CNA FINANCIAL CORP - FORM 8-K - EX-99.2 - EXHIBIT 99.2

Attached files

file	filename
EX-99.1 - EXHIBIT 99.1 - CNA FINANCIAL CORP	q3-18exhibit991.htm
8-K - 8-K - CNA FINANCIAL CORP	a2018q38-k.htm

CNA Financial Corporation

Supplemental Financial Information

September 30, 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.

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 September 30	Three Months									Nine Months
(In millions)	2018			2017			Change			2018			2017			Change
Revenues:
Net earned premiums	$	1,853		$	1,806		3		%	$	5,453		$	5,185		5		%
Net investment income	487			509			(4	)		1,483			1,529			(3	)
Net realized investment gains (losses):
Other-than-temporary impairment (OTTI) losses	(3		)	(5		)				(9		)	(9		)
Other net realized investment gains (losses)	17			(19		)				34			71
Net realized investment gains (losses)	14			(24		)				25			62
Non-insurance warranty revenue	258			99						744			290
Other revenues	10			8						26			28
Total revenues	2,622			2,398			9			7,731			7,094			9
Claims, Benefits and Expenses:
Insurance claims and policyholders' benefits	1,312			1,480						3,978			4,053
Amortization of deferred acquisition costs	337			309						992			926
Non-insurance warranty expense	235			74						676			216
Other operating expenses	302			307						903			875
Interest	34			41						104			124
Total claims, benefits and expenses	2,220			2,211			—			6,653			6,194			(7	)
Income (loss) before income tax	402			187						1,078			900
Income tax (expense) benefit	(66		)	(43		)				(181		)	(224		)
Net income (loss)	$	336		$	144		133		%	$	897		$	676		33		%

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



Periods ended September 30	Three Months							Nine Months
(In millions, except per share data)	2018			2017				2018			2017
Components of Income (Loss)
Core income (loss)	$	317		$	159			$	868		$	633
Net realized investment gains (losses)	13			(15		)		23			43
Net deferred tax asset remeasurement	6			—				6			—
Net income (loss)	$	336		$	144			$	897		$	676

Diluted Earnings (Loss) Per Common Share
Core income (loss)	$	1.17		$	0.58			$	3.19		$	2.33
Net realized investment gains (losses)	0.04			(0.05		)		0.08			0.15
Net deferred tax asset remeasurement	0.02			—				0.02			—
Diluted earnings (loss) per share	$	1.23		$	0.53			$	3.29		$	2.48

Weighted Average Outstanding Common Stock and Common Stock Equivalents
Basic	271.6			271.2				271.5			271.1
Diluted	272.5			272.1				272.4			272.0

Return on Equity
Net income (loss) ⁽¹⁾	11.7		%	4.7			%	10.1		%	7.5		%
Core income (loss) ⁽²⁾	10.5			5.3				9.5			7.0

(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)	September 30, 2018			December 31, 2017
Total investments	$	44,929		$	46,870
Reinsurance receivables, net of allowance for uncollectible receivables	4,224			4,261
Total assets	57,259			56,567
Insurance reserves	36,498			37,212
Debt	2,680			2,858
Total liabilities	45,749			44,323
Accumulated other comprehensive income (loss) ⁽¹⁾	(757		)	32
Total stockholders' equity	11,510			12,244

Book value per common share	$	42.41		$	45.15
Book value per common share excluding AOCI	$	45.20		$	45.02

Outstanding shares of common stock (in millions of shares)	271.4			271.2

Statutory capital and surplus - Combined Continental Casualty Companies ⁽²⁾	$	10,675		$	10,726



Three months ended September 30	2018			2017
Net cash flows provided (used) by operating activities	$	514		$	379
Net cash flows provided (used) by investing activities	(359		)	(329		)
Net cash flows provided (used) by financing activities	(134		)	4
Net cash flows provided (used) by operating, investing and financing activities	$	21		$	54



Nine months ended September 30	2018			2017
Net cash flows provided (used) by operating activities	$	868		$	894
Net cash flows provided (used) by investing activities	80			(218		)
Net cash flows provided (used) by financing activities	(989		)	(673		)
Net cash flows provided (used) by operating, investing and financing activities	$	(41	)	$	3

(1) As of September 30, 2018 and December 31, 2017, the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $1,115 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 September 30, 2018 is preliminary.

Property & Casualty - Results of Operations



Periods ended September 30	Three Months											Nine Months
(In millions)	2018				2017				Change			2018				2017				Change
Gross written premiums	$	2,703			$	2,712			—		%	$	8,669			$	8,242			5		%
Net written premiums	1,581				1,599				(1	)		5,163				4,933				5

Net earned premiums	1,721				1,670				3			5,056				4,782				6
Net investment income	282				308							869				927
Non-insurance warranty revenue	258				99							744				290
Other revenues	9				8							25				26
Total operating revenues	2,270				2,085				9			6,694				6,025				11
Insurance claims and policyholders' benefits	1,047				1,173							3,056				3,069
Amortization of deferred acquisition costs	337				309							992				926
Other insurance related expenses	237				249							690				702
Non-insurance warranty expense	235				74							676				216
Other expenses	24				13							71				52
Total claims, benefits and expenses	1,880				1,818				(3	)		5,485				4,965				(10	)
Core income (loss) before income tax	390				267							1,209				1,060
Income tax (expense) benefit on core income (loss)	(85		)		(100		)					(258		)		(364		)
Core income (loss)	$	305			$	167			83		%	$	951			$	696			37		%

Other Performance Metrics
Underwriting gain (loss)	$	100			$	(61	)		N/M		%	$	318			$	85			N/M		%

Loss & LAE ratio	60.5			%	69.9			%	9.4		pts	60.1			%	63.9			%	3.8		pts
Acquisition expense ratio	20.1				19.5				(0.6	)		19.8				19.4				(0.4	)
Underwriting expense ratio	13.2				14.0				0.8			13.4				14.6				1.2
Expense ratio	33.3				33.5				0.2			33.2				34.0				0.8
Dividend ratio	0.4				0.3				(0.1	)		0.4				0.3				(0.1	)
Combined ratio	94.2			%	103.7			%	9.5		pts	93.7			%	98.2			%	4.5		pts
Combined ratio excluding catastrophes and development	94.8			%	94.6			%	(0.2	)	pts	94.4			%	95.4			%	1.0		pts

Net accident year catastrophe losses incurred	$	46			$	269						$	106			$	342
Effect on loss & LAE ratio	2.6			%	16.5			%	13.9		pts	2.1			%	7.3			%	5.2		pts

Net prior year development and other: (favorable) / unfavorable	$	(54	)		$	(129	)					$	(142	)		$	(215	)
Effect on loss & LAE ratio	(3.2		)	%	(7.4		)	%	(4.2	)	pts	(2.8		)	%	(4.5		)	%	(1.7	)	pts

Rate	2			%	—			%	2		pts	2			%	—			%	2		pts
Renewal premium change	4			%	2			%	2		pts	4			%	3			%	1		pts
Retention	82			%	87			%	(5	)	pts	83			%	86			%	(3	)	pts
New business	$	288			$	267			8		%	$	975			$	816			19		%

Specialty - Results of Operations



Periods ended September 30	Three Months											Nine Months
(In millions)	2018				2017				Change			2018				2017				Change
Gross written premiums	$	1,715			$	1,753			(2	)	%	$	5,222			$	5,156			1		%
Net written premiums	688				695				(1	)		2,062				2,066				—

Net earned premiums	684				692				(1	)		2,039				2,024				1
Net investment income	124				129							376				394
Non-insurance warranty revenue	258				99							744				290
Other revenues	—				1							1				2
Total operating revenues	1,066				921				16			3,160				2,710				17
Insurance claims and policyholders' benefits	374				359							1,127				1,155
Amortization of deferred acquisition costs	153				151							447				440
Other insurance related expenses	68				65							202				203
Non-insurance warranty expense	235				74							676				216
Other expenses	11				11							34				32
Total claims, benefits and expenses	841				660				(27	)		2,486				2,046				(22	)
Core income (loss) before income tax	225				261							674				664
Income tax (expense) benefit on core income (loss)	(48		)		(88		)					(143		)		(223		)
Core income (loss)	$	177			$	173			2		%	$	531			$	441			20		%

Other Performance Metrics
Underwriting gain (loss)	$	89			$	117			(24	)	%	$	263			$	226			16		%

Loss & LAE ratio	54.5			%	51.7			%	(2.8	)	pts	55.1			%	56.9			%	1.8		pts
Acquisition expense ratio	21.1				20.0				(1.1	)		20.7				20.0				(0.7	)
Underwriting expense ratio	11.2				11.2				—			11.1				11.8				0.7
Expense ratio	32.3				31.2				(1.1	)		31.8				31.8				—
Dividend ratio	0.2				0.2				—			0.2				0.1				(0.1	)
Combined ratio	87.0			%	83.1			%	(3.9	)	pts	87.1			%	88.8			%	1.7		pts
Combined ratio excluding catastrophes and development	92.3			%	92.6			%	0.3		pts	92.2			%	93.6			%	1.4		pts

Net accident year catastrophe losses incurred	$	16			$	35						$	22			$	44
Effect on loss & LAE ratio	2.4			%	5.0			%	2.6		pts	1.1			%	2.2			%	1.1		pts

Net prior year development and other: (favorable) / unfavorable	$	(52	)		$	(102	)					$	(126	)		$	(146	)
Effect on loss & LAE ratio	(7.7		)	%	(14.5		)	%	(6.8	)	pts	(6.2		)	%	(7.0		)	%	(0.8	)	pts

Rate	2			%	—			%	2		pts	2			%	1			%	1		pts
Renewal premium change	3			%	1			%	2		pts	3			%	3			%	—		pts
Retention	84			%	90			%	(6	)	pts	84			%	89			%	(5	)	pts
New business	$	93			$	60			55		%	$	266			$	177			50		%

Commercial - Results of Operations



Periods ended September 30	Three Months											Nine Months
(In millions)	2018				2017				Change			2018				2017				Change
Gross written premiums	$	758			$	733			3		%	$	2,563			$	2,353			9		%
Net written premiums	697				697				—			2,339				2,203				6

Net earned premiums	782				752				4			2,278				2,129				7
Net investment income	144				166							450				495
Other revenues	8				6							24				24
Total operating revenues	934				924				1			2,752				2,648				4
Insurance claims and policyholders' benefits	501				614							1,449				1,470
Amortization of deferred acquisition costs	127				122							375				359
Other insurance related expenses	133				136							386				393
Other expenses	10				6							31				31
Total claims, benefits and expenses	771				878				12			2,241				2,253				1
Core income (loss) before income tax	163				46							511				395
Income tax (expense) benefit on core income (loss)	(36		)		(14		)					(108		)		(132		)
Core income (loss)	$	127			$	32			N/M		%	$	403			$	263			53		%

Other Performance Metrics
Underwriting gain (loss)	$	21			$	(120	)		118		%	$	68			$	(93	)		173		%

Loss & LAE ratio	63.5			%	81.2			%	17.7		pts	63.0			%	68.6			%	5.6		pts
Acquisition expense ratio	18.3				18.0				(0.3	)		18.1				18.1				—
Underwriting expense ratio	14.9				16.2				1.3			15.2				17.2				2.0
Expense ratio	33.2				34.2				1.0			33.3				35.3				2.0
Dividend ratio	0.7				0.5				(0.2	)		0.7				0.5				(0.2	)
Combined ratio	97.4			%	115.9			%	18.5		pts	97.0			%	104.4			%	7.4		pts
Combined ratio excluding catastrophes and development	94.3			%	94.7			%	0.4		pts	94.4			%	96.2			%	1.8		pts

Net accident year catastrophe losses incurred	$	25			$	176						$	73			$	238
Effect on loss & LAE ratio	3.1			%	23.9			%	20.8		pts	3.1			%	11.1			%	8.0		pts

Net prior year development and other: (favorable) / unfavorable	$	—			$	(23	)					$	(12	)		$	(54	)
Effect on loss & LAE ratio	—			%	(2.7		)	%	(2.7	)	pts	(0.5		)	%	(2.9		)	%	(2.4	)	pts

Rate	2			%	—			%	2		pts	1			%	—			%	1		pts
Renewal premium change	3			%	2			%	1		pts	3			%	3			%	—		pts
Retention	84			%	86			%	(2	)	pts	85			%	86			%	(1	)	pts
New business	$	123			$	138			(11	)	%	$	461			$	432			7		%

International - Results of Operations



Periods ended September 30	Three Months											Nine Months
(In millions)	2018				2017				Change			2018				2017				Change
Gross written premiums	$	230			$	226			2		%	$	884			$	733			21		%
Net written premiums	196				207				(5	)		762				664				15

Net earned premiums	255				226				13			739				629				17
Net investment income	14				13							43				38
Other revenues	1				1							—				—
Total operating revenues	270				240				13			782				667				17
Insurance claims and policyholders' benefits	172				200							480				444
Amortization of deferred acquisition costs	57				36							170				127
Other insurance related expenses	36				48							102				106
Other expenses	3				(4		)					6				(11		)
Total claims, benefits and expenses	268				280				4			758				666				(14	)
Core income (loss) before income tax	2				(40		)					24				1
Income tax (expense) benefit on core income (loss)	(1		)		2							(7		)		(9		)
Core income (loss)	$	1			$	(38	)		103		%	$	17			$	(8	)		N/M		%

Other Performance Metrics
Underwriting gain (loss)	$	(10	)		$	(58	)		83		%	$	(13	)		$	(48	)		73		%

Loss & LAE ratio	67.6			%	88.4			%	20.8		pts	65.0			%	70.6			%	5.6		pts
Acquisition expense ratio	23.2				23.0				(0.2	)		23.0				22.4				(0.6	)
Underwriting expense ratio	13.1				14.5				1.4			13.8				14.8				1.0
Expense ratio	36.3				37.5				1.2			36.8				37.2				0.4
Dividend ratio	—				—				—			—				—				—
Combined ratio	103.9			%	125.9			%	22.0		pts	101.8			%	107.8			%	6.0		pts
Combined ratio excluding catastrophes and development	102.6			%	99.9			%	(2.7	)	pts	100.9			%	99.2			%	(1.7	)	pts

Net accident year catastrophe losses incurred	$	5			$	58						$	11			$	60
Effect on loss & LAE ratio	2.1			%	27.5			%	25.4		pts	1.5			%	10.3			%	8.8		pts

Net prior year development and other: (favorable) / unfavorable	$	(2	)		$	(4	)					$	(4	)		$	(15	)
Effect on loss & LAE ratio	(0.8		)	%	(1.5		)	%	(0.7	)	pts	(0.6		)	%	(1.7		)	%	(1.1	)	pts

Rate	3			%	1			%	2		pts	3			%	—			%	3		pts
Renewal premium change	8			%	3			%	5		pts	6			%	2			%	4		pts
Retention	67			%	76			%	(9	)	pts	77			%	79			%	(2	)	pts
New business	$	72			$	69			4		%	$	248			$	207			20		%

Life & Group - Results of Operations



Periods ended September 30	Three Months									Nine Months
(In millions)	2018			2017			Change			2018			2017			Change
Net earned premiums	$	133		$	136		(2	)	%	$	398		$	404		(1	)	%
Net investment income	200			195						598			587
Other revenues	(1		)	—						—			1
Total operating revenues	332			331			—			996			992			—
Insurance claims and policyholders' benefits	277			322						907			980
Amortization of deferred acquisition costs	—			—						—			—
Other insurance related expenses	31			32						91			96
Other expenses	2			2						5			5
Total claims, benefits and expenses	310			356			13			1,003			1,081			7
Core income (loss) before income tax	22			(25		)				(7		)	(89		)
Income tax (expense) benefit on core income (loss)	10			35						43			108
Core income (loss)	$	32		$	10		220		%	$	36		$	19		89		%

Corporate & Other - Results of Operations



Periods ended September 30	Three Months									Nine Months
(In millions)	2018			2017			Change			2018			2017			Change
Net earned premiums	$	(1	)	$	—					$	(1	)	$	(1	)
Net investment income	5			6						16			15
Other revenues	2			—						1			1
Total operating revenues	6			6			—		%	16			15			7		%
Insurance claims and policyholders' benefits	(12		)	(15		)				15			4
Amortization of deferred acquisition costs	—			—						—			—
Other insurance related expenses	(2		)	—						(2		)	(2		)
Other expenses	44			52						152			146
Total claims, benefits and expenses	30			37			19			165			148			(11	)
Core income (loss) before income tax	(24		)	(31		)				(149		)	(133		)
Income tax (expense) benefit on core income (loss)	4			13						30			51
Core income (loss)	$	(20	)	$	(18	)	(11	)	%	$	(119	)	$	(82	)	(45	)	%

Investment Summary - Consolidated



	September 30, 2018						June 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	$	19,021		$	672		$	18,635		$	735		$	18,810	$	1,597
States, municipalities and political subdivisions:
Tax-exempt	8,335			676			9,168			810			11,130		1,136
Taxable	2,810			298			2,841			343			2,897		413
Total states, municipalities and political subdivisions	11,145			974			12,009			1,153			14,027		1,549
Asset-backed:
RMBS	4,971			(53		)	4,948			(13		)	5,120		77
CMBS	2,152			(13		)	2,072			(10		)	1,872		32
Other ABS	1,729			(3		)	1,557			—			1,094		11
Total asset-backed	8,852			(69		)	8,577			(23		)	8,086		120
U.S. Treasury and obligations of government-sponsored enterprises	145			—			127			—			109		(2		)
Foreign government	455			(2		)	437			1			444		7
Redeemable preferred stock	10			1			10			1			11		1
Total fixed maturity securities	39,628			1,576			39,795			1,867			41,487		3,272
Equities:
Common stock	105			—			89			—			27		6
Non-redeemable preferred stock	690			—			684			—			668		30
Total equities	795			—			773			—			695		36
Limited partnership investments	2,297			—			2,363			—			2,369		—
Other invested assets	51			—			48			—			44		—
Mortgage loans	868			—			865			—			839		—
Short term investments	1,290			—			1,308			—			1,436		(1		)
Total investments	$	44,929		$	1,576		$	45,152		$	1,867		$	46,870	$	3,307

Net receivable/(payable) on investment activity	$	(46	)				$	(188	)				$	23

Effective duration (in years)	5.9						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



	September 30, 2018						June 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	$	13,098		$	(38	)	$	12,855		$	(3	)	$	12,938		$	447
States, municipalities and political subdivisions:
Tax-exempt	781			22			1,273			40			2,827			112
Taxable	1,187			60			1,200			73			1,247			102
Total states, municipalities and political subdivisions	1,968			82			2,473			113			4,074			214
Asset-backed:
RMBS	4,816			(54		)	4,792			(15		)	4,951			72
CMBS	2,050			(12		)	1,969			(10		)	1,761			30
Other ABS	1,601			(3		)	1,433			—			981			7
Total asset-backed	8,467			(69		)	8,194			(25		)	7,693			109
U.S. Treasury and obligations of government-sponsored enterprises	120			(1		)	102			(1		)	82			(4		)
Foreign government	455			(2		)	437			1			444			7
Redeemable preferred stock	5			1			5			1			5			1
Total fixed maturity securities	24,113			(27		)	24,066			86			25,236			774
Equities:
Common stock	105			—			89			—			27			6
Non-redeemable preferred stock	175			—			178			—			237			7
Total equities	280			—			267			—			264			13
Limited partnership investments	2,297			—			2,363			—			2,369			—
Other invested assets	51			—			48			—			44			—
Mortgage loans	659			—			655			—			639			—
Short term investments	1,170			—			1,211			—			1,354			(1		)
Total investments	$	28,570		$	(27	)	$	28,610		$	86		$	29,906		$	786

Net receivable/(payable) on investment activity	$	(51	)				$	(116	)				$	(10	)

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

Investment Summary - Life & Group



	September 30, 2018					June 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	$	5,923	$	710		$	5,780		$	738	$	5,872	$	1,150
States, municipalities and political subdivisions:
Tax-exempt	7,554		654			7,895			770		8,303		1,024
Taxable	1,623		238			1,641			270		1,650		311
Total states, municipalities and political subdivisions	9,177		892			9,536			1,040		9,953		1,335
Asset-backed:
RMBS	155		1			156			2		169		5
CMBS	102		(1		)	103			—		111		2
Other ABS	128		—			124			—		113		4
Total asset-backed	385		—			383			2		393		11
U.S. Treasury and obligations of government-sponsored enterprises	25		1			25			1		27		2
Foreign government	—		—			—			—		—		—
Redeemable preferred stock	5		—			5			—		6		—
Total fixed maturity securities	15,515		1,603			15,729			1,781		16,251		2,498
Equities:
Common stock	—		—			—			—		—		—
Non-redeemable preferred stock	515		—			506			—		431		23
Total equities	515		—			506			—		431		23
Limited partnership investments	—		—			—			—		—		—
Other invested assets	—		—			—			—		—		—
Mortgage loans	209		—			210			—		200		—
Short term investments	120		—			97			—		82		—
Total investments	$	16,359	$	1,603		$	16,542		$	1,781	$	16,964	$	2,521

Net receivable/(payable) on investment activity	$	5				$	(72	)			$	33

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

Investments - Fixed Maturity Securities by Credit Rating



September 30, 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	$	—		$	—		$	44		$	(1	)	$	507		$	18		$	4,235		$	253		$	12,313		$	400		$	1,922		$	2		$	19,021		$	672
States, municipalities and political subdivisions:
Tax-exempt	—			—			1,931			191			3,335			271			2,750			177			301			34			18			3			8,335			676
Taxable	—			—			380			25			1,773			172			637			101			20			—			—			—			2,810			298
Total states, municipalities and political subdivisions	—			—			2,311			216			5,108			443			3,387			278			321			34			18			3			11,145			974
Asset-backed:
RMBS	4,244			(96		)	165			(2		)	16			(1		)	59			—			43			—			444			46			4,971			(53		)
CMBS	41			—			355			7			530			1			294			(4		)	592			(16		)	340			(1		)	2,152			(13		)
Other ABS	—			—			38			—			182			—			809			(2		)	700			(1		)	—			—			1,729			(3		)
Total asset-backed	4,285			(96		)	558			5			728			—			1,162			(6		)	1,335			(17		)	784			45			8,852			(69		)
U.S. Treasury and obligations of government-sponsored enterprises	145			—			—			—			—			—			—			—			—			—			—			—			145			—
Foreign government	—			—			151			1			232			(2		)	54			—			18			(1		)	—			—			455			(2		)
Redeemable preferred stock	—			—			—			—			—			—			—			—			10			1			—			—			10			1
Total fixed maturity securities	$	4,430		$	(96	)	$	3,064		$	221		$	6,575		$	459		$	8,838		$	525		$	13,997		$	417		$	2,724		$	50		$	39,628		$	1,576

Percentage of total fixed maturity securities	11		%				8		%				17		%				22		%				35		%				7		%				100		%

Components of Net Investment Income



	Consolidated
Periods ended September 30	Three Months						Nine Months
(In millions)	2018			2017			2018			2017
Taxable fixed income securities	$	366		$	350		$	1,070		$	1,051
Tax-exempt fixed income securities	93			106			298			320
Total fixed income securities	459			456			1,368			1,371
Limited partnership and common stock investments	23			51			96			157
Other, net of investment expense	5			2			19			1
Pretax net investment income	$	487		$	509		$	1,483		$	1,529
Fixed income securities, after tax	$	378		$	330		$	1,130		$	994
Net investment income, after tax	400			363			1,221			1,096

Effective income yield for fixed income securities, pretax	4.7		%	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 September 30	Three Months						Nine Months
(In millions)	2018			2017			2018			2017
Taxable fixed income securities	$	248		$	237		$	721		$	707
Tax-exempt fixed income securities	10			21			44			67
Total fixed income securities	258			258			765			774
Limited partnership and common stock investments	23			51			96			157
Other, net of investment expense	6			5			24			11
Pretax net investment income	$	287		$	314		$	885		$	942
Fixed income securities, after tax	$	206		$	175		$	612		$	528
Net investment income, after tax	229			211			707			637

Effective income yield for fixed income securities, pretax	4.2		%	4.2		%	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 September 30	Three Months								Nine Months
(In millions)	2018				2017				2018				2017
Taxable fixed income securities	$	118			$	113			$	349			$	344
Tax-exempt fixed income securities	83				85				254				253
Total fixed income securities	201				198				603				597
Limited partnership and common stock investments	—				—				—				—
Other, net of investment expense	(1		)		(3		)		(5		)		(10		)
Pretax net investment income	$	200			$	195			$	598			$	587
Fixed income securities, after tax	$	172			$	155			$	518			$	466
Net investment income, after tax	171				152				514				459

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 September 30, 2018 (In millions)	Specialty			Commercial			International			P&C Operations			Life & Group			Corporate & Other			Total Operations
Claim & claim adjustment expense reserves, beginning of period
Gross	$	5,816		$	8,599		$	1,706		$	16,121		$	3,522		$	2,347		$	21,990
Ceded	913			650			252			1,815			196			2,146			4,157
Net	4,903			7,949			1,454			14,306			3,326			201			17,833

Net incurred claim & claim adjustment expenses	373			496			172			1,041			256			—			1,297
Net claim & claim adjustment expense payments	(440		)	(543		)	(173		)	(1,156		)	(214		)	(4		)	(1,374		)
Foreign currency translation adjustment and other	—			2			(1		)	1			(10		)	(1		)	(10		)

Claim & claim adjustment expense reserves, end of period
Net	4,836			7,904			1,452			14,192			3,358			196			17,746
Ceded	673			680			237			1,590			193			2,075			3,858
Gross	$	5,509		$	8,584		$	1,689		$	15,782		$	3,551		$	2,271		$	21,604



Nine months ended September 30, 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	1,124			1,435			480			3,039			788			2			3,829
Net claim & claim adjustment expense payments	(1,295		)	(1,667		)	(420		)	(3,382		)	(679		)	(12		)	(4,073		)
Foreign currency translation adjustment and other	—			—			(40		)	(40		)	(41		)	1			(80		)

Claim & claim adjustment expense reserves, end of period
Net	4,836			7,904			1,452			14,192			3,358			196			17,746
Ceded	673			680			237			1,590			193			2,075			3,858
Gross	$	5,509		$	8,584		$	1,689		$	15,782		$	3,551		$	2,271		$	21,604

Life & Group Policyholder Reserves



September 30, 2018
(In millions)	Claim and claim adjustment expenses		Future policy benefits		Total
Long term care	$	2,689	$	9,078	$	11,767
Structured settlement annuities	535		—		535
Other	16		—		16
Total	3,240		9,078		12,318
Shadow adjustments	118		1,293		1,411
Ceded reserves	193		234		427
Total gross reserves	$	3,551	$	10,605	$	14,156



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, 2017 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.

•

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. 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.

•

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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