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

                                    FORM 10-K
                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
For the Year Ended December 31, 1997             Commission File Number 1-5823

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

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

           CNA PLAZA
      Chicago, Illinois                                             60685
(Address of principal executive offices)                         (Zip Code)
                                 (312) 822-5000
              (Registrant's telephone number, including area code)
           SECURITIES REGISTERED PURSUANT TO SECTION 12(B)OF THE ACT:

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

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

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

     As of March 3, 1998, 61,798,262 shares of common stock were outstanding and
the aggregate market value of the common stock of CNA Financial Corporation held
by non-affiliates was approximately $1,394 million.

                             DOCUMENTS INCORPORATED
                                  BY REFERENCE:

     Portions  of  the  CNA   Financial   Corporation   1997  Annual  Report  to
Shareholders are incorporated by reference into Parts I and II of this Report.

     Portions of the CNA Financial  Corporation Proxy Statement prepared for the
1998  annual  meeting  of   shareholders,   pursuant  to  Regulation   14A,  are
incorporated by reference into Part III of this Report.
================================================================================
<PAGE>

                            CNA FINANCIAL CORPORATION

                             FORM 10-K ANNUAL REPORT

                      FOR THE YEAR ENDED DECEMBER 31, 1997

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

    2.  Properties........................................................  12

    3.  Legal Proceedings.................................................  13

    4.  Submission of Matters to a Vote of Security Holders...............  13


                                     PART II

    5.  Market for the Registrant's Common Stock and
          Related Stockholder Matters.....................................  15

    6.  Selected Financial Data...........................................  15

    7.  Management's Discussion and Analysis of Financial Condition and
          Results of Operations...........................................  15

   7A.  Quantitative and Qualitative Disclosures about Market Risk........  15

    8.  Financial Statements and Supplementary Data.......................  15

    9.  Changes in and Disagreements with Accountants
          on Accounting and Financial Disclosure..........................  15


                                    PART III

   10.  Directors and Executive Officers of the Registrant................  16

   11.  Executive Compensation............................................  16

   12.  Security Ownership of Certain Beneficial Owners and Management....  16

   13.  Certain Relationships and Related Transactions....................  16


                                     PART IV

   14.  Financial Statements, Schedules, Exhibits and Reports on Form 8-K.  16

                                       2
<PAGE>
                                     PART I

ITEM 1.  BUSINESS

     CNA Financial  Corporation  (CNAF) 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 (the  acquisition  date) CNAF
acquired all the outstanding common stock of The Continental  Corporation and it
became  a  wholly  owned   subsidiary  of  CNAF.  The  Continental   Corporation
(Continental),  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.

     CNAF is a holding company   whose   primary   subsidiaries   consist   of
property/casualty   and  life  insurance  companies,   collectively  CNA.  CNA's
property/casualty  insurance  operations are conducted by CCC and its affiliates
and CIC and its 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, CNA underwrites
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 competes
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   3,400   individual    companies   that   sell
property/casualty   insurance  in  the  United   States.   CNAF's   consolidated
property/casualty  subsidiaries  ranked as the third  largest  property/casualty
insurance organization based upon 1996 statutory net written premium.

     There are  approximately  1,700  companies  selling  life  insurance in the
United  States.  CAC is  ranked  as the  twenty-second  largest  life  insurance
organization based on 1996 consolidated statutory premium volume.

DIVIDENDS BY INSURANCE SUBSIDIARIES

     The payment of dividends to CNAF by its insurance affiliates without prior
approval  of the  affiliates'  domiciliary  state  insurance  commissioners  is
limited to amounts  determined  by formula  in  accordance  with the  accounting
practices  prescribed or permitted by the states'  insurance  departments.  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's  surplus.  Based upon the various state
formulas,  approximately  $677 million in  dividends  can be paid to CNAF by its
insurance  affiliates in 1998 without  prior  approval.  All  dividends  must be
reported  to the  domiciliary  insurance  department  prior to  declaration  and
payment.
<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  powers  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

                                       3
<PAGE>
     REGULATION--(CONTINUED)

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 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.

     Reform of the  Nation's  tort  reform  system is another  issue  facing the
insurance  industry.  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 a significant number of
these  reforms.  Additionally,  new causes of action and theories of damages are
more   frequently   proposed  in  state   courts  or   legislatures.   Continued
unpredictability  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 the methodology for financing  future clean-up costs.
Although Superfund reform continues to be listed as one of Congress' 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 1997 Annual  Report to  Shareholders  for further  discussion,
incorporated by reference in Item 8, herein.

     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.  The RBC  requirements  establish  a formal  state
accreditation  process designed to regulate for solvency more closely,  minimize
the diversity of approved  statutory  accounting  and actuarial  practices,  and
increase 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,
1997,  all of  CNAF's  property/casualty  and  life  insurance  affiliates  have
adjusted capital amounts in excess of Company Action Levels.
<PAGE>
REINSURANCE

     Information as to the CNA's reinsurance  business is set forth in Note G of
the Consolidated Financial Statements of the 1997 Annual Report to Shareholders,
incorporated by reference in Item 8, herein.

EMPLOYEE RELATIONS

     CNA  has  approximately  24,700  full-time  equivalent  employees  and  has
experienced  satisfactory labor relations.  CNA has never had work stoppages due
to labor disputes.
                                       4
<PAGE>
     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.  See  Note I of  the  Consolidated
Financial  Statements  of the 1997  Annual  Report to  Shareholders  for further
discussion, incorporated by reference in Item 8, herein.

BUSINESS SEGMENTS

     Information as to the Company's business segments is set forth in Note M of
the Consolidated Financial Statements of the 1997 Annual Report to Shareholders,
incorporated by reference in Item 8, herein.

PROPERTY/CASUALTY BUSINESS

     The property/casualty  group is comprised of commercial business,  personal
lines of insurance, involuntary risks and other related businesses.

     Customers of the commercial  business 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  lines  also  includes   reinsurance  assumed  from  other  insurance
companies and certain group accident and health insurance coverages.

     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
property/casualty  commercial business are professional and specialty coverages,
general liability and commercial  automobile,  and workers'  compensation  which
accounted for 17%, 17% and 16%, respectively, of 1997 premiums earned.

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

     Involuntary  risks include  mandatory  participation  in residual  markets,
statutory  assessments for  insolvencies  of other  insurers,  and other similar
charges.  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.

     The property/casualty  group also provides other related services including
loss control,  policy  administration  and claim  administration  services under
service contracts for fees. Such services are provided primarily in the workers'
compensation market.

                                       5

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

     The following table sets forth  supplemental  data on a GAAP basis,  except
where indicated, for the property/casualty business:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
Year Ended December 31                               1997        1996          1995          1994       1993
(In millions of dollars, except ratio
information)
---------------------------------------------------------------------------------------------------------------
<S>                                                <C>         <C>          <C>           <C>          <C>
Commercial Premiums Earned (a)

   Professional and specialty...............        $ 1,688     $ 1,845      $ 1,558       $ 1,010     $   799
   General liability and commercial automobile        1,682       1,754        1,649         1,261       1,155
   Workers' compensation....................          1,845       1,543        1,476         1,426       1,501
   Multiple peril...........................          1,058       1,047          870           389         369
   Accident and health......................          1,062         919          699           557         428
   Reinsurance and other....................          1,083       1,189          974           774         712
                                                    -------     -------      -------       -------     -------
                                                    $ 8,418     $ 8,297      $ 7,226       $ 5,417     $ 4,964
                                                    =======     =======      =======       =======     =======
Personal Premiums Earned (a)
   Personal lines packages..................        $ 1,085     $ 1,063      $   782       $   563     $   511
   Monoline automobile and property coverages           440         367          325           314         343
   Accident and health......................            126         106          108            89          86
                                                    -------     -------      -------       -------     -------
                                                    $ 1,651     $ 1,536      $ 1,215       $   966     $   940
                                                    =======     =======      =======       =======     =======
Involuntary Risks Premiums Earned (a)(b)
   Workers' compensation....................        $  (249)    $   198      $   178       $   350     $   292
   Private passenger automobile.............             66          58           80            47          23
   Commercial  automobile...................             25          36           20            54          50
   Property and multiple peril..............             16           2            6             5           6
                                                    -------     -------      -------       -------     -------
                                                    $  (142)    $   294      $   284       $   456     $   371
                                                    =======     =======      =======       =======     =======
Net Investment Income and Other Income (a)
   Commercial...............................        $ 2,172     $ 2,074      $ 1,713       $ 1,145     $   980
   Personal.................................            209         222          231           178         156
   Involuntary risks........................             43          94          104            88          76
                                                    -------     -------      -------       -------     -------
                                                    $ 2,424     $ 2,390      $ 2,048       $ 1,411     $ 1,212
                                                    =======     =======      =======       =======     =======

Underwriting (Loss) Income (a)
   Commercial...............................        $(1,421)    $  (853)    $  (921)       $  (946)    $(1,536)
   Personal.................................            124        (184)       (102)          (185)       (100)
   Involuntary risks........................            135        (106)        (99)           (70)       (156)
                                                    -------     -------     -------        -------     -------
                                                    $(1,162)    $(1,143)    $(1,122)       $(1,201)    $(1,792)
                                                    =======     =======     =======        =======     =======
---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PROPERTY/CASUALTY BUSINESS--(CONTINUED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
Year Ended December 31                               1997        1996          1995          1994       1993
(In millions of dollars, except ratio
information)
---------------------------------------------------------------------------------------------------------------
<S>                                                   <C>          <C>        <C>           <C>         <C>
TRADE RATIOS - GAAP BASIS (C)
   Loss ratio...............................           77.1%       76.4%       77.9%          81.9%       96.2%
   Expense ratio............................           31.3        30.9        29.4           28.3        27.2

   Combined ratio (before policyholder                108.4       107.3       107.3          110.2       123.4
     dividends).............................
   Policyholder dividend ratio..............            0.5         1.6         3.0            4.8         3.9

TRADE RATIOS - STATUTORY BASIS (C)
   Loss ratio...............................           77.5%       76.8%       78.6%          82.2%       96.4%
   Expense ratio............................           30.7        30.6        29.2           27.8        27.1

   Combined ratio (before policyholder                108.2       107.4       107.8          110.0       123.5
     dividends).............................
  Policyholder dividend ratio..............             0.8         1.4         2.1            3.8         3.1

OTHER DATA - STATUTORY BASIS (D)
   Capital and surplus......................        $ 7,123      $6,349     $ 5,696        $ 3,367     $ 3,598
   Written to surplus ratio.................            1.4         1.6         1.7            2.0         1.7
-----------------------------------------------------------------------------------------------------------------
<FN>
     (a) Premiums earned,  net investment  income and underwriting loss includes
         the results of The Continental Corporation since the acquisition date.

     (b) Property/casualty  involuntary risks include mandatory participation in
         residual  markets,  statutory  assessments  for  insolvencies  of other
         insurers and other similar charges.
</FN>
</TABLE>
                                       6
<PAGE>
PROPERTY/CASUALTY BUSINESS--(CONTINUED)

     (c) GAAP trade ratios reflect the results of CCC and its  property/casualty
         insurance  subsidiaries  for the entire year, along with the results of
         Continental since the acquisition date.  Statutory trade ratios reflect
         the results of CCC and its property/casualty insurance subsidiaries and
         Continental  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 CNAF of $475 million in 1993. In
         addition,  dividends of $175 million,  $545 million, $325 million, $175
         million and $150 million were paid to CNAF by CCC in 1997,  1996, 1995,
         1994 and 1993, respectively.  Property/casualty  insurance subsidiaries
         have  received,  or will receive,  reimbursement  from CNAF for general
         management and  administrative  expenses,  unallocated  loss adjustment
         expenses and investment  expenses of $199 million,  $195 million,  $197
         million,  $170 million and $168 million in 1997,  1996,  1995, 1994 and
         1993, respectively.

         The following table displays the distribution of gross written premium:
       -------------------------------------------------------------------------
       GROSS WRITTEN PREMIUM                                 % OF TOTAL
                                                  ------------------------------
       YEAR ENDED DECEMBER 31                       1997        1996      1995
       -------------------------------------------------------------------------
       New York...................................    9.9        9.3      10.3
       California.................................    8.8        8.5       9.7
       Texas......................................    6.2        6.0       6.5
       Pennsylvania...............................    5.1        4.9       5.4
       Florida....................................    4.8        4.2       4.1
       Illinois...................................    4.4        5.3       5.2
       New Jersey.................................    4.3        4.1       4.6
       All other states, countries or political
       subdivisions (a)...........................   48.0       46.8      44.4
       Reinsurance assumed:
         Voluntary................................    9.7        9.1       7.8
         Involuntary..............................   (1.2)       1.8       2.0
                                                   -------   -------    ------
                                                    100.0      100.0     100.0
       =========================================================================
      (a) No other  state,  country or political  subdivision  accounts for more
          than 3.0% of gross written premium.
<PAGE>
PROPERTY/CASUALTY BUSINESS--(CONTINUED)


PROPERTY/CASUALTY CLAIM AND CLAIM EXPENSES

     The following loss reserve  development  table  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  the  Company's   property/casualty   insurance
subsidiaries'  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 the original  reserve was adequate or  inadequate to cover the estimated
costs of unsettled claims.

                                       7
<PAGE>
PROPERTY/CASUALTY CLAIM AND CLAIM EXPENSES--(CONTINUED)

     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       1987(a) 1988(a)  1989(a) 1990(a)  1991(a) 1992(a)  1993(a)  1994(b) 1995(c)  1996   1997(d)
(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  $29,395 $28,240
Ceded recoverable........   --      --       --    3,440    3,297   2,867    2,491    2,705   6,089    5,660   4,995
                          -----   -----    -----  ------   -----   -----    -----    -----   -----    -----   -----
Net reserves
for unpaid
claim
and claim expenses....    8,045   9,552   11,267  13,090   14,415  17,167   18,321   18,934  24,955   23,735  23,245
                          -----   -----   ------  ------   ------  ------   ------   ------  ------   ------  ------

NET PAID (CUMULATIVE) AS OF:

One year later........... 1,763   2,040    2,670   3,285    3,411   3,706    3,629    3,656   6,510    5,851    --
Two years later.......... 2,961   3,622    4,724   5,623    6,024   6,354    6,143    7,087  10,485      --     --
Three years later........ 4,031   4,977    6,294   7,490    7,946   8,121    8,764    9,195    --        --     --
Four years later......... 5,007   6,078    7,534   8,845    9,218  10,241   10,318     --      --        --     --
Five years later......... 5,801   6,960    8,485   9,726   10,950  11,461     --       --      --        --     --
Six years later.......... 6,476   7,682    9,108  11,207   11,951    --       --       --      --        --     --
Seven years later........ 7,061   8,142   10,393  12,023     --      --       --       --      --        --     --
Eight years later........ 7,426   9,303   11,086    --       --      --       --       --      --        --     --
Nine years later......... 8,522   9,924      --     --       --      --       --       --      --        --     --
Ten years later.......... 9,097     --       --     --       --      --       --       --      --        --     --

NET RESERVES RE-ESTIMATED
AS OF:

End of initial year...... 8,045   9,552   11,267  13,090   14,415  17,167   18,321   18,934  24,955   23,735  23,245
One year later........... 8,086   9,737   11,336  12,984   16,032  17,757   18,250   18,922  24,864   23,479    --
Two years later.......... 8,345   9,781   11,371  14,693   16,810  17,728   18,125   18,500  24,294     --      --
Three years later........ 8,424   9,796   13,098  15,737   16,944  17,823   17,868   18,008    --       --      --
Four years later......... 8,516  11,471   14,118  15,977   17,376  17,765   17,511     --      --       --      --
Five years later.........10,196  12,496   14,396  16,440   17,329  17,560     --       --      --       --      --
Six years later..........11,239  12,742   14,811  16,430   17,293    --       --       --      --       --      --
Seven years later........11,480  13,167   14,810  16,551     --      --       --       --      --       --      --
Eight years later........11,898  13,174   14,995    --       --      --       --       --      --       --      --
Nine years later.........11,925  13,396     --      --       --      --       --       --      --       --      --
Ten years later..........12,203    --       --      --       --      --       --       --      --       --      --
                         ------ ------    ------  ------   ------  ------   ------   ------  ------   ------  -----
Total net (deficiency)   (4,158) (3,844)  (3,728) (3,461)  (2,878)   (393)     810      926     661      256    --
redundancy
-----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
Schedule of
Property/Casualty
Loss Reserve
Development
Calendar Year Ended      1987(a) 1988(a)  1989(a)  1990(a)   1991(a) 1992(a) 1993(a)  1994(b) 1995(c) 1996   1997(d)
(In millions of
 dollars)
--------------------------------------------------------------------------------------------------------------------
<S>                      <C>    <C>     <C>       <C>    <C>     <C>      <C>      <C>     <C>       <C>     <C>
Reconciliation to gross
re-estimated reserves:
Net reserves
re-estimated             12,203  13,396   14,995  16,551   17,293  17,560   17,511   18,008  24,294   23,479    --
Re-estimated ceded
recoverable                --      --      --      2,939    2,672   2,085    1,904    2,405   6,560    6,108    --
                         ------  ------  ------   ------   ------  ------   ------   ------ -------  -------  ------
Total gross
re-estimated               --      --      --     19,490   19,965  19,645   19,415   20,413  30,854   29,587    --
reserves
---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------
Net (deficiency) redundancy
related to:
Asbestos claims.         (3,073) (3,017)  (2,919) (2,785)  (2,738) (1,049)    (449)    (414)   (156)    (105)   --
Environmental claims.... (1,000)   (997)    (970)   (960)    (914)   (869)    (423)    (243)    (63)     --     --
                         ------  -------  ------- -------  ------  ------  -------  ------- -------  ------    -----
Total asbestos and
environmental            (4,073) (4,014)  (3,889) (3,745)  (3,652) (1,918)    (872)    (657)   (219)    (105)   --
Other claims............    (85)    170      161     284      774   1,525    1,682    1,583     880      361    --
                         ------- ------   ------  ------   ------  ------   ------   ------  ------   -------------
Total net (deficiency)
redundancy.............. (4,158) (3,844)  (3,728) (3,461)  (2,878)   (393)     810      926     661      256    --
                         ======= ======= ======= ======= ========   ======  ======   ======  ======   ======   =====

---------------------------------------------------------------------------------------------------------------------
<FN>
(a)  Reflects  reserves  of  CNA's  property/casualty   insurance  subsidiaries,
excluding  Continental  reserves  which were acquired on the  acquisition  date.
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) 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,  on the
acquisition  date, 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 the  acquisition  date and  subsequent  development
thereon.

(d) Includes gross reserves of acquired companies of $64 million.
</FN>
</TABLE>
                                       8
<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 1997 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 1997 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 other  companies on a commission
basis.  Insurance products are also marketed through other distribution channels
such as banks,  direct  marketing and the  Internet.  The  individual  insurance
products  consist  primarily  of term,  universal  life,  and fixed and variable
annuity  products.  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.

     CNA's life  insurance  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 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 life insurance subsidiaries 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 position CNA properly in the evolving health care environment.

                                       9
<PAGE>
LIFE BUSINESS--(CONTINUED)

     The following table sets forth  supplemental  data on a GAAP basis,  except
where indicated for the life insurance business:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Year Ended December 31                                   1997        1996        1995         1994       1993
(In millions of dollars, except ratio information)
----------------------------------------------------------------------------------------------------------------
<S>                                                   <C>         <C>         <C>         <C>         <C>
INDIVIDUAL PREMIUM

   Life and annuities................................ $     642   $     629   $     497   $     369   $     312
   Accident and health...............................         3           2          33          33          31
                                                      ---------   ---------   ---------   ---------   ---------
                                                      $     645   $     631   $     530   $     402   $     343
                                                      =========   =========   =========   =========   =========
GROUP PREMIUM
   Accident and health (a)........................... $   2,527   $   2,548   $   2,190   $   2,111   $   1,983
   Life and annuities................................       263         195         313         165         116
                                                      ---------   ---------   ---------   ---------   ---------
                                                      $   2,790   $   2,743   $   2,503   $   2,276   $   2,099
                                                      =========   =========   =========   =========   =========
NET INVESTMENT INCOME AND OTHER INCOME
   Individual........................................ $     297   $     292   $     247   $     194   $     154
   Group.............................................       236         214         198         166         143
                                                      ---------   ---------   ---------   ---------   ---------
                                                      $     533   $     506   $     445   $     360   $     297
                                                      =========   =========   =========   =========   =========
OPERATING INCOME BEFORE INCOME TAX
   Individual........................................ $      88   $     101   $      65   $      47   $      14
   Group.............................................        65          70          95          87          52
                                                      ---------   ---------   ---------   ---------   ---------
                                                      $     153   $     171   $     160   $     134   $      66
                                                      =========   =========   =========   =========   =========
GROSS LIFE INSURANCE IN-FORCE
   Individual (b).................................... $ 239,843   $ 172,213   $ 113,901   $  80,560   $  76,835
   Group.............................................    71,755      64,796      52,145      46,873      35,413
                                                      ---------   ---------   ---------   ---------   ---------
                                                      $ 311,598   $ 237,009   $ 166,046   $ 127,433   $ 112,248
                                                      =========   =========   =========   =========   =========
OTHER DATA - STATUTORY BASIS(c)
   Capital and surplus............................... $   1,223   $   1,163   $   1,128   $   1,055   $   1,022
   Capital and surplus-percent of total liabilities..      22.4%       25.5%       28.2%       29.4%       30.1%
   Participating policyholders-percent of gross life
   insurance in force................................       0.7%        0.5%        0.6%        0.9%        1.1%
----------------------------------------------------------------------------------------------------------------
<FN>
(a) Group  accident  and  health  premium  includes contracts  involving  U.S. government  employees  and  their
    dependents, and amounted  to  approximately  $2.1 billion,  $2.1  billion,  $1.9  billion,  $1.8 billion and
    $1.7 billion in 1997, 1996, 1995, 1994 and 1993, 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 6.4%,  7.2%, 9.4%, 9.7% and 9.7% in 1997, 1996, 1995, 1994
    and 1993, respectively.

(c) Other  data  is  determined  on  the  basis  of  statutory   accounting  practices. Life insurance subsidiaries
    have received reimbursement from CNAF for general management and administrative  expenses and investment
    expenses of $18 million,  $29 million, $21 million, $25 million and $26 million in 1997, 1996, 1995,  1994,
    and 1993,  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.
</FN>
</TABLE>

                                       10
<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.

     The Company manages the liquidity and interest rate risks on the guaranteed
investment  contract  portfolio  by  managing  the  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                                       1997      1996       1995
-------------------------------------------------------------------------------
Duration in years:
   Assets.......................................   3.74      3.12       3.12
   Contracts....................................   3.63      3.16       2.98
                                                   ----      ----       ----
   Difference...................................   0.11     (0.04)      0.14
                                                   ====     ======      ====


Weighted average investment yield...............   6.81%     7.44%      7.58%


Weighted average interest crediting rates.......   6.78%     7.32%      7.45%


Withdrawal characteristics:
   With market value adjustment.................     97%       95%        92%
   Non-withdrawable.............................      3         5          8
-------------------------------------------------------------------------------
   Total                                            100%      100%       100%
===============================================================================

     As shown above, the weighted average investment yield at December 31, 1997,
1996 and 1995 was more than the weighted average interest crediting rate. During
1997, general market interest rates were lower which led to an increase in the
market value of CNA's fixed maturitiy securities.  As a result of this increase,
CNA was able to realize significant capital gains on its investment portfolio.
However, the interest rates on fixed maturity securities purchased in this
market had a lower yield which led to a narrowing of the spread between
investment yields and crediting rates.

INVESTMENTS

     Information  as to the Company's  investments is set forth in Note B of the
Consolidated  Financial  Statements of the 1997 Annual  Report to  Shareholders,
incorporated by reference in Item 8, herein.

                                       11
<PAGE>
ITEM 2.     PROPERTIES

     CNA  Plaza,  owned by  Continental  Assurance  Company,  serves as the home
office for CNAF and its insurance subsidiaries. An adjacent building (located at
55 E.  Jackson  Blvd.),  jointly  owned  by  Continental  Casualty  Company  and
Continental  Assurance  Company,  is partially  situated on grounds under leases
expiring  in 2058.  Approximately  28% of the  adjacent  building  is  rented to
non-affiliates.  CNAF's  subsidiaries  lease  office  space  in  various  cities
throughout the United States and in other  countries.  The following  table sets
forth certain  information  with respect to the principal office buildings owned
or leased by CNAF's subsidiaries:
    --------------------------------------------------------------------------
                               AMOUNT OF BUILDING OWNED
                               AND OCCUPIED OR LEASED
    LOCATION                   BY CNA OR ITS SUBSIDIARIES   PRINCIPAL USAGE
    --------------------------------------------------------------------------
    CNA                          1,144,378 sq. ft.*      Principal Executive
    Plaza                                                  Offices of CNAF
    333 S. Wabash
    Chicago, Illinois

    180 Maiden Lane              1,091,570***            Property/Casualty
    New York, New York                                     Insurance Offices

    55 E. Jackson Blvd.            440,292*              Principal Executive
    Chicago, Illinois                                      Offices of CNAF

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

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

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

    200 S. Wacker Drive            219,285**             Property/Casualty
    Chicago, Illinois                                      Insurance Offices

    1111 E. Broad  St.             183,019**             Property/Casualty
    Columbus, Ohio                                         Insurance Offices

    333 Glen Street                157,825**             Property/Casualty
    Glen Falls, New York                                   Insurance Offices

    1100 Cornwall Road             147,884**             Property/Casualty
    Monmouth Junction                                      Insurance Offices
    New Jersey

    600 North Pearl Street         139,151**             Property/Casualty
    Dallas, Texas                                          Insurance Offices

    111 Congressional Blvd.        118,215**             Property/Casualty
    Indianapolis, Indiana                                  Insurance Offices

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

    2401 Pleasant Valley           102,376**             Property/Casualty
    York, Pennsylvania                                     Insurance Offices

* Represents property owned by CNAF or its subsidiaries.
** Represents property leased by CNAF or its subsidiaries.
*** Property is owned by Continental and 46% of it is occupied by CNAF or its
    subsidiaries.
                                       12
<PAGE>
ITEM 3.    LEGAL PROCEEDINGS

     Information  as to CNA's  legal  proceedings  is set forth in Note F of the
Consolidated  Financial  Statements  of  1997  Annual  Report  to  Shareholders,
incorporated by reference in Item 8, herein.


ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

                                       13
<PAGE>
              EXECUTIVE OFFICERS OF THE REGISTRANT

<TABLE>
<CAPTION>

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





<S>                    <C>                <C>         <C>      <C>
 Laurence A. Tisch      Chief Executive    75          *       Co-Chairman of the Board and Co-Chief Executive
                        Officer, CNA                           Officer of Loews Corporation. President, Chief
                        Financial                              Executive Officer and Director of CBS, Inc. until
                        Corporation                            November 1995.  Executive officer of the Registrant
                                                               since 1974.


 Dennis H. Chookaszian  Chairman of the    54         1975     Chairman of the Board and Chief Executive Officer of
                        Board and Chief                        CNA since September 1992. Prior thereto,
                        Executive                              Mr. Chookaszian was President and Chief Operating
                        Officer, CNA                           Officer of CNA.  Executive officer of the Registrant
                                                               since 1975.

 Philip L. Engel        President, CNA     57         1977     President of CNA since September 1992. Prior thereto,
                                                               Mr. Engel was Executive Vice President of CNA.
                                                               Executive officer of the Registrant since 1992.

 Bernard L.             Executive Vice     51         1980     Executive Vice President and Chief Operating Officer
 Hengesbaugh            President  and                         of CNA since February 4, 1998.  Senior Vice President
                        Chief Operating                        of CNA since November 1990. Executive officer of the
                        Officer, CNA                           Registrant since 1992.

 W. James MacGinnitie   Senior Vice        59         1997     Senior Vice President and Chief Financial Officer of
                        President and                          CNA and of the Registrant since October 1997.  From
                        Chief Financial                        1994 through 1997, Partner at Ernst & Young LLP.
                        Officer                                Prior to that time, principal with Tillinghast.
<FN>

Officers  are  elected and hold office  until their  successors  are elected and
qualified, and are subject to removal by the Board of Directors.

*Mr. Tisch is not an officer of CNA.
</FN>
</TABLE>
                                       14
<PAGE>
                                     PART II

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

     Incorporated  herein by reference  from page 91 of the 1997 Annual
     Report to Shareholders.


ITEM 6.  SELECTED FINANCIAL DATA

     Incorporated  herein by  reference  from page 2 of the 1997 Annual
     Report to Shareholders.


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

     Incorporated  herein by reference  from pages 14 through 38 of the 1997
     Annual Report to Shareholders.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Incorporated herein by reference under the heading Market Risk in the
     Management  Discussion and Analysis of Financial Condition and  Results of
     Operations of the 1997 Annual Report to Shareholders on pages 30
     through 33.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
     Consolidated Balance Sheet - December 31, 1997 and 1996

     Statement of  Consolidated  Operations - Year Ended December 3l, 1997, 1996
     and 1995

     Statement of  Consolidated  Stockholders'  Equity - December 31, 1997, 1996
     and 1995

     Statement of  Consolidated  Cash Flows - Year Ended December 31, 1997, 1996
     and 1995

     Notes to Consolidated Financial Statements

     Independent Auditors' Report

     The above Consolidated Financial Statements,  the related Notes to the
     Consolidated  Financial Statements and the Independent Auditors' Report are
     incorporated  herein by  reference  from  pages 40  through  90 of the 1997
     Annual Report to Shareholders.


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

         None.

                                       15
<PAGE>
                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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

ITEM 11.  EXECUTIVE COMPENSATION

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

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

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

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

                                     PART IV

ITEM 14.  FINANCIAL STATEMENTS, SCHEDULES, EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
                                                                                                            Page
  (a)    1.     FINANCIAL STATEMENTS:                                                                       Number
<S>                                                                                                           <C>
                A separate index to the Consolidated Financial Statements is presented
                in Part II, Item 8.....................................................................       15

  (a)    2.     FINANCIAL STATEMENT SCHEDULES:

                Schedule I          Summary of Investments.............................................       20

                Schedule II         Condensed Financial Information (Parent Company)...................       21

                Schedule III        Supplementary Insurance Information................................       25

                Schedule V          Valuation and Qualifying Accounts and Reserves.....................       26

                Schedule VI         Supplementary Information Concerning Property/Casualty
                                    Insurance Operations...............................................       26

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

                Independent Auditors' Report...........................................................       27
</TABLE>
                                       16

<PAGE>
                                     PART IV

ITEM 14.      FINANCIAL STATEMENTS, SCHEDULES, EXHIBITS AND REPORTS ON FORM 8-K
              (continued)
<TABLE>
<CAPTION>
  (a)    3.       EXHIBITS:
                                                                                                         Exhibit
                                                    Description of Exhibit                                Number
                                                    ------------------------                              -------

         <S>                                                                                                <C>
         (2)      Plan of acquisition, reorganization, arrangement, liquidation or succession:

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

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

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

                  By-Laws of CNA Financial Corporation, as amended February 12, 1997
                  (Exhibit 3.2 to 1996 Form 10-K incorporated herein by reference.)........................  3.2

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

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

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

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

                  Continuing Services Agreement between CNA Financial Corporation and
                  Edward J. Noha, dated February 27, 1991 (Exhibit 6.0 to 1991
                  Form 8-K, filed March 18, 1991, incorporated herein by reference.)......................  10.4
                  CNA Employees' Retirement Benefit Equalization Plan, as amended through
                  January 1, 1993  (Exhibit 10.4 to 1992 Form 10-K incorporated herein by
                  reference.).............................................................................  10.5

                  CNA Employees' Supplemental Savings Plan, as amended through January 1, 1993
                  (Exhibit 10.6 to 1992 Form 10-K incorporated herein by reference.)......................  10.6
</TABLE>
                                       17
<PAGE>

                                     PART IV

ITEM 14.      FINANCIAL STATEMENTS, SCHEDULES, EXHIBITS AND REPORTS ON FORM 8-K
             (continued)
<TABLE>
<CAPTION>
  (a)    3.       EXHIBITS:
                                                                                                           Exhibit
                                                    Description of Exhibit                                 Number
                                                    ------------------------                             ----------
         <S>                                                                                                 <C>
         (10)     Material contracts (continued):

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

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

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

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

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

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

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

                  Trust Distribution Process - Annex A to the Trust Agreement as
                  of  December  23,  1993  (Exhibit  10.14  to  1993  Form  10-K
                  incorporated herein
                  by reference.)..........................................................................  10.14
                  Defendant Class Settlement Agreement dated December 22, 1993
                  (Exhibit 10.15 to 1993 Form 10-K incorporated herein by reference.).....................  10.15

                  Escrow Agreement among Continental Casualty Company, Pacific Indemnity
                  Company and The First National Bank of Chicago dated December 23, 1993
                  (Exhibit 10.16 to 1993 Form 10-K incorporated herein by reference.).....................  10.16
</TABLE>
                                       18
<PAGE>
                                                         PART IV

ITEM 14.      FINANCIAL STATEMENTS, SCHEDULES, EXHIBITS AND REPORTS ON FORM 8-K
              (continued)
<TABLE>
<CAPTION>
  (a)    3.       EXHIBITS:
                                                                                                             Exhibit
                                                    Description of Exhibit                                   Number
                                                    ------------------------                                --------
         <S>                                                                                                <C>
         (11)     Computation of Net Income per Common Share..............................................  11.1*

         (12)     Statements regarding computation of ratios:
                  Computation of Ratio of Earnings to Fixed Charges.......................................  12.1*
                  Computation of Ratio of Net Income, As Adjusted, to Fixed Charges.......................  12.2*

         (13)     1997 Annual Report......................................................................  13.1*

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

         (23)     Independent Auditors' Consent...........................................................  23.1*

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

  (b)             REPORTS ON FORM 8-K:
                  None

</TABLE>
                                       19
<PAGE>
<TABLE>
<CAPTION>
                                                                                                 SCHEDULE I

                                                CNA FINANCIAL CORPORATION
                                                  SUMMARY OF INVESTMENTS

-----------------------------------------------------------------------------------------------------------------
December 31                                                   1997                            1996
                                                 -----------------------------  ---------------------------------
                                                             Fair    Carrying                Fair     Carrying
(In millions of dollars)                            Cost     Value    Value        Cost      Value     Value
-----------------------------------------------------------------------------------------------------------------
<S>                                         <C>       <C>      <C>         <C>         <C>        <C>
Fixed maturities available-for-sale:
   Bonds:

       United States government and government
        agencies and authorities-taxable....      $13,798   $13,920  $13,920     $15,047    $15,045   $15,045
       States, municipalities and political
        subdivisions-tax exempt.............        4,534     4,724    4,724       4,860      4,951     4,951
       Foreign governments and political
        subdivisions........................          998       998      998       1,200      1,214     1,214
       Public utilities.....................          340       355      355         195        205       205
       Convertibles and bonds with warrants
        attached............................            3         2        2         167        169       169
       All other corporate..................        9,280     9,452    9,452       6,022      6,071     6,071
   Redeemable preferred stocks..............           67        97       97          49         66        66
                                                   ------    ------   ------      ------     ------    ------
       Total fixed maturities
         available-for-sale.................       29,020    29,548   29,548      27,540     27,721    27,721
                                                   ------    ======   ------      ------     ======    ------

Equity securities available-for-sale:
   Common stocks:
       Public utilities.....................           --        --       --          11         15        15
       Banks, trusts and insurance companies            8         7        7         132        185       185
       Industrial and other.................          559       672      672         335        431       431
   Non redeemable preferred stocks..........          128       135      135         224        228       228
                                                   ------    ------   ------      ------     ------    ------
       Total equity securities
         available-for-sale.................          695   $   814      814         702    $   859       859
                                                   ------    ======   ------      ------     ======    ------

Mortgage loans..............................           80                 80         113                  113
Real estate.................................            5                  5          10                   10
Policy loans................................          177                177         174                  174
Other invested assets.......................          544                695         617                  681
Short-term investments......................        4,884              4,884       5,854                5,854
-----------------------------------------------------------------------------------------------------------------
         Total investments                        $35,405            $36,203     $35,010              $35,412
=================================================================================================================
</TABLE>

                                       20
<PAGE>
<TABLE>
<CAPTION>
                                                                                              SCHEDULE II
                                                CNA FINANCIAL CORPORATION
                                                     (PARENT COMPANY)
                                             CONDENSED FINANCIAL INFORMATION


FINANCIAL POSITION
-----------------------------------------------------------------------------------------------------------
DECEMBER 31                                                                  1997                1996
(In millions of dollars)
-----------------------------------------------------------------------------------------------------------
ASSETS:
<S>                                                                      <C>                <C>
Investments in subsidiaries.......................................       $  9,770            $ 8,099
Deferred income taxes.............................................            511                877
Notes receivable from affiliate...................................            205                205
Short-term investments............................................            174                  2
Other.............................................................              4                 16
                                                                         --------            -------
        Total assets..............................................       $ 10,664            $ 9,199
                                                                         ========            =======
LIABILITIES:
Debt..............................................................       $  1,972            $ 1,971
Federal income taxes payable......................................            108                 29
Amounts due to affiliates.........................................            106                102
Other.............................................................            169                 37
                                                                         --------            -------
        Total liabilities.........................................          2,355              2,139
        Total stockholders' equity................................          8,309              7,060
-----------------------------------------------------------------------------------------------------------
        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                       $ 10,664            $ 9,199
===========================================================================================================

RESULTS OF OPERATIONS
----------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31                                              1997            1996           1995
(In millions of dollars)
----------------------------------------------------------------------------------------------------------
REVENUES:
Equity in income of subsidiaries before income tax:
   Operating income ..............................................$   956         $1,089         $   923
   Realized investment gains......................................    742            610             453
Net investment income.............................................     12             13               9
Realized investment gains (losses)................................     (4)            (5)              3
                                                                  -------         ------         -------
                                                                    1,706          1,707           1,388
                                                                  -------         ------         -------
EXPENSES:
Administrative and general expenses...............................    217            223             220
Interest expense..................................................    131            135             125
Other.............................................................      -              4               1
                                                                  -------         ------         -------
                                                                      348            362             346
                                                                  -------         ------          ------
       Income before income tax...................................  1,358          1,345           1,042
Income tax expense................................................    392            380             285
----------------------------------------------------------------------------------------------------------
       NET INCOME                                                 $   966         $  965         $   757
==========================================================================================================
           See accompanying Notes to Condensed Financial Information.
</TABLE>

                                       21
<PAGE>
<TABLE>
<CAPTION>
                                                                                  SCHEDULE II
                                                                                  (continued)

                                                CNA FINANCIAL CORPORATION
                                                     (PARENT COMPANY)
                                             CONDENSED FINANCIAL INFORMATION


Statement of Cash Flows
----------------------------------------------------------------------------------------------------------------
Year ended December 31                                                      1997            1996           1995
(In millions of dollars)
----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                       <C>            <C>             <C>
   Net income........................................................... $  966         $  965          $  757
                                                                           ----           ----            ----
   Adjustments to reconcile net income to net cash flows
       from operating activities:
       Equity in income of unconsolidated affiliates.................... (1,441)        (1,377)         (1,201)
       Realized losses (gains)..........................................      4              5              (3)
       Changes in:
        Federal income taxes............................................     79            165            (113)
        Deferred income taxes...........................................    366             93             173
        Other, net......................................................   (127)          (131)             87
                                                                          ------         -----           -----
         TOTAL ADJUSTMENTS.............................................. (1,119)        (1,245)         (1,057)
                                                                          -------        ------          ------
         NET CASH FLOWS FROM OPERATING ACTIVITIES.......................   (153)          (280)           (300)
                                                                          ------         -----           -----
Cash flows from investing activities:
   Purchase of The Continental Corporation..............................      -              -          (1,126)
   Other acquisitions...................................................      -              -             (13)
   Purchases of fixed maturities........................................      -              -            (709)
   Proceeds from fixed maturities:
      Sales.............................................................      -              -             501
      Maturities........................................................      -              -             201
   Net proceeds from the sale of equity securities......................      -              -              (1)
   Change in short-term investments.....................................    (15)            (2)              1
   Other................................................................     (4)            (5)              7
                                                                          -----          -----           -----
         NET CASH FLOWS FROM INVESTING ACTIVITIES.......................    (19)            (7)         (1,139)
                                                                          ------         ------          ------
Cash flows from financing activities:
   Dividends paid to preferred shareholders.............................     (6)            (6)             (7)
   Dividend from affiliates.............................................    175            548             326
   Proceeds from issuance of long-term debt.............................      -            248           1,325
   Principal payments on  long-term debt................................      -           (500)              -
   Loan to The Continental Corporation..................................      -              -            (205)
                                                                          -----          -----           -----
         NET CASH FLOWS FROM FINANCING ACTIVITIES.......................    169            290           1,439
                                                                          -----          -----           -----
         NET CASH FLOWS                                                      (3)             3               -
Cash at beginning of year...............................................      3              -               -
-------------------------------------------------------------------------------------------------------------------
CASH AT END OF YEAR                                                      $    -         $    3          $    -
===================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                                  SCHEDULE II
                                                                                  (continued)

                                                CNA FINANCIAL CORPORATION
                                                     (PARENT COMPANY)
                                             CONDENSED FINANCIAL INFORMATION


Statement of Cash Flows - (continued)
----------------------------------------------------------------------------------------------------------------
Year ended December 31                                                      1997            1996           1995
(In millions of dollars)
----------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>              <C>          <C>
Supplemental disclosures of cash flow information: Cash (paid) received:
       Interest ........................................................ $  (134)         $(141)          $(170)
       Federal income taxes.............................................     (95)            15             103
===================================================================================================================
Noncash  investing  activities  that are not  reflected in the Statement of Cash Flows are listed below.
                                                                            The
                                                                       Continental        Other
   December 31, 1995                                                    Corporation
--------------------------------------------------------------------------------------------------------------------
   Fair value of assets acquired.....................................    $15,259          $  13
   Liabilities assumed...............................................    (14,133)             -
                                                                         -------          -----
       Cash paid.....................................................    $ 1,126          $  13
====================================================================================================================
<FN>
                               See accompanying Notes to Condensed Financial Information.
</FN>
</TABLE>
                                       22
<PAGE>
                                                             SCHEDULE II
                                                              (continued)

                            CNA FINANCIAL CORPORATION
                                (PARENT COMPANY)
                         CONDENSED FINANCIAL INFORMATION


                    NOTES TO CONDENSED FINANCIAL INFORMATION


a.       Basis of presentation

         The  condensed  financial  information  of  CNA  Financial  Corporation
         (Parent  Company) should be read in conjunction  with the  Consolidated
         Financial  Statements  and Notes thereto  included in the CNA Financial
         Corporation  Annual Report to Shareholders.  Investment in subsidiaries
         are accounted for using the equity method of accounting.

         Certain  amounts  applicable to prior years have been  reclassified  to
         conform to classifications followed in 1997.

b.       Long-term debt

       -------------------------------------------------------------------------
       December 31                                                1997    1996
       (In millions of dollars)
       -------------------------------------------------------------------------
          Variable rate debt:
              Credit Facility.................................. $  400   $  400
              Commercial Paper.................................    675      675
          Senior Notes:
              8 7/8 %, due March 1, 1998.......................    150      150
              6 1/4%, due November 15, 2003....................    249      248
              6 3/4%, due November 15, 2006....................    248      248
          7 1/4%  Debenture, due November 15, 2023.............    247      247
          1.0% Urban Development Action Grant, due May 7, 2019.      3        3
      --------------------------------------------------------------------------
              Total                                             $1,972   $1,971
       =========================================================================

         CNA Financial Corporation (CNAF)has in place a revolving  credit
         facility that was used to finance the acquisition of The Continental
         Corporation.The interest rate on the facility is based on the London
         Interbank Offered Rate (LIBOR), plus 16 basis points.  Additionally,
         there is a facility fee of 9 basis points annually.  The average
         interest rate on the borrowings under the revolver at December 31, 1997
         and 1996, respectively was 6.16% and 5.72%.

         To take advantage of favorable   interest   rates,   CNAF
         established   a  commercial   paper  program  to  replace borrowings
         under the revolving  credit  facility.  The commercial paper borrowings
         are classified as long-term as $675 million of the committed  bank
         facility will support the commercial  paper program.  The weighted
         average  interest  rate on  commercial  paper at December  31, 1997 was
         6.05% compared to 5.67% at December 31, 1996.

         At year end 1997,  the  outstanding  loans under the  revolving  credit
         facility  were $400  million.  There was no unused  borrowing  capacity
         under the facility after the effects of the commercial paper program.
<PAGE>
                                                         SCHEDULE II
                                                         (continued)

         To offset the  variable  rate  characteristics  of the  facility,  CNAF
         entered into interest rate swap  agreements with several banks having a
         total notional  principal amount of $950 million,  which terminate from
         May 2000 to  December  2000.  These  agreements  provide  that CNAF pay
         interest at a fixed  rate,  averaging  6.20% at  December  31, 1997 and
         1996,  in exchange for the receipt of interest at the three month LIBOR
         rate. The

                                       23
<PAGE>
                                                         SCHEDULE II
                                                         (continued)


                            CNA FINANCIAL CORPORATION
                                (PARENT COMPANY)
                         CONDENSED FINANCIAL INFORMATION


              NOTES TO CONDENSED FINANCIAL INFORMATION--(CONTINUED)


         effect of these interest rate swaps was to increase  interest  expense
         by $4 million and $7 million for the years ended December 31, 1997 and
         1996, respectively.

         The weighted  average interest rate (interest and facility fees) on the
         variable rate  acquisition  debt,  which includes the revolving  credit
         facility and commercial  paper was 6.35% and 6.28% at December 31, 1997
         and 1996,  respectively.  This rate reflects the effect of the interest
         rate swaps.

         On August 18,  1997,  CNAF filed a  Registration  Statement on Form S-3
         with the Securities and Exchange  Commission  relating to $1 billion of
         senior and subordinated  debt and preferred stock that became effective
         on October 22,  1997.  This new shelf  registration  incorporated  $250
         million of  securities  remaining  available  for issuance from a prior
         shelf registration. On January 8, 1998, the Company issued $150 million
         principal  amount of 6.45%  senior  notes due January 15, 2008 and $150
         million principal amount of 6.95% senior notes due January 15, 2018.

         The net  proceeds  were used to pay down bank  loans  drawn  under the
         Company's  revolving credit facility.  Concurrent with the reduction in
         bank debt, the Company  terminated  $300 million in notional  amount of
         interest rate swaps.

         On March 2, 1998 CNAF paid at the due date $150  million of 8 7/8%
         senior  notes with funds  drawn  against  the revolving credit
         facility (unaudited).

     c.  Management and admininstrative expenses

         CNAF has reimbursed,  or will reimburse,  its  subsidiaries for general
         management and  administrative  expenses,  unallocated  loss adjustment
         expenses and investment expense of $217 million,  $223 million and $218
         million in 1997, 1996 and 1995, respectively.

     d.  Capital contributions

         There were no  contributions  made by CNAF to the capital of its
         insurance and other  subsidiaries  in 1997, 1996 or 1995.
--------------------------------------------------------------------------------
                                       24
<PAGE>
<TABLE>
<CAPTION>
                                                                                 SCHEDULE III
                            CNA FINANCIAL CORPORATION
                       SUPPLEMENTARY INSURANCE INFORMATION

------------------------------------------------------------------------------------------------
                                                          Gross Insurance Reserves
                                               -------------------------------------------------

                                               Claim
                                Deferred        and         Future                    Policy-
                               Acquisition     Claim        Policy      Unearned     holders'
(In millions of dollars)          Costs       Expense      Benefits     Premiums       Funds
------------------------------ ------------ ------------ ------------- ------------ ------------
December 31, 1997
   Property/Casualty:
<S>                             <C>          <C>          <C>           <C>           <C>
     Commercial............     $    804     $ 25,624     $     91      $  3,717      $  150
     Personal..............          358        1,386          445           963           2
     Involuntary risks.....           --        1,230           --            20          --
   Life:
     Individual............          934          114        3,593            --          31
     Group.................           46          555          700            --         559
                                 -------      -------      -------       -------       -----
       Subtotal............        2,142       28,909        4,829         4,700         742
   Other and intercompany
     eliminations..........            -          318            -             -           -
                                 -------      -------      -------       -------       -----
                                $  2,142     $ 29,227     $  4,829      $  4,700      $  742
                                 =======      =======      =======       =======       =====
December 31, 1996
   Property/Casualty:
     Commercial............     $    822     $ 25,887     $     47      $  3,591      $  172
     Personal..............          262        1,557          326         1,044           -
     Involuntary risks.....            -        1,951            -            24           -
   Life:
     Individual............          736          148        3,138             -          30
     Group.................           34          519          670             -         544
                                 -------      -------      -------       -------         ---
       Subtotal............        1,854       30,062        4,181         4,659         746
   Other and intercompany
     eliminations..........           --          333           --            --          --
                                 -------      -------      -------       -------       -----
                                $  1,854     $ 30,395     $  4,181      $  4,659      $  746
                                 =======      =======      =======       =======       =====
December 31, 1995
   Property/Casualty:
     Commercial............     $    702     $ 27,309     $     38      $  3,607      $  163
     Personal..............          258        1,427          260           869           -
     Involuntary risks.....            9        2,308            -            73           -
   Life:
     Individual............          505          162        2,679             -          31
     Group.................           19          473          539             -         511
                                 -------      -------      -------       -------       -----
       Subtotal............        1,493       31,679        3,516         4,549         705
   Other and intercompany
     eliminations..........           --          353           --            --          --
                                 -------      -------      -------       -------       -----
                                $  1,493     $ 32,032     $  3,516      $  4,549      $  705
                                 =======      =======      =======       =======       =====
</TABLE>
*Premiums written relates to property/casualty companies only.
<PAGE>
<TABLE>
<CAPTION>
                                                                           SCHEDULE III
                            CNA FINANCIAL CORPORATION
                 SUPPLEMENTARY INSURANCE INFORMATION - CONTINUED
--------------------------------------------------------------------------------------------------------
                                                                      Amortization
                                                       Insurance         of
                               Net          Net       Claims and      Deferred       Other
                             Premium    Investment   Policyholders'  Acquisition   Operating    Premiums
(In millions of dollars)     Revenue      Income       Benefits        Costs       Expenses      Written*
---------------------------------------------------------------------------------------------------------
December 31, 1997
   Property/Casualty:
<S>                         <C>          <C>          <C>           <C>          <C>         <C>
     Commercial............  $ 8,418     $ 1,601      $ 7,369        $ 1,855     $ 1,148      $ 8,570
     Personal..............    1,651         146          991            407         191        1,803
     Involuntary risks.....     (142)         43         (383)            --         107         (187)
   Life:
     Individual............      645         248          633            122          99           --
     Group.................    2,790         171        2,643             (1)        318           --
                              ------      ------       ------         ------      ------       ------
       Subtotal............   13,362       2,209       11,253          2,383       1,863       10,186
   Other and intercompany
     eliminations..........        -           -            -              -           2            -
                              ------      ------       ------         ------      ------       ------
                             $13,362     $ 2,209      $11,253        $ 2,383     $ 1,865      $10,186
                              ======      ======       ======         ======      ======       =======
December 31, 1996
   Property/Casualty:
     Commercial............  $ 8,297     $ 1,623      $ 6,703        $ 1,715     $ 1,104      $ 8,593
     Personal..............    1,536         166        1,184            402         273        1,731
     Involuntary risks.....      294          92          244             62          92          287
   Life:
     Individual............      631         227          667             26         129            -
     Group.................    2,743         173        2,579            (13)        322            -
                              ------      ------       ------         ------      ------       ------
       Subtotal............   13,501       2,281       11,377          2,192       1,920       10,611
   Other and intercompany
     eliminations..........      (22)         (5)         (20)            --         (40)          --
                              ------      ------       ------         ------      ------       ------
                             $13,479     $ 2,276      $11,357        $ 2,192     $ 1,880      $10,611
                              =======     ======       ======         ======       =====       ======
December 31, 1995
   Property/Casualty:
     Commercial............ $  7,226     $ 1,463      $ 5,995        $ 1,495     $   915      $ 7,561
     Personal..............    1,215         132          892            271         229        1,254
     Involuntary risks.....      284         104          234             17         146          311
   Life:
     Individual............      530         214          507             71         134            -
     Group.................    2,503         155        2,340            (10)        276            -
                              ------      ------       ------         ------      ------       -------
       Subtotal............   11,758       2,068        9,968          1,844       1,700        9,126
   Other and intercompany
     eliminations..........      (23)          9          (24)            --         (20)          --
                              ------      ------       ------         ------      ------       ------
                            $ 11,735     $ 2,077      $ 9,944        $ 1,844     $ 1,680      $ 9,126
                              =======     ======       ======         ======       =====       ======
</TABLE>
                                       25
<PAGE>
                                                                    SCHEDULE V
                            CNA FINANCIAL CORPORATION
                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
                                                     Balance at   Charged to   Charged to            Balance at
                                                     Beginning    Costs and     Other                  End of
(In millions of dollars)                             of Period    Expenses      Amounts    Deductions  Period
----------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1997 Deducted from assets:
     Allowance for doubtful accounts:
     <S>                                            <C>           <C>          <C>         <C>       <C>
       Receivables.................................  $ 277        $  30        $    -      $   4     $ 303
                                                     =====        =====        ======     ======     =====
Year Ended December 31, 1996
       Deducted from assets:
       Allowance for doubtful accounts:
       Receivables.................................  $ 289        $  34        $    -      $  46     $ 277
                                                     =====        =====        ======      =====     =====
Year Ended December 31, 1995
     Deducted from assets:
     Allowance for doubtful accounts:
     Receivables.................................    $ 128        $  39        $  143*     $   21     $ 289
                                                     =====        =====         ======     ======     =====
--------------------------------------------------------------------------------------------------------------
* Includes Continental allowance at the acquisition date.
</TABLE>
                                                                  SCHEDULE VI
                            CNA FINANCIAL CORPORATION
             SUPPLEMENTARY INFORMATION CONCERNING PROPERTY/CASUALTY
                              INSURANCE OPERATIONS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
                                                                        Consolidated Property/
                                                                           Casualty Entities
                                                                   -------------------------------------
Year Ended December 31                                              1997          1996         1995
(In millions of dollars)
--------------------------------------------------------------------------------------------------------
<S>                                                               <C>         <C>         <C>
Deferred acquisition costs....................................    $1,162      $  1,084    $    969

Reserves for unpaid claims and claim expenses.................    28,240        29,830      31,044

Discount deducted from claim and claim expense reserves above
  (based on interest rates ranging from 3.5% to 7.5%).........     2,409         2,459       2,449

Unearned premiums.............................................     4,700         4,659       4,549

Earned premiums...............................................     9,927        10,127       8,725

Net investment income.........................................     1,790         1,881       1,699

Claim and claim expenses related to current year..............     7,942         7,922       6,787

Claim and claim expenses related to prior years...............      (256)          (91)        122

Amortization of deferred acquisition costs....................     2,262         2,179       1,783

Paid claim and claim expenses.................................     8,376         9,200       7,057

Premiums written..............................................    10,186        10,611       9,126
--------------------------------------------------------------------------------------------------------
</TABLE>
                                       26
<PAGE>
                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
CNA Financial Corporation

We  have  audited  the  consolidated   financial  statements  of  CNA  Financial
Corporation (an affiliate of Loews  Corporation) and subsidiaries as of December
31, 1997 and 1996 and for each of the three years in the period  ended  December
31,  1997 and have issued our report  thereon  dated  February  18,  1998.  Such
consolidated  financial statements and report are included in the Company's 1997
Annual Report to  Shareholders  and are  incorporated  herein by reference.  Our
audits  also  included  the  financial  statement  schedules  of  CNA  Financial
Corporation  and  subsidiaries  listed  in Item 14.  These  financial  statement
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion  based on our audits.  In our opinion,  such  financial
statement  schedules,  when  considered  in relation  to the basic  consolidated
financial  statements taken as a whole,  present fairly in all material respects
the information set forth therein.




/S/DELOITTE & TOUCHE LLP

Deloitte & Touche LLP
Chicago, Illinois
February 18, 1998




                                       27

<PAGE>
                                   SIGNATURES

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


           CNA Financial Corporation

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

           By                  /S/W.JAMES MACGINNITIE
                 --------------------------------------------------------
                                  W. James MacGinnitie
                                Senior Vice President and
                                 Chief Financial Officer

Date: March 30, 1998


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


            Signature                      Title


    /S/ANTOINETTE COOK BUSH             Director            |
----------------------------------                          |
       Antoinette Cook Bush                                 |
                                                            |
                                                            |
    /S/DENNIS H. CHOOKASZIAN            Director            |
----------------------------------                          |
       Dennis H. Chookaszian                                |
                                                            |
                                                            |
    /S/PHILIP L. ENGEL                  Director            |       Dated
----------------------------------                          |
       Philip L. Engel                                      |
                                                            |   March 30, 1998
                                                            |
    /S/ROBERT P. GWINN                  Director            |
----------------------------------                          |
       Robert P. Gwinn                                      |
                                                            |
                                                            |
    /S/WALTER F. MONDALE                Director            |
--------------------------------                            |
       Walter F. Mondale                                    |



                                       28
<PAGE>

                             SIGNATURES--(CONTINUED)





            SIGNATURE                             TITLE


    /S/EDWARD J. NOHA                Chairman of the Board  |
----------------------------------     and Director         |
       Edward J. Noha                                       |
                                                            |
                                                            |
    /S/JOSEPH ROSENBERG              Director               |
----------------------------------                          |
       Joseph Rosenberg                                     |
                                                            |
                                                            |
    /S/RICHARD L. THOMAS             Director               |       Dated
----------------------------------                          |
       Richard L. Thomas                                    |
                                                            |   March 30, 1998
                                                            |
    /S/JAMES S. TISCH                Director               |
----------------------------------                          |
       James S. Tisch                                       |
                                                            |
                                                            |
    /S/LAURENCE A. TISCH             Chief Executive Officer|
----------------------------------   and Director           |
       Laurence A. Tisch                                    |
                                                            |
                                                            |
    /S/PRESTON R. TISCH              Director               |
---------------------------------                           |
       Preston R. Tisch                                     |
                                                            |
                                                            |
    /S/MARVIN ZONIS                  Director               |
-------------------------------                             |
       Marvin Zonis                                         |
                                                            |



                                      29

<PAGE>
                                                                   EXHIBIT 11.1
                            CNA FINANCIAL CORPORATION
                   COMPUTATION OF NET INCOME PER COMMON SHARE
<TABLE>
<CAPTION>
=============================================================================================
Year Ended December 31                              1997     1996     1995     1994   1993
(In millions, except per share data)
-----------------------------------------------------------------------------------------------
<S>                                                 <C>    <C>     <C>     <C>       <C>
Weighted average shares outstanding................  61.8    61.8    61.8    61.8     61.8
                                                   ======  ======  ======  ======   ======

Net income.........................................$  966  $  965  $  757  $   36   $  268
Less preferred stock dividends.....................     7       7       7       5        4
                                                   ------  ------  -------   ----   ------
Net income available to common stockholders........$  959  $  958  $  750  $   31   $  264
                                                   ======  ======  ======  ======   ======

Earnings per share:
   Net income available to common stockholders.....$15.52  $15.51  $12.14  $ 0.51   $ 4.26
                                                   ======  ======  ======  ======   ======

</TABLE>

                                       30
<PAGE>
                                                                    EXHIBIT 12.1

                            CNA FINANCIAL CORPORATION
                COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
Year Ended December 31                             1997     1996     1995      1994    1993
(In millions of dollars, except ratios)
---------------------------------------------------------------------------------------------
<S>                                              <C>      <C>      <C>        <C>      <C>
Income before income tax ........................$ 1,358  $ 1,345  $ 1,042    $(134)   $  94
Adjustments:
   Interest expense..............................    198      200      182       71       36
   Interest element of operating lease rental....     34       32       47       19       18
                                                 -------- -------  -------    ------   -----
Income before income tax, as adjusted............$ 1,590  $ 1,577  $ 1,271    $ (44)   $ 148
                                                  ======  =======  =======    ======   =====


Fixed charges:
   Interest expense..............................$   198  $   200  $   182    $  71    $  36
   Interest element of operating lease rental....     34       32       47       19       18
                                                 -------  -------  -------    -----    -----
Total fixed charges..............................$   232  $   232  $   229    $  90    $  54
                                                  ======  =======  =======    =====    =====

Ratio of earnings to fixed charges (1)...........    6.8      6.8      5.6     (0.5)     2.7
---------------------------------------------------------------------------------------------
<FN>
(1)  For purposes of computing  this ratio,  earnings  consist of income  before
     income taxes plus fixed charges of  consolidated  companies.  Fixed charges
     consist of interest  and that portion of  operating  lease  rental  expense
     which is deemed to be an interest factor for such rentals.
</FN>
<PAGE>
</TABLE>
                                                                    EXHIBIT 12.2

                            CNA FINANCIAL CORPORATION
                       COMPUTATION OF RATIO OF NET INCOME,
                          AS ADJUSTED, TO FIXED CHARGES
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Year Ended December 31                                      1997     1996     1995   1994   1993
(In millions of dollars, except ratios)
------------------------------------------------------------------------------------------------------
<S>                                                       <C>      <C>    <C>      <C>      <C>
Net income................................................$   966 $   965  $  757   $   37   $  268
Adjustments:
   Interest expense, after tax............................    129     130     119       46       24
   Interest element of operating lease rental, after tax..     22      21      30       12       12
                                                           ------  ------   -----    -----    -----
Net income, as adjusted...................................$ 1,117 $ 1,116  $  906   $   95   $  304
                                                           ======  ======   =====    =====    =====

Fixed charges:
   Interest expense, after tax............................$   129 $   130     119   $   46   $   24
   Interest element of operating lease rental, after tax..     22      21      30       12       12
                                                           ------  -------  -----    -----    -----
Total fixed charges.......................................$   151 $   151  $  149   $   58   $   36
                                                           ======  ======   =====    =====    =====


Ratio of net income, as adjusted, to fixed charges (1)....    7.4      7.4    6.1      1.6      8.6
------------------------------------------------------------------------------------------------------
<FN>
(1)  For  purposes  of  computing  this ratio,  net income has been  adjusted to
     include fixed charges of consolidated  companies,  after tax. Fixed charges
     consist of interest  and that portion of  operating  lease  rental  expense
     which is deemed to be an interest factor for such rentals.
</FN>
</TABLE>
                                       31
<PAGE>
                                                                    EXHIBIT 21.1
                           PRIMARY SUBSIDIARIES OF CNA



                                                         PLACE OF INCORPORATION
COMPANY


AMS Services, Inc.                                            Delaware

Alexsis, Inc.                                                 Maryland

American Casualty Company of Reading, Pennsylvania (ACCO)     Pennsylvania

Boston Old Colony Insurance Company                           Massachusetts

Claims Administration Corp.                                   Maryland

CNA Casualty of California                                    California

CNA Surety Corporation                                        Delaware

Columbia Casualty Company                                     Illinois

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

Continental Assurance Company (CAC)                           Illinois

Continental Casualty Company (CCC)                            Illinois

Continental Lloyd's Insurance Company                         Texas

Continental Reinsurance Corporation                           California

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

Kansas City Fire and Marine Insurance Company                 Missouri

National Fire Insurance Company of Hartford (NFI)             Connecticut

National-Ben Franklin Insurance Company of Illinois           Illinois

Niagara Fire Insurance Company                                Delaware

Pacific Insurance Company                                     California

                                       32
<PAGE>

                                                      EXHIBIT 21.1 - (continued)

                    PRIMARY SUBSIDIARIES OF CNA--(continued)

                                                         PLACE OF INCORPORATION
COMPANY


The Buckeye Union Insurance Company                            Ohio

The Continental Corporation, Inc.                              New York

The Continental Insurance Company                              New Hampshire

The Continental Insurance Company of New Jersey                New Jersey

Convida Holdings, Ltd.                                         Bahamas

The Fidelity and Casualty Company of New York                  New Hampshire

The Glens Falls Insurance Company                              Delaware

The Mayflower Insurance Company, Ltd.                          Indiana

Transcontinental Insurance Company                             New York

Transcontinental Technical Services, Inc. (ServCo)             Illinois

Transportation Insurance Company                               Illinois

Valley Forge Insurance Company                                 Pennsylvania

Valley Forge Life Insurance Company                            Pennsylvania

Western National Warranty Corporation                          Arizona

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

                                       33
<PAGE>


                                                                 EXHIBIT 23.1

                          INDEPENDENT AUDITORS' CONSENT


We consent to the  incorporation  by reference  in  Registration  Statement  No.
33-50753  of CNA  Financial  Corporation  and  subsidiaries  on Form  S-3 of our
reports dated February 18, 1998,  appearing in and  incorporated by reference in
the Annual Report on Form 10-K of CNA Financial Corporation and subsidiaries for
the year ended December 31, 1997.




/S/DELOITTE & TOUCHE LLP

Deloitte & Touche LLP
Chicago, Illinois
March 30, 1998

                                        34