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                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549




                                   FORM 10-K/A

                          AMENDMENT NO. 1 TO FORM 10-K

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

       FOR THE YEAR ENDED DECEMBER 31, 1996 COMMISSION FILE NUMBER 1-5823



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



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


            CNA PLAZA
        CHICAGO, ILLINOIS                                     60685
(Address of principal executive offices)                    (Zip Code)


                                 (312) 822-5000
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)



         The registrant hereby amends the following items, financial statements,
exhibits or other  portions of its Annual Report on Form 10-K for the year ended
December  31,  1996 filed on March 31,  1997 as set forth in the pages  attached
hereto:


         Part I:  Item 1.   Business
                            (To correct typographical errors on page 7
                             of Form 10-K)



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<PAGE>

                            CNA FINANCIAL CORPORATION


                            FORM 10-K/A ANNUAL REPORT


                      FOR THE YEAR ENDED DECEMBER 31, 1996

                                                                       Page
                                                                      Number
                                                                      ------

               Part 1 Item 1  Business................................  3-12

               Signature Page.........................................   13
               
               Independent Auditors' Consent..........................   14





                                       2
<PAGE>
                                   PART I

ITEM 1.  BUSINESS

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

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

COMPETITION

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

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

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

DIVIDENDS BY INSURANCE SUBSIDIARIES

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




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

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

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

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

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

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

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

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

REINSURANCE

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

EMPLOYEE RELATIONS

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

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

BUSINESS SEGMENTS

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




                                        5
<PAGE>
PROPERTY/CASUALTY BUSINESS

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

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

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

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

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

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




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

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

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

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

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

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

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

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

Trade Ratios - Statutory basis (c)
   Loss ratio...............................         76.8%       78.6%        82.2%       96.4%       116.3%
   Expense ratio............................         30.4        29.2         27.8        27.1         25.6
   Combined ratio (before policyholder              
   dividends)...............................        107.2       107.8        110.0       123.5        141.9
   Policyholder dividend ratio..............          1.4         2.1          3.8         3.1          2.4

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

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

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

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

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

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




                                       8
<PAGE>
PROPERTY/CASUALTY CLAIM AND CLAIM EXPENSES

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

NET PAID 
(CUMULATIVE) AS OF:

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

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

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

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

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

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

RESERVE DEVELOPMENT

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

LIFE BUSINESS

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

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

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

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




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

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

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

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

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

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

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

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

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

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

INVESTMENTS

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




                                       12
<PAGE>




                                   SIGNATURES

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


                     CNA Financial Corporation

                     By                       S/PATRICIA L. KUBERA
                           -----------------------------------------------------
                                              Patricia L. Kubera
                                           Group Vice President and
                                                  Controller


Date:  April 3, 1997

                                       13
<PAGE>
                          INDEPENDENT AUDITORS' CONSENT


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


S/DELOITTE & TOUCHE LLP


Deloitte & Touche LLP
Chicago, Illinois
April 3, 1997

                                       14