EX-99.01 4 c72872exv99w01.txt PROFORMA FINANCIAL STATEMENTS AND FOOTNOTES CNA FINANCIAL CORPORATION EXHIBIT 99.01 CNA FINANCIAL CORPORATION UNAUDITED PRO FORMA FINANCIAL INFORMATION The following unaudited pro forma financial information presents CNA Financial Corporation's (the Company or CNAF) pro forma unaudited condensed consolidated balance sheet as of September 30, 2002 and the Company's pro forma unaudited condensed consolidated statements of operations for the year ended December 31, 2001 and for the nine months ended September 30, 2002. On October 31, 2002, the Company completed the sale of the shares of CNA Re Management Company Limited and its wholly-owned subsidiary CNA Reinsurance Company Limited (collectively referred to hereinafter as CNA Re U.K.) to Tawa U.K. Limited. The sale includes business underwritten since inception by CNA Re U.K. except for certain risks retained by Continental Casualty Company (CCC), a wholly-owned subsidiary of the Company, as discussed below. This sale does not impact CNA Re's on-going U.S.-based operations. CNA Re U.K. was sold for $1, subject to adjustments that are primarily driven by certain operating results and changes in interest rates between January 1, 2002 and October 31, 2002, and realized foreign currency losses recognized by CNA Re U.K. prior to December 31, 2002. Due to the various components of the completion adjustments, which are initially prepared by the buyer, the final purchase price cannot yet be determined. However, based upon information currently available to the Company, management believes there will be a reduction in the previously recognized impairment loss, which will be reflected as a realized gain when the completion adjustments are finalized. The anticipated realized gain on sale is not reflected in the pro forma adjustments. Concurrent with the sale, several reinsurance agreements under which CCC provided retrocessional protection to CNA Re U.K. will be terminated. As part of the sale, CNA Re U.K.'s net exposure to all IGI Program liabilities, as described in note B2 below, will be ceded to CCC. Further, CCC will provide a $100 million stop loss reinsurance cover attaching at carried reserves on CNA Re U.K.'s 2001 underwriting year exposures for which CCC received premium of $25 million. The pro forma adjustments are presented as if they had occurred, as of September 30, 2002 for the purposes of the pro forma unaudited Condensed Consolidated Balance Sheet, and as of the beginning of the respective period presented for the purposes of the pro forma unaudited Condensed Consolidated Statements of Operations. This pro forma unaudited financial information does not purport to represent what the Company's actual financial position and results of operations would have been had such events actually occurred on the aforementioned dates. The pro forma unaudited financial information also does not purport to serve as a forecast of the Company's financial position or results of operations for any future periods. The pro forma adjustments are based on currently available information and upon certain assumptions that management believes are reasonable in the circumstances. This pro forma financial information should be read in conjunction with the Company's audited consolidated financial statements as of and for the year ended December 31, 2001 appearing in the Company's Annual Report on form 10-K for the year ended December 31, 2001, and the unaudited condensed consolidated financial statements as of September 30, 2002 and for the nine-month period then ended appearing in the Company's Quarterly Report on Form 10-Q for the quarter then ended. CNA FINANCIAL CORPORATION EXHIBIT 99.01 CNA FINANCIAL CORPORATION PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 2002 (UNAUDITED)
PRO FORMA ADJUSTMENTS ------------------------ AS REPORTED DECREASE (INCREASE) PRO FORMA CNAF CNAF BALANCE CNA RE U.K. OTHER BALANCE (In millions) SHEET [A] [B] NOTES SHEET ----------- ----------- ------- -------- --------- ASSETS: Investments and cash $36,439 $ 1,116 $ 286 B1,B2,B3 $35,037 Receivables 16,831 1,330 (77) B2 15,578 Deferred acquisition costs 2,548 1 - 2,547 Other assets 6,103 28 - 6,075 Separate account business 3,147 - - 3,147 ------- ------- ------- ------- Total assets $65,068 $ 2,475 $ 209 $62,384 ======= ======= ======= ======= LIABILITIES: Insurance reserves $42,580 $ 2,179 $ 308 B1,B2 $40,093 Debt 2,549 - - 2,549 Reinsurance balances payable 3,032 104 (35) B2 2,963 Other liabilities 4,827 192 (64) B1,B2,B3 4,699 Separate account business 3,147 - - 3,147 ------- ------- ------- ------- Total liabilities 56,135 2,475 209 53,451 ------- ------- ------- ------- Minority interest 233 - - 233 Stockholders' equity 8,700 - - 8,700 ------- ------- ------- ------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $65,068 $ 2,475 $ 209 $62,384 ======= ======= ======= =======
CNA FINANCIAL CORPORATION PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2001 (UNAUDITED)
PRO FORMA ADJUSTMENTS -------------------------- DECREASE (INCREASE) RESTATED PRO FORMA CNAF CNAF (In millions, except per share data) STATEMENT OF CNA RE U.K. OTHER STATEMENT OF OPERATIONS [C] [D] [E] OPERATIONS ------------- ----------- -------- ------------ REVENUES Net earned premiums $ 9,288 $ 224 $ - $ 9,064 Net investment income 1,856 59 15 1,782 Realized investment gains (losses), net of participating policyholders' and minority interests 1,262 (3) - 1,265 Other revenues 676 - - 676 -------- -------- -------- -------- Total revenues 13,082 280 15 12,787 -------- -------- -------- -------- CLAIMS, BENEFITS AND EXPENSES Insurance claims and benefits 11,279 467 - 10,812 Amortization of deferred acquisition costs 1,804 63 - 1,741 Other operating expenses 1,909 51 - 1,860 Restructuring and other related charges 251 6 - 245 Interest 157 - - 157 -------- -------- -------- -------- Total claims, benefits and expenses 15,400 587 - 14,813 -------- -------- -------- -------- Loss from continuing operations before income tax and minority interest (2,318) (307) 15 (2,026) Income tax benefit (expense) 745 (67) (5) 817 Minority interest (21) - - (21) -------- -------- -------- -------- (Loss) income from continuing operations $ (1,594) $ (374) $ 10 $ (1,230) ======== ======== ======== ======== BASIC AND DILUTED (LOSS) EARNINGS PER SHARE FROM CONTINUING OPERATIONS $ (8.22) $ (6.34) ======== ======== WEIGHTED AVERAGE OUTSTANDING COMMON STOCK AND COMMON STOCK EQUIVALENTS 194.0 194.0 ======== ========
CNA FINANCIAL CORPORATION EXHIBIT 99.01 CNA FINANCIAL CORPORATION PRO FORMA CONDENSED STATEMENT OF CONSOLIDATED OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 (UNAUDITED)
PRO FORMA ADJUSTMENTS -------------------------- DECREASE (INCREASE) RESTATED PRO FORMA CNAF CNAF (In millions, except per share data) STATEMENT OF CNA RE U.K. OTHER STATEMENT OF OPERATIONS [D] [E] OPERATIONS ------------- ----------- -------- ------------ REVENUES Net earned premiums $ 7,925 $ 13 $ - $ 7,912 Net investment income 1,292 32 7 1,253 Realized investment (losses) gains, net of participating policyholders' and minority interests (137) 11 - (148) Other revenues 476 - - 476 ------- ------- ------- ------- Total revenues 9,556 56 7 9,493 ------- ------- ------- ------- CLAIMS, BENEFITS AND EXPENSES Insurance claims and benefits 6,542 15 - 6,527 Amortization of deferred acquisition costs 1,350 5 - 1,345 Other operating expenses 1,261 12 - 1,249 Restructuring and other related charges - - - - Interest 112 - - 112 ------- ------- ------- ------- Total claims, benefits and expenses 9,265 32 - 9,233 ------- ------- ------- ------- Income from continuing operations before income tax and minority interest 291 24 7 260 Income tax expense (78) (1) (3) (74) Minority interest (11) - - (11) ------- ------- ------- ------- Income from continuing operations $ 202 $ 23 $ 4 $ 175 ======= ======= ======= ======= BASIC AND DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS $ 0.91 $ 0.78 ======= ======= WEIGHTED AVERAGE OUTSTANDING COMMON STOCK AND COMMON STOCK EQUIVALENTS 223.6 223.6 ======= =======
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS [A] This column of pro forma adjustments represents the balance sheet of CNA Re U.K. as included in the CNAF Condensed Consolidated Balance Sheet as of September 30, 2002 as reported. [B] This column of pro forma adjustments includes the transfer of certain assets and liabilities between CNA Re U.K. and its parent, CCC, arising from several concurrent completion transactions as more fully described below. [B1] Represents the impact of the termination of four intercompany reinsurance agreements under which, CNA Re U.K. ceded losses to CCC. These terminations result in a transfer of insurance reserves of $337 million and cash of $262 million from CCC to CNA Re U.K. [B2] In 1997, CNA Re U.K. entered into an arrangement with IOA Global, Ltd. (IOA), an independent managing general agent based in Philadelphia, Pennsylvania, to develop and manage a book of accident and health coverages. Pursuant to this arrangement, IGI Underwriting Agencies, Ltd. (IGI), a personal accident reinsurance managing general underwriter, was appointed to underwrite and CNA FINANCIAL CORPORATION EXHIBIT 99.01 market the book under the supervision of IOA. Between April 1, 1997 and December 1, 1999, IGI underwrote a number of reinsurance arrangements with respect to personal accident insurance worldwide (the IGI Program). This pro forma adjustment reflects the retrocession to CCC of CNA Re U.K.'s remaining net exposure relating to the IGI Program. This retrocession includes a transfer of insurance reserves of $29 million, receivables of $77 million, related liabilities of $35 million and cash of $2 million. [B3] Represents the impact of other aspects of the transaction including estimated foreign currency losses and other estimated future completion adjustments, which decreases cash by $22 million and decreases other liabilities by $22 million. [C] The CNAF Condensed Consolidated Statement of Operations for the year ended December 31, 2001 is restated to reclassify the results of CNA Vida as discontinued operations. [D] These columns of pro forma adjustments represent the results of operations of CNA Re U.K. as included in the CNAF Condensed Consolidated Statements of Operations for the respective periods presented. [E] This column of pro forma adjustments represents the estimated reduction of investment income assuming the cash related to CNAF's completion transactions in pro forma note B, was transferred to CNA Re U.K. as of January 1, 2001. This estimated reduction of interest income totals $15 million, which is based on the approximate two-year U.S. Treasury yield of 5% as of January 1, 2001. [F] This column of pro forma adjustments represents the estimated reduction of investment income assuming the cash related to completion transactions in pro forma note B, was transferred to CNA Re U.K. as of January 1, 2002. This estimated reduction of interest income totals $7 million, which is based on the approximate two-year U.S. Treasury yield of 3% as of January 1, 2002.