CNA FINANCIAL CORP - FORM 8-K - EX-99.2 - May 3, 2021

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CNA Financial Corporation
Supplemental Financial Information


March 31, 2021



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
Three months ended March 31
(In millions)20212020Change
Revenues:
Net earned premiums$1,962$1,8695 %
Net investment income50432953 
Net investment gains (losses)57(216)
Non-insurance warranty revenue338301
Other revenues58

Total revenues2,866 2,291 25 
Claims, Benefits and Expenses:
Insurance claims and policyholders' benefits1,5061,425
Amortization of deferred acquisition costs359344
Non-insurance warranty expense311281
Other operating expenses284299
Interest2831
Total claims, benefits and expenses2,488 2,380 (5)
Income (loss) before income tax378 (89)
Income tax (expense) benefit(66)28 
Net income (loss)$312 $(61)N/M%
1



Components of Income (Loss), Per Share Data and Return on Equity
Three months ended March 31
(In millions, except per share data)20212020
Components of Income (Loss)
Core income (loss)$263 $108 
Net investment gains (losses)49 (169)
Net income (loss)$312 $(61)
Diluted Earnings (Loss) Per Common Share
Core income (loss)$0.96 $0.40 
Net investment gains (losses)0.18 (0.63)
Diluted earnings (loss) per share$1.14 $(0.23)
Weighted Average Outstanding Common Stock and Common Stock Equivalents
Basic271.9 271.5 
Diluted272.9 271.5 
Return on Equity
Net income (loss) (1)
10.1 %(2.2)%
Core income (loss) (2)
8.8 3.7 
(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)March 31, 2021December 31, 2020
Total investments$48,671 $50,293 
Reinsurance receivables, net of allowance for uncollectible receivables5,111 4,457 
Total assets63,713 64,026 
Insurance reserves41,147 41,143 
Debt2,777 2,776 
Total liabilities51,624 51,319 
Accumulated other comprehensive income (loss) (1)
187 803 
Total stockholders' equity12,089 12,707 
Book value per common share$44.50 $46.82 
Book value per common share excluding AOCI$43.81 $43.86 
Outstanding shares of common stock (in millions of shares)271.6 271.4 
Statutory capital and surplus - Combined Continental Casualty Companies (2)
$10,628 $10,708 
Three months ended March 3120212020
Net cash flows provided (used) by operating activities$82 $212 
Net cash flows provided (used) by investing activities408 1,087 
Net cash flows provided (used) by financing activities(321)(675)
Net cash flows provided (used) by operating, investing and financing activities$169 $624 
(1) As of March 31, 2021 and December 31, 2020, the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $2,301 million and $2,773 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 March 31, 2021 is preliminary.
3



Property & Casualty - Results of Operations
Three months ended March 31
(In millions)20212020Change
Gross written premiums$3,250 $3,083 5 %
Gross written premiums ex. 3rd party captives
2,270 2,107 8 
Net written premiums1,937 1,863 4 
Net earned premiums1,842 1,742 6 
Net investment income279 113 
Non-insurance warranty revenue338 301 
Other revenues5 9 
Total operating revenues2,464 2,165 14 
Insurance claims and policyholders' benefits1,227 1,120 
Amortization of deferred acquisition costs359 344 
Non-insurance warranty expense311 281 
Other insurance related expenses220 232 
Other expenses15 32 
Total claims, benefits and expenses2,132 2,009 (6)
Core income (loss) before income tax332 156 
Income tax (expense) benefit on core income (loss)(69)(35)
Core income (loss)$263 $121 117 %
Other Performance Metrics
Underwriting gain (loss)$36 $46 (22)%
Loss & LAE ratio66.3 %63.8 %(2.5)pts
Expense ratio31.5 33.1 1.6 
Dividend ratio0.3 0.4 0.1 
Combined ratio98.1 %97.3 %(0.8)pts
Combined ratio excluding catastrophes and development91.9 %93.7 %1.8 pts
Net accident year catastrophe losses incurred$125 $75 
Effect on loss & LAE ratio6.8 %4.3 %(2.5)pts
Net prior year development and other: (favorable) / unfavorable$(11)$(11)
Effect on loss & LAE ratio(0.6)%(0.7)%(0.1)pts
Rate11 %9 %2 pts
Renewal premium change9 %9 %— pts
Retention83 %82 %1 pts
New business $394 $340 16 %

4



Specialty - Results of Operations
Three months ended March 31
(In millions)20212020Change
Gross written premiums$1,794 $1,714 5 %
Gross written premiums ex. 3rd party captives
816 741 10 
Net written premiums742 694 7 
Net earned premiums735 685 7 
Net investment income117 56 
Non-insurance warranty revenue338 301 
Other revenues— 1 
Total operating revenues1,190 1,043 14 
Insurance claims and policyholders' benefits428 406 
Amortization of deferred acquisition costs154 151 
Non-insurance warranty expense311 281 
Other insurance related expenses70 69 
Other expenses11 13 
Total claims, benefits and expenses974 920 (6)
Core income (loss) before income tax216 123 
Income tax (expense) benefit on core income (loss)(46)(27)
Core income (loss)$170 $96 77 %
Other Performance Metrics
Underwriting gain (loss)$83 $59 41 %
Loss & LAE ratio58.0 %59.1 %1.1 pts
Expense ratio30.6 32.0 1.4 
Dividend ratio0.2 0.2 — 
Combined ratio88.8 %91.3 %2.5 pts
Combined ratio excluding catastrophes and development90.2 %91.7 %1.5 pts
Net accident year catastrophe losses incurred$5 $8 
Effect on loss & LAE ratio0.7 %1.1 %0.4 pts
Net prior year development and other: (favorable) / unfavorable$(15)$(11)
Effect on loss & LAE ratio(2.1)%(1.5)%0.6 pts
Rate10 %10 %— pts
Renewal premium change9 %11 %(2)pts
Retention86 %83 %3 pts
New business$103 $74 39 %
5



Commercial - Results of Operations
Three months ended March 31
(In millions)20212020Change
Gross written premiums$1,113 $1,062 5 %
Gross written premiums ex. 3rd party captives
1,111 1,059 5 
Net written premiums960 950 1 
Net earned premiums855 818 5 
Net investment income148 42 
Other revenues5 8 
Total operating revenues1,008 868 16 
Insurance claims and policyholders' benefits644 560 
Amortization of deferred acquisition costs153 144 
Other insurance related expenses115 127 
Other expenses9 6 
Total claims, benefits and expenses921 837 (10)
Core income (loss) before income tax87 31 
Income tax (expense) benefit on core income (loss)(18)(8)
Core income (loss)$69 $23 N/M%
Other Performance Metrics
Underwriting gain (loss)$(57)$(13)N/M%
Loss & LAE ratio74.7 %67.8 %(6.9)pts
Expense ratio31.4 33.2 1.8 
Dividend ratio0.6 0.6 — 
Combined ratio106.7 %101.6 %(5.1)pts
Combined ratio excluding catastrophes and development 92.8 %94.6 %1.8 pts
Net accident year catastrophe losses incurred$115 $57 
Effect on loss & LAE ratio13.4 %7.0 %(6.4)pts
Net prior year development and other: (favorable) / unfavorable$4 $— 
Effect on loss & LAE ratio0.5 %— %(0.5)pts
Rate10 %8 %2 pts
Renewal premium change8 %9 %(1)pts
Retention84 %86 %(2)pts
New business$211 $198 7 %
6



International - Results of Operations
Three months ended March 31
(In millions)20212020Change
Gross written premiums$343 $307 12 %
Net written premiums235 219 7 
Net earned premiums252 239 5 
Net investment income14 15 
Other revenues— — 
Total operating revenues266 254 5 
Insurance claims and policyholders' benefits155 154 
Amortization of deferred acquisition costs52 49 
Other insurance related expenses35 36 
Other expenses(5)13 
Total claims, benefits and expenses237 252 6 
Core income (loss) before income tax29 2 
Income tax (expense) benefit on core income (loss)(5)— 
Core income (loss)$24 $2 N/M%
Other Performance Metrics
Underwriting gain (loss)$10 $— N/M%
Loss & LAE ratio61.5 %64.5 %3.0 pts
Expense ratio34.4 35.4 1.0 
Dividend ratio— — — 
Combined ratio95.9 %99.9 %4.0 pts
Combined ratio excluding catastrophes and development94.0 %95.7 %1.7 pts
Net accident year catastrophe losses incurred$5 $10 
Effect on loss & LAE ratio2.0 %4.3 %2.3 pts
Net prior year development and other: (favorable) / unfavorable$— $— 
Effect on loss & LAE ratio(0.1)%(0.1)%— pts
Rate14 %9 %5 pts
Renewal premium change11 %9 %2 pts
Retention74 %70 %4 pts
New business $80 $68 18 %
7



Life & Group - Results of Operations
Three months ended March 31
(In millions)20212020
Net earned premiums$120 $127 
Net investment income219 208 
Other revenues1 — 
Total operating revenues340 335 
Insurance claims and policyholders' benefits281 316 
Other insurance related expenses25 26 
Other expenses2 3 
Total claims, benefits and expenses308 345 
Core income (loss) before income tax32 (10)
Income tax (expense) benefit on core income (loss)4 14 
Core income (loss)$36 $4 

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Corporate & Other - Results of Operations
Three months ended March 31
(In millions)20212020
Net earned premiums$— $— 
Net investment income6 8 
Other revenues(1)(1)
Total operating revenues5 7 
Insurance claims and policyholders' benefits(2)(11)
Other insurance related expenses10 — 
Other expenses40 37 
Total claims, benefits and expenses48 26 
Core income (loss) before income tax(43)(19)
Income tax (expense) benefit on core income (loss)7 2 
Core income (loss)$(36)$(17)

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Investment Summary - Consolidated
March 31, 2021December 31, 2020
(In millions)Carrying ValueNet Unrealized Gains (Losses)Carrying ValueNet Unrealized Gains (Losses)
Fixed maturity securities:
Corporate and other bonds$23,690 $2,573 $24,352 $3,556 
States, municipalities and political subdivisions:
Tax-exempt8,2731,1618,4991,311
Taxable3,3273983,093552
Total states, municipalities and political subdivisions11,600 1,559 11,592 1,863 
Asset-backed:
RMBS3,283 68 3,587 145 
CMBS1,988 52 1,967 51 
Other ABS2,345 64 2,251 72 
Total asset-backed7,616 184 7,805 268 
U.S. Treasury and obligations of government-sponsored enterprises132 (6)338 (1)
Foreign government529 21 544 32 
Redeemable preferred stock12 — — — 
Total fixed maturity securities43,579 4,331 44,631 5,718 
Equities:
Common stock198 — 195 — 
Non-redeemable preferred stock786 — 797 — 
Total equities984 — 992 — 
Limited partnership investments1,654 — 1,619 — 
Other invested assets77 — 76 — 
Mortgage loans1,043 — 1,068 — 
Short term investments1,334 — 1,907 — 
Total investments$48,671 $4,331 $50,293 $5,718 
Net receivable/(payable) on investment activity$(81)$22 
Effective duration (in years)6.56.3
Weighted average rating AA
RMBS - Residential mortgage-backed securities
CMBS - Commercial mortgage-backed securities
Other ABS - Other asset-backed securities
10



Investment Summary - Property & Casualty and Corporate & Other
March 31, 2021December 31, 2020
(In millions)Carrying ValueNet Unrealized Gains (Losses)Carrying ValueNet Unrealized Gains (Losses)
Fixed maturity securities:
Corporate and other bonds$15,128 $913 $15,560 $1,348 
States, municipalities and political subdivisions:
Tax-exempt1,667851,711114
Taxable1,581501,286110
Total states, municipalities and political subdivisions3,248 135 2,997 224 
Asset-backed:
RMBS3,221 64 3,507 140 
CMBS1,908 48 1,879 46 
Other ABS2,149 51 2,056 52 
Total asset-backed7,278 163 7,442 238 
U.S. Treasury and obligations of government-sponsored enterprises113 (3)327 (1)
Foreign government515 19 529 29 
Redeemable preferred stock12 — — — 
Total fixed maturity securities26,294 1,227 26,855 1,838 
Equities:
Common stock198 — 195 — 
Non-redeemable preferred stock188 — 202 — 
Total equities386 — 397 — 
Limited partnership investments915 — 896 — 
Other invested assets77 — 76 — 
Mortgage loans795 — 782 — 
Short term investments1,280 — 1,772 — 
Total investments$29,747 $1,227 $30,778 $1,838 
Net receivable/(payable) on investment activity$(96)$10 
Effective duration (in years)4.94.5
Weighted average ratingA-A
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Investment Summary - Life & Group
March 31, 2021December 31, 2020
(In millions)Carrying ValueNet Unrealized Gains (Losses)Carrying ValueNet Unrealized Gains (Losses)
Fixed maturity securities:
Corporate and other bonds$8,562 $1,660 $8,792 $2,208 
States, municipalities and political subdivisions:
Tax-exempt6,6061,0766,7881,197
Taxable1,7463481,807442
Total states, municipalities and political subdivisions8,352 1,424 8,595 1,639 
Asset-backed:
RMBS62 4 80 5 
CMBS80 4 88 5 
Other ABS196 13 195 20 
Total asset-backed338 21 363 30 
U.S. Treasury and obligations of government-sponsored enterprises19 (3)11 — 
Foreign government14 2 15 3 
Redeemable preferred stock— — — — 
Total fixed maturity securities17,285 3,104 17,776 3,880 
Equities:
Common stock— — — — 
Non-redeemable preferred stock598 — 595 — 
Total equities598 — 595 — 
Limited partnership investments739 — 723 — 
Other invested assets— — — — 
Mortgage loans248 — 286 — 
Short term investments54 — 135 — 
Total investments$18,924 $3,104 $19,515 $3,880 
Net receivable/(payable) on investment activity$15 $12 
Effective duration (in years)9.19.2
Weighted average ratingAA
12



Investments - Fixed Maturity Securities by Credit Rating
March 31, 2021U.S. Government, Government agencies and Government-sponsored enterprisesAAAAAABBBNon-investment gradeTotal
(In millions)Fair ValueNet Unrealized Gains (Losses)Fair ValueNet Unrealized Gains (Losses)Fair ValueNet Unrealized Gains (Losses)Fair ValueNet Unrealized Gains (Losses)Fair ValueNet Unrealized Gains (Losses)Fair ValueNet Unrealized Gains (Losses)Fair ValueNet Unrealized Gains (Losses)
Corporate and other bonds$— $— $48 $— $478 $28 $5,109 $605 $15,866 $1,830 $2,189 $110 $23,690 $2,573 
States, municipalities and political subdivisions— — 3,009 364 5,539 727 2,675 417 363 50 14 1 11,600 1,559 
Asset-backed:
RMBS3,014 42 3 — 18 — 71 6 21 1 156 19 3,283 68 
CMBS3 — 307 16 790 35 271 5 469 (5)148 1 1,988 52 
Other ABS— — 74 1 128 2 1,169 19 945 42 29 — 2,345 64 
Total asset-backed3,017 42 384 17 936 37 1,511 30 1,435 38 333 20 7,616 184 
U.S. Treasury and obligations of government-sponsored enterprises132 (6)— — — — — — — — — — 132 (6)
Foreign government— — 148 4 268 10 85 5 28 2 — — 529 21 
Redeemable preferred stock— — — — — — — — — — 12 — 12 — 
Total fixed maturity securities$3,149 $36 $3,589 $385 $7,221 $802 $9,380 $1,057 $17,692 $1,920 $2,548 $131 $43,579 $4,331 
Percentage of total fixed maturity securities7 %8 %17 %21 %41 %6 %100 %
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Components of Net Investment Income
Three months ended March 31Consolidated
(In millions)20212020
Taxable fixed income securities$359 $371 
Tax-exempt fixed income securities80 78 
Total fixed income securities 439 449 
Limited partnership and common stock investments61 (125)
Other, net of investment expense4 5 
Net investment income$504 $329 
Effective income yield for fixed income securities portfolio4.4 %4.6 %
Limited partnership and common stock return3.4 (7.0)
Property & Casualty and Corporate & Other
Three months ended March 31
(In millions)20212020
Taxable fixed income securities$225 $234 
Tax-exempt fixed income securities12 5 
Total fixed income securities 237 239 
Limited partnership and common stock investments42 (125)
Other, net of investment expense6 7 
Net investment income$285 $121 
Effective income yield for fixed income securities portfolio3.8 %4.0 %
Three months ended March 31Life & Group
(In millions)20212020
Taxable fixed income securities$134 $137 
Tax-exempt fixed income securities68 73 
Total fixed income securities 202 210 
Limited partnership and common stock investments19 — 
Other, net of investment expense(2)(2)
Net investment income$219 $208 
Effective income yield for fixed income securities portfolio5.5 %5.6 %
14



Claim & Claim Adjustment Expense Reserve Rollforward
Three months ended March 31, 2021
(In millions)

Specialty
Commercial		InternationalP&C OperationsLife & Group Corporate & Other Total Operations
Claim & claim adjustment expense reserves, beginning of period
Gross$5,748 $8,250 $2,091 $16,089 $3,743 $2,874 $22,706 
Ceded850 775 269 1,894 128 1,983 4,005 
Net4,898 7,475 1,822 14,195 3,615 891 18,701 
Reduction of net reserves due to Excess Workers' Compensation Loss Portfolio Transfer— — — — — (632)(632)
Net incurred claim & claim adjustment expenses427 640 155 1,222 248 — 1,470 
Net claim & claim adjustment expense payments(329)(459)(114)(902)(244)(6)(1,152)
Foreign currency translation adjustment and other(1)1 (11)(11)(21)— (32)
Claim & claim adjustment expense reserves, end of period
Net4,995 7,657 1,852 14,504 3,598 253 18,355 
Ceded921 792 290 2,003 128 2,570 4,701 
Gross$5,916 $8,449 $2,142 $16,507 $3,726 $2,823 $23,056 
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Life & Group Policyholder Reserves
March 31, 2021
(In millions)Claim and claim adjustment expensesFuture policy benefitsTotal
Long term care$2,855 $9,795 12,650 
Structured settlement annuities537— 537 
Other9— 9 
Total 3,401 9,795 13,196 
Shadow adjustments1972,716 2,913 
Ceded reserves128261 389 
Total gross reserves$3,726 $12,772 16,498 
December 31, 2020
(In millions)Claim and claim adjustment expensesFuture policy benefitsTotal
Long term care$2,844 $9,762 $12,606 
Structured settlement annuities543— 543 
Other10— 10 
Total 3,397 9,762 13,159 
Shadow adjustments 2183,293 3,511 
Ceded reserves128263 391 
Total gross reserves$3,743 $13,318 17,061 
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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, asbestos and environmental pollution, excess workers' compensation and legacy mass tort. 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, 2020 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 net investment gains or losses and any cumulative effects of changes in accounting guidance. 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 reflective of our primary 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.
•Gross written premiums ex. 3rd party captives represents gross written premiums excluding business which is ceded to third party captives, including business related to large warranty programs.
•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

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