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10-Q


☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934


June 30, 2019





☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934





1-5823





CNA FINANCIAL CORPORATION





Delaware36-6169860(State or other jurisdiction ofincorporation or organization)(I.R.S. EmployerIdentification No.)


151 N. Franklin60606Chicago,Illinois(Zip Code)(Address of principal executive offices)


312
  822-5000














Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock, Par value $2.50"CNA"New York Stock ExchangeChicago Stock Exchange





Yes





Yes





Large accelerated filer☒Non-accelerated filer☐Accelerated filer☐Smaller reporting company☐Emerging growth company☐





☐


271,507,039





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Item NumberPageNumberPART I1.Condensed Consolidated Financial Statements:Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018 (Unaudited)3Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2019 and 2018 (Unaudited)4Condensed Consolidated Balance Sheets as of June 30, 2019 (Unaudited) and December 31, 20185Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018 (Unaudited)6Condensed Consolidated Statements of Stockholders' Equity for the three and six months ended June 30, 2019 and 2018 (Unaudited)7Notes to Condensed Consolidated Financial Statements (Unaudited)82.Management's Discussion and Analysis of Financial Condition and Results of Operations403.Quantitative and Qualitative Disclosures About Market Risk614.Controls and Procedures61PART II1.Legal Proceedings622.Unregistered Sales of Equity Securities and Use of Proceeds626.Exhibits62








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Periods ended June 30Three MonthsSix Months(In millions, except per share data)2019201820192018RevenuesNet earned premiums$1,824$1,815$3,627$3,600Net investment income5155061,086996Net investment (losses) gains:Other-than-temporary impairment losses(6)—(20)(6)Other net investment (losses) gains(12)(1)3317Net investment (losses) gains(18)(1)1311Non-insurance warranty revenue285248566486Other revenues461316Total revenues2,6102,5745,3055,109Claims, Benefits and ExpensesInsurance claims and policyholders’ benefits1,3521,3272,7092,666Amortization of deferred acquisition costs338359680655Non-insurance warranty expense263225523441Other operating expenses281298564601Interest34356870Total claims, benefits and expenses2,2682,2444,5444,433Income before income tax342330761676Income tax expense(64)(60)(141)(115)Net income$278$270$620$561Basic earnings per share$1.03$0.99$2.28$2.07Diluted earnings per share$1.02$0.99$2.28$2.06Weighted Average Outstanding Common Stock and Common Stock EquivalentsBasic271.6271.5271.6271.5Diluted272.4272.4272.5272.4














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Periods ended June 30Three MonthsSix Months(In millions)2019201820192018Comprehensive Income (Loss)Net income$278$270$620$561Other Comprehensive Income (Loss), Net of TaxChanges in:Net unrealized gains on investments with other-than-temporary impairments—(1)4(10)Net unrealized gains on other investments436(159)962(588)Net unrealized gains on investments436(160)966(598)Foreign currency translation adjustment—(52)17(40)Pension and postretirement benefits871517Other comprehensive income (loss), net of tax444(205)998(621)Total comprehensive income (loss)$722$65$1,618$(60)











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(In millions, except share data)June 30, 2019 (Unaudited)December 31, 2018AssetsInvestments:Fixed maturity securities at fair value (amortized cost of $38,023 and $38,085)$41,639$39,546Equity securities at fair value (cost of $812 and $844)830780Limited partnership investments1,7851,982Other invested assets5853Mortgage loans916839Short term investments1,5191,286Total investments46,74744,486Cash271310Reinsurance receivables (less allowance for uncollectible receivables of $29 and $29)4,2344,426Insurance receivables (less allowance for uncollectible receivables of $39 and $42)2,6512,323Accrued investment income398391Deferred acquisition costs681633Deferred income taxes106392Property and equipment at cost (less accumulated depreciation of $208 and $216)302324Goodwill146146Deferred non-insurance warranty acquisition expense2,6782,513Other assets (includes $- and $8 due from Loews Corporation)1,7491,208Total assets$59,963$57,152LiabilitiesInsurance reserves:Claim and claim adjustment expenses$21,729$21,984Unearned premiums4,6484,183Future policy benefits11,53710,597Long term debt2,6782,680Deferred non-insurance warranty revenue3,5953,402Other liabilities (includes $48 and $23 due to Loews Corporation)3,6893,089Total liabilities47,87645,935Commitments and contingencies (Notes C and F)Stockholders' EquityCommon stock ($2.50 par value; 500,000,000 shares authorized; 273,040,243 shares issued; 271,503,818 and 271,456,978 shares outstanding)683683Additional paid-in capital2,1902,192Retained earnings9,1599,277Accumulated other comprehensive income (loss)120(878)Treasury stock (1,536,425 and 1,583,265 shares), at cost(65)(57)Total stockholders’ equity12,08711,217Total liabilities and stockholders' equity$59,963$57,152











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Six months ended June 30(In millions)20192018Cash Flows from Operating ActivitiesNet income$620$561Adjustments to reconcile net income to net cash flows provided by operating activities:Deferred income tax expense2515Trading portfolio activity4(13)Net investment gains(13)(11)Equity method investees39(15)Net amortization of investments(47)(30)Depreciation and amortization3641Changes in:Receivables, net(135)(587)Accrued investment income(7)15Deferred acquisition costs(47)(43)Insurance reserves203563Other, net(164)(142)Net cash flows provided by operating activities514354Cash Flows from Investing ActivitiesDispositions:Fixed maturity securities - sales3,8584,781Fixed maturity securities - maturities, calls and redemptions1,3741,306Equity securities11725Limited partnerships29793Mortgage loans7068Purchases:Fixed maturity securities(4,896)(5,608)Equity securities(88)(127)Limited partnerships(139)(72)Mortgage loans(147)(94)Change in other investments(4)(6)Change in short term investments(211)135Purchases of property and equipment(14)(76)Other, net1614Net cash flows provided by investing activities233439Cash Flows from Financing ActivitiesDividends paid to common stockholders(738)(706)Proceeds from the issuance of debt496—Repayment of debt(520)(150)Purchase of treasury stock(16)—Other, net(10)1Net cash flows used by financing activities(788)(855)Effect of foreign exchange rate changes on cash2(5)Net change in cash(39)(67)Cash, beginning of year310355Cash, end of period$271$288











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Periods ended June 30Three MonthsSix Months(In millions)2019201820192018Common StockBalance, beginning of period$683$683$683$683Balance, end of period683683683683Additional Paid-in CapitalBalance, beginning of period2,1842,1732,1922,175Stock-based compensation66(2)4Balance, end of period2,1902,1792,1902,179Retained EarningsBalance, beginning of period8,9769,0289,2779,364Dividends to common stockholders ($0.35, $0.30, $2.70 and $2.60 per share)(95)(82)(738)(709)Net income278270620561Balance, end of period9,1599,2169,1599,216Accumulated Other Comprehensive Income (Loss)Balance, beginning of period(324)(400)(878)16Other comprehensive income (loss)444(205)998(621)Balance, end of period120(605)120(605)Treasury StockBalance, beginning of period(64)(59)(57)(60)Stock-based compensation1182Purchase of treasury stock(2)—(16)—Balance, end of period(65)(58)(65)(58)Total stockholders' equity$12,087$11,415$12,087$11,415














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General





89

















(In millions)Balance as of December 31, 2018Adjustments Due to Adoption of Topic 842Balance as of January 1, 2019Property and equipment at cost (less accumulated depreciation)$324$2$326Other assets1,2082371,445Other liabilities3,0892393,328


75








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Earnings (Loss) Per Share





776
  872
  1


835
  929
  445
  2


365,695
  16
    No











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Investments





Periods ended June 30Three MonthsSix Months(In millions)2019201820192018Fixed maturity securities$455$444$910$890Equity securities16124622Limited partnership investments374011370Mortgage loans12142425Short term investments961912Trading portfolio2345Other—323Gross investment income5315221,1181,027Investment expense(16)(16)(32)(31)Net investment income$515$506$1,086$996


4
  21
      2
  1





Periods ended June 30Three MonthsSix Months(In millions)2019201820192018Net investment gains (losses):Fixed maturity securities:Gross gains$28$37$64$106Gross losses(31)(33)(73)(84)Net investment gains (losses) on fixed maturity securities(3)4(9)22Equity securities11(10)53(25)Derivatives(6)4(11)9Short term investments and other(20)1(20)5Net investment gains (losses)$(18)$(1)$13$11


11
  53
      10
  25
    21
  500





Periods ended June 30Three MonthsSix Months(In millions)2019201820192018Fixed maturity securities available-for-sale:Corporate and other bonds$6$—$12$5Asset-backed——81OTTI losses recognized in earnings$6$—$20$6











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June 30, 2019Cost orAmortizedCostGrossUnrealizedGainsGrossUnrealizedLossesEstimatedFairValueUnrealizedOTTILosses (Gains)(In millions)Fixed maturity securities available-for-sale:Corporate and other bonds$19,654$1,880$44$21,490$—States, municipalities and political subdivisions9,1961,507—10,703—Asset-backed:Residential mortgage-backed4,66813124,797(24)Commercial mortgage-backed2,0329342,121—Other asset-backed1,8654071,898(2)Total asset-backed8,565264138,816(26)U.S. Treasury and obligations of government-sponsored enterprises1185—123—Foreign government48017—497—Redeemable preferred stock10——10—Total fixed maturity securities available-for-sale38,0233,6735741,639$(26)Total fixed maturity securities trading————Total fixed maturity securities$38,023$3,673$57$41,639


December 31, 2018Cost orAmortizedCostGrossUnrealizedGainsGrossUnrealizedLossesEstimatedFairValueUnrealizedOTTILosses (Gains)(In millions)Fixed maturity securities available-for-sale:Corporate and other bonds$18,764$791$395$19,160$—States, municipalities and political subdivisions9,6811,076910,748—Asset-backed:Residential mortgage-backed4,81568574,826(20)Commercial mortgage-backed2,20028322,196—Other asset-backed1,97511241,962—Total asset-backed8,9901071138,984(20)U.S. Treasury and obligations of government-sponsored enterprises1563—159—Foreign government48054481—Redeemable preferred stock10——10—Total fixed maturity securities available-for-sale38,0811,98252139,542$(20)Total fixed maturity securities trading4——4Total fixed maturity securities$38,085$1,982$521$39,546





The net unrealized gains on investments included in the tables above are recorded as a component of Accumulated other comprehensive income (AOCI).  When presented in AOCI, these amounts are net of tax and any required Shadow Adjustments.  To the extent that unrealized gains on fixed income securities supporting certain products within the Life & Group segment would result in a premium deficiency if realized, a related increase in Insurance reserves is recorded, net of tax, as a reduction of net unrealized gains through Other comprehensive income (loss) (Shadow Adjustments).  As ofJune 30, 2019andDecember 31, 2018, the net unrealized gains on investments included in AOCI were correspondingly reduced by Shadow Adjustments of$1,816 millionand$1,078 million .











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Less than 12 Months12 Months or LongerTotalJune 30, 2019EstimatedFair ValueGrossUnrealizedLossesEstimatedFair ValueGrossUnrealizedLossesEstimatedFair ValueGrossUnrealizedLosses(In millions)Fixed maturity securities available-for-sale:Corporate and other bonds$776$22$498$22$1,274$44States, municipalities and political subdivisions19—2—21—Asset-backed:Residential mortgage-backed163—13422972Commercial mortgage-backed5826921274Other asset-backed38657724637Total asset-backed6077280688713U.S. Treasury and obligations of government-sponsored enterprises——4—4—Foreign government3—11—14—Total$1,405$29$795$28$2,200$57


Less than 12 Months12 Months or LongerTotalDecember 31, 2018EstimatedFair ValueGrossUnrealizedLossesEstimatedFair ValueGrossUnrealizedLossesEstimatedFair ValueGrossUnrealizedLosses(In millions)Fixed maturity securities available-for-sale:Corporate and other bonds$8,543$340$825$55$9,368$395States, municipalities and political subdivisions5178515229Asset-backed:Residential mortgage-backed1,932231,119343,05157Commercial mortgage-backed72810397221,12532Other asset-backed83421125395924Total asset-backed3,494541,641595,135113U.S. Treasury and obligations of government-sponsored enterprises21—19—40—Foreign government114212422384Total$12,689$404$2,614$117$15,303$521











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Periods ended June 30Three MonthsSix Months(In millions)2019201820192018Beginning balance of credit losses on fixed maturity securities$17$25$18$27Reductions for securities sold during the period(1)(4)(2)(6)Ending balance of credit losses on fixed maturity securities$16$21$16$21














June 30, 2019December 31, 2018(In millions)Cost orAmortizedCostEstimatedFairValueCost orAmortizedCostEstimatedFairValueDue in one year or less$1,018$1,032$1,350$1,359Due after one year through five years8,0978,4767,9798,139Due after five years through ten years16,40317,29716,85916,870Due after ten years12,50514,83411,89313,174Total$38,023$41,639$38,081$39,542











172
      8
  4








875
  85











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Fair Value


























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June 30, 2019TotalAssets/Liabilitiesat Fair Value(In millions)Level 1Level 2Level 3AssetsFixed maturity securities:Corporate bonds and other$152$21,630$338$22,120States, municipalities and political subdivisions—10,703—10,703Asset-backed—8,6231938,816Total fixed maturity securities15240,95653141,639Equity securities:Common stock129—6135Non-redeemable preferred stock5162816695Total equity securities18062822830Short term and other3591,052—1,411Total assets$691$42,636$553$43,880LiabilitiesOther liabilities$—$8$—$8Total liabilities$—$8$—$8


December 31, 2018TotalAssets/Liabilitiesat Fair Value(In millions)Level 1Level 2Level 3AssetsFixed maturity securities:Corporate bonds and other$196$19,396$222$19,814States, municipalities and political subdivisions—10,748—10,748Asset-backed—8,7871978,984Total fixed maturity securities19638,93141939,546Equity securities:Common stock144—4148Non-redeemable preferred stock4857014632Total equity securities19257018780Short term and other216949—1,165Total assets$604$40,450$437$41,491LiabilitiesOther liabilities$—$(4)$—$(4)Total liabilities$—$(4)$—$(4)











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Level 3(In millions)Corporate bonds and otherStates, municipalities and political subdivisionsAsset-backedEquity securitiesTotalBalance as of April 1, 2019$253$—$184$20$457Total realized and unrealized investment gains (losses):Reported in Net investment gains (losses)—————Reported in Other comprehensive income (loss)12—4—16Total realized and unrealized investment gains (losses)12—4—16Purchases76——278Sales—————Settlements(2)—(4)—(6)Transfers into Level 3——40—40Transfers out of Level 3(1)—(31)—(32)Balance as of June 30, 2019$338$—$193$22$553Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2019 recognized in Net income (loss)$—$—$—$—$—Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2019 recognized in Other comprehensive income (loss)10—5—15
 Level 3(In millions)Corporate bonds and otherStates, municipalities and political subdivisionsAsset-backedEquity securitiesTotalBalance as of April 1, 2018$100$1$279$18$398Total realized and unrealized investment gains (losses):Reported in Net investment gains (losses)———(1)(1)Reported in Other comprehensive income (loss)(1)—(1)—(2)Total realized and unrealized investment gains (losses)(1)—(1)(1)(3)Purchases2—41—43Sales(5)———(5)Settlements(2)—(6)—(8)Transfers into Level 3——13—13Transfers out of Level 3——(53)—(53)Balance as of June 30, 2018$94$1$273$17$385Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2018 recognized in Net income (loss)$—$—$—$(1)$(1)











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Level 3(In millions)Corporate bonds and otherStates, municipalities and political subdivisionsAsset-backedEquity securitiesTotalBalance as of January 1, 2019$222$—$197$18$437Total realized and unrealized investment gains (losses):Reported in Net investment gains (losses)———22Reported in Other comprehensive income (loss)20—7—27Total realized and unrealized investment gains (losses)20—7229Purchases132—202154Sales—————Settlements(4)—(8)—(12)Transfers into Level 3——45—45Transfers out of Level 3(32)—(68)—(100)Balance as of June 30, 2019$338$—$193$22$553Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2019 recognized in Net income (loss)$—$—$—$3$3Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2019 recognized in Other comprehensive income (loss)17—8—25


Level 3(In millions)Corporate bonds and otherStates, municipalities and political subdivisionsAsset-backedEquity securitiesTotalBalance as of January 1, 2018$98$1$335$20$454Total realized and unrealized investment gains (losses):Reported in Net investment gains (losses)(1)—7(3)3Reported in Other comprehensive income (loss)(1)—(6)—(7)Total realized and unrealized investment gains (losses)(2)—1(3)(4)Purchases2—71—73Sales(5)—(72)—(77)Settlements(4)—(12)—(16)Transfers into Level 35—13—18Transfers out of Level 3——(63)—(63)Balance as of June 30, 2018$94$1$273$17$385Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2018 recognized in Net income (loss)$—$—$—$(3)$(3)











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June 30, 2019Estimated Fair Value(In millions)Valuation Technique(s)Unobservable Input(s)Range(Weighted Average)Fixed maturity securities$381Discounted cash flowCredit spread1% - 5% (2%)


December 31, 2018Estimated Fair Value (In millions)Valuation Technique(s)Unobservable Input(s)Range(Weighted Average)Fixed maturity securities$228Discounted cash flowCredit spread1% - 12% (3%)














June 30, 2019CarryingAmountEstimated Fair Value(In millions)Level 1Level 2Level 3TotalAssetsMortgage loans$916$—$—$936$936Note receivable20——2020LiabilitiesLong term debt$2,678$—$2,864$—$2,864


December 31, 2018CarryingAmountEstimated Fair Value(In millions)Level 1Level 2Level 3TotalAssetsMortgage loans$839$—$—$827$827Note receivable35——3535LiabilitiesLong term debt$2,680$—$2,731$—$2,731























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Claim and Claim Adjustment Expense Reserves








38
  96
    26
  60








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For the six months ended June 30(In millions)20192018Reserves, beginning of year:Gross$21,984$22,004Ceded4,0193,934Net reserves, beginning of year17,96518,070Net incurred claim and claim adjustment expenses:Provision for insured events of current year2,6152,552Increase (decrease) in provision for insured events of prior years(36)(112)Amortization of discount9892Total net incurred(1)2,6772,532Net payments attributable to:Current year events(315)(312)Prior year events(2,519)(2,387)Total net payments(2,834)(2,699)Foreign currency translation adjustment and other55(70)Net reserves, end of period17,86317,833Ceded reserves, end of period3,8664,157Gross reserves, end of period$21,729$21,990


|    |                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Total net incurred above does not agree to Insurance claims and policyholders' benefits as reflected on the Condensed Consolidated Statements of Operations due to amounts related to retroactive reinsurance deferred gain accounting, uncollectible reinsurance and loss deductible receivables, and benefit expenses related to future policy benefits, which are not reflected in the table above.




The following table presents development recorded for the Specialty, Commercial, International and Corporate & Other segments.


Periods ended June 30Three MonthsSix Months(In millions)2019201820192018Pretax (favorable) unfavorable development:Specialty$(18)$(44)$(38)$(74)Commercial(12)(13)(20)(22)International(1)(2)13(2)Corporate & Other————Total pretax (favorable) unfavorable development$(31)$(59)$(45)$(98)











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Periods ended June 30Three MonthsSix Months(In millions)2019201820192018Pretax (favorable) unfavorable development:Medical Professional Liability$15$3$30$23Other Professional Liability and Management Liability(7)(34)(19)(68)Surety(15)(15)(40)(30)Warranty(7)(6)(7)(6)Other(4)8(2)7Total pretax (favorable) unfavorable development$(18)$(44)$(38)$(74)



























































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Periods ended June 30Three MonthsSix Months(In millions)2019201820192018Pretax (favorable) unfavorable development:Commercial Auto$(3)$—$(8)$(1)General Liability1326(7)18Workers' Compensation(7)(6)(5)(12)Property and Other(15)(33)—(27)Total pretax (favorable) unfavorable development$(12)$(13)$(20)$(22)









































Favorable development in property and other was driven by lower than expected claim severity from catastrophes in accident year 2017.








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Periods ended June 30Three MonthsSix Months(In millions)2019201820192018Pretax (favorable) unfavorable development:Casualty$(5)$(6)$(5)$(6)Property(4)131112Energy and Marine9(5)8(5)Specialty(1)(1)(4)(1)(3)Total pretax (favorable) unfavorable development$(1)$(2)$13$(2)















































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1.6
  4
  1.6
  1.2
  2
  215
  2.2


2.2





Periods ended June 30Three MonthsSix Months(In millions)2019201820192018Additional amounts ceded under LPT:Net A&EP adverse development before consideration of LPT$—$—$—$113Provision for uncollectible third-party reinsurance on A&EP———(16)Total additional amounts ceded under LPT———97Retroactive reinsurance benefit recognized(14)(15)(36)(72)Pretax impact of deferred retroactive reinsurance$(14)$(15)$(36)$25


113


3.1
  338
  374


3.1
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Legal Proceedings, Contingencies and Guarantees








5





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Benefit Plans





Periods ended June 30Three MonthsSix Months(In millions)2019201820192018Net periodic pension cost (benefit)Service cost$—$—$—$—Non-service cost (benefit):Interest cost on projected benefit obligation25245047Expected return on plan assets(35)(40)(71)(80)Amortization of net actuarial (gain) loss1092018Settlement loss—1—5Total non-service cost (benefit)—(6)(1)(10)Total net periodic pension cost (benefit)$—$(6)$(1)$(10)


1
  1
  1


2
  3
  4
  7








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Accumulated Other Comprehensive Income (Loss) by Component





(In millions)Net unrealized gains (losses) on investments with OTTI lossesNet unrealized gains (losses) on other investmentsPension and postretirement benefitsCumulative foreign currency translation adjustmentTotalBalance as of April 1, 2019$20$587$(768)$(163)$(324)Other comprehensive income (loss) before reclassifications(1)434——433Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $-, $-, $2, $- and $2(1)(2)(8)—(11)Other comprehensive income (loss) net of tax (expense) benefit of $(1), $(114), $(2), $- and $(117)—4368—444Balance as of June 30, 2019$20$1,023$(760)$(163)$120


(In millions)Net unrealized gains (losses) on investments with OTTI lossesNet unrealized gains (losses) on other investmentsPension and postretirement benefitsCumulative foreign currency translation adjustmentTotalBalance as of April 1, 2018$21$430$(765)$(86)$(400)Other comprehensive income (loss) before reclassifications(1)(156)—(52)(209)Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $-, $(1), $2, $- and $1—3(7)—(4)Other comprehensive income (loss) net of tax (expense) benefit of $1, $46, $(2), $- and $45(1)(159)7(52)(205)Balance as of June 30, 2018$20$271$(758)$(138)$(605)








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(In millions)Net unrealized gains (losses) on investments with OTTI lossesNet unrealized gains (losses) on other investmentsPension and postretirement benefitsCumulative foreign currency translation adjustmentTotalBalance as of January 1, 2019$16$61$(775)$(180)$(878)Other comprehensive income (loss) before reclassifications3955(1)17974Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $-, $1, $4, $- and $5(1)(7)(16)—(24)Other comprehensive income (loss) net of tax (expense) benefit of $(2), $(255), $(4), $- and $(261)49621517998Balance as of June 30, 2019$20$1,023$(760)$(163)$120
 (In millions)Net unrealized gains (losses) on investments with OTTI lossesNet unrealized gains (losses) on other investmentsPension and postretirement benefitsCumulative foreign currency translation adjustmentTotalBalance as of January 1, 2018$30$859$(775)$(98)$16Other comprehensive income (loss) before reclassifications(11)(570)—(40)(621)Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $-, $(5), $5, $- and $-(1)18(17)——Other comprehensive income (loss) net of tax (expense) benefit of $3, $155, $(5), $- and $153(10)(588)17(40)(621)Balance as of June 30, 2018$20$271$(758)$(138)$(605)





Component of AOCIConsolidated Statements of Operations Line Item Affected by ReclassificationsNet unrealized gains (losses) on investments with OTTI lossesNet investment gains (losses)Net unrealized gains (losses) on other investmentsNet investment gains (losses)Pension and postretirement benefitsOther operating expenses and Insurance claims and policyholders' benefits








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Business Segments





three
  three
  two




















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Three months ended June 30, 2019SpecialtyCommercialInternationalLife &GroupCorporate& OtherEliminationsTotal(In millions)Operating revenuesNet earned premiums$688$763$243$130$—$—$1,824Net investment income134154152057—515Non-insurance warranty revenue285—————285Other revenues(1)31—2(1)4Total operating revenues1,1069202593359(1)2,628Claims, benefits and expensesNet incurred claims and benefits395507147309(12)—1,346Policyholders’ dividends15————6Amortization of deferred acquisition costs15213056———338Non-insurance warranty expense263—————263Other insurance related expenses761193430(1)—258Other expenses1273234(1)57Total claims, benefits and expenses89976824034121(1)2,268Core income (loss) before income tax20715219(6)(12)—360Income tax (expense) benefit on core income (loss)(46)(32)(2)131—(66)Core income (loss)$161$120$17$7$(11)$—294Net investment gains (losses)(18)Income tax (expense) benefit on net investment gains (losses)2Net investment gains (losses), after tax(16)Net income$278











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Three months ended June 30, 2018SpecialtyCommercialInternationalLife &GroupCorporate& OtherEliminationsTotal(In millions)Operating revenuesNet earned premiums$683$753$248$131$—$—$1,815Net investment income130157151986—506Non-insurance warranty revenue248—————248Other revenues—8(1)—(1)—6Total operating revenues1,0619182623295—2,575Claims, benefits and expensesNet incurred claims and benefits372470166327(14)—1,321Policyholders’ dividends15————6Amortization of deferred acquisition costs14912783———359Non-insurance warranty expense225—————225Other insurance related expenses701261030——236Other expenses12107167—97Total claims, benefits and expenses82973826635853—2,244Core income (loss) before income tax232180(4)(29)(48)—331Income tax (expense) benefit on core income (loss)(49)(37)(3)199—(61)Core income (loss)$183$143$(7)$(10)$(39)$—270Net investment gains (losses)(1)Income tax (expense) benefit on net investment gains (losses)1Net investment gains (losses), after tax—Net income$270








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Six months ended June 30, 2019SpecialtyCommercialInternationalLife &GroupCorporate& OtherEliminationsTotal(In millions)Operating revenuesNet earned premiums$1,349$1,526$493$260$—$(1)$3,627Net investment income2893443040914—1,086Non-insurance warranty revenue566—————566Other revenues—10114(3)13Total operating revenues2,2041,88052467018(4)5,292Claims, benefits and expensesNet incurred claims and benefits7871,017309617(33)—2,697Policyholders’ dividends210————12Amortization of deferred acquisition costs299257124———680Non-insurance warranty expense523—————523Other insurance related expenses1462495958(2)(1)509Other expenses24187473(3)123Total claims, benefits and expenses1,7811,55149967938(4)4,544Core income (loss) before income tax42332925(9)(20)—748Income tax (expense) benefit on core income (loss)(93)(70)(2)263—(136)Core income (loss)$330$259$23$17$(17)$—612Net investment gains (losses)13Income tax (expense) benefit on net investment gains (losses)(5)Net investment gains (losses), after tax8Net income$620
 June 30, 2019(In millions)Reinsurance receivables$696$766$242$399$2,160$—$4,263Insurance receivables1,0021,36231871—2,690Deferred acquisition costs316264101———681Goodwill117—29———146Deferred non-insurance warranty acquisition expense2,678—————2,678Insurance reservesClaim and claim adjustment expenses5,3968,5801,8003,7102,243—21,729Unearned premiums2,2611,721534133—(1)4,648Future policy benefits———11,537——11,537Deferred non-insurance warranty revenue3,595—————3,595








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Six months ended June 30, 2018SpecialtyCommercialInternationalLife &GroupCorporate& OtherEliminationsTotal(In millions)Operating revenuesNet earned premiums$1,355$1,496$484$265$—$—$3,600Net investment income2523062939811—996Non-insurance warranty revenue486—————486Other revenues116(1)1—(1)16Total operating revenues2,0941,81851266411(1)5,098Claims, benefits and expensesNet incurred claims and benefits75193830863027—2,654Policyholders’ dividends210————12Amortization of deferred acquisition costs294248113———655Non-insurance warranty expense441—————441Other insurance related expenses1342536660——513Other expenses232133109(1)158Total claims, benefits and expenses1,6451,470490693136(1)4,433Core income (loss) before income tax44934822(29)(125)—665Income tax (expense) benefit on core income (loss)(95)(72)(6)3326—(114)Core income (loss)$354$276$16$4$(99)$—551Net investment gains (losses)11Income tax (expense) benefit on net investment gains (losses)(1)Net investment gains (losses), after tax10Net income$561


December 31, 2018(In millions)Reinsurance receivables$649$795$250$414$2,347$—$4,455Insurance receivables9471,2772849(152)—2,365Deferred acquisition costs30823095———633Goodwill117—29———146Deferred non-insurance warranty acquisition expense2,513—————2,513Insurance reservesClaim and claim adjustment expenses5,4658,7431,7503,6012,425—21,984Unearned premiums2,1321,454475122——4,183Future policy benefits———10,597——10,597Deferred non-insurance warranty revenue3,402—————3,402











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Periods ended June 30Three MonthsSix Months(In millions)2019201820192018SpecialtyManagement & Professional Liability$629$627$1,265$1,251Surety151145290274Warranty & Alternative Risks326289649569Specialty revenues1,1061,0612,2042,094CommercialMiddle Market5455211,0921,025Small Business115120236239Other Commercial Insurance260277552554Commercial revenues9209181,8801,818InternationalCanada6863134121Europe8891179179Hardy103108211212International revenues259262524512Life & Group revenues335329670664Corporate & Other revenues951811Eliminations(1)—(4)(1)Total operating revenues2,6282,5755,2925,098Net investment gains (losses)(18)(1)1311Total revenues$2,610$2,574$5,305$5,109











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Non-Insurance Revenues from Contracts with Customers


3.6
  3.4
        246
  511
      213
  435
      530
  927
  746
  1.4











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Leases











9
  19
    4
  8
    9
  17





(In millions)June 30, 2019Operating lease ROU assets$223Operating lease liabilities301





(In millions)Operating Leases2019 (Excluding the six months ended June 30, 2019)$15202039202142202238202333Thereafter202Total lease payments369Less: Discount(68)Total operating lease liabilities$301








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June 30, 2019Weighted average remaining lease term10.8 yearsWeighted average discount rate3.4%





(In millions)Future Minimum Lease Payments2019$35202039202141202238202332Thereafter200Total$385











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|  |                   
|- | ------------------
|• | Insurance Reserves

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|- | -------------------------------------
|• | Reinsurance and Insurance Receivables

|  |                                                      
|- | -----------------------------------------------------
|• | Valuation of Investments and Impairment of Securities

|  |                        
|- | -----------------------
|• | Long Term Care Policies

|  |             
|- | ------------
|• | Income Taxes










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Periods ended June 30Three MonthsSix Months(In millions)2019201820192018Operating RevenuesNet earned premiums$1,824$1,815$3,627$3,600Net investment income5155061,086996Non-insurance warranty revenue285248566486Other revenues461316Total operating revenues2,6282,5755,2925,098Claims, Benefits and ExpensesNet incurred claims and benefits1,3461,3212,6972,654Policyholders' dividends661212Amortization of deferred acquisition costs338359680655Non-insurance warranty expense263225523441Other insurance related expenses258236509513Other expenses5797123158Total claims, benefits and expenses2,2682,2444,5444,433Core income before income tax360331748665Income tax expense on core income(66)(61)(136)(114)Core income294270612551Net investment (losses) gains(18)(1)1311Income tax benefit (expense) on net investment (losses) gains21(5)(1)Net investment (losses) gains, after tax(16)—810Net income$278$270$620$561

















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Periods ended June 30Three MonthsSix Months(In millions, except ratios, rate, renewal premium change and retention)2019201820192018Net written premiums$713$688$1,411$1,374Net earned premiums6886831,3491,355Net investment income134130289252Core income161183330354Other performance metrics:Loss and loss adjustment expense ratio57.4%54.6%58.3%55.4%Expense ratio33.132.033.031.6Dividend ratio0.20.20.20.2Combined ratio90.7%86.8%91.5%87.2%Rate4%2%4%2%Renewal premium change5545Retention88838984New business$97$93$183$173























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(In millions)June 30, 2019December 31, 2018Gross case reserves$1,527$1,623Gross IBNR reserves3,8693,842Total gross carried claim and claim adjustment expense reserves$5,396$5,465Net case reserves$1,364$1,483Net IBNR reserves3,3563,348Total net carried claim and claim adjustment expense reserves$4,720$4,831











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Periods ended June 30Three MonthsSix Months(In millions, except ratios, rate, renewal premium change and retention)2019201820192018Net written premiums$912$810$1,761$1,642Net earned premiums7637531,5261,496Net investment income154157344306Core income120143259276Other performance metrics:Loss and loss adjustment expense ratio66.5%62.4%66.7%62.7%Expense ratio32.633.533.233.4Dividend ratio0.60.70.60.7Combined ratio99.7%96.6%100.5%96.8%Rate3%1%2%1%Renewal premium change5445Retention85868585New business$186$157$350$339























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(In millions)June 30, 2019December 31, 2018Gross case reserves$3,979$4,181Gross IBNR reserves4,6014,562Total gross carried claim and claim adjustment expense reserves$8,580$8,743Net case reserves$3,645$3,831Net IBNR reserves4,2114,167Total net carried claim and claim adjustment expense reserves$7,856$7,998








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Periods ended June 30Three MonthsSix Months(In millions, except ratios, rate, renewal premium change and retention)2019201820192018Net written premiums$249$271$508$566Net earned premiums243248493484Net investment income15153029Core income (loss)17(7)2316Other performance metrics:Loss and loss adjustment expense ratio60.2%66.8%62.5%63.7%Expense ratio37.337.937.237.1Combined ratio97.5%104.7%99.7%100.8%Rate7%3%6%3%Renewal premium change8535Retention67776781New business$75$82$155$175























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(In millions)June 30, 2019December 31, 2018Gross case reserves$839$867Gross IBNR reserves961883Total gross carried claim and claim adjustment expense reserves$1,800$1,750Net case reserves$736$749Net IBNR reserves830775Total net carried claim and claim adjustment expense reserves$1,566$1,524











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Periods ended June 30Three MonthsSix Months(In millions)2019201820192018Net earned premiums$130$131$260$265Net investment income205198409398Core (loss) before income tax(6)(29)(9)(29)Income tax benefit on core loss13192633Core income (loss)7(10)174























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Periods ended June 30Three MonthsSix Months(In millions)2019201820192018Net investment income$7$6$14$11Interest expense34346868Core (loss)(11)(39)(17)(99)

















(In millions)June 30, 2019December 31, 2018Gross case reserves$1,176$1,208Gross IBNR reserves1,0671,217Total gross carried claim and claim adjustment expense reserves$2,243$2,425Net case reserves$93$96Net IBNR reserves8996Total net carried claim and claim adjustment expense reserves$182$192








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Periods ended June 30Three MonthsSix Months(In millions)2019201820192018Fixed income securities:Taxable fixed income securities$385$354$768$704Tax-exempt fixed income securities80100162205Total fixed income securities465454930909Limited partnership and common stock investments434213973Other, net of investment expense7101714Pretax net investment income$515$506$1,086$996Fixed income securities, after tax$382$375$762$752Net investment income, after tax420416885821Effective income yield for the fixed income securities portfolio, pretax4.8%4.7%4.8%4.7%Effective income yield for the fixed income securities portfolio, after tax3.9%3.9%3.9%3.9%Limited partnership and common stock return2.1%1.8%6.8%3.0%

















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Periods ended June 30Three MonthsSix Months(In millions)2019201820192018Fixed maturity securities:Corporate and other bonds$(7)$9$(7)$28States, municipalities and political subdivisions461226Asset-backed—(11)(14)(32)Total fixed maturity securities(3)4(9)22Non-redeemable preferred stock11(10)53(25)Short term and other(26)5(31)14Net investment (losses) gains(18)(1)1311Income tax benefit (expense) on net investment (losses) gains21(5)(1)Net investment (losses) gains, after tax$(16)$—$8$10




















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June 30, 2019December 31, 2018(In millions)Estimated Fair ValueNet Unrealized Gains (Losses)Estimated Fair ValueNet Unrealized Gains (Losses)U.S. Government, Government agencies and Government-sponsored enterprises$4,336$84$4,334$(24)AAA3,0143383,027245AA6,6977756,510512A8,8439618,768527BBB15,9841,37414,205274Non-investment grade2,765842,702(73)Total$41,639$3,616$39,546$1,461














June 30, 2019(In millions)Estimated Fair ValueGross Unrealized LossesU.S. Government, Government agencies and Government-sponsored enterprises$256$1AAA221AA52—A5268BBB59118Non-investment grade75329Total$2,200$57





June 30, 2019(In millions)Estimated Fair ValueGross Unrealized LossesDue in one year or less$45$1Due after one year through five years44412Due after five years through ten years1,47727Due after ten years23417Total$2,200$57











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June 30, 2019December 31, 2018(In millions)Estimated Fair ValueEffectiveDuration(In years)Estimated Fair ValueEffectiveDuration(In years)Investments supporting Life & Group$17,5418.9$16,2128.4Other investments26,2534.125,4284.4Total$43,7946.0$41,6406.0














(In millions)June 30, 2019December 31, 2018Short term investments:Commercial paper$920$705U.S. Treasury securities295185Other304396Total short term investments$1,519$1,286








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|  |                                                                                                                               
|- | ------------------------------------------------------------------------------------------------------------------------------
|• | During thesix months ended June 30, 2019, we repurchased365,695shares of our common stock at an aggregate cost of $16 million.

|  |                                                                                                                                                                                                                 
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | In thesecond quarter of 2019, we issued $500 million of 3.90% senior notes due May 1, 2029 andredeemed the $500 million outstanding aggregate principal balances of our 5.875% senior notes due August 15, 2020.

|  |                                                                                                                                                   
|- | --------------------------------------------------------------------------------------------------------------------------------------------------
|• | In the first quarter of2018, we redeemed the $150 million outstanding aggregate principal balance of our 6.950% senior notes due January 15, 2018.
















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|  |                                                                                                                                                                                                                                                                                                                                                                                                                         
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|• | the risks and uncertainties associated with our insurance reserves, as outlined in the Critical Accounting Estimates and the Reserves - Estimates and Uncertainties sections of our Annual Report on Form 10-K, including the sufficiency of the reserves and the possibility for future increases, which would be reflected in the results of operations in the period that the need for such adjustment is determined;

|  |                                                                                                                                                                                                                                                                                                                                                                                       
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | the risk that the other parties to the transaction in which, subject to certain limitations, we ceded our legacy A&EP liabilities will not fully perform their obligations to CNA, the uncertainty in estimating loss reserves for A&EP liabilities and the possible continued exposure of CNA to liabilities for A&EP claims that are not covered under the terms of the transaction;

|  |                                                                                  
|- | ---------------------------------------------------------------------------------
|• | the performance of reinsurance companies under reinsurance contracts with us; and

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|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | the risks and uncertainties associated with potential acquisitions and divestitures, including the consummation of such transactions, the successful integration of acquired operations and the potential for subsequent impairment of goodwill or intangible assets.




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|- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|• | the impact of competitive products, policies and pricing and the competitive environment in which we operate, including changes in our book of business;

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|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | product and policy availability and demand and market responses, including the level of ability to obtain rate increases and decline or non-renew underpriced accounts, to achieve premium targets and profitability and to realize growth and retention estimates;

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | general economic and business conditions, including recessionary conditions that may decrease the size and number of our insurance customers and create additional losses to our lines of business, especially those that provide management and professional liability insurance, as well as surety bonds, to businesses engaged in real estate, financial services and professional services and inflationary pressures on medical care costs, construction costs and other economic sectors that increase the severity of claims;

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|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | conditions in the capital and credit markets, including uncertainty and instability in these markets, as well as the overall economy, and their impact on the returns, types, liquidity and valuation of our investments;

|  |                                                                                                                                        
|- | ---------------------------------------------------------------------------------------------------------------------------------------
|• | conditions in the capital and credit markets that may limit our ability to raise significant amounts of capital on favorable terms; and

|  |                                                                                                                                                                                                                                                                                             
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | the possibility of changes in our ratings by ratings agencies, including the inability to access certain markets or distribution channels and the required collateralization of future payment obligations as a result of such changes, and changes in rating agency policies and practices.







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|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | regulatory and legal initiatives and compliance with governmental regulations and other legal requirements, including with respect to cyber security protocols, legal inquiries by state authorities, judicial interpretations within the regulatory framework, including interpretation of policy provisions, decisions regarding coverage and theories of liability, legislative actions that increase claimant activity, including those revising applicability of statutes of limitations, trends in litigation and the outcome of any litigation involving us and rulings and changes in tax laws and regulations;

|  |                                                                                                                                                                                                                                                                                                                              
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | regulatory limitations, impositions and restrictions upon us, including with respect to our ability to increase premium rates, and the effects of assessments and other surcharges for guaranty funds and second-injury funds, other mandatory pooling arrangements and future assessments levied on insurance companies; and

|  |                                                                                                                                                                                                                          
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | regulatory limitations and restrictions, including limitations upon our ability to receive dividends from our insurance subsidiaries, imposed by regulatory authorities, including regulatory capital adequacy standards.




|  |                                                                                                                                                                                                                                                                                                                                                         
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | weather and other natural physical events, including the severity and frequency of storms, hail, snowfall and other winter conditions, natural disasters such as hurricanes and earthquakes, as well as climate change, including effects on global weather patterns, greenhouse gases, sea, land and air temperatures, sea levels, rain, hail and snow;

|  |                                                                                                                                                                                                                                                                                                                                                                            
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | regulatory requirements imposed by coastal state regulators in the wake of hurricanes or other natural disasters, including limitations on the ability to exit markets or to non-renew, cancel or change terms and conditions in policies, as well as mandatory assessments to fund any shortfalls arising from the inability of quasi-governmental insurers to pay claims;

|  |                                                                                                                                                                                                                                                                    
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | man-made disasters, including the possible occurrence of terrorist attacks, the unpredictability of the nature, targets, severity or frequency of such events, and the effect of the absence or insufficiency of applicable terrorism legislation on coverages; and

|  |                             
|- | ----------------------------
|• | the occurrence of epidemics.




|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | in 2016, the U.K. approved an exit from the E.U., commonly referred to as "Brexit.”  Brexit remains scheduled to be completed in 2019, although the formal exit has been delayed twice.  Effective January 1, 2019, we write business in the E.U. through our recently established European subsidiary in Luxembourg and not through our U.K.-domiciled subsidiary.  As a result, the complexity and cost of regulatory compliance of our European business has increased and will likely continue to result in elevated expenses.










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Period(a) Total number of shares purchased(b) Average price paid per share(c) Total number of shares purchased as part of publicly announced plans or programs(d) Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs (in millions)May 1, 2019 - May 31, 201948,187$44.88N/AN/ATotal48,18744.88N/AN/A

















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CNA Financial CorporationDated:  August 5, 2019By/s/ James M. AndersonJames M. AndersonExecutive Vice President andChief Financial Officer(Duly authorized officer and principal financial and accounting officer)








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Description of ExhibitExhibit NumberCertification of Chief Executive Officer31.1Certification of Chief Financial Officer31.2Written Statement of the Chief Executive Officer of CNA Financial Corporation Pursuant to 18 U.S.C. Section 1350 (As adopted by Section 906 of the Sarbanes-Oxley Act of 2002)32.1Written Statement of the Chief Financial Officer of CNA Financial Corporation Pursuant to 18 U.S.C. Section 1350 (As adopted by Section 906 of the Sarbanes-Oxley Act of 2002)32.2XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document101.INSInline XBRL Taxonomy Extension Schema101.SCHInline XBRL Taxonomy Extension Calculation Linkbase101.CALInline XBRL Taxonomy Extension Definition Linkbase101.DEFInline XBRL Taxonomy Label Linkbase101.LABInline XBRL Taxonomy Extension Presentation Linkbase101.PRE