EXHIBIT 99

                            CNA FINANCIAL CORPORATION
                                AND SUBSIDIARIES

                     Consolidated Financial Statements as of
                 December 31, 1999 and 1998 and for Each of the
                Three Years in the Period Ended December 31, 1999

CNA FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
BALANCE SHEETS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------

                                                                              December 31,  December 31,
(In millions of dollars, except share data)                                      1999          1998
----------------------------------------------------------------------------------------------------------
<S>                                                                             <C>          <C>
ASSETS
  Investments:
    Fixed maturity securities available-for-sale (amortized cost: $27,948 and
    $29,511)....................................................................$27,248      $30,073
    Equity securities available-for-sale (cost: $1,150 and $1,055)..............  3,610        1,970
    Mortgage loans and real estate (less accumulated depreciation: $1 and $1)...     47           62
    Policy loans................................................................    192          177
    Other invested assets.......................................................  1,108          858
    Short-term investments .....................................................  3,355        4,037
                                                                                --------     --------
      TOTAL INVESTMENTS......................................................... 35,560       37,177
  Cash..........................................................................    153          217
  Receivables:
    Reinsurance.................................................................  8,023        6,894
    Insurance ..................................................................  4,483        5,198
    Less allowance for doubtful accounts........................................   (310)        (328)
  Deferred acquisition costs....................................................  2,436        2,422
  Prepaid reinsurance premiums..................................................  1,468          323
  Accrued investment income.....................................................    387          392
  Receivables for securities sold...............................................    284          255
  Federal income taxes recoverable (includes: $241 and $234 due from Loews).....    269          251
  Deferred income taxes.........................................................    852          995
  Property and equipment at cost (less accumulated depreciation: $701 and $695).    746          824
  Intangibles...................................................................    328          368
  Other.........................................................................  1,937        2,241
  Separate account business.....................................................  4,603        5,203
-----------------------------------------------------------------------------------------------------
      TOTAL ASSETS                                                              $61,219      $62,432
=====================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Insurance reserves:
     Claim and claim adjustment expense ........................................$27,356      $29,154
     Unearned premiums..........................................................  5,103        5,039
     Future policy benefits.....................................................  5,996        5,352
     Policyholders' funds.......................................................    710          855
  Collateral on loaned securities...............................................  1,300          130
  Payables for securities purchased.............................................    135          316
  Participating policyholders' equity...........................................    121          140
  Debt..........................................................................  2,881        3,160
  Other.........................................................................  3,881        3,722
  Separate account business.....................................................  4,603        5,203
                                                                                --------     --------
      TOTAL LIABILITIES......................................................... 52,086       53,071
                                                                                --------     --------
Commitments and contingencies

Minority interest...............................................................    195          204

Stockholders' equity:
  Common stock ($2.50 par value;
    Authorized as of December 31, 1999 - 500,000,000 shares;
    Authorized as of December 31, 1998 - 200,000,000 shares;
    Issued - 185,525,907 shares;
    Outstanding as of December 31, 1999 - 184,406,931 shares,
    Outstanding as of December 31, 1998 - 183,889,569 shares)...................    464          464
  Preferred stock...............................................................    150          350
  Additional paid-in capital....................................................    126          126
  Retained earnings.............................................................  7,114        7,258
  Accumulated other comprehensive income........................................  1,188        1,064
  Treasury stock, at cost.......................................................    (41)         (61)
                                                                                ---------    --------
                                                                                  9,001        9,201
  Notes receivable for the issue of stock.......................................    (63)         (44)
                                                                                ---------    --------
      TOTAL STOCKHOLDERS' EQUITY................................................  8,938        9,157
-----------------------------------------------------------------------------------------------------
      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                $61,219      $62,432
=====================================================================================================
 See accompanying Notes to Consolidated Financial Statements.
</TABLE>


CNA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
(In millions of dollars, except per share data)                              1999       1998      1997
----------------------------------------------------------------------------------------------------------
<S>                                                                          <C>        <C>       <C>
Revenues:
 Premiums....................................................................$13,282    $13,536   $13,624
 Net investment income.......................................................  2,101      2,146     2,209
 Realized investment gains, net of participating
 policyholders' and minority interests.......................................    315        681       738
 Other  .....................................................................    705        799       628
                                                                             --------   --------  --------
  Total revenues                                                              16,403     17,162    17,199
                                                                             --------   --------  --------
Claims, benefits and expenses:
  Insurance claims and policyholders' benefits............................... 11,900     11,847    11,395
  Amortization of deferred acquisition costs.................................  2,143      2,180     2,138
  Other operating expenses...................................................  2,086      2,321     2,100
  Restructuring and other related charges ...................................     83        246        -
  Interest...................................................................    202        219       198
                                                                             --------   --------  --------
  Total claims, benefits and expenses                                         16,414     16,813    15,831
                                                                             --------   --------  --------
  Income (loss) before income tax and cumulative
  effect of a change in accounting principle.................................    (11)       349     1,368
Income tax benefit (expense).................................................     88        (47)     (392)
Minority interest expense....................................................    (30)       (20)      (10)
                                                                             --------   --------  --------
Income before cumulative effect of a change in accounting principle..........     47        282       966
Cumulative effect of a change in accounting principle, net of tax of $95.....   (177)         -         -
                                                                             --------   --------  --------
     NET INCOME (LOSS).......................................................$  (130)   $   282   $   966
==========================================================================================================
BASIC AND DILUTED EARNINGS PER SHARE
Net income before cumulative effect of a change in accounting principle......$  0.19    $  1.49   $  5.17
Cumulative effect of a change in accounting principle, net of tax............  (0.96)         -         -
                                                                             --------   --------  --------
Income (loss)................................................................$ (0.77)   $  1.49   $  5.17
                                                                             ========   ========  ========
Weighted average outstanding common shares and
   common stock equivalents (in millions of shares)...  .....................  184.2      184.9     185.4
==========================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.

<PAGE>
CNA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                                                             Notes
                                                                  Accumulated              Receivable
                                             Additional              Other                    for         Total
                          Common  Preferred   Paid-in   Retained  Comprehensive  Treasury   the Issue  Stockholders'
(In millions of dollars)  Stock   Stock      Capital    Earnings    Income         Stock     of Stock     Equity
--------------------------------------------------------------------------------------------------------------------
<S>                         <C>     <C>      <C>        <C>          <C>            <C>       <C>         <C>
BALANCE, JANUARY 1, 1997    $464    $150     $126       $6,024       $299           $(3)      $-          $7,060
Comprehensive income:
  Net income............       -       -        -       $  966          -             -        -             966
  Other comprehensive
    income..............       -       -        -            -        290             -        -             290
                                                                                                          -------
     Total comprehensive
      income............                                                                                   1,256

Preferred dividends.....       -       -        -           (7)         -             -        -              (7)
--------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997   464     150      126        6,983        589            (3)       -           8,309
Comprehensive income:
  Net income............       -       -        -          282          -             -        -             282
  Other comprehensive
    income..............       -       -        -            -        475             -        -             475
                                                                                                          -------
     Total comprehensive
      loss..............                                                                                     757

Issuance of preferred stock    -     200        -            -          -             -        -             200
Purchase of treasury stock     -       -        -            -          -          (102)       -            (102)
Issue of stock for notes
     receivable.........       -       -        -            -          -            44      (44)              -
Preferred dividends.....       -       -        -           (7)         -             -        -              (7)
--------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998   464     350      126        7,258      1,064           (61)     (44)          9,157
Comprehensive income:
  Net loss..............       -       -        -         (130)         -             -        -            (130)
  Other comprehensive
    income..............       -       -        -            -        124             -        -             124
                                                                                                          --------
     Total comprehensive
      loss..............                                                                                      (6)

Redemption of preferred
  stock.................      -     (200)       -            -          -             -        -            (200)
Issue of stock for
notes receivable........      -        -        -           (1)         -            20      (19)              -
Preferred dividends.....      -        -        -          (13)         -             -        -             (13)
--------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999 $464     $150     $126       $7,114     $1,188          $(41)    $(63)         $8,938
====================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.


CNA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
---------------------------------------------------------------------------
Year Ended December 31
(In millions of dollars)                      1999        1998       1997
---------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
-------------------------------------
Net income (loss)........................  $   (130)   $   282    $    966
                                           --------------------------------
Adjustments  to  reconcile  net  income
  (loss) to  net  cash  flows  from
  operating activities:
  Minority interest .....................        30         20          10
  Deferred income tax provision..........        43         47         144
  Net realized investment gains..........      (315)      (681)       (738)
  Amortization of intangibles............        23         93          30
  Amortization of bond discount..........       (39)      (208)       (100)
  Depreciation...........................       185        166         158
  Changes in:
    Receivables, net.....................      (472)       718         147
    Deferred acquisition costs...........         1       (280)       (288)
    Accrued investment income............         6         (3)        119
    Federal income taxes recoverable.....       (17)      (233)        116
    Prepaid reinsurance premiums.........    (1,145)      (121)         93
    Insurance reserves...................    (1,190)       586        (133)
    Other................................       376        101        (717)
---------------------------------------------------------------------------
      Total adjustments ..................   (2,514)    (1,231)     (1,159)
---------------------------------------------------------------------------
   NET CASH FLOWS FROM
        OPERATING ACTIVITIES .............   (2,644)      (949)   $   (193)
---------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
-------------------------------------
Purchases of fixed maturity securities...  $(45,515)  $(39,039)   $(42,492)
Proceeds from fixed maturity securities:
   Sales.................................    43,587     35,480      38,429
   Maturities, calls and redemptions.....     2,996      3,564       2,997
Purchases of equity securities...........    (1,575)    (1,071)     (1,323)
Proceeds from sale of equity securities..     1,803        848       1,406
Change in short-term investments.........       703        823       1,112
Change in collateral on loaned
securities...............................     1,170        (23)         53
Change in other investments..............       151         62         421
Purchases of property and equipment,
  net....................................      (250)      (261)       (280)
Acquisitions, net of cash acquired.......       (19)      (120)       (104)
Other, net...............................        86        180          (7)
---------------------------------------------------------------------------

   NET CASH FLOWS FROM INVESTING ACTIVITIES   3,137        443        (212)
---------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
-------------------------------------
Dividends paid to preferred stockholders..   $  (13)    $   (7)   $      6
Purchase of treasury stock................        -       (102)          -
Receipts from investment
   contracts credited to policyholder
   account balances.......................        7          6           7
Return of policyholder account
  balances on investment contracts..........    (78)       (20)        (26)
Principal payments on long-term debt........   (450)      (730)         (5)
Proceeds from issuance of long-term debt....    177        993         137
Issuance (redemption) of preferred stock....   (200)       200           -
Net cash flows from financing activities....   (557)       340         107
Net change in cash..........................    (64)      (166)        126
---------------------------------------------------------------------------
   CASH AT BEGINNING OF PERIOD..............    217        383         257
---------------------------------------------------------------------------
   CASH AT END OF PERIOD                     $  153     $  217    $    383
===========================================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
--------------------------------------------------
Cash paid:
  Interest expense......................... $   201     $  210    $    201
  Federal income taxes.....................     279        143          95
Non-cash transactions:
  Notes receivable for the issue of stock..      19         44           -
  Exchange of Canary Wharf Limited
    Partnership interest into common stock.     539          -           -
===========================================================================
See accompanying Notes to Consolidated Financial Statements.

CNA FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
----------------------------------------------------


BASIS OF PRESENTATION

The consolidated  financial statements include CNA Financial Corporation and its
subsidiaries,  which include property/casualty  insurance companies (principally
Continental  Casualty  Company and The Continental  Insurance  Company) and life
insurance companies (principally  Continental Assurance Company and Valley Forge
Life Insurance  Company),  collectively  CNA or the Company.  Loews Corporation
(Loews) owns approximately 86% of the outstanding common stock of the Company.

The  accompanying  consolidated  financial  statements  have  been  prepared  in
conformity with generally accepted accounting principles (GAAP). Certain amounts
applicable  to prior  years  have been  reclassified  to  conform  with the 1999
presentation. All material intercompany amounts have been eliminated.

The  preparation of  consolidated  financial  statements in conformity with GAAP
requires  management to make estimates and assumptions  that affect the reported
amounts  of assets and  liabilities  and  disclosure  of  contingent  assets and
liabilities  at the  date  of the  consolidated  financial  statements  and  the
reported  amounts of revenues and expenses during the reporting  period.  Actual
results could differ from those estimates.


BUSINESS

CNA serves a wide  spectrum  of  customers,  including  small,  medium and large
businesses; associations; professionals; and groups and individuals with a broad
range of insurance and risk management products and services.

Insurance products include property and casualty  coverages;  life, accident and
health insurance;  and pension products and annuities. CNA services include risk
management,  information services, healthcare management, claims administration
and employee leasing/payroll  processing. CNA products and services are marketed
through agents, brokers, managing general agents and direct sales.


INSURANCE

PREMIUM REVENUES

Insurance  premiums  on  property/casualty  and  accident  and health  insurance
contracts are earned ratably over the terms of the policies after  provision for
estimated adjustments on retrospectively rated policies and deductions for ceded
insurance.  Revenues on universal  life-type contracts are comprised of contract
charges and fees,  which are  recognized  over the coverage  period.  Other life
insurance  premiums  and  annuities  are  recognized  as revenue  when due after
deductions for ceded insurance premiums.

CLAIM AND CLAIM ADJUSTMENT EXPENSE RESERVES

Claim and claim  adjustment  expense  reserves,  except  reserves for structured
settlements,  workers'  compensation  lifetime  claims and  accident  and health
disability  claims, are not discounted and are based on (a) case basis estimates
for losses reported on direct  business,  adjusted in the aggregate for ultimate
loss  expectations,  (b) estimates of unreported losses, (c) estimates of losses
on assumed  insurance,  (d)  estimates  of future  expenses  to be  incurred  in
settlement  of  claims  and (e)  estimates  of claim  recoveries,  exclusive  of
reinsurance  recoveries  which are  reported as an asset.  Management  considers
current conditions and trends as well as past Company and industry experience in
establishing   these  estimates.   The  effects  of  inflation,   which  can  be
significant,  are implicitly considered in the reserving process and are part of
the recorded reserve balance.

Claim and claim adjustment expense reserves represent  management's estimates of
ultimate  liabilities  based on currently  available  facts and case law and the
ultimate  liability may vary  significantly  from such estimates.  CNA regularly
reviews its reserves, and any adjustments to the previously established reserves
are recognized in operating  income in the period the need for such  adjustments
becomes apparent.

Structured   settlements   have  been   negotiated   for   claims   on   certain
property/casualty  insurance policies.  Structured settlements are agreements to
provide fixed periodic payments to claimants. Certain structured settlements are
funded by annuities  purchased from Continental  Assurance Company for which the
related annuity  obligations  are reported in future policy  benefits  reserves.
Obligations  for structured  settlements not funded by annuities are included in
claim and claim  adjustment  expense  reserves  and  carried at  present  values
determined  using interest rates ranging from 6.0% to 7.5%. At December 31, 1999
and 1998 the discounted reserves for unfunded  structured  settlements were $883
million and $893 million,  respectively  (net of discounts of $1,483 million and
$1,511 million, respectively).

Workers' compensation lifetime claim reserves and accident and health disability
claim reserves are calculated using mortality and morbidity assumptions based on
the  Company's and industry  experience,  and are  discounted at interest  rates
allowed by insurance  regulators  that range from 3.5% to 6.0%.  At December 31,
1999 and 1998,  such  discounted  reserves  totaled  $2,174  million  and $2,277
million,  respectively  (net of  discounts  of $893  million  and $869  million,
respectively).

FUTURE POLICY BENEFITS RESERVES

Reserves for traditional life insurance  products (whole and term life products)
are computed using the net level premium method,  which  incorporates  actuarial
assumptions  as  to  interest  rates,  mortality,  morbidity,   withdrawals  and
expenses.  Actuarial assumptions generally vary by plan, age at issue and policy
duration, and include a margin for adverse deviation.  Interest rates range from
3% to 9% and mortality,  morbidity and withdrawal  assumptions  are based on CNA
and industry  experience  prevailing at the time of issue.  Expense  assumptions
include the estimated  effects of inflation  and expenses to be incurred  beyond
the premium paying period.  Reserves for universal life-type contracts are equal
to the  account  balances  that  accrue  to the  benefit  of the  policyholders.
Interest  crediting  rates  ranged from 4.45% to 7.25% for the three years ended
December 31, 1999.

INVOLUNTARY RISKS

CNA's  participation  in  involuntary  risk pools is mandatory  and  generally a
function  of its  proportionate  share  of the  voluntary  market,  by  line  of
insurance,  in each  state in which it does  business.  In the first  quarter of
1999, CNA adopted  Statement of Position 97-3 "Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments"(SOP 97-3). SOP 97-3 requires that
insurance companies recognize liabilities for insurance-related assessments when
an  assessment  is  probable  and  will be  imposed,  when it can be  reasonably
estimated,  and when the  event  obligating  the  entity  to pay an  imposed  or
probable  assessment  has  occurred  on or  before  the  date  of the  financial
statements. Adoption of SOP 97-3 resulted in an after-tax charge of $177 million
as a cumulative effect of a change in accounting principle. The pro forma effect
of adoption on reported results for prior periods is not significant.

REINSURANCE

Amounts  recoverable  from reinsurers are estimated in a manner  consistent with
claim and claim adjustment  expense reserves or future policy benefits  reserves
and reported as a recoverable in the consolidated balance sheets.

DEFERRED ACQUISITION COSTS

Costs of acquiring  property/casualty  insurance business that vary with and are
primarily  related to the production of such business are deferred and amortized
ratably over the period the related premiums are recognized.  Such costs include
commissions,  premium taxes and certain  underwriting and policy issuance costs.
Anticipated  investment  income  is  considered  in  the  determination  of  the
recoverability of deferred acquisition costs.

Life  acquisition  costs are  capitalized  and  amortized  based on  assumptions
consistent  with those  used for  computing  future  policy  benefits  reserves.
Acquisition  costs on  traditional  life business are amortized over the assumed
premium  paying  periods.  Universal  life and  annuity  acquisition  costs  are
amortized in proportion to the present value of estimated gross profits over the
products'  assumed  duration.  To the extent that unrealized  gains or losses on
available-for-sale  securities  would result in an adjustment of deferred policy
acquisition  costs,  had  those  gains or  losses  actually  been  realized,  an
adjustment  to  deferred  acquisition  costs is  recorded  as an  adjustment  to
unrealized  investment  gains or losses which are included in accumulated  other
comprehensive income and reported as a component of stockholders' equity.


INVESTMENTS

VALUATION OF INVESTMENTS

CNA  classifies its fixed maturity  securities  (bonds and redeemable  preferred
stocks) and its equity securities as  available-for-sale,  and as such, they are
carried at fair  value.  The  amortized  cost of fixed  maturity  securities  is
adjusted for  amortization  of premiums and  accretion of discounts to maturity,
and  amortization  and accretion are included in investment  income.  Changes in
fair  value  are  reported  as  a  component  of  other  comprehensive   income.
Investments are written down to estimated fair values, and losses are recognized
in income, when a decline in value is determined to be other than temporary.

Mortgage loans are carried at unpaid principal balances,  including  unamortized
premium or discount.  Real estate is carried at depreciated  cost.  Policy loans
are carried at unpaid balances.  Short-term investments are carried at amortized
cost, which approximates fair value.

Other invested  assets include joint  ventures,  limited  partnerships,  certain
derivative  securities  and other  investments.  The joint  ventures and limited
partnerships  are carried at CNA's  equity in the  investees'  net  assets.  CNA
accounts for its  derivative  securities at fair value.  Under this method,  the
derivative  securities are recorded in the  consolidated  balance sheets at fair
value at the reporting date and changes in fair value are recognized in realized
investment  gains and losses.  For interest rate swaps  associated  with certain
corporate  borrowings,  amounts due or payable under these swaps are recorded as
an adjustment to interest expense and changes in the fair value of the swaps are
not recognized in the Company's consolidated financial statements.

INVESTMENT GAINS AND LOSSES

All securities  transactions are recorded on the trade date. Realized investment
gains  and  losses  are  determined  on the basis of the  amortized  cost of the
specific securities sold.

EQUITY IN AFFILIATES

CNA uses the equity method of accounting  for  investments in companies in which
its ownership  interest of the voting shares is at least twenty  percent but not
greater than fifty percent.  Equity in operating  income of these  affiliates is
reported in other income.  Equity in  investment  gains or losses is included in
realized  investment  gains  or  losses,  or  other  comprehensive   income,  as
appropriate.

SECURITIES LENDING ACTIVITIES

CNA lends  securities to unrelated  parties,  primarily major  brokerage  firms.
Borrowers of these securities must deposit  collateral with CNA equal to 100% of
the fair value of the  securities  if the  collateral  is cash,  or 102% if the
collateral is securities.  Cash deposits from these transactions are invested in
short-term   investments   (primarily  commercial  paper)  and  a  liability  is
recognized for the obligation to return the collateral. CNA continues to receive
the interest on loaned debt  securities as beneficial  owner,  and  accordingly,
loaned debt securities are included in fixed maturity securities.

SEPARATE ACCOUNT BUSINESS

Continental  Assurance  Company and Valley Forge Life  Insurance  Company  write
investment  and annuity  contracts.  The  supporting  assets and  liabilities of
certain of these  contracts  are legally  segregated  and reported as assets and
liabilities  of  separate  account  business.   Continental   Assurance  Company
guarantees   principal  and  a  specified  return  to  the   contractholders  on
approximately  53% and 64% of the separate account business at December 31, 1999
and  1998,  respectively.  Substantially  all  assets  of the  separate  account
business are carried at fair value.  Separate account liabilities are carried at
contract values.

INCOME TAXES

The Company  accounts for income  taxes under the  liability  method.  Under the
liability method deferred income taxes are recognized for temporary  differences
between the financial  statement and tax return bases of assets and liabilities.
Temporary  differences  primarily  relate  to  insurance  reserves  (principally
discounting of claim and claim  adjustment  expense  reserves and differences in
the calculation of unearned premium  reserves),  deferred  acquisition costs and
net unrealized investment gains or losses.


PROPERTY AND EQUIPMENT

Property  and  equipment  are  carried  at cost less  accumulated  depreciation.
Depreciation  is based on the estimated  useful lives of the various  classes of
property and equipment and determined principally on accelerated methods.

EARNINGS PER SHARE

Earnings  per share  applicable  to common  stock are based on  weighted-average
outstanding shares, retroactively adjusted for all stock splits. The computation
of earnings per share for the years ended  December 31, 1999,  1998 and 1997 was
as follows:

EARNINGS PER SHARE
-----------------------------------------------------------------------------
Year ended December 31
(In millions of dollars)                          1999       1998      1997
-----------------------------------------------------------------------------

Net income (loss)                               $  (130)    $  282   $  966
Less: Preferred dividends                           (13)        (7)      (7)
-----------------------------------------------------------------------------
Net income (loss) applicable to common stock    $  (143)    $  275   $  959

Weighted average outstanding common shares
and common stock equivalents (in millions
of shares)                                        184.2      184.9    185.4
-----------------------------------------------------------------------------
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE     $ (0.77)    $ 1.49   $ 5.17
=============================================================================

NOTE B - INVESTMENTS:
---------------------

The  significant  components  of net  investment  income  are  presented  in the
following table:


NET INVESTMENT INCOME
------------------------------------------------------------------
Year ended December 31
(In millions of dollars)         1999         1998         1997
------------------------------------------------------------------

Fixed maturity securities    $   1,776    $   1,832    $   1,817
Short-term investments             188          241          321
Other                              178          126          118
------------------------------------------------------------------
                                 2,142        2,199        2,256
Investment expenses                (41)         (53)         (47)
------------------------------------------------------------------
   NET INVESTMENT INCOME     $   2,101    $   2,146    $   2,209
==================================================================


Net  realized   investment  gains  (losses)  and  net  unrealized   appreciation
(depreciation) in investments are set forth in the following table:

NET INVESTMENT APPRECIATION
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
Year ended December 31
(In millions of dollars)                                          1999      1998     1997
-------------------------------------------------------------------------------------------
<S>                                                             <C>      <C>       <C>
Net realized investment gains (losses): Fixed maturity
securities:
       Gross realized gains                                     $   269  $    621  $   651
       Gross realized losses                                       (580)     (154)    (199)
-------------------------------------------------------------------------------------------
   Net realized gains (losses) on fixed maturity securities        (311)      467      452

   Equity securities:
       Gross realized gains                                         481       119      137
       Gross realized losses                                       (115)      (81)     (34)
-------------------------------------------------------------------------------------------
   Net realized gains on equity securities                          366        38      103
   Other realized investment gains                                  253       190      198
-------------------------------------------------------------------------------------------
Total net realized investment gains                                 308       695      753
Allocation to participating policyholders and minority interest       7       (14)     (15)
Income tax expense                                                 (123)     (247)    (260)
-------------------------------------------------------------------------------------------
Net realized investment gains                                       192       434      478
-------------------------------------------------------------------------------------------

Net unrealized appreciation (depreciation) in investments:
   Fixed maturity securities                                     (1,262)       34      347
   Equity securities                                              1,545       796      (38)
   Other                                                             33      (112)      72
-------------------------------------------------------------------------------------------
Total net unrealized appreciation in investments                    316       718      381
Net change in unrealized appreciation (depreciation) on separate
  accounts and other                                                (74)        5        -
Allocation to participating policyholders and minority interest      24        (6)      (9)
Deferred income tax expense                                        (100)     (249)    (101)
-------------------------------------------------------------------------------------------
Net unrealized appreciation in investments                          166       468      271
-------------------------------------------------------------------------------------------
   NET APPRECIATION IN INVESTMENTS                             $    358  $    902  $   749
===========================================================================================
</TABLE>

Other realized  investment gains for the years ended December 31, 1999 and 1997,
include  gains  and  losses  related  to  the  sale  of  certain  operations  or
affiliates. See Note O.

The  following  table  provides  a  summary  of  investments  in fixed  maturity
securities and equity securities available-for-sale:

SUMMARY OF FIXED MATURITY AND EQUITY SECURITIES
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
                                                   COST OR      GROSS        GROSS
                                                  AMORTIZED  UNREALIZED   UNREALIZED  FAIR
(In millions of dollars)                            COST        GAINS       LOSSES    VALUE
--------------------------------------------------------------------------------------------
<S>                                                <C>        <C>        <C>        <C>
DECEMBER 31, 1999

United States Treasury securities and obligations
  of government agencies                           $ 8,431    $    14    $   127    $ 8,318
Asset-backed securities                              7,253         14        228      7,039
States, municipalities and political subdivisions
  - tax-exempt                                       4,514         16        134      4,396
Corporate securities                                 5,502         34        303      5,233
Other debt securities                                2,185         36         89      2,132
Redeemable preferred stocks                             63         72          5        130
--------------------------------------------------------------------------------------------
Total fixed maturity securities                     27,948        186        886     27,248
Equity securities                                    1,150      2,635        175      3,610
--------------------------------------------------------------------------------------------
   TOTAL                                           $29,098    $ 2,821    $ 1,061    $30,858
============================================================================================

DECEMBER 31, 1998

United States Treasury securities and obligations
  of government agencies                           $ 7,568    $   183    $    17    $ 7,734
Asset-backed securities                              8,096        130         12      8,214
States, municipalities and political subdivisions
  - tax-exempt                                       6,127        206         12      6,321
Corporate securities                                 5,074        135        143      5,066
Other debt securities                                2,610        104         70      2,644
Redeemable preferred stocks                             36         60          2         94
--------------------------------------------------------------------------------------------
Total fixed maturity securities                     29,511        818        256     30,073
Equity securities                                    1,055      1,051        136      1,970
--------------------------------------------------------------------------------------------
   TOTAL                                           $30,566    $ 1,869    $   392    $32,043
============================================================================================
</TABLE>

The following table summarizes fixed maturity securities by contractual maturity
at December 31, 1999:

CONTRACTUAL MATURITY
------------------------------------------------------------------------
                                                COST OR
                                               AMORTIZED        FAIR
(In millions of dollars)                          COST         VALUE
------------------------------------------------------------------------

Due in one year or less                       $     1,554   $     1,541
Due after one year through five years               6,513         6,388
Due after five years through ten years              7,040         6,557
Due after ten years                                 5,588         5,723
Asset-backed securities                             7,253         7,039
------------------------------------------------------------------------
   TOTAL                                      $    27,948   $    27,248
========================================================================


Actual maturities may differ from contractual maturities because some securities
may be called or prepaid with or without call or prepayment penalties.

The carrying value of investments  (other than equity  securities)  that did not
produce income during 1999 was $54 million. At December 31, 1999, the fair value
of the  Company's  investments  in the  common  stock of Global  Crossing,  Ltd.
(Global  Crossing) and the Vista Fund (a money market fund) were $1,822  million
and $903 million,  respectively. No other investments, other than investments in
U.S. government securities, exceeded 10% of stockholders' equity.

RESTRICTED INVESTMENTS

On December 30, 1993, CNA deposited  $987 million in an escrow account  pursuant
to the Fibreboard  Global  Settlement  Agreement.  The majority of the funds are
included in short-term  investments and are invested  primarily in U.S. Treasury
securities.  The escrow  account  amounted to $36 million and $1,130  million at
December  31,  1999 and  1998,  respectively.  During  1999,  the  Company  paid
approximately  $1.1  billion  from  escrow to the  Fibreboard  Trust,  which was
established to administer claims pursuant to the Trilateral Agreement.  See Note
F.

The  Company  may from  time to time  invest in  securities  that have a limited
market or the sale of which may be  restricted in whole or in part. In May 1999,
Global  Crossing  entered  into a  transaction  to  merge  Frontier  Corporation
(Frontier) into a subsidiary of Global Crossing.  As part of the Frontier merger
agreement,  certain  shareholders  of Global  Crossing,  including  the Company,
entered into a voting  agreement to limit their sales of Global  Crossing common
stock to ensure that 51% of the outstanding shares of Global Crossing would vote
in favor of the merger. A large proportion of those shareholders,  including the
Company, also agreed to suspend their rights under a shareholders' agreement and
a registration  rights agreement until the closing of the Frontier  transaction.
The voting agreement was amended on September 2, 1999 to continue the limitation
on sales and to delay the  exercise of those  rights  described  in the previous
sentence until the earlier of the termination of the Frontier transaction or six
months after the closing of the Frontier transaction. The Frontier merger closed
on September 28, 1999. Beginning on March 28, 2000, the Company has the right to
require  Global  Crossing to register up to 25% of the Company's  holdings under
the  Securities  Act of 1933 (the Act),  and  beginning on August 13,  2000,  to
require  Global  Crossing to register up to an  additional  25% of the Company's
holdings.  The  Company's  holdings of Global  Crossing  were not  acquired in a
public offering, and may not be sold to the public unless the sale is registered
or exempt from the  registration  requirements of the Act. Such exemptions will
include  sales  pursuant  to Rule  144  under  the Act if such  sales  meet  the
requirements of the Rule.  Subsequent to December 31, 1999, CNA entered into
option agreements intended to hedge a substantial portion of the market risk
associated with approximately half of its holdings of Global Crossing.


Cash and securities  with carrying  values of $1.8 billion and $1.7 billion were
deposited  by  the  Company's  insurance   subsidiaries  under  requirements  of
regulatory authorities as of December 31, 1999 and 1998, respectively.

NOTE C - FINANCIAL INSTRUMENTS:
-------------------------------

In the normal  course of  business,  CNA  invests in various  financial  assets,
incurs  various  financial  liabilities,  and enters into  agreements  involving
derivative securities, including off-balance sheet financial instruments.

Fair values are required to be disclosed for all financial instruments for which
it is  practicable  to  estimate  fair  value,  whether  or not such  values are
recognized in the  consolidated  balance sheets.  Management  attempts to obtain
quoted market prices for the purposes of these disclosures.  Where quoted market
prices are not available, fair values are estimated using present value or other
valuation   techniques.   These   techniques  are   significantly   affected  by
management's assumptions,  including discount rates and estimates of future cash
flows.  Potential taxes and other  transaction costs have not been considered in
estimating  fair values.  The  estimates  presented  herein are not  necessarily
indicative of the amounts that CNA would realize in a current market exchange.

Non-financial  instruments--such  as real estate,  deferred  acquisition  costs,
property  and  equipment,  deferred  income taxes and  intangibles--and  certain
financial instruments specifically identified in the accounting literature--such
as insurance reserves and leases--are  excluded from the fair value disclosures.
Thus,  the fair value amounts  cannot be aggregated to determine the  underlying
economic value of the Company.

The  carrying  amounts  reported in the  consolidated  balance  sheets for cash,
short-term  investments,  accrued investment income,  receivables for securities
sold,  federal  income  taxes  recoverable,  securities  sold  under  repurchase
agreements, payables for securities purchased and certain other assets and other
liabilities  approximate  fair value because of the  short-term  nature of these
items. These assets and liabilities are not listed in the following tables.

The  carrying  amounts  and  estimated  fair  values  of CNA's  other  financial
instrument assets and liabilities are listed in the following tables. Derivative
financial instruments are shown in a separate table.

FINANCIAL ASSETS
------------------------------------------------------------------------------
                                          1999                  1998
                                   -------------------- ----------------------
December 31                        CARRYING  ESTIMATED   Carrying  Estimated
(In millions of dollars)            AMOUNT   FAIR VALUE   Amount   Fair Value
------------------------------------------------------------------------------

Investments:
   Fixed maturity securities          $27,248   $27,248    $30,073   $30,073
   Equity securities                    3,610     3,610      1,970     1,970
   Mortgage loans                          44        42         57        61
   Policy loans                           192       179        177       173
   Other invested assets                1,108     1,108        858       858
Separate account business:
   Fixed maturity securities            3,260     3,260      4,155     4,155
   Equity securities                      260       260        297       297
   Other                                  493       493        216       216
Notes receivable for the issue
of stock                                   63        56         44        39
------------------------------------------------------------------------------

The following  methods and  assumptions  were used by CNA in estimating the fair
value for the above financial assets.

The fair values of fixed maturity securities and equity securities were based on
quoted market prices, where available.  For securities not actively traded, fair
values were estimated using values obtained from independent pricing services or
quoted market prices of comparable instruments.

The fair  values for  mortgage  loans and  policy  loans  were  estimated  using
discounted  cash flow analyses at interest rates  currently  offered for similar
loans  to  borrowers  of   comparable   credit   quality.   Loans  with  similar
characteristics were aggregated for purposes of these calculations.

Valuation  techniques to determine fair value of other invested assets and other
separate  account  business  assets  consisted  of  discounting  cash  flows and
obtaining quoted market prices of the investments, comparable instruments or the
underlying assets of the investments.

FINANCIAL LIABILITIES
------------------------------------------------------------------------------
                                           1999                   1998
                                   -------------------   ---------------------
December 31                        CARRYING  ESTIMATED    Carrying Estimated
(In millions of dollars)            AMOUNT   FAIR VALUE    Amount  Fair Value
------------------------------------------------------------------------------

Premium deposits and annuity
contracts                             $ 1,293   $ 1,240    $ 1,259   $ 1,205
Debt                                    2,881     2,775      3,160     3,179
Financial guarantee contracts             111       100        240       231
Separate account business:
   Guaranteed investment contracts      1,516     1,518      2,423     2,478
   Variable separate accounts           1,505     1,505      1,268     1,268
   Deferred annuities                     117       125         85       102
   Other                                  571       571        600       600
------------------------------------------------------------------------------

Premium  deposits  and annuity  contracts  were valued  based on cash  surrender
values and the outstanding fund balances.

CNA's senior notes and debentures were valued based on quoted market prices. The
fair value for other  long-term debt was estimated  using  discounted  cash flow
analyses  based on current  incremental  borrowing  rates for similar  borrowing
arrangements.

The fair value of the liability for financial  guarantee  contracts was based on
discounted  cash flows utilizing  interest rates  currently  offered for similar
contracts.

The fair values of guaranteed investment contracts and deferred annuities of the
separate account business were estimated using discounted cash flow calculations
based on interest  rates  currently  offered for similar  contracts with similar
maturities.  The fair values of the  liabilities for variable  separate  account
business were based on the quoted market values of the underlying assets of each
variable separate account.  The fair value of other separate account liabilities
approximate their carrying value because of their short-term nature.


DERIVATIVE FINANCIAL INSTRUMENTS

CNA invests in derivative financial instruments in the normal course of business
primarily  to reduce its  exposure to market risk  (principally  interest  rate,
equity stock price and foreign  currency risk).  Financial  instruments used for
such  purposes  include  interest rate swaps,  interest rate caps,  put and call
options,  commitments to purchase securities,  futures and forwards.  Other than
derivatives held in certain separate  accounts,  the Company  generally does not
hold or issue these instruments for trading purposes.  CNA also uses derivatives
to mitigate the risk  associated  with its indexed  group  annuity  contracts by
purchasing S&P 500 futures  contracts in a notional  amount equal to the portion
of the customer liability related to S&P 500 exposure.

The gross  notional  principal or  contractual  amounts of derivative  financial
instruments  in the general  account at  December  31, 1999 and 1998 were $2,062
million  and $1,667  million,  respectively.  The gross  notional  principal  or
contractual amounts of derivative financial instruments in the separate accounts
were  $1,627  million  and  $1,193  million  at  December  31,  1999  and  1998,
respectively.  The  contractual  or notional  amounts are used to calculate  the
exchange of contractual payments under the agreements and are not representative
of the potential for gain or loss on these instruments.

The fair values associated with derivative  financial  instruments are generally
affected by interest rates,  equity prices and foreign currency  exchange rates.
The credit exposure  associated with  non-performance  by the  counterparties to
these  instruments is generally limited to the gross fair value asset related to
the  instruments  recognized in the  consolidated  balance  sheets.  The Company
continuously  monitors the credit worthiness of its counterparties.  The Company
generally  does  not  require   collateral   from  its   derivative   investment
counterparties.

The fair value of derivatives generally represent the estimated amounts that CNA
would  expect  to  receive  or pay  upon  termination  of the  contracts  at the
reporting  date.  Dealer  quotes are available  for  substantially  all of CNA's
derivatives.  For derivative  instruments not actively  traded,  fair values are
estimated  using values obtained from  independent  pricing  services,  costs to
settle or quoted market prices of comparable instruments.

A summary of the  aggregate  contractual  or notional  amounts,  estimated  fair
values and gains or losses related to derivative financial instruments as of and
for the year ended December 31, 1999 and 1998 are presented below.

SUMMARY OF DERIVATIVE FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                                              FAIR VALUE
                                                        ------------------------
DECEMBER 31, 1999                        CONTRACTUAL                              RECOGNIZED
(In millions of dollars)                NOTIONAL AMOUNT  ASSET      (LIABILITY)   GAIN (LOSS)
----------------------------------------------------------------------------------------------
<S>                                      <C>              <C>            <C>        <C>
GENERAL ACCOUNT
---------------
   Interest rate swaps on corporate      $  650           $   --         $   --     $   --
     borrowings
   Total return swaps                         7               --             --         11
   Interest rate caps                       500                4             --          4
   Commitments to purchase government
    and municipal securities               127                --             (1)        (1)
   Futures sold, not yet purchased          153               --             --          9
   Forwards                                 591                9             --         21
   Options purchased                         25                4             --         (5)
   Options written                            9               --             --         --
----------------------------------------------------------------------------------------------
   TOTAL                                 $2,062           $   17         $   (1)    $   39
==============================================================================================
SEPARATE ACCOUNTS
-----------------
   Futures purchased                     $1,113           $   --         $   --     $  131
   Futures sold, not yet purchased           79               --             --          2
   Forwards                                  --               --             --         --
   Commitments to purchase government
     and municipal securities               228               --             (2)        (4)
   Options purchased                        108                1             --         (1)
   Options written                           99               --             --          4
----------------------------------------------------------------------------------------------
   TOTAL                                 $1,627           $    1         $   (2)    $  132
==============================================================================================
</TABLE>

SUMMARY OF DERIVATIVE FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                                              FAIR VALUE
                                                        ------------------------
DECEMBER 31, 1998                         CONTRACTUAL/                             RECOGNIZED
(In millions of dollars)                 NOTIONAL AMOUNT  ASSET      (LIABILITY)   GAIN (LOSS)
----------------------------------------------------------------------------------------------
<S>                                      <C>              <C>            <C>        <C>
GENERAL ACCOUNT
---------------
   Interest rate swaps on corporate      $  650           $   --         $  (10)    $   --
   borrowings
   Total return swaps                        78               --            (10)       (30)
   Interest rate caps                       500                1             --         (2)
   Futures sold, not yet purchased          158               --             --         (3)
   Forwards                                 211               --             (1)        (6)
   Options purchased                         70                3             --         51
   Options written                           --               --             --          2
----------------------------------------------------------------------------------------------
   TOTAL                                 $1,667           $    4         $  (21)    $   12
==============================================================================================
SEPARATE ACCOUNTS
-----------------
   Futures purchased                     $  928           $    2         $   --     $  156
   Futures sold, not yet purchased           51               --             --         (1)
   Forwards                                   2               --             --         --
   Commitments to purchase government
    and municipal securities                 69                1             --          4
   Options purchased                         77                1             --         (1)
   Options written                           66               --             --          2
----------------------------------------------------------------------------------------------
   TOTAL                                 $1,193           $    4         $   --     $  160
==============================================================================================
</TABLE>

The  Company has  entered  into  interest  rate swap  agreements  to convert the
variable  rate of its  borrowings  under a  revolving  credit  facility  and its
commercial paper program to a fixed rate. The Company was party to interest rate
swap agreements with several banks with an aggregate  notional  principal amount
of $650  million,  at  December  31,  1999 and  1998.  Those  agreements,  which
terminate from May 2000 to December 2000, effectively fix the Company's interest
cost on $650  million of variable  rate debt for the years  ending  December 31,
1999 and 1998.

CNA also has  outstanding  total  return  swaps  which  primarily  represent  an
exchange of the 90-day  treasury  bill rate for the change in the Goldman  Sachs
Commodities Index.

Futures  are  contracts  to buy or sell a  standard  quantity  and  quality of a
commodity, financial instrument or index at a specified future date and price.

Forwards  are  contracts  between two  parties to  purchase  and sell a specific
quantity  of a  commodity,  government  security,  foreign  currency,  or  other
financial  instrument at a price specified at contract inception,  with delivery
and settlement at a specified future date.

Commitments to purchase  government  and municipal  securities are agreements to
purchase securities in the future at a predetermined price.

Options are  contracts  that grant the  purchaser,  for a premium  payment,  the
right, but not the obligation, to either purchase or sell a financial instrument
at a specified price within a specified period of time.

An  interest  rate  cap  consists  of a  guarantee  given by the  issuer  to the
purchaser in exchange for the payment of a premium.  This guarantee  states that
if  interest  rates  rise  above a  specified  rate the  issuer  will pay to the
purchaser the difference  between the then current market rate and the specified
rate on the notional principal amount.

NOTE D - INCOME TAXES:
----------------------

CNA  and  its  eligible  subsidiaries  (CNA  Tax  Group)  are  included  in  the
consolidated  Federal income tax return of Loews and its eligible  subsidiaries.
Loews and CNA have agreed that for each  taxable  year,  CNA will (i) be paid by
Loews the amount,  if any, by which the Loews  consolidated  Federal  income tax
liability  is  reduced  by virtue of the  inclusion  of the CNA Tax Group in the
Loews consolidated Federal income tax return, or (ii) pay to Loews an amount, if
any,  equal to the Federal  income tax which would have been  payable by the CNA
Tax Group  filing a separate  consolidated  tax return.  In the event that Loews
should have a net operating loss in the future computed on the basis of filing a
separate  consolidated tax return without the CNA Tax Group, CNA may be required
to repay tax recoveries  previously  received from Loews. This agreement between
Loews and CNA may be canceled by either party upon thirty days written notice.

For  1999 and  1998,  the  inclusion  of the CNA Tax  Group in the  consolidated
Federal  income tax return of Loews has resulted in a decreased  Federal  income
tax  liability  for  Loews.  Accordingly,  Loews  has  paid or  will  pay to CNA
approximately  $288  million  for 1999 and $83 million  for 1998.  In 1997,  the
inclusion of the CNA Tax Group into the  consolidated  Federal income tax return
of Loews increased the Loews Federal income tax liability.  Accordingly, CNA has
paid Loews approximately $210 million for 1997.

At December 31, 1999, the CNA Tax Group had accumulated net operating  losses of
approximately  $390 million from 1999 and 1998,  available to be carried back or
forward. These net operating losses expire beginning in 2018.

A  reconciliation  between the Federal  income tax at statutory  rates and CNA's
effective  income taxes,  after giving effect to minority  interest,  but before
giving effect to the cumulative effect of a 1999 change in accounting  principle
for SOP 97-3 is as follows:

TAX RATE RECONCILIATION
----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
(In millions of dollars)                           1999     1998       1997
----------------------------------------------------------------------------

  Income tax (benefit) expense at statutory rates  $(14)     $115      $475
  Tax benefit from tax exempt income                (84)     (103)      (91)
  Other expense, including state income taxes        10        35         8
----------------------------------------------------------------------------
  EFFECTIVE INCOME TAX (BENEFIT) EXPENSE           $(88)     $ 47      $392
============================================================================

The composition of CNA's total income tax (benefit)  expense  allocated  between
operating  income  and  realized  investment  gains and  losses,  excluding  the
cumulative effect of the 1999 change in accounting  principle for SOP 97-3 is as
follows:

COMPONENTS OF TAX PROVISION
----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
(In millions of dollars)                             1999     1998     1997
----------------------------------------------------------------------------

   Income tax (benefit) expense on operating income $(211)   $(200)    $132
   Income tax expense on realized investment gains    123      247      260
----------------------------------------------------------------------------
   TOTAL INCOME TAX (BENEFIT) EXPENSE               $ (88)   $  47     $392
============================================================================

The current and  deferred  components  of CNA's  income tax  (benefit)  expense,
excluding the cumulative  effect of the 1999 change in accounting  principle for
SOP 97-3, are as follows:

CURRENT AND DEFERRED TAXES
----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
(In millions of dollars)                             1999     1998     1997
----------------------------------------------------------------------------

   Current tax (benefit) expense                    $(226)   $   -     $248
   Deferred tax expense                               138       47      144
----------------------------------------------------------------------------
   TOTAL INCOME TAX (BENEFIT) EXPENSE               $ (88)   $  47     $392
============================================================================

On January 1, 1999, CNA adopted SOP 97-3, and as a result,  an accrued liability
was  established  for  financial  reporting  purposes,  but not for  income  tax
purposes.  Consequently  on  January  1,  1999,  as  part  of the  $177  million
cumulative after-tax effect of SOP 97-3, a deferred tax asset of $95 million was
established.  During  1999,  changes  in this  assessment  accrual  reduced  the
associated  deferred tax asset by $23  million.  The deferred tax effect of this
assessment accrual and other significant components of CNA's deferred tax assets
and liabilities as of December 31, 1999 and 1998, respectively, are set forth in
the table below.

COMPONENTS OF NET DEFERRED TAX ASSETS
------------------------------------------------------------------------
DECEMBER 31
(In millions of dollars)                            1999         1998
------------------------------------------------------------------------

Gross deferred tax assets:
   Insurance reserves:
     Property/casualty claim reserves              $ 1,058      $ 1,183
     Unearned premium reserves                         335          372
     Life reserves                                     213          195
     Other insurance reserves                           26           27
   Postretirement benefits other than pensions         149          142
    Net operating losses                               137            -
    Accrued assessments and guarantees                  72            -
   Restructuring costs                                  10           56
   Other                                               257          295
------------------------------------------------------------------------
     TOTAL GROSS DEFERRED TAX ASSETS                 2,257        2,270
------------------------------------------------------------------------
Gross deferred tax liabilities:
   Deferred acquisition costs                         (778)        (748)
   Net unrealized gains                               (627)        (527)
------------------------------------------------------------------------
     TOTAL GROSS DEFERRED TAX LIABILITIES           (1,405)      (1,275)
------------------------------------------------------------------------
NET DEFERRED TAX ASSETS                            $   852      $   995
========================================================================

CNA has a history of profitability and as such, CNA's management  believes it is
more likely than not that the deferred tax assets will be realized.

NOTE E - CLAIM AND CLAIM ADJUSTMENT EXPENSE RESERVES:
-----------------------------------------------------

CNA's  property/casualty  insurance claim and claim adjustment expense reserves
represent  the estimated  amounts  necessary to settle all  outstanding  claims,
including claims which are incurred but not reported,  as of the reporting date.
The Company's  reserve  projections are based primarily on detailed  analysis of
the  facts in each  case,  CNA's  experience  with  similar  cases  and  various
historical  development  patterns.  Consideration  is given  to such  historical
patterns as field  reserving  trends,  loss  payments,  pending levels of unpaid
claims and product  mix, as well as court  decisions,  economic  conditions  and
public attitudes. All of these factors can affect the estimation of reserves.

Establishing loss reserves is an estimation process. Many factors can ultimately
affect the final  settlement  of a claim and,  therefore,  the  reserve  that is
needed.  Changes in the law,  results of litigation,  medical costs, the cost of
repair  materials  and labor  rates can all  impact  ultimate  claim  costs.  In
addition,  time can be a critical  part of  reserving  determinations  since the
longer the span between the incidence of a loss and the payment or settlement of
the claim, the more variable the ultimate settlement amount can be. Accordingly,
short-tail  claims,  such as property damage claims,  tend to be more reasonably
estimable  than long-tail  claims,  such as general  liability and  professional
liability claims.

The table below provides a reconciliation between beginning and ending claim and
claim adjustment expense reserves for 1999, 1998 and 1997.

RECONCILIATION OF CLAIM AND CLAIM ADJUSTMENT EXPENSE RESERVES
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
Year Ended December 31
(In millions of dollars)                                               1999       1998     1997
-------------------------------------------------------------------------------------------------
<S>                                                                   <C>       <C>      <C>
Reserves at beginning of year:
   Gross                                                              $28,317   $28,533  $29,357
   Ceded                                                                5,424     5,326    5,660
-------------------------------------------------------------------------------------------------
Net reserves at beginning of year                                      22,893    23,207   23,697

Net reserves transferred under retroactive reinsurance agreements      (1,024)       --       --
Net reserves of acquired insurance companies at date of acquisition        --       122       57
-------------------------------------------------------------------------------------------------
Total net adjustments                                                  (1,024)      122       57
-------------------------------------------------------------------------------------------------

Net incurred claims and claim adjustment expenses:
   Provision for insured events of current year                         7,287     7,903    7,942
   Increase (decrease) in provision for insured events of prior years   1,027       263     (256)
   Amortization of discount                                               139       143      143
-------------------------------------------------------------------------------------------------
Total net incurred                                                      8,453     8,309    7,829
-------------------------------------------------------------------------------------------------

Net payments attributable to:
   Current year events                                                  2,744     2,791    2,514
   Prior year events                                                    7,460     5,954    5,862
   Reinsurance recoverable against net reserves transferred under
     retroactive reinsurance agreements                                  (240)       --       --
-------------------------------------------------------------------------------------------------
Total net payments                                                      9,964     8,745    8,376
-------------------------------------------------------------------------------------------------
Net reserves at end of year                                            20,358    22,893   23,207
Ceded reserves at end of year                                           6,273     5,424    5,326
-------------------------------------------------------------------------------------------------
GROSS RESERVES AT END OF YEAR*                                        $26,631   $28,317  $28,533
=================================================================================================
</TABLE>

* Excludes  life  claim  and  claim   adjustment   expense  reserves  and
  intercompany  eliminations  of $725  million,  $837  million  and  $987
  million as of December 31, 1999, 1998 and 1997, respectively,  included in the
  consolidated balance sheets.

The increase  (decrease) in provision for insured events of prior years (reserve
development) is comprised of the following components:

RESERVE DEVELOPMENT
-----------------------------------------------------------------------
Year Ended December 31
(In millions of dollars)                         1999     1998    1997
-----------------------------------------------------------------------

Asbestos                                       $  560    $ 243   $ 105
Environmental pollution and other mass tort       (84)     227      --
Other                                             551     (207)   (361)
-----------------------------------------------------------------------
   TOTAL                                       $1,027    $ 263   $(256)
=======================================================================


ENVIRONMENTAL POLLUTION, OTHER MASS TORT AND ASBESTOS RESERVES

Environmental  pollution  clean-up  is the  subject  of both  federal  and state
regulation.  By some  estimates,  there are  thousands of potential  waste sites
subject to clean-up.  The insurance industry is involved in extensive litigation
regarding coverage issues. Judicial  interpretations in many cases have expanded
the scope of coverage and liability beyond the original intent of the policies.

The Comprehensive  Environmental Response Compensation and Liability Act of 1980
(Superfund) and comparable state statutes  (mini-Superfund)  govern the clean-up
and  restoration  of abandoned  toxic waste sites and  formalize  the concept of
legal liability for clean-up and restoration by Potentially  Responsible Parties
(PRPs).  Superfund  and  the  mini-Superfunds  establish  mechanisms  to pay for
clean-up of waste sites if PRPs fail to do so, and to assign  liability to PRPs.
The extent of  liability  to be  allocated to a PRP is dependent on a variety of
factors.  Further,  the number of waste sites subject to clean-up is unknown. To
date,   approximately   1,300  clean-up  sites  have  been   identified  by  the
Environmental  Protection  Agency on its  National  Priorities  List (NPL).  The
addition of new clean-up sites to the NPL has slowed in recent years.
Many clean-up sites have been designated by state authorities as well.

Many policyholders  have made claims against various CNA insurance  subsidiaries
for defense costs and indemnification in connection with environmental pollution
matters.  These claims relate to accident years 1989 and prior,  which coincides
with CNA's adoption of the Simplified Commercial General Liability coverage that
includes an absolute  pollution  exclusion.  CNA and the insurance  industry are
disputing  coverage for many such claims.  Key coverage  issues include  whether
clean-up costs are considered  damages under the policies,  trigger of coverage,
allocation of liability among  triggered  policies,  applicability  of pollution
exclusions  and owned property  exclusions,  the potential for joint and several
liability  and  definition  of  an  occurrence.   To  date,   courts  have  been
inconsistent in their rulings on these issues.

A number of proposals  to reform  Superfund  have been made by various  parties.
However,  no reforms  were  enacted by  Congress in 1999 and it is unclear as to
what  positions  the Congress or the  Administration  will take in 2000 and what
legislation,  if  any,  will  result.  If  there  is  legislation,  and in  some
circumstances even if there is no legislation, the federal role in environmental
clean-up  may be  significantly  reduced in favor of state  action.  Substantial
changes in the federal  statute or the  activity of the EPA may cause  states to
reconsider their environmental  clean-up statutes and regulations.  There can be
no meaningful prediction of the pattern of regulation that would result.

Due to the inherent  uncertainties  described above, including the inconsistency
of court  decisions,  the number of waste  sites  subject to  clean-up,  and the
standards  for  clean-up  and  liability,  the  ultimate  liability  of CNA  for
environmental  pollution claims may vary substantially from the amount currently
recorded.

As of December  31, 1999 and 1998,  CNA carried  approximately  $463 million and
$787 million,  respectively, of claim and claim adjustment expense reserves, net
of reinsurance recoverables, for reported and unreported environmental pollution
and other mass tort  claims.  In 1999,  CNA  recorded  $84 million of  favorable
development compared to $227 million of adverse development in 1998. The changes
were based upon the Company's continuous review of these types of exposures,  as
well as its internal study and annual  analysis of  environmental  pollution and
other mass tort claims.  The 1999 analysis  indicated  favorable  results in the
number of new  claims  being  reported  in the other  mass tort  area.  The 1998
analysis indicated deterioration in claim experience related mainly to pollution
claims.

CNA's insurance  subsidiaries  also have exposure to asbestos claims,  including
those attributable to CNA's litigation with Fibreboard  Corporation.  A detailed
discussion  of  CNA's   litigation   with   Fibreboard   Corporation   regarding
asbestos-related  bodily  injury  claims can be found in Note F.  Estimation  of
asbestos  claim  reserves   involves  many  of  the  same   limitations  as  for
environmental  pollution claims discussed above,  such as inconsistency of court
decisions,  specific policy provisions,  allocation of liability among insurers,
missing  policies and proof of coverage.  As of December 31, 1999 and 1998,  CNA
carried  approximately $684 million and $1,456 million,  respectively,  of claim
and claim adjustment  expense  reserves,  net of reinsurance  recoverables,  for
reported and  unreported  asbestos-related  claims.  In 1999,  CNA recorded $560
million of adverse  development  compared to $243 million of adverse development
in 1998. The reserve  strengthening in 1999 for asbestos  related claims,  was a
result of management's  continuous  review of development  with respect to these
exposures,  as well as a review of the results of the Company's  annual analysis
of  these  claims  which  was  completed  in  conjunction   with  the  study  of
environmental  pollution  and other mass tort claims.  This  analysis  indicated
continued deterioration in claim counts for asbestos related claims.

The results of operations in future years may continue to be adversely  affected
by  environmental  pollution and other mass tort, and asbestos claim mass claims
and claim  adjustment  expenses.  Management  will  continue  to  monitor  these
liabilities and make further adjustments as warranted.

The following  table  provides  additional  data related to CNA's  environmental
pollution, other mass tort and asbestos-related claim and claim adjustment
expense reserves.

ENVIRONMENTAL POLLUTION, OTHER MASS TORT AND ASBESTOS RESERVES
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
                                       1999                              1998
                             --------------------------------  -----------------------------
                              ENVIRONMENTAL                      Environmental
 December 31                  POLLUTION AND                      Pollution and
(In millions of dollars)     OTHER MASS TORT   ASBESTOS         Other Mass Tort    Asbestos
--------------------------------------------------------------------------------------------
<S>                          <C>               <C>              <C>                 <C>
Gross reserves               $ 618             $ 946            $ 828                $1,547
Less ceded reserves           (155)             (262)             (41)                  (91)
--------------------------------------------------------------------------------------------
   NET RESERVES              $ 463             $ 684            $ 787                $1,456
============================================================================================
</TABLE>

OTHER PROPERTY AND CASUALTY RESERVES

Other lines unfavorable claim and claim adjustment  expense reserve  development
for  1999  of  $551  million  was  due  to  unfavorable   loss   development  of
approximately  $540 million for standard  commercial  lines,  approximately  $60
million for medical malpractice,  and approximately $70 million for accident and
health. These unfavorable changes were partially offset by favorable development
of approximately $120 million in non-medical  professional liability and assumed
reinsurance on older accident  years.  The  unfavorable  development in standard
commercial  lines  was  due  to  commercial  automobile  liability  and  workers
compensation  losses being higher than  expected in recent  accident  years.  In
addition, the number of claims reported for commercial  multiple-peril liability
claims from older  accident  years has not  decreased as much as  expected.  The
unfavorable  development  for medical  malpractice  was also due to losses being
higher  than  expected  for  recent  accident  years.  The  accident  and health
unfavorable  development  is due to higher  than  expected  claim  reporting  on
assumed personal accident coverage in recent accident years.

Other lines favorable claim and claim adjustment expense reserve development for
1998 of $207 million was due to favorable loss development of approximately $100
million in commercial lines business and approximately $105 million of favorable
loss  development in personal lines business.  The favorable  development in the
commercial lines business was primarily  attributable to improved  frequency and
severity in the commercial  auto lines for older accident years, as well as some
continued  improvement in workers'  compensation  for older years. The favorable
development in the personal lines business was  attributable to improved trends,
particularly in personal auto liability.

FINANCIAL GUARANTEE RESERVES

Through  August 1, 1989,  CNA's  property/casualty  operations  wrote  financial
guarantee  insurance  in the  form of  surety  bonds,  and also  insured  equity
policies.   These  bonds  primarily  represented   industrial  development  bond
guarantees and, in the case of insured equity  policies,  typically  extended in
initial terms from ten to thirteen years.  For these guarantees and policies CNA
received an advance premium,  which is non-refundable and is recognized over the
exposure period and in proportion to the underlying risk insured.

At December  31, 1999 and 1998,  gross  exposure of financial  guarantee  surety
bonds  and  insured   equity   policies  was  $352  million  and  $507  million,
respectively.   The  degree  of  risk  to  CNA  related  to  this   exposure  is
substantially  reduced  through  reinsurance,  diversification  of exposures and
collateral requirements. In addition, security interests in improved real estate
are also commonly obtained on the financial  guarantee risks.  Approximately 37%
and 36% of the risks were ceded to  reinsurers  at  December  31, 1999 and 1998,
respectively.  Total exposure, net of reinsurance,  amounted to $222 million and
$323 million at December 31, 1999 and 1998,  respectively.  At December 31, 1999
and 1998,  collateral  consisting  of letters of credit,  cash reserves and debt
service reserves amounted to $62 million and $38 million, respectively.

Gross  unearned  premium  reserves for financial  guarantee  contracts  were $11
million and $8 million at December 31, 1999 and 1998, respectively.  Gross claim
and claim  adjustment  expense reserves totaled $100 million and $232 million at
December  31,  1999  and  1998,  respectively.

NOTE F - LEGAL  PROCEEDINGS  AND CONTINGENT LIABILITIES:
--------------------------------------------------------

FIBREBOARD CORPORATION LITIGATION

An  agreement  between  Continental  Casualty  Corporation  (Casualty),  Pacific
Indemnity and Fibreboard Corporation (Fibreboard) (the Trilateral Agreement) has
obtained final court approval and its implementation has substantially  resolved
Casualty's  exposure with respect to asbestos claims involving  Fibreboard.  The
Trilateral  Agreement calls for payment by Casualty and Pacific  Indemnity of an
aggregate  $2.0 billion,  of which  Casualty's  portion is  approximately  $1.46
billion,  to  Fibreboard  to resolove (a) all claims by  Fibreboard  and (b) all
filed but  unsettled  asbestos  claims as of August  23,  1993,  and all  future
asbestos claims against Fibreboard. Casualty has paid all amounts required under
this obligation of the Trilateral  Agreement.  Casualty is also obligated to pay
asbestos claims settled as of August 23, 1993.

Through  December 31, 1999,  Casualty,  Fibreboard  and plaintiff  attorneys had
reached  settlements  with  respect  to  approximately  133,000  claims,  for an
estimated  settlement amount of approximately  $1.63 billion plus any applicable
interest.  Approximately  $1.72 billion (including interest of $184 million) was
paid by Casualty  through  December 31, 1999.  Such payments have been partially
recovered from Pacific Indemnity.

While there does exist the  possibility  of further  adverse  developments  with
respect to Fibreboard claims,  management does not anticipate subsequent reserve
adjustments,  if any, to materially  affect the equity of CNA.  Management  will
continue  to monitor  the  potential  liabilities  with  respect  to  Fibreboard
asbestos claims and will make adjustments to claim reserves if warranted. During
1999, the Company paid  approximately $1.1 billion from escrow to the Fibreboard
Trust,  which was  established to administer  claims  pursuant to the Trilateral
Agreement.

TOBACCO LITIGATION

Three insurance  subsidiaries of the Company are defendants in a lawsuit arising
out of policies allegedly issued to Liggett Group, Inc.  (Liggett).  Although it
did not  issue  policies  to  Liggett,  the  Company  also has  been  named as a
defendant in this  lawsuit, which was filed by Liggett and Brooke Group Holding
Inc. in Delaware  Superior  Court,  New Castle  County on January 26, 2000.  The
lawsuit, which involves numerous insurers,  concerns coverage issues relating to
hundreds of tobacco-related claims asserted against Liggett over the past twenty
years.  However,  Liggett only began  submitting  claims for coverage  under the
policies in January  2000.  All of the policies  issued by  subsidiaries  of the
Company that have been located to date contain  exclusions  for  tobacco-related
claims.  Based on facts and circumstances  currently known,  management believes
that the ultimate outcome of the pending litigation should not materially affect
the financial condition of CNA.

IGI CONTINGENCY

In  1997,  CNA  Reinsurance  Company  Limited  (CNA  Re  Ltd.)  entered  into an
arrangement with IOA Global,  Ltd. (IOA), an independent  managing general agent
based in  Philadelphia,  Pennsylvania,  to develop and manage a book of accident
and health coverages.  Pursuant to this arrangement,  IGI Underwriting Agencies,
Ltd. (IGI), a personal accident reinsurance  managing general  underwriter,  was
appointed to underwrite  and market the book under the  supervision of IOA. Over
the  past  three  years,  IGI  bound  CNA Re Ltd.  on a  number  of  reinsurance
arrangements  with respect to personal  accident  insurance  worldwide  (the IGI
Program).  Under  various  arrangements  CNA Re Ltd.  both  assumed  risks  as a
reinsurer  and  also  ceded a  substantial  portion  of  those  risks  to  other
companies,  including other CNA Insurance subsidiaries and ultimately a group of
reinsurers  participating in a reinsurance pool known as the Associated Accident
and  Health  Reinsurance  Underwriters  (AAHRU)  Facility.  CNA's  Group  Health
business  unit  participated  as a pool member in the AAHRU  Facility in varying
percentages over the past three years.

CNA has  undertaken a review of the IGI Program  and,  among other  things,  has
determined that  approximately $20 million of premium was assumed by CNA Re Ltd.
with respect to United States workers' compensation  "carve-out" insurance.  CNA
is aware that a number of reinsurers  with respect to such  carve-out  insurance
have disavowed their  obligations  under various legal theories.  If one or more
such companies are successful in avoiding or reducing their liabilities, then it
is  likely  that  CNA's  liability  will  also be  reduced.  Moreover,  based on
information  known at this time, CNA  reasonably  believes it has strong grounds
for avoiding  altogether a substantial portion of its carve-out exposure through
legal action.

As  noted,  CNA  arranged  substantial  reinsurance  protection  to  manage  its
exposures  under  the IGI  Program.  Although  CNA  believes  it has  valid  and
enforceable  reinsurance  contracts with the AAHRU Facility and other reinsurers
with respect to United States workers'  compensation  carve-out business,  it is
unable to predict to what extent such reinsurers would dispute their liabilities
to CNA. Legal actions could result, and the resolution of any such actions could
take years.

CNA has a reserve of $50  million as of December  31,  1999 with  respect to the
United States workers'  compensation  carve-out exposure it incurred through the
IGI Program.  These reserves were  established net of estimated  recoveries from
retrocessionaires   and  the   estimate  of   ultimate   losses  is  subject  to
consideragble  uncertainty.  As a result of these uncertainties,  the results of
operations in future years may be adversely affected by potentially  significant
reserve  additions.  Management  does not believe  that any such future  reserve
additions will be material to equity.

OTHER LITIGATION


CNA and its  subsidiaries  are also parties to other  litigation  arising in the
ordinary course of business.  The outcome of this other  litigation will not, in
the opinion of management, materially affect the results of operations or equity
of CNA.

NOTE G - REINSURANCE:
---------------------

CNA assumes and cedes  insurance  with other insurers and reinsurers and members
of  various  reinsurance  pools  and  associations.   CNA  utilizes  reinsurance
arrangements to limit its maximum loss, provide greater  diversification of risk
and minimize  exposures on larger risks. The reinsurance  coverages are tailored
to the specific  risk  characteristics  of each product line and CNA's  retained
amount varies by type of coverage. Generally, property risks are reinsured on an
excess of loss, per risk basis. Liability coverages are generally reinsured on a
quota  share  basis in excess of CNA's  retained  risk.  CNA's life  reinsurance
includes coinsurance, yearly renewable term and facultative programs.

The ceding of insurance does not discharge the primary liability of the Company.
CNA places  reinsurance with carriers only after careful review of the nature of
the contract and a thorough  assessment of the  reinsurers'  credit  quality and
claims  settlement  practices.   Further,  CNA  generally  requires  collateral,
primarily  in the form of bank  letters  of credit  from  carriers  that are not
authorized  reinsurers  in  CNA's  states  of  domicile.   Such  collateral  was
approximately  $1,191  million and $774  million at December  31, 1999 and 1998,
respectively.

CNA's  largest   recoverables  from  a  single   reinsurer,   including  prepaid
reinsurance  premiums,  were approximately $788 and $510 million at December 31,
1999,  and were with The Allstate  Corporation  (Allstate) and Lloyds of London,
respectively.

Insurance claims and policyholders'  benefits are net of reinsurance  recoveries
of $3,272  million,  $994  million and $1,309  million for 1999,  1998 and 1997,
respectively.

Life premiums are primarily from long duration  contracts and  property/casualty
premiums and accident and health  premiums  are  primarily  from short  duration
contracts.

The effects of reinsurance on earned premiums are shown in the following table:

COMPONENTS OF EARNED PREMIUMS
-----------------------------------------------------------------------------
Year Ended December 31
(In millions of dollars)      Direct       Assumed      Ceded         Net
-----------------------------------------------------------------------------

1999 EARNED PREMIUMS:
   Property/casualty         $ 9,158      $ 1,816      $ 2,199       $ 8,775
   Accident and health         3,730          198          397         3,531
   Life                        1,174          222          420           976
-----------------------------------------------------------------------------
TOTAL 1999 EARNED PREMIUMS   $14,062      $ 2,236      $ 3,016       $13,282
=============================================================================

1998 EARNED PREMIUMS:
   Property/casualty         $ 8,327      $ 1,549      $   897       $ 8,979
   Accident and health         3,745          176          256         3,665
   Life                        1,014          159          281           892
-----------------------------------------------------------------------------
TOTAL 1998 EARNED PREMIUMS   $13,086      $ 1,884      $ 1,434       $13,536
=============================================================================

1997 EARNED PREMIUMS:
   Property/casualty         $ 8,528      $ 1,101      $   612       $ 9,017
   Accident and health         3,723          259          280         3,702
   Life                          908          128          131           905
-----------------------------------------------------------------------------
TOTAL 1997 EARNED PREMIUMS   $13,159      $ 1,488      $ 1,023       $13,624
=============================================================================


The  effects of  reinsurance  on  written  premiums  are shown in the  following
table:

COMPONENTS OF WRITTEN PREMIUMS
-----------------------------------------------------------------------------
Year Ended December 31
(In millions of dollars)      Direct       Assumed      Ceded         Net
-----------------------------------------------------------------------------

1999 WRITTEN PREMIUMS:
   Property/casualty         $ 9,114      $ 1,948      $ 3,262       $ 7,800
   Accident and health         3,764          194          412         3,546
   Life                        1,177          196          429           944
-----------------------------------------------------------------------------
TOTAL 1999 WRITTEN PREMIUMS  $14,055      $ 2,338      $ 4,103       $12,290
=============================================================================

1998 WRITTEN PREMIUMS:
   Property/casualty         $ 8,765      $ 1,429      $   969       $ 9,225
   Accident and health         3,785          178          257         3,706
   Life                        1,014          159          281           892
-----------------------------------------------------------------------------
TOTAL 1998 WRITTEN PREMIUMS  $13,564      $ 1,766      $ 1,507       $13,823
=============================================================================

1997 WRITTEN PREMIUMS:
   Property/casualty         $ 8,576      $ 1,262      $   693       $ 9,145
   Accident and health         3,592          133          155         3,570
   Life                          908          128          131           905
-----------------------------------------------------------------------------
TOTAL 1997 WRITTEN PREMIUMS  $13,076      $ 1,523      $   979       $13,620
=============================================================================

The impact of reinsurance  on life insurance  in-force is shown in the following
table:

COMPONENTS OF LIFE INSURANCE IN-FORCE
--------------------------------------------------------------------------
December 31
(In millions of dollars)    Direct      Assumed        Ceded        Net
--------------------------------------------------------------------------
1999                       $339,255    $ 130,735    $184,376     $285,614
1998                        297,488       96,906     128,896      265,498
1997                        235,468       76,130      74,262      237,336
==========================================================================

NOTE H - DEBT:

Debt consists of the following obligations at December 31, 1999 and 1998:

DEBT
------------------------------------------------------------------------
December 31
(In millions of dollars)                               1999        1998
------------------------------------------------------------------------

Variable rate debt:
   Commercial paper                                   $  675     $  500
   Credit facility - CNA                                  77        235
   Credit facility - CNA Surety                          100        113
Senior notes:
   8.25%, due April 15, 1999                               -        100
   7.25%, due March 1, 2003                              143        147
   6.25%, due November 15, 2003                          249        249
   6.50% , due April 15, 2005                            497        497
   6.75%, due November 15, 2006                          248        248
   6.45%, due January 15, 2008                           149        149
   6.60%, due December 15, 2008                          199        199
   8.375%, due August 15, 2012                            81         98
   6.95%, due January 15, 2018                           148        148
7.25%  debenture, due November 15, 2023                  247        247
11.0% secured mortgage notes, due June 30, 2013            -        157
6.9% - 17.02% secured capital leases, due
  through December 31, 2011                               42         46
Other debt, due through 2019 (rates of 1.0% to 6.60%)     26         27
------------------------------------------------------------------------
   TOTAL DEBT                                         $2,881     $3,160
========================================================================

CNA has a $795 million  revolving credit facility (the Facility) that expires in
May  2001.  The  amount  available  under  the  Facility  is  reduced  by  CNA's
outstanding commercial paper borrowings.  As of December 31, 1999, there was $43
million of unused  borrowing  capacity under the Facility.  The interest rate on
the Facility was equal to the London  Interbank  Offered Rate  (LIBOR),  plus 16
basis points.  Additionally,  there was an annual facility fee of 9 basis points
on the entire  facility.  The average  interest rate on the borrowings under the
Facility,  excluding facility fees, at December 31, 1999 and 1998, was 6.66% and
5.49%, respectively.

The weighted-average  interest rate on commercial paper at December 31, 1999 was
6.50% compared to 5.89% at December 31, 1998. Generally,  commercial paper has a
weighted average maturity of 40 days.

To offset the  variable  rate  characteristics  of the Facility and the interest
rate risk associated with periodically  reissuing commercial paper, CNA is party
to interest rate swap  agreements  with several  banks,  which have an aggregate
notional  principal  amount of $650 million at both  December 31, 1999 and 1998,
and which terminate from May 2000 to December 2000. These agreements require CNA
to pay interest at a fixed rate,  averaging  6.07% at both December 31, 1999 and
1998,  in exchange for the receipt of the three month  LIBOR.  The effect of the
interest  rate  swaps was to  increase  interest  expense  by  approximately  $4
million,  $2 million and $4 million for the years ending December 31, 1999, 1998
and 1997, respectively.

The combined  weighted-average  cost of borrowings,  including facility fees, of
the Facility,  commercial paper borrowings and interest rate swaps was 6.47% and
6.36% at December 31, 1999 and 1998, respectively.

On February 15, 2000, Standard & Poor's lowered the Company's senior debt rating
from A- to BBB and lowered the Company's preferred stock rating from BBB to BB+.
As a result of these actions the facility fee payable on the aggregate amount of
the  Facility  was  increased  to 12 1/2 basis points per annum and the interest
rate on the Facility was increased to LIBOR plus 27 1/2 basis points.

In 1998,  CNA issued $1 billion of senior notes under a $1 billion  Registration
Statement  on Form S-3 filed with the  Securities  and  Exchange  Commission  on
August 18, 1997. This shelf registration incorporated $250 million of securities
remaining available for issuance from a prior shelf  registration.  Since filing
the shelf  registration,  the Company has issued  senior notes in four  separate
offerings with an aggregate principal amount of $1 billion.

On April 15, 1999, CNA retired $100 million of 8.25% senior notes.

On August 2, 1999,  the Company  repaid its $157 million,  11% Secured  Mortgage
Notes,  due  June  30,  2013.  The  gain  realized  on the  transaction  was not
significant.

CNA Surety Corporation (CNA Surety), a 63% owned subsidiary of the Company,  has
entered into a $130 million,  5 year revolving  credit  facility that expires in
September 2002. The interest rate on facility  borrowings is based on LIBOR plus
20 basis  points.  Additionally,  there is an  annual  facility  fee of 10 basis
points on the entire facility. The average interest rate on the borrowings under
this facility, including facility fees, at December 31, 1999 and 1998, was 6.49%
and 5.53%, respectively.

The combined  aggregate  maturities for debt at December 31, 1999, are presented
in the following table:

MATURITY OF DEBT
----------------------------------------------------------
Year Ended December 31
(In millions of dollars)
----------------------------------------------------------

2000                                              $     3
2001                                                  755
2002                                                  103
2003                                                  399
2004                                                    5
Thereafter                                          1,632
Less original issue discount                          (16)
----------------------------------------------------------
   TOTAL                                          $ 2,881
==========================================================

Commercial  paper is reported as due in 2001 in the foregoing  table because the
commercial paper program is fully supported by the Facility.

NOTE I - BENEFIT PLANS:
------------------------

PENSION AND POSTRETIREMENT HEALTHCARE AND LIFE
INSURANCE BENEFIT PLANS

CNA sponsors  noncontributory pension plans covering all full-time employees age
21 or over who have  completed at least one year of service.  While the terms of
the plans vary,  benefits are generally  based on years of credited  service and
the employee's highest sixty consecutive months of compensation.

CNA's funding  policy is to make  contributions  in accordance  with  applicable
governmental  regulatory  requirements.  The  assets of the  plans are  invested
primarily  in U.S.  government  securities  with the balance in mortgage  backed
securities, equity investments and short-term investments.

CNA provides certain health care benefits for eligible retirees, through age 64,
and provides life  insurance and  reimbursement  of Medicare Part B premiums for
all eligible  retired  persons.  The funding for these plans is generally to pay
covered expenses as they are incurred.

In  1999,  the  Company  recorded  curtailment  and  other  related  charges  of
approximately  $8 million  related to the transfer of personal  lines  insurance
business to  Allstate as  discussed  in Note O. This  transaction  resulted in a
reduction of the pension and postretirement  benefit  obligations of $44 million
and $2 million, respectively.

A 1999  amendment to the  postretirement  plan that  affected  early  retirement
eligibility  and level of employer  subsidy  resulted in a net  reduction in the
postretirement  benefit  obligation of approximately $40 million at December 31,
1999.

Additionally,  in 1999, the Company amended its benefit plans to introduce RSKCo
Choice.  The amendment resulted in a reduction in the pension and postretirement
benefit obligations of approximately $10 million and $8 million, respectively.

In 1998, CNA amended the Continental  Post-Retirement  Plan to make the benefits
available to Continental  retirees  equivalent to the benefits  available to CNA
retirees.   As  a  result  of  this   amendment,   the  Company's   consolidated
postretirement benefit obligation was reduced by $99 million.

The Company recorded  curtailment  charges of approximately  $19 million in 1998
related  to  its  restructuring   activities  as  discussed  in  Note  N.  These
curtailments  resulted in a reduction of the pension and postretirement  benefit
obligations of $88 million and $34 million, respectively.

The following table provides a reconciliation of benefit obligations:

BENEFIT OBLIGATIONS AND ACCRUED BENEFIT COSTS
-----------------------------------------------------------------------------
                                                            POSTRETIREMENT
                                          PENSION BENEFITS     BENEFITS
                                          ----------------  -----------------
(In millions of dollars)                  1999        1998   1999     1998
-----------------------------------------------------------------------------

Benefit obligation at January 1           $1,900   $1,780    $  321   $  377
Change in benefit obligation:
   Service cost                               64       58        11       11
   Interest cost                             129      126        22       28
   Participants' contributions                 -        -         4        5
   Plan amendments                           (10)       -       (48)     (99)
   Actuarial gain (loss)                    (130)     118        (5)      67
   Curtailment                               (44)     (88)       (2)     (34)
   Special termination benefits                3        -         -        -
   Acquisition                                 2        -         -        -
   Benefits paid                             (99)     (94)      (35)     (34)
-----------------------------------------------------------------------------
Benefit obligation at December 31          1,815    1,900       268      321
-----------------------------------------------------------------------------

Fair value of plan assets at January 1     1,424    1,313         -        -
Change in plan assets:
   Actual return on plan assets              (17)     105         -        -
   Acquisition                                 2        -         -        -
   Company contributions                     142      100        31       29
   Participants' contributions                 -        -         4        5
   Benefits paid                             (99)     (94)      (35)     (34)
-----------------------------------------------------------------------------
Fair value of plan assets at December 31   1,452    1,424         -        -
-----------------------------------------------------------------------------
Funded status                               (363)    (476)     (268)    (321)
Unrecognized net actuarial loss              173      239        41       51
Unrecognized prior service cost (benefit)     39       60      (132)     (97)
-----------------------------------------------------------------------------
   ACCRUED BENEFIT COST                   $ (151)  $ (177)   $ (359)  $ (367)
=============================================================================

The  components  of net periodic  benefit  costs are  presented in the following
table:

NET PERIODIC BENEFIT COSTS
--------------------------------------------------------------------------
                                                          POSTRETIREMENT
                                     PENSION BENEFITS        BENEFITS
Year ended December 31              ------------------   -----------------
(In millions of dollars)            1999   1998   1997   1999  1998   1997
--------------------------------------------------------------------------

Service cost                       $  64 $  58   $ 54   $ 11  $ 11  $  10
Interest cost on projected
benefit obligation                   129   126    119     22    28     25
Expected return on plan assets      (100)  (97)   (98)     -     -      -
Prior service cost amortization        6    10     11    (13)   (4)     -
Actuarial loss                         8     4      6      3     1      -
Transition amount amortization         -    (2)    (5)     -     -      -
Curtailment loss                       8    17      -      -     2      -
--------------------------------------------------------------------------
   NET PERIODIC BENEFIT COST       $ 115 $ 116   $ 87   $ 23  $ 38  $  35
==========================================================================

Actuarial assumptions are set forth in the following table:

ACTUARIAL ASSUMPTIONS
------------------------------------------------------------------------------
                                                            POSTRETIREMENT
                                    PENSION BENEFITS            BENEFITS
                                    -------------------   --------------------
December 31                         1999   1998    1997   1999    1998   1997
------------------------------------------------------------------------------

Discount rate                       7.75%  6.75%   7.25%  7.75%   6.75%  7.25%
Expected return on plan assets      8.00   7.00    7.50    N/A     N/A    N/A
Rate of compensation increases      5.70   5.70    5.70    N/A     N/A    N/A
------------------------------------------------------------------------------

The  assumed  health  care cost trend  rate used in  measuring  the  accumulated
postretirement  benefit obligation was 8% in 1999, declining to an ultimate rate
of 5% in 2002.  The health  care cost trend rate  assumption  has a  significant
effect on the amount of the benefit  obligation and periodic cost  reported.  An
increase  in the  assumed  health  care cost trend rate of 1% in each year would
increase the accumulated  postretirement  benefit  obligation as of December 31,
1999 by $12 million and the aggregate net periodic  postretirement  benefit cost
for 1999 by $2 million. A decrease in the assumed health care cost trend rate of
1% in each year would decrease the accumulated postretirement benefit obligation
as of  December  31,  1999  by  $11  million  and  the  aggregate  net  periodic
postretirement benefit cost for 1999 by $2 million.


SAVINGS PLANS

CNA sponsors savings plans, which are generally  contributory  plans, that allow
employees to make regular contributions of up to 16% of their salary, subject to
contain limitations  prescribed by the Internal Revenue Service. CNA contributes
an additional  amount equal to 70% of the first 6% of salary  contributed by the
employee.

Contributions by the Company to the savings plans were $23 million,  $25 million
and $23 million in 1999, 1998 and 1997, respectively.

STOCK OPTIONS

The Board of Directors approved the CNA Long-Term  Incentive Plan (the LTI Plan)
during  the third  quarter  of 1999,  which  authorizes  the grant of options to
certain  management  personnel  for up to 2.0  million  shares of the  Company's
common stock.  All options  granted have 10-year terms and vest ratably over the
four-year period following the date of grant. The number of shares available for
the  granting  of  options  under  the LTI Plan as of  December  31,  1999,  was
approximately 1.7 million.

The following table presents activity under the LTI Plan during 1999:

OPTION PLAN ACTIVITY
---------------------------------------------------------------------
                                                            Weighted
                                                            Average
                                                             Option
                                       Number of           Price Per
                                        Shares               Share
---------------------------------------------------------------------
Balance at January 1, 1999                   -            $        -
    Options granted                    294,900                 35.21
    Options forfeited                    3,600                 35.09
    Options exercised                        -                     -
---------------------------------------------------------------------
Balance at December 31, 1999           291,300            $    35.21
=====================================================================

The weighted-average remaining contractual life of options granted was 9.6 years
and the range of  exercise  prices on those  options  was $35.09 to  $36.53.  No
options were exercisable at December 31, 1999.

The fair  value of granted  options  was  estimated  at the grant date using the
Black-Scholes  option-pricing  model. The weighted-average fair value of options
granted during 1999 was $11.82. The following weighted-average  assumptions were
used for the year ended  December 31,  1999:  risk free  interest  rate of 6.2%;
expected  dividend  yield of  0.0%;  expected  option  life of five  years;  and
expected stock price volatility of 22.9%.

CNA Surety has reserved  shares of its common  stock for issuance to  directors,
officers,  employees and certain advisors of CNA Surety through  incentive stock
options,  non-qualified  stock  options and stock  appreciation  rights  under a
separate  plan (CNA Surety  Plan).  CNA Surety has also  reserved  shares of its
common stock for issuance to Capsure  Holdings  Corp.  (Capsure)  option holders
under the CNA Surety  Corporation  Replacement  Stock  Option Plan  (Replacement
Plan).  The CNA Surety Plan and the Replacement Plan have an aggregate number of
3.0 million shares  available for which options may be granted.  At December 31,
1999, approximately 1.2 million options were outstanding under these two plans.

The  Company  follows  the  financial  disclosure  provisions  of  Statement  of
Financial   Accounting   Standards   No.  123,   "Accounting   for   Stock-Based
Compensation"  (Statement 123) with respect to its stock-based  incentive plans.
The Company applies Accounting  Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related  interpretations,  in accounting for its
plan as permitted by Statement 123.  Accordingly,  no compensation cost has been
recognized  for any of the  aforementioned  plans,  as the exercise price of the
granted  options  equaled the market price of the underlying  stock at the grant
date.  However,  had the Company  applied the fair value  provision of Statement
123, the  Company's  net income,  including  the pro forma effect of the options
issued under the CNA Surety Plan and the  Replacement  Plan,  for the year ended
December 31, 1999, would have been a loss of $131 million,  or loss per share of
$0.78.

NOTE J - LEASES:
----------------

CNA occupies  facilities  under lease  agreements  that expire at various  dates
through  2015.  CNA's home office is partially  situated on grounds under leases
expiring  in 2058.  In  addition,  data  processing,  office and  transportation
equipment are leased under agreements that expire at various dates through 2004.
Most leases contain  renewal  options that provide for rent  increases  based on
prevailing market conditions.

CNA has vacated  certain  owned and leased  facilities  in  connection  with its
restructuring  and other related  activities (see Note N). These facilities have
been leased or subleased  under lease  agreements  that expire at various  dates
through 2014. Lease expense for the years ended December 31, 1999, 1998 and 1997
was $81 million,  $134 million and $105 million,  respectively.  Sublease income
for the years ended December 31, 1999, 1998 and 1997 was $7 million,  $5 million
and $5 million, respectively.

The table on the following page presents the future minimum lease payments to be
made under non-cancelable  operating leases along with lease and sublease future
minimum  receipts to be received on owned and leased  properties at December 31,
1999.

FUTURE LEASE PAYMENTS AND RECEIPTS
---------------------------------------------------------------------------
                               Future Minimum Lease   Future Minimum Lease
(In millions of dollars)            Payments               Receipts
---------------------------------------------------------------------------

2000                                 $   163               $    45
2001                                     103                    44
2002                                      90                    41
2003                                      72                    39
2004                                      47                    38
Thereafter                               153                   306
---------------------------------------------------------------------------
   TOTAL                             $   628               $   513
===========================================================================

NOTE K - STOCKHOLDERS' EQUITY AND STATUTORY FINANCIAL INFORMATION:
------------------------------------------------------------------
<TABLE>
<CAPTION>
SUMMARY OF CAPITAL STOCK
-----------------------------------------------------------------------------------------------------
                                                                                 Number of Shares
December 31                                                                    1999          1998
-----------------------------------------------------------------------------------------------------
<S>                                                                         <C>          <C>
Preferred stock, without par value, non-voting:
   Authorized                                                                12,500,000   12,500,000
Money market cumulative preferred stock, without par value, non-voting;
   Issued and outstanding:
     Series E (stated value $100,000 per share)                                     750          750
     Series F (stated value $100,000 per share)                                     750          750
Cumulative, exchangeable preferred stock, without par value, non-voting;
     Series G (stated value $100,000 per share)                                      --        2,000
Common stock with par value of $2.50;
   Authorized                                                               500,000,000  200,000,000
   Issued                                                                   185,525,907  185,525,907
   Outstanding                                                              184,406,931  183,889,569
   Treasury stock                                                             1,118,976    1,636,338
-----------------------------------------------------------------------------------------------------
</TABLE>

On May 20, 1999, the Company increased the number of authorized shares of common
stock from 200,000,000 to 500,000,000.

On May 6, 1998, CNA's Board of Directors  approved a three-for-one  split of the
Company's  common  stock which  increased  the  outstanding  common  shares from
61,798,262  to  185,394,786.  The  shares  were  distributed  on June 1, 1998 to
shareholders of record on May 22, 1998.

The dividend rate on money market  preferred  stock is determined  approximately
every 49 days by auction.  The money market  preferred  stock is  redeemable  at
CNA's  option,  as a whole or in part,  at $100,000  per share plus  accrued and
unpaid  dividends.  As of December 31, 1999,  preferred  dividends  declared and
payable  were  approximately  $7 million.  On  February  15,  2000,  the Company
announced  its  intention  to purchase or redeem all  outstanding  shares of its
money market preferred stock.

On  August  5,  1998,  CNA's  Board of  Directors  approved  a plan  (the  Share
Repurchase  Program)  to  purchase,  in the open  market  or  through  privately
negotiated transactions,  its outstanding common stock from time to time, as the
Company's  management deems appropriate.  During 1998, pursuant to the announced
Share Repurchase Program, CNA purchased 2,734,800 shares of its common stock for
approximately $102 million. Total shares classified on the December 31, 1999 and
December 31, 1998 balance  sheets as treasury stock are 1,118,976 and 1,636,338,
respectively,  resulting in a decrease in stockholders'  equity of approximately
$41 million and $61 million, respectively.

On October  9, 1998,  CNA filed a  Registration  Statement  on Form S-8 with the
Securities and Exchange  Commission  registering  $60 million of $2.50 par value
common stock, to be offered pursuant to the CNA Officer Stock Ownership Plan. On
October 9, 1998,  prior to the  opening of the  trading  session on the New York
Stock  Exchange,  CNA sold  1,229,583  shares of common  stock that were held in
treasury  to certain  senior  officers  of CNA at the average of the highest and
lowest sale price on the New York Stock Exchange composite  transactions,  which
was at a price  of  $34.91  per  share.  The  purchases  were  financed  by full
recourse,  collateralized  loans from CNA, which, at December 31, 1998, were $44
million,  including accrued interest.  The loans are ten year notes,  which bear
interest  at the  Applicable  Federal  Rate  (AFR)  for  October  1998  (5.39%),
compounding semi-annually.

During 1999,  CNA sold an  additional  507,362  shares of common stock that were
held in  treasury  to certain  senior  officers  of CNA,  at the  average of the
highest  and  lowest  sale  prices  on the New  York  Stock  Exchange  composite
transactions,  for the dates of the sales.  The purchases  were financed by full
recourse,  collateralized  loans from CNA which at December 31,  1999,  totaling
approximately $20 million,  including  accrued interest.  The loans are ten-year
notes,  which bear  interest  at the AFR for March 1999  (5.23%) and August 1999
(6.14%), compounding semi-annually.

On  December  23,  1998,  CNA  issued  2,000  shares  of  Series  G  cumulative,
exchangeable  preferred  stock to Loews for $200  million.  On June 30, 1999 CNA
repurchased the Series G preferred stock from Loews.

STATUTORY ACCOUNTING PRACTICES

CNA's  insurance  subsidiaries  are  domiciled in various  jurisdictions.  These
subsidiaries   prepare  statutory   financial   statements  in  accordance  with
accounting  practices  prescribed  or  otherwise  permitted  by  the  respective
jurisdictions'  insurance regulators.  Prescribed statutory accounting practices
are set  forth in a variety  of  publications  of the  National  Association  of
Insurance  Commissioners  as  well  as  state  laws,  regulations,  and  general
administrative  rules.  The Company's  insurance  subsidiaries  have no material
permitted accounting practices.

CNA's  ability to pay  dividends to its  stockholders  is affected,  in part, by
receipt of dividends from its  subsidiaries.  The payment of dividends to CNA by
its insurance subsidiaries without prior approval of the insurance department of
each subsidiary's domiciliary  jurisdiction is limited by formula.  Dividends in
excess of these  amounts are subject to  pre-approval  by the  respective  state
insurance  departments.  As of December 31, 1999,  approximately $887 million of
dividend payments would not be subject to insurance department pre-approval.

Combined  statutory  capital and surplus and net income (loss), determined  in
accordance with accounting  practices prescribed by the regulations and statutes
of  various  insurance  regulators,  for  property/casualty  and life  insurance
subsidiaries are as follows:

STATUTORY INFORMATION
-------------------------------------------------------------------------------
                              Statutory Capital and        Statutory Net
                                     Surplus                Income(Loss)
                             ----------------------  --------------------------
                                   December 31        Year Ended December 31
(Unaudited)                  ----------------------  --------------------------
(In millions of dollars)        1999       1998        1999     1998      1997
-------------------------------------------------------------------------------

Property/casualty  companies*  $8,679     $7,593        $361    $161    $1,043
Life insurance companies        1,222      1,109          77     (57)       43
-------------------------------------------------------------------------------
* Surplus  includes  equity of  property/casualty  companies'  ownership in life
insurance subsidiaries.

NOTE L - COMPREHENSIVE INCOME:
------------------------------

Comprehensive income is comprised of all changes to stockholders' equity, except
those changes resulting from transactions with stockholders in their capacity as
stockholders. The components of comprehensive income are shown below:

COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
Year ended December 31
(In millions of dollars)                                             1999    1998    1997
-------------------------------------------------------------------------------------------
<S>                                                                 <C>     <C>     <C>
Net income (loss)                                                   $(130)  $ 282   $  966
Other comprehensive income:
   Change in unrealized gains/losses on general account investments:
     Holding gains (losses) arising during the period                 729     925      567
Unrealized losses (gains) at beginning of period included in
       realized gains/losses during the period                       (413)   (207)    (186)
-------------------------------------------------------------------------------------------
   Net change in unrealized gains/losses on general account           316     718      381
   investments
   Net change in unrealized gains (losses) on separate                (74)      5        -
     accounts and other
   Foreign currency translation adjustment                            (42)      7       19
   Minority interest and other                                         24      (6)      (9)
-------------------------------------------------------------------------------------------
   Other comprehensive income, before tax                             224     724      391
Deferred income tax expense related to other comprehensive           (100)   (249)    (101)
     income
-------------------------------------------------------------------------------------------
Other comprehensive income, net of tax                                124     475      290
-------------------------------------------------------------------------------------------
   TOTAL COMPREHENSIVE INCOME (LOSS)                                $  (6)  $ 757   $1,256
===========================================================================================
</TABLE>

In  the  preceeding  table,   deferred  income  tax  expense  related  to  other
comprehensive  income  is  attributable  to  each  of the  components  of  other
comprehensive  income  in  equal  proportion  except  for the  foreign  currency
translation adjustment, for which there are no deferred taxes.

The following table displays the components of accumulated  other  comprehensive
income  included in the  consolidated  balance  sheets at December  31, 1999 and
1998.

ACCUMULATED OTHER COMPREHENSIVE INCOME
-----------------------------------------------------------------
December 31
(In millions of dollars)                     1999          1998
-----------------------------------------------------------------

Foreign currency translation adjustment    $   31         $   73
Net unrealized gains on investments         1,157            991
-----------------------------------------------------------------
ACCUMULATED OTHER COMPREHENSIVE INCOME     $1,188         $1,064
=================================================================

NOTE M - BUSINESS SEGMENTS:
---------------------------

CNA conducts its  operations  through seven  operating  segments:  Agency Market
Operations,  Specialty Operations,  CNA Re, Global Operations,  Risk Management,
Group  Operations  and Life  Operations.  In  addition  to the  seven  operating
segments,  certain other activities are reported in a Corporate  segment.  These
segments  reflect  the  way  in  which  CNA  distributes  its  products  to  the
marketplace  and the way in which  it  manages  operations  and  makes  business
decisions.

Agency Market Operations provides a wide range of property/casualty  products to
individuals and small to mid-size  businesses.  Specialty  Operations provides a
broad array of professional,  financial and specialty property/casualty products
and  services.  CNA Re offers  primarily  traditional  property/casualty  treaty
reinsurance.  Global Operations provides marine, casualty,  surety, warranty and
specialty products.  Risk Management serves the property/casualty needs of large
domestic commercial businesses by offering customized, solution-based strategies
to address risk management needs. Group Operations offers a broad array of group
life and health insurance and reinsurance products to employers, affinity groups
and other entities that purchase insurance as a group. Life Operations  provides
financial  protection  to  individuals  through a full product line of term life
insurance,  universal life insurance, long-term care insurance and annuities and
provides retirement service products to institutional markets.

Corporate  segment results consist of interest expense on corporate  borrowings,
certain  run-off  insurance  operations,  asbestos  claims related to Fibreboard
Corporation,  financial guarantee insurance contracts, and certain non-insurance
operations,  principally  the  operations  of  AMS  Services,  Inc.  (AMS),  an
information technology and agency software development subsidiary. See Note O to
the  consolidated  financial  statements  regarding  the  sale of a  significant
portion of the Company's investment in AMS during 1999.

The accounting  policies of the segments are the same as those  described in the
summary of significant  accounting polices.  The Company manages its assets on a
legal entity basis while segment operations are conducted across legal entities,
as such assets are not readily  identifiable by individual segment. In addition,
distinct  investment  portfolios  are  not  maintained  for  each  segment,  and
accordingly,  allocation of assets to each segment is not  performed.  Therefore
investment  income and realized  investment  gains/losses are allocated based on
each segment's net carried insurance reserves, as adjusted.

All intersegment income and expense has been eliminated. Risk Management's other
revenues and expenses in 1999 include revenues for services  provided by RSKCoSM
to other units within the Risk  Management  segment that are  eliminated  at the
consolidated  level.  Such intrasegment  revenue and expenses  eliminated at the
consolidated level were $176 million for the year ended December 31, 1999.

Income  taxes  have been  allocated  on the basis of the  taxable  income of the
segments.

Approximately 97% of the Company's  premiums are derived from the United States.
Premiums from any individual foreign country are not significant.


Group Operations'  revenues include $2.1 billion,  $2.0 billion and $2.1 billion
in 1999, 1998 and 1997,  respectively,  under contracts covering U.S. government
employees and their dependents (FEHBP).

SEGMENT RESULTS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
                                                    Agency
Year Ended December 31, 1999                        Market    Specialty               Global     Risk
(In millions of dollars)                          Operations Operations    CNA Re  Operations  Management
----------------------------------------------------------------------------------------------------------
<S>                                                <C>         <C>        <C>         <C>         <C>
Net earned premiums                                $ 4,799     $ 1,001    $ 1,176     $ 1,010     $   801
Benefits and Expenses                                5,791       1,166      1,369       1,037         936
Restructuring and other related charges                 60           -          -           -           -
----------------------------------------------------------------------------------------------------------
Underwriting gain (loss)                            (1,052)       (165)      (193)        (27)       (135)
Net investment income                                  686         235        161         132         154
Other revenues                                          80          19          4         120         316
Other expenses                                          77          30          -         100         307
Non-insurance restructuring & related charges            -           -          -           -          10
----------------------------------------------------------------------------------------------------------
Pre-tax operating income (loss)                       (363)         59        (28)        125          18
Income tax benefit (expense)                           162         (10)        15         (33)          1
Minority interest                                        -           -          -         (28)          -
----------------------------------------------------------------------------------------------------------
Net operating income (loss) (excluding realized
       investment gains (losses))                     (201)         49        (13)         64          19
Realized investment gains, net of tax and
       minority interest                                75          38         21          15          19
Cumulative effect of a change in accounting
       principle, net of tax                          (93)         (3)          -          (3)        (74)
----------------------------------------------------------------------------------------------------------
Net income (loss)                                 $  (219)    $    84    $      8     $    76     $   (36)
==========================================================================================================
</TABLE>

                           SEGMENT RESULTS (CONTINUED)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
                                                     Agency
Year Ended December 31, 1998                         Market    Specialty               Global     Risk
(In millions of dollars)                           Operations Operations    CNA Re  Operations  Management
----------------------------------------------------------------------------------------------------------
<S>                                               <C>         <C>        <C>          <C>         <C>
Net earned premiums                               $ 5,247     $ 1,092    $    944     $   941     $   823
Benefits and Expenses                               6,050       1,251       1,005         991       1,018
Restructuring and other related charges                96           5           1           1           -
----------------------------------------------------------------------------------------------------------
Underwriting gain (loss)                             (899)       (164)        (62)        (51)       (195)
Net investment income                                 744         245         163         110         144
Other revenues                                         48          27           5          82         230
Other expenses                                         52          44          11          80         227
Non-insurance restructuring & related charges           -           -           -           -          88
----------------------------------------------------------------------------------------------------------
Pre-tax operating income (loss)                      (159)         64          95          61        (136)
Income tax benefit (expense)                          105          (6)        (27)        (18)         48
Minority interest                                       -           -           -         (25)          -
----------------------------------------------------------------------------------------------------------
Net operating income (loss) (excluding realized
       investment gains (losses))                     (54)         58          68          18         (88)
Realized investment gains, net of tax and
       minority interest                              171          57          27          17          31
----------------------------------------------------------------------------------------------------------
Net income (loss)                                 $   117     $   115     $    95     $    35     $   (57)
==========================================================================================================
</TABLE>
---------------------------------------------------------------------

     Group           Life
  Operations      Operations   Corporate   Eliminations      Total
---------------------------------------------------------------------

$   3,571        $     936     $      35      $     (47)   $  13,282
    3,706            1,331           228           (224)      15,340
        5                -             -              -           65
---------------------------------------------------------------------
     (140)            (395)         (193)           177       (2,123)
      130              556            47              -        2,101
       40              123           204           (196)         710
       46               68           387            (19)         996
        -                -             8              -           18
---------------------------------------------------------------------
      (16)             216          (337)             -         (326)
       10              (71)          137              -          211
        -                -            (2)             -          (30)
---------------------------------------------------------------------

       (6)             145          (202)             -         (145)

        4              (31)           51              -          192

       (2)              (2)            -              -         (177)
---------------------------------------------------------------------
$      (4)       $     112     $    (151)     $       -    $    (130)
=====================================================================

---------------------------------------------------------------------

     Group           Life
  Operations      Operations     Corporate   Eliminations     Total
---------------------------------------------------------------------

$   3,733        $     823     $     (26)     $     (41)   $  13,536
    3,903            1,225           308            (57)      15,694
       39                3             -              -          145
---------------------------------------------------------------------
     (209)            (405)         (334)            16       (2,303)
      133              525            82              -        2,146
       24              115           284            (16)         799
       31               68           360              -          873
        -                4             9              -          101
---------------------------------------------------------------------
      (83)             163          (337)             -         (332)
       35              (58)          121              -          200
        -                -             5              -          (20)
---------------------------------------------------------------------

      (48)             105          (211)             -         (152)

       29               82            20              -          434
---------------------------------------------------------------------
$     (19)       $     187     $    (191)     $       -    $     282
=====================================================================

SEGMENT RESULTS (CONTINUED)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
                                                     Agency
Year Ended December 31, 1997                         Market    Specialty               Global     Risk
(In millions of dollars)                           Operations Operations    CNA Re  Operations  Management
----------------------------------------------------------------------------------------------------------
<S>                                                <C>         <C>        <C>         <C>         <C>
Net earned premiums                               $ 5,092     $ 1,251    $    898     $   854     $    776
Benefits and expenses                               5,491       1,397         991         858          974
-----------------------------------------------------------------------------------------------------------
Underwriting gain(loss)                              (399)       (146)        (93)         (4)        (198)
Net investment income                                 787         268         153         117          158
Other revenues                                         50          14           7          29          194
Other expenses                                          6          10           5          26          216
-----------------------------------------------------------------------------------------------------------
Pre-tax operating income (loss)                       432         126          62         116          (62)
Income tax benefit (expense)                         (106)        (31)        (11)        (35)          25
Minority interest                                       -           -           -         (29)           -
-----------------------------------------------------------------------------------------------------------
Net operating income (loss) (excluding realized
       investment gains/(losses))                     326          95          51          52          (37)
Realized investment gains, net of tax and
       minority interest                              187          63          34          20           37
-----------------------------------------------------------------------------------------------------------
NET  INCOME (LOSS)                                $   513      $  158     $    85     $    72     $      -
===========================================================================================================
</TABLE>
---------------------------------------------------------------------

     Group           Life
  Operations      Operations     Corporate   Eliminations     Total
---------------------------------------------------------------------

$   3,936        $     797     $      20      $       -    $  13,624
    4,069            1,158           323            (24)      15,237
---------------------------------------------------------------------
     (133)            (361)         (303)            24       (1,613)
      117              501           108              -        2,209
       17              105           249            (37)         628
       19               58           267            (13)         594
---------------------------------------------------------------------
      (18)             187          (213)             -          630
       10              (66)           82              -         (132)
        -                -            19              -          (10)
---------------------------------------------------------------------

       (8)             121          (112)             -          488

       28              124           (15)             -          478
---------------------------------------------------------------------
$      20        $     245     $    (127)     $       -    $     966
=====================================================================

NOTE N - RESTRUCTURING AND OTHER RELATED CHARGES:
-------------------------------------------------

The Company  finalized  and approved a  restructuring  plan (the Plan) in August
1998. In connection with the Plan, the Company  incurred  various  expenses that
were  recorded  in the third and fourth  quarters of 1998 and  throughout  1999.
These restructuring and other related charges primarily related to the following
activities:  planned  reductions in the workforce;  the consolidation of certain
processing  centers;  the  exiting of certain  businesses  and  facilities;  the
termination of lease obligations;  and the writeoff of certain assets related to
these activities.  The Plan contemplates a gross reduction in workforce of 4,500
employees,   resulting  in  a  planned  net  reduction  of  approximately  2,400
employees.  As of December 31, 1999, the Company had completed  essentially  all
aspects of the Plan.

The  Company  accrued  $220  million of these  restructuring  and other  related
charges in the third quarter of 1998 (the Initial  Accrual).  Other charges such
as parallel processing costs,  relocation costs, and retention bonuses,  did not
qualify  for  accrual  under GAAP and have been  charged to expense as  incurred
(Period Costs). The Company incurred Period Costs of $83 million and $26 million
during 1999 and the fourth quarter of 1998, respectively.

The Company incurred  restructuring and other related charges of $246 million in
1998 that were comprised of the Initial Accrual and fourth quarter Period Costs,
and which  included  the  following:  a) costs and  benefits  related to planned
employee  terminations of $98 million, of which $53 million related to severance
and outplacement costs, $24 million related to other employee transition related
costs and $21 million related to benefit plan curtailment costs; b) writedown of
certain assets to their fair value of $74 million,  of which $59 million related
to a writedown of an intangible  asset,  and $15 million of abandoned  leasehold
improvements  and other  related fixed assets  associated  with leases that were
terminated as part of the restructuring  plan; c) lease termination costs of $42
million; d) losses incurred on the exiting of certain businesses of $32 million.

The 1998  restructuring  and other  related  charges  incurred by Agency  Market
Operations  were  approximately  $96 million.  These charges  included  employee
severance  and  outplacement  costs of $43  million  related to the  planned net
reduction in the workforce of approximately  1,200 employees.  Lease termination
costs  of  approximately  $29  million  were  incurred  in  connection  with the
consolidation  of four regional offices into two zone offices and a reduction of
the  number  of  claim  processing  offices  from  24 to 8.  The  Agency  Market
Operations  charges also included benefit plan curtailment costs of $12 million,
parallel  processing  charges  of $7  million  and $5  million  of  fixed  asset
writedowns.   Through  December  31,  1998,   approximately  364  Agency  Market
Operations  employees,  the  majority  of whom were loss  adjusters  and  office
support staff had been released.

The 1999 Period Costs incurred by Agency Market  Operations  were  approximately
$60 million.  These charges included  employee  related expenses  (outplacement,
retention  bonuses and  relocation  costs) of $23 million,  parallel  processing
costs of $16 million and  consulting  expenses of $10  million.  Other  charges,
including  technology  and facility  charges,  were  approximately  $15 million.
Additionally,   Agency  Market   Operations   reduced  its  estimate  for  lease
termination  costs by $4 million during 1999. During 1999,  approximately  1,000
Agency Market  Operations  employees,  the majority of whom were office  support
staff, were released.

The 1998  restructuring  and other related  charges  incurred by Risk Management
were  approximately $88 million.  These charges included lease termination costs
associated with the  consolidation of claim offices in 36 market  territories of
approximately $8 million. In addition, employee severance and outplacement costs
relating  to the  planned  net  reduction  in  workforce  of  approximately  200
employees  were  approximately  $10  million  and the  writedown  of  fixed  and
intangible assets was approximately $64 million.  Parallel  processing and other
charges were approximately $6 million.  Through December 31, 1998, approximately
152 Risk Management employees had been released, the majority of whom were claim
adjusters and office support staff.

The  charges  related to fixed and  intangible  assets were  primarily  due to a
writedown of an intangible asset (goodwill)  related to Alexsis,  Inc., a wholly
owned  subsidiary   acquired  by  the  Company  in  1995  that  provided  claims
administration services for unrelated parties. As part of the Company's periodic
reviews of asset  recoverability  and as a result of several adverse events, the
Company concluded,  based on an undiscounted cash flow analysis completed in the
third  quarter of 1998,  that an impairment  existed,  and based on a discounted
cash flow  analysis,  that a $59 million  writeoff  was  necessary.  The adverse
events  contributing  to this  conclusion  included  operating  losses  from the
business,  the loss of several significant  customers whose business volume with
this operation  constituted a large portion of the revenue base, and substantial
changes in the overall market demand for the services  offered by this operation
which,  in turn,  had  negative  effects  on the  prospects  for  achieving  the
profitability levels necessary to recover the intangible asset.

The 1999  Period  Costs  incurred  by Risk  Management  were  approximately  $10
million.  These charges  included  employee  related  expenses of $3 million and
parallel processing charges of $3 million.  Other charges,  including consulting
and  facility  charges,  were  approximately  $7  million.  Additionally,   Risk
Management  reduced its estimate for lease  termination  costs by $2 million and
its estimate of employee severance costs by $1 million during 1999. During 1999,
approximately 136 Risk Management employees were released,  the majority of whom
were claims adjusters and office support staff.

The 1998  restructuring  and other related charges  incurred by Group Operations
were approximately $39 million. These charges included approximately $29 million
of costs  related to the  Company's  decision  to exit the  Employer  Health and
Affinity  lines of business.  These costs  represent the  Company's  estimate of
losses in connection with fulfilling the remaining  obligations under contracts.
Earned premiums for these lines of business were  approximately  $400 million in
1998. The 1998 charges also included employee  severance and outplacement  costs
of approximately $7 million related to the planned net reduction in workforce of
approximately 400 employees. Charges for lease termination costs and fixed asset
writedowns were $3 million.  Through  December 31, 1998,  approximately 56 Group
Operations  employees had been released.  The majority of the released employees
were claims and sales support staff.

The 1999  Period  Costs  incurred  by Group  Operations  were  approximately  $5
million.  These  charges  include $7 million of employee  severance  and related
charges.  Additionally,  Group Operations reduced its estimate for business exit
costs by $2 million during 1999. During 1999, approximately 300 Group Operations
employees  were released,  the majority of whom were claims  adjusters and sales
support staff.

For the other segments of the Company,  restructuring  and other related charges
were approximately $23 million in 1998. Charges related primarily to the closing
of leased  facilities  were $3 million and employee  severance and  outplacement
costs  related  to  planned  net  reductions  of 600  employees  in the  current
workforce and benefit costs  associated with those  reductions were $13 million.
In  addition,  there  were  charges of $4 million  related to the  writedown  of
certain  assets and $3 million  related  to the  exiting of certain  businesses.
Through December 31, 1998,  approximately 270 employees of these other segments,
most of whom were underwriters and office support staff, had been released.

For the other  segments  of the  Company,  Period  Costs were  approximately  $8
million for 1999. These charges were primarily for employee  termination related
costs.  Through  December 31, 1999,  approximately  600 employees of these other
segments,  most of whom were  underwriters  and office support  staff,  had been
released.

The following  table sets forth the major  categories of the Initial Accrual and
the activity in the accrual during 1998 and 1999.

ACCRUED RESTRUCTURING AND OTHER RELATED CHARGES
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
                                    Employee
                                  Termination and                 Lease
                                  Related Benefit    Writedown  Termination  Business
(In millions of dollars)             Costs           of Assets    Costs     Exit Costs   Total
-----------------------------------------------------------------------------------------------
<S>                                  <C>              <C>          <C>        <C>        <C>
Initial Accrual                      $72              $74          $42        $32        $220
    Payments charged against
    liability                        (14)               -            -          -         (14)
     Costs that did not
     require cash                    (21)             (74)           -          -         (95)
-----------------------------------------------------------------------------------------------
Accrued costs at December 31,
1998                                  37                -           42         32         111
    Payments charged against
    liability                        (32)               -           (9)       (15)        (56)
    Reduction in estimated
    costs                             (1)               -           (6)        (2)         (9)
-----------------------------------------------------------------------------------------------
Accrued costs at
December 31, 1999                     $4               $-          $27        $15        $ 46
================================================================================================
</TABLE>

NOTE O - SIGNIFICANT TRANSACTIONS:
----------------------------------

PERSONAL INSURANCE TRANSACTION

On October 1, 1999,  certain  subsidiaries  of CNA completed a transaction  with
Allstate,  whereby CNA's personal lines insurance business and related employees
were  transferred  to  Allstate.  Approximately  $1.1  billion  of cash and $1.1
billion of additional assets (primarily premium  receivables and deferred policy
acquisition  costs) were  transferred  to Allstate,  and  Allstate  assumed $2.2
billion  of claim and  claim  adjustment  expense  reserves.  Additionally,  CNA
received  $140  million in cash which  consisted  of (i) $120  million in ceding
commission  for  the  reinsurance  of the CNA  personal  insurance  business  by
Allstate, and (ii) $20 million for an option exercisable during 2002 to purchase
100% of the common stock of five CNA insurance  subsidiaries at a price equal to
GAAP carrying value as of the exercise date. Also, CNA invested $75 million in a
ten year equity-linked note issued by Allstate.

CNA will continue to write new and renewal  personal  insurance  policies and to
reinsure  this business  with  Allstate  companies,  until such time as Allstate
exercises  its  option  to buy the five  CNA  subsidiaries.  Prior to 2002,  the
Company will concentrate the direct writing of personal lines insurance business
into the five optioned  companies,  such that most, if not all, business related
to this  transaction  will be written by those  companies  by the date  Allstate
exercises  its option.  CNA  continues  to have  primary  liability  on policies
reinsured by Allstate.

CNA will  continue  to have an ongoing  interest in the  profitability  of CNA's
personal lines insurance  business and the related successor business through an
agreement  licensing  the "CNA  Personal  Insurance"  trademark and a portion of
CNA's  Agency  Market  Operations  distribution  system to  Allstate  for use in
Allstate's  personal insurance agency business for a period of five years. Under
this  agreement,  CNA will receive a royalty fee based on the business volume of
personal  insurance  policies  sold  through  the CNA agents for a period of six
years.  In  addition,  the $75  million  equity-linked  note will be redeemed on
September 30, 2009 (subject to earlier  redemption on stated  contingencies) for
an amount  equal to the face  amount plus or minus an amount not  exceeding  $10
million,  depending  on  the  underwriting  profitability  of the  CNA  personal
insurance business.

CNA also shares in any reserve development related to claim and claim adjustment
expense  reserves  transferred to Allstate at the  transaction  date.  Under the
reserve development  sharing agreement,  80% of any favorable or adverse reserve
development  up to $40  million  and 90% of any  favorable  or  adverse  reserve
development in excess of $40 million inure to CNA. CNA's obligation with respect
to unallocated  loss adjustment  expense reserves was settled at the transaction
date, and is therefore not subject to the reserve sharing arrangement.

The retroactive portion of the reinsurance transaction,  consisting primarily of
the cession of claim and claim adjustment  expense reserves  approximating  $1.0
billion,  was not recognized as reinsurance  because  criteria for risk transfer
was not met for this portion of the transaction.  The related consideration paid
was  recorded as a deposit and is included  in  reinsurance  receivables  in the
consolidated  balance sheets. The prospective portion of the transaction,  which
as of the transaction date consisted primarily of the cession of $1.1 billion of
unearned  premium  reserves,  has been  recorded  as  reinsurance.  The  related
consideration paid was recorded as prepaid reinsurance premiums.  Premiums ceded
after the  transaction  date will  follow this same  treatment.  The $20 million
received from Allstate for the option to purchase the five CNA  subsidiaries was
deferred and will not be recognized  until  Allstate  exercises  its option,  at
which time it will be recorded in realized gains and losses.

CNA recognized an after-tax realized loss of  approximately  $39 million related
to the transaction, consisting primarily of the accrual of lease obligations and
the  write-down of assets that related  specifically  to the Personal  Insurance
lines of business.  The ceding commission related to the prospective  portion of
the  transaction  will be recognized in  proportion  to the  recognition  of the
unearned  premium  reserve  to which  it  relates.  $51  million  of the  ceding
commission was earned in 1999. Royalty fees earned in 1999 were approximately $7
million.

The Personal  Insurance  lines  transferred to Allstate  contributed  net earned
premiums  of $1,354  million,  $1,622  million  and $1,607  million  and pre-tax
operating  income of $89  million,  $97  million  and $237  million for the nine
months ended  September 30, 1999 and the years ended December 31, 1998 and 1997,
respectively.

SALE OF AMS SERVICES, INC.

On November  30, 1999,  CNA sold the  majority of its interest in AMS  Services,
Inc. (AMS), a software  development company serving the insurance agency market.
Prior to the sale,  CNA owned 89% of AMS and  consolidated  AMS in its financial
statements.  As a result of the sale, CNA owns 9% of AMS and therefore AMS is no
longer  consolidated.  CNA  recognized  an after-tax  gain of $21 million on the
sale. Total assets of AMS as of the sale date were  approximately  $135 million.
CNA's share of the AMS' operating results were $206 million,  $264 million,  and
$216 million of operating revenue and $8 million,  $28 million,  and $10 million
of operating  losses,  for the eleven  months ended  November 30, 1999,  and the
years ended December 31, 1998 and 1997, respectively.

MERGER WITH CAPSURE HOLDINGS CORP.

In the fourth quarter of 1996, CNA entered into a merger  agreement with Capsure
Holdings  Corp.  (Capsure) to merge CNA's surety  business  with the business of
Capsure and form a new stock company,  CNA Surety  Corporation (CNA Surety),  of
which CNA owns  approximately  63%. The transaction closed on September 30, 1997
and was accounted for as a sale of  approximately  39% of CNA's previous  surety
business and a purchase of 61% of Capsure.  In  conjunction  with the closing of
the  transaction,  CNA realized an investment gain of $95 million.  CNA Surety's
results  of  operations  have been  included  in CNA's  consolidated  results of
operations,  net of minority  interest  subsequent  to September  30,  1997.  At
December 31, 1997,  total assets of CNA Surety were $727  million.  CNA Surety's
revenues  and net income  for the three  months  ended  December  31,  1997 were
approximately $71 million and $11 million, respectively.

NOTE P - UNAUDITED QUARTERLY FINANCIAL DATA:
--------------------------------------------

UNAUDITED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
(In millions of dollars,
except per share data)                     First    Second    Third    Fourth      Year
--------------------------------------------------------------------------------------------
<S>                                        <C>       <C>       <C>       <C>        <C>
1999 QUARTERS

Revenues                                   $4,386    $4,387    $3,922    $3,708     $16,403
Net operating income (loss)
    excluding realized gains/losses            28        45        82      (300)       (145)
Net realized investment gains (losses)        144       109       (53)       (8)        192
--------------------------------------------------------------------------------------------
Net Income (loss) before cumulative effect
  of a change in accounting principle         172       154        29      (308)         47
Cumulative effect of a change in
  accounting principle, net of tax           (177)        -         -         -        (177)
--------------------------------------------------------------------------------------------
Net income (loss)                          $   (5)   $  154    $   29    $ (308)    $  (130)
============================================================================================

Basic and diluted earnings (loss) per
share                                      $(0.05)   $ 0.82    $ 0.15    $(1.68)    $ (0.77)
============================================================================================

1998 QUARTERS

Revenues                                   $4,354    $4,466    $4,170    $4,172   $17,162
Net operating income (loss)
    excluding realized gains/losses           117        64       (70)     (263)     (152)
Net realized investment gains                 116       146        56       116       434
------------------------------------------------------------------------------------------
Net income (loss)                          $  233    $  210    $  (14)   $ (147)  $   282
==========================================================================================
Earnings (loss) per share                  $ 1.25    $ 1.12    $(0.09)   $(0.81)  $  1.49
==========================================================================================

1997 QUARTERS

Revenues                                   $4,172    $4,273    $4,337    $4,417   $17,199
Net operating income
    excluding realized gains/losses           136       126       121       105       488
Net realized investment gains                  42       109       153       174       478
------------------------------------------------------------------------------------------
Net income                                 $  178    $  235    $  274    $  279   $   966
==========================================================================================
Earnings per share                         $ 0.95    $ 1.26    $ 1.47    $ 1.49   $  5.17
==========================================================================================
</TABLE>

NOTE Q- RELATED PARTY TRANSACTIONS:
-----------------------------------

CNA reimburses or pays directly to Loews for management fees, travel and related
expenses,  and expenses of investment  facilities and services  provided to CNA.
Amounts paid to Loews amounted to approximately $13 million, $13 million and $11
million in 1999, 1998 and 1997, respectively.

CNA and its  eligible  subsidiaries  are  included in the  consolidated  Federal
income  tax  return of Loews  and its  eligible  subsidiaries.  See Note D for a
detailed  description of the income tax agreement between the Company and Loews.
Note D also  includes  payments  made between the Company and Loews  pursuant to
this agreement.

CNA writes,  at standard  rates, a limited amount of insurance for Loews and its
affiliates. The total premiums from Loews and its affiliates were $5 million for
1999, and $6 million for 1998 and 1997.

CNA  assumes the risk for a limited  amount of  insurance  from R.V.I.  Guaranty
Company, Inc. (RVI), a 50% owned affiliate. CNA assumed approximately $5 million
in written premiums from RVI during 1999.

CNA sponsors a stock ownership plan whereby the Company finances the purchase of
Company  stock  by  certain  executive  officers.  See  Note  K for  a  detailed
discussion of this plan.




                        INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders of CNA Financial Corporation:

We have audited the consolidated balance sheets of CNA Financial Corporation (an
affiliate of Loews  Corporation)  and  subsidiaries  as of December 31, 1999 and
1998,  and the related  consolidated  statements  of  operations,  stockholders'
equity,  and cash flows for each of the three years in the period ended December
31, 1999.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements  based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management, as well as evaluating the ove rall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,  the  financial  position of CNA Financial  Corporation  and
subsidiaries  as of  December  31,  1999  and  1998,  and the  results  of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with generally accepted accounting principles.

As discussed in Note A to the  consolidated  financial  statements,  the Company
changed  its  method  of  accounting  for  liabilities   for   insurance-related
assessments in 1999.

DELOITTE & TOUCHE LLP

Chicago, Illinois
February 23, 2000