investment (losses) gains	(61		)	20			(38		)	63
Less: Net deferred tax asset remeasurement	—			(83		)	6			(83		)
Core (loss) income	$	(23	)	$	286		$	845		$	919

Reconciliation of Net Income (Loss) per Diluted Share to Core Income (Loss) per Diluted Share

Core income (loss) per diluted share provides management and investors with a valuable measure of the Company's operating performance for the same reasons applicable to its underlying measure, core income (loss). Core income (loss) per diluted share is core income (loss) on a per diluted share basis.



	Results for the Three Months Ended December 31						Results for the Year Ended December 31
	2018			2017			2018			2017
Net (loss) income per diluted share	$	(0.31	)	$	0.82		$	2.98		$	3.30
Less: Net realized investment (losses) gains	(0.23		)	0.08			(0.14		)	0.23
Less: Net deferred tax asset remeasurement	—			(0.31		)	0.02			(0.31		)
Core (loss) income per diluted share	$	(0.08	)	$	1.05		$	3.10		$	3.38

Reconciliation of Book Value per Share to Book Value per Share Excluding AOCI

Book value per share excluding AOCI allows management and investors to analyze the amount of the Company's net worth primarily attributable to the Company's business operations. The Company believes this measurement is useful as it reduces the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates.



	December 31, 2018			December 31, 2017
Book value per share	$	41.32		$	45.15
Less: Per share impact of AOCI	(3.23		)	0.13
Book value per share excluding AOCI	$	44.55		$	45.02

Calculation of Return on Equity and Core Return on Equity

Core return on equity provides management and investors with a measure of how effectively the Company is investing the portion of the Company's net worth that is primarily attributable to its business operations.



	Results for the Three Months Ended December 31							Results for the Year Ended December 31
($ millions)	2018				2017			2018			2017
Annualized net (loss) income	$	(336	)		$	893		$	813		$	899
Average stockholders' equity including AOCI ^(a)	11,363				12,207			11,730			12,106
Return on equity	(3.0		)	%	7.3		%	6.9		%	7.4		%

Annualized core (loss) income	$	(91	)		$	1,143		$	845		$	919
Average stockholders' equity excluding AOCI ^(a)	12,180				12,136			12,152			12,176
Core return on equity	(0.7		)	%	9.4		%	7.0		%	7.5		%


(a)	Average stockholders' equity is calculated using a simple average of the beginning and ending balances for the period.

For additional information, please refer herein and/or to CNA's most recent 10-K on file with the Securities and Exchange Commission, as well as the financial supplement, available at www.cna.com.

Forward-Looking Statement

This press release includes statements that relate to anticipated future events (forward-looking statements) rather than actual present conditions or historical events. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and generally include words such as “believes,” “expects,” “intends,” “anticipates,” “estimates” and similar expressions. Forward-looking statements, by their nature, are subject to a variety of inherent risks and uncertainties that could cause actual results to differ materially from the results projected. Many of these risks and uncertainties cannot be controlled by CNA. For a detailed description of these risks and uncertainties please refer to CNA’s filings with the Securities and Exchange Commission, available at www.cna.com.

Any forward-looking statements made in this press release are made by CNA as of the date of this press release. Further, CNA does not have any obligation to update or revise any forward-looking statement contained in this press release, even if CNA’s expectations or any related events, conditions or circumstances change.

Any descriptions of coverage under CNA policies or programs in this press release are provided for convenience only and are not to be relied upon with respect to questions of coverage, exclusions or limitations. With regard to all such matters, the terms and provisions of relevant insurance policies are primary and controlling. In addition, please note that all coverages may not be available in all states.

“CNA" is a registered trademark of CNA Financial Corporation. Certain CNA Financial Corporation subsidiaries use the "CNA" trademark in connection with insurance underwriting and claims activities. Copyright © 2019 CNA. All rights reserved.

# # #

EX-99.2 3 q4-18exhibit992.htm EXHIBIT 99.2 Exhibit

CNA Financial Corporation

Supplemental Financial Information

December 31, 2018

This report is for informational purposes only and includes consolidated financial statements and financial exhibits that are unaudited. This report should be read in conjunction with documents filed with the U.S. Securities and Exchange Commission, including the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

Table of Contents



	Page
Consolidated Results
Statements of Operations..................................................................................................................................................................................................	1
Components of Income (Loss), Per Share Data and Return on Equity.............................................................................................................................	2
Selected Balance Sheet Data and Statement of Cash Flows Data...................................................................................................................................	3
Results of Operations
Property & Casualty...........................................................................................................................................................................................................	4
Specialty............................................................................................................................................................................................................................	5
Commercial.......................................................................................................................................................................................................................	6
International.......................................................................................................................................................................................................................	7
Life & Group......................................................................................................................................................................................................................	8
Corporate & Other.............................................................................................................................................................................................................	9
Investment Information
Investment Summary - Consolidated................................................................................................................................................................................	10
Investment Summary - Property & Casualty and Corporate & Other................................................................................................................................	11
Investment Summary - Life & Group.................................................................................................................................................................................	12
Investments - Fixed Maturity Securities by Credit Rating..................................................................................................................................................	13
Components of Net Investment Income............................................................................................................................................................................	14
Other
Claim & Claim Adjustment Expense Reserve Rollforward................................................................................................................................................	15
Life & Group Policyholder Reserves..................................................................................................................................................................................	16
Definitions and Presentation..............................................................................................................................................................................................	17

Statements of Operations



Periods ended December 31	Three Months									Twelve Months
(In millions)	2018			2017			Change			2018			2017			Change
Revenues:
Net earned premiums	$	1,859		$	1,803		3		%	$	7,312		$	6,988		5		%
Net investment income	334			505			(34	)		1,817			2,034			(11	)
Net realized investment gains (losses):
Other-than-temporary impairment (OTTI) losses	(12		)	(5		)				(21		)	(14		)
Other net realized investment gains (losses)	(65		)	36						(31		)	107
Net realized investment gains (losses)	(77		)	31						(52		)	93
Non-insurance warranty revenue	263			100						1,007			390
Other revenues	24			9						50			37
Total revenues	2,403			2,448			(2	)		10,134			9,542			6
Claims, Benefits and Expenses:
Insurance claims and policyholders' benefits	1,594			1,257						5,572			5,310
Amortization of deferred acquisition costs	343			307						1,335			1,233
Non-insurance warranty expense	247			83						923			299
Other operating expenses	299			354						1,202			1,229
Interest	34			37						138			161
Total claims, benefits and expenses	2,517			2,038			(24	)		9,170			8,232			(11	)
Income (loss) before income tax	(114		)	410						964			1,310
Income tax (expense) benefit	30			(187		)				(151		)	(411		)
Net income (loss)	$	(84	)	$	223		N/M		%	$	813		$	899		(10	)	%

Components of Income (Loss), Per Share Data and Return on Equity



Periods ended December 31	Three Months								Twelve Months
(In millions, except per share data)	2018				2017				2018				2017
Components of Income (Loss)
Core income (loss)	$	(23	)		$	286			$	845			$	919
Net realized investment gains (losses)	(61		)		20				(38		)		63
Net deferred tax asset remeasurement	—				(83		)		6				(83		)
Net income (loss)	$	(84	)		$	223			$	813			$	899

Diluted Earnings (Loss) Per Common Share
Core income (loss)	$	(0.08	)		$	1.05			$	3.10			$	3.38
Net realized investment gains (losses)	(0.23		)		0.08				(0.14		)		0.23
Net deferred tax asset remeasurement	—				(0.31		)		0.02				(0.31		)
Diluted earnings (loss) per share	$	(0.31	)		$	0.82			$	2.98			$	3.30

Weighted Average Outstanding Common Stock and Common Stock Equivalents
Basic	271.6				271.3				271.5				271.1
Diluted	272.6				272.3				272.5				272.1

Return on Equity
Net income (loss) ⁽¹⁾	(3.0		)	%	7.3			%	6.9			%	7.4			%
Core income (loss) ⁽²⁾	(0.7		)		9.4				7.0				7.5

(1) Annualized net income (loss) divided by the average stockholders' equity including accumulated other comprehensive income (loss) (AOCI) for the period. Average equity including AOCI is calculated using a simple average of the beginning and ending balances for the period.

(2) Annualized core income (loss) divided by the average stockholders' equity excluding AOCI for the period. Average equity excluding AOCI is calculated using a simple average of the beginning and ending balances for the period.

Selected Balance Sheet Data and Statement of Cash Flows Data



(In millions, except per share data)	December 31, 2018			December 31, 2017
Total investments	$	44,486		$	46,870
Reinsurance receivables, net of allowance for uncollectible receivables	4,426			4,261
Total assets	57,152			56,567
Insurance reserves	36,764			37,212
Debt	2,680			2,858
Total liabilities	45,935			44,323
Accumulated other comprehensive income (loss) ⁽¹⁾	(878		)	32
Total stockholders' equity	11,217			12,244

Book value per common share	$	41.32		$	45.15
Book value per common share excluding AOCI	$	44.55		$	45.02

Outstanding shares of common stock (in millions of shares)	271.5			271.2

Statutory capital and surplus - Combined Continental Casualty Companies ⁽²⁾	$	10,411		$	10,726



Three months ended December 31	2018			2017
Net cash flows provided (used) by operating activities	$	359		$	360
Net cash flows provided (used) by investing activities	(257		)	(206		)
Net cash flows provided (used) by financing activities	(96		)	(82		)
Net cash flows provided (used) by operating, investing and financing activities	$	6		$	72



Twelve months ended December 31	2018			2017
Net cash flows provided (used) by operating activities	$	1,227		$	1,254
Net cash flows provided (used) by investing activities	(177		)	(424		)
Net cash flows provided (used) by financing activities	(1,085		)	(755		)
Net cash flows provided (used) by operating, investing and financing activities	$	(35	)	$	75

(1) As of December 31, 2018 and 2017, the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $1,078 million and $1,411 million. To the extent that unrealized gains on fixed income securities supporting certain products within the Life & Group segment would result in a premium deficiency if realized, an increase in Insurance reserves are recorded, net of tax, as a reduction of net unrealized gains through Other comprehensive income (loss) (Shadow Adjustments).

(2) Statutory capital and surplus as of December 31, 2018 is preliminary.

Property & Casualty - Results of Operations



Periods ended December 31	Three Months											Twelve Months
(In millions)	2018				2017				Change			2018				2017				Change
Gross written premiums	$	2,735			$	2,740			—		%	$	11,404			$	10,982			4		%
Net written premiums	1,659				1,601				4			6,822				6,534				4

Net earned premiums	1,727				1,668				4			6,783				6,450				5
Net investment income	127				305							996				1,232
Non-insurance warranty revenue	263				100							1,007				390
Other revenues	6				7							31				33
Total operating revenues	2,123				2,080				2			8,817				8,105				9
Insurance claims and policyholders' benefits	1,247				991							4,303				4,060
Amortization of deferred acquisition costs	343				307							1,335				1,233
Other insurance related expenses	229				269							919				971
Non-insurance warranty expense	247				83							923				299
Other expenses	32				41							103				93
Total claims, benefits and expenses	2,098				1,691				(24	)		7,583				6,656				(14	)
Core income (loss) before income tax	25				389							1,234				1,449
Income tax (expense) benefit on core income (loss)	(9		)		(126		)					(267		)		(490		)
Core income (loss)	$	16			$	263			(94	)	%	$	967			$	959			1		%

Other Performance Metrics
Underwriting gain (loss)	$	(92	)		$	101			N/M		%	$	226			$	186			22		%

Loss & LAE ratio	71.8			%	58.9			%	(12.9	)	pts	63.1			%	62.6			%	(0.5	)	pts
Acquisition expense ratio	19.7				19.6				(0.1	)		19.8				19.5				(0.3	)
Underwriting expense ratio	13.5				15.0				1.5			13.4				14.7				1.3
Expense ratio	33.2				34.6				1.4			33.2				34.2				1.0
Dividend ratio	0.4				0.5				0.1			0.4				0.3				(0.1	)
Combined ratio	105.4			%	94.0			%	(11.4	)	pts	96.7			%	97.1			%	0.4		pts
Combined ratio excluding catastrophes and development	98.0			%	95.8			%	(2.2	)	pts	95.4			%	95.5			%	0.1		pts

Net accident year catastrophe losses incurred	$	146			$	38						$	252			$	380
Effect on loss & LAE ratio	8.6			%	2.3			%	(6.3	)	pts	3.7			%	6.0			%	2.3		pts

Net prior year development and other: (favorable) / unfavorable	$	(21	)		$	(69	)					$	(163	)		$	(284	)
Effect on loss & LAE ratio	(1.2		)	%	(4.1		)	%	(2.9	)	pts	(2.4		)	%	(4.4		)	%	(2.0	)	pts

Rate	3			%	1			%	2		pts	2			%	—			%	2		pts
Renewal premium change	3			%	3			%	—		pts	4			%	3			%	1		pts
Retention	82			%	86			%	(4	)	pts	83			%	86			%	(3	)	pts
New business	$	251			$	269			(7	)	%	$	1,226			$	1,085			13		%

Specialty - Results of Operations



Periods ended December 31	Three Months											Twelve Months
(In millions)	2018				2017				Change			2018				2017				Change
Gross written premiums	$	1,682			$	1,748			(4	)	%	$	6,904			$	6,904			—		%
Net written premiums	682				665				3			2,744				2,731				—

Net earned premiums	693				688				1			2,732				2,712				1
Net investment income	63				128							439				522
Non-insurance warranty revenue	263				100							1,007				390
Other revenues	1				(1		)					2				1
Total operating revenues	1,020				915				11			4,180				3,625				15
Insurance claims and policyholders' benefits	404				382							1,531				1,537
Amortization of deferred acquisition costs	152				150							599				590
Other insurance related expenses	77				76							279				279
Non-insurance warranty expense	247				83							923				299
Other expenses	12				11							46				43
Total claims, benefits and expenses	892				702				(27	)		3,378				2,748				(23	)
Core income (loss) before income tax	128				213							802				877
Income tax (expense) benefit on core income (loss)	(30		)		(72		)					(173		)		(295		)
Core income (loss)	$	98			$	141			(30	)	%	$	629			$	582			8		%

Other Performance Metrics
Underwriting gain (loss)	$	60			$	80			(25	)	%	$	323			$	306			6		%

Loss & LAE ratio	58.0			%	55.5			%	(2.5	)	pts	55.9			%	56.5			%	0.6		pts
Acquisition expense ratio	21.3				20.6				(0.7	)		20.8				20.1				(0.7	)
Underwriting expense ratio	11.7				12.3				0.6			11.3				11.9				0.6
Expense ratio	33.0				32.9				(0.1	)		32.1				32.0				(0.1	)
Dividend ratio	0.2				0.2				—			0.2		%		0.2				—
Combined ratio	91.2			%	88.6			%	(2.6	)	pts	88.2			%	88.7			%	0.5		pts
Combined ratio excluding catastrophes and development	94.3			%	94.5			%	0.2		pts	92.7			%	93.8			%	1.1		pts

Net accident year catastrophe losses incurred	$	4			$	—						$	26			$	44
Effect on loss & LAE ratio	0.6			%	(0.1		)	%	(0.7	)	pts	1.0			%	1.6			%	0.6		pts

Net prior year development and other: (favorable) / unfavorable	$	(26	)		$	(41	)					$	(152	)		$	(187	)
Effect on loss & LAE ratio	(3.7		)	%	(5.8		)	%	(2.1	)	pts	(5.5		)	%	(6.7		)	%	(1.2	)	pts

Rate	2			%	1			%	1		pts	2			%	1			%	1		pts
Renewal premium change	2			%	2			%	—		pts	3			%	3			%	—		pts
Retention	84			%	87			%	(3	)	pts	84			%	89			%	(5	)	pts
New business	$	87			$	65			34		%	$	353			$	242			46		%

Commercial - Results of Operations



Periods ended December 31	Three Months											Twelve Months
(In millions)	2018				2017				Change			2018				2017				Change
Gross written premiums	$	787			$	766			3		%	$	3,350			$	3,119			7		%
Net written premiums	721				719				—			3,060				2,922				5

Net earned premiums	772				752				3			3,050				2,881				6
Net investment income	50				163							500				658
Other revenues	4				8							28				32
Total operating revenues	826				923				(11	)		3,578				3,571				—
Insurance claims and policyholders' benefits	624				478							2,073				1,948
Amortization of deferred acquisition costs	130				122							505				481
Other insurance related expenses	119				137							505				530
Other expenses	12				26							43				57
Total claims, benefits and expenses	885				763				(16	)		3,126				3,016				(4	)
Core income (loss) before income tax	(59		)		160							452				555
Income tax (expense) benefit on core income (loss)	13				(54		)					(95		)		(186		)
Core income (loss)	$	(46	)		$	106			N/M		%	$	357			$	369			(3	)	%

Other Performance Metrics
Underwriting gain (loss)	$	(101	)		$	15			N/M		%	$	(33	)		$	(78	)		58		%

Loss & LAE ratio	80.3			%	62.6			%	(17.7	)	pts	67.3			%	67.0			%	(0.3	)	pts
Acquisition expense ratio	16.8				17.8				1.0			17.7				18.0				0.3
Underwriting expense ratio	15.5				16.9				1.4			15.4				17.1				1.7
Expense ratio	32.3				34.7				2.4			33.1				35.1				2.0
Dividend ratio	0.7				0.9				0.2			0.7				0.6				(0.1	)
Combined ratio	113.3			%	98.2			%	(15.1	)	pts	101.1			%	102.7			%	1.6		pts
Combined ratio excluding catastrophes and development	96.9			%	95.5			%	(1.4	)	pts	95.0			%	95.9			%	0.9		pts

Net accident year catastrophe losses incurred	$	120			$	34						$	193			$	272
Effect on loss & LAE ratio	15.7			%	4.7			%	(11.0	)	pts	6.4			%	9.5			%	3.1		pts

Net prior year development and other: (favorable) / unfavorable	$	5			$	(15	)					$	(7	)		$	(69	)
Effect on loss & LAE ratio	0.7			%	(2.0		)	%	(2.7	)	pts	(0.3		)	%	(2.7		)	%	(2.4	)	pts

Rate	2			%	—			%	2		pts	1			%	—			%	1		pts
Renewal premium change	3			%	3			%	—		pts	3			%	3			%	—		pts
Retention	84			%	86			%	(2	)	pts	85			%	86			%	(1	)	pts
New business	$	105			$	136			(23	)	%	$	566			$	568			—		%

International - Results of Operations



Periods ended December 31	Three Months											Twelve Months
(In millions)	2018				2017				Change			2018				2017				Change
Gross written premiums	$	266			$	226			18		%	$	1,150			$	959			20		%
Net written premiums	256				217				18			1,018				881				16

Net earned premiums	262				228				15			1,001				857				17
Net investment income	14				14							57				52
Other revenues	1				—							1				—
Total operating revenues	277				242				14			1,059				909				17
Insurance claims and policyholders' benefits	219				131							699				575
Amortization of deferred acquisition costs	61				35							231				162
Other insurance related expenses	33				56							135				162
Other expenses	8				4							14				(7		)
Total claims, benefits and expenses	321				226				(42	)		1,079				892				(21	)
Core income (loss) before income tax	(44		)		16							(20		)		17
Income tax (expense) benefit on core income (loss)	8				—							1				(9		)
Core income (loss)	$	(36	)		$	16			N/M		%	$	(19	)		$	8			N/M		%

Other Performance Metrics
Underwriting gain (loss)	$	(51	)		$	6			N/M		%	$	(64	)		$	(42	)		(52	)	%

Loss & LAE ratio	83.3			%	57.2			%	(26.1	)	pts	69.8			%	67.0			%	(2.8	)	pts
Acquisition expense ratio	23.7				22.3				(1.4	)		23.2				22.4				(0.8	)
Underwriting expense ratio	12.5				17.2				4.7			13.5				15.4				1.9
Expense ratio	36.2				39.5				3.3			36.7				37.8				1.1
Dividend ratio	—				—				—			—				—				—
Combined ratio	119.5			%	96.7			%	(22.8	)	pts	106.5			%	104.8			%	(1.7	)	pts
Combined ratio excluding catastrophes and development	111.1			%	100.7			%	(10.4	)	pts	103.6			%	99.6			%	(4.0	)	pts

Net accident year catastrophe losses incurred	$	22			$	4						$	33			$	64
Effect on loss & LAE ratio	8.2			%	1.5			%	(6.7	)	pts	3.3			%	7.9			%	4.6		pts

Net prior year development and other: (favorable) / unfavorable	$	—			$	(13	)					$	(4	)		$	(28	)
Effect on loss & LAE ratio	0.2			%	(5.5		)	%	(5.7	)	pts	(0.4		)	%	(2.7		)	%	(2.3	)	pts

Rate	5			%	1			%	4		pts	3			%	—			%	3		pts
Renewal premium change	5			%	3			%	2		pts	7			%	2			%	5		pts
Retention	68			%	83			%	(15	)	pts	76			%	80			%	(4	)	pts
New business	$	59			$	68			(13	)	%	$	307			$	275			12		%

Life & Group - Results of Operations



Periods ended December 31	Three Months								Twelve Months
(In millions)	2018			2017		Change			2018			2017			Change
Net earned premiums	$	132		$	135	(2	)	%	$	530		$	539		(2	)	%
Net investment income	203			195					801			782
Other revenues	2			1					2			2
Total operating revenues	337			331		2			1,333			1,323			1
Insurance claims and policyholders' benefits	311			289					1,218			1,269
Amortization of deferred acquisition costs	—			—					—			—
Other insurance related expenses	31			33					122			129
Other expenses	2			2					7			7
Total claims, benefits and expenses	344			324		(6	)		1,347			1,405			4
Core income (loss) before income tax	(7		)	7					(14		)	(82		)
Income tax (expense) benefit on core income (loss)	14			24					57			132
Core income (loss)	$	7		$	31	(77	)	%	$	43		$	50		(14	)	%

Corporate & Other - Results of Operations



Periods ended December 31	Three Months								Twelve Months
(In millions)	2018			2017			Change		2018			2017			Change
Net earned premiums	$	—		$	—				$	(1	)	$	(1	)
Net investment income	4			5					20			20
Other revenues	16			1					17			2
Total operating revenues	20			6			N/M	%	36			21			71		%
Insurance claims and policyholders' benefits	36			(23		)			51			(19		)
Amortization of deferred acquisition costs	—			—					—			—
Other insurance related expenses	—			—					(2		)	(2		)
Other expenses	39			46					191			192
Total claims, benefits and expenses	75			23			N/M		240			171			(40	)
Core income (loss) before income tax	(55		)	(17		)			(204		)	(150		)
Income tax (expense) benefit on core income (loss)	9			9					39			60
Core income (loss)	$	(46	)	$	(8	)	N/M	%	$	(165	)	$	(90	)	(83	)	%

Investment Summary - Consolidated



	December 31, 2018					September 30, 2018						December 31, 2017
(In millions)	Carrying Value		Net Unrealized Gains (Losses)			Carrying Value			Net Unrealized Gains (Losses)			Carrying Value		Net Unrealized Gains (Losses)
Fixed maturity securities:
Corporate and other bonds	$	19,164	$	396		$	19,021		$	672		$	18,810	$	1,597
States, municipalities and political subdivisions:
Tax-exempt	7,874		733			8,335			676			11,130		1,136
Taxable	2,874		334			2,810			298			2,897		413
Total states, municipalities and political subdivisions	10,748		1,067			11,145			974			14,027		1,549
Asset-backed:
RMBS	4,826		11			4,971			(53		)	5,120		77
CMBS	2,196		(4		)	2,152			(13		)	1,872		32
Other ABS	1,962		(13		)	1,729			(3		)	1,094		11
Total asset-backed	8,984		(6		)	8,852			(69		)	8,086		120
U.S. Treasury and obligations of government-sponsored enterprises	159		3			145			—			109		(2		)
Foreign government	481		1			455			(2		)	444		7
Redeemable preferred stock	10		—			10			1			11		1
Total fixed maturity securities	39,546		1,461			39,628			1,576			41,487		3,272
Equities:
Common stock	148		—			105			—			27		6
Non-redeemable preferred stock	632		—			690			—			668		30
Total equities	780		—			795			—			695		36
Limited partnership investments	1,982		—			2,297			—			2,369		—
Other invested assets	53		—			51			—			44		—
Mortgage loans	839		—			868			—			839		—
Short term investments	1,286		(1		)	1,290			—			1,436		(1		)
Total investments	$	44,486	$	1,460		$	44,929		$	1,576		$	46,870	$	3,307

Net receivable/(payable) on investment activity	$	176				$	(46	)				$	23

Effective duration (in years)	6.0					5.9						5.9
Weighted average rating	A					A						A

RMBS - Residential mortgage-backed securities

CMBS - Commercial mortgage-backed securities

Other ABS - Other asset-backed securities

Investment Summary - Property & Casualty and Corporate & Other



	December 31, 2018					September 30, 2018						December 31, 2017
(In millions)	Carrying Value		Net Unrealized Gains (Losses)			Carrying Value			Net Unrealized Gains (Losses)			Carrying Value			Net Unrealized Gains (Losses)
Fixed maturity securities:
Corporate and other bonds	$	12,844	$	(180	)	$	13,098		$	(38	)	$	12,938		$	447
States, municipalities and political subdivisions:
Tax-exempt	661		25			781			22			2,827			112
Taxable	1,198		68			1,187			60			1,247			102
Total states, municipalities and political subdivisions	1,859		93			1,968			82			4,074			214
Asset-backed:
RMBS	4,671		8			4,816			(54		)	4,951			72
CMBS	2,093		(4		)	2,050			(12		)	1,761			30
Other ABS	1,840		(11		)	1,601			(3		)	981			7
Total asset-backed	8,604		(7		)	8,467			(69		)	7,693			109
U.S. Treasury and obligations of government-sponsored enterprises	133		3			120			(1		)	82			(4		)
Foreign government	481		1			455			(2		)	444			7
Redeemable preferred stock	5		—			5			1			5			1
Total fixed maturity securities	23,926		(90		)	24,113			(27		)	25,236			774
Equities:
Common stock	148		—			105			—			27			6
Non-redeemable preferred stock	164		—			175			—			237			7
Total equities	312		—			280			—			264			13
Limited partnership investments	1,982		—			2,297			—			2,369			—
Other invested assets	53		—			51			—			44			—
Mortgage loans	631		—			659			—			639			—
Short term investments	1,232		(1		)	1,170			—			1,354			(1		)
Total investments	$	28,136	$	(91	)	$	28,570		$	(27	)	$	29,906		$	786

Net receivable/(payable) on investment activity	$	106				$	(51	)				$	(10	)

Effective duration (in years)	4.4					4.5						4.4
Weighted average rating	A-					A-						A

Investment Summary - Life & Group



	December 31, 2018					September 30, 2018					December 31, 2017
(In millions)	Carrying Value		Net Unrealized Gains (Losses)			Carrying Value		Net Unrealized Gains (Losses)			Carrying Value		Net Unrealized Gains (Losses)
Fixed maturity securities:
Corporate and other bonds	$	6,320	$	576		$	5,923	$	710		$	5,872	$	1,150
States, municipalities and political subdivisions:
Tax-exempt	7,213		708			7,554		654			8,303		1,024
Taxable	1,676		266			1,623		238			1,650		311
Total states, municipalities and political subdivisions	8,889		974			9,177		892			9,953		1,335
Asset-backed:
RMBS	155		3			155		1			169		5
CMBS	103		—			102		(1		)	111		2
Other ABS	122		(2		)	128		—			113		4
Total asset-backed	380		1			385		—			393		11
U.S. Treasury and obligations of government-sponsored enterprises	26		—			25		1			27		2
Foreign government	—		—			—		—			—		—
Redeemable preferred stock	5		—			5		—			6		—
Total fixed maturity securities	15,620		1,551			15,515		1,603			16,251		2,498
Equities:
Common stock	—		—			—		—			—		—
Non-redeemable preferred stock	468		—			515		—			431		23
Total equities	468		—			515		—			431		23
Limited partnership investments	—		—			—		—			—		—
Other invested assets	—		—			—		—			—		—
Mortgage loans	208		—			209		—			200		—
Short term investments	54		—			120		—			82		—
Total investments	$	16,350	$	1,551		$	16,359	$	1,603		$	16,964	$	2,521

Net receivable/(payable) on investment activity	$	70				$	5				$	33

Effective duration (in years)	8.4					8.2					8.4
Weighted average rating	A					A					A

Investments - Fixed Maturity Securities by Credit Rating



December 31, 2018	U.S. Government, Government agencies and Government-sponsored enterprises						AAA						AA						A						BBB						Non-investment grade						Total
(In millions)	Fair Value			Net Unrealized Gains (Losses)			Fair Value			Net Unrealized Gains (Losses)			Fair Value			Net Unrealized Gains (Losses)			Fair Value			Net Unrealized Gains (Losses)			Fair Value			Net Unrealized Gains (Losses)			Fair Value			Net Unrealized Gains (Losses)			Fair Value			Net Unrealized Gains (Losses)
Corporate and other bonds	$	—		$	—		$	46		$	(1	)	$	490		$	19		$	4,113		$	236		$	12,593		$	247		$	1,922		$	(105	)	$	19,164		$	396
States, municipalities and political subdivisions:
Tax-exempt	—			—			1,850			210			3,150			291			2,608			194			261			38			5			—			7,874			733
Taxable	—			—			397			28			1,813			195			644			111			20			—			—			—			2,874			334
Total states, municipalities and political subdivisions	—			—			2,247			238			4,963			486			3,252			305			281			38			5			—			10,748			1,067
Asset-backed:
RMBS	4,133			(27		)	186			(1		)	12			—			71			—			20			(1		)	404			40			4,826			11
CMBS	42			—			353			8			625			7			268			(1		)	548			(11		)	360			(7		)	2,196			(4		)
Other ABS	—			—			48			—			160			(1		)	1,015			(13		)	728			2			11			(1		)	1,962			(13		)
Total asset-backed	4,175			(27		)	587			7			797			6			1,354			(14		)	1,296			(10		)	775			32			8,984			(6		)
U.S. Treasury and obligations of government-sponsored enterprises	159			3			—			—			—			—			—			—			—			—			—			—			159			3
Foreign government	—			—			147			1			260			1			49			—			25			(1		)	—			—			481			1
Redeemable preferred stock	—			—			—			—			—			—			—			—			10			—			—			—			10			—
Total fixed maturity securities	$	4,334		$	(24	)	$	3,027		$	245		$	6,510		$	512		$	8,768		$	527		$	14,205		$	274		$	2,702		$	(73	)	$	39,546		$	1,461

Percentage of total fixed maturity securities	11		%				8		%				16		%				22		%				36		%				7		%				100		%

Components of Net Investment Income



	Consolidated
Periods ended December 31	Three Months							Twelve Months
(In millions)	2018				2017			2018				2017
Taxable fixed income securities	$	379			$	346		$	1,449			$	1,397
Tax-exempt fixed income securities	86				107			384				427
Total fixed income securities	465				453			1,833				1,824
Limited partnership and common stock investments	(138		)		50			(42		)		207
Other, net of investment expense	7				2			26				3
Pretax net investment income	$	334			$	505		$	1,817			$	2,034
Fixed income securities, after tax	$	382			$	330		$	1,512			$	1,324
Net investment income, after tax	279				366			1,500				1,462

Effective income yield for fixed income securities, pretax	4.8			%	4.7		%	4.7			%	4.7		%
Effective income yield for fixed income securities, after tax	3.9				3.4			3.9				3.4



	Property & Casualty and Corporate & Other
Periods ended December 31	Three Months							Twelve Months
(In millions)	2018				2017			2018				2017
Taxable fixed income securities	$	256			$	235		$	977			$	942
Tax-exempt fixed income securities	6				21			50				88
Total fixed income securities	262				256			1,027				1,030
Limited partnership and common stock investments	(138		)		50			(42		)		207
Other, net of investment expense	7				4			31				15
Pretax net investment income	$	131			$	310		$	1,016			$	1,252
Fixed income securities, after tax	$	209			$	175		$	821			$	703
Net investment income, after tax	105				212			812				849

Effective income yield for fixed income securities, pretax	4.3			%	4.1		%	4.2			%	4.2		%
Effective income yield for fixed income securities, after tax	3.4				2.8			3.4				2.9



	Life & Group
Periods ended December 31	Three Months							Twelve Months
(In millions)	2018			2017				2018				2017
Taxable fixed income securities	$	123		$	111			$	472			$	455
Tax-exempt fixed income securities	80			86				334				339
Total fixed income securities	203			197				806				794
Limited partnership and common stock investments	—			—				—				—
Other, net of investment expense	—			(2		)		(5		)		(12		)
Pretax net investment income	$	203		$	195			$	801			$	782
Fixed income securities, after tax	$	173		$	155			$	691			$	621
Net investment income, after tax	174			154				688				613

Effective income yield for fixed income securities, pretax	5.6		%	5.6			%	5.6			%	5.7			%
Effective income yield for fixed income securities, after tax	4.8			4.4				4.8				4.4

Claim & Claim Adjustment Expense Reserve Rollforward



Three months ended December 31, 2018 (In millions)	Specialty			Commercial			International			P&C Operations			Life & Group			Corporate & Other			Total Operations
Claim & claim adjustment expense reserves, beginning of period
Gross	$	5,509		$	8,584		$	1,689		$	15,782		$	3,551		$	2,271		$	21,604
Ceded	673			680			237			1,590			193			2,075			3,858
Net	4,836			7,904			1,452			14,192			3,358			196			17,746

Net incurred claim & claim adjustment expenses	402			620			219			1,241			284			1			1,526
Net claim & claim adjustment expense payments	(406		)	(524		)	(114		)	(1,044		)	(211		)	(3		)	(1,258		)
Foreign currency translation adjustment and other	(1		)	(2		)	(33		)	(36		)	(11		)	(2		)	(49		)

Claim & claim adjustment expense reserves, end of period
Net	4,831			7,998			1,524			14,353			3,420			192			17,965
Ceded	634			745			226			1,605			181			2,233			4,019
Gross	$	5,465		$	8,743		$	1,750		$	15,958		$	3,601		$	2,425		$	21,984



Twelve months ended December 31, 2018 (In millions)	Specialty			Commercial			International			P&C Operations			Life & Group			Corporate & Other			Total Operations
Claim & claim adjustment expense reserves, beginning of period
Gross	$	5,669		$	8,764		$	1,636		$	16,069		$	3,499		$	2,436		$	22,004
Ceded	662			628			204			1,494			209			2,231			3,934
Net	5,007			8,136			1,432			14,575			3,290			205			18,070

Net incurred claim & claim adjustment expenses	1,526			2,055			699			4,280			1,072			3			5,355
Net claim & claim adjustment expense payments	(1,701		)	(2,191		)	(534		)	(4,426		)	(890		)	(15		)	(5,331		)
Foreign currency translation adjustment and other	(1		)	(2		)	(73		)	(76		)	(52		)	(1		)	(129		)

Claim & claim adjustment expense reserves, end of period
Net	4,831			7,998			1,524			14,353			3,420			192			17,965
Ceded	634			745			226			1,605			181			2,233			4,019
Gross	$	5,465		$	8,743		$	1,750		$	15,958		$	3,601		$	2,425		$	21,984

Life & Group Policyholder Reserves



December 31, 2018
(In millions)	Claim and claim adjustment expenses		Future policy benefits		Total
Long term care	$	2,761	$	9,113	$	11,874
Structured settlement annuities	530		—		530
Other	14		—		14
Total	3,305		9,113		12,418
Shadow adjustments	115		1,250		1,365
Ceded reserves	181		234		415
Total gross reserves	$	3,601	$	10,597	$	14,198



December 31, 2017
(In millions)	Claim and claim adjustment expenses		Future policy benefits		Total
Long term care	$	2,568	$	8,959	$	11,527
Structured settlement annuities	547		—		547
Other	16		—		16
Total	3,131		8,959		12,090
Shadow adjustments	159		1,990		2,149
Ceded reserves	209		230		439
Total gross reserves	$	3,499	$	11,179	$	14,678

Definitions and Presentation


•	Collectively, CNA Financial Corporation (CNAF) and its subsidiaries are referred to as CNA or the Company.


•	P&C Operations includes Specialty, Commercial and International.


•	Life & Group segment primarily includes the results of long term care businesses that are in run-off.


•	Corporate & Other segment primarily includes certain corporate expenses including interest on corporate debt and the results of certain property and casualty business in run-off, including CNA Re and asbestos and environmental pollution. Intersegment eliminations are also included in this segment.


•	Management uses the core income (loss) financial measure to monitor the Company’s operations. Please refer to Note O to the Consolidated Financial Statements within the December 31, 2018 Form 10-K for further discussion of this non-GAAP financial measure.


•	Management uses underwriting results to monitor insurance operations. Underwriting results are pretax and are calculated as net earned premiums less total insurance expenses, which includes insurance claims and policyholders' benefits, amortization of deferred acquisition costs and other insurance related expenses.

•

In the evaluation of the results of Specialty, Commercial and International, management uses the loss ratio, the expense ratio, the dividend ratio and the combined ratio. These ratios are calculated using financial results prepared in accordance with accounting principles generally accepted in the United States of America. 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 insurance underwriting and acquisition expenses, including the amortization of deferred acquisition costs, to net earned premiums. The dividend ratio is the ratio of policyholders' dividends incurred to net earned premiums. The combined ratio is the sum of the loss, expense and dividend ratios. In addition, management also utilizes renewal premium change, rate, retention and new business in evaluating operating trends. Renewal premium change represents the estimated change in average premium on policies that renew, including rate and exposure changes. Rate represents the average change in price on policies that renew excluding exposure change. Exposure represents the measure of risk used in the pricing of the insurance product. Retention represents the percentage of premium dollars renewed in comparison to the expiring premium dollars from policies available to renew. Rate, renewal premium change and retention presented for the prior year is updated to reflect subsequent activity on policies written in the period. New business represents premiums from policies written with new customers and additional policies written with existing customers.

•

This financial supplement may also reference or contain financial measures that are not in accordance with GAAP. Management utilizes these financial measures to monitor the Company's insurance operations and investment portfolio. Core income, which is derived from certain income statement amounts, is used by management to monitor performance of the Company's insurance operations. The Company's investment portfolio is monitored by management through analysis of various factors including unrealized gains and losses on securities, portfolio duration and exposure to market and credit risk.

•


•	Pretax net prior year development and other includes the effects of interest accretion and change in allowance for uncollectible reinsurance and deductible amounts.


•	Net investment income from fixed income securities, as presented, includes both fixed maturity securities and non-redeemable preferred stock.

•

The majority of our limited partnership investments employ hedge fund strategies. While the Company generally does not invest in highly leveraged partnerships, there are risks inherent in limited partnership investments which may result in losses due to short-selling, derivatives or other speculative investment practices. The use of leverage increases volatility generated by the underlying investment strategies.


•	Certain immaterial differences are due to rounding.


•	N/M = Not Meaningful

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