Form 8-K CNA FINANCIAL CORP For: Apr 29

April 29, 2019 9:06 AM

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

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

Date of Report (Date of earliest event reported) April 29, 2019

CNA FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)



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



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

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

NOT APPLICABLE

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

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

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

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

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

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

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

Emerging growth company [ ]

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

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On April 29, 2019, the registrant issued a press release and posted on its website (www.cna.com) a financial supplement providing information on its results of operations for the first quarter 2019. The press release is furnished as Exhibit 99.1 and the financial supplement is furnished as Exhibit 99.2 to this Form 8-K.

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

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits:

See Exhibit Index.

EXHIBIT INDEX



Exhibit No.		Description
99.1		CNA Financial Corporation press release, issued April 29, 2019, providing information on the first quarter 2019 results of operations.

99.2		CNA Financial Corporation financial supplement, posted on its website April 29, 2019, providing supplemental financial information on the first quarter 2019.

SIGNATURES

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



		CNA Financial Corporation
		(Registrant)

Date: April 29, 2019	By	/s/ James M. Anderson
		(Signature)
		James M. Anderson Executive Vice President and Chief Financial Officer

FOR IMMEDIATE RELEASE

CONTACT:



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

CNA FINANCIAL ANNOUNCES FIRST QUARTER 2019 RESULTS


•	NET INCOME OF $342M, $1.25 PER SHARE; ROE 12.1%


•	CORE INCOME OF $318M, $1.17 PER SHARE; ROE 10.7%


•	P&C COMBINED RATIO OF 97.8% VS 96.7% FULL YEAR 2018


•	P&C UNDERLYING COMBINED RATIO OF 94.9% VS 95.4% FULL YEAR 2018


•	P&C UNDERLYING LOSS RATIO OF 60.7% VS 61.8% FULL YEAR 2018


•	QUARTERLY DIVIDEND OF $0.35 PER SHARE

CHICAGO, April 29, 2019 --- CNA Financial Corporation (NYSE: CNA) today announced first quarter 2019 net income of $342 million, or $1.25 per share, and core income of $318 million, or $1.17 per share. Property & Casualty Operations combined ratio for the first quarter was 97.8% and the underlying combined ratio was 94.9%. Net investment income, after tax, was $465 million for the first quarter of 2019, including $96 million from limited partnership and common stock investments.

The U.S. P&C segments generated gross written premium growth, excluding third party captives, of 5% and net written premium growth of 2%. Gross written premium decreased (5)% and net written premium decreased (12)% for the International segment.

Core income (loss) for our Life & Group and Corporate & Other segments was $10 million and $(6) million, respectively.

CNA Financial declared a quarterly dividend of $0.35 per share, payable May 30, 2019 to stockholders of record on May 13, 2019.



	Results for the Three Months Ended March 31
($ millions, except per share data)	2019		2018
Net income	$	342	$	291
Core income^(a)	318		281

Net income per diluted share	$	1.25	$	1.07
Core income per diluted share	1.17		1.03



	March 31, 2019		December 31, 2018
Book value per share	$	42.19	$	41.32
Book value per share excluding AOCI	43.38		44.55


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

“CNA had a strong start to the year, generating core income of $1.17 per share," said Dino E. Robusto, Chairman & Chief Executive Officer of CNA Financial Corporation. “Our underlying combined ratio of 94.9% is lower than 2018’s full year 95.4%, our U.S. P&C segments generated good premium growth, premium rate increases improved on many major lines, investment income rebounded favorably, and long term care once again generated positive core income.”

Property & Casualty Operations



	Results for the Three Months Ended March 31
($ millions)	2019				2018
Net written premiums	$	1,806			$	1,813
NWP change (% year over year)	—			%
Net investment income	$	360			$	285
Core income	314				327

Loss ratio excluding catastrophes and development	60.7			%	60.0			%
Effect of catastrophe impacts	3.4				2.1
Effect of development-related items	(0.5		)		(2.2		)
Loss ratio	63.6			%	59.9			%

Expense ratio	33.8			%	32.8			%

Combined ratio	97.8			%	93.1			%
Combined ratio excluding catastrophes and development	94.9			%	93.2			%


•	The combined ratio excluding catastrophes and development increased 1.7 points compared with the prior year quarter driven by a 1.0 point increase in the expense ratio driven by an unusually low acquisition ratio in the first quarter of 2018 and a 0.7 point increase in the underlying loss ratio.

•

The combined ratio increased 4.7 points compared with the prior year quarter. Net catastrophe losses were $58 million, or 3.4 points of the loss ratio in the quarter compared with $34 million, or 2.1 points of the loss ratio, for the prior year quarter. Favorable net prior period development improved the loss ratio by 0.5 points in the quarter compared with a 2.2 point improvement in the prior year quarter.


•	Net written premiums were consistent with the prior year quarter with U.S. P&C segments net written premiums up 2% offset by the impact of the previously disclosed underwriting actions in the International segment.

Business Operating Highlights

Specialty



	Results for the Three Months Ended March 31
($ millions)	2019				2018
Net written premiums	$	698			$	686
NWP change (% year over year)	2			%
Core income	$	169			$	171

Loss ratio excluding catastrophes and development	60.5			%	60.3			%
Effect of catastrophe impacts	1.8				0.5
Effect of development-related items	(3.0		)		(4.5		)
Loss ratio	59.3			%	56.3			%

Expense ratio	32.8			%	31.0			%

Combined ratio	92.3			%	87.5			%
Combined ratio excluding catastrophes and development	93.5			%	91.5			%


•	The combined ratio excluding catastrophes and development increased 2.0 points compared with the prior year quarter driven by a 1.8 point increase in the expense ratio driven by an unusually low acquisition ratio in the first quarter of 2018 and lower earned premium.


•	The combined ratio increased 4.8 points compared with the prior year quarter. Net catastrophe losses were $12 million, or 1.8 points of the loss ratio, compared with $3 million, or 0.5 points of the loss ratio, for the prior year quarter. Favorable net prior period development improved the loss ratio by 3.0 points in the quarter compared with a 4.5 point improvement in the prior year quarter.


•	Net written premiums for Specialty grew 2% compared with the prior year quarter driven by strong retention, higher new business and positive renewal premium change.

Commercial



	Results for the Three Months Ended March 31
($ millions)	2019				2018
Net written premiums	$	849			$	832
NWP change (% year over year)	2			%
Core income	$	139			$	133

Loss ratio excluding catastrophes and development	62.1			%	59.8			%
Effect of catastrophe impacts	5.2				3.9
Effect of development-related items	(0.4		)		(0.7		)
Loss ratio	66.9			%	63.0			%

Expense ratio	33.8			%	33.5			%

Combined ratio	101.3			%	97.1			%
Combined ratio excluding catastrophes and development	96.5			%	93.9			%


•	The combined ratio excluding catastrophes and development increased 2.6 points compared with the prior year quarter reflecting a re-evaluation of the underlying loss ratio in 2018 subsequent to the first quarter, as well as higher claim handling expenses.


•	The combined ratio increased 4.2 points compared with the prior year quarter. Net catastrophe losses were $40 million, or 5.2 points of the loss ratio compared with $29 million, or 3.9 points of the loss ratio, for the prior year quarter. Favorable net prior period development improved the loss ratio by 0.4 points in the quarter compared with a 0.7 point improvement in the prior year quarter.


•	Net written premiums for Commercial grew 2% compared with the prior year quarter driven by positive renewal premium change partially offset by a higher level of ceded reinsurance.

International



	Results for the Three Months Ended March 31
($ millions)	2019				2018
Net written premiums	$	259			$	295
NWP change (% year over year)	(12		)	%
Core income	$	6			$	23

Loss ratio excluding catastrophes and development	57.0			%	59.9			%
Effect of catastrophe impacts	2.3				0.7
Effect of development-related items	5.5				(0.2		)
Loss ratio	64.8			%	60.4			%

Expense ratio	37.1			%	36.2			%

Combined ratio	101.9			%	96.6			%
Combined ratio excluding catastrophes and development	94.1			%	96.1			%


•	The combined ratio excluding catastrophes and development improved 2.0 points compared with the prior year quarter driven by a 2.9 point improvement in the underlying loss ratio. This was partially offset by a 0.9 point increase in the expense ratio driven by higher acquisition costs.

•

The combined ratio increased 5.3 points compared with the prior year quarter. Net catastrophe losses were $6 million, or 2.3 points of the loss ratio compared with $2 million, or 0.7 points for the prior year quarter. Unfavorable net prior period development, resulting from fourth quarter 2018 catastrophe events, increased the loss ratio by 5.5 points in the quarter compared with a 0.2 point improvement in the prior year quarter.


•	Excluding currency fluctuations, net written premiums for International decreased 8% driven by underwriting actions taken in the fourth quarter of 2018 to address profitability within our London-based operation and a higher level of ceded reinsurance.

Life & Group



	Results for the Three Months Ended March 31
($ millions)	2019		2018
Net investment income	$	204	$	200
Total operating revenues	335		335
Core income	10		14

Core income was $10 million as persistency continues to benefit from a high proportion of policyholders choosing to lapse coverage or reduce benefits in lieu of premium rate increases. Morbidity continues to trend in line with expectations.

Corporate & Other



	Results for the Three Months Ended March 31
($ millions)	2019			2018
Net investment income	$	7		$	5
Interest expense	34			34
Core loss	(6		)	(60		)

Core loss of $(6) million improved $54 million compared with the prior year quarter. Results in 2018 were negatively affected by a $32 million after-tax non-economic charge as a result of retroactive reinsurance accounting driven by additional cessions to the A&EP Loss Portfolio Transfer. The Company completed A&EP reserve reviews in both the first and fourth quarters of 2018 and intends to complete its annual review in the fourth quarter of 2019.

Net Investment Income



	Results for the Three Months Ended March 31
	2019		2018
Pretax net investment income	$	571	$	490
Net investment income, after tax	465		405

Net investment income, after tax, increased $60 million compared with the prior year quarter. The increase was driven by limited partnership and common stock investments, which returned 4.5%, or $96 million compared with 1.3%, or $31 million, in the prior year quarter.

About the Company

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

Conference Call and Webcast/Presentation Information

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

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

Definition of Reported Segments


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


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


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


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


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

Financial Measures

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


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


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


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


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


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


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


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


•	Rate represents the average change in price on policies that renew excluding exposure change. For certain products within Small Business, where quantifiable, rate includes the influence of new business as well.


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


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

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

Reconciliation of GAAP Measures to Non-GAAP Measures

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

Reconciliation of Net Income to Core Income

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.



	Results for the Three Months Ended March 31
($ millions)	2019		2018
Net income	$	342	$	291
Less: Net investment gains	24		10
Core income	$	318	$	281

Reconciliation of Net Income per Diluted Share to Core Income per Diluted Share

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



	Results for the Three Months Ended March 31
	2019		2018
Net income per diluted share	$	1.25	$	1.07
Less: Net investment gains	0.08		0.04
Core income per diluted share	$	1.17	$	1.03

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

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



	March 31, 2019			December 31, 2018
Book value per share	$	42.19		$	41.32
Less: Per share impact of AOCI	(1.19		)	(3.23		)
Book value per share excluding AOCI	$	43.38		$	44.55

Calculation of Return on Equity and Core Return on Equity

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



	Results for the Three Months Ended March 31
($ millions)	2019			2018
Annualized net income	$	1,366		$	1,166
Average stockholders' equity including AOCI ^(a)	11,336			11,835
Return on equity	12.1		%	9.8		%

Annualized core income	$	1,271		$	1,122
Average stockholders' equity excluding AOCI ^(a)	11,937			12,018
Core return on equity	10.7		%	9.3		%


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

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

Forward-Looking Statements

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

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

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

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

# # #

CNA Financial Corporation

Supplemental Financial Information

March 31, 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



	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



Three months ended March 31
(In millions)	2019			2018			Change
Revenues:
Net earned premiums	$	1,803		$	1,785		1		%
Net investment income	571			490			17
Net investment gains (losses):
Other-than-temporary impairment (OTTI) losses	(14		)	(6		)
Other net investment gains (losses)	45			18
Net investment gains (losses)	31			12
Non-insurance warranty revenue	281			238
Other revenues	9			10
Total revenues	2,695			2,535			6
Claims, Benefits and Expenses:
Insurance claims and policyholders' benefits	1,357			1,339
Amortization of deferred acquisition costs	342			296
Non-insurance warranty expense	260			216
Other operating expenses	283			303
Interest	34			35
Total claims, benefits and expenses	2,276			2,189			(4	)
Income (loss) before income tax	419			346
Income tax (expense) benefit	(77		)	(55		)
Net income (loss)	$	342		$	291		18		%

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



Three months ended March 31
(In millions, except per share data)	2019			2018
Components of Income (Loss)
Core income (loss)	$	318		$	281
Net investment gains (losses)	24			10
Net income (loss)	$	342		$	291

Diluted Earnings (Loss) Per Common Share
Core income (loss)	$	1.17		$	1.03
Net investment gains (losses)	0.08			0.04
Diluted earnings (loss) per share	$	1.25		$	1.07

Weighted Average Outstanding Common Stock and Common Stock Equivalents
Basic	271.6			271.4
Diluted	272.6			272.4

Return on Equity
Net income (loss) ⁽¹⁾	12.1		%	9.8		%
Core income (loss) ⁽²⁾	10.7			9.3

(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)	March 31, 2019			December 31, 2018
Total investments	$	45,639		$	44,486
Reinsurance receivables, net of allowance for uncollectible receivables	4,277			4,426
Total assets	58,477			57,152
Insurance reserves	37,336			36,764
Debt	2,681			2,680
Total liabilities	47,022			45,935
Accumulated other comprehensive income (loss) ⁽¹⁾	(324		)	(878		)
Total stockholders' equity	11,455			11,217

Book value per common share	$	42.19		$	41.32
Book value per common share excluding AOCI	$	43.38		$	44.55

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

Statutory capital and surplus - Combined Continental Casualty Companies ⁽²⁾	$	10,202		$	10,411



Three months ended March 31	2019			2018
Net cash flows provided (used) by operating activities	$	287		$	218
Net cash flows provided (used) by investing activities	289			489
Net cash flows provided (used) by financing activities	(665		)	(781		)
Net cash flows provided (used) by operating, investing and financing activities	$	(89	)	$	(74	)

(1) As of March 31, 2019 and December 31, 2018, the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $1,458 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 March 31, 2019 is preliminary.

Property & Casualty - Results of Operations



Three months ended March 31
(In millions)	2019				2018				Change
Gross written premiums	$	2,966			$	2,991			(1	)	%
Net written premiums	1,806				1,813				—

Net earned premiums	1,674				1,651				1
Net investment income	360				285
Non-insurance warranty revenue	281				238
Other revenues	8				9
Total operating revenues	2,323				2,183				6
Insurance claims and policyholders' benefits	1,070				995
Amortization of deferred acquisition costs	342				296
Other insurance related expenses	225				247
Non-insurance warranty expense	260				216
Other expenses	27				18
Total claims, benefits and expenses	1,924				1,772				(9	)
Core income (loss) before income tax	399				411
Income tax (expense) benefit on core income (loss)	(85		)		(84		)
Core income (loss)	$	314			$	327			(4	)	%

Other Performance Metrics
Underwriting gain (loss)	$	37			$	113			(67	)	%

Loss & LAE ratio	63.6			%	59.9			%	(3.7	)	pts
Acquisition expense ratio	20.1				19.4				(0.7	)
Underwriting expense ratio	13.7				13.4				(0.3	)
Expense ratio	33.8				32.8				(1.0	)
Dividend ratio	0.4				0.4				—
Combined ratio	97.8			%	93.1			%	(4.7	)	pts
Combined ratio excluding catastrophes and development	94.9			%	93.2			%	(1.7	)	pts

Net accident year catastrophe losses incurred	$	58			$	34
Effect on loss & LAE ratio	3.4			%	2.1			%	(1.3	)	pts

Net prior year development and other: (favorable) / unfavorable	$	(9	)		$	(36	)
Effect on loss & LAE ratio	(0.5		)	%	(2.2		)	%	(1.7	)	pts

Rate	3			%	2			%	1		pts
Renewal premium change	3			%	5			%	(2	)	pts
Retention	83			%	85			%	(2	)	pts
New business	$	330			$	355			(7	)	%

Specialty - Results of Operations



Three months ended March 31
(In millions)	2019				2018				Change
Gross written premiums	$	1,701			$	1,771			(4	)	%
Net written premiums	698				686				2

Net earned premiums	661				672				(2	)
Net investment income	155				122
Non-insurance warranty revenue	281				238
Other revenues	1				1
Total operating revenues	1,098				1,033				6
Insurance claims and policyholders' benefits	393				380
Amortization of deferred acquisition costs	147				145
Other insurance related expenses	70				64
Non-insurance warranty expense	260				216
Other expenses	12				11
Total claims, benefits and expenses	882				816				(8	)
Core income (loss) before income tax	216				217
Income tax (expense) benefit on core income (loss)	(47		)		(46		)
Core income (loss)	$	169			$	171			(1	)	%

Other Performance Metrics
Underwriting gain (loss)	$	51			$	83			(39	)	%

Loss & LAE ratio	59.3			%	56.3			%	(3.0	)	pts
Acquisition expense ratio	21.0				20.1				(0.9	)
Underwriting expense ratio	11.8				10.9				(0.9	)
Expense ratio	32.8				31.0				(1.8	)
Dividend ratio	0.2		%		0.2				—
Combined ratio	92.3			%	87.5			%	(4.8	)	pts
Combined ratio excluding catastrophes and development	93.5			%	91.5			%	(2.0	)	pts

Net accident year catastrophe losses incurred	$	12			$	3
Effect on loss & LAE ratio	1.8			%	0.5			%	(1.3	)	pts

Net prior year development and other: (favorable) / unfavorable	$	(20	)		$	(30	)
Effect on loss & LAE ratio	(3.0		)	%	(4.5		)	%	(1.5	)	pts

Rate	3			%	2			%	1		pts
Renewal premium change	4			%	4			%	—		pts
Retention	89			%	85			%	4		pts
New business	$	86			$	80			8		%

Commercial - Results of Operations



Three months ended March 31
(In millions)	2019				2018				Change
Gross written premiums	$	941			$	880			7		%
Net written premiums	849				832				2

Net earned premiums	763				743				3
Net investment income	190				149
Other revenues	7				8
Total operating revenues	960				900				7
Insurance claims and policyholders' benefits	515				473
Amortization of deferred acquisition costs	127				121
Other insurance related expenses	130				127
Other expenses	11				11
Total claims, benefits and expenses	783				732				(7	)
Core income (loss) before income tax	177				168
Income tax (expense) benefit on core income (loss)	(38		)		(35		)
Core income (loss)	$	139			$	133			5		%

Other Performance Metrics
Underwriting gain (loss)	$	(9	)		$	22			(141	)	%

Loss & LAE ratio	66.9			%	63.0			%	(3.9	)	pts
Acquisition expense ratio	18.1				18.0				(0.1	)
Underwriting expense ratio	15.7				15.5				(0.2	)
Expense ratio	33.8				33.5				(0.3	)
Dividend ratio	0.6				0.6				—
Combined ratio	101.3			%	97.1			%	(4.2	)	pts
Combined ratio excluding catastrophes and development	96.5			%	93.9			%	(2.6	)	pts

Net accident year catastrophe losses incurred	$	40			$	29
Effect on loss & LAE ratio	5.2			%	3.9			%	(1.3	)	pts

Net prior year development and other: (favorable) / unfavorable	$	(3	)		$	(6	)
Effect on loss & LAE ratio	(0.4		)	%	(0.7		)	%	(0.3	)	pts

Rate	2			%	1			%	1		pts
Renewal premium change	3			%	5			%	(2	)	pts
Retention	85			%	85			%	—		pts
New business	$	164			$	182			(10	)	%

International - Results of Operations



Three months ended March 31
(In millions)	2019				2018				Change
Gross written premiums	$	324			$	340			(5	)	%
Net written premiums	259				295				(12	)

Net earned premiums	250				236				6
Net investment income	15				14
Other revenues	—				—
Total operating revenues	265				250				6
Insurance claims and policyholders' benefits	162				142
Amortization of deferred acquisition costs	68				30
Other insurance related expenses	25				56
Other expenses	4				(4		)
Total claims, benefits and expenses	259				224				(16	)
Core income (loss) before income tax	6				26
Income tax (expense) benefit on core income (loss)	—				(3		)
Core income (loss)	$	6			$	23			(74	)	%

Other Performance Metrics
Underwriting gain (loss)	$	(5	)		$	8			(163	)	%

Loss & LAE ratio	64.8			%	60.4			%	(4.4	)	pts
Acquisition expense ratio	24.1				22.0				(2.1	)
Underwriting expense ratio	13.0				14.2				1.2
Expense ratio	37.1				36.2				(0.9	)
Dividend ratio	—				—				—
Combined ratio	101.9			%	96.6			%	(5.3	)	pts
Combined ratio excluding catastrophes and development	94.1			%	96.1			%	2.0		pts

Net accident year catastrophe losses incurred	$	6			$	2
Effect on loss & LAE ratio	2.3			%	0.7			%	(1.6	)	pts

Net prior year development and other: (favorable) / unfavorable	$	14			$	—
Effect on loss & LAE ratio	5.5			%	(0.2		)	%	(5.7	)	pts

Rate	5			%	3			%	2		pts
Renewal premium change	1			%	8			%	(7	)	pts
Retention	71			%	83			%	(12	)	pts
New business	$	80			$	93			(14	)	%

Life & Group - Results of Operations



Three months ended March 31
(In millions)	2019			2018		Change
Net earned premiums	$	130		$	134	(3	)	%
Net investment income	204			200
Other revenues	1			1
Total operating revenues	335			335		—
Insurance claims and policyholders' benefits	308			303
Other insurance related expenses	28			30
Other expenses	2			2
Total claims, benefits and expenses	338			335		(1	)
Core income (loss) before income tax	(3		)	—
Income tax (expense) benefit on core income (loss)	13			14
Core income (loss)	$	10		$	14	(29	)	%

Corporate & Other - Results of Operations



Three months ended March 31
(In millions)	2019			2018			Change
Net earned premiums	$	(1	)	$	—
Net investment income	7			5
Other revenues	—			—
Total operating revenues	6			5			20	%
Insurance claims and policyholders' benefits	(21		)	41
Other insurance related expenses	(2		)	—
Other expenses	37			41
Total claims, benefits and expenses	14			82			83
Core income (loss) before income tax	(8		)	(77		)
Income tax (expense) benefit on core income (loss)	2			17
Core income (loss)	$	(6	)	$	(60	)	90	%

Investment Summary - Consolidated



	March 31, 2019					December 31, 2018
(In millions)	Carrying Value			Net Unrealized Gains (Losses)		Carrying Value		Net Unrealized Gains (Losses)
Fixed maturity securities:
Corporate and other bonds	$	20,476		$	1,170	$	19,164	$	396
States, municipalities and political subdivisions:
Tax-exempt	7,671			924		7,874		733
Taxable	2,925			375		2,874		334
Total states, municipalities and political subdivisions	10,596			1,299		10,748		1,067
Asset-backed:
RMBS	4,832			72		4,826		11
CMBS	2,072			46		2,196		(4		)
Other ABS	1,890			13		1,962		(13		)
Total asset-backed	8,794			131		8,984		(6		)
U.S. Treasury and obligations of government-sponsored enterprises	164			2		159		3
Foreign government	513			11		481		1
Redeemable preferred stock	10			—		10		—
Total fixed maturity securities	40,553			2,613		39,546		1,461
Equities:
Common stock	140			—		148		—
Non-redeemable preferred stock	674			—		632		—
Total equities	814			—		780		—
Limited partnership investments	1,876			—		1,982		—
Other invested assets	59			—		53		—
Mortgage loans	863			—		839		—
Short term investments	1,474			—		1,286		(1		)
Total investments	$	45,639		$	2,613	$	44,486	$	1,460

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

Effective duration (in years)	6.0					6.0
Weighted average rating	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



	March 31, 2019					December 31, 2018
(In millions)	Carrying Value			Net Unrealized Gains (Losses)		Carrying Value		Net Unrealized Gains (Losses)
Fixed maturity securities:
Corporate and other bonds	$	13,382		$	250	$	12,844	$	(180	)
States, municipalities and political subdivisions:
Tax-exempt	516			28		661		25
Taxable	1,212			75		1,198		68
Total states, municipalities and political subdivisions	1,728			103		1,859		93
Asset-backed:
RMBS	4,675			68		4,671		8
CMBS	1,968			44		2,093		(4		)
Other ABS	1,782			8		1,840		(11		)
Total asset-backed	8,425			120		8,604		(7		)
U.S. Treasury and obligations of government-sponsored enterprises	137			1		133		3
Foreign government	508			11		481		1
Redeemable preferred stock	5			—		5		—
Total fixed maturity securities	24,185			485		23,926		(90		)
Equities:
Common stock	140			—		148		—
Non-redeemable preferred stock	175			—		164		—
Total equities	315			—		312		—
Limited partnership investments	1,876			—		1,982		—
Other invested assets	59			—		53		—
Mortgage loans	623			—		631		—
Short term investments	1,368			—		1,232		(1		)
Total investments	$	28,426		$	485	$	28,136	$	(91	)

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

Effective duration (in years)	4.2					4.4
Weighted average rating	A-					A-

Investment Summary - Life & Group



	March 31, 2019					December 31, 2018
(In millions)	Carrying Value			Net Unrealized Gains (Losses)		Carrying Value		Net Unrealized Gains (Losses)
Fixed maturity securities:
Corporate and other bonds	$	7,094		$	920	$	6,320	$	576
States, municipalities and political subdivisions:
Tax-exempt	7,155			896		7,213		708
Taxable	1,713			300		1,676		266
Total states, municipalities and political subdivisions	8,868			1,196		8,889		974
Asset-backed:
RMBS	157			4		155		3
CMBS	104			2		103		—
Other ABS	108			5		122		(2		)
Total asset-backed	369			11		380		1
U.S. Treasury and obligations of government-sponsored enterprises	27			1		26		—
Foreign government	5			—		—		—
Redeemable preferred stock	5			—		5		—
Total fixed maturity securities	16,368			2,128		15,620		1,551
Equities:
Common stock	—			—		—		—
Non-redeemable preferred stock	499			—		468		—
Total equities	499			—		468		—
Limited partnership investments	—			—		—		—
Other invested assets	—			—		—		—
Mortgage loans	240			—		208		—
Short term investments	106			—		54		—
Total investments	$	17,213		$	2,128	$	16,350	$	1,551

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

Effective duration (in years)	8.7					8.4
Weighted average rating	A					A

Investments - Fixed Maturity Securities by Credit Rating



March 31, 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	$	—		$	—	$	50		$	—	$	532		$	30		$	4,393		$	388		$	13,352		$	758	$	2,149		$	(6	)	$	20,476		$	1,170
States, municipalities and political subdivisions:
Tax-exempt	—			—		1,785			248		3,095			368			2,458			248			317			59		16			1			7,671			924
Taxable	—			—		399			30		1,832			218			673			126			21			1		—			—			2,925			375
Total states, municipalities and political subdivisions	—			—		2,184			278		4,927			586			3,131			374			338			60		16			1			10,596			1,299
Asset-backed:
RMBS	4,173			30		185			1		14			—			63			—			20			—		377			41			4,832			72
CMBS	41			—		345			13		643			21			204			4			514			5		325			3			2,072			46
Other ABS	—			—		48			—		145			(1		)	1,041			(3		)	639			12		17			5			1,890			13
Total asset-backed	4,214			30		578			14		802			20			1,308			1			1,173			17		719			49			8,794			131
U.S. Treasury and obligations of government-sponsored enterprises	164			2		—			—		—			—			—			—			—			—		—			—			164			2
Foreign government	—			—		161			3		277			5			56			2			19			1		—			—			513			11
Redeemable preferred stock	—			—		—			—		—			—			—			—			10			—		—			—			10			—
Total fixed maturity securities	$	4,378		$	32	$	2,973		$	295	$	6,538		$	641		$	8,888		$	765		$	14,892		$	836	$	2,884		$	44		$	40,553		$	2,613

Percentage of total fixed maturity securities	11		%			7		%			16		%				22		%				37		%			7		%				100		%

Components of Net Investment Income



Three months ended March 31	Consolidated
(In millions)	2019			2018
Taxable fixed income securities	$	383		$	350
Tax-exempt fixed income securities	82			105
Total fixed income securities	465			455
Limited partnership and common stock investments	96			31
Other, net of investment expense	10			4
Pretax net investment income	$	571		$	490
Fixed income securities, after tax	$	380		$	377
Net investment income, after tax	465			405

Effective income yield for fixed income securities, pretax	4.8		%	4.7		%
Effective income yield for fixed income securities, after tax	3.9			3.9
Limited partnership and common stock return	4.5			1.3



	Property & Casualty and Corporate & Other
Three months ended March 31	Property & Casualty and Corporate & Other
(In millions)	2019			2018
Taxable fixed income securities	$	253		$	233
Tax-exempt fixed income securities	6			20
Total fixed income securities	259			253
Limited partnership and common stock investments	96			31
Other, net of investment expense	12			6
Pretax net investment income	$	367		$	290
Fixed income securities, after tax	$	205		$	203
Net investment income, after tax	291			233

Effective income yield for fixed income securities, pretax	4.3		%	4.1		%
Effective income yield for fixed income securities, after tax	3.4			3.3



Three months ended March 31	Life & Group
(In millions)	2019				2018
Taxable fixed income securities	$	130			$	117
Tax-exempt fixed income securities	76				85
Total fixed income securities	206				202
Limited partnership and common stock investments	—				—
Other, net of investment expense	(2		)		(2		)
Pretax net investment income	$	204			$	200
Fixed income securities, after tax	$	175			$	174
Net investment income, after tax	174				172

Effective income yield for fixed income securities, pretax	5.6			%	5.7			%
Effective income yield for fixed income securities, after tax	4.8				4.9

Claim & Claim Adjustment Expense Reserve Rollforward



Three months ended March 31, 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	392			509			162			1,063			302			2			1,367
Net claim & claim adjustment expense payments	(413		)	(594		)	(138		)	(1,145		)	(258		)	(6		)	(1,409		)
Foreign currency translation adjustment and other	1			—			9			10			3			—			13

Claim & claim adjustment expense reserves, end of period
Net	4,811			7,913			1,557			14,281			3,467			188			17,936
Ceded	659			710			230			1,599			178			2,123			3,900
Gross	$	5,470		$	8,623		$	1,787		$	15,880		$	3,645		$	2,311		$	21,836

Life & Group Policyholder Reserves



March 31, 2019
(In millions)	Claim and claim adjustment expenses		Future policy benefits		Total
Long term care	$	2,792	$	9,138	$	11,930
Structured settlement annuities	527		—		527
Other	12		—		12
Total	3,331		9,138		12,469
Shadow adjustments	136		1,710		1,846
Ceded reserves	178		230		408
Total gross reserves	$	3,645	$	11,078	$	14,723



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

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.

•


•	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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Form 8-K CNA FINANCIAL CORP For: Apr 29

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