EX-99.2 3 q2-19exhibit992.htm EXHIBIT 99.2 Exhibit



cnalogoq22019.gif

 
 
 
 
 




CNA Financial Corporation
Supplemental Financial Information


June 30, 2019



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.

 
 
 
 
 



Table of Contents




Statements of Operations
Periods ended June 30
Three Months
 
 
Six Months
 
(In millions)
2019
 
2018
 
Change
 
 
2019
 
2018
 
Change
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earned premiums
$
1,824

 
$
1,815

 
—

%
 
$
3,627

 
$
3,600

 
1

%
Net investment income
515

 
506

 
2

 
 
1,086

 
996

 
9

 
Net investment gains (losses):
 
 
 
 
 
 
 
 
 
 
 
 
 
Other-than-temporary impairment (OTTI) losses
(6
)
 
—

 
 
 
 
(20
)
 
(6
)
 

 
Other net investment gains (losses)
(12
)
 
(1
)
 
 
 
 
33

 
17

 


 
Net investment gains (losses)
(18
)
 
(1
)
 
 
 
 
13

 
11

 


 
Non-insurance warranty revenue
285

 
248

 
 
 
 
566

 
486

 
 
 
Other revenues
4

 
6

 
 
 
 
13

 
16

 

 
Total revenues
2,610

 
2,574

 
1

 
 
5,305

 
5,109

 
4

 
Claims, Benefits and Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Insurance claims and policyholders' benefits
1,352

 
1,327

 
 
 
 
2,709

 
2,666

 


 
Amortization of deferred acquisition costs
338

 
359

 
 
 
 
680

 
655

 


 
Non-insurance warranty expense
263

 
225

 
 
 
 
523

 
441

 
 
 
Other operating expenses
281

 
298

 
 
 
 
564

 
601

 


 
Interest
34

 
35

 
 
 
 
68

 
70

 


 
Total claims, benefits and expenses
2,268

 
2,244

 
(1
)
 
 
4,544

 
4,433

 
(3
)
 
Income (loss) before income tax
342

 
330

 
 
 
 
761

 
676

 


 
Income tax (expense) benefit
(64
)
 
(60
)
 
 
 
 
(141
)
 
(115
)
 


 
Net income (loss)
$
278

 
$
270

 
3

%
 
$
620

 
$
561

 
11

%

1




Components of Income (Loss), Per Share Data and Return on Equity
Periods ended June 30
Three Months
 
 
Six Months
 
(In millions, except per share data)
2019
 
2018
 
 
2019
 
2018
 
Components of Income (Loss)
 
 
 
 
 
 
 
 
 
Core income (loss)
$
294

 
$
270

 
 
$
612

 
$
551

 
Net investment gains (losses)
(16
)
 
—

 
 
8

 
10

 
Net income (loss)
$
278

 
$
270

 
 
$
620

 
$
561

 
 
 
 
 
 
 
 
 
 
 
Diluted Earnings (Loss) Per Common Share
 
 
 
 
 
 
 
 
 
Core income (loss)
$
1.08

 
$
0.99

 
 
$
2.25

 
$
2.02

 
Net investment gains (losses)
(0.06
)
 
—

 
 
0.03

 
0.04

 
Diluted earnings (loss) per share
$
1.02

 
$
0.99

 
 
$
2.28


$
2.06

 
 
 
 
 
 
 
 
 
 
 
Weighted Average Outstanding Common Stock and Common Stock Equivalents
 
 
 
 
 
 
 
 
 
Basic
271.6

 
271.5

 
 
271.6

 
271.5

 
Diluted
272.4

 
272.4

 
 
272.5

 
272.4

 
 
 
 
 
 
 
 
 
 
 
Return on Equity
 
 
 
 
 
 
 
 
 
Net income (loss) (1)
9.5

%
9.4

%
 
10.6

%
9.5

%
Core income (loss) (2)
9.9

 
9.1

 
 
10.2

 
9.1

 
(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.


2




Selected Balance Sheet Data and Statement of Cash Flows Data
(In millions, except per share data)
June 30, 2019
 
December 31, 2018
Total investments
$
46,747

 
$
44,486

Reinsurance receivables, net of allowance for uncollectible receivables
4,234

 
4,426

Total assets
59,963

 
57,152

Insurance reserves
37,914

 
36,764

Debt
2,678

 
2,680

Total liabilities
47,876

 
45,935

Accumulated other comprehensive income (loss) (1)
120

 
(878
)
Total stockholders' equity
12,087

 
11,217

 
 
 
 
Book value per common share
$
44.52

 
$
41.32

Book value per common share excluding AOCI
$
44.08

 
$
44.55

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

 
271.5

 
 
 
 
Statutory capital and surplus - Combined Continental Casualty Companies (2)
$
10,410

 
$
10,411


Three Months Ended June 30
2019
 
2018
Net cash flows provided (used) by operating activities
$
227

 
$
136

Net cash flows provided (used) by investing activities
(56
)
 
(50
)
Net cash flows provided (used) by financing activities
(123
)
 
(74
)
Net cash flows provided (used) by operating, investing and financing activities
$
48

 
$
12


Six months ended June 30
2019
 
2018
Net cash flows provided (used) by operating activities
$
514

 
$
354

Net cash flows provided (used) by investing activities
233

 
439

Net cash flows provided (used) by financing activities
(788
)
 
(855
)
Net cash flows provided (used) by operating, investing and financing activities
$
(41
)
 
$
(62
)
(1) As of June 30, 2019 and December 31, 2018, the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $1,816 million and $1,078 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 June 30, 2019 is preliminary.

3




Property & Casualty - Results of Operations
Periods ended June 30
Three Months
 
 
Six Months
 
(In millions)
2019
 
2018
 
Change
 
 
2019
 
2018
 
Change
 
Gross written premiums
$
3,035

 
$
2,975

 
2

%
 
$
6,001

 
$
5,966

 
1

%
Net written premiums
1,874

 
1,769

 
6

 
 
3,680

 
3,582

 
3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earned premiums
1,694

 
1,684

 
1

 
 
3,368

 
3,335

 
1

 
Net investment income
303

 
302

 
 
 
 
663

 
587

 


 
Non-insurance warranty revenue
285

 
248

 
 
 
 
566

 
486

 
 
 
Other revenues
3

 
7

 
 
 
 
11

 
16

 


 
Total operating revenues
2,285

 
2,241

 
2

 
 
4,608

 
4,424

 
4

 
Insurance claims and policyholders' benefits
1,055

 
1,014

 
 
 
 
2,125

 
2,009

 


 
Amortization of deferred acquisition costs
338

 
359

 
 
 
 
680

 
655

 


 
Non-insurance warranty expense
263

 
225

 
 
 
 
523

 
441

 
 
 
Other insurance related expenses
229

 
206

 
 
 
 
454

 
453

 


 
Other expenses
22

 
29

 
 
 
 
49

 
47

 


 
Total claims, benefits and expenses
1,907

 
1,833

 
(4
)
 
 
3,831

 
3,605

 
(6
)
 
Core income (loss) before income tax
378

 
408

 
 
 
 
777

 
819

 


 
Income tax (expense) benefit on core income (loss)
(80
)
 
(89
)
 
 
 
 
(165
)
 
(173
)
 


 
Core income (loss)
$
298

 
$
319

 
(7
)
%
 
$
612

 
$
646

 
(5
)
%
 
 
 
 
 
 
 
 
 
 
 
 


 
Other Performance Metrics
 
 
 
 
 
 
 
 
 
 
 


 
Underwriting gain (loss)
$
72

 
$
105

 
(31
)
%
 
$
109

 
$
218

 
(50
)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss & LAE ratio
61.9

%
59.9

%
(2.0
)
pts
 
62.7

%
59.9

%
(2.8
)
pts
Acquisition expense ratio
19.3

 
20.0

 
0.7

 
 
19.7

 
19.7

 
—

 
Underwriting expense ratio
14.1

 
13.5

 
(0.6
)
 
 
14.0

 
13.5

 
(0.5
)
 
Expense ratio
33.4

 
33.5

 
0.1

 
 
33.7

 
33.2

 
(0.5
)
 
Dividend ratio
0.4

 
0.4

 
—

 
 
0.4

 
0.4

 
—

 
Combined ratio
95.7

%
93.8

%
(1.9
)
pts
 
96.8

%
93.5

%
(3.3
)
pts
Combined ratio excluding catastrophes and development
94.6

%
95.3

%
0.7

pts
 
94.8

%
94.3

%
(0.5
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net accident year catastrophe losses incurred
$
38

 
$
26

 
 
 
 
$
96

 
$
60

 

 
Effect on loss & LAE ratio
2.2

%
1.6

%
(0.6
)
pts
 
2.9

%
1.8

%
(1.1
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net prior year development and other: (favorable) / unfavorable
$
(19
)
 
$
(52
)
 
 
 
 
$
(28
)
 
$
(88
)
 


 
Effect on loss & LAE ratio
(1.1
)
%
(3.1
)
%
(2.0
)
pts
 
(0.9
)
%
(2.6
)
%
(1.7
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rate
4

%
1

%
3

pts
 
3

%
2

%
1

pts
Renewal premium change
5

%
4

%
1

pts
 
4

%
5

%
(1
)
pts
Retention
83

%
83

%
—

pts
 
83

%
84

%
(1
)
pts
New business
$
358

 
$
332

 
8

%
 
$
688

 
$
687

 
—

%

4




Specialty - Results of Operations
Periods ended June 30
Three Months
 
 
Six Months
 
(In millions)
2019
 
2018
 
Change
 
 
2019
 
2018
 
Change
 
Gross written premiums
$
1,724

 
$
1,736

 
(1
)
%
 
$
3,425

 
$
3,507

 
(2
)
%
Net written premiums
713

 
688

 
4

 
 
1,411

 
1,374

 
3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earned premiums
688

 
683

 
1

 
 
1,349

 
1,355

 
—

 
Net investment income
134

 
130

 
 
 
 
289

 
252

 


 
Non-insurance warranty revenue
285

 
248

 
 
 
 
566

 
486

 
 
 
Other revenues
(1
)
 
—

 
 
 
 
—

 
1

 


 
Total operating revenues
1,106

 
1,061

 
4

 
 
2,204

 
2,094

 
5

 
Insurance claims and policyholders' benefits
396

 
373

 
 
 
 
789

 
753

 


 
Amortization of deferred acquisition costs
152

 
149

 
 
 
 
299

 
294

 


 
Non-insurance warranty expense
263

 
225

 
 
 
 
523

 
441

 
 
 
Other insurance related expenses
76

 
70

 
 
 
 
146

 
134

 


 
Other expenses
12

 
12

 
 
 
 
24

 
23

 


 
Total claims, benefits and expenses
899

 
829

 
(8
)
 
 
1,781

 
1,645

 
(8
)
 
Core income (loss) before income tax
207

 
232

 
 
 
 
423

 
449

 


 
Income tax (expense) benefit on core income (loss)
(46
)
 
(49
)
 
 
 
 
(93
)
 
(95
)
 


 
Core income (loss)
$
161

 
$
183

 
(12
)
%
 
$
330

 
$
354

 
(7
)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Performance Metrics
 
 
 
 
 
 
 
 
 
 
 
 
 
Underwriting gain (loss)
$
64

 
$
91

 
(30
)
%
 
$
115

 
$
174

 
(34
)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss & LAE ratio
57.4

%
54.6

%
(2.8
)
pts
 
58.3

%
55.4

%
(2.9
)
pts
Acquisition expense ratio
21.3

 
20.8

 
(0.5
)
 
 
21.2

 
20.5

 
(0.7
)
 
Underwriting expense ratio
11.8

 
11.2

 
(0.6
)
 
 
11.8

 
11.1

 
(0.7
)
 
Expense ratio
33.1

 
32.0

 
(1.1
)
 
 
33.0

 
31.6

 
(1.4
)
 
Dividend ratio
0.2
 %
 
0.2

 
—

 
 
0.2
 %
 
0.2

 
—

 
Combined ratio
90.7

%
86.8

%
(3.9
)
pts
 
91.5

%
87.2

%
(4.3
)
pts
Combined ratio excluding catastrophes and development
93.2

%
92.7

%
(0.5
)
pts
 
93.4

%
92.2

%
(1.2
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net accident year catastrophe losses incurred
$
1

 
$
3

 
 
 
 
$
13

 
$
6

 


 
Effect on loss & LAE ratio
0.1

%
0.5

%
0.4

pts
 
1.0

%
0.5

%
(0.5
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net prior year development and other: (favorable) / unfavorable
$
(18
)
 
$
(44
)
 
 
 
 
$
(38
)
 
$
(74
)
 


 
Effect on loss & LAE ratio
(2.6
)
%
(6.4
)
%
(3.8
)
pts
 
(2.9
)
%
(5.5
)
%
(2.6
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rate
4

%
2

%
2

pts
 
4

%
2

%
2

pts
Renewal premium change
5

%
5

%
—

pts
 
4

%
5

%
(1
)
pts
Retention
88

%
83

%
5

pts
 
89

%
84

%
5

pts
New business
$
97

 
$
93

 
4

%
 
$
183

 
$
173

 
6

%

5




Commercial - Results of Operations
Periods ended June 30
Three Months
 
 
Six Months
 
(In millions)
2019
 
2018
 
Change
 
 
2019
 
2018
 
Change
 
Gross written premiums
$
1,024

 
$
925

 
11

%
 
$
1,965

 
$
1,805

 
9

%
Net written premiums
912

 
810

 
13

 
 
1,761

 
1,642

 
7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earned premiums
763

 
753

 
1

 
 
1,526

 
1,496

 
2

 
Net investment income
154

 
157

 
 
 
 
344

 
306

 


 
Other revenues
3

 
8

 
 
 
 
10

 
16

 


 
Total operating revenues
920

 
918

 
—

 
 
1,880

 
1,818

 
3

 
Insurance claims and policyholders' benefits
512

 
475

 
 
 
 
1,027

 
948

 


 
Amortization of deferred acquisition costs
130

 
127

 
 
 
 
257

 
248

 


 
Other insurance related expenses
119

 
126

 
 
 
 
249

 
253

 


 
Other expenses
7

 
10

 
 
 
 
18

 
21

 


 
Total claims, benefits and expenses
768

 
738

 
(4
)
 
 
1,551

 
1,470

 
(6
)
 
Core income (loss) before income tax
152

 
180

 
 
 
 
329

 
348

 


 
Income tax (expense) benefit on core income (loss)
(32
)
 
(37
)
 
 
 
 
(70
)
 
(72
)
 


 
Core income (loss)
$
120

 
$
143

 
(16
)
%
 
$
259

 
$
276

 
(6
)
%
 
 
 
 
 
 
 
 
 
 
 
 


 
Other Performance Metrics
 
 
 
 
 
 
 
 
 
 
 


 
Underwriting gain (loss)
$
2

 
$
25

 
(92
)
%
 
$
(7
)
 
$
47

 
(115
)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss & LAE ratio
66.5

%
62.4

%
(4.1
)
pts
 
66.7

%
62.7

%
(4.0
)
pts
Acquisition expense ratio
16.2

 
17.9

 
1.7

 
 
17.1

 
17.9

 
0.8

 
Underwriting expense ratio
16.4

 
15.6

 
(0.8
)
 
 
16.1

 
15.5

 
(0.6
)
 
Expense ratio
32.6

 
33.5

 
0.9

 
 
33.2

 
33.4

 
0.2

 
Dividend ratio
0.6

 
0.7

 
0.1

 
 
0.6

 
0.7

 
0.1

 
Combined ratio
99.7

%
96.6

%
(3.1
)
pts
 
100.5

%
96.8

%
(3.7
)
pts
Combined ratio excluding catastrophes and development
94.9

%
95.0

%
0.1

pts
 
95.7

%
94.4

%
(1.3
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net accident year catastrophe losses incurred
$
37

 
$
19

 
 
 
 
$
77

 
$
48

 


 
Effect on loss & LAE ratio
4.9

%
2.5

%
(2.4
)
pts
 
5.1

%
3.2

%
(1.9
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net prior year development and other: (favorable) / unfavorable
$
—

 
$
(6
)
 
 
 
 
$
(3
)
 
$
(12
)
 


 
Effect on loss & LAE ratio
(0.1
)
%
(0.9
)
%
(0.8
)
pts
 
(0.3
)
%
(0.8
)
%
(0.5
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rate
3

%
1

%
2

pts
 
2

%
1

%
1

pts
Renewal premium change
5

%
4

%
1

pts
 
4

%
5

%
(1
)
pts
Retention
85

%
86

%
(1
)
pts
 
85

%
85

%
—

pts
New business
$
186

 
$
157

 
18

%
 
$
350

 
$
339

 
3

%

6




International - Results of Operations
Periods ended June 30
Three Months
 
 
Six Months
 
(In millions)
2019
 
2018
 
 
 
 
2019
 
2018
 
Change
 
Gross written premiums
$
287

 
$
314

 
(9
)
%
 
$
611

 
$
654

 
(7
)
%
Net written premiums
249

 
271

 
(8
)
 
 
508

 
566

 
(10
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earned premiums
243

 
248

 
(2
)
 
 
493

 
484

 
2

 
Net investment income
15

 
15

 
 
 
 
30

 
29

 


 
Other revenues
1

 
(1
)
 
 
 
 
1

 
(1
)
 


 
Total operating revenues
259

 
262

 
(1
)
 
 
524

 
512

 
2

 
Insurance claims and policyholders' benefits
147

 
166

 
 
 
 
309

 
308

 


 
Amortization of deferred acquisition costs
56

 
83

 
 
 
 
124

 
113

 


 
Other insurance related expenses
34

 
10

 
 
 
 
59

 
66

 


 
Other expenses
3

 
7

 
 
 
 
7

 
3

 


 
Total claims, benefits and expenses
240

 
266

 
10

 
 
499

 
490

 
(2
)
 
Core income (loss) before income tax
19

 
(4
)
 
 
 
 
25

 
22

 


 
Income tax (expense) benefit on core income (loss)
(2
)
 
(3
)
 
 
 
 
(2
)
 
(6
)
 


 
Core income (loss)
$
17

 
$
(7
)
 
N/M

%
 
$
23

 
$
16

 
44

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Performance Metrics
 
 
 
 
 
 
 
 
 
 
 
 
 
Underwriting gain (loss)
$
6

 
$
(11
)
 
155

%
 
$
1

 
$
(3
)
 
133

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss & LAE ratio
60.2

%
66.8

%
6.6

pts
 
62.5

%
63.7

%
1.2

pts
Acquisition expense ratio
23.8

 
23.7

 
(0.1
)
 
 
23.9

 
22.9

 
(1.0
)
 
Underwriting expense ratio
13.5

 
14.2

 
0.7

 
 
13.3

 
14.2

 
0.9

 
Expense ratio
37.3

 
37.9

 
0.6

 
 
37.2

 
37.1

 
(0.1
)
 
Dividend ratio
—

 
—

 
—

 
 
—

 
—

 
—

 
Combined ratio
97.5

%
104.7

%
7.2

pts
 
99.7

%
100.8

%
1.1

pts
Combined ratio excluding catastrophes and development
97.4

%
103.8

%
6.4

pts
 
95.7

%
100.0

%
4.3

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net accident year catastrophe losses incurred
$
—

 
$
4

 
 
 
 
$
6

 
$
6

 


 
Effect on loss & LAE ratio
0.2

%
1.6

%
1.4

pts
 
1.3

%
1.3

%
—

pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net prior year development and other: (favorable) / unfavorable
$
(1
)
 
$
(2
)
 
 
 
 
$
13

 
$
(2
)
 


 
Effect on loss & LAE ratio
(0.1
)
%
(0.7
)
%
(0.6
)
pts
 
2.7

%
(0.5
)
%
(3.2
)
pts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rate
7

%
3

%
4

pts
 
6

%
3

%
3

pts
Renewal premium change
8

%
5

%
3

pts
 
3

%
5

%
(2
)
pts
Retention
67

%
77

%
(10
)
pts
 
67

%
81

%
(14
)
pts
New business
$
75

 
$
82

 
(9
)
%
 
$
155

 
$
175

 
(11
)
%

7




Life & Group - Results of Operations
Periods ended June 30
Three Months
 
 
Six Months
 
(In millions)
2019
 
2018
 
Change
 
 
2019
 
2018
 
Change
 
Net earned premiums
$
130

 
$
131

 
(1
)
%
 
$
260

 
$
265

 
(2
)
%
Net investment income
205

 
198

 
 
 
 
409

 
398

 


 
Other revenues
—

 
—

 
 
 
 
1

 
1

 


 
Total operating revenues
335

 
329

 
2

 
 
670

 
664

 
1

 
Insurance claims and policyholders' benefits
309

 
327

 
 
 
 
617

 
630

 


 
Other insurance related expenses
30

 
30

 
 
 
 
58

 
60

 


 
Other expenses
2

 
1

 
 
 
 
4

 
3

 


 
Total claims, benefits and expenses
341

 
358

 
5

 
 
679

 
693

 
2

 
Core income (loss) before income tax
(6
)
 
(29
)
 
 
 
 
(9
)
 
(29
)
 


 
Income tax (expense) benefit on core income (loss)
13

 
19

 
 
 
 
26

 
33

 


 
Core income (loss)
$
7

 
$
(10
)
 
N/M

%
 
$
17

 
$
4

 
N/M

%


8




Corporate & Other - Results of Operations
Periods ended June 30
Three Months
 
 
Six Months
 
(In millions)
2019
 
2018
 
Change
 
 
2019
 
2018
 
Change
 
Net earned premiums
$
—

 
$
—

 
 
 
 
$
(1
)
 
$
—

 


 
Net investment income
7

 
6

 
 
 
 
14

 
11

 


 
Other revenues
1

 
(1
)
 
 
 
 
1

 
(1
)
 


 
Total operating revenues
8

 
5

 
60

%
 
14

 
10

 
40

%
Insurance claims and policyholders' benefits
(12
)
 
(14
)
 
 
 
 
(33
)
 
27

 


 
Other insurance related expenses
(1
)
 
—

 
 
 
 
(3
)
 
—

 


 
Other expenses
33

 
67

 
 
 
 
70

 
108

 


 
Total claims, benefits and expenses
20

 
53

 
62

 
 
34

 
135

 
75

 
Core income (loss) before income tax
(12
)
 
(48
)
 
 
 
 
(20
)
 
(125
)
 


 
Income tax (expense) benefit on core income (loss)
1

 
9

 
 
 
 
3

 
26

 


 
Core income (loss)
$
(11
)
 
$
(39
)
 
72

%
 
$
(17
)
 
$
(99
)
 
83

%


9




Investment Summary - Consolidated
 
June 30, 2019
 
March 31, 2019

December 31, 2018
(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
$
21,490

 
$
1,836

 
$
20,476

 
$
1,170

 
$
19,164

 
$
396

States, municipalities and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Tax-exempt
7,784

 
1,081

 
7,671

 
924

 
7,874

 
733

Taxable
2,919

 
426

 
2,925

 
375

 
2,874

 
334

Total states, municipalities and political subdivisions
10,703

 
1,507

 
10,596

 
1,299

 
10,748

 
1,067

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
RMBS
4,797

 
129

 
4,832

 
72

 
4,826

 
11

CMBS
2,121

 
89

 
2,072

 
46

 
2,196

 
(4
)
Other ABS
1,898

 
33

 
1,890

 
13

 
1,962

 
(13
)
Total asset-backed
8,816

 
251

 
8,794

 
131

 
8,984

 
(6
)
U.S. Treasury and obligations of government-sponsored enterprises
123

 
5

 
164

 
2

 
159

 
3

Foreign government
497

 
17

 
513

 
11

 
481

 
1

Redeemable preferred stock
10

 
—

 
10

 
—

 
10

 
—

Total fixed maturity securities
41,639

 
3,616

 
40,553

 
2,613

 
39,546

 
1,461

Equities:
 
 
 
 
 
 
 
 
 
 
 
Common stock
135

 
—

 
140

 
—

 
148

 
—

Non-redeemable preferred stock
695

 
—

 
674

 
—

 
632

 
—

Total equities
830

 
—

 
814

 
—


780


—

Limited partnership investments
1,785

 
—

 
1,876

 
—

 
1,982

 
—

Other invested assets
58

 
—

 
59

 
—

 
53

 
—

Mortgage loans
916

 
—

 
863

 
—

 
839

 
—

Short term investments
1,519

 
—

 
1,474

 
—

 
1,286

 
(1
)
Total investments
$
46,747

 
$
3,616

 
$
45,639

 
$
2,613


$
44,486


$
1,460

 
 
 
 
 
 
 
 
 
 
 
 
Net receivable/(payable) on investment activity
$
(59
)
 
 
 
$
(7
)
 
 
 
$
176

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective duration (in years)
6.0

 
 
 
6.0

 
 
 
6.0

 
 
Weighted average rating
A

 
 
 
A

 
 
 
 A

 
 
RMBS - Residential mortgage-backed securities
CMBS - Commercial mortgage-backed securities
Other ABS - Other asset-backed securities

10




Investment Summary - Property & Casualty and Corporate & Other
 
June 30, 2019
 
March 31, 2019
 
December 31, 2018
(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
$
13,847

 
$
579

 
$
13,382

 
$
250

 
$
12,844

 
$
(180
)
States, municipalities and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Tax-exempt
650

 
35

 
516

 
28

 
661

 
25

Taxable
1,184

 
84

 
1,212

 
75

 
1,198

 
68

Total states, municipalities and political subdivisions
1,834

 
119

 
1,728

 
103

 
1,859

 
93

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
RMBS
4,675

 
124

 
4,675

 
68

 
4,671

 
8

CMBS
2,014

 
84

 
1,968

 
44

 
2,093

 
(4
)
Other ABS
1,788

 
27

 
1,782

 
8

 
1,840

 
(11
)
Total asset-backed
8,477

 
235

 
8,425

 
120

 
8,604

 
(7
)
U.S. Treasury and obligations of government-sponsored enterprises
122

 
5

 
137

 
1

 
133

 
3

Foreign government
491

 
16

 
508

 
11

 
481

 
1

Redeemable preferred stock
5

 
—

 
5

 
—

 
5

 
—

Total fixed maturity securities
24,776

 
954

 
24,185

 
485

 
23,926

 
(90
)
Equities:
 
 
 
 
 
 
 
 
 
 
 
Common stock
135

 
—

 
140

 
—

 
148

 
—

Non-redeemable preferred stock
178

 
—

 
175

 
—

 
164

 
—

Total equities
313

 
—

 
315

 
—

 
312

 
—

Limited partnership investments
1,785

 
—

 
1,876

 
—

 
1,982

 
—

Other invested assets
58

 
—

 
59

 
—

 
53

 
—

Mortgage loans
654

 
—

 
623

 
—

 
631

 
—

Short term investments
1,448

 
—

 
1,368

 
—

 
1,232

 
(1
)
Total investments
$
29,034

 
$
954

 
$
28,426

 
$
485


$
28,136


$
(91
)
 
 
 
 
 
 
 
 
 
 
 
 
Net receivable/(payable) on investment activity
$
(149
)
 
 
 
$
(2
)
 
 
 
$
106

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective duration (in years)
4.1

 
 
 
4.2

 
 
 
4.4

 
 
Weighted average rating
A-

 
 
 
A-

 
 
 
 A-

 
 

11




Investment Summary - Life & Group
 
June 30, 2019
 
March 31, 2019
 
December 31, 2018
(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
$
7,643

 
$
1,257

 
$
7,094

 
$
920

 
$
6,320

 
$
576

States, municipalities and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
Tax-exempt
7,134

 
1,046

 
7,155

 
896

 
7,213

 
708

Taxable
1,735

 
342

 
1,713

 
300

 
1,676

 
266

Total states, municipalities and political subdivisions
8,869

 
1,388

 
8,868

 
1,196

 
8,889

 
974

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
RMBS
122

 
5

 
157

 
4

 
155

 
3

CMBS
107

 
5

 
104

 
2

 
103

 
—

Other ABS
110

 
6

 
108

 
5

 
122

 
(2
)
Total asset-backed
339

 
16

 
369

 
11

 
380

 
1

U.S. Treasury and obligations of government-sponsored enterprises
1

 
—

 
27

 
1

 
26

 
—

Foreign government
6

 
1

 
5

 
—

 
—

 
—

Redeemable preferred stock
5

 
—

 
5

 
—

 
5

 
—

Total fixed maturity securities
16,863

 
2,662

 
16,368

 
2,128

 
15,620

 
1,551

Equities:
 
 
 
 
 
 
 
 
 
 
 
Common stock
—

 
—

 
—

 
—

 
—

 
—

Non-redeemable preferred stock
517

 
—

 
499

 
—

 
468

 
—

Total equities
517

 
—


499

 
—

 
468


—

Limited partnership investments
—

 
—

 
—

 
—

 
—

 
—

Other invested assets
—

 
—

 
—

 
—

 
—

 
—

Mortgage loans
262

 
—

 
240

 
—

 
208

 
—

Short term investments
71

 
—

 
106

 
—

 
54

 
—

Total investments
$
17,713

 
$
2,662


$
17,213

 
$
2,128

 
$
16,350


$
1,551

 
 
 
 
 
 
 
 
 
 
 
 
Net receivable/(payable) on investment activity
$
90

 
 
 
$
(5
)
 
 
 
$
70

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective duration (in years)
8.9

 
 
 
8.7

 
 
 
8.4

 
 
Weighted average rating
A

 
 
 
A

 
 
 
 A

 
 

12




Investments - Fixed Maturity Securities by Credit Rating  
June 30, 2019
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
$
—

 
$
—

 
$
40

 
$
—

 
$
540

 
$
40

 
$
4,435

 
$
512

 
$
14,382

 
$
1,253

 
$
2,093

 
$
31

 
$
21,490

 
$
1,836

States, municipalities and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tax-exempt
—

 
—

 
1,806

 
276

 
3,221

 
438

 
2,399

 
285

 
342

 
81

 
16

 
1

 
7,784

 
1,081

Taxable
—

 
—

 
422

 
34

 
1,813

 
247

 
663

 
144

 
21

 
1

 
—

 
—

 
2,919

 
426

Total states, municipalities and political subdivisions
—

 
—

 
2,228

 
310

 
5,034

 
685

 
3,062

 
429

 
363

 
82

 
16

 
1

 
10,703

 
1,507

Asset-backed:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RMBS
4,173

 
79

 
194

 
4

 
20

 
1

 
51

 
—

 
11

 
—

 
348

 
45

 
4,797

 
129

CMBS
40

 
—

 
332

 
19

 
710

 
40

 
227

 
9

 
519

 
16

 
293

 
5

 
2,121

 
89

Other ABS
—

 
—

 
69

 
—

 
119

 
1

 
1,016

 
8

 
679

 
22

 
15

 
2

 
1,898

 
33

Total asset-backed
4,213

 
79

 
595

 
23

 
849

 
42

 
1,294

 
17

 
1,209

 
38

 
656

 
52

 
8,816

 
251

U.S. Treasury and obligations of government-sponsored enterprises
123

 
5

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
123

 
5

Foreign government
—

 
—

 
151

 
5

 
274

 
8

 
52

 
3

 
20

 
1

 
—

 
—

 
497

 
17

Redeemable preferred stock
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
10

 
—

 
—

 
—

 
10

 
—

Total fixed maturity securities
$
4,336

 
$
84

 
$
3,014

 
$
338

 
$
6,697

 
$
775

 
$
8,843

 
$
961

 
$
15,984

 
$
1,374

 
$
2,765

 
$
84

 
$
41,639

 
$
3,616

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of total fixed maturity securities
10
%
 
 
 
7
%
 
 
 
16
%
 
 
 
21
%
 
 
 
39
%
 
 
 
7
%
 
 
 
100
%
 
 

13




Components of Net Investment Income
 
Consolidated
 
Periods ended June 30
Three Months
 
Six Months
 
(In millions)
2019
 
2018
 
2019
 
2018
 
    Taxable fixed income securities
$
385

 
$
354

 
$
768

 
$
704

 
    Tax-exempt fixed income securities
80

 
100

 
162

 
205

 
Total fixed income securities
465

 
454

 
930

 
909

 
Limited partnership and common stock investments
43

 
42

 
139

 
73

 
Other, net of investment expense
7

 
10

 
17

 
14

 
Pretax net investment income
$
515

 
$
506

 
$
1,086

 
$
996

 
Fixed income securities, after tax
$
382

 
$
375

 
$
762

 
$
752

 
Net investment income, after tax
420

 
416

 
885

 
821

 
 
 
 
 
 
 
 
 
 
Effective income yield for fixed income securities, pretax
4.8

%
4.7

%
4.8

%
4.7

%
Effective income yield for fixed income securities, after tax
3.9

 
3.9

 
3.9

 
3.9

 
Limited partnership and common stock return
2.1

 
1.8

 
6.8

 
3.0

 
 
Property & Casualty and Corporate & Other
 
Periods ended June 30
Three Months
 
Six Months
 
(In millions)
2019
 
2018
 
2019
 
2018
 
    Taxable fixed income securities
$
254

 
$
240

 
$
507

 
$
473

 
    Tax-exempt fixed income securities
5

 
14

 
11

 
34

 
Total fixed income securities
259

 
254

 
518

 
507

 
Limited partnership and common stock investments
43

 
42

 
139

 
73

 
Other, net of investment expense
8

 
12

 
20

 
18

 
Pretax net investment income
$
310

 
$
308

 
$
677

 
$
598

 
Fixed income securities, after tax
$
206

 
$
203

 
$
411

 
$
406

 
Net investment income, after tax
246

 
245

 
537

 
478

 
 
 
 
 
 
 
 
 
 
Effective income yield for fixed income securities, pretax
4.3

%
4.2

%
4.3

%
4.2

%
Effective income yield for fixed income securities, after tax
3.5

 
3.4

 
3.4

 
3.3

 
 
Life & Group
 
Periods ended June 30
Three Months
 
Six Months
 
(In millions)
2019
 
2018
 
2019
 
2018
 
    Taxable fixed income securities
$
131

 
$
114

 
$
261

 
$
231

 
    Tax-exempt fixed income securities
75

 
86

 
151

 
171

 
Total fixed income securities
206

 
200

 
412

 
402

 
Limited partnership and common stock investments
—

 
—

 
—

 
—

 
Other, net of investment expense
(1
)
 
(2
)
 
(3
)
 
(4
)
 
Pretax net investment income
$
205

 
$
198

 
$
409

 
$
398

 
Fixed income securities, after tax
$
176

 
$
172

 
$
351

 
$
346

 
Net investment income, after tax
174

 
171

 
348

 
343

 
 
 
 
 
 
 
 
 
 
Effective income yield for fixed income securities, pretax
5.6

%
5.6

%
5.6

%
5.6

%
Effective income yield for fixed income securities, after tax
4.8

 
4.8

 
4.8

 
4.8

 

14




Claim & Claim Adjustment Expense Reserve Rollforward
Three months ended June 30, 2019
(In millions)

Specialty
 

Commercial
 
International
 
P&C Operations
 
Life & Group
 
Corporate & Other
 
Total Operations
Claim & claim adjustment expense reserves, beginning of period
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross
$
5,470

 
$
8,623

 
$
1,787

 
$
15,880

 
$
3,645

 
$
2,311

 
$
21,836

Ceded
659

 
710

 
230

 
1,599

 
178

 
2,123

 
3,900

Net
4,811

 
7,913

 
1,557

 
14,281

 
3,467

 
188

 
17,936

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net incurred claim & claim adjustment expenses
395

 
507

 
147

 
1,049

 
260

 
1

 
1,310

Net claim & claim adjustment expense payments
(486
)
 
(564
)
 
(140
)
 
(1,190
)
 
(228
)
 
(7
)
 
(1,425
)
Foreign currency translation adjustment and other
—

 
—

 
2

 
2

 
40

 
—

 
42

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Claim & claim adjustment expense reserves, end of period
 
 
 
 
 
 
 
 
 
 
 
 
 
Net
4,720

 
7,856

 
1,566

 
14,142

 
3,539

 
182

 
17,863

Ceded
676

 
724

 
234

 
1,634

 
171

 
2,061

 
3,866

Gross
$
5,396

 
$
8,580

 
$
1,800

 
$
15,776

 
$
3,710

 
$
2,243

 
$
21,729

Six months ended June 30, 2019
(In millions)

Specialty
 

Commercial
 
International
 
P&C Operations
 
Life & Group
 
Corporate & Other
 
Total Operations
Claim & claim adjustment expense reserves, beginning of period
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross
$
5,465

 
$
8,743

 
$
1,750

 
$
15,958

 
$
3,601

 
$
2,425

 
$
21,984

Ceded
634

 
745

 
226

 
1,605

 
181

 
2,233

 
4,019

Net
4,831

 
7,998

 
1,524

 
14,353

 
3,420

 
192

 
17,965

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net incurred claim & claim adjustment expenses
787

 
1,016

 
309

 
2,112

 
562

 
3

 
2,677

Net claim & claim adjustment expense payments
(899
)
 
(1,158
)
 
(278
)
 
(2,335
)
 
(486
)
 
(13
)
 
(2,834
)
Foreign currency translation adjustment and other
1

 
—

 
11

 
12

 
43

 
—

 
55

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Claim & claim adjustment expense reserves, end of period
 
 
 
 
 
 
 
 
 
 
 
 
 
Net
4,720

 
7,856

 
1,566

 
14,142

 
3,539

 
182

 
17,863

Ceded
676

 
724

 
234

 
1,634

 
171

 
2,061

 
3,866

Gross
$
5,396

 
$
8,580

 
$
1,800

 
$
15,776

 
$
3,710

 
$
2,243

 
$
21,729



15




Life & Group Policyholder Reserves
June 30, 2019
 
 
 
 
 
(In millions)
Claim and claim adjustment expenses
 
Future policy benefits
 
Total
Long term care
$
2,845

 
$
9,168

 
$
12,013

Structured settlement annuities
523

 
—

 
523

Other
14

 
—

 
14

Total
3,382

 
9,168

 
12,550

Shadow adjustments
157
 
2,141

 
2,298

Ceded reserves
171
 
228

 
399

Total gross reserves
$
3,710

 
$
11,537

 
$
15,247

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


16




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. For certain products within Small Business, where quantifiable, rate includes the influence of new business as well. 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.

17




•
Core income (loss) is calculated by excluding from net income (loss) the after-tax effects of i) net 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 investment gains or losses because net 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. For reconciliations of non-GAAP measures to the most comparable GAAP measures and other 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 press release, available at www.cna.com.
•
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.
•
Certain immaterial differences are due to rounding.
•
N/M = Not Meaningful


18