===============================================================================
                        SECURITIES AND EXCHANGE COMMISSION

                              Washington, D.C. 20549

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

                                   FORM 10-Q


                   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                       OF THE SECURITIES EXCHANGE ACT OF 1934


For the Quarterly Period Ended September 30, 1995  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)

     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  periods  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...

     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.


                 Class                        Outstanding at November 1, 1995
     ------------------------------           -------------------------------
     Common Stock , Par value $2.50                     61,798,262

===============================================================================
                            Page (1) of (31)

<PAGE>

                                 CNA FINANCIAL CORPORATION

                                           INDEX


PART I.   FINANCIAL INFORMATION                                        PAGE NO.
-------   ---------------------                                        --------
ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:

 CONSOLIDATED BALANCE SHEET
   SEPTEMBER 30, 1995 (Unaudited) and DECEMBER 31, 1994. . . . . . . .       3

 STATEMENT OF CONSOLIDATED OPERATIONS (Unaudited)
   FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 . .       4

 STATEMENT OF CONSOLIDATED STOCKHOLDERS' EQUITY (Unaudited)
   FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 . . . . . . .       5

 STATEMENT OF CONSOLIDATED CASH FLOWS (Unaudited)
   FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 . . . . . . .       6

 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
   SEPTEMBER 30, 1995. . . . . . . . . . . . . . . . . . . . . . . . .       7

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
   AND RESULTS OF OPERATIONS  . . . . . . . . . . . . . . . . . . . . .     18


PART II.  OTHER INFORMATION
--------  -----------------

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . .     28 

SIGNATURES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     29

EXHIBIT 11.  COMPUTATION OF NET INCOME PER COMMON SHARE . . . . . . . .     30

EXHIBIT 27.  FINANCIAL DATA SCHEDULE. . . . . . . . . . . . . . . . . .     31


                                       (2)

<PAGE>

                                          CNA FINANCIAL CORPORATION

                                          CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
                                                                                   September 30  December 31
                                                                                        1995        1994
(In millions of dollars)                                                             (Unaudited)
------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>          <C>
Assets
  Investments:
    Fixed maturities available for sale (cost: $26,926.0 and $21,623.1) . . . . . .   $27,505.0    $20,827.7
    Equity securities available for sale (cost: $601.1 and $736.3). . . . . . . . .       742.7        754.8
    Mortgage loans and real estate (less accumulated depreciation: $3.6 and $3.4) .       111.1         46.9
    Policy loans  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       175.1        176.3
    Other invested assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       479.2        101.1
    Short-term investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . .     7,676.6      5,036.1
                                                                                     ----------   ----------
         Total investments  . . . . . . . . . . . . . . . . . . . . . . . . . . . .    36,689.7     26,942.9
    Cash  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       218.3        147.6
    Insurance receivables:
      Reinsurance receivables . . . . . . . . . . . . . . . . . . . . . . . . . . .     7,454.0      3,187.7
      Other insurance receivables . . . . . . . . . . . . . . . . . . . . . . . . .     5,785.9      3,861.4
      Less allowance for doubtful accounts. . . . . . . . . . . . . . . . . . . . .      (210.9)      (127.5)
    Deferred acquisition costs  . . . . . . . . . . . . . . . . . . . . . . . . . .     1,479.5      1,026.4
    Accrued investment income . . . . . . . . . . . . . . . . . . . . . . . . . . .       553.9        407.1
    Receivables for securities sold . . . . . . . . . . . . . . . . . . . . . . . .     2,590.0        258.7
    Federal income taxes recoverable (includes $164.5 and $85.8 due from Loews) . .       127.8         93.4
    Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     1,563.2      1,662.5
    Property and equipment at cost (less accumulated depreciation: $620.7 and
     $244.9)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       540.2        263.3
    Prepaid reinsurance premiums  . . . . . . . . . . . . . . . . . . . . . . . . .       567.2        175.1
    Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     1,241.1        341.5
    Separate Account business . . . . . . . . . . . . . . . . . . . . . . . . . . .     5,995.7      6,080.3
------------------------------------------------------------------------------------------------------------
         Total assets                                                                 $64,595.6    $44,320.4
============================================================================================================

<PAGE>
                                          CNA FINANCIAL CORPORATION

                                    CONSOLIDATED BALANCE SHEET-continued

------------------------------------------------------------------------------------------------------------
                                                                                  September 30   December 31
                                                                                        1995        1994
(In millions of dollars)                                                             (Unaudited)
------------------------------------------------------------------------------------------------------------

Liabilities and Stockholders Equity
Liabilities:
    Insurance reserves:
     Claim and claim expense  . . . . . . . . . . . . . . . . . . . . . . . . . . .   $32,450.8    $22,564.7
     Future policy benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . .     3,397.7      3,049.8
     Unearned premiums  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     4,665.2      2,690.7
     Policyholders' funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       622.8        632.5
    Participating policyholders' equity . . . . . . . . . . . . . . . . . . . . . .       128.8         98.0
    Securities sold under repurchase agreements . . . . . . . . . . . . . . . . . .     2,504.8      2,478.6
    Payables for securities purchased . . . . . . . . . . . . . . . . . . . . . . .     2,855.3        281.4
    Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         4.7          2.0
    Long-term debt  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     3,012.0        911.8
    Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     2,697.6        984.7
    Separate Account business . . . . . . . . . . . . . . . . . . . . . . . . . . .     5,995.7      6,080.3
                                                                                     ----------   ----------
         Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .    58,335.4     39,774.5
                                                                                     ----------   ----------
Commitments and contingent liabilities
Stockholders' equity:
    Common stock ($2.50 par value; Authorized - 200,000,000 shares;
      Issued - 61,841,969 shares) . . . . . . . . . . . . . . . . . . . . . . . . .       154.6        154.6
    Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       150.0        150.0
    Additional paid-in capital  . . . . . . . . . . . . . . . . . . . . . . . . . .       434.7        434.7
    Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     4,886.2      4,315.5
    Net unrealized investment gains (losses). . . . . . . . . . . . . . . . . . . .       610.7       (506.4)
    Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . .        26.5           -
    Treasury stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (2.5)        (2.5)
                                                                                     ----------   ----------
         Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . .     6,260.2      4,545.9
------------------------------------------------------------------------------------------------------------
         Total liabilities and stockholders' equity                                   $64,595.6    $44,320.4
============================================================================================================
        See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
</TABLE>

                                       (3)
<PAGE>
                                   CNA FINANCIAL CORPORATION

                               STATEMENT OF CONSOLIDATED OPERATIONS
                                           (Unaudited)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
PERIOD ENDED SEPTEMBER 30                                                  THIRD QUARTER              NINE MONTHS
                                                                         1995        1994          1995        1994
(In millions of dollars, except per share data)
------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>          <C>         <C>          <C>
Revenues:
 Premiums .......................................................     $3,196.2    $2,406.4    $ 8,581.1    $7,082.3
 Net investment income ..........................................        552.0       394.4      1,497.6     1,124.8
 Realized investment gains (losses) .............................         97.7       (14.3)       339.3      (196.3)
 Other...........................................................        155.0        57.8        294.9       169.0
                                                                      --------    --------    ---------    --------
                                                                       4,000.9     2,844.3     10,712.9     8,179.8
                                                                      --------    --------    ---------    --------
Benefits and expenses:
 Insurance claims and policyholders' benefits ...................      2,740.9     2,119.5      7,314.8     6,421.2
 Amortization of deferred acquisition costs......................        480.2       364.4      1,262.9     1.026.0
 Other operating expenses........................................        472.1       319.4      1,204.5       913.7
 Interest expense................................................         64.8        17.6        120.5        52.9
                                                                      --------    --------    ---------    --------
                                                                       3,758.0     2,820.9      9,902.7     8,413.8
                                                                      --------    --------    ---------    --------
    Income (loss) from continuing operations before income tax...        242.9        23.4        810.2      (234.0)
Income tax benefit (expense).....................................        (76.6)       31.5       (234.4)      174.6
                                                                      --------    --------    ---------    --------
    Income (loss) from continuing operation......................        166.3        54.9        575.8       (59.4)
Income from discontinued operations, net of income taxes.........         -           -            -           -
-------------------------------------------------------------------------------------------------------------------
    NET INCOME (LOSS)                                                 $  166.3    $   54.9    $   575.8       (59.4)
===================================================================================================================
EARNINGS PER SHARE
------------------
Income (loss) from continuing operations..........................    $   2.66    $   0.87   $    9.23     $  (1.02)
Income from discontinued operations, net of income taxes.........         -           -            -           -
-------------------------------------------------------------------------------------------------------------------
Net Income (loss)................................................     $   2.66    $   0.87   $    9.23     $  (1.02)
===================================================================================================================

Weighted average outstanding shares of
 common stock (in millions of shares)............................         61.8        61.8        61.8         61.8
===================================================================================================================
         See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
</TABLE>

                                       (4)
<PAGE>

                                   CNA FINANCIAL CORPORATION

                          STATEMENT OF CONSOLIDATED STOCKHOLDERS' EQUITY
                                           (Unaudited)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Nine Months Ended September 30, 1995 and 1994
                                                                        Net
                                                                     Unrealized     Foreign
                                             Additional              Investment    Currency
                                  Capital     Paid-in    Retained      Gains      Translation
(In millions of dollars)           Stock      Capital    Earnings     (Losses)     Adjustment    Total
------------------------------------------------------------------------------------------------------
<S>                               <C>        <C>        <C>         <C>          <C>          <C>
Balance, December 31, 1993.....   $302.1     $434.7     $4,284.3    $  360.0     $    -       $5,381.1
  Net loss.....................     -          -           (59.4)       -             -          (59.4)
  Unrealized investment losses.     -          -            -         (676.8)         -         (676.8)
  Preferred dividends..........     -          -            (3.5)       -             -           (3.5)
------------------------------------------------------------------------------------------------------
Balance, September 30, 1994       $302.1     $434.7     $4,221.4    $ (316.8)    $    -       $4,641.4
======================================================================================================

Balance, December 31, 1994.....   $302.1     $434.7     $4,315.5    $ (506.4)    $    -       $4,545.9
  Net income...................     -          -           575.8        -             -          575.8
  Unrealized investment gains..     -          -             -       1,117.1          -        1,117.1
  Foreign currency translation
    adjustment.................     -          -             -          -             26.5        26.5
  Preferred dividends..........     -          -            (5.1)       -             -           (5.1)
------------------------------------------------------------------------------------------------------
Balance, September 30, 1995       $302.1     $434.7     $4,886.2    $  610.7     $    26.5    $6,260.2
======================================================================================================
      See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
</TABLE>

                                       (5)
<PAGE>

                                   CNA FINANCIAL CORPORATION

                               STATEMENT OF CONSOLIDATED CASH FLOWS
                                          (Unaudited)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
Nine Months Ended September 30                                      1995         1994
(In millions of dollars)
--------------------------------------------------------------------------------------
<S>                                                         <C>           <C>
Cash flows from operating activities:
  Net income (loss)......................................   $     575.8   $    (59.4)
                                                            -----------   ----------
  Adjustments  to  reconcile  net  income  to net  cash 
  provided  by  operating activities:
    Pretax realized (gains) losses.......................        (339.3)       196.3
    Participating policyholders' interest................          (1.4)        (9.9)
    Amortization of bond discount........................        (108.3)       (64.1)
    Amortization of goodwill.............................          12.2          2.5
    Depreciation.........................................          65.2         45.0
    Changes in:
       Other insurance receivables.......................        (710.4)      (202.7)
       Reinsurance receivables...........................        (406.9)      (138.0)
       Prepaid reinsurance premiums......................          57.9         (5.1)
       Deferred acquisition costs........................        (147.1)       (45.8)
       Accrued investment income.........................         (38.8)       (13.0)
       Insurance reserves................................         755.6      1,305.3
       Federal income taxes..............................         (34.4)       (46.5)
       Deferred income taxes.............................         190.4        (66.6)
       Reinsurance payables..............................          41.5        (27.8)
       Other liabilities..................................        666.4        (69.4)
       Other, net........................................        (169.2)       (56.1)
                                                            ------------  -----------
               Total adjustments.........................        (166.6)       804.1
                                                            ------------  -----------
               Net cash provided by operating activities.         409.2        744.7
                                                            ------------  -----------
Cash flows from investing activities:
  Purchase of The Continental Corporation................      (1,125.5)        -
  Cash acquired in connection with the
    Continental merger...................................         165.1         -
  Purchase of Alexsis....................................         (46.3)        -
  Purchases of fixed maturities..........................     (25,308.3)   (30,339.6)
  Proceeds from fixed maturities:
    Sales................................................      23,320.0     21,997.9
    Maturities, calls and redemptions....................       2,306.3      3,837.6
  Purchases of equity securities.........................        (567.0)      (618.1)
  Proceeds from sale of equity securities................         914.4        480.9
  Change in short-term investments.......................      (1,029.2)     1,218.5
  Purchases of property and equipment....................         (72.5)       (84.2)
  Change in securities sold under repurchase agreements..          26.2      2,778.1
  Change in other investments............................         (18.6)       (20.5)
  Other, net.............................................         (13.0)         1.4
                                                            ------------   ----------
               Net cash used in investing activities.....      (1,448.4)      (748.0)
                                                            ------------   ----------
</TABLE>

<PAGE>

                                   CNA FINANCIAL CORPORATION

                         STATEMENT OF CONSOLIDATED CASH FLOWS-continued
                                          (Unaudited)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
Nine Months Ended September 30                                      1995         1994
(In millions of dollars)
-------------------------------------------------------------------------------------
<S>                                                         <C>           <C>
Cash flows from financing activities:
  Dividends paid to preferred shareholders...............          (5.2)        (3.4)
  Receipts from investment contracts credited to
    policyholder account balances........................          19.4         27.1
  Return of policyholder account balances on investment
    contracts............................................         (25.9)       (19.0)
  Principal payments on long-term debt...................        (504.5)        (2.8)
  Retirement of notes payable............................        (205.0)        -
  Proceeds from issuance of long-term debt...............       1,831.1          0.2
                                                            ------------   ----------
               Net cash provided by financing
                activities...............................       1,109.9          2.1
                                                            ------------   ----------
               Net increase (decrease) in cash...........          70.7         (1.2)
Cash at beginning of period .............................         147.6        129.6
--------------------------------------------------------------------------------------
Cash at end of period                                       $     218.3   $    128.4
======================================================================================

Supplemental disclosures of cash flow information:
Cash received (paid):
   Interest expense......................................   $    (113.4)  $    (52.5)
   Federal income taxes..................................        (122.7)        72.6
======================================================================================
      See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
</TABLE>

                                      (6)
<PAGE>                            
                            CNA FINANCIAL CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1995
                                   (Unaudited)


NOTE A.  Basis of Presentation:

    The condensed  consolidated  financial  statements  (unaudited)  include CNA
Financial  Corporation  and its  subsidiaries  (CNA) and have been  prepared  in
accordance with generally accepted accounting principles.  Results of operations
for the three-month and nine-month  periods ended September 30, 1995 include the
operations of The Continental Corporation  (Continental) since May 10, 1995, the
date of  acquisition  of  Continental.  Results of operations for the comparable
periods ended  September 30, 1994 reflect  historical  results of CNA and do not
include  earnings related to the acquisition of Continental (See Note B). In the
opinion of management,  these statements include all adjustments  (consisting of
normal  recurring  accruals) which are necessary for a fair  presentation of the
financial  position,  results of operations  and cash flows in the  accompanying
unaudited condensed consolidated financial statements.

    The operating results for the interim periods are not necessarily indicative
of the results to be expected for the full year. These statements should be read
in conjunction with the financial statements and notes thereto included in CNA's
Annual Report to Shareholders  (incorporated  by reference in Form 10-K) for the
year ended  December 31, 1994,  filed with the  Commission on March 30, 1995 and
the information shown below.

    Certain  amounts  applicable  to 1994 have been  reclassified  to conform to
classifications followed in 1995.

NOTE B.  Acquisition of Continental:

     On December 6, 1994, CNA entered into a merger agreement  providing for the
payment of $20.00 per share to holders of  Continental  common stock.  On May 9,
1995, at a Special  Meeting of  Continental  Shareholders  called to approve the
merger agreement, holders of 77% of the outstanding shares of Continental Common
Stock voted to approve the Merger. Final regulatory approvals of the merger were
received on May 9, 1995 and the merger was consummated on May 10, 1995.

     The  acquisition  of  Continental  has been  accounted  for as a  purchase,
therefore  Continental's  operations are included in the Condensed  Consolidated
Financial  Statements  as of May 10, 1995.  CNA has  completed  its  preliminary
purchase  accounting  analysis.  The purchase of Continental  currently reflects
goodwill of approximately $366 million (which is included in "Other Assets")
which will be amortized over twenty years at an annual charge to income of $18 
million.  Evaluation  and appraisal of the net assets is continuing and 
allocation of the purchase price may be adjusted.

                                      (7)
<PAGE>
                            CNA FINANCIAL CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued


     The unaudited pro forma  condensed  results of operations  presented  below
assume the above  transaction  had  occurred  at the  beginning  of the  periods
presented:
<TABLE>
<CAPTION>
------------------------------------------------------------ ----------------------- -------------------------
Pro Forma                                                          Third Quarter             Nine Months
Period Ended September 30                                        1995        1994        1995        1994
(In millions of dollars, except per share data)
------------------------------------------------------------ ----------- ----------- ------------- -----------
<S>                                                           <C>        <C>           <C>         <C>   
Revenues ...................................................  $ 4,000.9  $   4,069.3   $ 12,200.5  $ 11,999.5


Realized investment gains (losses) included in revenue .           97.7        (18.3)       459.4      (174.9)

Income (loss) from continuing  operations  before income tax.     242.9       (579.4)       839.0      (982.1)
Income tax benefit (expense) ................................     (76.6)       286.0       (257.8)      462.9
                                                                  ------      ------       -------     -------
Income (loss) from continuing operations .................... $   166.3  $    (293.4)   $   581.2   $  (519.2)          
                                                                  =====       =======       =====      =======
Net income (loss) per share ................................. $    2.66 $      (4.73)   $    9.32   $   (8.34)
                                                                   ====        ======        ====       ======
------------------------------------------------------------- ----------- -------------- ----------- ----------
</TABLE>

    The unaudited pro forma condensed  financial  information is not necessarily
indicative  either of the results of  operations  that would have  occurred  had
these  transactions been consummated at the beginning of the period presented or
of future operations of the combined companies.

    CNA filed a Current  Report on Form 8-K/A with the  Securities  and Exchange
Commission on July 24, 1995.  Included in this report is pro forma  consolidated
financial  information  including a discussion of the preliminary purchase price
allocation based on fair values.

NOTE C.  Restricted Investments:

    On December 30, 1993,  CNA deposited  $986.8  million in an escrow  account,
pursuant to the Fibreboard Global Settlement  Agreement,  as discussed in Note E
below. At September 30, 1995, the escrow account amounted to $1.03 billion.  The
funds are included in short-term  investments and are invested in U. S. Treasury
securities. The escrow account is the prefunding mechanism to the trust fund for
future claimants.
<PAGE>
                            CNA FINANCIAL CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued


NOTE D.  Reinsurance:

    CNA assumes and cedes  insurance  with other  insurers  and  reinsurers  and
members of various reinsurance pools and associations.  CNA utilizes reinsurance
arrangements  to limit its maximum loss, to provide greater  diversification  of
risk and to minimize  exposures on larger risks.  The reinsurance  coverages are
tailored to the specific  risk  characteristics  of each product line with CNA's
retained amount varying by type of coverage.
                          
    The ceding of  insurance  does not  discharge  the primary  liability of the
original insurer.  CNA places reinsurance with other carriers only after careful
review  of  the  nature  of  the  contract  and a  thorough  assessment  of  the
reinsurers'  credit  quality  and claim  settlement  performance.  Further,  for
carriers that are not authorized reinsurers in domiciliary states, CNA receives
collateral primarily in the form of bank letters of credit, securing a large 
portion of the recoverables.

                                      (8)

<PAGE>
                            CNA FINANCIAL CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued


    The effects of  reinsurance on written  premiums and earned  premiums are as
follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Written Premium
(In millions of dollars)             Direct   Assumed  Ceded    Net         Direct   Assumed  Ceded    Net
----------------------------------------------------------------------  -------------------------------------

Nine Months Ended September 30 .                   1995                                    1994
                                   -----------------------------------   ------------------------------------
<S>                                <C>        <C>      <C>    <C>         <C>        <C>      <C>    <C>
 Long Duration Contracts           $   506.2     88.5   16.9    577.8     $   382.5     85.1   19.0    448.6
 Short Duration Contracts            6,823.5    950.1  491.3  7,282.3       6,306.0  1,030.1  457.0  6,879.1
                                    --------  -------  -----  -------       -------  -------  -----  -------
       Total                       $ 7,329.7  1,038.6  508.2  7,860.1     $ 6,688.5  1,115.2  476.0  7,327.7
                                     =======  =======  =====  =======       =======  =======  =====  ======= 
                                   -----------------------------------   ------------------------------------
Third Quarter Ended September 30                   1995                                     1994
                                   -----------------------------------   ------------------------------------
 Long Duration Contracts           $   173.9     28.0    6.4    195.5     $   122.7     27.2    7.0     142.9
 Short Duration Contracts            2,301.1    377.9  190.4  2,488.6       2,121.4    302.2  143.1   2,280.5
                                     -------    -----  -----  -------       -------    -----  -----   -------
       Total                       $ 2,475.0    405.9  196.8  2,684.1     $ 2,244.1    329.4  150.1   2,423.4
                                     =======    =====  =====  =======       =======    =====  =====   =======
-------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
Earned Premium
(In millions of dollars)            Direct   Assumed   Ceded     Net        Direct   Assumed    Ceded      Net
-------------------------------------------------------------------------  --------------------------------------

Nine Months Ended September 30                     1995                                    1994
                                  ---------------------------------------  ---------------------------------------
<S>                                <C>         <C>      <C>      <C>        <C>        <C>         <C>    <C>  
 Long Duration Contracts           $   451.5      88.5     16.9    523.1    $   315.9     85.1      19.0    382.0
 Short Duration Contracts            8,069.4   1,014.2  1,025.6  8,058.0      6,127.0  1,025.2     451.9  6,700.3
                                     -------   -------  -------  -------      -------  -------     -----  -------
       Total                       $ 8,520.9   1,102.7  1,042.5  8,581.1    $ 6,442.9  1,110.3     470.9  7,082.3
                                     =======   =======  =======  =======      =======  =======     =====  =======
                                  ---------------------------------------  ---------------------------------------
Third Quarter Ended September 30                   1995                                    1994
                                  ---------------------------------------  ---------------------------------------
 Long Duration Contracts           $   156.5      28.0      6.4    178.1    $    92.7     27.2       7.0    112.9
 Short Duration Contracts            3,176.8     378.4    537.1  3,018.1      2,130.7    316.1     153.3  2,293.5
                                     -------     -----    -----  -------      -------    -----     -----  -------
       Total                       $ 3,333.3     406.4    543.5  3,196.2    $ 2,223.4    343.3     160.3  2,406.4
                                     =======     =====    =====  =======      =======    =====     =====  =======   
------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
                            CNA FINANCIAL CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued


     Insurance  claims  and  policyholders'  benefits  are  net  of  reinsurance
recoveries  of $1,112.8  million and $489.7  million for the nine months  ending
September 30, 1995 and September 30, 1994, respectively,  and $782.8 million and
$229.9 million for the three months ending  September 30, 1995 and September 30,
1994, respectively.

NOTE E.  Legal Proceedings and Contingent Liabilities:

     The  following   information   updates  legal  proceedings  and  contingent
liabilities reported in Notes J and K of the Notes to the Consolidated Financial
Statements in the 1994 Annual Report to Shareholders.

Fibreboard Litigation

     CNA's primary  property/casualty  subsidiary,  Continental Casualty Company
("Casualty"),  is party to litigation with Fibreboard Corporation ("Fibreboard")
involving  coverage for certain  asbestos-related  claims and defense costs (San
Francisco  Superior Court,  Judicial Council  Coordination  Proceeding 1072). As
described below,  Casualty,  Fibreboard,  another insurer (Pacific Indemnity,  a
subsidiary of the Chubb  Corporation),  and a negotiating  committee of asbestos
claimant attorneys (collectively referred to as Settling Parties) have reached a
Global   Settlement   (the   "Global   Settlement")   to   resolve   all  future
asbestos-related bodily injury claims involving Fibreboard. Casualty, Fibreboard
and  Pacific  Indemnity  have  also  reached  an  agreement,   (the  "Trilateral
Agreement")  which is subject to court approval,  on a settlement to resolve the
coverage  litigation  in the event the Global  Settlement  does not obtain final
court approval.  The  implementation  of the Global Settlement or the Trilateral
Agreement  would  have  the  effect  of  settling  Casualty's   litigation  with
Fibreboard.
                                      (9)
<PAGE>
                    CNA FINANCIAL CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

     On July 27, 1995, the United States District Court for the Eastern District
of Texas  entered  judgment  approving the Global  Settlement  Agreement and the
Trilateral Agreement.  As expected,  appeals have been filed as respects both of
these decisions. Briefs will be filed with the United States Fifth Circuit Court
of Appeals in New Orleans this fall.  The Court has scheduled oral arguments for
December 6 and 7, 1995.

Coverage Litigation

     Between  1928  and  1971,  Fibreboard   manufactured   insulation  products
containing  asbestos.  Since the  1970's,  thousands  of claims  have been filed
against Fibreboard by individuals claiming bodily injury as a result of asbestos
exposure.

     Casualty insured Fibreboard under a comprehensive  general liability policy
between  May 4, 1957,  and March 15,  1959.  Fibreboard  disputed  the  coverage
positions  taken by its  insurers  and,  in 1979,  Fireman's  Fund,  another  of
Fibreboard's  insurers,  brought  suit with  respect to coverage for defense and
indemnity  costs.  In January 1990, the San Francisco  Superior Court  (Judicial
Council  Coordination  Proceeding 1072) rendered a decision against the insurers
including Casualty and Pacific Indemnity.  The court held that the insurers owed
a duty to defend and indemnify  Fibreboard  for certain of the  asbestos-related
bodily injury claims asserted against  Fibreboard (in the case of Casualty,  for
all claims  involving  exposure to Fibreboard's  asbestos  products if there was
exposure to asbestos  at any time prior to 1959  including  years prior to 1957,
regardless  of when the  claims  were  asserted  or  injuries  manifested)  and,
although the  policies  had a $500,000  per person  limit and a  $1,000,000  per
occurrence  limit, they contained no aggregate limit of liability in relation to
such claims. The judgment was appealed.

     The Court of Appeal entered an opinion on November 15, 1993, as modified on
December 13, 1993, which  substantially  affirmed the lower court's decisions on
scope of coverage and trigger of coverage issues,  as described below. The Court
of Appeal  withheld  its ruling on the issues  discrete to Casualty  and Pacific
Indemnity  pending final court  approval of either the Global  Settlement or the
Trilateral  Agreement  described  below.  On January 27,  1994,  the  California
Supreme Court granted a Petition for Review filed by several insurers, including
Casualty,  of, among other things, the trigger and scope of coverage issues. The
order granting  review has no effect on the Court of Appeal's order severing the
issues  unique to  Casualty  and  Pacific  Indemnity.  On October  19,  1995 the
California  Supreme Court  transferred the case back to the Court of Appeal with
directions  to  vacate  its  decision  and  reconsider  the case in light of the
Supreme Court's  decision in Montrose  Chemical Corp. v. Admiral Ins. Co. (1995)
10 Cal.4th 645, where the Court adopted a continuous  trigger in litigation over
the duty to defend  bodily  injury  and property  damage due to  exposure  to
D.D.T.  Additional  briefs will be filed in the Court of Appeal by November 20,
1995.  Casualty cannot predict the time frame within which the issues before the
California Courts may be resolved.  The appeal of issues such as trigger of
coverage and scope of coverage are in process notwithstanding the pending 
proceedings to approve the Global and Trilateral Agreements.  If neither the
Global Settlement nor the Trilateral Agreement is finally approved, it is 
anticipated that Casualty and Pacific Indemnity will resume the coverage appeal
process of the issues discrete to them.  Casualty's appeal of the coverage 
judgment raises many legal issues.  Key issues on appeal under the policy are 
trigger of coverage,  scope of coverage,  dual coverage  requirements and 
number of occurrences:
<PAGE>
                           CNA FINANCIAL CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

                    *    The  trial  court  adopted  a  continuous   trigger  of
                         coverage  theory under which all insurance  policies in
                         effect  at any time from  first  exposure  to  asbestos
                         until  the  date  of the  claim  filing  or  death  are
                         triggered.  The Court of Appeal endorsed the continuous
                         trigger theory, but modified the ruling to provide that
                         policies are triggered by a claimant's  first  exposure
                         to the policyholder's products, as opposed to the first
                         exposure  to  any  asbestos  product.   Therefore,   an
                         insurance policy is not triggered if a claimant's first
                         exposure to the policyholder's product took place after
                         the  policy  period.  The  court,  however,  placed the
                         burden on the  insurer  to prove the  claimant  was not
                         exposed to its policyholder's  product before or during
                         the  policy  period.  
                                      
                                      (10)
<PAGE>
                    CNA FINANCIAL CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued


                         Casualty's  position  is that its policy is triggered
                         under   California law by manifestation of appreciable 
                         harm  during the policy period.  The bodily injury
                         cannot  be said to occur within the meaning of the  
                         policy until actual  physical symptoms and associated
                         functional impairment manifest themselves.  Thus,
                         Casualty's  position  is that there would be no
                         under  Casualty's  policy. 

                   *     The scope of coverage decision imposed a form of
                         "joint and several"  liability  that makes each  
                         triggered policy liable in whole for each covered 
                         claim, regardless of the length of the period the  
                         policy was in effect.  This decision  was  affirmed by
                         the Court of Appeal, but is now again before the Court
                         due to the Supreme Court's transfer order.  Casualty's 
                         position is that liability for asbestos  claims should
                         be shared not jointly, but severally and on a pro rata
                         basis between the insurers and insured. Under this 
                         theory, Casualty would only be liable for that 
                         proportion of the bodily injury that occurred during 
                         the 22-month period its policy was in force.
 
                   *     Casualty  maintains  that both the occurrence and the 
                         injury  resulting  therefrom must happen during the 
                         policy  period  for the  policy  to be  triggered.
                         Consequently, if the court holds that the occurrence is
                         exposure  to  asbestos,  Casualty's  position  is  that
                         coverage  under the Casualty  policy is  restricted  to
                         those who actually inhaled  Fibreboard  asbestos fibers
                         and suffered injury from May 4, 1957 to March 15, 1959.
                         The Court of Appeal  withheld  ruling on this issue, as
                         noted above. 

                   *     Casualty's  policy had a $1 million per occurrence
                         limit.  Casualty  contends  the number  of occurrences
                         under California law must be determined by the general
                         cause of the  injuries,  not the number of claimants,
                         and that the  cause of the  injury  was the continuous
                         manufacture and sale of the product. Because the
                         manufacture and sale proceeded from two locations,
                         Casualty maintains that there were only two occurrences
                         and thus only $2 million of coverage  under the policy.
                         However,  the per occurrence  limit was  interpreted by
                         the trial  court to mean that each claim  submitted  by
                         each individual constituted a separate occurrence.  The
                         Court of Appeal withheld ruling on this issue, as noted
                         above.

     Even  if  Casualty   were   successful  on  appeal  on  the  dual  coverage
requirements or the number of occurrences, if the final decision in the coverage
case  affirms  the  trial  court's  decision  on the  existence  of the  Pacific
Indemnity policy,  then Casualty would still have obligations under the Casualty
and Pacific Indemnity Agreement described below.
<PAGE>
                           CNA FINANCIAL CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued


     Under  various  reinsurance  agreements,  Casualty  has asserted a right to
reimbursement  for a  portion  of its  potential  exposure  to  Fibreboard.  The
reinsurers have disputed  Casualty's right to  reimbursement  and have taken the
position that any claim by Casualty is subject to arbitration  under  provisions
in the reinsurance agreement. A Federal court has ruled that the dispute must be
resolved  by  arbitration.  There  can be no  assurance  that  Casualty  will be
successful in obtaining a significant recovery under its reinsurance agreements.

     On April  9,  1993,  Casualty  and  Fibreboard  entered  into an  agreement
pursuant to which,  among  other  things,  the parties  agreed to use their best
efforts  to  negotiate  and  finalize  a global  class  action  settlement  with
asbestos-related bodily injury and death claimants.

     Through September 30, 1995,  Casualty,  Fibreboard and plaintiff  attorneys
had reached settlements with respect to approximately 137,500 claims, subject to
resolution  of the  coverage  issues,  for an  estimated  settlement  amount  of
approximately $1.63 billion plus any applicable interest.  If neither the Global
Settlement  nor  the  Trilateral   Agreement   receives  final  court  approval,
Casualty's  obligation to pay under these  settlements will be partially subject
to the results of the pending appeal in the coverage litigation. Minimum amounts
payable  under  all such  agreements,  regardless  of the  outcome  of  coverage

                                      (11)
<PAGE>
                            CNA FINANCIAL CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued


litigation,   may  total  as  much  as  approximately  $793  million,  of  which
approximately  $556 million was paid through  September  30, 1995.  Casualty may
negotiate other  agreements with various classes of claimants  including  groups
who may have previously reached agreement with Fibreboard.
     
     Casualty will continue to pursue its appeals in the coverage litigation and
all other  litigation  involving  Fibreboard  if the  Global  Settlement  or the
Trilateral Agreement cannot be implemented.

Global Settlement

     On  August  27,  1993,  Casualty,  Pacific  Indemnity,   Fibreboard  and  a
negotiating  committee of asbestos  claimant  attorneys  reached an agreement in
principle  for an  omnibus  settlement  to resolve  all future  asbestos-related
bodily injury claims involving Fibreboard. The Global Settlement was executed on
December 23, 1993. The agreement calls for  contribution by Casualty and Pacific
Indemnity of an  aggregate of $1.525  billion to a trust fund for a class of all
future  asbestos  claimants,  defined  generally as those  persons  whose claims
against  Fibreboard  were neither  filed nor settled  before August 27, 1993. An
additional  $10  million is to be  contributed  to the fund by  Fibreboard.  The
Global Settlement approval is subject to possible appeals. As noted below, there
is limited  precedent  with  settlements  which  determine  the rights of future
claimants to seek relief.

     Subsequent to the  announcement  of the  agreement in principle,  Casualty,
Fibreboard and Pacific  Indemnity  entered into the Trilateral  Agreement  which
would, subject to court approval, settle the coverage case in the event the 
Global Settlement approval by the trial court is not upheld on appeal.  In such
case,  Casualty and Pacific Indemnity would contribute to a settlement fund an
aggregate of $2 billion, less certain  adjustments.  Such fund would be devoted
to the payment of Fibreboard's asbestos  liabilities other than liabilities for
claims settled before August 23, 1993.  Casualty's share of such fund would be
$1.44 billion reduced by a portion of an additional payment of $635 million 
which Pacific Indemnity has agreed to pay for unsettled present claims and 
previously settled claims. Casualty has agreed that if either the Global 
Settlement or the Trilateral Agreement is finally approved, it will assume 
responsibility for the claims that had been settled before August 27, 1993.  
The additional  $635 million to be  contributed by Pacific  Indemnity would be 
applied to the payment of such claims as well.  As a part of the Global 
Settlement  and  the  Trilateral  Agreement,   Casualty  would  be  released  by
Fibreboard from any further liability under the comprehensive  general liability
policy  written  for  Fibreboard  by  Casualty,  including  but not  limited  to
liability  for  asbestos-related  claims  against  Fibreboard.   The  Trilateral
Agreement  approval by the trial court is subject to possible  appeal.  Casualty
and  Fibreboard  have entered into a supplemental  agreement (the  "Supplemental
Agreement") which governs the interim  arrangements and obligations  between the
parties until such time as the trial court's  approval of the Global  Settlement
is upheld on appeal and also governs certain  obligations between the parties in
the event the Global  Settlement  is upheld on appeal  including  the payment of
claims which are not included in the Global Settlement.
<PAGE>
                           CNA FINANCIAL CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued


     In addition,  Casualty and Pacific Indemnity have entered into an agreement
(the "Casualty-Pacific  Agreement") which sets forth the parties' agreement with
respect to the means for allocating among themselves responsibility for payments
arising  out of the  Fibreboard  insurance  policies  whether  or not the Global
Settlement  or  the  Trilateral   Agreement  is  finally  approved.   Under  the
Casualty-Pacific  Agreement,  Casualty and Pacific  Indemnity have agreed to pay
64.71%  and  35.29%,  respectively,  of the $1.525  billion  plus  expenses  and
interest accrued in escrow to be used to satisfy the claims of future claimants.
If  neither  the  Global  Settlement  nor the  Trilateral  Agreement  is finally
approved,  Casualty and Pacific  Indemnity would share, in the same percentages,
most but not all  liabilities  and costs of either  insurer  including,  but not
limited to,  liabilities  for unsettled  present  claims and  presently  settled
claims  (regardless  of whether  either such insurer  would  otherwise  have any
liability therefor). If either the Trilateral Agreement or the Global Settlement
is finally approved,  Pacific Indemnity's share for unsettled present claims and
presently settled claims will be $635 million.

                                      (12)

<PAGE>
                           CNA FINANCIAL CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued


Reserves

     In the fourth quarter of 1992,  Casualty increased its reserve with respect
to potential exposure to  asbestos-related  bodily injury cases by $1.5 billion.
In  connection  with the  agreement in  principle  announced on August 27, 1993,
Casualty  added $500 million to such claim reserve in the third quarter of 1993.
The   Fibreboard   litigation   represents   the  major  portion  of  Casualty's
asbestos-related claim exposure.

     There are  inherent  uncertainties  in  establishing  a reserve for complex
litigation  of this  type.  Courts  have  tended  to impose  joint  and  several
liability, and because the number of manufacturers who remain potentially liable
for asbestos-related injuries has diminished on account of bankruptcies,  as has
the  potential  number  of  insurers  due to  operation  of policy  limits,  the
liability of the  remaining  defendants  is difficult  to estimate.  Further,  a
recent trend by courts to  consolidate  like cases into mass tort trials  limits
the discovery ability of insurers, generally does not allow for individual claim
adjudication, restricts the identification of appropriate allocation methods and
thereby results in an increasing  likelihood for fraud and  disproportionate and
potentially excessive judgments.  Additionally,  management believes that recent
court  decisions  would  appear to be based on  social  or other  considerations
irrespective of the facts and legal issues involved.

     The Global  Settlement and the Trilateral  Agreement  approved by the trial
court are subject to appeal.  There is limited  precedent with settlements which
determine  the  rights of  future  claimants  to seek  relief.  It is  extremely
difficult to assess the  magnitude of  Casualty's  potential  liability for such
future  claimants  if neither  the  approval  of the Global  Settlement  nor the
Trilateral  Agreement  is  upheld on  appeal,  keeping  in mind that  Casualty's
potential  liability  is  limited to persons  exposed to  asbestos  prior to the
termination of the policy in 1959.

     Projections by experts of future trends differ widely, based upon different
assumptions with respect to a host of complex variables. Some recently published
studies,  not  specifically  related to Fibreboard,  conclude that the number of
future  asbestos-related  bodily injury claims  against  asbestos  manufacturers
could be  several  times the  number of claims  brought  to date.  Such  studies
include claims asserted against asbestos  manufacturers for all years, including
claims  filed or  projected to be filed for  exposure  starting  after 1959.  As
indicated  above, as of September 30, 1995,  Casualty,  Fibreboard and plaintiff
attorneys have reached settlements with respect to approximately 137,500 claims,
subject to the  resolution  of  coverage  issues.  Such  amount does not include
presently  pending or unsettled claims,  claims  previously  dismissed or claims
settled pursuant to agreements to which Casualty is not a party.
<PAGE>
                           CNA FINANCIAL CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued


     Another aspect of the complexity in  establishing a reserve arises from the
widely  disparate  values that have been ascribed to claims by courts and in the
context of settlements. Under the terms of a settlement reached with plaintiffs'
counsel in August 1993, the expected settlement for approximately  49,500 claims
for  exposure to asbestos  both prior to and after 1959 is  currently  averaging
approximately  $13,300 per claim for the before 1959  claims  processed  through
September 30, 1995. Based on reports by Fibreboard,  between  September 1988 and
April 1993, Fibreboard resolved  approximately 40,000 claims,  approximately 45%
of which  involved no cost to  Fibreboard  other than  defense  costs,  with the
remaining claims  involving the payment of  approximately  $11,000 per claim. On
the other  hand,  a trial  court in Texas in 1990  rendered  a verdict  in which
Fibreboard's  liability in respect of 2,300 claims was found to be approximately
$310,000 per claim including  interest and punitive damages.  Fibreboard entered
into a  settlement  of such claims by means of an  assignment  of its  potential
proceeds from its policy with  Casualty.  Casualty  intervened and settled these
claims for  approximately  $77,000  on  average,  with a portion of the  payment
contingent  on  final  approval  on  appeal  of  the  Global  Settlement  or the
Trilateral Agreement, and if neither is finally approved,  subject to resolution
of the coverage appeal.

     Casualty  believes  that  as a  result  of the  Global  Settlement  and the
Trilateral Agreement it has greatly reduced the uncertainty of its exposure with
respect to the Fibreboard matter. However, if neither the Global Settlement, nor
the Trilateral  Agreement is upheld on appeal, in light of the factors discussed
                                      
                                      (13)
<PAGE>
                            CNA FINANCIAL CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued


herein  the range of  Casualty's  potential  liability  cannot  be  meaningfully
estimated and there can be no assurance that the reserves  established  would be
sufficient to pay all amounts which  ultimately  could become payable in respect
of asbestos-related bodily injury liabilities.
             
     While it is possible that the ultimate  outcome of this matter could have a
material  adverse  impact on the  equity  of the  Company,  management  does not
believe that a further  loss  material to equity is  probable.  Management  will
continue to monitor the potential  liabilities with respect to  asbestos-related
bodily  injury  claims  and will  make  adjustments  to the  claim  reserves  if
warranted.


Environmental Pollution and Asbestos

     The CNA  property/casualty  insurance  companies have  potential  exposures
related  to  environmental  pollution,  asbestos-related,  and other  toxic tort
claims.

     Environmental  pollution  clean-up is the subject of both federal and state
regulation.  By some  estimates,  there are  thousands of potential  waste sites
subject to clean-up.  The insurance industry is involved in extensive litigation
regarding coverage issues. Judicial  interpretations in many cases have expanded
the scope of coverage and liability  beyond the original intent of the policies.
The Comprehensive  Environmental Response Compensation and Liability Act of 1980
("Superfund")  and  comparable  state  statutes  ("mini-Superfund")  govern  the
clean-up  and  restoration  of  abandoned  toxic waste sites and  formalize  the
concept of legal liability for clean-up and restoration by "Responsible Parties"
("RP's").  Superfund  and the  mini-Superfunds  (Environmental  Clean-up Laws or
"ECLs") establish a mechanism to pay for clean-up of waste sites if RP's fail to
do so, and to assign  liability to RP's. The extent of liability to be allocated
to a RP is dependent on a variety of factors. Further, the number of waste sites
subject to clean-up is unknown. To date, approximately 1,300 clean-up sites have
been  identified  by  the  Environmental   Protection  Agency  on  its  National
Priorities  List. On the other hand, the  Congressional  Budget Office estimates
that there will be 4,500  National  Priority  List  sites,  and other  estimates
project as many as 30,000 sites that will require  clean-up under ECLs. Very few
sites have been  subject to clean-up to date.  The extent of clean-up  necessary
and the assignment of liability has not been established.  CNA and the insurance
industry are disputing many such claims.  Key coverage  issues  include  whether
Superfund response costs are considered  damages under the policies,  trigger of
coverage,  applicability  of pollution  exclusions,  the potential for joint and
several liability and definition of an occurrence. Similar coverage issues exist
for clean-up of waste sites not covered under  Superfund.  To date,  courts have
been inconsistent in their rulings on these issues.

<PAGE>
                            CNA FINANCIAL CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued


     A number of  proposals  to  reform  Superfund  have  been  made by  various
parties,  however,  no reforms were enacted by Congress in 1994.  The  Superfund
taxing authority will expire at the end of 1995 and will, therefore,  need to be
addressed by the 104th  Congress.  While  Congress  may address  this issue,  no
predictions can be made as to what positions the Congress or the  Administration
will take and what  legislation,  if any, will result.  If there is legislation,
and in some circumstances  even if there is no legislation,  the federal role in
environmental  clean-up  may be  materially  reduced  in favor of state  action.
Substantial  changes in the federal statute or the activity of the EPA may cause
states to reconsider  their  environmental  clean-up  statutes and  regulations.
There can be no meaningful  prediction  of the pattern of regulation  that would
result.

     Due  to  the  inherent   uncertainties   described  above,   including  the
inconsistency of court decisions, the number of waste sites subject to clean-up,
and  the  standards  for  clean-up  and  liability,  the  exposure  to  CNA  for
environmental  pollution  claims cannot be  meaningfully  quantified.  Claim and
claim expense reserves represent  management's estimates of ultimate liabilities
based  on  currently  available  facts  and law.  However,  in  addition  to the
uncertainties  previously  discussed,  additional issues related to, among other
things,  specific  policy  provisions,   multiple  insurers  and  allocation  of
liability  among  insurers,  consequences  of  conduct by the  insured,  missing
policies and proof of coverage make quantification of liabilities  exceptionally

                                      (14)
<PAGE>
                            CNA FINANCIAL CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued


difficult and subject to later adjustment based on new data. As of September 30,
1995 and  December  31, 1994,  CNA carried  approximately  $986 million and $509
million,  respectively,  of claim and claim expense reserves, before reinsurance
recoverable,   for  reported  and  unreported  environmental  pollution  claims.
Included  in the  September  30,  1995  reserves  are $380  million  related  to
Continental,  whose financial results are included in the accompanying financial
statements for the period May 10, 1995 through  September 30, 1995.  Unfavorable
reserve  development  for the nine months ended  September 30, 1995 and the full
year 1994 totaled $145 million and $180  million,  respectively.  The  foregoing
reserve  information  includes  claims for accident years 1988 and prior,  which
coincides  with CNA's adoption of the Simplified  Commercial  General  Liability
coverage form which included an absolute pollution exclusion.

CNA has exposure to  asbestos-related  claims,  including those  attributable to
Fibreboard,  and other toxic tort claims.  Estimation  of  asbestos-related  and
other toxic tort claim reserves encounter many of the same limitations discussed
above  for  environmental  pollution  claims  such  as  inconsistency  of  court
decisions,  specific  policy  provisions,  multiple  insurers and  allocation of
liability  among  insurers,  missing  policies  and  proof  of  coverage.  As of
September  30, 1995 and  December  31, 1994,  CNA carried  approximately  $2,305
million and $2,049 million,  respectively,  of claim and claim expense reserves,
before reinsurance recoverable, for reported and unreported asbestos-related and
other toxic tort claims.  Included in the  September  30, 1995 reserves are $319
million  related to  Continental,  whose  financial  results are included in the
accompanying  financial statements for the period May 10, 1995 through September
30, 1995.  Unfavorable  reserve  development for the nine months ended September
30,  1995  and the  full  year  1994  totaled  $105  million  and  $37  million,
respectively.

     The results of  operations  in future  years may  continue to be  adversely
affected by environmental  pollution claims and claim expenses.  Management will
continue  to monitor  potential  liabilities  and make  further  adjustments  as
warranted.
<PAGE>
              CNA FINANCIAL CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued


---------------------------------------------------- ------------ --------------
Reserve Recap                                        September 30   December 31
(In millions of dollars)                                 1995          1994
---------------------------------------------------- ------------ --------------
Environmental pollution                                     986        509
Asbestos and other toxic tort                             2,305      2,049
                                                          -----      -----
                                                          3,291      2,558
Reinsurance recoverable                                    (161)      (113)
                                                          -----      ----- 
     Net reserves                                       $ 3,130    $ 2,445
                                                          =====      =====
---------------------------------------------------- ------------ --------------

Other Litigation

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

                                      (15)

<PAGE>
                            CNA FINANCIAL CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

                         
NOTE F. Debt:
Long and short-term borrowings consist of the following:

--------------------------- ------------- --------------
Long and Short-Term Debt    September 30    December 31
(In millions of dollars)       1995            1994
--------------------------- ------------- --------------
Long-term:
   Credit Facility ......   $    825.0        $    --
   Commercial Paper .....        500.0             --
   Senior Notes .........        647.1           646.4
   Debenture ............        247.1           247.1
   Secured Mortgage Notes        384.3             --
   Secured Capital Leases         46.0             --
   Other ................        362.3            18.3
Short-term ..............          4.7             2.0
                               -------           -----
                            $  3,016.7        $  913.8
                               =======           =====
-------------------------   ------------ --------------

     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  involving 16 banks led by The First National Bank of
Chicago and The Chase Manhattan  Bank,  N.A.. The interest rate for the facility
is based on the one,  two,  three,  or six month London  Interbank  Offered Rate
(LIBOR),   as  elected,   plus  25  basis  points  or  other  negotiated  rates.
Additionally,  there is a facility fee of 10 basis points.  The average interest
rate on the borrowings under the revolver at September 30, 1995 was 6.11%. Under
the terms of the facility,  CNA may prepay the debt without penalty,  giving CNA
flexibility to arrange longer-term financing on more favorable terms.

     To offset the variable rate  characteristics  of the facility,  CNA entered
into 5 year interest rate swap agreements with several banks.  These  agreements
which terminate from May 2000 to July 2000 will convert variable rate debt based
on three month LIBOR into fixed rate debt  resulting  in fixed rates on notional
amounts totaling $950 million. The weighted average fixed swap rate at September
30, 1995 was 6.40%.

     On August 10, 1995, to take  advantage of favorable  interest rate spreads,
CNA  established  a  Commercial  Paper  Program,  borrowing  $500  million  from
investors to replace a like amount of bank financing. The weighted-average yield
on  commercial  paper at  September  30, 1995 was 5.97%.  The  commercial  paper
borrowings  are  classified as long-term as $500 million of the  committed  bank
facility  will support the  commercial  paper  program.  Standard and Poor's and
Moody's issued  short-term  debt ratings of A2 and P2,  respectively,  for CNA's
Commercial Paper Program.

The  weighted  average  interest  rate  (interest  and  facility  fees)  on  the
acquisition  debt,  which  includes the revolving  credit  facility,  commercial
paper,  and the effect of the interest  rate swaps,  was 6.48% on September  30,
1995.

                                      (16)
<PAGE>          
                            CNA FINANCIAL CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - concluded


NOTE G. Discontinued Operations:

     The financial  statements reflect the operating results of the discontinued
insurance  operations  separately from continuing  operations.  The discontinued
operations were acquired as part of the Continental merger;  therefore,  results
of operations for the nine-month period ended September 30, 1995,  reflects only
activity from May 10, 1995 through September 30, 1995.  Operating results of the
discontinued operations were as follows:
<TABLE>
<CAPTION>
--------------------------------------------- ------------------- -------------------
                                               Three months ended     Period ended
(In millions of dollars)                       September 30, 1995  September 30, 1995
--------------------------------------------- ------------------- -------------------

<S>                                                 <C>                   <C>  
Revenues ....................................       $19.8                  $29.8
Expenses ....................................        19.8                   29.8
                                                     ----                   ----
   Income (Loss) Before Income Taxes ........         -                      -
Income Taxes ................................         -                      -
                                                     ----                   ----
   Income (Loss) from Discontinued Operations       $ -                    $ -
                                                     ====                   ====
--------------------------------------------- ------------------- -------------------
</TABLE>

     Net assets of discontinued  insurance operations at September 30, 1995 were
included  in  "Other  Assets",  net of  intercompany  eliminations,  and were as
follows:

---------------------------------------- ---------------
                                           September 30
(In millions of dollars)                       1995
---------------------------------------- ---------------

Assets:
Cash and Investments ...................   $  1,001.4
Reinsurance Receivables and Other Assets        975.1
                                              -------
                                              1,976.5
                                              =======
Liabilities:
Claim and Claim Expenses ...............      1,364.8
Other Liabilities ......................        471.0
                                              -------
                                              1,835.8
                                              -------
   Net Assets ..........................   $    140.7
                                              =======
---------------------------------------- --------------- 

                                      (17)

<PAGE>
                            CNA FINANCIAL CORPORATION
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

                                  
The following  discussion and analysis  should be read in  conjunction  with the
consolidated  financial  statements  and notes  thereto  found on pages 3 to 17,
which contain additional information helpful in evaluating operating results and
financial condition.


Continental Acquisition

     CNA  reached  an  agreement  in  late  1994  to  acquire  The   Continental
Corporation  (Continental)  through a cash  merger  for $1.1  billion or $20 per
Continental  share.  On May  9,  1995,  Continental  shareholders  approved  the
agreement  and  the  merger  was  completed  on May 10.  As a  result  and  upon
consummation of the merger,  Continental became a wholly owned subsidiary of CNA
Financial  Corporation.  CNA funded the cash purchase price with proceeds from a
five-year revolving credit facility from a syndicate of banks. See Liquidity and
Capital Resources  section for summary  description of financing of acquisition.
Continental is an insurance holding company  principally engaged in the business
of owning a group of property and casualty insurance companies. This acquisition
makes CNA the largest U.S.  commercial  lines  insurer,  the third  largest U.S.
property-casualty  organization,  and the sixth  largest U.S.  insurance  group,
based on 1994 premium volume.

     CNA has completed its preliminary  purchase  accounting  analysis and filed
pro forma financial  information with the SEC on July 24, 1995 on Current Report
Form  8-K/A.  Evaluation  and  appraisal  of the net  assets is  continuing  and
allocation of the purchase  price may be adjusted.  The purchase of  Continental
reflects  goodwill of  approximately  $366 million which will be amortized  over
twenty years at an annual charge to income of $18 million.

     CNA's top priority is to consolidate  the two  organizations  as quickly as
possible without disruption to its existing businesses.  The merged organization
will operate under the name CNA with  headquarters in Chicago.  The company will
merge most of the Continental and CNA sales and support offices nationwide.  CNA
continues  to remain  committed  to strong  relationships  with the  agents  and
brokers who distribute its products and services.

     Going  forward,  the combined  organization  is expected to be stronger and
more  competitive  than  either  company  could  have been on its own.  CNA will
benefit  from  a  stronger  market  position  in  nearly  all  property-casualty
businesses,   increased  economies  of  scale  and  efficiencies,  and  expanded
distribution  of  new  and  existing  products.  CNA  believes  that  its  major
businesses  are  leaders  in their  respective  fields,  or are on their  way to
establishing a leadership position.

                                      (18)
<PAGE>
                            CNA FINANCIAL CORPORATION
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS-continued


Results of Operations:

     The following chart summarizes key components of operating  results for the
third quarter and nine months ended September 30, 1995 and 1994.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
Period Ended September 30                                 Third Quarter             Nine Months
(In millions of dollars)                                 1995       1994          1995       1994
---------------------------------------------------------------------------------------------------                
<S>                                                <C>         <C>          <C>          <C>
Operating Summary (excluding realized investment
gains/losses):
Revenues:
  Premiums:
    Property/Casualty ..........................   $  2,427.8  $   1,759.6  $   6,375.1  $  5,087.5
    Life .......................................        768.4        646.8      2,206.0     1,994.8
                                                     --------    ---------    ---------    --------
                                                      3,196.2      2,406.4      8,581.1     7,082.3
  Net investment income ........................        552.0        394.4      1,497.6     1,124.8
  Other ........................................        155.0         57.8        294.9       169.0
                                                     --------    ---------    ---------    --------
                                                      3,903.2      2,858.6     10,373.6     8,376.1
Benefits and expenses ..........................      3,757.3      2,821.4      9,895.1     8,425.4
                                                     --------    ---------     --------    -------- 
  Operating income (loss) before income tax ....        145.9         37.2        478.5       (49.3)
Income tax benefit (expense) ...................        (42.8)        26.4       (116.6)      113.8
                                                     --------    ---------    ---------    --------
  Net operating income .........................   $    103.1  $      63.6  $     361.9  $     64.5
                                                     ========    =========    =========    ========

Supplemental Financial Data:
Net operating income (loss) by group:
  Property/Casualty ............................   $    122.1  $      52.8  $     361.7  $     39.8
  Life .........................................         24.6         23.1         73.1        60.5
  Other ........................................        (43.6)       (12.3)       (72.9)      (35.8)
                                                     --------    ---------    ---------    --------
                                                        103.1         63.6        361.9        64.5
                                                     --------    ---------    ---------    --------
Net realized investment gains (losses) by group:
  Property/Casualty ............................         52.3         (4.2)       138.0       (87.1)
  Life .........................................          9.2         (6.9)        72.9       (37.7)
  Other ........................................          1.7          2.4          3.0         0.9
                                                     --------    ---------    ---------    --------
                                                         63.2         (8.7)       213.9      (123.9)
                                                     --------    ---------    ---------    --------
Net income (loss) by group:
  Property/Casualty ............................        174.4         48.6        499.7       (47.3)
  Life .........................................         33.8         16.2        146.0        22.8
  Other ........................................        (41.9)        (9.9)       (69.9)      (34.9)
                                                     --------    ---------    ---------    --------
                                                   $    166.3  $      54.9  $     575.8  $    (59.4)
====================================================================================================
</TABLE>
<PAGE>
                            CNA FINANCIAL CORPORATION
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                       AND RESULTS OF OPERATIONS-continued


Consolidated Results
--------------------

     As discussed above, the merger of Continental and CNA Financial Corporation
was  consummated  on May 10, 1995.  Thus,  the third quarter and nine month 1995
results of operations include Continental subsequent to May 10, 1995.

     Consolidated  revenues excluding realized gains/losses were $10.37 billion,
up $2 billion for the first nine  months of 1995,  compared to revenues of $8.38
billion  for  the  same  period  in  1994.   Consolidated  revenues,   excluding
Continental, were up $639 million or 7.6%. Of that increase, $362 million was in
earned  premiums,  $196  million in  investment  income and $81 million in other
income.  For Continental,  earned premiums during the period from May 10 through
September 30, 1995 were $1.14 billion,  investment income was $171 million,  and
other  income,  comprised  primarily  of  claims  adjusting  fees and  insurance
inspection fees, was $45 million.

                                      (19)
<PAGE>
                            CNA FINANCIAL CORPORATION
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                       AND RESULTS OF OPERATIONS-continued


     Consolidated revenues,  excluding realized investment gains (losses),  were
up 36.5% in the third quarter to $3.90 billion compared to $2.86 billion for the
third quarter of 1994.  Excluding  Continental,  premium revenue  increased $118
million or 4.9% and investment income increased $51 million, or 13.0%.

     CNA  reported  increased  earnings  for the  first  nine  months of 1995 as
compared to the similar period of 1994. Net operating  income which excludes net
realized investment gains, was $361.9 million, or $5.77 per share, compared with
income of $64.5 million,  or $0.99 per share, for the first nine months of 1994.
Net  operating  income for the third  quarter was $103.2  million,  or $1.64 per
share,  compared with $63.6 million,  or $1.01 per share for the same quarter in
1994.  This  improvement was chiefly  attributable to improved loss  experience,
notably in the workers'  compensation  line, a lower level of catastrophe  
losses, and  increased  investment  income  for  both  the  property/casualty 
and  life operations.

     Realized  investment  gains,  net of tax, for the first nine months of 1995
were $213.9  million,  or $3.46 per share,  compared to net realized  investment
losses for the first nine months of 1994 of $123.9 million,  or $2.01 per share.
Realized investment gains, net of tax, for the third quarter of 1995 amounted to
$63.2 million,  or $1.02 per share,  compared to net realized  investment losses
for the third quarter of 1994 of $8.7 million, or $.14 per share.

     The  components  of the  net  realized  investment  gains  (losses)  are as
follows:

----------------------------------------------------------------------
Realized Investment Gains (Losses)
Nine Months Ended September 30                         1995      1994
(In millions of dollars) 
----------------------------------------------------------------------       
 Bonds:
  U.S. Government ..............................   $   99.2  $ (155.1)
  Tax exempt ...................................       23.6      21.2
  Asset-backed .................................       35.7     (60.9)
  Taxable ......................................      (17.6)    (40.9)
                                                     ------    ------
     Total bonds ...............................      140.9    (235.7)
Stocks .........................................      126.3      37.4
Derivative securities ..........................        0.8       9.8
Other ..........................................       71.3      (7.8)
                                                     ------    ------
     Realized investment gains (losses) reported          
     in revenues . . . . . . . . . . . . . . . .      339.3    (196.3)          
Participating policyholders' interest ..........       (7.6)     11.6
Income tax benefit (expense) ...................     (117.8)     60.8
                                                     ------    ------

     Net realized investment gains (losses) ....   $  213.9  $ (123.9)
=====================================================================

<PAGE>
                            CNA FINANCIAL CORPORATION
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                       AND RESULTS OF OPERATIONS-continued


     CNA's total income tax expense for the nine months ended September 30, 1995
amounted to $234.4 million  compared to a benefit of $174.6 million for the same
period in 1994.  CNA's income tax expense  excluding tax on realized  investment
gains (losses)  amounted to $116.6  million for the nine months ended  September
30, 1995, compared to a $113.8 million benefit in the first nine months of 1994.
The income tax expense on realized  investment  gains for the nine months  ended
September 30, 1995,  totaled $117.8 million  compared with an income tax benefit
of $60.8 million for the same period a year ago.

     Net income was $575.8 million,  or $9.23 per share,  compared to a net loss
of $59.4  million,  or $1.02 per share,  for the first nine months of 1994.  Net
income for the third quarter was $166.3  million,  or $2.66 per share,  compared
with net income of $54.9 million,  or $0.87 per share,  for the third quarter of
1994.

                                      (20)

<PAGE>
                            CNA FINANCIAL CORPORATION
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                       AND RESULTS OF OPERATIONS-continued


<TABLE>
<CAPTION>
Property/Casualty Operations
----------------------------

-------------------------------------------------------------------------------------------
Property/Casualty Group                             Third Quarter            Nine Months
Period Ended September 30                          1995       1994       1995        1994
(In millions of dollars)
-------------------------------------------------------------------------------------------
<S>                                           <C>         <C>        <C>         <C>
Operating Summary (excluding realized investment gains/losses):
Revenues:
  Premiums ................................   $  2,427.8  $  1,759.6 $  6,375.1  $  5,087.5
  Net investment income ...................        460.4       312.7    1,226.8       894.5
  Other ...................................        136.0        44.2      252.0       131.7
                                                --------    --------   --------    --------
                                                 3,024.2     2,116.5    7,853.9     6,113.7
Benefits and expenses .....................      2,848.9     2,097.1    7,376.2     6,202.3
                                                --------    --------   --------    --------
  Income (loss) before income tax .........        175.3        19.4      477.7       (88.6)
Income tax benefit (expense) ..............        (53.2)       33.4     (116.0)      128.4
                                                --------    --------   --------    --------
  Net operating income (excluding realized
    investment gains/losses) ..............   $    122.1  $     52.8 $    361.7  $     39.8
===========================================================================================
</TABLE>

     Property/casualty  operating  profitability  improved  significantly in the
first nine months of 1995.  Pretax  operating  income  (excluding  net  realized
investment  gains/losses) for the property/casualty  insurance  subsidiaries was
$477.7 million and $175.3 for the nine and three months ended September 30, 1995
compared to pretax  operating loss of $88.6 million and pretax  operating income
of $19.4  million  for the same  periods a year ago.  Operating  income for 1995
reflects both improved investment income and underwriting results.

     Underwriting losses for the nine and three months ended September 30, 1995,
were $737.8  million and $273.8  million  compared to $983.1  million and $293.3
million for the same periods in 1994. The statutory  combined ratio for the nine
and three months ended  September  30, 1995 was 110.3%  compared with 115.9% and
112.9 % for the  same  periods  in  1994.  Contributing  to the  improvement  in
underwriting   results  were   continued   favorable   trends  in  the  workers'
compensation line and lower catastrophe  losses.  Pre-tax catastrophe losses for
the nine and three  months  ended  September  30, 1995 were  approximately  $116
million and $38 million, respectively,  compared to $213 million and $47 million
for the  respective  periods  in  1994.  The  1994  catastrophe  losses  related
primarily  to  the  Northridge  earthquake  and  severe  winter  storms  in  the
Northeast.
<PAGE>
                            CNA FINANCIAL CORPORATION
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                       AND RESULTS OF OPERATIONS-continued


     Property/casualty revenues, excluding net realized investment gains/losses,
increased  28.5% and 42.9% for the nine months and three months ended  September
30,  1995,  respectively,  compared to the same periods a year ago. For the nine
months and three  months ended  September  30,  1995,  property/casualty  earned
premium increased $1,287.6 million,  or 25.3% and $668.2 million,  or 38.0% from
the prior year's comparable periods,  respectively. The increase was principally
attributable  to the  inclusion of  Continental  business  ($1,137  million) and
increases in other CNA business including small and medium commercial  accounts,
mass  marketing  and  reinsurance  offset in part by decreases in large  account
premium business due to the continued shift to high deductibles and decreases in
involuntary residual markets.

     Investment  income  increased 37.1% and 47.2% for the nine and three months
ended September 30, 1995 to $1,226.8  million and $460.4 million,  respectively,
when  compared  with the  comparable  periods a year ago of $894.5  million  and
$312.7 million,  respectively.  Investment  income  increased for the first nine
months of 1995,  when compared to the first nine months of 1994 primarily due to
the acquisition of Continental ($171.2 million),  continued strong positive cash
flow and higher  yielding  investments  resulting  from a shift late in the 1994

                                      (21)
<PAGE>
                            CNA FINANCIAL CORPORATION
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS-continued


first  quarter to longer  term  securities.  Interest  rates on debt  securities
generally rose  throughout  1994, but have declined since January 1995. The bond
segment of the  investment  portfolio  yielded  7.0% in the first nine months of
1995 compared with 6.3% for the same period a year ago.

     The net income of CNA's property/casualty insurance subsidiaries, excluding
net realized investment gains/losses,  was $361.7 million and $122.1 million for
the nine and three months ended September 30, 1995,  compared to income of $39.8
million and $52.8 million for the same periods in 1994. Net realized  investment
gains for the nine and three months ended September 30, 1995 were $138.0 million
and $52.3 million  compared to net realized  investment  losses of $87.1 million
and $4.2 million for the same periods in 1994. The  property/casualty  group had
sold  approximately  $25  billion of fixed  income and equity  securities  since
December 31, 1994,  realizing  pre-tax net gains of $206.5  million.  Of the $25
billion  of  securities  sold,   approximately   $13  billion  and  $5  billion,
respectively,  were from the U.S. Treasury and Government  mortgage-backed  bond
portfolios.
<TABLE>
<CAPTION>
Life Operations
---------------

-----------------------------------------------------------------------------------------
Life Group                                        Third Quarter            Nine Months
Period Ended September 30                       1995        1994        1995         1994
(In millions of dollars)
-----------------------------------------------------------------------------------------
<S>                                          <C>       <C>         <C>         <C>
Operating Summary (excluding realized investment gains/losses):
Revenues:
  Premiums ...............................   $  775.3  $    660.1  $  2,227.0  $  2,016.6
  Net investment income ..................       88.8        79.7       266.0       228.2
  Other ..................................       19.1        15.5        43.0        39.1
                                               ------    --------    --------    --------
                                                883.2       755.3     2,536.0     2,283.9
Benefits and expenses ....................      845.2       719.9     2,423.0     2,190.9
                                               ------    --------    --------    --------
  Income before income tax ...............       38.0        35.4       113.0        93.0
Income tax expense .......................      (13.4)      (12.3)      (39.9)      (32.5)
                                               ------    --------    --------    --------
  Net operating income (excluding realized
    investment gains/losses) .............   $   24.6  $     23.1  $     73.1  $     60.5
=========================================================================================
</TABLE>
<PAGE>
                            CNA FINANCIAL CORPORATION
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                       AND RESULTS OF OPERATIONS-continued
      

     Life group revenues, excluding realized investment gains, were $2,536.0  
million  and  $883.2  million  for the nine  and  three  months  ended
September 30, 1995, up 11.0% and 16.9%, respectively,  when compared to the same
period a year ago.  Life group earned  premium was  $2,227.0  million and $775.3
million for the nine and three months  ended  September  30, 1995,  up 10.4% and
17.5%, respectively, with the primary growth in annuities and term life products
and  group  business.  The  increase  was due  primarily  to new  life  products
introduced in 1995. Investment income increased 16.6% and 11.3% for the nine and
three months ended  September 30, 1995,  compared to the same periods a year ago
primarily due to the same reasons  described for  property/casualty  operations.
The bond segment of the life investment portfolio yielded 7.0% in the first nine
months of 1995 compared with 6.5% for the same period a year ago.

     Pretax operating income for the life insurance subsidiaries,  excluding
net realized investment  gains/losses,  was $113.0 million and $38.0 million for
the nine and three months ended  September  30, 1995,  compared to $93.0 million
and $35.4 million,  respectively,  for the same periods in 1994. The increase in
pretax  operating income is primarily due to improved  mortality  experience and
increased  interest-rate  spreads  on  interest-sensitive  products  as  well as
improved investment results.

     CNA's life insurance  subsidiaries'  net income  excluding net realized
investment  gains/losses  was $73.1  million and $24.6  million for the nine and
three  months  ended  September  30, 1995  compared  to $60.5  million and $23.1

                                      (22)
<PAGE>
                            CNA FINANCIAL CORPORATION
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS-continued
      

million,  respectively,  for the same periods in 1994.  Net realized  investment
gains for the nine and three months ended  September 30, 1995 were $72.9 million
and $9.2  million,  respectively,  compared to $37.7 million and $6.9 million of
net realized investment losses recognized for the same periods in 1994.
<TABLE>
<CAPTION>
Investments:
-------------------------------------------------------------------------------------------------
Summary of General Account Investments                                  Change in
  at Market Value                            September 30  December 31 Unrealized    Realized
                                                 1995        1994     Gains(losses) Gains(losses)
(In millions of dollars)
-------------------------------------------------------------------------------------------------
<S>                                             <C>         <C>         <C>        <C> 
Fixed income securities:
U. S. Treasury securities and
obligations of government agencies ..........   $ 12,501    $ 10,782    $    839   $     99
Asset-backed securities .....................      4,955       2,564         196         36
Tax exempt securities .......................      3,419       3,770          47         24
Taxable .....................................      6,630       3,712         293        (18)
                                                --------    --------    --------   --------
   Total fixed income securities ............     27,505      20,828       1,375        141
Stocks ......................................        743         755         123        126
Short-term investments ......................      7,677       5,036          --         --
Other .......................................        749         323          --         19
Derivative security investments .............         16           1          --          1
                                                --------    --------    --------   --------
   Total general account investments ........   $ 36,690    $ 26,943       1,498        287
                                                ========    ========
Separate Accounts and discontinued operations                                238         53
Participating policyholders' interest .......                                (32)        (8)
Income tax expense ..........................                               (587)      (118)
                                                                        --------    -------
   Net investment gains .....................                           $  1,117    $   214
                                                                           =====      =====

-----------------------------------------------------------------------------------------------
</TABLE>

-------------------------------------------------
Short-term investments:
-------------------------------------------------
Security repurchase collateral    $2,508   $2,479
Escrow  (Note C) ..............    1,035    1,010
Other .........................    4,134    1,547
                                  ------   ------
   Total short-term investments   $7,677   $5,036
                                  ======   ======

-------------------------------------------------
<PAGE>
                            CNA FINANCIAL CORPORATION
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                       AND RESULTS OF OPERATIONS-continued
      

     CNA's assets increased  approximately  $20.3 billion to $64.6 billion as of
September  30,  1995  including  $15.4  billion  related to the  acquisition  of
Continental.  CNA's investment portfolio increased by $9.7 billion from December
31, 1994 to $36.7 billion including $7.4 billion related to Continental.

     CNA's general  account  investment  portfolio is managed to maximize  total
after-tax  investment  return,  while  minimizing  credit risks with investments
concentrated  in high quality  securities to support its insurance  underwriting
operations.

     CNA has the  capacity  to hold its  fixed  income  portfolio  to  maturity.
However,  securities may be sold as part of CNA's asset/liability  strategies or
to take  advantage of investment  opportunities  generated by changing  interest
rates,  prepayments,  tax and credit  considerations,  or other similar factors.
Accordingly, the fixed income securities are classified as available-for-sale.

     CNA holds a small amount of derivative  financial  instruments for purposes
of  enhancing   income  and  total  return.   The   derivative   securities  are
marked-to-market  with valuation  changes reported as realized  investment gains
and losses. CNA's investment in, and risk in relation to, derivative  securities
is not significant. 

                                      (23)

<PAGE>
                            CNA FINANCIAL CORPORATION
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                       AND RESULTS OF OPERATIONS-continued


     The general account portfolio consists primarily of high quality marketable
debt securities,  approximately  94% of which are rated as investment  grade. At
September 30, 1995, short-term investments,  excluding collateral for securities
sold under repurchase  agreements,  comprised  approximately  14% of the general
account's  total  investment  portfolio  compared  to 9% at December  31,  1994.
Historically,  CNA has maintained short-term assets at a level that provided for
liquidity to meet its  short-term  obligations.  In the first three  quarters of
1995,  short-term  investments have increased well above such levels as positive
cash flows, including proceeds from sales of securities,  have not been invested
in long-term  securities;  currently,  short-term  interest rates are relatively
attractive  compared to  longer-term  rates.  At September  30, 1995,  the major
components  of the  short-term  investment  portfolio  were  approximately $4.5
billion of high-grade  commercial paper and $2.0 billion of U.S. Treasury bills.
Collateral for securities sold under repurchase agreements were $2.5 billion and
were invested in high-grade commercial paper.

     Debt security carrying values are highly susceptible to changes in interest
rates  and were  favorably  affected  as a general  decline  in  interest  rates
occurred in the first half of 1995.  Interest  rates have  continued  to decline
throughout  October resulting in additional  unrealized  investment gains in the
bond portfolio, primarily relating to government securities.

     As of  September  30,  1995,  the  market  value of CNA's  general  account
investments  in bonds and  redeemable  preferred  stocks was $27.5  billion  and
exceeded  amortized cost by  approximately  $579 million.  This compares to $795
million of net  unrealized  investment  losses at December 31,  1994.  The gross
unrealized investment gains and losses for the fixed income securities portfolio
at  September  30,  1995,  were $787  million  and $208  million,  respectively,
compared to $194 million and $989 million, respectively, at December 31, 1994.

     Net unrealized  investment  gains on general account bonds at September 30,
1995  include net  unrealized  gains on high yield  securities  of $57  million,
compared to net  unrealized  investment  losses of $30  million at December  31,
1994. High yield  securities are bonds rated as below  investment  grade by bond
rating agencies,  plus private placements and other unrated securities which, in
the opinion of management, are below investment grade. Fair values of high yield
securities  in the general  account  were $1.7  billion at  September  30, 1995,
compared to $1.0 billion at December 31, 1994.

     At September 30, 1995, total separate account cash and investments amounted
to $6.0 billion with taxable debt securities  representing  approximately 92% of
the  separate  accounts'  portfolios.  Approximately  86%  of  separate  account
investments are used to fund guaranteed  investment  contracts (GIC's) for which
Continental Assurance Company guarantees principal and a specified return to the
contractholders.  The  fair  value of all  fixed  income  securities  in the GIC
portfolio  was $4.9 billion  compared to $4.6  billion at December 31, 1994.  At
September 30, 1995, fair values  exceeded the amortized  costs by  approximately
$14 million.  This compares to $195 million of net unrealized  investment losses
at December 31, 1994. The gross  unrealized  investment gains and losses for the
GIC fixed income  securities  portfolio at September 30, 1995,  were $89 million
and $75  million,  respectively,  compared  to $34  million  and  $229  million,
respectively, at December 31, 1994.
<PAGE>
                            CNA FINANCIAL CORPORATION
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                       AND RESULTS OF OPERATIONS-continued

     Carrying  values of high yield  securities in the GIC  portfolio  were $1.0
billion at September  30,  1995,  compared to $1.1 billion at December 31, 1994.
Net unrealized  investment losses on high yield securities held in such separate
accounts  were $26 million at September  30,  1995,  compared to $108 million at
December 31, 1994.

                                      (24)
<PAGE>
                            CNA FINANCIAL CORPORATION
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS-continued


     High yield securities  generally involve a greater degree of risk than that
of investment grade securities. Expected returns should, however, compensate for
the added risk. The risk is also considered in the interest rate  assumptions in
the underlying insurance products. As of September 30, 1995, CNA's concentration
in high yield bonds including  separate accounts was approximately 4.2% of total
assets.  In addition,  CNA's  investment in mortgage loans and  investment  real
estate are substantially below the industry average,  representing less than one
half of one percent of its total assets.

     Included in CNA's fixed income  securities  at September  30, 1995 (general
and GIC portfolios) are $7.4 billion of asset-backed  securities,  consisting of
approximately  33% in  collateralized  mortgage  obligations  ("CMO's"),  27% in
corporate   asset-backed   obligations,   and  40%  in  U.S.  Government  issued
pass-through certificates. The majority of CMO's held are U.S. Government agency
issues,  which are actively traded in liquid markets. At September 30, 1995, the
fair value of asset-backed  securities  exceeded amortized cost by approximately
$95 million compared to unrealized investment losses of $181 million at December
31, 1994. CNA limits the risks  associated with interest rate  fluctuations  and
prepayment by  concentrating  its CMO investments in early planned  amortization
classes with wide bands and relatively short principal repayment windows.

     Over the last few years, much concern has been raised regarding the quality
of insurance  company invested assets. At September 30, 1995, 61% of the general
account's debt securities portfolio was invested in U.S. Government  securities,
15% in other AAA rated  securities and 12% in AA and A rated  securities.  CNA's
GIC fixed income portfolio is comprised of 32% U.S. Government  securities,  19%
in  other  AAA  rated  securities  and 17% in AA and A rated  securities.  These
ratings  are  primarily  from  Standard  & Poor's  (92% of the  general  account
portfolio and 95% of the GIC portfolio).
<TABLE>
<CAPTION>
Financial Condition:
--------------------------------------------------------------------------------------------------
Financial Position                                                     September 30   December 31
(In millions of dollars, except per share data)                            1995           1994
---------------------------------------------------------------------------------------------------
<S>                                                                    <C>          <C>         
Assets .............................................................   $   64,595.6 $   44,320.4
Debt ...............................................................        3,016.7        913.8
Stockholders' Equity ...............................................        6,260.2      4,545.9
Unrealized Net Appreciation (Depreciation) Included in Stockholders'                 
   Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           610.7       (506.4)           
Book Value per Common Share ........................................          98.87        71.13
--------------------------------------------------------------------------------------------------
</TABLE>
     During the first nine months of 1995, CNA's stockholders'  equity increased
by $1.7 billion,  or 37.7%, to approximately $6.3 billion.  The major components
of this change were $575.8  million from net income and a $1.1 billion  increase
in unrealized net appreciation, primarily related to changes in market values of
debt securities. Debt security carrying values are highly susceptible to changes
in interest rates and were favorably  affected as a general  decline in interest
rates occurred in the first nine months of 1995.
<PAGE>
                            CNA FINANCIAL CORPORATION
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                       AND RESULTS OF OPERATIONS-continued


     The statutory surplus of the property/casualty subsidiaries amounts to $5.6
billion,  including  $1.7  billion  for  Continental,  compared  to a pro  forma
combined  statutory  surplus of $4.8 billion at December 31, 1994. The increase,
excluding that caused by the addition of  Continental,  resulted  primarily from
net  income.  The  statutory  surplus  of the  life  insurance  subsidiaries  is
approximately $1.1 billion.

                                      (25)
<PAGE>
                            CNA FINANCIAL CORPORATION
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                       AND RESULTS OF OPERATIONS-continued


Liquidity and Capital Resources:

     The  liquidity   requirements   of  CNA,   excluding  the   acquisition  of
Continental,  have been met primarily by funds  generated from  operations.  The
principal  operating  cash  flow  sources  of CNA's  property/casualty  and life
insurance subsidiaries are premiums and investment income. The primary operating
cash flow uses are payments for claims, policy benefits and operating expenses.

     For the first nine months of 1995, CNA's operating activities generated net
cash flows of $409  million,  compared  to $745  million  for the same period in
1994.  The decrease in cash flows is due  primarily to  Continental  activities,
namely the impact in 1995 from the 1994 sale of $408 million in receivables  and
increased claim payments.

     Net cash flows are invested in marketable securities. Investment strategies
employed by CNA's insurance  subsidiaries consider the cash flow requirements of
the  insurance  products  sold,  and the tax  attributes of the various types of
marketable investments.

     On May 10, 1995, CNA acquired all the outstanding shares of Continental for
approximately  $1.1  billion  or $20  per  Continental  share.  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  involving 16 banks led by The First  National  Bank of Chicago and The
Chase Manhattan  Bank,  N.A.. The interest rate for the facility is based on the
one, two, three, or six month London Interbank Offered Rate (LIBOR), as elected,
plus 25  basis  points  or  other  negotiated  rates.  Additionally,  there is a
facility fee of 10 basis points.  The average  interest  rate on the  borrowings
under the  revolver  at  September  30,  1995 was 6.11%.  Under the terms of the
facility,  CNA may prepay the debt without  penalty,  giving CNA  flexibility to
arrange longer-term financing on more favorable terms.

     To offset the variable rate  characteristics  of the facility,  CNA entered
into 5 year interest rate swap agreements with several banks.  These  agreements
will convert  variable rate debt based on three month LIBOR into fixed rate debt
resulting  in fixed  rates on notional  amounts of $950  million.  The  weighted
average fixed swap rate at September 30, 1995 was 6.40%.

     On August 10, 1995, to take  advantage of favorable  interest rate spreads,
CNA  established  a  Commercial  Paper  Program,  borrowing  $500  million  from
investors to replace a like amount of bank financing. The weighted-average yield
on  commercial  paper at  September  30, 1995 was 5.97%.  The  commercial  paper
borrowings  are  classified as long-term as $500 million of the  committed  bank
facility  will back up the  commercial  paper  program (at an undrawn cost of 10
basis points).  Standard and Poor's and Moody's issued  short-term debt ratings
of A2 and P2, respectively, for CNA's Commercial Paper Program.

The  weighted-average   interest  rate  (interest  and  facility  fees)  on  the
acquisition debt, which includes the revolving credit facility, commercial paper
and the effect of the interest rate swaps, was 6.48% at September 30, 1995.

                                      (26)
<PAGE>
                            CNA FINANCIAL CORPORATION
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                       AND RESULTS OF OPERATIONS-concluded


     Coincident  with the  Continental  acquisition,  A.M.  Best,  Standard  and
Poor's,  Moody's and Duff & Phelps issued revised ratings for CNA's  Continental
Casualty Company (CCC) Intercompany Pool,  Continental  Insurance Company (CIC)
Intercompany Pool and Continental  Assurance Company (CAC) Intercompany  Pool. 
Also rated were the senior debt of both CNA and The Continental Corporation 
(Continental) and CNA's preferred stock.

     In some cases the rating agencies affirmed the previous ratings. In others,
the ratings were lowered  because of the increased level of debt associated with
the Continental acquisition.

     The chart below lists the current ratings.
<TABLE>
<CAPTION>
|------------------|-----------------------|--------------------------------------------|    
|                  |   INSURANCE RATINGS   |        DEBT AND STOCK RATINGS              |
|                  |-----------------------|--------------------------------------------|
|                  |   Financial Strength  |                                            |
|                  |                       |                                            |
|                  |----------|------|-----|--------------------------------|-----------|
|                  |          |      |     |              CNA               |Continental|
|                  |          |      |     |-----------|----------|---------|-----------|
|                  |          |      |     |Senior Debt|Commercial|Preferred|Senior Debt|
|                  |   CCC    | CAC  | CIC |           |  Paper   |  Stock  |           |
|                  |----------|------|-----|-----------|----------|---------|-----------| 
<S>                <C>        <C>    <C>   <C>         <C>        <C>       <C>         
|A.M. Best         |    A     |   A  |  A- |      -    |     -    |    -    |     -     |
|                  |          |      |     |           |          |         |           |
|                  |          |      |     |           |          |         |           |
|Moody's           |    A1    |   A1 |  A2 |      A3   |     P2   |    a3   |    Baa1   |
|                  |          |      |     |           |          |         |           |
|                  |----------|------|-----|           |          |         |           |
|                  | Claims Paying Ability |           |          |         |           | 
|                  |----------|------|-----|           |          |         |           |
|                  |          |      |     |           |          |         |           |
|Standard & Poor's |    A+    |   AA |  A- |      A-   |     A2   |    A-   |    BBB-   |
|                  |          |      |     |           |          |         |           | 
|                  |          |      |     |           |          |         |           |
|Duff & Phelps     |    AA-   |   AA |  -  |      A-   |     -    |    A-   |     -     |
|------------------|----------|------|-----|-----------|----------|---------|-----------|
</TABLE>

     CNA  and the  insurance  industry  are  exposed  to an  unknown  amount  of
liability for  environmental  pollution,  asbestos-related  and other toxic tort
claims.  Refer  to  Note E of  Notes  to the  Condensed  Consolidated  Financial
Statements for further discussion of these exposures.
<PAGE>
                            CNA FINANCIAL CORPORATION
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                       AND RESULTS OF OPERATIONS-concluded


Accounting Standards:

     In March 1995,  the  Financial  Accounting  Standards  Board (FASB)  issued
Statement of Financial  Accounting  Standards  (SFAS) 121,  "Accounting  for the
Impairment of Long-Lived  Assets and for  Long-Lived  Assets to be Disposed Of".
This Statement establishes accounting standards for the impairment of long-lived
assets, certain identifiable  intangibles,  and goodwill related to those assets
to be held and used for long-lived assets and certain  identifiable  intangibles
to be disposed of. This statement  requires that  long-lived  assets and certain
identifiable  intangibles  to be held and used by the  entity  be  reviewed  for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying  amount  of an asset may not be  recoverable.  This  Statement  will be
effective  for  1996  financial   statements,   although   earlier  adoption  is
permissible.  This  Statement  will not have a  significant  impact on CNA.
  
     In October  1995,   the  FASB  issued  SFAS  123, "Accounting  for 
Stock-Based Compensation".  This Statement  establishes  financial  accounting
and reporting standards for stock-based  employee  compensation plans The
requirements of this Statement  will  generally  be effective  for 1996 
financial  statements.  This Statement will have no significant impact on CNA.

                                      (27)
<PAGE>


                            CNA FINANCIAL CORPORATION

                            PART II OTHER INFORMATION

                                                
Item 6.  Exhibits and Reports on Form 8-K

(a)  EXHIBITS:

                       Description of Exhibit      Exhibit        Page
                                                    Number       Number


(11)  Computation of Net Income per Common Share.     11          30
(27)  Financial Data Schedule                         27          31


(b)  REPORTS ON FORM 8-K:

         On May 23,  1995,  CNA filed a current  report on Form 8-K which stated
that on May 10th,  the  Company  consummated  the  merger  with The  Continental
Corporation (CIC) On July 24, 1995 on Form 8-K/A, CNA reported under Items 2 and
7 additional  financial  information  related to the merger including  financial
statements of CIC and pro forma financial information.

                                      (28)
<PAGE>

                            CNA FINANCIAL CORPORATION

                      PART II OTHER INFORMATION - Concluded

                                   SIGNATURES


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


                                               CNA FINANCIAL CORPORATION


Date:  November 14, 1995                        By    PETER E. JOKIEL
                                                  -------------------------
                                                  Peter E. Jokiel
                                                  Senior Vice President and
                                                  Chief Financial Officer

                                      (29)
<PAGE>
                                                                      EXHIBIT 11

                            CNA FINANCIAL CORPORATION
                   COMPUTATION OF NET INCOME PER COMMON SHARE
<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------
Period Ended September 30                                    Third Quarter             Nine Months
(In millions, except per share data)                       1995      1994           1995       1994
-------------------------------------------------------------------------------------------------------

Earnings per share:
<S>                                                       <C>        <C>          <C>        <C>      
   Net income (loss).................................     $ 166.3    $  54.9      $ 575.8    $ (59.4)
   Less preferred stock dividends....................         1.3        1.1          5.1        3.6
                                                            -----      -----        -----      ------

   Net income (loss) available to common stockholders     $ 165.0    $  53.8      $ 570.7    $  (63.0)
                                                          ========    ======       ======      =======

   Weighted average shares outstanding...............        61.8       61.8        61.8          61.8
                                                            =====      =====       =====        ======

   Net income (loss) per common share................     $  2.66    $  0.87      $ 9.23       $ (1.02)
                                                           ======      ======      =====        ======
--------------------------------------------------------------------------------------------------------
</TABLE>
                                      (30)