================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the Year Ended December 31, 1996               Commission File Number 1-5823

                         ------------------------------
                            CNA FINANCIAL CORPORATION
             (Exact name of registrant as specified in its charter)

          DELAWARE                                         36-6169860
(State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                         Identification No.)

               CNA PLAZA
          CHICAGO, ILLINOIS                                  60685
(Address of principal executive offices)                   (Zip Code)
                                 (312) 822-5000
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

                                                      NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS                                        WHICH REGISTERED
-------------------                                   -------------------------
Common Stock                                          New York Stock Exchange
with a par value                                      Chicago Stock Exchange
of $2.50 per share                                    Pacific Stock Exchange
                         -----------------------------

                 SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                                      None
                         ------------------------------
     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No....

     As of March 3, 1997, 61,798,262 shares of common stock were outstanding and
the aggregate market value of the common stock of CNA Financial Corporation held
by non-affiliates was approximately $1,077 million.

                             DOCUMENTS INCORPORATED
                                  BY REFERENCE:

     Portions of the CNA Financial Corporation 1996 Annual Report to
Shareholders are incorporated by reference into Parts I and II of this Report.

     Portions of the CNA Financial Corporation Proxy Statement prepared for the
1997 annual meeting of shareholders, pursuant to Regulation 14A, are
incorporated by reference into Part III of this Report.
================================================================================
<PAGE>
                            CNA FINANCIAL CORPORATION

                             FORM 10-K ANNUAL REPORT

                      FOR THE YEAR ENDED DECEMBER 31, 1996

Item                                                                       Page
Number                             PART I                                 Number
------                                                                    ------
 1           Business.............................................            3

 2           Properties...........................................           13

 3           Legal Proceedings....................................           14

 4           Submission of Matters to a Vote of Security Holders..           14


                                   PART II
 5           Market for the Registrant's Common Stock and
             Related Stockholder Matters...........................          17

 6           Selected Financial Data..............................           17

 7           Management's Discussion and Analysis of Financial
             Condition and Results of Operations...................          17

 8           Financial Statements and Supplementary Data...........          17

 9           Changes in and Disagreements with Accountants
             on Accounting and Financial Disclosure................          17

                                   PART III

10          Directors and Executive Officers of the Registrant.....          18

11          Executive Compensation.................................          18

12          Security Ownership of Certain Beneficial Owners and
            Management.............................................          18

13          Certain Relationships and Related Transactions.........          18


                                   PART IV

14          Financial Statements, Schedules, Exhibits and Reports
            on Form 8-K............................................          18

                                       2
<PAGE>
                                   PART I

ITEM 1.  BUSINESS

     CNA Financial  Corportion  ("CNA") was  incorporated  in 1967 as the parent
company of  Continental  Casualty  Company  ("CCC"),  incorporated  in 1897, and
Continental  Assurance Company ("CAC") incorporated in 1911. In 1975, CAC became
a  wholly-owned  subsidiary  of  CCC.  On May 10,  1995,  CNA  acquired  all the
outstanding common stock of The Continental  Corporation  ("Continental") and it
became a wholly owned subsidiary of CNA. The Continental Corporation, a New York
corporation incorporated in 1968, is an insurance holding company. Its principal
subsidiary, The Continental Insurance Company ("CIC") was organized in 1853. The
principal  business of  Continental  is the ownership of a group of property and
casualty insurance companies.

     CNA's property and casualty  insurance  operations are conducted by CCC and
its  property  and casualty  insurance  affiliates  and CIC and its property and
casualty insurance  affiliates.  Life insurance  operations are conducted by CAC
and its  life  insurance  affiliates.  CNA's  principal  business  is  insurance
conducted through its insurance  subsidiaries.  As multiple-line  insurers,  the
insurance companies underwrite property,  casualty, life and accident and health
coverages, as well as pension products and annuities. Their principal market for
insurance products is the United States.

COMPETITION

     All  aspects  of the  insurance  business  are  highly  competitive.  CNA's
insurance  operations  compete with a large number of stock and mutual insurance
companies  and  other  entities  for  both  producers  and  customers  and  must
continuously  allocate  resources to refine and improve  insurance  products and
services.

     There  are  approximately  3,300  companies  that  sell   property/casualty
insurance in the United  States,  approximately  900 of which  operate in all or
most states. CNA's consolidated  property/casualty  subsidiaries  (including CIC
for the  full  year of  1995)  would  have  been  ranked  as the  third  largest
property/casualty  insurance  organization  in 1995  based  upon  statutory  net
written premium.

     There are approximately  1,770 companies selling life insurance  (including
accident and health  insurance and pension products and annuities) in the United
States. CAC is ranked as the twenty-second  largest life insurance  organization
based on 1995 consolidated statutory premium volume.

DIVIDENDS BY INSURANCE SUBSIDIARIES

     The payment of dividends to CNA by its insurance  affiliates  without prior
approval of the affiliate's domiciliary state insurance commissioners is limited
to amounts  determined by formula in accordance  with the  accounting  practices
prescribed or permitted by the state's insurance department. This formula varies
by state.  The formula  for the  majority of the states is the greater of 10% of
prior year  statutory  surplus  or prior year  statutory  net  income,  less the
aggregate  of all  dividends  paid  during  the twelve  months  prior to date of
payment.  Some states,  however,  have an additional  stipulation that dividends
can't  exceed  prior  year  surplus.  Based  upon the  various  state  formulas,
approximately  $941  million in  dividends  can be paid to CNA by its  insurance
affiliates in 1997 without prior approval. All dividends must be reported to the
domiciliary insurance department prior to declaration and payment.




                                       3
<PAGE>
REGULATION
     The insurance industry is subject to comprehensive and detailed  regulation
and  supervision  throughout  the  United  States.  Each  state has  established
supervisory  agencies  with broad  administrative  power  relative to  licensing
insurers and agents, approving policy forms,  establishing reserve requirements,
fixing minimum  interest rates for  accumulation of surrender values and maximum
interest  rates of policy loans,  prescribing  the form and content of statutory
financial  reports,  regulating  solvency and the type and amount of investments
permitted.  Regulatory  powers also  extend to premium  rate  regulations  which
require that rates not be excessive,  inadequate or unfairly discriminatory.  In
addition to regulation of dividends by insurance  subsidiaries  discussed above,
intercompany  transfers  of assets may be subject to prior  notice or  approval,
depending  on the  size  of such  transfers  and  payments  in  relation  to the
financial position of the insurance affiliates making the transfer.

     Insurers  are also  required by the states to provide  coverage to insureds
who would not  otherwise  be  considered  eligible by the  insurers.  Each state
dictates the types of insurance and the level of coverage which must be provided
to  such  involuntary  risks.  CNA's  insurance  subsidiaries'  share  of  these
involuntary  risks is mandatory and generally a function of its respective share
of the voluntary market by line of insurance in each state.

     After  failing  to enact the  massive  health  reform  introduced  in 1994,
Congress  passed  a  health  insurance  reform  bill in  August  of 1996 and the
President signed it into law (P.L. 104-191) on August 21, 1996. The new law does
little for Americans without health insurance but it will protect those who have
health  insurance  from  losing it. The 105th  Congress  is expected to consider
additional  incremental  health care  reform as it  attempts to provide  greater
access and affordability to Americans. Among the bills that have been introduced
this year are measures  that would allow small  businesses  to band  together to
form  association  health  plans  to buy  insurance;  bar  the  use  of  clauses
restricting what doctors can tell patients about treatment options;  restructure
the Medicare  program;  subsidize health insurance for uninsured  children;  and
limit or prohibit  underwriting on the basis of genetic  information.  We cannot
predict  if any of these  proposals  will be enacted or the extent to which they
may affect the insurance industry.

     Last year, a moderate  product  liability  bill was vetoed and Congress was
not able to override the veto.  This year, a similar  product  liability  reform
bill was  introduced in the Senate.  The bill contains many of the provisions of
the vetoed bill and thus, one cannot predict if any reform will be adopted.

     Although  federal  standards  would create more uniform  laws,  tort reform
supporters  still look  primarily to the states for passage of reform  measures.
Over the last  decade,  many states  have  passed some type of reform,  but more
recently,  state courts have modified or overturned  approximately  38% of these
reforms.  Additionally,  new causes of action and  theories  of damages are more
frequently proposed in state courts or legislatures.  Continued  unpredicability
in the law  means  that  insurance  underwriting  and  rating  is  difficult  in
commercial lines, professional liability and some specialty coverages.

     Environmental  clean-up  remains  the  subject  of both  federal  and state
regulation. Last year Congress and the Clinton Administration failed to reach an
agreement on efforts to overhaul the federal Superfund  hazardous waste program.
The legislative stalemate was the result of a failure by Superfund  stakeholders
and  Congress  to reach a  compromise  on  clean-up  standards,  the  repeal  of
retroactive  liability  and how to finance  future  clean-up  costs.  In the new
Congress, Superfund reform has been listed as one of the legislative priorities.
At this time we cannot predict if any reform will be enacted. 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
concerning clean up of hazardous waste.  Judicial  interpretations in many cases
have expanded the scope of coverage and liability  beyond the original intent of
the policies.  See Note E of the Consolidated  Financial  Statements of the 1996
Annual Report to Shareholders for further discussion.
                                       4
<PAGE>
REGULATION --(CONTINUED)

     In recent years,  increased  scrutiny of state regulated  insurer  solvency
requirements by certain members of the U.S.  Congress,  resulted in the National
Association of Insurance  Commissioners  developing  industry minimum Risk-Based
Capital (RBC) requirements,  establishing a formal state  accreditation  process
designed to more  closely  regulate  for  solvency,  minimize  the  diversity of
approved statutory  accounting and actuarial practices and increasing the annual
statutory statement disclosure requirements.

     The RBC  formulas are  designed to identify an  insurer's  minimum  capital
requirements  based upon the inherent  risks (e.g.,  asset  default,  credit and
underwriting)   of  its   operations.   In  addition  to  the  minimum   capital
requirements, the RBC formula and related regulations identify various levels of
capital adequacy and corresponding  actions that the state insurance departments
should initiate. The level of capital adequacy below which insurance departments
would take action is defined as the Company  Action  Level.  As of December  31,
1996, all of CNA's property/casualty and life insurance affiliates have adjusted
capital amounts in excess of Company Action Levels.

REINSURANCE

     Information as to CNA's reinsurance  business is set forth in Note G of the
Consolidated  Financial  Statements of the 1996 Annual  Report to  Shareholders,
incorporated by reference in Item 8, herein.

EMPLOYEE RELATIONS

     CNA  has  approximately  24,300  full-time  equivalent  employees  and  has
experienced  satisfactory labor relations.  CNA has never had work stoppages due
to labor disputes.

     CNA has comprehensive benefit plans for substantially all of its employees,
including  retirement  plans,  savings plans,  disability  programs,  group life
programs and group health care programs.

BUSINESS SEGMENTS

     Information  as to CNA's  business  segments  is set forth in Note M of the
Consolidated  Financial  Statements of the 1996 Annual  Report to  Shareholders,
incorporated by reference in Item 8, herein.




                                       5
<PAGE>
PROPERTY/CASUALTY BUSINESS

     CNA's property/casualty  operations market commercial and personal lines of
property/casualty insurance through independent agents and brokers.

     Commercial lines customers include large national  corporations,  small and
medium-sized  businesses,  groups and associations and professionals.  Coverages
are written primarily through  traditional  insurance contracts under which risk
is  transferred  to the  insurer.  Many large  commercial  account  policies are
written  under  retrospectively-rated   contracts  which  are  experience-rated.
Premiums for such  contracts  may be  adjusted,  subject to  limitations  set by
contract,  based on loss  experience  of the  insureds.  Other  experience-rated
policies   include   provisions   for  dividends   based  on  loss   experience.
Experience-rated contracts reduce but do not eliminate risk to the insurer.

     Commercial business includes such lines as workers'  compensation,  general
liability and commercial automobile,  professional and specialty, multiple peril
and  accident  and health  coverages as well as  reinsurance.  Professional  and
specialty  coverages  include  liability  coverage for architects and engineers,
lawyers, accountants,  medical and dental professionals;  directors and officers
liability;  and  other  specialized  coverages.  The major  components  of CNA's
commercial business are professional and specialty coverages,  general liability
and commercial automobile and workers' compensation which accounted for 18%, 17%
and 17%, respectively, of 1996 premiums earned.

     The property/casualty group markets personal lines of insurance,  primarily
automobile and  homeowners'  coverages  sold to  individuals  under monoline and
package policies.

     CNA is required by the various  states in which it does business to provide
coverage  for  risks  that  would  not  otherwise  be  considered   under  CNA's
underwriting  standards.  CNA's  share of  involuntary  risks is  mandatory  and
generally a function of its share of the  voluntary  market by line of insurance
in  each  state.   Premiums  for   involuntary   risks  result  from   mandatory
participation in residual markets.  Property/casualty  involuntary risks include
mandatory   participation  in  residual  markets,   statutory   assessments  for
insolvencies of other insurers and other charges.

     CNA  also   provides  loss  control,   policy   administration   and  claim
administration  services  under service  contracts  for fees.  Such services are
provided primarily in the workers'  compensation market, where retention of more
risk by the employer  through  self-insurance  or  high-deductible  programs has
become increasingly prevalent.




                                       6
<PAGE>
PROPERTY/CASUALTY BUSINESS--(CONTINUED)
<TABLE>
<CAPTION>

     The following table sets forth  supplemental  data on a GAAP basis,  except
where indicated, for the property/casualty business:

---------------------------------------------------------------------------------------------------------------
Year Ended December 31                            1996       1995(a)       1994         1993        1992
(In millions of dollars)
---------------------------------------------------------------------------------------------------------------
Commercial Premiums Earned
<S>                                             <C>          <C>         <C>         <C>          <C>
   Professional and specialty...............    $ 1,844.9   $  1,557.7   $ 1,010.1   $    798.9   $   741.5
   General liability and commercial automobile    1,754.1      1,648.9     1,261.1      1,154.5     1,176.0
   Workers' compensation....................      1,542.5      1,475.8     1,426.3      1,501.5     1,669.2
   Multiple peril..........................       1,046.9        869.9       389.0        368.5       374.9
   Accident and health.....................         919.0        699.1       557.1        428.3       352.6
   Reinsurance and other....................      1,188.9        973.9       773.5        712.2       556.0
                                                ---------    ---------   ---------   ----------   ---------
                                                $ 8,296.3   $  7,225.3   $ 5,417.1   $  4,963.9   $ 4,870.2
                                                =========    =========   =========   ==========   =========

Personal Premiums Earned
   Personal lines packages..................    $ 1,063.3   $    781.6   $   562.6   $    510.7   $   447.3
   Monoline automobile and property coverages       366.5        325.4       314.2        343.5       395.0
   Accident and health......................        168.9        107.8        88.9         85.6        88.6
                                                ---------   ----------   ---------   ----------   ---------
                                                $ 1,598.7   $  1,214.8   $   965.7   $    939.8   $   930.9
                                                =========   ==========   =========   ==========   =========

Involuntary Risks Premiums Earned (b)
   Workers' compensation....................    $   135.6   $    178.2   $   350.0   $   292.3    $   451.4
   Private passenger automobile.............         57.9         79.7        46.4        23.2         52.5
   Commercial automobile....................         36.4         19.9        54.3        50.3         44.9
   Property and multiple peril..............          2.2          5.9         5.0         5.5          3.7
                                                ---------   ----------   ---------   ---------    ---------
                                                $   232.1   $    283.7   $   455.7   $   371.3    $   552.5
                                                =========   ==========   =========   =========    =========

Net Investment Income and Other Income
   Commercial...............................    $ 1,943.3   $  1,713.1   $ 1,145.1   $   979.8    $ 1,087.3
   Personal.................................        353.0        230.4       177.6       156.1        165.3
   Involuntary risks........................         93.4        104.3        88.1        75.7         83.6
                                                ---------   ----------   ---------   ---------    ---------
                                                $ 2,389.7   $  2,047.8   $ 1,410.8   $ 1,211.6    $ 1,336.2
                                                =========   ==========   =========   =========    =========

Underwriting (Loss)
   Commercial...............................    $  (853.1)  $  (920.8)   $  (945.7)  $(1,535.6)   $(2,505.9)
   Personal................................        (183.8)     (101.9)      (185.2)      (99.7)      (152.8)
   Involuntary risks........................       (106.3)      (98.8)       (70.3)     (156.5)      (340.9)
                                                ----------  ----------   ----------  ----------   ----------
                                                $(1,143.2)  $(1,121.5)   $(1,201.2)  $(1,791.8)   $(2,999.6)
                                                ==========  ==========   ==========  ==========   ==========
--------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
Year Ended December 31                            1996       1995(a)       1994         1993        1992
(In millions of dollars)
---------------------------------------------------------------------------------------------------------------
Trade Ratios (c)
<S>                                                  <C>         <C>          <C>         <C>         <C>
   Loss ratio...............................         76.4%       77.9%        81.9%       96.2%       116.7%
   Expense ratio...........................          30.9        29.4         28.3        27.2         26.2
   Combined ratio (before policyholder
   dividends)...............................        107.3       107.3        110.2       123.4        142.9
   Policyholder dividend ratio..............          1.6         3.0          4.8         3.9          1.9

Trade Ratios - Statutory basis (c)
   Loss ratio...............................         76.8%       78.6%        82.2%       96.4%       116.3%
   Expense ratio............................         31.6        29.2         27.8        27.1         25.6
   Combined ratio (before policyholder
   dividends)...............................        108.4       107.8        110.0       123.5        141.9
   Policyholder dividend ratio..............          1.4         2.1          3.8         3.1          2.4

Other Data - Statutory basis (d)
   Capital and surplus......................     $6,348.8    $5,695.9     $3,367.3    $3,598.4     $3,135.8
   Written to surplus ratio.................          1.6         1.7          2.0         1.7          2.0
---------------------------------------------------------------------------------------------------------------
</TABLE>
     (a) Premium earned,  net investment  income and underwriting  loss includes
         the results of The Continental Corporation since May 10, 1995.

     (b) Property/casualty  involuntary risks include mandatory participation in
         residual  markets,  statutory  assessments  for  insolvencies  of other
         insurers and other involuntary charges.

                                       7
<PAGE>
PROPERTY/CASUALTY BUSINESS--(CONTINUED)

     (c) GAAP trade ratios reflect the results of Continental  Casualty  Company
         and its property/casualty  insurance  subsidiaries for the entire year,
         along with the  results of The  Continental  Insurance  Company and its
         property/casualty  insurance subsidiaries since May 10, 1995. Statutory
         trade ratios  reflect the results of Continental  Casualty  Company and
         its  property/casualty   insurance  subsidiaries  and  The  Continental
         Insurance  Company  and its  property/casualty  insurance  subsidiaries
         since  January 1, 1995.  Prior year  ratios  have not been  restated to
         include   Continental.   Trade   ratios  are   industry   measures   of
         property/casualty   underwriting   results.   The  loss  ratio  is  the
         percentage of incurred claim and claim adjustment  expenses to premiums
         earned.  Under generally accepted  accounting  principles,  the expense
         ratio is the percentage of underwriting expenses,  including the change
         in deferred  acquisition  costs,  to premiums  earned.  Under statutory
         accounting   principles,   the  expense  ratio  is  the  percentage  of
         underwriting  expenses  (with no  deferral  of  acquisition  costs)  to
         premiums written. The combined ratio is the sum of the loss and expense
         ratios.  The  policyholder  dividend  ratio is the  ratio of  dividends
         incurred to premiums earned.

     (d) Other Data is  determined  on the  statutory  basis of  accounting  and
         reflects a capital  contribution  from CNA of $475 million in 1993.  In
         addition,  dividends of $545 million,  $325 million, $175 million, $150
         million  and $100  million  were  paid to CNA by  Continental  Casualty
         Company   in  1996,   1995,   1994,   1993  and   1992,   respectively.
         Property/casualty   insurance   subsidiaries  have  received,  or  will
         receive,   reimbursement   from   CNA  for   general   management   and
         administrative  expenses,  unallocated  loss  adjustment  expenses  and
         investment  expenses  of $194.6,  $197.0,  $169.6,  $167.5,  and $141.1
         million in 1996, 1995, 1994, 1993 and 1992, respectively.

       The following table displays the distribution of gross written premium:
       ------------------------------------------------------------------------
       Gross Written Premium                                   % of Total
                                                         ---------------------
       Year Ended December 31                            1996    1995     1994
       ------------------------------------------------------------------------
       New York.....................................      9.3    10.3      8.6
       California...................................      8.5     9.7     11.4
       Texas........................................      6.0     6.5      6.5
       Illinois.....................................      5.3     5.2      4.9
       Pennsylvania.................................      4.9     5.4      5.7
       Florida......................................      4.2     4.1      4.6
       New Jersey...................................      4.1     4.6      3.2
       All other states, countries or political
       subdivisions (a).............................     46.8    44.4     43.2
       Reinsurance assumed:
         Voluntary..................................      9.1     7.8      5.9
         Involuntary................................      1.8     2.0      6.0
                                                        ------ -------   ------
                                                        100.0   100.0    100.0
       ========================================================================
      (a) No other  state,  country or political  subdivision  accounts for more
      than 3.0% of gross written premium.




                                       8
<PAGE>
PROPERTY/CASUALTY CLAIM AND CLAIM EXPENSES

The loss reserve  development  table below  illustrates  the change over time of
reserves established for property/casualty  claims and claims expense at the end
of various  calendar  years.  The first section shows the reserves as originally
reported at the end of the stated year. The second section,  reading down, shows
the  cumulative  amounts paid as of the end of successive  years with respect to
that reserve liability.  The third section,  reading down, shows re-estimates of
the original recorded reserve as of the end of each successive year which is the
result of CNA's expanded  awareness of additional facts and  circumstances  that
pertain  to  the  unsettled  claims.   The  last  section  compares  the  latest
re-estimated  reserve  to the  reserve  originally  established,  and  indicates
whether or not the  original  reserve was  adequate or  inadequate  to cover the
estimated costs of unsettled claims.
<PAGE>
     The loss reserve  development  table is cumulative and,  therefore,  ending
balances  should not be added since the amount at the end of each  calendar year
includes activity for both the current and prior years.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Schedule of
Property/Casualty
Loss Reserve
Development
Calendar Year Ended      1986(a) 1987(a) 1988(a)1989(a)  1990(a)  1991(a) 1992(a)  1993(a)  1994(b) 1995(c)   1996
(In millions of
 dollars)
--------------------------------------------------------------------------------------------------------------------
<S>                     <C>     <C>      <C>     <C>     <C>      <C>      <C>      <C>      <C>     <C>       <C>
Gross reserves
for unpaid
claim and claim
expenses................$  --   $  --    $  --   $  --   $16,530  $17,712 $20,034  $20,812  $21,639 $31,044  $29,830
Ceded recoverable.......   --      --       --      --     3,440    3,297   2,867    2,491    2,705   6,089    6,095
                        -----   -----    -----   -----   -------  ------- -------  -------  ------- -------  -------
Net reserves
for unpaid
claim and claim
expenses................ 6,243   8,045    9,552  11,267   13,090   14,415  17,167   18,321   18,934  24,955   23,735
                        ------   -----    -----  ------   ------   ------  ------   ------   ------  ------   ------

NET PAID
(CUMULATIVE) AS OF:

One year later.......... 1,335   1,763    2,040   2,670    3,285    3,411   3,706    3,629    3,656   6,510      --
Two years later......... 2,383   2,961    3,622   4,724    5,623    6,024   6,354    6,143    7,087     --       --
Three years later....... 3,197   4,031    4,977   6,294    7,490    7,946   8,121    8,764      --      --       --
Four years later........ 3,963   5,007    6,078   7,534    8,845    9,218  10,241     --        --      --       --
Five years later........ 4,736   5,801    6,960   8,485    9,726   10,950     --      --        --      --       --
Six years later......... 5,339   6,476    7,682   9,108   11,207     --       --      --        --      --       --
Seven years later....... 5,880   7,061    8,142  10,393     --       --       --      --        --      --       --
Eight years later....... 6,382   7,426    9,303     --      --       --       --      --        --      --       --
Nine years later........ 6,690   8,522      --      --      --       --       --      --        --      --       --
Ten years later......... 7,738     --       --      --      --       --       --      --        --      --       --
--------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Schedule of
Property/Casualty
Loss Reserve
Development - continued
Calendar Year Ended      1986(a) 1987(a) 1988(a) 1989(a)  1990(a)  1991(a) 1992(a)  1993(a)  1994(b) 1995(c)   1996
(In millions of
 dollars)
--------------------------------------------------------------------------------------------------------------------
NET RESERVES
RE-ESTIMATED AS OF:
<S>                     <C>     <C>      <C>     <C>     <C>      <C>      <C>      <C>      <C>     <C>       <C>
End of initial year..... 6,243   8,045    9,552  11,267   13,090   14,415  17,167   18,321   18,934  24,955   23,735
One year later.......... 6,642   8,086    9,737  11,336   12,984   16,032  17,757   18,250   18,922  24,864     --
Two years later......... 6,763   8,345    9,781  11,371   14,693   16,810  17,728   18,125   18,500    --       --
Three years later....... 6,989   8,424    9,796  13,098   15,737   16,944  17,823   17,868     --      --       --
Four years later........ 7,166   8,516   11,471  14,118   15,977   17,376  17,765     --       --      --       --
Five years later........ 7,314  10,196   12,496  14,396   16,440   17,329    --       --       --      --       --
Six years later......... 9,022  11,239   12,742  14,811   16,430     --      --       --       --      --       --
Seven years later.......10,070  11,480   13,167  14,810     --       --      --       --       --      --       --
Eight years later.......10,317  11,898   13,174    --       --       --      --       --       --      --       --
Nine years later........10,755  11,925     --      --       --       --      --       --       --      --       --
Ten years later.........10,823    --       --      --       --       --      --       --       --      --       --
                        ------- ------   ------  ------  -------   ------  ------   ------   ------  ------   -----
Total net (deficiency)
redundancy              (4,580) (3,880)  (3,622) (3,543)  (3,340)  (2,914)   (598)     453      434      91     --
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Reconciliation to Gross
Re-estimated Reserves:
Net reserves
re-estimated............ 10,823 11,925   13,174  14,810   16,430   17,329  17,765   17,868   18,500  24,864     --
Re-estimated ceded
recoverable                --      --       --      --     2,855    2,610   2,046    1,918    2,472   6,262     --
                         ------ ------   ------  ------   ------   ------  ------   ------   ------  ------    -----
 Total gross
   re-estimated reserves   --      --       --      --    19,285   19,939  19,811   19,786   20,972  31,126     --
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Net (Deficiency)
Redundancy
Related to:
Asbestos claims.........(3,021) (2,973)  (2,917) (2,818)  (2,681) (2,634)  (945)    (345)    (309)    (51)     --
Environmental claims....(1,021) (1,007)  (1,002)   (975)    (964)   (918)  (871)    (425)    (246)    (65)     --
                        ------- -------  ------- -------  ------- -------  -----    -----    -----   -----    -----
Total asbestos and      (4,042) (3,980)  (3,919) (3,793)  (3,645) (3,552)(1,816)    (770)    (555)   (116)     --
environmental
Other...................  (538)    100      297     250      305     638  1,218    1,223      989     207      --
                        ------- -------  ------- -------  ------- ------- ------   ------    -----   -----   ------
Total net
(deficiency)
redundancy..............(4,580) (3,880)  (3,622) (3,543)  (3,340) (2,914)  (598)     453      434      91      --
-------------------------------------------------------------------------------------------------------------------------
<PAGE>

<FN>
(a) Reflects reserves of CNA, excluding Continental reserves which were acquired
on May 10, 1995. Accordingly,  the reserve development (net reserves recorded at
the end of the year, as initially estimated,  less net reserves  re-estimated as
of subsequent  years) relates only to the operations of CNA and does not include
Continental.

(b)  Reserve  development  related  to  the  1994  reserves  of  CNA,  excluding
Continental,  as determined by the balances in this column, plus adverse reserve
development of $134 million related to the reserves of Continental,  acquired on
May 10, 1995,  which are not  reflected in this column,  were recorded by CNA in
1995 and subsequent periods.

(c) Includes  Continental  gross  reserves of $9,713 million and net reserves of
$6,063 million acquired on May 10, 1995 and subsequent development thereon.
</FN>
</TABLE>

                                       9
<PAGE>
PROPERTY/CASUALTY CLAIM AND CLAIM EXPENSES - (CONTINUED)

     Additional  information  as to CNA's  property/casualty  claim  and  claim
expense  reserves  is set forth in Notes A and E of the  Consolidated  Financial
Statements of the 1996 Annual Report to Shareholders,  incorporated by reference
in Item 8, herein.

RESERVE DEVELOPMENT

     Information  as to CNA's reserve  development is set forth in Note E of the
Consolidated  Financial  Statements of the 1996 Annual  Report to  Shareholders,
incorporated by reference in Item 8, herein.

LIFE BUSINESS

     CNA's life  insurance  operations  market  individual  and group  insurance
products through licensed agents, most of whom are independent contractors,  who
sell life and/or group insurance for CNA and for other companies on a commission
basis.

     The individual  insurance  products  consist  primarily of term,  universal
life,  participating  policies and annuity products.  Products developed in 1996
included a portfolio of variable  products and new universal life products which
are expected to be marketed in 1997.  Group  insurance  products  include  life,
accident and health  consisting  primarily of major medical and  hospitalization
and pension products,  such as guaranteed investment contracts and annuities. In
the medical and  hospitalization  market,  CNA underwrites the Federal Employees
Health Benefits Program (FEHBP) which had revenues of $2.1 billion, $1.9 billion
and $1.8  billion  in 1996,  1995  and  1994.  CNA has  undertaken  a number  of
initiatives  to enhance  service,  manage  health  care  utilization  demand and
quality  and  strengthen  CNA's  networks  of  physicians,  hospitals  and other
providers.

     CNA's  products  are  designed  and  priced  using  assumptions  management
believes to be reasonably  conservative for mortality,  morbidity,  persistency,
expense levels and investment  results.  Underwriting  practices that management
believes are prudent are  followed in selecting  the risks that will be insured.
Further,  actual experience related to pricing  assumptions is monitored closely
so that  prospective  adjustments  to these  assumptions  may be  implemented as
necessary.   CNA  mitigates  the  risk  related  to   persistency  by  including
contractual  surrender  charge  provisions  in its  ordinary  life  and  annuity
policies  in the first five to ten years,  thus  providing  for the  recovery of
acquisition  expenses.  The investment  portfolios supporting interest sensitive
products,  including  universal  life  and  individual  annuities,  are  managed
separately to minimize surrender and interest rate risk.

     Profitability in the health insurance  business continues to be impacted by
intense  competition  and rising medical  costs.  CNA has  aggressively  pursued
expense  reduction  through  increases  in  automation  and  other  productivity
improvements.  Further,  increasing  costs of  health  care have  resulted  in a
continued  market shift away from  traditional  forms of health  coverage toward
managed care products and  experience-rated  plans.  CNA's ability to compete in
this  market will be  increasingly  dependent  on its  ability to control  costs
through managed care techniques, innovation and quality customer-focused service
in order to properly position CNA in the evolving health care environment.




                                       10
<PAGE>
LIFE BUSINESS--(CONTINUED)
<TABLE>
<CAPTION>
     The following  table sets forth  supplemental  data for the life  insurance
business:
--------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31                                        1996        1995        1994        1993       1992
(In millions of dollars)
--------------------------------------------------------------------------------------------------------------------
INDIVIDUAL PREMIUM
<S>                                                        <C>         <C>         <C>        <C>         <C>
   Life and annuities................................      $   629.1   $   497.1   $   369.4  $   312.1   $   294.7
   Accident and health...............................            1.8        32.7        32.6       30.9        27.1
                                                           ---------   ---------   ---------  ---------   ---------
                                                           $   630.9   $   529.8   $   402.0  $   343.0   $   321.8
                                                           =========   =========   =========  =========   =========
GROUP PREMIUM
   Accident and health (a)...........................      $ 2,548.0   $ 2,189.7   $ 2,111.2  $ 1,983.0   $ 1,957.5
   Life and annuities................................          194.9       312.9       165.0      116.2       158.4
                                                           ---------   ---------   ---------  ---------   ---------
                                                           $ 2,742.9   $ 2,502.6   $ 2,276.2  $ 2,099.2   $ 2,115.9
                                                           =========   =========   =========  =========   =========
NET INVESTMENT INCOME AND OTHER INCOME
   Individual........................................      $   292.2   $   247.3   $   193.8  $   154.2   $   163.0
   Group.............................................          214.2       198.1       166.4      142.8       156.6
                                                           ---------   ---------   ---------  ---------   ---------
                                                           $   506.4   $   445.4   $   360.2  $   297.0   $   319.6
                                                           =========   =========   =========  =========   =========
INCOME EXCLUDING REALIZED CAPITAL GAINS, BEFORE INCOME TAX
   Individual........................................      $   100.9   $    65.4   $    47.3  $    14.5   $    22.5
   Group.............................................           69.8        94.9        87.1       51.9        56.1
                                                           ---------   ---------   ---------  ---------   ---------
                                                           $   170.7   $   160.3   $   134.4  $    66.4   $    78.6
                                                           =========   =========   =========  =========   =========
GROSS LIFE INSURANCE IN FORCE
   Individual (b)....................................      $ 172,213   $ 113,901   $  80,560  $  76,835   $  75,569
   Group.............................................         64,796      52,146      46,873     35,413      29,643
                                                           ---------   ---------   ---------  ---------   ---------
                                                           $ 237,009   $ 166,047   $ 127,433  $ 112,248   $ 105,212
                                                           =========   =========   =========  =========   =========
OTHER DATA - STATUTORY BASIS(C)
   Capital and surplus...............................      $ 1,163.4   $ 1,127.6   $ 1,054.6  $ 1,022.0   $ 1,003.0
   Capital and surplus-percent of total liabilities..           25.5%       28.2%       29.4%      30.1%       33.4%
   Participating policyholders-percent of gross life
   insurance in force                                            0.5         0.6         0.9        1.1         1.2
--------------------------------------------------------------------------------------------------------------------
     (a)  Group accident and health premiums  include  contracts  involving U.S.
          government  employees and their dependents  amounting to approximately
          $2.1,  $1.9, $1.8, $1.7 and $1.6 billion in 1996, 1995, 1994, 1993 and
          1992, respectively.

     (b)  Lapse ratios for individual life insurance,  as measured by surrenders
          and withdrawals as a percentage of average  ordinary life insurance in
          force were 7.2%,  9.4%, 9.7%, 9.7% and 8.6%, in 1996, 1995, 1994, 1993
          and 1992, respectively.

     (c) Other  Data  is  determined  on  the  basis  of  statutory   accounting
         practices. Life insurance subsidiaries have received reimbursement from
         CNA for general management and  administrative  expenses and investment
         expenses of $28.5, $21.3, $24.7, $25.6 and $24.5 million in 1996, 1995,
         1994, 1993 and 1992,  respectively.  Statutory capital and surplus as a
         percent of total  liabilities is determined  after  excluding  Separate
         Account  liabilities and reclassifying  the statutorily  required Asset
         Valuation and Interest Maintenance Reserves as surplus.
</TABLE>
                                       11
<PAGE>
LIFE BUSINESS - (CONTINUED)

Guaranteed Investment Contracts
-------------------------------

     CAC  writes  the  majority  of its group  pension  products  as  guaranteed
investment contracts in a fixed Separate Account, which is permitted by Illinois
insurance  statutes.   CAC  guarantees  principal  and  a  specified  return  to
guaranteed    investment    contractholders.    This   guarantee   affords   the
contractholders  additional  security,  in the  form of  CAC's  general  account
surplus, which supports the principal and interest payments.

     CNA  manages  the  liquidity  and  interest  rate  risks on the  guaranteed
investment  contract  portfolio  by matching the  approximate  duration of fixed
maturity  securities  included  in  the  investment   portfolio  supporting  the
guaranteed  investment  contracts with the  corresponding  payout pattern of the
contracts,  and assessing market value surrender  charges on the majority of the
contracts.

     The table below shows a comparison of the duration of assets and contracts,
weighted average  investment yield,  weighted average interest  crediting rates,
and withdrawal characteristics of the guaranteed investment contract portfolio.
--------------------------------------------------------------------------------
December 31                                       1996      1995       1994
--------------------------------------------------------------------------------
Duration in years:
   Assets......................................    3.12      3.12       3.23
   Contracts...................................    3.16      2.98       2.99
                                                   ----      ----       ----
   Difference..................................   (0.04)     0.14       0.24
                                                  ======     ====       ====

Weighted average investment yield..............    7.44%     7.58%      7.67%

Weighted average interest crediting rates......    7.32%     7.45%      7.53%

Withdrawal characteristics:
   With market value adjustment................      95%       92%        79%
   Non-withdrawable............................       5         8         15
   Without market value adjustment.............       0         0          6
--------------------------------------------------------------------------------
   Total                                            100%      100%       100%
================================================================================
     As shown above, the weighted average investment yield at December 31, 1996,
1995 and 1994 was more than the weighted average interest crediting rate.

INVESTMENTS

     Information  as to  CNA's  investments  is  set  forth  in  Note  B of  the
Consolidated  Financial  Statements of the 1996 Annual  Report to  Shareholders,
incorporated by reference in Item 8, herein.




                                       12
<PAGE>
ITEM 2.     PROPERTIES

     CNA  Plaza,  owned by  Continental  Assurance  Company,  serves as the home
office for CNA and its insurance subsidiaries.  An adjacent building (located at
55 E.  Jackson  Blvd.),  jointly  owned  by  Continental  Casualty  Company  and
Continental  Assurance  Company,  is partially  situated on grounds under leases
expiring  in 2058.  Approximately  30% of the  adjacent  building  is  rented to
non-affiliates.   CNA's  subsidiaries  lease  office  space  in  various  cities
throughout the United States and in other  countries.  The following  table sets
forth certain  information  with respect to the principal office buildings owned
or leased by CNA's subsidiaries:

--------------------------------------------------------------------------------
                              AMOUNT OF BUILDING
                              OWNED AND OCCUPIED OR
                              LEASED BY CNA OR ITS
LOCATION                      SUBSIDIARIES                     PRINCIPAL USAGE
--------------------------------------------------------------------------------
CNA Plaza                      1,144,378 *           Principal Executive Offices
333 S. Wabash                                        of CNA
Chicago, Illinois

180 Maiden Lane                  507,547*            Property/Casualty
New York, New York                                   Insurance Offices

1 Continental Drive              490,993**           Property/Casualty
Cranbury, New Jersey                                 Insurance Offices

55 E. Jackson Blvd.              308,750 *           Principal Executive
Chicago, Illinois                                    Offices of CNA

401 Penn Street                  251,691*            Property/Casualty
Reading, Pennsylvania                                Insurance Offices

100 CNA Drive                    251,363*            Life Insurance Offices
Nashville, Tennessee

7361 Calhoun Place               224,725**           Life Insurance Offices
Rockville, Maryland

1111 E. Broad St.                215,470**           Property/Casualty
Columbus, Ohio                                       Insurance Offices

200 S. Wacker Drive              214,997**           Property/Casualty
Chicago, Illinois                                    Insurance Offices

333 Glen Street                  157,825**           Property/Casualty
Glen Falls, New York                                 Insurance Offices;
                                                     Residual Market Center

111 Congressional Blvd.          118,215**           Personal Lines
Indianapolis, Indiana

1431 Opus Place                  106,151**           Property/Casualty,
Downers Grove, Illinois                              Surety Insurance Offices

2401 Pleasant Valley             102,376**           Commercial Operations
York, Pennsylvania

1100 Ward Avenue                  93,771*            First Insurance Company
Honolulu, Hawaii                                     of Hawaii, Ltd.Headquarters

* Represents property owned by CNA or its subsidiaries.
** Represents property leased by CNA or its subsidiaries.

                                       13
<PAGE>
ITEM 3.    LEGAL PROCEEDINGS

     Incorporated  herein by reference from Note F of the Consolidated Financial
Statements in the 1996 Annual Report to Shareholders.

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
     None.



                                       14
<PAGE>
                 EXECUTIVE OFFICERS OF THE REGISTRANT

                                          FIRST BECAME
                        POSITION AND      OFFICER OF
                        OFFICES HELD      THE CNA
                         WITH             INSURANCE
NAME                    REGISTRANT    AGE COMPANIES  PRINCIPAL OCCUPATION
                                                     DURING PAST FIVE YEARS


Laurence A. Tisch       Chief Executive  74   ****   Co-Chairman of the
                        Officer                      Board and Co-Chief
                                                     Executive Officer of
                                                     Loews Corporation.
                                                     President, Chief
                                                     Executive Officer and
                                                     Director of CBS, Inc.
                                                     until November 1995.
                                                     Executive officer of
                                                     the Registrant since
                                                     1974.

Dennis H. Chookaszian   Chairman of the  53   1975   Chairman of the Board
                        Board and Chief              and Chief Executive
                        Executive Officer,           Officer of the CNA
                        CNA Insurance                Insurance Companies
                        Companies                    since September 1992.
                                                     Prior thereto,  Mr.
                                                     Chookaszian was
                                                     President and Chief
                                                     Operating Officer of
                                                     the CNA Insurance
                                                     Companies.  Executive
                                                     officer of the
                                                     Registrant since 1975.

Philip L. Engel        President, CNA    56   1977   President of the CNA
                       Insurance                     Insurance Companies
                       Companies                     since September 1992.
                                                     Prior thereto, Mr.
                                                     Engel was Executive
                                                     Vice President of the
                                                     CNA Insurance
                                                     Companies.  Executive
                                                     officer of the
                                                     Registrant since 1992.

William J.             Senior Vice       44   1987   Senior Vice President
Adamson, Jr.           President, CNA                of the CNA Insurance
                       Insurance                     Companies since November
                       Companies                     1995; Group Vice President
                                                     of the CNA Insurance
                                                     Companies from April 1993
                                                     through October 1995. Prior
                                                     thereto, Mr. Adamson was
                                                     Vice President of the CNA
                                                     Insurance Companies.
                                                     Exectuive officer of the
                                                     Registrant since 1996.


<PAGE>
                                          FIRST BECAME
                        POSITION AND      OFFICER OF
                        OFFICES HELD      THE CNA
                         WITH             INSURANCE
NAME                    REGISTRANT    AGE COMPANIES  PRINCIPAL OCCUPATION
                                                     DURING PAST FIVE YEARS

James P. Flood         Senior Vice       46   1995   Senior Vice President of
                       President, CNA                the CNA Insurance Companies
                       Insurance                     since May 1995;  Senior
                       Companies                     Vice President of The
                                                     Continental Insurance
                                                     Company from October 1992
                                                     through May 1995.
                                                     Prior thereto, Mr. Flood
                                                     was Vice President of The
                                                     Continental Insurance
                                                     Company. Executive officer
                                                     of the Registrant since
                                                     1996.

Michael C. Garner      Senior Vice       44   1993   Senior Vice President of
                       President, CNA                the CNA Insurance Companies
                       Insurance                     since September 1993.
                       Companies                     Prior thereto, Mr. Garner
                                                     was a partner of Coopers
                                                     and Lybrand LLP.  Executive
                                                     officer of the Registrant
                                                     since 1996.

Bernard L. Hengesbaugh Senior Vice       50   1980   Senior Vice President of
                       President, CNA                the CNA Insurance Companies
                       Insurance                     since November 1990.
                       Companies                     Executive officer of the
                                                     Registrant since 1996.

Peter E. Jokiel        Senior Vice       49   1985   Senior Vice President and
                       President and                 Chief Financial Officer
                       Chief Financial               since November 1990.
                       Officer                       Executive officer of the
                                                     Registrant since 1990.

Jonathan D. Kantor     Senior Vice       41   1994*  Group Vice President of the
                       President*                    CNA Insurance Companies
                                                     since April 1994.
                                                     Prior thereto, partner at
                                                     the law firm of Shea &
                                                     Gould.  Executive officer
                                                     of the Registrant effective
                                                     April 1, 1997.**

Donald M. Lowry        Senior Vice      67  1982     Senior Vice President,
                       President,                    Secretary and General
                       Secretary and                 Counsel since August 1992.
                       General                       Prior thereto, Mr. Lowry
                       Counsel***                    was Senior Vice President
                                                     and General Counsel of the
                                                     CNA Insurance Companies.
                                                     Executive officer of the
                                                     Registrant since 1992.

Carolyn L. Murphy      Senior Vice    52   1978      Senior Vice President of
                       President, CNA                the CNA Insurance Companies
                       Insurance                     since November 1990.
                       Companies                     Executive officer of the
                                                     Registrant since 1992.
<PAGE>
                                          FIRST BECAME
                        POSITION AND      OFFICER OF
                        OFFICES HELD      THE CNA
                         WITH             INSURANCE
NAME                    REGISTRANT    AGE COMPANIES  PRINCIPAL OCCUPATION
                                                     DURING PAST FIVE YEARS

William H. Sharkey,Jr. Senior Vice   48   1994       Senior Vice President of
                       President, CNA                the CNA Insurance Companies
                       Insurance                     since January 1994.  Prior
                       Companies                     therto, Mr. Sharkey was
                                                     Senior Vice President of
                                                     Cigna Healthcare. Executive
                                                     officer of the Registrant
                                                     since 1996.

                                       15
<PAGE>
                  EXECUTIVE OFFICERS OF THE REGISTRANT - CONTINUED

                                          FIRST BECAME
                        POSITION AND      OFFICER OF
                        OFFICES HELD      THE CNA
                         WITH             INSURANCE
NAME                    REGISTRANT    AGE COMPANIES  PRINCIPAL OCCUPATION
                                                     DURING PAST FIVE YEARS

Adrian M. Tocklin      Senior Vice   45   1995       Senior Vice President of
                       President, CNA                the CNA Insurance Companies
                       Insurance                     since May 1995; President
                       Companies                     of The Continental
                                                     Insurance Company from June
                                                     1994 through May 1995;
                                                     Executive Vice President of
                                                     The Continental Insurance
                                                     Company from August 1991
                                                     through June 1994.
                                                     Prior thereto, Ms. Tocklin
                                                     was Senior Vice President
                                                     of The Continental
                                                     Insurance Company.
                                                     Executive officer of the
                                                     Registrant since 1996.

Jae L. Wittlich        Senior Vice  54    1977       Senior Vice President of
                       President,                    the CNA Insurance Companies
                       CNA                           since November 1990.
                       Insurance                     Executive officer of the
                       Companies                     Registrant since 1992.

David W. Wroe          Senior Vice  50    1996       Senior Vice President of
                       President,                    the CNA Insurance Companies
                       CNA                           since June 1996.  Prior
                       Insurance                     thereto, Mr. Wroe was
                       Companies                     President of Agency
                                                     Management Systems.
                                                     Executive officer of the
                                                     Registrant since 1996.
-------------------------------
Officers  are  elected and hold office  until their  successors  are elected and
qualified, and are subject to removal by the Board of Directors.

*Mr.  Kantor will succeed  Donald Lowry as Senior Vice President , Secretary and
General  Counsel of the CNA Insurance  Companies  effective April 1, 1997 and as
Senior Vice President and General Counsel of the Registrant effective 1998.

**Shea & Gould declared bankruptcy in 1995.

***Mr. Lowry will remain Senior Vice President, Secretary and General Counsel of
the Registrant until 1998.

****Mr. Tisch is not an officer of the CNA Insurance Companies.




                                       16
<PAGE>
                                  PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

     Incorporated  herein by reference from page 82 of the 1996 Annual Report to
     Shareholders.


ITEM 6. SELECTED FINANCIAL DATA

     Incorporated  herein by reference  from page 2 of the 1996 Annual Report to
     Shareholders.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     Incorporated  herein by  reference  from  pages 12  through  29 of the 1996
     Annual Report to Shareholders.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Consolidated Balance Sheet - December 31, 1996 and 1995

     Statement of Consolidated Operations - Years Ended December 3l, 1996, 1995
     and 1994

     Statement of Consolidated Stockholders' Equity - December 31, 1996, 1995
     and 1994

     Statement of Consolidated  Cash Flows - Years Ended December 31, 1996, 1995
     and 1994

     Notes to Consolidated Financial Statements

     Independent Auditors' Report

     The above  Consolidated  Financial  Statements,  the  related  Notes to the
Consolidated  Financial  Statements  and the  Independent  Auditors'  Report are
incorporated  herein by  reference  from pages 30 through 81 of the 1996  Annual
Report to Shareholders.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     None.




                                       17
<PAGE>
                                  PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information required in Part III has been omitted as the Registrant intends
to file a  definitive  proxy  statement  pursuant  to  Regulation  14A  with the
Securities  and Exchange  Commission  not later than 120 days after the close of
its fiscal year.

ITEM 11.  EXECUTIVE COMPENSATION

     Information required in Part III has been omitted as the Registrant intends
to file a  definitive  proxy  statement  pursuant  to  Regulation  14A  with the
Securities  and Exchange  Commission  not later than 120 days after the close of
its fiscal year.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Information required in Part III has been omitted as the Registrant intends
to file a  definitive  proxy  statement  pursuant  to  Regulation  l4A  with the
Securities  and Exchange  Commission  not later than 120 days after the close of
its fiscal year.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information required in Part III has been omitted as the Registrant intends
to file a  definitive  proxy  statement  pursuant  to  Regulation  14A  with the
Securities  and Exchange  Commission  not later than 120 days after the close of
its fiscal year.


                             PART IV
ITEM 14. FINANCIAL STATEMENTS, SCHEDULES, EXHIBITS AND REPORTS ON FORM 8-K
                                                                         Page
                                                                        Number
                                                                        ------
(a)    1.  FINANCIAL STATEMENTS:

           A separate index to the Consolidated Financial Statements
           is presented in Part II, Item 8..........................       17

(a)    2.  FINANCIAL STATEMENT SCHEDULES:

           Schedule I    Summary of Investments.....................       22

           Schedule II   Condensed Financial Information (Parent Company). 23

           Schedule III  Supplementary Insurance Information.............. 27

           Schedule V    Valuation and Qualifying Accounts and Reserves..  28

           Schedule VI   Supplementary Information Concerning
                         Property/Casualty Insurance Operations..........  28

           Other schedules are omitted because of the absence of conditions
           under  which  they  are   required   or  because  the   required
           information is provided in the Consolidated Financial Statements
           or notes thereto.

           Independent Auditors' Report.................................   29




                                       18
<PAGE>
                                  PART IV
ITEM 14.  FINANCIAL STATEMENTS, SCHEDULES, EXHIBITS AND REPORTS ON FORM 8-K
          (CONTINUED)
(a)   3.     EXHIBITS:


                                                                         Exhibit
                            Description of Exhibit                        Number
                            ----------------------                       -------
      (2) Plan of acquisition, reorganization, arrangement, liquidation
          or succession:

          Securities Purchase Agreement, dated as of December 6, 1994,
          by and between CNA Financial Corporation and The Continental
          Corporation (with exhibits thereto) (Exhibit 1 to Form 8-K
          dated December 9, 1994 incorporated herein by reference.)....     2.1

          Merger Agreement, dated as of December 6, 1994, by and among
          CNA Financial Corporation, Chicago Acquisition Corp. and The
          Continental Corporation (Exhibit 2 to Form 8-K dated December
          9, 1994 incorporated herein by reference.)...................     2.2

      (3)  Articles of incorporation and by-laws:
           Certificate of Incorporation of CNA Financial Corporation, as
           amended May 6, 1987 (Exhibit 3.1 to 1987 Form 10-K incorporated
           herein by reference.)........................................    3.1

           By-Laws of CNA Financial Corporation, as amended February 12,
           1997.........................................................    3.2*

     (4)   Instruments defining the rights of security holders, including
           indentures:
           CNA Financial Corporation hereby agrees to furnish
           to the Commission upon request copies of instruments with
           respect to long-term debt, pursuant to Item 601(b)(4)(iii)
           of Regulation S-K..........................................      --

     (10)  Material contracts:

           Continental Casualty Company "CNA" Annual Incentive Bonus Plan
           Provisions (Exhibit 10.1 to 1994 Form 10K incorporated herein
           by reference.)................................................  10.1

           Employment Agreement between CNA Financial Corporation and
           Dennis H. Chookaszian, dated December 31, 1995
           (Exhibit 10.2 to 1995 Form 10K incorporated herein by
           reference.)...................................................  10.2

           Employment Agreement between CNA Financial Corporation and
           Philip L. Engel, dated December 31, 1995 (Exhibit 10.3 to 1995
           Form 10K incorporated herein by reference.)...................  10.3

           Continuing Services Agreement between CNA Financial Corporation
           and Edward J. Noha, dated February 27, 1991 (Exhibit 6.0 to 1991
           Form 8-K, filed March 18, 1991, incorporated herein by
           reference.)...................................................  10.4

           CNA Employees' Retirement Benefit Equalization Plan, as amended
           through January 1, 1993  (Exhibit 10.4 to 1992 Form 10-K
           incorporated herein by reference.)............................. 10.5

           CNA Employees' Supplemental Savings Plan, as amended through
           January 1, 1993 (Exhibit 10.6 to 1992 Form 10-K incorporated
           herein by reference.).......................................... 10.6

                                       19

<PAGE>
                                     PART IV

ITEM 14. FINANCIAL STATEMENTS, SCHEDULES, EXHIBITS AND REPORTS ON FORM 8-K
         (continued)

  (a) 3.    EXHIBITS:
                                                                        Exhibit
                          Description of Exhibit Number                 Number
                          -----------------------------                 -------

     (10)Material contracts (continued):

         Federal Income Tax Allocation Agreement dated February
         29, 1980 between CNA Financial Corporation and Loews
         Corporation (Exhibit 10.2 to 1987 Form 10-K incorporated
         herein by reference.)........................................    10.7

         Agreement  between  Fibreboard   Corporation  and  Continental
         Casualty Company,  dated April 9, 1993 (Exhibit A to 1993 Form
         8-K filed April 12, 1993 incorporated herein by reference.)....  10.8

         Settlement  Agreement  entered into on October 12, 1993 by and
         among Fibreboard  Corporation,  Continental  Casualty Company,
         CNA  Casualty of  California,  Columbia  Casualty  Company and
         Pacific Indemnity Company together the "Parties" (Exhibit 10.1
         to September 30, 1993 Form 10-Q incorporated herein by
         reference.)...................................................   10.9

         Continental-Pacific  Agreement  entered  into October 12, 1993
         between  Continental  Casualty  Company and Pacific  Indemnity
         Company   (Exhibit  10.2  to  September  30,  1993  Form  10-Q
         incorporated herein by reference.).............................  10.10

         Global  Settlement  Agreement  among  Fibreboard  Corporation,
         Continental   Casualty   Company,   CNA  Casualty  Company  of
         California,   Columbia  Casualty  Company,  Pacific  Indemnity
         Company  and the  Settlement  Class  dated  December  23, 1993
         (Exhibit 10.11 to 1993 Form 10-K incorporated herein
          by reference.)..............................................    10.11

         Glossary  of  Terms  in  Global  Settlement  Agreement,  Trust
         Agreement,  Trust  Distribution  Process and  Defendant  Class
         Settlement Agreement as of December 23, 1993 (Exhibit 10.12 to
         1993 Form 10-K incorporated herein by reference.).............   10.12

         Fibreboard Asbestos Corporation Trust Agreement dated
         December 23, 1993 (Exhibit 10.13 to 1993 Form 10-K incorporated
         herein by reference.)..........................................  10.13

         Trust Distribution Process - Annex A to the Trust Agreement as
         of  December  23,  1993  (Exhibit  10.14  to  1993  Form  10-K
         incorporated herein by reference.)............................   10.14

         Defendant Class Settlement Agreement dated December 22, 1993
         (Exhibit 10.15 to 1993 Form 10-K incorporated herein by
         reference.)....................................................  10.15

         Escrow Agreement among Continental Casualty Company, Pacific
         Indemnity Company and The First National Bank of Chicago dated
         December 23, 1993 (Exhibit 10.16 to 1993 Form 10-K incorporated
         herein by reference.)..........................................  10.16

                                       20
<PAGE>
                                     PART IV

ITEM 14. FINANCIAL STATEMENTS, SCHEDULES, EXHIBITS AND REPORTS ON FORM 8-K
         (CONTINUED)

(a)      3.   EXHIBITS:
                                                                        Exhibit
                    Description of Exhibit                               Number
                    ----------------------                               ------

     (11)     Computation of Net Income per Common Share................  11.1*

     (12)     Statements regarding computation of ratios:
              Computation of Ratio of Earnings to Fixed Charges.........  12.1*

              Computation of Ratio of Net Income, As Adjusted,
              to Fixed Charges..........................................  12.2*

     (13)     1996 Annual Report........................................  13.1*

     (21)     Subsidiaries of CNA.......................................  21.1*

     (23)     Independent Auditor's Consent.............................  23.1*

     (27)     Financial Data Schedule...................................  27*
              *Filed herewith

     (b)      REPORTS ON FORM 8-K:


              None

                                       21
<PAGE>



<TABLE>
<CAPTION>
                                                                                                         SCHEDULE I

                                                CNA FINANCIAL CORPORATION
                                                  SUMMARY OF INVESTMENTS

-------------------------------------------------------------------------------------------------------------------
DECEMBER 31                                                   1996                               1995
                                                 ------------------------------ -----------------------------------
                                                             MARKET   CARRYING                  MARKET    CARRYING
(In millions of dollars)                            COST      VALUE     VALUE         COST       VALUE      VALUE
-------------------------------------------------------------------------------------------------------------------
<S>                                             <C>        <C>       <C>         <C>         <C>        <C>
Fixed maturities available-for-sale:
   Bonds:
       United States government and government
        agencies and authorities-taxable....      $15,046.9 $15,045.3 $15,045.3    $17,903.4   $18,511.4  $18,511.4
       States, municipalities and political
        subdivisions-tax exempt.............        4,859.6   4,951.2   4,951.2      3,452.8     3,603.1    3,603.1
       Foreign governments and political
        subdivisions........................        1,200.1   1,213.9   1,213.9      1,509.3     1,543.3    1,543.3
       Public utilities.....................          195.5     205.4     205.4        280.2       305.2      305.2
       Convertibles and bonds with warrants
        attached............................          166.6     168.7     168.7        252.2       260.8      260.8
       All other corporate..................        6,021.7   6,070.5   6,070.5      5,887.2     6,104.6    6,104.6
   Redeemable preferred stocks..............           49.2      65.6      65.6        100.3       116.3      116.3
                                                   --------  --------  --------     --------    --------   --------
         Total fixed maturities                    27,539.6  27,720.6  27,720.6     29,385.4    30,444.7   30,444.7
         available-for-sale                        ========  ========  ========     ========    ========   ========

Equity securities available-for-sale:
   Common stocks:
       Public utilities.....................           11.0      15.1      15.1         17.7        23.5       23.5
       Banks, trusts and insurance companies          131.5     185.1     185.1         84.3        96.7       96.7
       Industrial and other.................          335.1     431.0     431.0        631.8       795.0      795.0
   Non redeemable preferred stocks..........          224.3     227.9     227.9          2.5         2.5        2.5
                                                   --------  --------  --------     --------    --------   --------
         Total equity securities                      701.9 $   859.1     859.1        736.3   $   917.7      917.7
         available-for-sale.................       --------  --------  --------     --------    --------   --------

Mortgage loans..............................          112.6               112.6        139.8                  119.3
                                                   --------            --------     --------               --------
Real estate:
   Investment properties....................           14.7                10.7          6.6                    3.0
   Acquired in satisfaction of debt.........            0.2                 0.1          0.2                    0.1
                                                   --------            --------     --------               --------
         Total real estate..................           14.9                10.8          6.8                    3.1
                                                   --------            --------     --------               --------
Policy loans................................          174.4               174.4        177.1                  177.2
Other invested assets.......................          616.6               681.2        483.5                  499.9
Short-term investments......................        5,853.7             5,853.7      3,724.5                3,724.5
-------------------------------------------------------------------------------------------------------------------
         Total investments                        $35,013.7           $35,412.4    $34,653.4              $35,886.4
===================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                                        SCHEDULE II
                            CNA FINANCIAL CORPORATION
                                (PARENT COMPANY)
                         CONDENSED FINANCIAL INFORMATION


FINANCIAL POSITION
--------------------------------------------------------------------------------
DECEMBER 31                                                1996           1995
(In millions of dollars)
--------------------------------------------------------------------------------
ASSETS:
<S>                                                    <C>           <C>
Investments in subsidiaries.........................   $ 8,098.9     $ 8,060.6
Federal income taxes recoverable....................          --         136.6
Deferred income taxes...............................       877.2         785.2
Notes receivable from affiliate.....................       205.0         205.0
Other...............................................        17.9           7.9
                                                      ----------    ----------
        Total assets................................   $ 9,199.0     $ 9,195.3
LIABILITIES:                                          ==========    ==========
Debt................................................   $ 1,971.2     $ 2,222.4
Federal income taxes payable........................        28.7            --
Amounts due to affiliates...........................       101.7         190.3
Other...............................................        37.6          47.1
                                                      ----------    ----------
        Total liabilities...........................     2,139.2       2,459.8
                                                      ----------    ----------
        Total stockholders' equity..................     7,059.8       6,735.5
------------------------------------------------------------------------------
        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY     $ 9,199.0     $ 9,195.3
==============================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS
----------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31                                    1996            1995           1994
(In millions of dollars)
----------------------------------------------------------------------------------------------
<S>                                                  <C>             <C>           <C>
REVENUES:
Equity in income of subsidiaries before income tax:
   Operating income ...............................   $1,088.8       $  923.5         $ 389.1
   Realized investment gains (losses)..............      609.7          453.0          (256.8)
Net investment income..............................       13.6            9.0             0.3
Realized investment gains (losses).................       (5.4)           3.1            (0.3)
                                                      ---------      --------          ------
                                                       1,706.7        1,388.6           132.3
                                                      ---------      --------          ------
EXPENSES:
Administrative and general expenses................      222.6          219.7           193.1
Interest expense...................................      135.0          125.3            69.6
Other..............................................        4.0            1.2             3.7
                                                      --------       --------          ------
                                                         361.6          346.2           266.4
                                                      --------       --------          ------
       Income (loss) before income tax.............    1,345.1        1,042.4          (134.1)
Income tax benefit (expense).......................     (380.3)        (285.4)          170.6
==============================================================================================
       Net income                                     $  964.8       $  757.0         $  36.5
==============================================================================================
                                See accompanying Notes to Condensed Financial Information.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                                     SCHEDULE II
                                                                                     (Continued)



                                                CNA FINANCIAL CORPORATION
                                                     (PARENT COMPANY)
                                             CONDENSED FINANCIAL INFORMATION


STATEMENT OF CASH FLOWS
-----------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31                                                     1996         1995       1994
(In millions of dollars)
-----------------------------------------------------------------------------------------------------------
<S>                                                                     <C>         <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income........................................................... $ 964.8     $ 757.0      $ 36.5
                                                                         -------     -------       -----
   Adjustments to reconcile net income to net cash
   used in operating activities:
       Equity in earnings of unconsolidated affiliates                  (1,376.7)   (1,200.7)      (98.0)
       Realized (gains) losses..........................................     5.4        (3.1)        0.3
       Changes in:
        Accrued investment income.......................................       -           -         1.1
        Federal income taxes............................................   165.3      (112.9)        5.6
        Deferred income taxes...........................................    93.3       173.2      (115.0)
        Other, net......................................................  (131.9)       86.7       (23.6)
                                                                         -------     -------      ------
         TOTAL ADJUSTMENTS..............................................(1,244.6)   (1,056.8)     (229.6)
                                                                         --------    --------     ------
         NET CASH USED IN OPERATING ACTIVITIES..........................  (279.8)     (299.8)     (193.1)
                                                                         -------     -------      ------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of The Continental Corporation.............................       -    (1,125.5)          -
   Other acquisition....................................................       -       (13.0)          -
   Purchases of fixed maturities........................................    (0.2)     (709.0)     (195.7)
   Proceeds from fixed maturities:
      Sales.............................................................       -       501.2        19.6
      Maturities........................................................       -       200.6       192.4
   Net proceeds from the sale of equity securities......................       -        (0.5)        4.0
   Change in short-term investments.....................................    (1.7)        0.8         1.1
   Change in other investments..........................................    (4.6)       10.3         2.3
   Other................................................................       -        (3.3)       (1.0)
                                                                         -------     -------      ------
         NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES............    (6.5)   (1,138.4)       22.7
                                                                         --------    --------     ------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Dividends paid to preferred shareholders.............................    (6.3)       (7.3)       (4.5)
   Dividend from affiliates.............................................   547.5       325.8       175.0
   Proceeds from issuance of long-term debt.............................   248.1     1,325.0           -
   Principal payments on  long-term debt................................  (500.0)          -           -
   Loan to The Continental Corporation..................................       -      (205.0)          -
                                                                         -------     -------      -------
         NET CASH PROVIDED BY FINANCING ACTIVITIES......................   289.3     1,438.5       170.5
                                                                         -------     -------      -------
         NET INCREASE  IN CASH..........................................     3.0         0.3         0.1
Cash at beginning of year...............................................     0.4         0.1           -
---------------------------------------------------------------------------------------------------------
CASH AT END OF YEAR                                                     $    3.4     $   0.4      $  0.1
===========================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS - CONTINUED
-----------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31                                                     1996         1995       1994
(In millions of dollars)
-----------------------------------------------------------------------------------------------------------
<S>                                                                    <C>           <C>        <C>
Supplemental disclosures of cash flow information:
Cash received (paid):
       Interest expense................................................. $(140.9)    $(169.5)     $(70.5)
       Federal income taxes.............................................    15.4       102.5        53.1
===========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Supplemental disclosures of cash flow information relating to acquisitions:
Noncash  investing  activities  that are not  reflected in the Statement of Cash
Flows are listed below*.
------------------------------------------------------------------------------------------------------------
                                                                           The
                                                                       Continental       Other
   December 31, 1995                                                   Corporation
------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>               <C>
 Fair value of assets acquired......................................... $15,258.5        $  13.0
 Liabilities assumed................................................... (14,133.0)           -
                                                                        ---------        -------
       Cash paid....................................................... $ 1,125.5        $  13.0
============================================================================================================
*  There were no significant  acquisitions by CNA Financial  Corporation (Parent
   Company) during the year ended December 31, 1996 and December 31, 1994.
</TABLE>

           See accompanying Notes to Condensed Financial Information.
<PAGE>
                                                               SCHEDULE II
                                                               (CONTINUED)

                            CNA FINANCIAL CORPORATION
                                (PARENT COMPANY)
                         CONDENSED FINANCIAL INFORMATION


                    Notes to Condensed Financial Information


a.       Basis of Presentation


         The  financial   statements  of  the  registrant   should  be  read  in
         conjunction  with  the  Consolidated  Financial  Statements  and  Notes
         thereto  included in the CNA  Financial  Corporation  Annual  Report to
         Shareholders.


         Certain  amounts  applicable to prior years have been  reclassified  to
         conform to classifications followed in 1996.


b.       Debt:
<TABLE>
<CAPTION>

    -------------------------------------------------------------------------
    DECEMBER 31                                               1996    1995
    (In millions of dollars)
    -------------------------------------------------------------------------
    Long-term
      <S>                                                      <C>     <C>
       Variable rate debt:
           Credit Facility..................................$  400.0 $  825.0
           Commercial Paper.................................   675.0    500.0
       Senior Notes:
           8 7/8 %, due March 1, 1998.......................   149.6    149.2
           6 1/4%, due November 15, 2003....................   248.4    248.2
           6 3/4%, due November 15, 2006....................   248.1     --
       7 1/4%  Debenture, due November 15, 2023.............   247.1    247.1
       1.0% Urban Development Action Grant, due May 7, 2019.     3.0      3.0
                                                            -------- --------
           Total long-term debt............................. 1,971.2  1,972.5
    Short-term debt.........................................     --     249.9
    -------------------------------------------------------------------------
             Total                                          $1,971.2 $2,222.4
    =========================================================================
</TABLE>

   To finance the acquisition of Continental (including the refinancing of
   $205 million of Continental  debt) CNA entered into a five-year  $1.325
   billion  revolving credit facility.  In 1996, the Company  renegotiated
   the facility  extending the maturity to May 2001. The interest rate for
   the facility is based on the London  Interbank  Offered  Rate  (LIBOR),
   plus 16 basis points. Additionally,  there is a facility fee of 9 basis
   points annually.  The average interest rate on the borrowings under the
   revolver  at  December  31,  1996 was  5.72%.  Under  the  terms of the
   facility, CNA may prepay the debt without penalty.

<PAGE>

   On November 15, 1996, CNA issued $250 million 6 3/4% senior notes,  due
   November 15, 2006. The net proceeds from this issuance of approximately
   $248  million  were  used  to pay  down  a  portion  of the  borrowings
   outstanding  under the revolving credit  facility.  As a result of this
   debt issuance,  borrowing  capacity under the revolving credit facility
   was reduced by $250 million, to $1.075 billion.

   An additional $250 million of securities  remain available for issuance
   under a shelf registration.

                                       25
<PAGE>

         NOTES TO CONDENSED FINANCIAL INFORMATION (CONTINUED)



   In 1995, to take advantage of favorable interest rates, CNA established
   a commercial  paper program  borrowing  $500 million from  investors to
   replace a like amount of credit  facility  financing.  During 1996, CNA
   increased its  borrowings  under the  commercial  paper program to $675
   million.  The average interest rate on the commercial paper at December
   31, 1996 was 5.67%.  The commercial  paper borrowings are classified as
   long-term as borrowing  capacity under the credit facility will support
   the commercial paper. At year end 1996, the outstanding loans under the
   revolving  credit  facility  were  $400  million.  There  was no unused
   borrowing  capacity  under  the  facility  after  the  effects  of  the
   commercial paper program.


   In 1995, CNA entered into interest rate swap agreements with a notional
   principal amount of $1.2 billion,  which terminate from May to December
   2000. These  agreements  provide that CNA pay interest at a fixed rate,
   averaging  6.20% at December  31,  1996 in exchange  for the receipt of
   interest at the three month LIBOR rate.  Concurrent with the paydown of
   $250 million on the revolving credit facility,  CNA terminated interest
   rate swaps with a total notional amount of $250 million.

   The  effect  of these  interest  rate  swaps was to  increase  interest
   expense by  approximately $7 million and $2 million for the years ended
   December 31, 1996 and 1995, respectively.

   The weighted  average interest rate (interest and facility fees) on the
   variable  rate debt,  which  includes the  revolving  credit  facility,
   commercial  paper and the effect of the interest rate swaps,  was 6.28%
   and 6.50% at December 31, 1996 and 1995, respectively.


c. CNA has reimbursed,  or will reimburse,  its  subsidiaries  for general
   management and  administrative  expenses,  unallocated  loss adjustment
   expenses and investment  expense of $223.1 million,  $218.3 million and
   $194.3 million in 1996, 1995 and 1994, respectively.


d. There were no capital contributions by CNA in 1996, 1995 or 1994.
--------------------------------------------------------------------------------

                                       26
<PAGE>


<TABLE>
<CAPTION>
                                                                        SCHEDULE III

                            CNA FINANCIAL CORPORATION
                       SUPPLEMENTARY INSURANCE INFORMATION
-------------------------------------------------------------------------------------------------
                                                          Gross Insurance Reserves
                                              ---------------------------------------------------
                                               CLAIM
                                DEFERRED        AND         FUTURE                    POLICY-
                               ACQUISITION     CLAIM        POLICY      UNEARNED     HOLDERS'
(In millions of dollars)          COSTS       EXPENSE      BENEFITS     PREMIUMS       FUNDS
-------------------------------------------------------------------------------------------------
DECEMBER 31, 1996
   Property/Casualty:
<S>                              <C>          <C>          <C>           <C>          <C>
     Commercial............      $  822.3     $26,321.8    $   47.4      $ 3,591.3    $ 171.8
     Personal..............         262.1       1,556.8       325.5        1,043.8         -
     Involuntary risks.....           -         1,951.4         -             23.6         -
   Life:
     Individual............         735.8         147.9     3,138.5           -          30.2
     Group.................          34.0         519.2       669.9           -         543.6
                                  -------     ---------     -------        -------      ------
       CNA Insurance.......      $1,854.2      30,497.1    $4,181.3      $ 4,658.7    $ 745.6
                                  =======                   ========       =======      ======
   Other and intercompany
     eliminations..........                       332.4
                                              ---------
                                              $30,829.5
                                               ========
DECEMBER 31, 1995
   Property/Casualty
     Commercial............      $  701.9     $27,309.3    $   38.5      $ 3,607.0    $ 162.6
     Personal..............         258.2       1,426.5       259.9          868.9         -
     Involuntary risks.....           8.6       2,308.5         -             73.5         -
   Life:
     Individual............         505.7         162.3     2,678.8           -          31.0
     Group.................          18.9         473.0       538.7           -         511.4
                                  -------     ---------     -------        ------      ------
       CNA Insurance.......      $1,493.3      31,679.6    $3,515.9      $ 4,549.4    $ 705.0
                                  =======                   =======       =======      ======
   Other and intercompany
     eliminations..........                       352.8
                                              ---------
                                              $32,032.4
                                              =========
DECEMBER 31, 1994
   Property/Casualty:
     Commercial............      $  395.2     $18,920.3    $   28.5      $ 2,129.1    $ 128.4
     Personal..............         197.1       1,042.4       199.0          559.9         -
     Involuntary risks.....           -         1,675.9         -              1.7         -
   Life:
     Individual............         427.3         145.2     2,414.9           -          31.7
     Group.................           6.8         439.4       407.4           -         472.4
                                  -------     ---------     -------       --------      ------
       CNA Insurance.......      $1,026.4      22,223.2    $3,049.8      $ 2,690.7    $ 632.5
                                  =======                   =======       ========      ======
   Other and intercompany
     eliminations..........                       341.6
                                              ---------
                                              $22,564.8
                                              =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                            CNA FINANCIAL CORPORATION
                 SUPPLEMENTARY INSURANCE INFORMATION - CONTINUED
-------------------------------------------------------------------------------------------------------------

                                                                       Amortization
                                                        Insurance         of
                                 Net          Net       Claims and      Deferred       Other
                               Premium    Investment   Policyholders'  Acquisition   Operating    Premiums
                               Revenue      Income       Benefits        Costs       Expenses      Written
-------------------------------------------------------------------------------------------------------------

December 31, 1996
   Property/Casualty:
     <S>                    <C>          <C>          <C>            <C>            <C>          <C>
     Commercial............  $ 8,296.3    $1,622.7     $ 6,703.2      $1,715.3      $ 1,103.9    $  8,592.7
     Personal..............    1,598.7       166.0       1,183.8         402.2          273.5       1,731.5
     Involuntary risks.....      232.1        92.6         243.6          61.6           91.6         286.5
   Life:
     Individual............      630.9       227.6         666.9          26.4          128.8             -
     Group.................    2,742.9       172.5       2,579.2         (13.4)         321.6             -
                             ---------     -------      --------       --------       -------     ---------
       CNA Insurance.......   13,500.9     2,281.4      11,376.7      $2,192.1        1,919.4    $ 10,610.7
                                                                      =========                   =========
   Other and intercompany
     eliminations..........      (21.9)       (5.4)        (20.4)                       (39.7)
                             ---------     --------     ---------                       ------
                             $13,479.0    $2,276.0    $ 11,356.3                    $ 1,879.7
                              ========     ========     =========                     ========
December 31, 1995
   Property/Casualty:
     Commercial............  $ 7,225.3    $1,463.1    $  5,995.2      $1,494.8     $    915.3     $ 7,561.3
     Personal..............    1,214.8       132.4         891.6         271.4          228.5       1,254.3
     Involuntary risks.....      283.7       104.3         234.0          16.7          145.8         310.5
   Life:
     Individual............      529.8       214.6         506.8          70.5          134.3             -
     Group.................    2,502.6       154.6       2,340.1          (9.9)         275.6             -
                             ---------     -------      --------       --------       -------     ---------
       CNA Insurance.......   11,756.2     2,069.0       9,967.7      $1,843.5        1,699.5     $ 9,126.1
                                                                       ========                   =========
   Other and intercompany
     eliminations..........      (21.1)        7.6         (23.8)                      (19.7)
                             ---------     --------      --------                     -------
                             $11,735.1    $2,076.6     $ 9,943.9                    $ 1,679.8
                              ========     ========      ========                     ========

December 31, 1994
   Property/Casualty:
     Commercial............  $ 5,417.1    $1,050.8     $ 4,845.8      $ 1,099.2     $   512.3     $ 5,488.7
     Personal..............      965.7       101.5         833.2          229.6         164.1       1,037.3
     Involuntary risks.....      455.7        88.1         339.6              -         186.4         438.7
   Life:
     Individual............      402.0       172.2         392.2           46.7         109.6             -
     Group.................    2,276.2       138.4       2,092.9            2.0         260.6             -
                             ---------     -------      --------        -------       -------      --------
       CNA Insurance.......    9,516.7     1,551.0       8,503.7      $ 1,377.5       1,233.0     $ 6,964.7
                                                                        =======                    ========
   Other and intercompany
     eliminations..........      (42.3)        0.2         (42.5)                         2.4
                             ---------     --------      -------                      -------
                             $ 9,474.4    $1,551.2     $ 8,461.2                    $ 1,235.4
                              ========     ========      =======                      =======
</TABLE>
                                       27
<PAGE>
<TABLE>
<CAPTION>


                                                                             SCHEDULE V



                                CNA FINANCIAL CORPORATION
                     VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

-----------------------------------------------------------------------------------------------------------
                                  Balance      Balance                                             Balance
                                                  at       Charged to   Charged to                    at
                                              Beginning     Costs and      Other                    End of
  (In millions of dollars)                    of Period     Expenses      Amounts    Deductions     Period
  ----------------------------------------------------------------------------------------------------------
  <S>                                        <C>           <C>            <C>       <C>            <C>
  Year Ended December 31, 1996
     Deducted from assets:
       Allowance for doubtful accounts:
         Insurance receivables............    $  288.7      $   34.5     $    -       $   46.0     $  277.2
                                               =======       =======      =======      =======      =======
  Year Ended December 31, 1995
     Deducted from assets:
       Allowance for doubtful accounts:
         Insurance receivables............    $  127.5      $   39.0     $  143.5*    $   21.3     $  288.7
                                               =======       =======      ========     =======      =======
  Year Ended December 31, 1994
     Deducted from assets:
       Allowance for doubtful accounts:
         Insurance receivables............    $  117.3      $   18.6     $    -       $    8.4     $  127.5
                                               =======       =======      =======      =======      =======
  ---------------------------------------------------------------------------------------------------------
  * Includes Continental allowance at acquisition.
  </TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                                 SCHEDULE VI


                            CNA FINANCIAL CORPORATION
             SUPPLEMENTARY INFORMATION CONCERNING PROPERTY/CASUALTY
                              INSURANCE OPERATIONS

----------------------------------------------------------------------------------------------
                                                                 CONSOLIDATED PROPERTY/
                                                                    CASUALTY ENTITIES
                                                         -------------------------------------

YEAR ENDED DECEMBER 31                                       1996          1995         1994
(In millions of dollars)
----------------------------------------------------------------------------------------------
<S>                                                     <C>           <C>           <C>
Deferred acquisition costs...............................$  1,084      $    969      $    592


Reserves for unpaid claims and claim expenses............  29,830        31,044        21,639

Discount, if any, deducted above (based on interest
rates ranging from 3.5% to 7.5%).........................   2,459         2,449         1,951

Unearned premiums........................................   4,659         4,549         2,691

Earned premiums..........................................  10,127         8,724         6,839

Net investment income....................................   1,881         1,700         1,240

Claim and claim expenses related to current year.........   7,922         6,787         5,611

Claim and claim expenses related to prior years..........     (91)          122           (71)

Amortization of deferred acquisition costs...............   2,179         1,783         1,329

Paid claim and claim expenses............................   9,201         7,058         5,027

Premiums written.........................................  10,611         9,126         6,965
----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>



                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Shareholders
CNA Financial Corporation


We  have  audited  the  consolidated   financial  statements  of  CNA  Financial
Corporation (an affiliate of Loews  Corporation) and subsidiaries as of December
31, 1996 and 1995 and for each of the three years in the period  ended  December
31,  1996 and have issued our report  thereon  dated  February  12,  1997.  Such
consolidated  financial statements and report are included in the Company's 1996
Annual Report to  Shareholders  and are  incorporated  herein by reference.  Our
audits  also  included  the  financial  statement  schedules  of  CNA  Financial
Corporation  and  subsidiaries  listed  in Item 14.  These  financial  statement
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion  based on our audits.  In our opinion,  such  financial
statement  schedules,  when  considered  in relation  to the basic  consolidated
financial  statements taken as a whole,  present fairly in all material respects
the information set forth therein.



S/DELOITTE & TOUCHE LLP


Deloitte & Touche LLP
Chicago, Illinois
February 12, 1997
<PAGE>



                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                     CNA Financial Corporation

                     By                       S/LAURENCE A. TISCH
                           -----------------------------------------------------
                                              Laurence A. Tisch
                                           Chief Executive Officer
                                        (Principal Executive Officer)

                     By                        S/PETER E. JOKIEL
                           -----------------------------------------------------
                                               Peter E. Jokiel
                                          Senior Vice President and
                                           Chief Financial Officer

Date: March 28, 1997


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the date indicated.


            SIGNATURE                             TITLE


      S/ANTOINETTE COOK BUSH             Director       |
----------------------------------                      |
      Antoinette Cook Bush                              |
                                                        |
                                                        |
      S/DENNIS H. CHOOKASZIAN            Director       |
----------------------------------                      |
      Dennis H. Chookaszian                             |
                                                        |
                                                        |
        S/PHILIP L. ENGEL               Director        |      Dated
----------------------------------                      |
         Philip L. Engel                                |     March 28, 1997
                                                        |
                                                        |
         S/ROBERT P. GWINN               Director       |
----------------------------------                      |
         Robert P. Gwinn                                |
                                                        |
                                                        |
        S/WALTER F. MONDALE              Director       |
----------------------------------                      |
        Walter F. Mondale                               |


                                       30
<PAGE>







            SIGNATURE                             TITLE


         S/EDWARD J. NOHA                Chairman of the   |
----------------------------------       Board and Director|
         Edward J. Noha                                    |
                                                           |
                                                           |
        S/JOSEPH ROSENBERG               Director          |
----------------------------------                         |
        Joseph Rosenberg                                   |
                                                           |
                                                           |
       S/RICHARD L. THOMAS              Director           |      Dated
----------------------------------                         |
        Richard L. Thomas                                  |     March 28, 1997
                                                           |
                                                           |
         S/JAMES S. TISCH                Director          |
----------------------------------                         |
         James S. Tisch                                    |
                                                           |
                                                           |
        S/LAURENCE A. TISCH              Chief Executive   |
----------------------------------       Officer and       |
          Laurence A. Tisch              Director          |
                                                           |
                                                           |
                                                           |
        S/PRESTON R. TISCH               Director          |
----------------------------------                         |
        Preston R. Tisch                                   |
                                                           |
                                                           |
          S/MARVIN ZONIS                 Director          |
----------------------------------                         |
           Marvin Zonis                                    |

                                       31
<PAGE>
<TABLE>
<CAPTION>
                                                                                                    EXHIBIT 11.1

                            CNA FINANCIAL CORPORATION
                   COMPUTATION OF NET INCOME PER COMMON SHARE

-------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31                                                1996      1995     1994      1993     1992
(In millions, except per share data)
-------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>       <C>      <C>       <C>      <C>
Weighted average shares outstanding...............................      61.8      61.8     61.8      61.8     61.8
                                                                     =======   =======  =======   =======  =======

Net income (loss) before cumulative effect of accounting changes..   $ 964.8  $  757.0  $  36.5   $ 267.5  $(662.5)
Less preferred stock dividends....................................       6.1       6.9      5.3       4.0      4.2
                                                                     -------   -------  -------   -------  -------
Net income (loss) before cumulative effect of accounting changes
     available to common stockholders.............................     958.7     750.1     31.2     263.5   (666.7)
Cumulative effect on prior years of changes in accounting principles      -        -        -         -      331.9
                                                                     -------   -------  -------   -------  -------
   Net income (loss) available to common stockholders.............   $ 958.7   $ 750.1  $  31.2   $ 263.5  $(334.8)
                                                                     =======   =======  =======   =======  =======


Earnings per share:

Net income (loss) before cumulative effect of accounting changes..   $  15.51  $  12.14 $   0.51  $   4.26 $ (10.79)
Cumulative effect on prior years of changes in accounting principles       -         -      -         -        5.37
                                                                     --------  --------   -------  -------- --------
   Net income (loss) available to common stockholders.............   $  15.51  $  12.14  $  0.51 $    4.26 $  (5.42)
                                                                     ========  ======== ========  ======== =========
--------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       32
<PAGE>



<TABLE>
<CAPTION>
                                                                                                      EXHIBIT 12.1

                            CNA FINANCIAL CORPORATION
                COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

--------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31                                         1996       1995       1994        1993       1992
(In millions of dollars, except ratios)
--------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>        <C>          <C>        <C>       <C>
Income before income tax and cumulative effect of accounting
changes..................................................... $ 1,345.1  $ 1,042.4    $(134.0)   $  93.5   $(1,374.9)
Adjustments:
   Interest expense.........................................     200.4      182.3       70.5       36.3        36.7
   Interest element of operating lease rental...............      31.8       46.7       19.1       18.2        17.6
                                                             ---------  ---------   ---------   --------   ---------
Income before income tax and cumulative effect of
     accounting changes, as adjusted........................ $ 1,577.3  $ 1,271.4    $ (44.4)   $ 148.0   $(1,320.6)
                                                             =========   =========  =========   ========  =========

Fixed charges:
   Interest expense......................................... $   200.4  $   182.3    $  70.5    $  36.3    $   36.7
   Interest element of operating lease rental...............      31.8       46.7       19.1       18.2        17.6
                                                             ---------  ---------    -------    -------   ---------
Fixed charges............................................... $   232.2  $   229.0    $  89.6    $  54.5    $   54.3
                                                              ========   ========    =======    =======   =========
Ratio of earnings to fixed charges (1)......................       6.8        5.6       (0.5)       2.7       (24.3)
--------------------------------------------------------------------------------------------------------------------

(1)  For purposes of computing  this ratio,  earnings  consist of income  before
     income taxes and cumulative effect of accounting changes plus fixed charges
     of  consolidated  companies.  Fixed  charges  consist of interest  and that
     portion of operating lease rental expense which is deemed to be an interest
     factor for such rentals.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                                              EXHIBIT 12.2

                            CNA FINANCIAL CORPORATION
                       COMPUTATION OF RATIO OF NET INCOME,
                          AS ADJUSTED, TO FIXED CHARGES

------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31                                          1996       1995      1994       1993      1992
(In millions of dollars, except ratios)
------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>         <C>        <C>       <C>       <C>
Net income.................................................   $   964.8   $  757.0   $  36.5   $ 267.5   $ (330.6)
Adjustments:
   Interest expense, after tax.............................       130.3      118.5      45.8      23.6       24.2
   Interest element of operating lease rental, after tax...        20.7       30.3      12.4      11.8       11.7
                                                              ---------   --------   -------   -------    --------
Net income, as adjusted....................................   $ 1,115.8   $  905.8   $  94.7   $ 302.9   $ (294.6)
                                                              =========   ========   =======   =======    ========


Fixed charges:
   Interest expense, after tax.............................   $   130.3   $  118.5    $ 45.8   $  23.6   $   24.2
   Interest element of operating lease rental, after tax...        20.7       30.3      12.4      11.8       11.7
                                                              ---------   --------    ------   --------  ---------
Fixed charges..............................................   $   151.0   $  148.8    $ 58.2   $  35.4   $   35.9
                                                              =========   ========    ======   ========  =========



Ratio of net income, as adjusted, to fixed charges (1).....         7.4        6.1       1.6       8.6       (8.2)
------------------------------------------------------------------------------------------------------------------

(1)  For  purposes  of  computing  this ratio,  net income has been  adjusted to
     include fixed charges of consolidated  companies,  after tax. Fixed charges
     consist of interest  and that portion of  operating  lease  rental  expense
     which is deemed to be an interest factor for such rentals.

</TABLE>
                                       33
<PAGE>



                                                                 EXHIBIT 21.1


                           PRIMARY SUBSIDIARIES OF CNA



                                                             PLACE OF
COMPANY                                                      INCORPORATION
-------                                                      --------------

AMS Services, Inc. and subsidiaries (10)                      Delaware

Alexsis, Inc. and subsidiaries (4)                            Maryland

American Casualty Company of Reading, Pennsylvania (ACCO)     Pennsylvania

Boston Old Colony Insurance Company                           Massachusetts

Claims Administration Corp.                                   Maryland

CNA Casualty of California                                    California

Columbia Casualty Company                                     Illinois

Commercial Insurance Company of Newark, N.J.                  New Jersey

Continental Assurance Company (CAC)                           Illinois

Continental Casualty Company (CCC)                            Illinois

Continental Lloyd's Insurance Company                         Texas

Continental Reinsurance Corporation                           California

Firemen's Insurance Company of Newark, New Jersey             New Jersey

Kansas City Fire and Marine Insurance Company                 Missouri

National Fire Insurance Company of Hartford (NFI)             Connecticut

National-Ben Franklin Insurance Company of Illinois           Illinois

Niagara Fire Insurance Company                                Delaware

Pacific Insurance Company                                     California


                                       34
<PAGE>

                                                      EXHIBIT 21.1 - (continued)


                     PRIMARY SUBSIDIARIES OF CNA - CONTINUED

The Buckeye Union Insurance Company                           Ohio

The Continental Corporation, Inc. (CIC)                       New York

The Continental Insurance Company                             New Hampshire

The Continental Insurance Company of New Jersey               New Jersey

Convida Holdings, Ltd and  subsidiary (1)                     Bahamas

The Fidelity and Casualty Company of New York                 New Hampshire

The Glens Falls Insurance Company                             Delaware

The Mayflower Insurance Company, Ltd.                         Indiana

Transcontinental Insurance Company                            New York

Transcontinental Technical Services, Inc. (ServCo)            Illinois

Transportation Insurance Company                              Illinois

Valley Forge Insurance Company                                Pennsylvania

Valley Forge Life Insurance Company                           Pennsylvania

Western National Warranty Corporation and  subsidiary (1)     Arizona


All other subsidiaries, when aggregated, are not considered significant.

                                       34
<PAGE>



                                                              EXHIBIT 23.1

                          INDEPENDENT AUDITORS' CONSENT


We consent to the  incorporation  by reference  in  Registration  Statement  No.
33-50753  of CNA  Financial  Corporation  and  subsidiaries  on Form  S-3 of our
reports dated February 12, 1997,  appearing in and  incorporated by reference in
the Annual Report on Form 10-K of CNA Financial Corporation and subsidiaries for
the year ended December 31, 1996.



S/DELOITTE & TOUCHE LLP


Deloitte & Touche LLP
Chicago, Illinois
March 31, 1997


                                       36