##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 1-5823
 
 CNA FINANCIAL CORPORATION
  Delaware
    
    36-6169860(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)333 S. WabashChicago, Illinois
    
    60604(Address of principal executive offices)
    
    (Zip Code)
 (312) 822-5000
  þ o
  o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ
  Class
    
    Outstanding at October 29, 2009Common Stock, Par value $2.50
    
    269,026,759




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##### 



CNA Financial Corporation
Index
 Item
    
    
    
    
    PageNumber
    
    
    
    
    NumberPART I. Financial Information1.
    
    Condensed Consolidated Financial Statements (Unaudited):Condensed Consolidated Statements of Operations for the
Three and Nine months ended September 30, 2009 and 2008
    
    
    3Condensed Consolidated Statements of Comprehensive
Income for the Three and Nine months ended September
30, 2009 and 2008
    
    
    5Condensed Consolidated Balance Sheets at September 30,
2009 and December 31, 2008
    
    
    6Condensed Consolidated Statements of Cash Flows for the
Nine months ended September 30, 2009 and 2008
    
    
    7Condensed Consolidated Statements of Equity for the
Nine months ended September 30, 2009 and 2008
    
    
    9Notes to Condensed Consolidated Financial Statements
    
    
    102.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    553.
    
    Quantitative and Qualitative Disclosures About Market
Risk
    
    
    784.
    
    Controls and Procedures
    
    
    79PART II. Other Information1.
    
    Legal Proceedings
    
    
    806.
    
    Exhibits
    
    
    80EX-31.1EX-31.2EX-32.1EX-32.2




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##### Table of Contents



CNA Financial Corporation (CNAF)
 
 Part I. Financial Information
 
 Item 1. Condensed Consolidated Financial Statements
 
 Condensed Consolidated Statements of Operations (Unaudited)
 Periods ended September 30
    
    Three Months
    
    
    Nine Months(In millions, except per share data)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008RevenuesNet earned premiums
    
    $
    1,707
    
    
    $
    1,799
    
    
    $
    5,035
    
    
    $
    5,386Net investment income
    
    
    660
    
    
    
    439
    
    
    
    1,755
    
    
    
    1,449Net realized investment losses, net of participating policyholders interests:Other-than-temporary impairment losses
    
    
    (232
    )
    
    
    (584
    )
    
    
    (1,330
    )
    
    
    (840
    )Portion of other-than-temporary impairment losses recognized in Other
comprehensive income
    
    
    84
    
    
    
    
    
    
    
    173
    
    
    
    Net impairment losses recognized in earnings
    
    
    (148
    )
    
    
    (584
    )
    
    
    (1,157
    )
    
    
    (840
    )Other net realized investment gains (losses)
    
    
    48
    
    
    
    (67
    )
    
    
    228
    
    
    
    27Net realized investment losses, net of participating policyholders interests
    
    
    (100
    )
    
    
    (651
    )
    
    
    (929
    )
    
    
    (813
    )Other revenues
    
    
    73
    
    
    
    72
    
    
    
    213
    
    
    
    240Total revenues
    
    
    2,340
    
    
    
    1,659
    
    
    
    6,074
    
    
    
    6,262Claims, Benefits and ExpensesInsurance claims and policyholders benefits
    
    
    1,283
    
    
    
    1,519
    
    
    
    3,919
    
    
    
    4,380Amortization of deferred acquisition costs
    
    
    365
    
    
    
    355
    
    
    
    1,063
    
    
    
    1,083Other operating expenses
    
    
    272
    
    
    
    294
    
    
    
    814
    
    
    
    724Interest
    
    
    34
    
    
    
    33
    
    
    
    95
    
    
    
    100Total claims, benefits and expenses
    
    
    1,954
    
    
    
    2,201
    
    
    
    5,891
    
    
    
    6,287Income (loss) from continuing operations before income tax
    
    
    386
    
    
    
    (542
    )
    
    
    183
    
    
    
    (25
    )Income tax (expense) benefit
    
    
    (108
    )
    
    
    218
    
    
    
    30
    
    
    
    92Income (loss) from continuing operations
    
    
    278
    
    
    
    (324
    )
    
    
    213
    
    
    
    67Income (loss) from discontinued operations, net of income tax
(expense) benefit of $0, $9, $0 and $9
    
    
    (1
    )
    
    
    9
    
    
    
    (2
    )
    
    
    10Net income (loss)
    
    
    277
    
    
    
    (315
    )
    
    
    211
    
    
    
    77Net income attributable to noncontrolling interests
    
    
    (14
    )
    
    
    (16
    )
    
    
    (38
    )
    
    
    (40
    )Net income (loss) attributable to CNAF
    
    $
    263
    
    
    $
    (331
    )
    
    $
    173
    
    
    $
    37Income (Loss) Attributable to CNAF Common StockholdersIncome (loss) from continuing operations attributable to CNAF
    
    $
    264
    
    
    $
    (340
    )
    
    $
    175
    
    
    $
    27Less: Dividends on 2008 Senior Preferred
    
    
    (31
    )
    
    
    
    
    
    
    (94
    )
    
    
    Income (loss) from continuing operations attributable to CNAF common
stockholders
    
    
    233
    
    
    
    (340
    )
    
    
    81
    
    
    
    27Income (loss) from discontinued operations attributable to CNAF common
stockholders
    
    
    (1
    )
    
    
    9
    
    
    
    (2
    )
    
    
    10Income (loss) attributable to CNAF common stockholders
    
    $
    232
    
    
    $
    (331
    )
    
    $
    79
    
    
    $
    37
 
 3




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##### Table of Contents



Periods ended September 30
    
    Three Months
    
    
    Nine Months(In millions, except per share data)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Basic and Diluted Earnings (Loss) Per Share Attributable to CNAF Common
StockholdersIncome (loss) from continuing operations attributable to CNAF common
stockholders
    
    $
    0.86
    
    
    $
    (1.26
    )
    
    $
    0.30
    
    
    $
    0.10Income (loss) from discontinued operations attributable to CNAF common
stockholders
    
    
    
    
    
    
    0.03
    
    
    
    (0.01
    )
    
    
    0.04Basic and diluted earnings (loss) per share attributable to CNAF common
stockholders
    
    $
    0.86
    
    
    $
    (1.23
    )
    
    $
    0.29
    
    
    $
    0.14Weighted Average Outstanding Common Stock and Common Stock
EquivalentsBasic
    
    
    269.0
    
    
    
    269.0
    
    
    
    269.0
    
    
    
    269.6Diluted
    
    
    269.2
    
    
    
    269.1
    
    
    
    269.1
    
    
    
    269.6
 
 4




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##### Table of Contents



CNA Financial Corporation (CNAF)
 
 Condensed Consolidated Statements of Comprehensive Income (Unaudited)
 Periods ended September 30
    
    Three Months
    
    
    Nine Months(In millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Net income (loss)
    
    $
    277
    
    
    $
    (315
    )
    
    $
    211
    
    
    $
    77Other comprehensive income (loss), net of taxChanges in:Net unrealized losses on investments with other-than-temporary
impairments
    
    
    (36
    )
    
    
    
    
    
    
    (70
    )
    
    
    Net other unrealized gains (losses) on investments
    
    
    1,906
    
    
    
    (1,212
    )
    
    
    3,815
    
    
    
    (2,246
    )Net unrealized gains (losses) on investments
    
    
    1,870
    
    
    
    (1,212
    )
    
    
    3,745
    
    
    
    (2,246
    )Unrealized gains (losses) on discontinued operations and other
    
    
    5
    
    
    
    (3
    )
    
    
    5
    
    
    
    (3
    )Foreign currency translation adjustment
    
    
    39
    
    
    
    (44
    )
    
    
    110
    
    
    
    (53
    )Pension and postretirement benefits
    
    
    1
    
    
    
    (2
    )
    
    
    4
    
    
    
    (5
    )Allocation to participating policyholders
    
    
    (17
    )
    
    
    10
    
    
    
    (36
    )
    
    
    24Other comprehensive income (loss), net of tax
    
    
    1,898
    
    
    
    (1,251
    )
    
    
    3,828
    
    
    
    (2,283
    )Comprehensive income (loss)
    
    
    2,175
    
    
    
    (1,566
    )
    
    
    4,039
    
    
    
    (2,206
    )Net income attributable to noncontrolling interests
    
    
    (14
    )
    
    
    (16
    )
    
    
    (38
    )
    
    
    (40
    )Other comprehensive (income) loss attributable to noncontrolling interests
    
    
    (18
    )
    
    
    9
    
    
    
    (29
    )
    
    
    17Total comprehensive income (loss) attributable to CNAF
    
    $
    2,143
    
    
    $
    (1,573
    )
    
    $
    3,972
    
    
    $
    (2,229
    )
 
 5




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##### Table of Contents



CNA Financial Corporation (CNAF)
 
 Condensed Consolidated Balance Sheets (Unaudited)
 September 30,
    
    
    December 31,(In millions, except share data)
    
    2009
    
    
    2008AssetsInvestments:Fixed maturity securities at fair value (amortized cost of $34,880 and $34,155)
    
    $
    34,718
    
    
    $
    28,887Equity securities at fair value (cost of $639 and $1,016)
    
    
    972
    
    
    
    871Limited partnership investments
    
    
    1,890
    
    
    
    1,683Other invested assets
    
    
    6
    
    
    
    28Short term investments
    
    
    4,075
    
    
    
    3,534Total investments
    
    
    41,661
    
    
    
    35,003Cash
    
    
    128
    
    
    
    85Reinsurance receivables (less allowance for uncollectible receivables of $357 and $366)
    
    
    6,644
    
    
    
    7,395Insurance receivables (less allowance for doubtful accounts of $211 and $221)
    
    
    1,720
    
    
    
    1,818Accrued investment income
    
    
    429
    
    
    
    356Receivables for securities sold and collateral
    
    
    235
    
    
    
    402Deferred acquisition costs
    
    
    1,138
    
    
    
    1,125Prepaid reinsurance premiums
    
    
    223
    
    
    
    237Federal income tax recoverable (includes $428 and $299 due from Loews Corporation)
    
    
    434
    
    
    
    294Deferred income taxes
    
    
    1,383
    
    
    
    3,493Property and equipment at cost (less accumulated depreciation of $488 and $641)
    
    
    363
    
    
    
    393Goodwill and other intangible assets
    
    
    141
    
    
    
    141Other assets
    
    
    624
    
    
    
    562Separate account business
    
    
    452
    
    
    
    384Total assets
    
    $
    55,575
    
    
    $
    51,688Liabilities and EquityLiabilities:Insurance reserves:Claim and claim adjustment expenses
    
    $
    26,906
    
    
    $
    27,593Unearned premiums
    
    
    3,392
    
    
    
    3,406Future policy benefits
    
    
    7,864
    
    
    
    7,529Policyholders funds
    
    
    200
    
    
    
    243Collateral on loaned securities and derivatives
    
    
    1
    
    
    
    6Payables for securities purchased
    
    
    502
    
    
    
    12Participating policyholders funds
    
    
    55
    
    
    
    20Long term debt
    
    
    2,056
    
    
    
    2,058Reinsurance balances payable
    
    
    339
    
    
    
    316Other liabilities
    
    
    2,553
    
    
    
    2,824Separate account business
    
    
    452
    
    
    
    384Total liabilities
    
    
    44,320
    
    
    
    44,391Commitments and contingencies (Notes D, E, G, H, and J)Equity:Preferred
stock (12,500,000 shares authorized)2008 Senior Preferred (no par
value; $100,000 stated value; 12,500 shares issued;
held by Loews Corporation)
    
    
    1,250
    
    
    
    1,250Common stock ($2.50 par value; 500,000,000 shares authorized; 273,040,243 shares
issued;
and 269,026,759 and 269,024,408 shares outstanding)
    
    
    683
    
    
    
    683Additional paid-in capital
    
    
    2,176
    
    
    
    2,174Retained earnings
    
    
    7,046
    
    
    
    6,845Accumulated other comprehensive loss
    
    
    (247
    )
    
    
    (3,924
    )Treasury stock (4,013,484 and 4,015,835 shares), at cost
    
    
    (109
    )
    
    
    (109
    )Notes receivable for the issuance of common stock
    
    
    (30
    )
    
    
    (42
    )Total CNAF stockholders equity
    
    
    10,769
    
    
    
    6,877Noncontrolling interests
    
    
    486
    
    
    
    420Total equity
    
    
    11,255
    
    
    
    7,297Total liabilities and equity
    
    $
    55,575
    
    
    $
    51,688
 
 6




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##### Table of Contents



CNA Financial Corporation (CNAF)
 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
 Nine months ended September 30(In millions)
    
    2009
    
    
    2008Cash Flows from Operating ActivitiesNet income
    
    $
    211
    
    
    $
    77Adjustments to reconcile net income to net cash flows provided by
operating activities:(Income) loss from discontinued operations
    
    
    2
    
    
    
    (10
    )Loss on disposal of property and equipment
    
    
    13
    
    
    
    1Deferred income tax provision
    
    
    81
    
    
    
    6Trading portfolio activity
    
    
    (621
    )
    
    
    472Net realized investment losses, net of participating
policyholders interests
    
    
    929
    
    
    
    813Undistributed (earnings) losses of equity method investees
    
    
    (151
    )
    
    
    137Net amortization of investment discount
    
    
    (169
    )
    
    
    (217
    )Depreciation
    
    
    63
    
    
    
    56Changes in:Receivables, net
    
    
    849
    
    
    
    712Accrued investment income
    
    
    (73
    )
    
    
    (54
    )Deferred acquisition costs
    
    
    (13
    )
    
    
    4Prepaid reinsurance premiums
    
    
    14
    
    
    
    (6
    )Federal income taxes recoverable
    
    
    (140
    )
    
    
    (276
    )Insurance reserves
    
    
    (488
    )
    
    
    (238
    )Reinsurance balances payable
    
    
    23
    
    
    
    (34
    )Other assets
    
    
    (66
    )
    
    
    (6
    )Other liabilities
    
    
    (177
    )
    
    
    (174
    )Other, net
    
    
    4
    
    
    
    5Total adjustments
    
    
    80
    
    
    
    1,191Net cash flows provided by operating activities-continuing operations
    
    $
    291
    
    
    $
    1,268Net cash flows used by operating activities-discontinued operations
    
    $
    (16
    )
    
    $
    (7
    )Net cash flows provided by operating activities-total
    
    $
    275
    
    
    $
    1,261Cash Flows from Investing ActivitiesPurchases of fixed maturity securities
    
    $
    (18,099
    )
    
    $
    (39,989
    )Proceeds from fixed maturity securities:Sales
    
    
    15,507
    
    
    
    36,545Maturities, calls and redemptions
    
    
    2,568
    
    
    
    3,374Purchases of equity securities
    
    
    (262
    )
    
    
    (170
    )Proceeds from sales of equity securities
    
    
    510
    
    
    
    177Change in short term investments
    
    
    (460
    )
    
    
    (165
    )Change in collateral on loaned securities and derivatives
    
    
    (5
    )
    
    
    (57
    )Change in other investments
    
    
    101
    
    
    
    (153
    )Purchases of property and equipment
    
    
    (46
    )
    
    
    (90
    )Other, net
    
    
    2
    
    
    
    3Net cash flows used by investing activities-continuing operations
    
    $
    (184
    )
    
    $
    (525
    )Net cash flows provided by investing activities-discontinued operations
    
    $
    16
    
    
    $
    17Net cash flows used by investing activities-total
    
    $
    (168
    )
    
    $
    (508
    )
 
 7




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##### Table of Contents



Nine months ended September 30(In millions)
    
    2009
    
    
    2008Cash Flows from Financing ActivitiesDividends paid to common stockholders
    
    $
    
    
    
    $
    (122
    )Dividends paid to Loews Corporation for 2008 Senior Preferred
    
    
    (94
    )
    
    
    Principal payments on debt
    
    
    
    
    
    
    (150
    )Return of investment contract account balances
    
    
    (10
    )
    
    
    (421
    )Receipts on investment contract account balances
    
    
    3
    
    
    
    3Stock options exercised
    
    
    1
    
    
    
    1Purchase of treasury stock
    
    
    
    
    
    
    (70
    )Other, net
    
    
    28
    
    
    
    26Net cash flows used by financing activities-continuing operations
    
    $
    (72
    )
    
    $
    (733
    )Net cash flows provided (used) by financing activities-discontinued operations
    
    $
    
    
    
    $
    Net cash flows used by financing activities-total
    
    $
    (72
    )
    
    $
    (733
    )Effect of foreign exchange rate changes on cash-continuing operations
    
    
    8
    
    
    
    (6
    )Net change in cash
    
    
    43
    
    
    
    14Net cash transactions from continuing operations to discontinued
operations
    
    
    
    
    
    
    17Net cash transactions from discontinued operations to continuing operations
    
    
    
    
    
    
    (17
    )Cash, beginning of year
    
    
    85
    
    
    
    101Cash, end of period
    
    $
    128
    
    
    $
    115Cash-continuing operations
    
    $
    128
    
    
    $
    115Cash-discontinued operations
    
    
    
    
    
    
    Cash-total
    
    $
    128
    
    
    $
    115
 
 8




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##### Table of Contents



CNA Financial Corporation (CNAF)
 
 Condensed Consolidated Statements of Equity (Unaudited)
 Nine months ended September 30(In millions)
    
    2009
    
    
    2008Preferred StockBalance, beginning and end of period
    
    $
    1,250
    
    
    $
    Common StockBalance, beginning and end of period
    
    
    683
    
    
    
    683Additional Paid-in CapitalBalance, beginning of period
    
    
    2,174
    
    
    
    2,169Stock-based compensation and other
    
    
    2
    
    
    
    3Balance, end of period
    
    
    2,176
    
    
    
    2,172Retained EarningsBalance, beginning of period
    
    
    6,845
    
    
    
    7,285Cumulative effect adjustment from change in impairment
accounting guidance
    
    
    122
    
    
    
    Dividends paid to common stockholders
    
    
    
    
    
    
    (122
    )Dividends paid to Loews Corporation for 2008 Senior Preferred
    
    
    (94
    )
    
    
    Net income attributable to CNAF
    
    
    173
    
    
    
    37Balance, end of period
    
    
    7,046
    
    
    
    7,200Accumulated Other Comprehensive Income (Loss)Balance, beginning of period
    
    
    (3,924
    )
    
    
    103Cumulative effect adjustment from change in impairment
accounting guidance
    
    
    (122
    )
    
    
    Other comprehensive income (loss) attributable to CNAF
    
    
    3,799
    
    
    
    (2,266
    )Balance, end of period
    
    
    (247
    )
    
    
    (2,163
    )Treasury StockBalance, beginning of period
    
    
    (109
    )
    
    
    (39
    )Purchase of treasury stock
    
    
    
    
    
    
    (70
    )Balance, end of period
    
    
    (109
    )
    
    
    (109
    )Notes Receivable for the Issuance of Common StockBalance, beginning of period
    
    
    (42
    )
    
    
    (51
    )Decrease in notes receivable for the issuance of common stock
    
    
    12
    
    
    
    4Balance, end of period
    
    
    (30
    )
    
    
    (47
    )Total CNAF Stockholders Equity
    
    
    10,769
    
    
    
    7,736Noncontrolling InterestsBalance, beginning of period
    
    
    420
    
    
    
    385Net income
    
    
    38
    
    
    
    40Other comprehensive income (loss)
    
    
    29
    
    
    
    (17
    )Other
    
    
    (1
    )
    
    
    (4
    )Balance, end of period
    
    
    486
    
    
    
    404Total Equity
    
    $
    11,255
    
    
    $
    8,140
 
 9




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##### Table of Contents



CNA Financial Corporation
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 Note A. Basis of Presentation
    Note B. Accounting Standards Updates
 Recognition and Presentation of Other-Than-Temporary Impairments
   10




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##### Table of Contents



Note C. Earnings (Loss) Per Share
      11




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##### Table of Contents



Note D. Investments
  Net Investment Income
 Periods ended September 30
    
    Three Months
    
    
    Nine Months(In millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Fixed maturity securities
    
    $
    496
    
    
    $
    501
    
    
    $
    1,458
    
    
    $
    1,495Short term investments
    
    
    7
    
    
    
    29
    
    
    
    28
    
    
    
    94Limited partnerships
    
    
    145
    
    
    
    (77
    )
    
    
    240
    
    
    
    (70
    )Equity securities
    
    
    11
    
    
    
    18
    
    
    
    39
    
    
    
    62Trading portfolio  indexed group annuity (a)
    
    
    
    
    
    
    (22
    )
    
    
    
    
    
    
    (103
    )Trading portfolio  other (b)
    
    
    12
    
    
    
    (1
    )
    
    
    20
    
    
    
    (1
    )Other
    
    
    2
    
    
    
    3
    
    
    
    6
    
    
    
    14Gross investment income
    
    
    673
    
    
    
    451
    
    
    
    1,791
    
    
    
    1,491Investment expense
    
    
    (13
    )
    
    
    (12
    )
    
    
    (36
    )
    
    
    (42
    )Net investment income
    
    $
    660
    
    
    $
    439
    
    
    $
    1,755
    
    
    $
    1,449
 
 (a)
    
    The gains (losses) related to the indexed group annuity trading portfolio, including
net unrealized gains (losses), were substantially offset by a corresponding change in the
policyholders funds reserves supported by this trading portfolio, which was included in
Insurance claims and policyholders benefits on the Condensed Consolidated Statements of
Operations.(b)
    
    Net unrealized gains on trading securities still held included in net investment
income were $6 million for the three and nine months ended September 30, 2009.  Net Realized Investment Gains (Losses)
 Periods ended September 30
    
    Three Months
    
    
    Nine Months(In millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Net realized investment gains (losses):Fixed maturity securities:Gross realized gains
    
    $
    148
    
    
    $
    75
    
    
    $
    352
    
    
    $
    275Gross realized losses
    
    
    (260
    )
    
    
    (390
    )
    
    
    (1,214
    )
    
    
    (750
    )Net realized investment losses on fixed maturity securities
    
    
    (112
    )
    
    
    (315
    )
    
    
    (862
    )
    
    
    (475
    )Equity securities:Gross realized gains
    
    
    20
    
    
    
    10
    
    
    
    97
    
    
    
    21Gross realized losses
    
    
    (1
    )
    
    
    (386
    )
    
    
    (230
    )
    
    
    (426
    )Net realized investment gains (losses) on equity securities
    
    
    19
    
    
    
    (376
    )
    
    
    (133
    )
    
    
    (405
    )Derivatives
    
    
    (13
    )
    
    
    35
    
    
    
    51
    
    
    
    47Short term investments and other
    
    
    6
    
    
    
    5
    
    
    
    15
    
    
    
    20Net realized investment losses, net of participating
policyholders interests
    
    $
    (100
    )
    
    $
    (651
    )
    
    $
    (929
    )
    
    $
    (813
    )
 12




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##### Table of Contents



Periods ended September 30
    
    Three Months
    
    
    Nine Months(In millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Fixed maturity securities available-for-sale:Asset-backed securities:Residential mortgage-backed securities
    
    $
    108
    
    
    $
    29
    
    
    $
    376
    
    
    $
    142Commercial mortgage-backed securities
    
    
    4
    
    
    
    1
    
    
    
    185
    
    
    
    57Other asset-backed securities
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    10Total asset-backed securities
    
    
    112
    
    
    
    30
    
    
    
    592
    
    
    
    209States, municipalities and political subdivisions
 tax-exempt securities
    
    
    12
    
    
    
    1
    
    
    
    27
    
    
    
    1Corporate and other taxable bonds
    
    
    24
    
    
    
    247
    
    
    
    308
    
    
    
    288Redeemable preferred stock
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    Total fixed maturity securities available-for-sale
    
    
    148
    
    
    
    278
    
    
    
    936
    
    
    
    498Equity securities available-for-sale:Common stock
    
    
    
    
    
    
    51
    
    
    
    4
    
    
    
    79Preferred stock
    
    
    
    
    
    
    255
    
    
    
    217
    
    
    
    263Total equity securities available-for-sale
    
    
    
    
    
    
    306
    
    
    
    221
    
    
    
    342Net OTTI losses recognized in earnings
    
    $
    148
    
    
    $
    584
    
    
    $
    1,157
    
    
    $
    840
    13




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##### Table of Contents



Summary of Fixed Maturity and Equity Securities
 Cost or
    
    
    Gross
    
    
    Gross Unrealized Losses
    
    
    Estimated
    
    
    UnrealizedSeptember 30, 2009
    
    Amortized
    
    
    Unrealized
    
    
    Less than
    
    
    12 Months
    
    
    Fair
    
    
    OTTI(In millions)
    
    Cost
    
    
    Gains
    
    
    12 Months
    
    
    or Greater
    
    
    Value
    
    
    LossesFixed maturity securities available-for-sale:U.S. Treasury securities and obligations
of government agencies
    
    $
    223
    
    
    $
    27
    
    
    $
    1
    
    
    $
    
    
    
    $
    249
    
    
    $
    Asset-backed securities:Residential mortgage-backed securities
    
    
    7,345
    
    
    
    81
    
    
    
    371
    
    
    
    500
    
    
    
    6,555
    
    
    
    190Commercial mortgage-backed
securities
    
    
    760
    
    
    
    4
    
    
    
    4
    
    
    
    161
    
    
    
    599
    
    
    
    6Other asset-backed securities
    
    
    701
    
    
    
    12
    
    
    
    1
    
    
    
    40
    
    
    
    672
    
    
    
    Total asset-backed securities
    
    
    8,806
    
    
    
    97
    
    
    
    376
    
    
    
    701
    
    
    
    7,826
    
    
    
    196States, municipalities and political
subdivisions  tax-exempt securities
    
    
    7,434
    
    
    
    295
    
    
    
    75
    
    
    
    168
    
    
    
    7,486
    
    
    
    Corporate and other taxable bonds
    
    
    17,752
    
    
    
    1,233
    
    
    
    281
    
    
    
    214
    
    
    
    18,490
    
    
    
    25Redeemable preferred stock
    
    
    49
    
    
    
    3
    
    
    
    
    
    
    
    1
    
    
    
    51
    
    
    
    Total fixed maturity securities
available-for-sale
    
    
    34,264
    
    
    
    1,655
    
    
    
    733
    
    
    
    1,084
    
    
    
    34,102
    
    
    $
    221Total fixed maturity securities trading
    
    
    616
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    616Equity securities available-for-sale:Common stock
    
    
    60
    
    
    
    381
    
    
    
    
    
    
    
    2
    
    
    
    439Preferred stock
    
    
    579
    
    
    
    39
    
    
    
    18
    
    
    
    67
    
    
    
    533Total equity securities available-for-sale
    
    
    639
    
    
    
    420
    
    
    
    18
    
    
    
    69
    
    
    
    972Total
    
    $
    35,519
    
    
    $
    2,075
    
    
    $
    751
    
    
    $
    1,153
    
    
    $
    35,690
 14




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##### Table of Contents



Summary of Fixed Maturity and Equity Securities
 Cost or
    
    
    Gross
    
    
    Gross Unrealized Losses
    
    
    EstimatedDecember 31, 2008
    
    Amortized
    
    
    Unrealized
    
    
    Less than
    
    
    12 Months
    
    
    Fair(In millions)
    
    Cost
    
    
    Gains
    
    
    12 Months
    
    
    or Greater
    
    
    ValueFixed maturity securities available-for-sale:U.S. Treasury securities and obligations
of government agencies
    
    $
    2,862
    
    
    $
    69
    
    
    $
    1
    
    
    $
    
    
    
    $
    2,930Asset-backed securities
    
    
    9,670
    
    
    
    24
    
    
    
    961
    
    
    
    969
    
    
    
    7,764States, municipalities and political
subdivisions  tax-exempt securities
    
    
    8,557
    
    
    
    90
    
    
    
    609
    
    
    
    623
    
    
    
    7,415Corporate and other taxable bonds
    
    
    12,993
    
    
    
    275
    
    
    
    1,164
    
    
    
    1,374
    
    
    
    10,730Redeemable preferred stock
    
    
    72
    
    
    
    1
    
    
    
    23
    
    
    
    3
    
    
    
    47Total fixed maturity securities
available-for-sale
    
    
    34,154
    
    
    
    459
    
    
    
    2,758
    
    
    
    2,969
    
    
    
    28,886Total fixed maturity securities trading
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Equity securities available-for-sale:Common stock
    
    
    134
    
    
    
    190
    
    
    
    1
    
    
    
    3
    
    
    
    320Preferred stock
    
    
    882
    
    
    
    5
    
    
    
    15
    
    
    
    321
    
    
    
    551Total equity securities available-for-sale
    
    
    1,016
    
    
    
    195
    
    
    
    16
    
    
    
    324
    
    
    
    871Total
    
    $
    35,171
    
    
    $
    654
    
    
    $
    2,774
    
    
    $
    3,293
    
    
    $
    29,758
   Period fromThree Months ended
    
    
    April 1, 2009 to(In millions)
    
    September 30, 2009
    
    
    September 30, 2009Beginning balance of credit losses on fixed maturity securities
    
    $
    212
    
    
    $
    192Additional credit losses for which an OTTI loss was previously recognized
    
    
    57
    
    
    
    78Additional credit losses for which an OTTI loss was not previously recognized
    
    
    65
    
    
    
    149Reductions for securities sold during the period
    
    
    (114
    )
    
    
    (150
    )Reductions for securities the Company intends to sell or more likely than not
will be required to sell
    
    
    (11
    )
    
    
    (60
    )Ending balance of credit losses on fixed maturity securities
    
    $
    209
    
    
    $
    209
    15




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##### Table of Contents



Asset-Backed Securities
      Gross Unrealized Losses by Ratings Distribution
 September 30, 2009
 GrossAmortized
    
    
    Estimated
    
    
    UnrealizedRating
    
    Cost
    
    
    Fair Value
    
    
    LossU.S. Government Agencies
    
    $
    409
    
    
    $
    400
    
    
    $
    9AAA
    
    
    2,730
    
    
    
    2,363
    
    
    
    367AA
    
    
    490
    
    
    
    384
    
    
    
    106A
    
    
    457
    
    
    
    342
    
    
    
    115BBB
    
    
    422
    
    
    
    336
    
    
    
    86Non-investment grade
and equity tranches
    
    
    1,652
    
    
    
    1,258
    
    
    
    394Total
    
    $
    6,160
    
    
    $
    5,083
    
    
    $
    1,077
  16




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##### Table of Contents



States, Municipalities and Political Subdivisions  Tax-Exempt Securities
    Gross Unrealized Losses by Ratings Distribution
 September 30, 2009
 GrossAmortized
    
    
    Estimated
    
    
    UnrealizedRating
    
    Cost
    
    
    Fair Value
    
    
    LossAAA
    
    $
    1,127
    
    
    $
    1,089
    
    
    $
    38AA
    
    
    664
    
    
    
    591
    
    
    
    73A
    
    
    333
    
    
    
    315
    
    
    
    18BBB
    
    
    712
    
    
    
    600
    
    
    
    112Non-investment grade
    
    
    48
    
    
    
    46
    
    
    
    2Total
    
    $
    2,884
    
    
    $
    2,641
    
    
    $
    243
   Corporate and Other Taxable Bonds
  17




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##### Table of Contents



September 30, 2009
    
    
    
    
    
    Estimated
    
    
    Gross(In millions)
    
    Amortized Cost
    
    
    Fair Value
    
    
    Unrealized LossCommunications
    
    $
    287
    
    
    $
    276
    
    
    $
    11Consumer, Cyclical
    
    
    490
    
    
    
    434
    
    
    
    56Consumer, Non-cyclical
    
    
    275
    
    
    
    256
    
    
    
    19Energy
    
    
    315
    
    
    
    296
    
    
    
    19Financial
    
    
    1,962
    
    
    
    1,670
    
    
    
    292Industrial
    
    
    235
    
    
    
    211
    
    
    
    24Utilities
    
    
    469
    
    
    
    419
    
    
    
    50Other
    
    
    252
    
    
    
    228
    
    
    
    24Total
    
    $
    4,285
    
    
    $
    3,790
    
    
    $
    495
 Gross Unrealized Losses by Ratings Distribution
 September 30, 2009
 Estimated
    
    
    GrossRating
    
    Amortized Cost
    
    
    Fair Value
    
    
    Unrealized LossAAA
    
    $
    63
    
    
    $
    57
    
    
    $
    6AA
    
    
    80
    
    
    
    79
    
    
    
    1A
    
    
    951
    
    
    
    864
    
    
    
    87BBB
    
    
    1,900
    
    
    
    1,686
    
    
    
    214Non-investment grade
    
    
    1,291
    
    
    
    1,104
    
    
    
    187Total
    
    $
    4,285
    
    
    $
    3,790
    
    
    $
    495
   Non-Redeemable Preferred Stock
  18




---



##### Table of Contents



Gross Unrealized Losses by Ratings Distribution
 September 30, 2009
 GrossEstimated
    
    
    UnrealizedRating
    
    Amortized Cost
    
    
    Fair Value
    
    
    LossA
    
    $
    95
    
    
    $
    81
    
    
    $
    14BBB
    
    
    396
    
    
    
    331
    
    
    
    65Non-investment grade
    
    
    18
    
    
    
    12
    
    
    
    6Total
    
    $
    509
    
    
    $
    424
    
    
    $
    85
  Contractual Maturity
  September 30, 2009
    
    
    December 31, 2008Cost or
    
    
    Estimated
    
    
    Cost or
    
    
    EstimatedContractual Maturity
    
    Amortized
    
    
    Fair
    
    
    Amortized
    
    
    Fair(In millions)
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    ValueDue in one year or less
    
    $
    1,206
    
    
    $
    1,176
    
    
    $
    3,105
    
    
    $
    2,707Due after one year through five years
    
    
    10,058
    
    
    
    9,990
    
    
    
    10,295
    
    
    
    9,210Due after five years through ten years
    
    
    8,998
    
    
    
    8,928
    
    
    
    5,929
    
    
    
    4,822Due after ten years
    
    
    14,002
    
    
    
    14,008
    
    
    
    14,825
    
    
    
    12,147Total
    
    $
    34,264
    
    
    $
    34,102
    
    
    $
    34,154
    
    
    $
    28,886
 Auction Rate Securities
  19




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##### Table of Contents



Limited Partnerships
     Investment Commitments
   20




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##### Table of Contents



Note E. Derivative Financial Instruments
         21




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##### Table of Contents



Credit Ratings of Underlying Reference
   Obligations
 Fair Value of
    
    
    Maximum Amount of
    
    
    WeightedSeptember 30, 2009
    
    Credit Default
    
    
    Future Payments under
    
    
    Average Years(In millions)
    
    Swaps
    
    
    Credit Default Swaps
    
    
    to MaturityBBB
    
    $
    
    
    
    $
    25
    
    
    
    0.2B
    
    
    
    
    
    
    8
    
    
    
    3.4Total
    
    $
    
    
    
    $
    33
    
    
    
    1.0
 Credit Ratings of Underlying Reference
   Obligations
 Fair Value of
    
    
    Maximum Amount of
    
    
    WeightedDecember 31, 2008
    
    Credit Default
    
    
    Future Payments under
    
    
    Average Years(In millions)
    
    Swaps
    
    
    Credit Default Swaps
    
    
    to MaturityAAA/AA/A
    
    $
    (8
    )
    
    $
    40
    
    
    
    12.3BBB
    
    
    (4
    )
    
    
    55
    
    
    
    3.1B
    
    
    (2
    )
    
    
    8
    
    
    
    4.1CCC and lower
    
    
    (29
    )
    
    
    45
    
    
    
    4.5Total
    
    $
    (43
    )
    
    $
    148
    
    
    
    6.1
   22




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##### Table of Contents



Recognized Gains (Losses)
 Periods ended September 30
    
    Three Months
    
    
    Nine Months(In millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Without hedge designationInterest rate swaps
    
    $
    
    
    
    $
    4
    
    
    $
    61
    
    
    $
    6Credit default swaps  purchased protection
    
    
    (11
    )
    
    
    53
    
    
    
    (46
    )
    
    
    64Credit default swaps  sold protection
    
    
    
    
    
    
    (4
    )
    
    
    2
    
    
    
    (13
    )Total return swaps
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    Futures sold, not yet purchased
    
    
    (2
    )
    
    
    (23
    )
    
    
    21
    
    
    
    (12
    )Commitments to purchase government and
municipal securities (TBAs)
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    3Options embedded in convertible debt securities
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Equity warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )Options written
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    Trading activitiesFutures purchased
    
    
    
    
    
    
    (18
    )
    
    
    
    
    
    
    (96
    )Futures sold, not yet purchased
    
    
    (4
    )
    
    
    
    
    
    
    (5
    )
    
    
    1Currency forwards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Total
    
    $
    (17
    )
    
    $
    16
    
    
    $
    46
    
    
    $
    (47
    )
   23




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##### Table of Contents



Derivative Financial Instruments
 Contractual/September 30, 2009
    
    Notional
    
    
    Estimated Fair Value(In millions)
    
    Amount
    
    
    Asset
    
    
    (Liability)Without hedge designationCredit default swaps  purchased protection
    
    $
    159
    
    
    $
    2
    
    
    $
    (12
    )Credit default swaps  sold protection
    
    
    33
    
    
    
    
    
    
    
    Futures sold, not yet purchased
    
    
    174
    
    
    
    
    
    
    
    Equity warrants
    
    
    2
    
    
    
    
    
    
    
    Trading activitiesFutures sold, not yet purchased
    
    
    130
    
    
    
    
    
    
    
    Total
    
    $
    498
    
    
    $
    2
    
    
    $
    (12
    )
 Derivative Financial Instruments
 Contractual/December 31, 2008
    
    Notional
    
    
    Estimated Fair Value(In millions)
    
    Amount
    
    
    Asset
    
    
    (Liability)Without hedge designationInterest rate swaps
    
    $
    900
    
    
    $
    
    
    
    $
    (66
    )Credit default swaps  purchased protection
    
    
    405
    
    
    
    24
    
    
    
    (2
    )Credit default swaps  sold protection
    
    
    148
    
    
    
    
    
    
    
    (43
    )Equity warrants
    
    
    4
    
    
    
    
    
    
    
    Total
    
    $
    1,457
    
    
    $
    24
    
    
    $
    (111
    )
  24




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##### Table of Contents



Note F. Fair Value
      25




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##### Table of Contents



Assets and Liabilities Measured at Fair Value
  TotalSeptember 30, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    assets/(liabilities)(in millions)
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    at fair valueAssetsFixed maturity securities:U.S. Treasury securities and obligations of
government agencies
    
    $
    731
    
    
    $
    96
    
    
    $
    
    
    
    $
    827Asset-backed securities:Residential mortgage-backed securities
    
    
    
    
    
    
    5,818
    
    
    
    737
    
    
    
    6,555Commercial mortgage-backed securities
    
    
    
    
    
    
    388
    
    
    
    211
    
    
    
    599Other asset-backed securities
    
    
    
    
    
    
    384
    
    
    
    288
    
    
    
    672Total asset-backed securities
    
    
    
    
    
    
    6,590
    
    
    
    1,236
    
    
    
    7,826States, municipalities and political subdivisions -
tax-exempt securities
    
    
    
    
    
    
    6,716
    
    
    
    770
    
    
    
    7,486Corporate and other taxable bonds
    
    
    139
    
    
    
    17,617
    
    
    
    772
    
    
    
    18,528Redeemable preferred stock
    
    
    
    
    
    
    49
    
    
    
    2
    
    
    
    51Total fixed maturity securities
    
    
    870
    
    
    
    31,068
    
    
    
    2,780
    
    
    
    34,718Equity securities
    
    
    478
    
    
    
    484
    
    
    
    10
    
    
    
    972Derivative financial instruments, included in Other
invested assets
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    2Short term investments
    
    
    3,036
    
    
    
    1,031
    
    
    
    8
    
    
    
    4,075Life settlement contracts, included in Other assets
    
    
    
    
    
    
    
    
    
    
    129
    
    
    
    129Discontinued operations investments, included in Other
liabilities
    
    
    25
    
    
    
    107
    
    
    
    16
    
    
    
    148Separate account business
    
    
    59
    
    
    
    353
    
    
    
    40
    
    
    
    452Total assets
    
    $
    4,468
    
    
    $
    33,043
    
    
    $
    2,985
    
    
    $
    40,496LiabilitiesDerivative financial instruments, included in Other
liabilities
    
    $
    
    
    
    $
    
    
    
    $
    (12
    )
    
    $
    (12
    )Total liabilities
    
    $
    
    
    
    $
    
    
    
    $
    (12
    )
    
    $
    (12
    )
 26




---



##### Table of Contents



TotalDecember 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    assets/(liabilities)(in millions)
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    at fair valueAssetsFixed maturity securities
    
    $
    2,028
    
    
    $
    24,367
    
    
    $
    2,492
    
    
    $
    28,887Equity securities
    
    
    567
    
    
    
    94
    
    
    
    210
    
    
    
    871Derivative financial instruments, included in Other
invested assets
    
    
    
    
    
    
    
    
    
    
    24
    
    
    
    24Short term investments
    
    
    2,926
    
    
    
    608
    
    
    
    
    
    
    
    3,534Life settlement contracts, included in Other assets
    
    
    
    
    
    
    
    
    
    
    129
    
    
    
    129Discontinued operations investments, included in
Other
liabilities
    
    
    83
    
    
    
    59
    
    
    
    15
    
    
    
    157Separate account business
    
    
    40
    
    
    
    306
    
    
    
    38
    
    
    
    384Total assets
    
    $
    5,644
    
    
    $
    25,434
    
    
    $
    2,908
    
    
    $
    33,986LiabilitiesDerivative financial instruments, included in Other
liabilities
    
    $
    
    
    
    $
    
    
    
    $
    (111
    )
    
    $
    (111
    )Total liabilities
    
    $
    
    
    
    $
    
    
    
    $
    (111
    )
    
    $
    (111
    )
 27




---



##### Table of Contents



Net realizedinvestmentNet realized
    
    
    gains (losses)investment
    
    
    and netgains (losses)
    
    
    change inand net
    
    
    unrealized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealized gainschange in
    
    
    appreciation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (losses) on Levelunrealized
    
    
    (depreciation)
    
    
    Purchases,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3 assets andappreciation
    
    
    included in
    
    
    sales,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    liabilities held at(depreciation)
    
    
    other
    
    
    issuances
    
    
    Transfers
    
    
    Transfers
    
    
    Balance at
    
    
    September 30,Level 3
    
    Balance at
    
    
    included in
    
    
    comprehensive
    
    
    and
    
    
    into
    
    
    out of
    
    
    September 30,
    
    
    2009 recognized(in millions)
    
    July 1, 2009
    
    
    net income*
    
    
    income
    
    
    settlements
    
    
    Level 3
    
    
    Level 3
    
    
    2009
    
    
    in net income*Fixed maturity securities:Asset-backed securities:Residential
mortgage-backed
securities
    
    $
    808
    
    
    $
    1
    
    
    $
    62
    
    
    $
    20
    
    
    $
    
    
    
    $
    (154
    )
    
    $
    737
    
    
    $
    (1
    )Commercial
mortgage-backed
securities
    
    
    175
    
    
    
    (3
    )
    
    
    28
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    211
    
    
    
    (3
    )Other asset-backed securities
    
    
    141
    
    
    
    1
    
    
    
    14
    
    
    
    132
    
    
    
    
    
    
    
    
    
    
    
    288
    
    
    
    Total asset-backed securities
    
    
    1,124
    
    
    
    (1
    )
    
    
    104
    
    
    
    163
    
    
    
    
    
    
    
    (154
    )
    
    
    1,236
    
    
    
    (4
    )States, municipalities and
political
subdivisions-tax-exempt
securities
    
    
    785
    
    
    
    
    
    
    
    19
    
    
    
    (34
    )
    
    
    
    
    
    
    
    
    
    
    770
    
    
    
    Corporate and other taxable bonds
    
    
    730
    
    
    
    (10
    )
    
    
    67
    
    
    
    63
    
    
    
    5
    
    
    
    (83
    )
    
    
    772
    
    
    
    (10
    )Redeemable preferred stock
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    Total fixed maturity securities
    
    
    2,640
    
    
    
    (11
    )
    
    
    191
    
    
    
    192
    
    
    
    5
    
    
    
    (237
    )
    
    
    2,780
    
    
    
    (14
    )Equity securities
    
    
    209
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (199
    )
    
    
    10
    
    
    
    Derivative financial instruments, net
    
    
    (10
    )
    
    
    (10
    )
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    (4
    )Short term investments
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    Life settlement contracts
    
    
    126
    
    
    
    8
    
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    129
    
    
    
    5Discontinued operations investments
    
    
    13
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    Separate account business
    
    
    38
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    (1
    )
    
    
    40
    
    
    
    Total
    
    $
    3,016
    
    
    $
    (13
    )
    
    $
    195
    
    
    $
    207
    
    
    $
    5
    
    
    $
    (437
    )
    
    $
    2,973
    
    
    $
    (13
    )
 28




---



##### Table of Contents



Net realized
    
    
    Net realizedinvestment
    
    
    investment gainsgains (losses)
    
    
    (losses) and net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealizedand net
    
    
    change in
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    gains (losses) onchange in
    
    
    unrealized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Level 3 assetsunrealized
    
    
    appreciation
    
    
    Purchases,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    and liabilitiesappreciation
    
    
    (depreciation)
    
    
    sales,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    held at(depreciation)
    
    
    included in other
    
    
    issuances
    
    
    Transfers
    
    
    Transfers
    
    
    Balance at
    
    
    September 30,Level 3
    
    Balance at
    
    
    included in
    
    
    comprehensive
    
    
    and
    
    
    into
    
    
    out of
    
    
    September 30,
    
    
    2008 recognized(in millions)
    
    July 1, 2008
    
    
    net loss*
    
    
    loss
    
    
    settlements
    
    
    Level 3
    
    
    Level 3
    
    
    2008
    
    
    in net loss*Fixed maturity securities
    
    $
    3,213
    
    
    $
    (27
    )
    
    $
    (103
    )
    
    $
    (152
    )
    
    $
    138
    
    
    $
    (87
    )
    
    $
    2,982
    
    
    $
    (23
    )Equity securities
    
    
    261
    
    
    
    
    
    
    
    (1
    )
    
    
    (23
    )
    
    
    
    
    
    
    (23
    )
    
    
    214
    
    
    
    Derivative financial instruments, net
    
    
    (67
    )
    
    
    54
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    76Short term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Life settlement contracts
    
    
    118
    
    
    
    4
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    121
    
    
    
    3Discontinued operations investments
    
    
    23
    
    
    
    
    
    
    
    (2
    )
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    20
    
    
    
    Separate account business
    
    
    45
    
    
    
    
    
    
    
    (7
    )
    
    
    (1
    )
    
    
    6
    
    
    
    
    
    
    
    43
    
    
    
    Total
    
    $
    3,593
    
    
    $
    31
    
    
    $
    (113
    )
    
    $
    (156
    )
    
    $
    144
    
    
    $
    (110
    )
    
    $
    3,389
    
    
    $
    56
 29




---



##### Table of Contents



Net realized
    
    
    Net realizedinvestment
    
    
    investment gainsgains (losses)
    
    
    (losses) and net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealizedand net
    
    
    change in
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    gains (losses) onchange in
    
    
    unrealized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Level 3 assetsunrealized
    
    
    appreciation
    
    
    Purchases,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    and liabilitiesappreciation
    
    
    (depreciation)
    
    
    sales,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    held at(depreciation)
    
    
    included in other
    
    
    issuances
    
    
    Transfers
    
    
    Transfers
    
    
    Balance at
    
    
    September 30,Level 3
    
    Balance at
    
    
    included in
    
    
    comprehensive
    
    
    and
    
    
    into
    
    
    out of
    
    
    September 30,
    
    
    2009 recognized(in millions)
    
    January 1, 2009
    
    
    net income*
    
    
    income
    
    
    settlements
    
    
    Level 3
    
    
    Level 3
    
    
    2009
    
    
    in net income*Fixed maturity securities:Asset-backed securities:Residential mortgage-backed
securities
    
    $
    782
    
    
    $
    (22
    )
    
    $
    98
    
    
    $
    (28
    )
    
    $
    71
    
    
    $
    (164
    )
    
    $
    737
    
    
    $
    (13
    )Commercial mortgage-backed
securities
    
    
    186
    
    
    
    (168
    )
    
    
    170
    
    
    
    (3
    )
    
    
    26
    
    
    
    
    
    
    
    211
    
    
    
    (166
    )Other asset-backed securities
    
    
    139
    
    
    
    (29
    )
    
    
    54
    
    
    
    90
    
    
    
    153
    
    
    
    (119
    )
    
    
    288
    
    
    
    (31
    )Total asset-backed securities
    
    
    1,107
    
    
    
    (219
    )
    
    
    322
    
    
    
    59
    
    
    
    250
    
    
    
    (283
    )
    
    
    1,236
    
    
    
    (210
    )States, municipalities and
political
subdivisions-tax-exempt
securities
    
    
    750
    
    
    
    
    
    
    
    74
    
    
    
    (54
    )
    
    
    
    
    
    
    
    
    
    
    770
    
    
    
    Corporate and other taxable bonds
    
    
    622
    
    
    
    (15
    )
    
    
    113
    
    
    
    130
    
    
    
    23
    
    
    
    (101
    )
    
    
    772
    
    
    
    (15
    )Redeemable preferred stock
    
    
    13
    
    
    
    (9
    )
    
    
    9
    
    
    
    7
    
    
    
    
    
    
    
    (18
    )
    
    
    2
    
    
    
    (9
    )Total fixed maturity securities
    
    
    2,492
    
    
    
    (243
    )
    
    
    518
    
    
    
    142
    
    
    
    273
    
    
    
    (402
    )
    
    
    2,780
    
    
    
    (234
    )Equity securities
    
    
    210
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (199
    )
    
    
    10
    
    
    
    Derivative financial instruments, net
    
    
    (87
    )
    
    
    15
    
    
    
    
    
    
    
    62
    
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    (11
    )Short term investments
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    Life settlement contracts
    
    
    129
    
    
    
    24
    
    
    
    
    
    
    
    (24
    )
    
    
    
    
    
    
    
    
    
    
    129
    
    
    
    7Discontinued operations investments
    
    
    15
    
    
    
    
    
    
    
    3
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    Separate account business
    
    
    38
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    (1
    )
    
    
    40
    
    
    
    Total
    
    $
    2,797
    
    
    $
    (204
    )
    
    $
    521
    
    
    $
    188
    
    
    $
    273
    
    
    $
    (602
    )
    
    $
    2,973
    
    
    $
    (238
    )
 30




---



##### Table of Contents



Net realizedinvestment
    
    
    Net realizedgains (losses)
    
    
    investment gainsand net
    
    
    (losses) and net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealized gainschange in
    
    
    change in
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (losses) on Levelunrealized
    
    
    unrealized
    
    
    Purchases,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3 assets andappreciation
    
    
    appreciation
    
    
    sales,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    liabilities held atBalance at
    
    
    (depreciation)
    
    
    (depreciation)
    
    
    issuances
    
    
    Transfers
    
    
    Transfers
    
    
    Balance at
    
    
    September 30,Level 3
    
    January 1,
    
    
    included in
    
    
    included in other
    
    
    and
    
    
    into
    
    
    out of
    
    
    September 30,
    
    
    2008 recognized(in millions)
    
    2008
    
    
    net income*
    
    
    comprehensive loss
    
    
    settlements
    
    
    Level 3
    
    
    Level 3
    
    
    2008
    
    
    in net income*Fixed maturity securities
    
    $
    2,684
    
    
    $
    (150
    )
    
    $
    (373
    )
    
    $
    (68
    )
    
    $
    1,392
    
    
    $
    (503
    )
    
    $
    2,982
    
    
    $
    (158
    )Equity securities
    
    
    196
    
    
    
    (2
    )
    
    
    (4
    )
    
    
    25
    
    
    
    22
    
    
    
    (23
    )
    
    
    214
    
    
    
    (4
    )Derivative financial instruments, net
    
    
    2
    
    
    
    55
    
    
    
    
    
    
    
    (48
    )
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    7Short term investments
    
    
    85
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (85
    )
    
    
    
    
    
    
    Life settlement contracts
    
    
    115
    
    
    
    34
    
    
    
    
    
    
    
    (28
    )
    
    
    
    
    
    
    
    
    
    
    121
    
    
    
    8Discontinued operations investments
    
    
    42
    
    
    
    
    
    
    
    (2
    )
    
    
    (3
    )
    
    
    
    
    
    
    (17
    )
    
    
    20
    
    
    
    Separate account business
    
    
    30
    
    
    
    
    
    
    
    (11
    )
    
    
    (2
    )
    
    
    26
    
    
    
    
    
    
    
    43
    
    
    
    Total
    
    $
    3,154
    
    
    $
    (63
    )
    
    $
    (390
    )
    
    $
    (124
    )
    
    $
    1,440
    
    
    $
    (628
    )
    
    $
    3,389
    
    
    $
    (147
    )
 31




---



##### Table of Contents



*
    
    Net realized and unrealized gains and losses shown above are reported in Net income (loss) as
follows: Major Category of Assets and Liabilities
    
    Condensed Consolidated Statement of Operations Line ItemsFixed maturity securities available-for-sale
    
    Net realized investment gains (losses)Fixed maturity securities trading
    
    Net investment incomeEquity securities
    
    Net realized investment gains (losses)Derivative financial instruments held in a
trading portfolio
    
    Net investment incomeDerivative financial instruments, other
    
    Net realized investment gains (losses)Life settlement contracts
    
    Other revenues
      Fixed Maturity Securities
  32




---



##### Table of Contents



Equity Securities
  Derivative Financial Instruments
  Short Term Investments
  Life Settlement Contracts
  Discontinued Operations Investments
  Separate Account Business
  Financial Assets and Liabilities Not Measured at Fair Value
  September 30, 2009
    
    December 31, 2008Carrying
    
    Estimated
    
    Carrying
    
    Estimated(In millions)
    
    Amount
    
    Fair Value
    
    Amount
    
    Fair ValueFinancial assetsNotes receivable for the issuance of
common stock
    
    $
    30
    
    
    $
    30
    
    
    $
    42
    
    
    $
    42Financial liabilitiesPremium deposits and annuity contracts
    
    $
    107
    
    
    $
    110
    
    
    $
    111
    
    
    $
    113Long term debt
    
    
    2,056
    
    
    
    1,953
    
    
    
    2,058
    
    
    
    1,585
 33




---



##### Table of Contents



Note G. Claim and Claim Adjustment Expense Reserves
     34




---



##### Table of Contents



A&E Reserves
  A&E Reserves
 September 30, 2009
    
    
    December 31, 2008Environmental
    
    
    
    
    
    
    Environmental(In millions)
    
    Asbestos
    
    
    Pollution
    
    
    Asbestos
    
    
    PollutionGross reserves
    
    $
    1,912
    
    
    $
    345
    
    
    $
    2,112
    
    
    $
    392Ceded reserves
    
    
    (821
    )
    
    
    (119
    )
    
    
    (910
    )
    
    
    (130
    )Net reserves
    
    $
    1,091
    
    
    $
    226
    
    
    $
    1,202
    
    
    $
    262
 Asbestos
     A.P. Green:
 35




---



##### Table of Contents



Keasbey:
   Burns & Roe:
 Direct Action Case  Montana: Pennock, et al. v. Maryland Casualty, et al.
 36




---



##### Table of Contents



Environmental Pollution
  Net Prior Year Development
   37




---



##### Table of Contents



Three Month Comparison
 Net Prior Year Development  Three months ended September 30, 2009
 Corporate &Standard
    
    
    Specialty
    
    
    Other Non-(In millions)
    
    Lines
    
    
    Lines
    
    
    Core
    
    
    TotalPretax (favorable) unfavorable net prior year
claim and allocated claim adjustment expense
reserve development:Core (Non-A&E)
    
    $
    (13
    )
    
    $
    (47
    )
    
    $
    1
    
    
    $
    (59
    )A&E
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Pretax (favorable) unfavorable net prior year
development before impact of premium development
    
    
    (13
    )
    
    
    (47
    )
    
    
    1
    
    
    
    (59
    )Pretax (favorable) unfavorable premium development
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    12Total pretax (favorable) unfavorable net prior year
development
    
    $
    (1
    )
    
    $
    (47
    )
    
    $
    1
    
    
    $
    (47
    )
 Net Prior Year Development
Three months ended September 30, 2008
 Corporate &Standard
    
    
    Specialty
    
    
    Other Non-(In millions)
    
    Lines
    
    
    Lines
    
    
    Core
    
    
    TotalPretax (favorable) unfavorable net prior year
claim and allocated claim adjustment expense
reserve development:Core (Non-A&E)
    
    $
    (4
    )
    
    $
    (68
    )
    
    $
    1
    
    
    $
    (71
    )A&E
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    13Pretax (favorable) unfavorable net prior year
development before impact of premium development
    
    
    (4
    )
    
    
    (68
    )
    
    
    14
    
    
    
    (58
    )Pretax (favorable) unfavorable premium development
    
    
    3
    
    
    
    (2
    )
    
    
    (3
    )
    
    
    (2
    )Total pretax (favorable) unfavorable net prior year
development
    
    $
    (1
    )
    
    $
    (70
    )
    
    $
    11
    
    
    $
    (60
    )
 2009 Net Prior Year Development
 Standard Lines
   38




---



##### Table of Contents



Specialty Lines
   2008 Net Prior Year Development
 Standard Lines
    39




---



##### Table of Contents



Specialty Lines
    Corporate & Other Non-Core
  40




---



##### Table of Contents



Nine Month Comparison
 Net Prior Year Development  Nine months ended September 30, 2009
 Corporate &Standard
    
    
    Specialty
    
    
    Other Non-(In millions)
    
    Lines
    
    
    Lines
    
    
    Core
    
    
    TotalPretax (favorable) unfavorable net prior year
claim and allocated
claim adjustment expense reserve development:Core (Non-A&E)
    
    $
    (123
    )
    
    $
    (128
    )
    
    $
    6
    
    
    $
    (245
    )A&E
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Pretax (favorable) unfavorable net prior year
development before
impact of premium development
    
    
    (123
    )
    
    
    (128
    )
    
    
    6
    
    
    
    (245
    )Pretax (favorable) unfavorable premium development
    
    
    88
    
    
    
    (3
    )
    
    
    (3
    )
    
    
    82Total pretax (favorable) unfavorable net prior year
development
    
    $
    (35
    )
    
    $
    (131
    )
    
    $
    3
    
    
    $
    (163
    )
 Net Prior Year Development
Nine months ended September 30, 2008
 Corporate &Standard
    
    
    Specialty
    
    
    Other Non-(In millions)
    
    Lines
    
    
    Lines
    
    
    Core
    
    
    TotalPretax (favorable) unfavorable net prior year
claim and allocated
claim adjustment expense reserve development:Core (Non-A&E)
    
    $
    (54
    )
    
    $
    (50
    )
    
    $
    9
    
    
    $
    (95
    )A&E
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    21Pretax (favorable) unfavorable net prior year
development before
impact of premium development
    
    
    (54
    )
    
    
    (50
    )
    
    
    30
    
    
    
    (74
    )Pretax (favorable) unfavorable premium development
    
    
    4
    
    
    
    (20
    )
    
    
    (3
    )
    
    
    (19
    )Total pretax (favorable) unfavorable net prior year
development
    
    $
    (50
    )
    
    $
    (70
    )
    
    $
    27
    
    
    $
    (93
    )
 2009 Net Prior Year Development
 Standard Lines
   41




---



##### Table of Contents



Specialty Lines
   2008 Net Prior Year Development
 Standard Lines
   42




---



##### Table of Contents



Specialty Lines
     Corporate & Other Non-Core
  43




---



##### Table of Contents



Note H Legal Proceedings and Contingent Liabilities
 Insurance Brokerage Antitrust Litigation
 In re Insurance Brokerage Antitrust Litigation
  California Long Term Care Litigation
 Shaffer v. Continental Casualty Company
 Asbestos and Environmental Pollution (A&E) Reserves
  Other Litigation
  44




---



##### Table of Contents



Note I. Benefit Plans
  Net Periodic Cost (Benefit)
 Periods ended September 30
    
    Three Months
    
    
    Nine Months(In millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Pension cost (benefit)Service cost
    
    $
    4
    
    
    $
    5
    
    
    $
    12
    
    
    $
    15Interest cost on projected benefit obligation
    
    
    38
    
    
    
    37
    
    
    
    115
    
    
    
    110Expected return on plan assets
    
    
    (37
    )
    
    
    (45
    )
    
    
    (109
    )
    
    
    (134
    )Actuarial loss
    
    
    7
    
    
    
    1
    
    
    
    19
    
    
    
    3Net periodic pension cost (benefit)
    
    $
    12
    
    
    $
    (2
    )
    
    $
    37
    
    
    $
    (6
    )Postretirement benefitService cost
    
    $
    
    
    
    $
    
    
    
    $
    1
    
    
    $
    1Interest cost on projected benefit obligation
    
    
    3
    
    
    
    2
    
    
    
    7
    
    
    
    6Prior service cost amortization
    
    
    (4
    )
    
    
    (3
    )
    
    
    (12
    )
    
    
    (11
    )Actuarial loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Net periodic postretirement benefit
    
    $
    (1
    )
    
    $
    (1
    )
    
    $
    (4
    )
    
    $
    (3
    )
 45




---



##### Table of Contents



Note J. Commitments, Contingencies, and Guarantees
 Commitments and Contingencies
     Guarantees
     46




---



##### Table of Contents



47




---



##### Table of Contents



Note K. Business Segments
       48




---



##### Table of Contents



Three months ended
    
    
    
    
    
    
    
    
    
    
    
    
    
    CorporateSeptember 30, 2009
    
    Standard
    
    
    Specialty
    
    
    Life & Group
    
    
    & Other(In millions)
    
    Lines
    
    
    Lines
    
    
    Non-Core
    
    
    Non-Core
    
    
    Eliminations
    
    
    TotalRevenuesNet earned premiums
    
    $
    702
    
    
    $
    859
    
    
    $
    149
    
    
    $
    (3
    )
    
    $
    
    
    
    $
    1,707Net investment income
    
    
    243
    
    
    
    187
    
    
    
    169
    
    
    
    61
    
    
    
    
    
    
    
    660Other revenues
    
    
    12
    
    
    
    54
    
    
    
    2
    
    
    
    5
    
    
    
    
    
    
    
    73Total operating revenues
    
    
    957
    
    
    
    1,100
    
    
    
    320
    
    
    
    63
    
    
    
    
    
    
    
    2,440Claims, benefits and expensesNet incurred claims and benefits
    
    
    519
    
    
    
    533
    
    
    
    199
    
    
    
    25
    
    
    
    
    
    
    
    1,276Policyholders dividends
    
    
    4
    
    
    
    1
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    7Amortization of deferred acquisition costs
    
    
    169
    
    
    
    191
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    365Other insurance related expenses
    
    
    95
    
    
    
    63
    
    
    
    45
    
    
    
    1
    
    
    
    
    
    
    
    204Other expenses
    
    
    9
    
    
    
    59
    
    
    
    7
    
    
    
    27
    
    
    
    
    
    
    
    102Total claims, benefits and expenses
    
    
    796
    
    
    
    847
    
    
    
    258
    
    
    
    53
    
    
    
    
    
    
    
    1,954Operating income from continuing operations before income tax
    
    
    161
    
    
    
    253
    
    
    
    62
    
    
    
    10
    
    
    
    
    
    
    
    486Income tax expense on operating income
    
    
    (49
    )
    
    
    (81
    )
    
    
    (11
    )
    
    
    (1
    )
    
    
    
    
    
    
    (142
    )Net operating income, after-tax, attributable to
noncontrolling interests
    
    
    
    
    
    
    (13
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13
    )Net operating income from continuing operations attributable
to CNAF
    
    
    112
    
    
    
    159
    
    
    
    51
    
    
    
    9
    
    
    
    
    
    
    
    331Net realized investment gains (losses), net of participating
policyholders interests
    
    
    (69
    )
    
    
    (35
    )
    
    
    21
    
    
    
    (17
    )
    
    
    
    
    
    
    (100
    )Income tax (expense) benefit on net realized investment
gains (losses)
    
    
    24
    
    
    
    11
    
    
    
    (7
    )
    
    
    6
    
    
    
    
    
    
    
    34Net realized investment gains, after-tax, attributable to
noncontrolling interests
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )Net realized investment gains (losses) attributable to CNAF
    
    
    (45
    )
    
    
    (25
    )
    
    
    14
    
    
    
    (11
    )
    
    
    
    
    
    
    (67
    )Net income (loss) from continuing operations attributable to
CNAF
    
    $
    67
    
    
    $
    134
    
    
    $
    65
    
    
    $
    (2
    )
    
    $
    
    
    
    $
    264
 49




---



##### Table of Contents



Three months ended
    
    
    
    
    
    
    
    
    
    
    
    
    
    CorporateSeptember 30, 2008
    
    Standard
    
    
    Specialty
    
    
    Life & Group
    
    
    & Other(In millions)
    
    Lines
    
    
    Lines
    
    
    Non-Core
    
    
    Non-Core
    
    
    Eliminations
    
    
    TotalRevenuesNet earned premiums
    
    $
    762
    
    
    $
    882
    
    
    $
    154
    
    
    $
    2
    
    
    $
    (1
    )
    
    $
    1,799Net investment income
    
    
    136
    
    
    
    121
    
    
    
    135
    
    
    
    47
    
    
    
    
    
    
    
    439Other revenues
    
    
    13
    
    
    
    59
    
    
    
    (1
    )
    
    
    1
    
    
    
    
    
    
    
    72Total operating revenues
    
    
    911
    
    
    
    1,062
    
    
    
    288
    
    
    
    50
    
    
    
    (1
    )
    
    
    2,310Claims, benefits and expensesNet incurred claims and benefits
    
    
    734
    
    
    
    516
    
    
    
    294
    
    
    
    (19
    )
    
    
    
    
    
    
    1,525Policyholders dividends
    
    
    (10
    )
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    (6
    )Amortization of deferred acquisition costs
    
    
    174
    
    
    
    177
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    355Other insurance related expenses
    
    
    87
    
    
    
    79
    
    
    
    51
    
    
    
    6
    
    
    
    (1
    )
    
    
    222Other expenses
    
    
    20
    
    
    
    52
    
    
    
    7
    
    
    
    26
    
    
    
    
    
    
    
    105Total claims, benefits and expenses
    
    
    1,005
    
    
    
    826
    
    
    
    358
    
    
    
    13
    
    
    
    (1
    )
    
    
    2,201Operating income (loss) from continuing operations
before income tax
    
    
    (94
    )
    
    
    236
    
    
    
    (70
    )
    
    
    37
    
    
    
    
    
    
    
    109Income tax (expense) benefit on operating income (loss)
    
    
    41
    
    
    
    (74
    )
    
    
    34
    
    
    
    (11
    )
    
    
    
    
    
    
    (10
    )Net operating (income) loss, after-tax, attributable
to noncontrolling interests
    
    
    
    
    
    
    (17
    )
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    (16
    )Net operating income (loss) from continuing operations
attributable to CNAF
    
    
    (53
    )
    
    
    145
    
    
    
    (36
    )
    
    
    27
    
    
    
    
    
    
    
    83Net realized investment losses, net of participating
policyholders interests
    
    
    (178
    )
    
    
    (116
    )
    
    
    (298
    )
    
    
    (59
    )
    
    
    
    
    
    
    (651
    )Income tax benefit on net realized investment losses
    
    
    63
    
    
    
    41
    
    
    
    104
    
    
    
    20
    
    
    
    
    
    
    
    228Net realized investment (gains) losses, after-tax,
attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net realized investment losses attributable to CNAF
    
    
    (115
    )
    
    
    (75
    )
    
    
    (194
    )
    
    
    (39
    )
    
    
    
    
    
    
    (423
    )Net income (loss) from continuing operations
attributable to CNAF
    
    $
    (168
    )
    
    $
    70
    
    
    $
    (230
    )
    
    $
    (12
    )
    
    $
    
    
    
    $
    (340
    )
 50




---



##### Table of Contents



Nine months ended
    
    
    
    
    
    
    
    
    
    
    
    
    
    CorporateSeptember 30, 2009
    
    Standard
    
    
    Specialty
    
    
    Life & Group
    
    
    & Other(In millions)
    
    Lines
    
    
    Lines
    
    
    Non-Core
    
    
    Non-Core
    
    
    Eliminations
    
    
    TotalRevenuesNet earned premiums
    
    $
    2,083
    
    
    $
    2,505
    
    
    $
    447
    
    
    $
    2
    
    
    $
    (2
    )
    
    $
    5,035Net investment income
    
    
    615
    
    
    
    483
    
    
    
    496
    
    
    
    161
    
    
    
    
    
    
    
    1,755Other revenues
    
    
    41
    
    
    
    159
    
    
    
    7
    
    
    
    6
    
    
    
    
    
    
    
    213Total operating revenues
    
    
    2,739
    
    
    
    3,147
    
    
    
    950
    
    
    
    169
    
    
    
    (2
    )
    
    
    7,003Claims, benefits and expensesNet incurred claims and benefits
    
    
    1,507
    
    
    
    1,554
    
    
    
    773
    
    
    
    69
    
    
    
    
    
    
    
    3,903Policyholders dividends
    
    
    6
    
    
    
    7
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    16Amortization of deferred acquisition costs
    
    
    498
    
    
    
    550
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    1,063Other insurance related expenses
    
    
    239
    
    
    
    185
    
    
    
    138
    
    
    
    3
    
    
    
    (2
    )
    
    
    563Other expenses
    
    
    40
    
    
    
    155
    
    
    
    64
    
    
    
    87
    
    
    
    
    
    
    
    346Total claims, benefits and expenses
    
    
    2,290
    
    
    
    2,451
    
    
    
    993
    
    
    
    159
    
    
    
    (2
    )
    
    
    5,891Operating income (loss) from continuing operations
before income tax
    
    
    449
    
    
    
    696
    
    
    
    (43
    )
    
    
    10
    
    
    
    
    
    
    
    1,112Income tax (expense) benefit on operating income (loss)
    
    
    (131
    )
    
    
    (207
    )
    
    
    46
    
    
    
    3
    
    
    
    
    
    
    
    (289
    )Net operating income, after-tax, attributable to
noncontrolling interests
    
    
    
    
    
    
    (38
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38
    )Net operating income from continuing operations
attributable to CNAF
    
    
    318
    
    
    
    451
    
    
    
    3
    
    
    
    13
    
    
    
    
    
    
    
    785Net realized investment losses, net of participating
policyholders interests
    
    
    (418
    )
    
    
    (247
    )
    
    
    (156
    )
    
    
    (108
    )
    
    
    
    
    
    
    (929
    )Income tax benefit on net realized investment losses
    
    
    146
    
    
    
    80
    
    
    
    55
    
    
    
    38
    
    
    
    
    
    
    
    319Net realized investment (gains) losses, after-tax,
attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net realized investment losses attributable to CNAF
    
    
    (272
    )
    
    
    (167
    )
    
    
    (101
    )
    
    
    (70
    )
    
    
    
    
    
    
    (610
    )Net income (loss) from continuing operations
attributable to CNAF
    
    $
    46
    
    
    $
    284
    
    
    $
    (98
    )
    
    $
    (57
    )
    
    $
    
    
    
    $
    175
 September 30, 2009(In millions)Reinsurance receivables
    
    $
    2,135
    
    
    $
    1,388
    
    
    $
    1,759
    
    
    $
    1,719
    
    
    $
    
    
    
    $
    7,001Insurance receivables
    
    $
    1,157
    
    
    $
    767
    
    
    $
    8
    
    
    $
    (1
    )
    
    $
    
    
    
    $
    1,931Deferred acquisition costs
    
    $
    300
    
    
    $
    381
    
    
    $
    457
    
    
    $
    
    
    
    $
    
    
    
    $
    1,138Insurance reservesClaim and claim adjustment expenses
    
    $
    11,658
    
    
    $
    8,618
    
    
    $
    2,866
    
    
    $
    3,764
    
    
    $
    
    
    
    $
    26,906Unearned premiums
    
    
    1,395
    
    
    
    1,850
    
    
    
    145
    
    
    
    3
    
    
    
    (1
    )
    
    
    3,392Future policy benefits
    
    
    
    
    
    
    
    
    
    
    7,864
    
    
    
    
    
    
    
    
    
    
    
    7,864Policyholders funds
    
    
    10
    
    
    
    13
    
    
    
    177
    
    
    
    
    
    
    
    
    
    
    
    200
 51




---



##### Table of Contents



Nine months ended
    
    
    
    
    
    
    
    
    
    
    
    
    
    CorporateSeptember 30, 2008
    
    Standard
    
    
    Specialty
    
    
    Life & Group
    
    
    & Other(In millions)
    
    Lines
    
    
    Lines
    
    
    Non-Core
    
    
    Non-Core
    
    
    Eliminations
    
    
    TotalRevenuesNet earned premiums
    
    $
    2,313
    
    
    $
    2,614
    
    
    $
    460
    
    
    $
    2
    
    
    $
    (3
    )
    
    $
    5,386Net investment income
    
    
    499
    
    
    
    408
    
    
    
    376
    
    
    
    166
    
    
    
    
    
    
    
    1,449Other revenues
    
    
    42
    
    
    
    166
    
    
    
    20
    
    
    
    12
    
    
    
    
    
    
    
    240Total operating revenues
    
    
    2,854
    
    
    
    3,188
    
    
    
    856
    
    
    
    180
    
    
    
    (3
    )
    
    
    7,075Claims, benefits and expensesNet incurred claims and benefits
    
    
    1,877
    
    
    
    1,641
    
    
    
    822
    
    
    
    28
    
    
    
    
    
    
    
    4,368Policyholders dividends
    
    
    (3
    )
    
    
    10
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    12Amortization of deferred acquisition costs
    
    
    528
    
    
    
    545
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    1,083Other insurance related expenses
    
    
    193
    
    
    
    182
    
    
    
    152
    
    
    
    8
    
    
    
    (3
    )
    
    
    532Other expenses
    
    
    44
    
    
    
    144
    
    
    
    17
    
    
    
    87
    
    
    
    
    
    
    
    292Total claims, benefits and expenses
    
    
    2,639
    
    
    
    2,522
    
    
    
    1,006
    
    
    
    123
    
    
    
    (3
    )
    
    
    6,287Operating income (loss) from continuing operations
before income tax
    
    
    215
    
    
    
    666
    
    
    
    (150
    )
    
    
    57
    
    
    
    
    
    
    
    788Income tax (expense) benefit on operating income (loss)
    
    
    (49
    )
    
    
    (212
    )
    
    
    81
    
    
    
    (14
    )
    
    
    
    
    
    
    (194
    )Net operating income, after-tax, attributable to
noncontrolling interests
    
    
    
    
    
    
    (40
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40
    )Net operating income (loss) from continuing operations
attributable to CNAF
    
    
    166
    
    
    
    414
    
    
    
    (69
    )
    
    
    43
    
    
    
    
    
    
    
    554Net realized investment losses, net of participating
policyholders interests
    
    
    (254
    )
    
    
    (154
    )
    
    
    (321
    )
    
    
    (84
    )
    
    
    
    
    
    
    (813
    )Income tax benefit on net realized investment losses
    
    
    89
    
    
    
    55
    
    
    
    112
    
    
    
    30
    
    
    
    
    
    
    
    286Net realized investment (gains) losses, after-tax,
attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net realized investment losses attributable to CNAF
    
    
    (165
    )
    
    
    (99
    )
    
    
    (209
    )
    
    
    (54
    )
    
    
    
    
    
    
    (527
    )Net income (loss) from continuing operations
attributable to CNAF
    
    $
    1
    
    
    $
    315
    
    
    $
    (278
    )
    
    $
    (11
    )
    
    $
    
    
    
    $
    27
 December 31, 2008(In millions)Reinsurance receivables
    
    $
    2,266
    
    
    $
    1,496
    
    
    $
    1,907
    
    
    $
    2,092
    
    
    $
    
    
    
    $
    7,761Insurance receivables
    
    $
    1,264
    
    
    $
    765
    
    
    $
    6
    
    
    $
    4
    
    
    $
    
    
    
    $
    2,039Deferred acquisition costs
    
    $
    293
    
    
    $
    360
    
    
    $
    472
    
    
    $
    
    
    
    $
    
    
    
    $
    1,125Insurance reservesClaim and claim adjustment expenses
    
    $
    12,048
    
    
    $
    8,282
    
    
    $
    2,862
    
    
    $
    4,401
    
    
    $
    
    
    
    $
    27,593Unearned premiums
    
    
    1,401
    
    
    
    1,848
    
    
    
    152
    
    
    
    5
    
    
    
    
    
    
    
    3,406Future policy benefits
    
    
    
    
    
    
    
    
    
    
    7,529
    
    
    
    
    
    
    
    
    
    
    
    7,529Policyholders funds
    
    
    14
    
    
    
    10
    
    
    
    219
    
    
    
    
    
    
    
    
    
    
    
    243
 52




---



##### Table of Contents



Revenue by Line of Business
 Periods ended September 30
    
    Three Months
    
    
    Nine Months(In millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Standard LinesBusiness Insurance
    
    $
    150
    
    
    $
    140
    
    
    $
    393
    
    
    $
    450Commercial Insurance
    
    
    738
    
    
    
    593
    
    
    
    1,928
    
    
    
    2,150Standard Lines revenue
    
    
    888
    
    
    
    733
    
    
    
    2,321
    
    
    
    2,600Specialty LinesU.S. Specialty Lines
    
    
    667
    
    
    
    547
    
    
    
    1,786
    
    
    
    1,834Surety
    
    
    123
    
    
    
    121
    
    
    
    355
    
    
    
    356Warranty
    
    
    70
    
    
    
    70
    
    
    
    191
    
    
    
    218CNA Global
    
    
    205
    
    
    
    208
    
    
    
    568
    
    
    
    626Specialty Lines revenue
    
    
    1,065
    
    
    
    946
    
    
    
    2,900
    
    
    
    3,034Life & Group Non-CoreLife & Annuity
    
    
    80
    
    
    
    (18
    )
    
    
    167
    
    
    
    15Health
    
    
    257
    
    
    
    11
    
    
    
    620
    
    
    
    491Other
    
    
    4
    
    
    
    (3
    )
    
    
    7
    
    
    
    29Life & Group Non-Core revenue
    
    
    341
    
    
    
    (10
    )
    
    
    794
    
    
    
    535Corporate & Other Non-CoreCNA Re
    
    
    13
    
    
    
    
    
    
    
    22
    
    
    
    32Other
    
    
    33
    
    
    
    (9
    )
    
    
    39
    
    
    
    64Corporate & Other Non-Core revenue
    
    
    46
    
    
    
    (9
    )
    
    
    61
    
    
    
    96Eliminations
    
    
    
    
    
    
    (1
    )
    
    
    (2
    )
    
    
    (3
    )Total revenue
    
    $
    2,340
    
    
    $
    1,659
    
    
    $
    6,074
    
    
    $
    6,262
 53




---



##### Table of Contents



Note L Discontinued Operations
   Discontinued Operations
 Periods ended September 30
    
    Three Months
    
    
    Nine Months(In millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues:Net investment income
    
    $
    1
    
    
    $
    2
    
    
    $
    4
    
    
    $
    6Net realized investment gains and other
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    3Total revenues
    
    
    2
    
    
    
    3
    
    
    
    5
    
    
    
    9Insurance related expenses
    
    
    3
    
    
    
    3
    
    
    
    7
    
    
    
    8Income (loss) before income taxes
    
    
    (1
    )
    
    
    
    
    
    
    (2
    )
    
    
    1Income tax (expense) benefit
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    9Income (loss) from discontinued operations, net of tax
    
    $
    (1
    )
    
    $
    9
    
    
    $
    (2
    )
    
    $
    10
   Discontinued Operations
 (In millions)
    
    September 30, 2009
    
    
    December 31, 2008Assets:Investments
    
    $
    148
    
    
    $
    157Reinsurance receivables
    
    
    4
    
    
    
    6Cash
    
    
    
    
    
    
    Other assets
    
    
    2
    
    
    
    1Total assets
    
    
    154
    
    
    
    164Liabilities:Insurance reserves
    
    
    150
    
    
    
    162Other liabilities
    
    
    6
    
    
    
    8Total liabilities
    
    
    156
    
    
    
    170Net liabilities of discontinued operations
    
    $
    (2
    )
    
    $
    (6
    )
  54




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##### Table of Contents



CNA Financial Corporation
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
    55




---



##### Table of Contents



CONSOLIDATED OPERATIONS
 Results of Operations
  Periods ended September 30
    
    Three Months
    
    
    Nine Months(In millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008RevenuesNet earned premiums
    
    $
    1,707
    
    
    $
    1,799
    
    
    $
    5,035
    
    
    $
    5,386Net investment income
    
    
    660
    
    
    
    439
    
    
    
    1,755
    
    
    
    1,449Other revenues
    
    
    73
    
    
    
    72
    
    
    
    213
    
    
    
    240Total operating revenues
    
    
    2,440
    
    
    
    2,310
    
    
    
    7,003
    
    
    
    7,075Claims, benefits and expensesNet incurred claims and benefits
    
    
    1,276
    
    
    
    1,525
    
    
    
    3,903
    
    
    
    4,368Policyholders dividends
    
    
    7
    
    
    
    (6
    )
    
    
    16
    
    
    
    12Amortization of deferred acquisition costs
    
    
    365
    
    
    
    355
    
    
    
    1,063
    
    
    
    1,083Other insurance related expenses
    
    
    204
    
    
    
    222
    
    
    
    563
    
    
    
    532Other expenses
    
    
    102
    
    
    
    105
    
    
    
    346
    
    
    
    292Total claims, benefits and expenses
    
    
    1,954
    
    
    
    2,201
    
    
    
    5,891
    
    
    
    6,287Operating income from continuing operations before
income tax
    
    
    486
    
    
    
    109
    
    
    
    1,112
    
    
    
    788Income tax expense on operating income
    
    
    (142
    )
    
    
    (10
    )
    
    
    (289
    )
    
    
    (194
    )Net operating income, after-tax, attributable to
noncontrolling interests
    
    
    (13
    )
    
    
    (16
    )
    
    
    (38
    )
    
    
    (40
    )Net operating income from continuing operations
attributable to CNAF
    
    
    331
    
    
    
    83
    
    
    
    785
    
    
    
    554Net realized investment losses, net of
participating policyholders interests
    
    
    (100
    )
    
    
    (651
    )
    
    
    (929
    )
    
    
    (813
    )Income tax benefit on net realized investment losses
    
    
    34
    
    
    
    228
    
    
    
    319
    
    
    
    286Net realized investment gains, after-tax,
attributable to noncontrolling interests
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    Net realized investment losses attributable to CNAF
    
    
    (67
    )
    
    
    (423
    )
    
    
    (610
    )
    
    
    (527
    )Income (loss) from continuing operations
attributable to CNAF
    
    
    264
    
    
    
    (340
    )
    
    
    175
    
    
    
    27Income (loss) from discontinued operations
attributable to CNAF, net of income tax (expense)
benefit of $0, $9, $0 and $9
    
    
    (1
    )
    
    
    9
    
    
    
    (2
    )
    
    
    10Net income (loss) attributable to CNAF
    
    $
    263
    
    
    $
    (331
    )
    
    $
    173
    
    
    $
    37
 Three Month Comparison
   56




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Nine Month Comparison
     57




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##### Table of Contents



Critical Accounting Estimates
    
    
    Insurance Reserves
    
    Reinsurance
    
    Valuation of Investments and Impairment of Securities
    
    Long Term Care Products
    
    Pension and Postretirement Benefit Obligations
    
    Legal Proceedings
    
    Income Taxes
  58




---



##### Table of Contents



SEGMENT RESULTS
 
 STANDARD LINES
  Results of Operations
 Periods ended September 30
    
    Three Months
    
    
    Nine Months(In millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Net written premiums
    
    $
    632
    
    
    $
    723
    
    
    $
    2,156
    
    
    $
    2,342Net earned premiums
    
    
    702
    
    
    
    762
    
    
    
    2,083
    
    
    
    2,313Net investment income
    
    
    243
    
    
    
    136
    
    
    
    615
    
    
    
    499Net operating income (loss)
    
    
    112
    
    
    
    (53
    )
    
    
    318
    
    
    
    166Net realized investment losses, after-tax
    
    
    (45
    )
    
    
    (115
    )
    
    
    (272
    )
    
    
    (165
    )Net income (loss) attributable to CNAF
    
    
    67
    
    
    
    (168
    )
    
    
    46
    
    
    
    1RatiosLoss and loss adjustment expense
    
    
    74.0
    %
    
    
    96.3
    %
    
    
    72.4
    %
    
    
    81.1
    %Expense
    
    
    37.7
    
    
    
    34.4
    
    
    
    35.3
    
    
    
    31.3Dividend
    
    
    0.5
    
    
    
    (1.4
    )
    
    
    0.3
    
    
    
    (0.2
    )Combined
    
    
    112.2
    %
    
    
    129.3
    %
    
    
    108.0
    %
    
    
    112.2
    %
 Three Month Comparison
    59




---



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Nine Month Comparison
     60




---



##### Table of Contents



Gross and Net Carried
 Claim
and Claim Adjustment Expense Reserves
 (In millions)
    
    September 30, 2009
    
    
    December 31, 2008Gross Case Reserves
    
    $
    5,933
    
    
    $
    6,158Gross IBNR Reserves
    
    
    5,725
    
    
    
    5,890Total Gross Carried Claim and Claim Adjustment Expense Reserves
    
    $
    11,658
    
    
    $
    12,048Net Case Reserves
    
    $
    4,765
    
    
    $
    4,995Net IBNR Reserves
    
    
    4,853
    
    
    
    4,875Total Net Carried Claim and Claim Adjustment Expense Reserves
    
    $
    9,618
    
    
    $
    9,870
 61




---



##### Table of Contents



SPECIALTY LINES
  Results of Operations
 Periods ended September 30
    
    Three Months
    
    
    Nine Months(In millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Net written premiums
    
    $
    845
    
    
    $
    875
    
    
    $
    2,508
    
    
    $
    2,583Net earned premiums
    
    
    859
    
    
    
    882
    
    
    
    2,505
    
    
    
    2,614Net investment income
    
    
    187
    
    
    
    121
    
    
    
    483
    
    
    
    408Net operating income
    
    
    159
    
    
    
    145
    
    
    
    451
    
    
    
    414Net realized investment losses, after-tax
    
    
    (25
    )
    
    
    (75
    )
    
    
    (167
    )
    
    
    (99
    )Net income attributable to CNAF
    
    
    134
    
    
    
    70
    
    
    
    284
    
    
    
    315RatiosLoss and loss adjustment expense
    
    
    62.1
    %
    
    
    58.5
    %
    
    
    62.0
    %
    
    
    62.8
    %Expense
    
    
    29.6
    
    
    
    29.0
    
    
    
    29.4
    
    
    
    27.8Dividend
    
    
    0.2
    
    
    
    0.3
    
    
    
    0.3
    
    
    
    0.4Combined
    
    
    91.9
    %
    
    
    87.8
    %
    
    
    91.7
    %
    
    
    91.0
    %
 Three Month Comparison
       62




---



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Nine Month Comparison
        63




---



##### Table of Contents



Gross
and Net Carried  Claim and Claim Adjustment Expense Reserves
 (In millions)
    
    September 30, 2009
    
    
    December 31, 2008Gross Case Reserves
    
    $
    2,780
    
    
    $
    2,719Gross IBNR Reserves
    
    
    5,838
    
    
    
    5,563Total Gross Carried Claim and Claim Adjustment Expense Reserves
    
    $
    8,618
    
    
    $
    8,282Net Case Reserves
    
    $
    2,264
    
    
    $
    2,149Net IBNR Reserves
    
    
    4,991
    
    
    
    4,694Total Net Carried Claim and Claim Adjustment Expense Reserves
    
    $
    7,255
    
    
    $
    6,843
 LIFE & GROUP NON-CORE
  Results of Operations
 Periods ended September 30
    
    Three Months
    
    Nine Months(In millions)
    
    2009
    
    2008
    
    2009
    
    2008Net earned premiums
    
    $
    149
    
    
    $
    154
    
    
    $
    447
    
    
    $
    460Net investment income
    
    
    169
    
    
    
    135
    
    
    
    496
    
    
    
    376Net operating income (loss)
    
    
    51
    
    
    
    (36
    )
    
    
    3
    
    
    
    (69
    )Net realized investment gains (losses), after-tax
    
    
    14
    
    
    
    (194
    )
    
    
    (101
    )
    
    
    (209
    )Net income (loss) attributable to CNAF
    
    
    65
    
    
    
    (230
    )
    
    
    (98
    )
    
    
    (278
    )
 Three Month Comparison
   Nine Month Comparison
   64




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##### Table of Contents



CORPORATE & OTHER NON-CORE
  Results of Operations
 Periods ended September 30
    
    Three Months
    
    Nine Months(In millions)
    
    2009
    
    2008
    
    2009
    
    2008Net investment income
    
    $
    61
    
    
    $
    47
    
    
    $
    161
    
    
    $
    166Net operating income
    
    
    9
    
    
    
    27
    
    
    
    13
    
    
    
    43Net realized investment losses, after-tax
    
    
    (11
    )
    
    
    (39
    )
    
    
    (70
    )
    
    
    (54
    )Net loss attributable to CNAF
    
    
    (2
    )
    
    
    (12
    )
    
    
    (57
    )
    
    
    (11
    )
 Three Month Comparison
   Nine Month Comparison
   65




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##### Table of Contents



Gross and Net Carried  Claim and Claim Adjustment Expense Reserves
 (In millions)
    
    September 30, 2009
    
    
    December 31, 2008Gross Case Reserves
    
    $
    1,596
    
    
    $
    1,823Gross IBNR Reserves
    
    
    2,168
    
    
    
    2,578Total Gross Carried Claim and Claim Adjustment Expense Reserves
    
    $
    3,764
    
    
    $
    4,401Net Case Reserves
    
    $
    1,000
    
    
    $
    1,126Net IBNR Reserves
    
    
    1,408
    
    
    
    1,561Total Net Carried Claim and Claim Adjustment Expense Reserves
    
    $
    2,408
    
    
    $
    2,687
 A&E Reserves
  Asbestos
     66




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##### Table of Contents



Pending Asbestos Accounts and Associated Reserves
 Net Paid Losses
    
    
    Net Asbestos
    
    
    Percent ofNumber of
    
    
    in 2009
    
    
    Reserves
    
    
    AsbestosSeptember 30, 2009
    
    Policyholders
    
    
    (In millions)
    
    
    (In millions)
    
    
    Net ReservesPolicyholders with settlement agreementsStructured settlements
    
    
    18
    
    
    $
    18
    
    
    $
    136
    
    
    
    12
    %Wellington
    
    
    3
    
    
    
    1
    
    
    
    14
    
    
    
    1Coverage in place
    
    
    38
    
    
    
    12
    
    
    
    96
    
    
    
    9Total with settlement agreements
    
    
    59
    
    
    
    31
    
    
    
    246
    
    
    
    22Other policyholders with active accountsLarge asbestos accounts
    
    
    256
    
    
    
    59
    
    
    
    191
    
    
    
    17Small asbestos accounts
    
    
    997
    
    
    
    13
    
    
    
    82
    
    
    
    8Total other policyholders
    
    
    1,253
    
    
    
    72
    
    
    
    273
    
    
    
    25Assumed reinsurance and pools
    
    
    
    
    
    
    8
    
    
    
    107
    
    
    
    10Unassigned IBNR
    
    
    
    
    
    
    
    
    
    
    465
    
    
    
    43Total
    
    
    1,312
    
    
    $
    111
    
    
    $
    1,091
    
    
    
    100
    %
 Pending Asbestos Accounts and Associated Reserves
 Net Paid Losses
    
    
    Net Asbestos
    
    
    Percent ofNumber of
    
    
    in 2008
    
    
    Reserves
    
    
    AsbestosDecember 31, 2008
    
    Policyholders
    
    
    (In millions)
    
    
    (In millions)
    
    
    Net ReservesPolicyholders with settlement agreementsStructured settlements
    
    
    18
    
    
    $
    17
    
    
    $
    133
    
    
    
    11
    %Wellington
    
    
    3
    
    
    
    1
    
    
    
    11
    
    
    
    1Coverage in place
    
    
    36
    
    
    
    16
    
    
    
    94
    
    
    
    8Total with settlement agreements
    
    
    57
    
    
    
    34
    
    
    
    238
    
    
    
    20Other policyholders with active accountsLarge asbestos accounts
    
    
    236
    
    
    
    62
    
    
    
    234
    
    
    
    19Small asbestos accounts
    
    
    1,009
    
    
    
    32
    
    
    
    91
    
    
    
    8Total other policyholders
    
    
    1,245
    
    
    
    94
    
    
    
    325
    
    
    
    27Assumed reinsurance and pools
    
    
    
    
    
    
    19
    
    
    
    114
    
    
    
    9Unassigned IBNR
    
    
    
    
    
    
    
    
    
    
    525
    
    
    
    44Total
    
    
    1,302
    
    
    $
    147
    
    
    $
    1,202
    
    
    
    100
    %
  67




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Environmental Pollution
      68




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##### Table of Contents



Pending Environmental Pollution Accounts and Associated Reserves
 NetEnvironmental
    
    
    Percent ofNet Paid
    
    
    Pollution
    
    
    EnvironmentalNumber of
    
    
    Losses in 2009
    
    
    Reserves
    
    
    Pollution NetSeptember 30, 2009
    
    Policyholders
    
    
    (In millions)
    
    
    (In millions)
    
    
    ReservePolicyholders with settlement agreementsStructured settlements
    
    
    14
    
    
    $
    9
    
    
    $
    9
    
    
    
    4
    %Coverage in place
    
    
    16
    
    
    
    1
    
    
    
    12
    
    
    
    5Total with settlement agreements
    
    
    30
    
    
    
    10
    
    
    
    21
    
    
    
    9Other policyholders with active accountsLarge pollution accounts
    
    
    119
    
    
    
    14
    
    
    
    39
    
    
    
    17Small pollution accounts
    
    
    335
    
    
    
    11
    
    
    
    44
    
    
    
    20Total other policyholders
    
    
    454
    
    
    
    25
    
    
    
    83
    
    
    
    37Assumed reinsurance and pools
    
    
    
    
    
    
    1
    
    
    
    27
    
    
    
    12Unassigned IBNR
    
    
    
    
    
    
    
    
    
    
    95
    
    
    
    42Total
    
    
    484
    
    
    $
    36
    
    
    $
    226
    
    
    
    100
    %
 Pending Environmental Pollution Accounts and Associated Reserves
 NetEnvironmental

    
    
    Percent ofNet Paid Losses
    
    
    Pollution
    
    
    EnvironmentalNumber of
    
    
    in 2008
    
    
    Reserves
    
    
    Pollution NetDecember 31, 2008
    
    Policyholders
    
    
    (In millions)
    
    
    (In millions)
    
    
    ReservePolicyholders with settlement agreementsStructured settlements
    
    
    16
    
    
    $
    5
    
    
    $
    9
    
    
    
    4
    %Coverage in place
    
    
    16
    
    
    
    3
    
    
    
    13
    
    
    
    5Total with settlement agreements
    
    
    32
    
    
    
    8
    
    
    
    22
    
    
    
    9Other policyholders with active accountsLarge pollution accounts
    
    
    116
    
    
    
    40
    
    
    
    48
    
    
    
    18Small pollution accounts
    
    
    320
    
    
    
    11
    
    
    
    41
    
    
    
    16Total other policyholders
    
    
    436
    
    
    
    51
    
    
    
    89
    
    
    
    34Assumed reinsurance and pools
    
    
    
    
    
    
    4
    
    
    
    27
    
    
    
    10Unassigned IBNR
    
    
    
    
    
    
    
    
    
    
    124
    
    
    
    47Total
    
    
    468
    
    
    $
    63
    
    
    $
    262
    
    
    
    100
    %
 69




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##### Table of Contents



INVESTMENTS
   Net Investment Income
  Net Investment Income
 Periods ended September 30
    
    Three Months
    
    
    Nine Months(In millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Fixed maturity securities
    
    $
    496
    
    
    $
    501
    
    
    $
    1,458
    
    
    $
    1,495Short term investments
    
    
    7
    
    
    
    29
    
    
    
    28
    
    
    
    94Limited partnerships
    
    
    145
    
    
    
    (77
    )
    
    
    240
    
    
    
    (70
    )Equity securities
    
    
    11
    
    
    
    18
    
    
    
    39
    
    
    
    62Trading portfolio  indexed group annuity
    
    
    
    
    
    
    (22
    )
    
    
    
    
    
    
    (103
    )Trading portfolio  other
    
    
    12
    
    
    
    (1
    )
    
    
    20
    
    
    
    (1
    )Other
    
    
    2
    
    
    
    3
    
    
    
    6
    
    
    
    14Gross investment income
    
    
    673
    
    
    
    451
    
    
    
    1,791
    
    
    
    1,491Investment expense
    
    
    (13
    )
    
    
    (12
    )
    
    
    (36
    )
    
    
    (42
    )Net investment income
    
    $
    660
    
    
    $
    439
    
    
    $
    1,755
    
    
    $
    1,449
    70




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##### Table of Contents



Net Realized Investment Gains (Losses)
  Periods ended September 30
    
    Three Months
    
    
    Nine Months(In millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Fixed maturity securities:U.S. Treasury securities and obligations of government agencies
    
    $
    (34
    )
    
    $
    34
    
    
    $
    (61
    )
    
    $
    20Corporate and other taxable bonds
    
    
    10
    
    
    
    (289
    )
    
    
    (259
    )
    
    
    (328
    )States, municipalities and political subdivisions  tax-exempt
securities
    
    
    16
    
    
    
    1
    
    
    
    70
    
    
    
    51Asset-backed securities
    
    
    (104
    )
    
    
    (61
    )
    
    
    (603
    )
    
    
    (218
    )Redeemable preferred stock
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    Total fixed maturity securities
    
    
    (112
    )
    
    
    (315
    )
    
    
    (862
    )
    
    
    (475
    )Equity securities
    
    
    19
    
    
    
    (376
    )
    
    
    (133
    )
    
    
    (405
    )Derivative securities
    
    
    (13
    )
    
    
    35
    
    
    
    51
    
    
    
    47Short term investments
    
    
    2
    
    
    
    4
    
    
    
    10
    
    
    
    11Other
    
    
    4
    
    
    
    1
    
    
    
    5
    
    
    
    9Realized investment losses, net of participating policyholders
interests
    
    
    (100
    )
    
    
    (651
    )
    
    
    (929
    )
    
    
    (813
    )Income tax benefit
    
    
    34
    
    
    
    228
    
    
    
    319
    
    
    
    286Realized investment gains, after-tax, attributable to
noncontrolling interests
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    Net realized investment losses attributable to CNAF
    
    $
    (67
    )
    
    $
    (423
    )
    
    $
    (610
    )
    
    $
    (527
    )
     Fixed Maturity Ratings
 September 30,
    
    
    
    
    
    
    December 31,(In millions)
    
    2009
    
    
    %
    
    
    2008
    
    
    %U.S. Government and Agencies
    
    $
    3,270
    
    
    
    9
    %
    
    $
    4,611
    
    
    
    16
    %AAA rated
    
    
    6,114
    
    
    
    18
    
    
    
    8,494
    
    
    
    29AA and A rated
    
    
    12,142
    
    
    
    35
    
    
    
    8,166
    
    
    
    29BBB rated
    
    
    9,429
    
    
    
    27
    
    
    
    5,029
    
    
    
    17Non-investment grade
    
    
    3,763
    
    
    
    11
    
    
    
    2,587
    
    
    
    9Total
    
    $
    34,718
    
    
    
    100
    %
    
    $
    28,887
    
    
    
    100
    %
 71




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##### Table of Contents



Non-investment Grade
 Rating
    
    September 30,
    
    
    
    
    
    
    December 31,(In millions)
    
    2009
    
    
    %
    
    
    2008
    
    
    %BB
    
    $
    1,251
    
    
    
    33
    %
    
    $
    1,585
    
    
    
    61
    %B
    
    
    1,202
    
    
    
    32
    
    
    
    754
    
    
    
    29CCC  C
    
    
    1,228
    
    
    
    33
    
    
    
    232
    
    
    
    9D
    
    
    82
    
    
    
    2
    
    
    
    16
    
    
    
    1Total
    
    $
    3,763
    
    
    
    100
    %
    
    $
    2,587
    
    
    
    100
    %
     Maturity Profile
 Percent of
    
    Percent ofFair Value
    
    Unrealized LossDue in one year or less
    
    
    4
    %
    
    
    3
    %Due after one year through five years
    
    
    26
    
    
    
    24Due after five years through ten years
    
    
    23
    
    
    
    29Due after ten years
    
    
    47
    
    
    
    44Total
    
    
    100
    %
    
    
    100
    %
 72




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##### Table of Contents



Duration
     Effective Durations
 September 30, 2009
    
    
    December 31, 2008Effective Duration
    
    
    
    
    
    
    Effective Duration(In millions)
    
    Fair Value
    
    
    (In years)
    
    
    Fair Value
    
    
    (In years)Segregated investments
    
    $
    10,427
    
    
    
    11.4
    
    
    $
    8,168
    
    
    
    9.9Other interest sensitive investments
    
    
    28,627
    
    
    
    4.3
    
    
    
    25,194
    
    
    
    4.5Total
    
    $
    39,054
    
    
    
    6.2
    
    
    $
    33,362
    
    
    
    5.8
  73




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##### Table of Contents



Asset-Backed Mortgage Exposure
 Asset-Backed Distribution
 September 30, 2009
    
    Security Type(In millions)
    
    RMBS (a)
    
    
    CMBS (b)
    
    
    Other ABS (c)
    
    
    TotalU.S. Government Agencies
    
    $
    2,442
    
    
    $
    
    
    
    $
    
    
    
    $
    2,442AAA
    
    
    1,910
    
    
    
    378
    
    
    
    516
    
    
    
    2,804AA
    
    
    285
    
    
    
    92
    
    
    
    27
    
    
    
    404A
    
    
    282
    
    
    
    65
    
    
    
    11
    
    
    
    358BBB
    
    
    224
    
    
    
    47
    
    
    
    118
    
    
    
    389Non-investment grade and equity tranches
    
    
    1,412
    
    
    
    17
    
    
    
    
    
    
    
    1,429Total Fair Value
    
    $
    6,555
    
    
    $
    599
    
    
    $
    672
    
    
    $
    7,826Total Amortized Cost
    
    $
    7,345
    
    
    $
    760
    
    
    $
    701
    
    
    $
    8,806Sub-prime (included above)Fair Value
    
    $
    711
    
    
    $
    
    
    
    $
    
    
    
    $
    711Amortized Cost
    
    $
    950
    
    
    $
    
    
    
    $
    
    
    
    $
    950Alt-A (included above)Fair Value
    
    $
    840
    
    
    $
    
    
    
    $
    
    
    
    $
    840Amortized Cost
    
    $
    1,011
    
    
    $
    
    
    
    $
    
    
    
    $
    1,011
 
 (a)
    
    Residential mortgage-backed securities (RMBS)(b)
    
    Commercial mortgage-backed securities (CMBS)(c)
    
    Other asset-backed securities (Other ABS)   Short Term Investments
  Short Term Investments
 September 30,
    
    
    December 31,(In millions)
    
    2009
    
    
    2008Short term investments available-for-sale:Commercial paper
    
    $
    730
    
    
    $
    563U.S. Treasury securities
    
    
    2,279
    
    
    
    2,258Money market funds
    
    
    251
    
    
    
    329Other
    
    
    815
    
    
    
    384Total short term investments
    
    $
    4,075
    
    
    $
    3,534
  74




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
 Cash Flows
       Liquidity
  
    
    We do not anticipate changes in our core property and casualty commercial insurance
operations which would significantly impact liquidity and we continue to maintain
reinsurance contracts which limit the impact of potential catastrophic events.
    
    We have entered into several settlement agreements and assumed reinsurance contracts
that require collateralization of future payment obligations and assumed reserves if our
ratings or other specific criteria fall below certain thresholds. The ratings triggers
are generally more than one level below our current ratings. A downgrade below our
current ratings levels would also result in additional collateral requirements for
derivative contracts for which we are in a liability position at any given point in time.
The maximum potential collateralization requirements are approximately $70 million.
    
    As of September 30, 2009, our holding company held short term investments of $414
million. Our holding companys ability to meet its debt service and other obligations is
significantly dependent on receipt of dividends from our subsidiaries. The payment of
dividends to us by our insurance subsidiaries without prior approval of the insurance
department of each subsidiarys domiciliary jurisdiction is limited by formula.
Notwithstanding this limitation, we believe that our
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##### Table of Contents



holding company has sufficient liquidity to fund our preferred stock dividend and debt
service payments through 2010.
 Accounting Standards Updates
  FORWARD-LOOKING STATEMENTS
  
    
    conditions in the capital and credit markets including severe levels of volatility,
illiquidity, uncertainty and overall disruption, as well as sharply reduced economic activity,
that may impact the returns, types, liquidity and valuation of our investments;
    
    general economic and business conditions, including recessionary conditions that may
decrease the size and number of our insurance customers and create higher exposures to our
lines of business, especially those that provide management and professional liability
insurance, as well as surety bonds, to businesses engaged in real estate, financial services
and professional services, and inflationary pressures on medical care costs, construction
costs and other economic sectors that increase the severity of claims;
    
    the effects of the mergers and failures of a number of prominent financial institutions and
government sponsored entities, as well as the effects of accounting and financial reporting
scandals and other major failures in internal controls and governance, on capital and credit
markets, as well as on the markets for directors and officers and errors and omissions
coverages;
    
    changes in foreign or domestic political, social and economic conditions;
    
    regulatory initiatives and compliance with governmental regulations, judicial decisions,
including interpretation of policy provisions, decisions regarding coverage and theories of
liability, trends in litigation and the outcome of any litigation involving us, and rulings
and changes in tax laws and regulations;
    
    regulatory limitations, impositions and restrictions upon us, including the effects of
assessments and other surcharges for guaranty funds and second-injury funds, other mandatory
pooling arrangements and future assessments levied on insurance companies and other financial
industry participants under the Emergency Economic Stabilization Act of 2008 recoupment
provisions;
    
    the impact of competitive products, policies and pricing and the competitive environment in
which we operate, including changes in our book of business;
    
    product and policy availability and demand and market responses, including the level of
ability to obtain rate increases and decline or non-renew under priced accounts, to achieve
premium targets and profitability and to realize growth and retention estimates;
 76




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##### Table of Contents




    
    development of claims and the impact on loss reserves, including changes in claim
settlement policies;
    
    the assertion of public nuisance theories of liability, pursuant to which plaintiffs seek
to recover monies spent to administer public health care programs and/or to abate hazards to
public health and safety;
    
    the effectiveness of current initiatives by claims management to reduce loss and expense
ratios through more efficacious claims handling techniques;
    
    the performance of reinsurance companies under reinsurance contracts with us;
    
    conditions in the capital and credit markets that may limit our ability to raise
significant amounts of capital on favorable terms, as well as restrictions on the ability or
willingness of Loews Corporation to provide additional capital support to us;
    
    weather and other natural physical events, including the severity and frequency of storms,
hail, snowfall and other winter conditions, natural disasters such as hurricanes and
earthquakes, as well as climate change, including effects on weather patterns, greenhouse
gases, sea, land and air temperatures, sea levels, rain and snow;
    
    regulatory requirements imposed by coastal state regulators in the wake of hurricanes or
other natural disasters, including limitations on the ability to exit markets or to non-renew,
cancel or change terms and conditions in policies, as well as mandatory assessments to fund
any shortfalls arising from the inability of quasi-governmental insurers to pay claims;
    
    man-made disasters, including the possible occurrence of terrorist attacks and the effect
of the absence or insufficiency of applicable terrorism legislation on coverages;
    
    the unpredictability of the nature, targets, severity or frequency of potential terrorist
events, as well as the uncertainty as to our ability to contain our terrorism exposure
effectively, notwithstanding the extension through December 31, 2014 of the Terrorism Risk
Insurance Act of 2002;
    
    the occurrence of epidemics;
    
    exposure to liabilities due to claims made by insureds and others relating to asbestos
remediation and health-based asbestos impairments, as well as exposure to liabilities for
environmental pollution, construction defect claims and exposure to liabilities due to claims
made by insureds and others relating to lead-based paint and other mass torts;
    
    the sufficiency of our loss reserves and the possibility of future increases in reserves;
    
    regulatory limitations and restrictions, including limitations upon our ability to receive
dividends from our insurance subsidiaries imposed by state regulatory agencies and minimum
risk-based capital standards established by the National Association of Insurance
Commissioners;
    
    the risks and uncertainties associated with our loss reserves as outlined in the Critical
Accounting Estimates and the Reserves  Estimates and Uncertainties sections of our Annual
Report on Form 10-K;
    
    the possibility of changes in our ratings by ratings agencies, including the inability to
access certain markets or distribution channels and the required collateralization of future
payment obligations as a result of such changes, and changes in rating agency policies and
practices; and
    
    the actual closing of contemplated transactions and agreements.
  77




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CNA Financial Corporation
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 
 78




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##### Table of Contents



CNA Financial Corporation
 
 Item 4. Controls and Procedures
    79




---



##### Table of Contents



CNA Financial Corporation
 
 Part II. Other Information
 
 Item 1. Legal Proceedings
  
 Item 6. Exhibits
  Description of Exhibit
    
    Exhibit NumberCertification of Chief Executive Officer
    
    
    
    31.1Certification of Chief Financial Officer
    
    
    
    31.2Written Statement of the Chief Executive Officer of CNA Financial Corporation Pursuant
to 18 U.S.C. Section 1350 (As adopted by Section 906 of the Sarbanes-Oxley Act of 2002)
    
    
    
    32.1Written Statement of the Chief Financial Officer of CNA Financial Corporation Pursuant
to 18 U.S.C. Section 1350 (As adopted by Section 906 of the Sarbanes-Oxley Act of 2002)
    
    
    
    32.2
 80




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##### Table of Contents



CNA Financial Corporation
Part II. Other Information
 
 SIGNATURES
  CNA Financial CorporationDated:  November 2, 2009
    By
    /s/ D. Craig MenseD. Craig MenseExecutive Vice President and
Chief Financial Officer 81