##### 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 June 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
(State or other jurisdiction of 
incorporation or organization)
    
    36-6169860
(I.R.S. Employer
Identification No.)333 S. Wabash 
Chicago, Illinois
(Address of principal executive offices)
    
    60604
(Zip Code)
 (312) 822-5000
 þ o
 o o
  Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company o o þ
  Class
    
    Outstanding at July 30, 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 Six months ended June 30, 2009 and 2008
    
    
    3Condensed Consolidated Statements of Comprehensive Income for
the Three and Six months ended June 30, 2009 and 2008
    
    
    5Condensed Consolidated Balance Sheets at June 30, 2009 and
December 31, 2008
    
    
    6Condensed Consolidated Statements of Cash Flows for the Six
months ended June 30, 2009 and 2008
    
    
    7Condensed Consolidated Statements of Equity for the Six months
ended June 30, 2009 and 2008
    
    
    9Notes to Condensed Consolidated Financial Statements
    
    
    102.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    543.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    784.
    
    Controls and Procedures
    
    
    79PART II. Other Information1.
    
    Legal Proceedings
    
    
    804.
    
    Submission of Matters to a Vote of Security Holders
    
    
    806.
    
    Exhibits
    
    
    81EX-10.1EX-10.2EX-10.3EX-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)
 Three Months
    
    
    Six MonthsPeriods ended June 30
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008(In millions, except per share data)RevenuesNet earned premiums
    
    $
    1,656
    
    
    $
    1,774
    
    
    $
    3,328
    
    
    $
    3,587Net investment income
    
    
    675
    
    
    
    576
    
    
    
    1,095
    
    
    
    1,010Net realized investment losses, net of participating policyholders interests:Other-than-temporary impairment losses
    
    
    (484
    )
    
    
    (170
    )
    
    
    (1,098
    )
    
    
    (256
    )Portion of other-than-temporary impairment losses recognized in Other
comprehensive income
    
    
    89
    
    
    
    
    
    
    
    89
    
    
    
    Net impairment losses recognized in earnings
    
    
    (395
    )
    
    
    (170
    )
    
    
    (1,009
    )
    
    
    (256
    )Other net realized investment gains
    
    
    98
    
    
    
    59
    
    
    
    180
    
    
    
    94Net realized investment losses, net of participating policyholders interests
    
    
    (297
    )
    
    
    (111
    )
    
    
    (829
    )
    
    
    (162
    )Other revenues
    
    
    62
    
    
    
    82
    
    
    
    140
    
    
    
    168Total revenues
    
    
    2,096
    
    
    
    2,321
    
    
    
    3,734
    
    
    
    4,603Claims, Benefits and ExpensesInsurance claims and policyholders benefits
    
    
    1,294
    
    
    
    1,472
    
    
    
    2,636
    
    
    
    2,861Amortization of deferred acquisition costs
    
    
    349
    
    
    
    360
    
    
    
    698
    
    
    
    728Other operating expenses
    
    
    291
    
    
    
    203
    
    
    
    542
    
    
    
    430Interest
    
    
    30
    
    
    
    33
    
    
    
    61
    
    
    
    67Total claims, benefits and expenses
    
    
    1,964
    
    
    
    2,068
    
    
    
    3,937
    
    
    
    4,086Income (loss) from continuing operations before income tax
    
    
    132
    
    
    
    253
    
    
    
    (203
    )
    
    
    517Income tax (expense) benefit
    
    
    (12
    )
    
    
    (62
    )
    
    
    138
    
    
    
    (126
    )Income (loss) from continuing operations
    
    
    120
    
    
    
    191
    
    
    
    (65
    )
    
    
    391Income (loss) from discontinued operations, net of income tax
(expense) benefit of $0, $0, $0 and $0
    
    
    (1
    )
    
    
    2
    
    
    
    (1
    )
    
    
    1Net income (loss)
    
    
    119
    
    
    
    193
    
    
    
    (66
    )
    
    
    392Net income attributable to noncontrolling interests
    
    
    (14
    )
    
    
    (12
    )
    
    
    (24
    )
    
    
    (24
    )Net income (loss) attributable to CNAF
    
    $
    105
    
    
    $
    181
    
    
    $
    (90
    )
    
    $
    368Income (Loss) Attributable to CNAF Common StockholdersIncome (loss) from continuing operations attributable to CNAF
    
    $
    106
    
    
    $
    179
    
    
    $
    (89
    )
    
    $
    367Less: Dividends on 2008 Senior Preferred
    
    
    (32
    )
    
    
    
    
    
    
    (63
    )
    
    
    Income (loss) from continuing operations attributable to CNAF common
stockholders
    
    
    74
    
    
    
    179
    
    
    
    (152
    )
    
    
    367Income (loss) from discontinued operations attributable to CNAF common
stockholders
    
    
    (1
    )
    
    
    2
    
    
    
    (1
    )
    
    
    1Income (loss) attributable to CNAF common stockholders
    
    $
    73
    
    
    $
    181
    
    
    $
    (153
    )
    
    $
    368
 
 3




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##### Table of Contents



Three Months
    
    
    Six MonthsPeriods ended June 30
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008(In millions, except per share data)Basic and Diluted Earnings (Loss) Per Share Attributable to CNAF Common
StockholdersIncome (loss) from continuing operations attributable to CNAF common
stockholders
    
    $
    0.28
    
    
    $
    0.66
    
    
    $
    (0.56
    )
    
    $
    1.36Income (loss) from discontinued operations attributable to CNAF common
stockholders
    
    
    (0.01
    )
    
    
    0.01
    
    
    
    (0.01
    )
    
    
    Basic and diluted earnings (loss) per share attributable to CNAF common
stockholders
    
    $
    0.27
    
    
    $
    0.67
    
    
    $
    (0.57
    )
    
    $
    1.36Weighted Average Outstanding Common Stock and Common Stock
EquivalentsBasic
    
    
    269.0
    
    
    
    269.0
    
    
    
    269.0
    
    
    
    269.9Diluted
    
    
    269.0
    
    
    
    269.1
    
    
    
    269.0
    
    
    
    270.0
 
 4




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##### Table of Contents



CNA Financial Corporation (CNAF)
 
 Condensed Consolidated Statements of Comprehensive Income (Unaudited)
 Three Months
    
    
    Six MonthsPeriods ended June 30
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008(In millions)Net income (loss)
    
    $
    119
    
    
    $
    193
    
    
    $
    (66
    )
    
    $
    392Other comprehensive income (loss), net of taxChanges in:Net unrealized gains (losses) on investments
    
    
    1,474
    
    
    
    (161
    )
    
    
    1,875
    
    
    
    (1,034
    )Unrealized gains (losses) on discontinued operations and other
    
    
    2
    
    
    
    (4
    )
    
    
    
    
    
    
    Foreign currency translation adjustment
    
    
    79
    
    
    
    2
    
    
    
    71
    
    
    
    (9
    )Pension and postretirement benefits
    
    
    1
    
    
    
    (1
    )
    
    
    3
    
    
    
    (3
    )Allocation to participating policyholders
    
    
    (19
    )
    
    
    
    
    
    
    (19
    )
    
    
    14Other comprehensive income (loss), net of tax
    
    
    1,537
    
    
    
    (164
    )
    
    
    1,930
    
    
    
    (1,032
    )Comprehensive income (loss)
    
    
    1,656
    
    
    
    29
    
    
    
    1,864
    
    
    
    (640
    )Net income attributable to noncontrolling interests
    
    
    (14
    )
    
    
    (12
    )
    
    
    (24
    )
    
    
    (24
    )Other comprehensive (income) loss attributable to noncontrolling interests
    
    
    (6
    )
    
    
    6
    
    
    
    (11
    )
    
    
    8Total comprehensive income (loss) attributable to CNAF
    
    $
    1,636
    
    
    $
    23
    
    
    $
    1,829
    
    
    $
    (656
    )
 
 5




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##### Table of Contents



CNA Financial Corporation (CNAF)
 
 Condensed Consolidated Balance Sheets (Unaudited)
 June 30,
    
    
    December 31,2009
    
    
    2008(In millions, except share data)AssetsInvestments:Fixed maturity securities at fair value (amortized cost of $33,826 and $34,155)
    
    $
    31,040
    
    
    $
    28,887Equity securities at fair value (cost of $667 and $1,016)
    
    
    748
    
    
    
    871Limited partnership investments
    
    
    1,780
    
    
    
    1,683Other invested assets
    
    
    8
    
    
    
    28Short term investments
    
    
    4,481
    
    
    
    3,534Total investments
    
    
    38,057
    
    
    
    35,003Cash
    
    
    98
    
    
    
    85Reinsurance receivables (less allowance for uncollectible receivables of $358 and $366)
    
    
    6,979
    
    
    
    7,395Insurance receivables (less allowance for doubtful accounts of $212 and $221)
    
    
    1,848
    
    
    
    1,818Accrued investment income
    
    
    383
    
    
    
    356Receivables for securities sold and collateral
    
    
    392
    
    
    
    402Deferred acquisition costs
    
    
    1,145
    
    
    
    1,125Prepaid reinsurance premiums
    
    
    240
    
    
    
    237Federal income tax recoverable (includes $495 and $299 due from Loews Corporation)
    
    
    503
    
    
    
    294Deferred income taxes
    
    
    2,537
    
    
    
    3,493Property and equipment at cost (less accumulated depreciation of $474 and $641)
    
    
    378
    
    
    
    393Goodwill and other intangible assets
    
    
    141
    
    
    
    141Other assets
    
    
    474
    
    
    
    562Separate account business
    
    
    413
    
    
    
    384Total assets
    
    $
    53,588
    
    
    $
    51,688Liabilities and EquityLiabilities:Insurance reserves:Claim and claim adjustment expenses
    
    $
    27,100
    
    
    $
    27,593Unearned premiums
    
    
    3,508
    
    
    
    3,406Future policy benefits
    
    
    7,746
    
    
    
    7,529Policyholders funds
    
    
    217
    
    
    
    243Collateral on loaned securities and derivatives
    
    
    1
    
    
    
    6Payables for securities purchased
    
    
    480
    
    
    
    12Participating policyholders funds
    
    
    37
    
    
    
    20Long term debt
    
    
    2,058
    
    
    
    2,058Reinsurance balances payable
    
    
    350
    
    
    
    316Other liabilities
    
    
    2,567
    
    
    
    2,824Separate account business
    
    
    413
    
    
    
    384Total liabilities
    
    
    44,477
    
    
    
    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 269,024,408 shares outstanding)
    
    
    683
    
    
    
    683Additional paid-in capital
    
    
    2,175
    
    
    
    2,174Retained earnings
    
    
    6,814
    
    
    
    6,845Accumulated other comprehensive loss
    
    
    (2,127
    )
    
    
    (3,924
    )Treasury stock (4,015,835 shares), at cost
    
    
    (109
    )
    
    
    (109
    )Notes receivable for the issuance of common stock
    
    
    (30
    )
    
    
    (42
    )Total CNAF stockholders equity
    
    
    8,656
    
    
    
    6,877Noncontrolling interests
    
    
    455
    
    
    
    420Total equity
    
    
    9,111
    
    
    
    7,297Total liabilities and equity
    
    $
    53,588
    
    
    $
    51,688
 
 6




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##### Table of Contents



CNA Financial Corporation (CNAF)  Condensed Consolidated Statements of Cash
Flows (Unaudited)
 Six months ended June 30(In millions)
    
    2009
    
    
    2008Cash Flows from Operating Activities:Net income (loss)
    
    $
    (66
    )
    
    $
    392Adjustments to reconcile net income (loss) to net cash flows provided by
operating activities:(Income) loss from discontinued operations
    
    
    1
    
    
    
    (1
    )Loss on disposal of property and equipment
    
    
    8
    
    
    
    Deferred income tax benefit
    
    
    (59
    )
    
    
    (44
    )Trading portfolio activity
    
    
    (142
    )
    
    
    351Net realized investment losses, net of participating policyholders
interests
    
    
    829
    
    
    
    162Undistributed losses (earnings) of equity method investees
    
    
    (47
    )
    
    
    36Net amortization of bond discount
    
    
    (115
    )
    
    
    (137
    )Depreciation
    
    
    42
    
    
    
    36Changes in:Receivables, net
    
    
    386
    
    
    
    401Accrued investment income
    
    
    (27
    )
    
    
    6Deferred acquisition costs
    
    
    (20
    )
    
    
    (6
    )Prepaid reinsurance premiums
    
    
    (3
    )
    
    
    (20
    )Federal income taxes recoverable
    
    
    (209
    )
    
    
    22Insurance reserves
    
    
    (245
    )
    
    
    (148
    )Reinsurance balances payable
    
    
    34
    
    
    
    (28
    )Other assets
    
    
    88
    
    
    
    (23
    )Other liabilities
    
    
    (159
    )
    
    
    (190
    )Other, net
    
    
    3
    
    
    
    1Total adjustments
    
    
    365
    
    
    
    418Net cash flows provided by operating activities-continuing operations
    
    $
    299
    
    
    $
    810Net cash flows provided (used) by operating activities-discontinued operations
    
    $
    (12
    )
    
    $
    2Net cash flows provided by operating activities-total
    
    $
    287
    
    
    $
    812Cash Flows from Investing Activities:Purchases of fixed maturity securities
    
    $
    (12,402
    )
    
    $
    (28,260
    )Proceeds from fixed maturity securities:Sales
    
    
    11,083
    
    
    
    26,260Maturities, calls and redemptions
    
    
    1,723
    
    
    
    2,464Purchases of equity securities
    
    
    (240
    )
    
    
    (133
    )Proceeds from sales of equity securities
    
    
    440
    
    
    
    132Change in short term investments
    
    
    (895
    )
    
    
    (430
    )Change in collateral on loaned securities and derivatives
    
    
    (5
    )
    
    
    (63
    )Change in other investments
    
    
    102
    
    
    
    (153
    )Purchases of property and equipment
    
    
    (33
    )
    
    
    (64
    )Other, net
    
    
    (5
    )
    
    
    1Net cash flows used by investing activities-continuing operations
    
    $
    (232
    )
    
    $
    (246
    )Net cash flows provided by investing activities-discontinued operations
    
    $
    12
    
    
    $
    15Net cash flows used by investing activities-total
    
    $
    (220
    )
    
    $
    (231
    )
 
 7




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##### Table of Contents



Six months ended June 30(In millions)
    
    2009
    
    
    2008Cash Flows from Financing Activities:Dividends paid to common stockholders
    
    
    
    
    
    
    (81
    )Dividends paid to Loews Corporation for 2008 Senior Preferred
    
    
    (63
    )
    
    
    Principal payments on debt
    
    
    
    
    
    
    (150
    )Return of investment contract account balances
    
    
    (10
    )
    
    
    (299
    )Receipts on investment contract account balances
    
    
    2
    
    
    
    2Stock options exercised
    
    
    
    
    
    
    1Purchase of treasury stock
    
    
    
    
    
    
    (70
    )Other, net
    
    
    12
    
    
    
    3Net cash flows used by financing activities-continuing operations
    
    $
    (59
    )
    
    $
    (594
    )Net cash flows used by financing activities-discontinued operations
    
    $
    
    
    
    $
    Net cash flows used by financing activities-total
    
    $
    (59
    )
    
    $
    (594
    )Effect of foreign exchange rate changes on cash-continuing
operations
    
    
    5
    
    
    
    (1
    )Net change in cash
    
    
    13
    
    
    
    (14
    )Net cash transactions from continuing operations to discontinued
operations
    
    
    
    
    
    
    15Net cash transactions from discontinued operations to continuing
operations
    
    
    
    
    
    
    (15
    )Cash, beginning of year
    
    
    85
    
    
    
    101Cash, end of period
    
    $
    98
    
    
    $
    87Cash-continuing operations
    
    $
    98
    
    
    $
    78Cash-discontinued operations
    
    
    
    
    
    
    9Cash-total
    
    $
    98
    
    
    $
    87
 
 8




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##### Table of Contents



CNA Financial Corporation (CNAF)  Condensed Consolidated Statements of Equity (Unaudited)
 Six months ended June 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
    
    
    1
    
    
    
    2Balance, end of period
    
    
    2,175
    
    
    
    2,171Retained EarningsBalance, beginning of period
    
    
    6,845
    
    
    
    7,285Cumulative effect adjustment from adoption of FSP FAS 115-2
and FAS 124-2 as of April 1, 2009, net of tax
    
    
    122
    
    
    
    Dividends paid to common stockholders
    
    
    
    
    
    
    (81
    )Dividends paid to Loews Corporation for 2008 Senior Preferred
    
    
    (63
    )
    
    
    Net income (loss) attributable to CNAF
    
    
    (90
    )
    
    
    368Balance, end of period
    
    
    6,814
    
    
    
    7,572Accumulated Other Comprehensive Income (Loss)Balance, beginning of period
    
    
    (3,924
    )
    
    
    103Cumulative effect adjustment from adoption of FSP FAS 115-2
and FAS 124-2 as of April 1, 2009, net of tax
    
    
    (122
    )
    
    
    Other comprehensive income (loss) attributable to CNAF
    
    
    1,919
    
    
    
    (1,024
    )Balance, end of period
    
    
    (2,127
    )
    
    
    (921
    )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
    
    
    
    1Balance, end of period
    
    
    (30
    )
    
    
    (50
    )Total CNAF Stockholders Equity
    
    
    8,656
    
    
    
    9,346Noncontrolling InterestsBalance, beginning of period
    
    
    420
    
    
    
    385Net income
    
    
    24
    
    
    
    24Other comprehensive income (loss)
    
    
    11
    
    
    
    (8
    )Other
    
    
    
    
    
    
    (3
    )Balance, end of period
    
    
    455
    
    
    
    398Total Equity
    
    $
    9,111
    
    
    $
    9,744
 
 9




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##### Table of Contents



CNA Financial Corporation  Notes to Condensed Consolidated Financial Statements (Unaudited)
 Note A. Basis of Presentation
    10




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Note B. Accounting Pronouncements
 Adopted in the second quarter of 2009
 Financial Accounting Standards Board (FASB) Staff Position (FSP) FAS 107-1 and Accounting
Principles Board (APB) APB 28-1, Interim Disclosures about Fair Value of Financial
Instruments (FSP FAS 107-1 and APB 28-1)
  FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary
Impairments (FSP FAS 115-2 and FAS 124-2)
     11




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FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or
Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly (FSP
FAS 157-4)
  Recently issued accounting pronouncements to be adopted
 Statement of Financial Accounting Standard (SFAS) No. 167, Amendments to FASB Interpretation
No. 46(R) (SFAS 167)
  12




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##### Table of Contents



Note C. Earnings (Loss) Per Share
      13




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##### Table of Contents



Note D. Investments
  Net Investment Income
 Periods ended June 30
    
    Three Months
    
    
    Six Months(In millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Fixed maturity securities
    
    $
    487
    
    
    $
    476
    
    
    $
    962
    
    
    $
    994Short term investments
    
    
    11
    
    
    
    26
    
    
    
    21
    
    
    
    65Limited partnerships
    
    
    165
    
    
    
    46
    
    
    
    95
    
    
    
    7Equity securities
    
    
    14
    
    
    
    39
    
    
    
    28
    
    
    
    44Trading
portfolio  Indexed Group Annuity (a)
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    (81
    )Trading portfolio  Other (b)
    
    
    8
    
    
    
    1
    
    
    
    8
    
    
    
    Other
    
    
    1
    
    
    
    5
    
    
    
    4
    
    
    
    11Gross investment income
    
    
    686
    
    
    
    588
    
    
    
    1,118
    
    
    
    1,040Investment expense
    
    
    (11
    )
    
    
    (12
    )
    
    
    (23
    )
    
    
    (30
    )Net investment income
    
    $
    675
    
    
    $
    576
    
    
    $
    1,095
    
    
    $
    1,010
 
 (a)
    
    The gains (losses) related to the Indexed Group Annuity trading portfolio, including
the 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)
    
    The net unrealized gains on trading securities still held included in net investment
income was $1 million for the three and six months ended June 30, 2009.  Net Realized Investment Gains (Losses)
 Periods ended June 30
    
    Three Months
    
    
    Six Months(In millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Net realized investment gains (losses):Fixed maturity securities:Gross realized gains
    
    $
    100
    
    
    $
    83
    
    
    $
    204
    
    
    $
    200Gross realized losses
    
    
    (492
    )
    
    
    (241
    )
    
    
    (954
    )
    
    
    (360
    )Net realized investment losses on fixed maturity securities
    
    
    (392
    )
    
    
    (158
    )
    
    
    (750
    )
    
    
    (160
    )Equity securities:Gross realized gains
    
    
    73
    
    
    
    7
    
    
    
    77
    
    
    
    11Gross realized losses
    
    
    (9
    )
    
    
    (21
    )
    
    
    (229
    )
    
    
    (40
    )Net realized investment gains (losses) on equity securities
    
    
    64
    
    
    
    (14
    )
    
    
    (152
    )
    
    
    (29
    )Derivatives
    
    
    33
    
    
    
    56
    
    
    
    64
    
    
    
    12Short term investments and other
    
    
    (2
    )
    
    
    5
    
    
    
    9
    
    
    
    15Net realized investment losses, net of participating
policyholders interests
    
    $
    (297
    )
    
    $
    (111
    )
    
    $
    (829
    )
    
    $
    (162
    )
   14




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15




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##### Table of Contents



Summary of Fixed Maturity and Equity Securities
 Gross Unrealized LossesCost or
    
    
    Gross
    
    
    
    
    
    
    
    
    
    
    Estimated
    
    
    UnrealizedJune 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
    
    $
    1,008
    
    
    $
    43
    
    
    $
    80
    
    
    $
    
    
    
    $
    971
    
    
    $
    Asset-backed securities:Residential mortgage-backed securities
    
    
    7,457
    
    
    
    41
    
    
    
    308
    
    
    
    926
    
    
    
    6,264
    
    
    
    141Commercial mortgage-backed
securities
    
    
    901
    
    
    
    1
    
    
    
    10
    
    
    
    240
    
    
    
    652
    
    
    
    7Other asset-backed securities
    
    
    476
    
    
    
    9
    
    
    
    1
    
    
    
    54
    
    
    
    430
    
    
    
    Total asset-backed securities
    
    
    8,834
    
    
    
    51
    
    
    
    319
    
    
    
    1,220
    
    
    
    7,346
    
    
    
    148States, municipalities and political
subdivisions  tax-exempt securities
    
    
    8,289
    
    
    
    106
    
    
    
    263
    
    
    
    494
    
    
    
    7,638
    
    
    
    Corporate and other taxable bonds
    
    
    15,526
    
    
    
    543
    
    
    
    564
    
    
    
    582
    
    
    
    14,923
    
    
    
    2Redeemable preferred stock
    
    
    69
    
    
    
    2
    
    
    
    5
    
    
    
    4
    
    
    
    62
    
    
    
    Total fixed maturity securities
available-for-sale
    
    
    33,726
    
    
    
    745
    
    
    
    1,231
    
    
    
    2,300
    
    
    
    30,940
    
    
    $
    150Total fixed maturity securities trading
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100Equity securities available-for-sale:Common stock
    
    
    89
    
    
    
    206
    
    
    
    
    
    
    
    3
    
    
    
    292Preferred stock
    
    
    578
    
    
    
    31
    
    
    
    41
    
    
    
    112
    
    
    
    456Total equity securities available-for-sale
    
    
    667
    
    
    
    237
    
    
    
    41
    
    
    
    115
    
    
    
    748Total
    
    $
    34,493
    
    
    $
    982
    
    
    $
    1,272
    
    
    $
    2,415
    
    
    $
    31,788
 Summary of Fixed Maturity and Equity Securities
 Gross Unrealized LossesCost or
    
    
    Gross
    
    
    
    
    
    
    
    
    
    
    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
 16




---



##### Table of Contents



(In millions)
    
    Three Months endedJune 30, 2009Beginning balance of credit losses on fixed maturity securities
    
    $
    192Additional credit losses for which an OTTI loss was previously recognized
    
    
    21Additional credit losses for which an OTTI loss was not previously recognized
    
    
    84Reductions for securities sold during the period
    
    
    (36
    )Reductions for securities the Company intends to sell or more likely than not will be required to sell
    
    
    (49
    )Ending balance of credit losses on fixed maturity securities
    
    $
    212
    Asset-Backed Securities
     17




---



##### Table of Contents



Gross Unrealized Losses by Ratings Distribution
 June 30,
2009
 GrossAmortized
    
    
    Estimated
    
    
    UnrealizedRating
    
    Cost
    
    
    Fair Value
    
    
    LossU.S. Government Agencies
    
    $
    732
    
    
    $
    714
    
    
    $
    18AAA
    
    
    4,327
    
    
    
    3,431
    
    
    
    896AA
    
    
    491
    
    
    
    308
    
    
    
    183A
    
    
    427
    
    
    
    249
    
    
    
    178BBB
    
    
    353
    
    
    
    269
    
    
    
    84Non-investment grade
and equity tranches
    
    
    657
    
    
    
    477
    
    
    
    180Total
    
    $
    6,987
    
    
    $
    5,448
    
    
    $
    1,539
   States, Municipalities and Political Subdivisions  Tax-Exempt Securities
  18




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##### Table of Contents



Gross Unrealized Losses by Ratings Distribution
 June 30, 2009
 GrossAmortized
    
    
    Estimated
    
    
    UnrealizedRating
    
    Cost
    
    
    Fair Value
    
    
    LossAAA
    
    $
    1,673
    
    
    $
    1,548
    
    
    $
    125AA
    
    
    1,883
    
    
    
    1,669
    
    
    
    214A
    
    
    1,015
    
    
    
    913
    
    
    
    102BBB
    
    
    943
    
    
    
    627
    
    
    
    316Total
    
    $
    5,514
    
    
    $
    4,757
    
    
    $
    757
       19




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##### Table of Contents



Corporate and Other Taxable Bonds
   Gross Unrealized Losses by Industry Sector
 June 30, 2009
 Estimated
    
    
    GrossAmortized Cost
    
    
    Fair Value
    
    
    Unrealized LossCommunications
    
    $
    939
    
    
    $
    853
    
    
    $
    86Consumer, Cyclical
    
    
    927
    
    
    
    781
    
    
    
    146Consumer, Non-cyclical
    
    
    504
    
    
    
    441
    
    
    
    63Energy
    
    
    609
    
    
    
    547
    
    
    
    62Financial
    
    
    2,446
    
    
    
    1,932
    
    
    
    514Industrial
    
    
    537
    
    
    
    472
    
    
    
    65Utilities
    
    
    859
    
    
    
    730
    
    
    
    129Other
    
    
    673
    
    
    
    592
    
    
    
    81Total
    
    $
    7,494
    
    
    $
    6,348
    
    
    $
    1,146
 Gross Unrealized Losses by Ratings Distribution
 June 30, 2009
 Estimated
    
    
    GrossRating
    
    Amortized Cost
    
    
    Fair Value
    
    
    Unrealized LossAAA
    
    $
    323
    
    
    $
    308
    
    
    $
    15AA
    
    
    285
    
    
    
    274
    
    
    
    11A
    
    
    1,269
    
    
    
    1,080
    
    
    
    189BBB
    
    
    3,540
    
    
    
    3,001
    
    
    
    539Non-investment grade
    
    
    2,077
    
    
    
    1,685
    
    
    
    392Total
    
    $
    7,494
    
    
    $
    6,348
    
    
    $
    1,146
    Non-Redeemable Preferred Stock
  20




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##### Table of Contents



Gross Unrealized Losses by Ratings Distribution
 June 30,
2009
 Estimated
    
    
    GrossRating
    
    Amortized Cost
    
    
    Fair Value
    
    
    Unrealized LossA
    
    $
    104
    
    
    $
    75
    
    
    $
    29BBB
    
    
    421
    
    
    
    304
    
    
    
    117Non-investment grade
    
    
    18
    
    
    
    11
    
    
    
    7Total
    
    $
    543
    
    
    $
    390
    
    
    $
    153
   Contractual Maturity
  Contractual Maturity
 June 30, 2009
    
    
    December 31, 2008Cost or
    
    
    Estimated
    
    
    Cost or
    
    
    EstimatedAmortized
    
    
    Fair
    
    
    Amortized
    
    
    Fair(In millions)
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    ValueDue in one year or less
    
    $
    1,280
    
    
    $
    1,203
    
    
    $
    3,105
    
    
    $
    2,707Due after one year through five years
    
    
    9,247
    
    
    
    8,718
    
    
    
    10,295
    
    
    
    9,210Due after five years through ten years
    
    
    8,020
    
    
    
    7,421
    
    
    
    5,929
    
    
    
    4,822Due after ten years
    
    
    15,179
    
    
    
    13,598
    
    
    
    14,825
    
    
    
    12,147Total
    
    $
    33,726
    
    
    $
    30,940
    
    
    $
    34,154
    
    
    $
    28,886
 21




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##### Table of Contents



Limited Partnerships
     Investment Commitments
   22




---



##### Table of Contents



Note E. Derivative Financial Instruments
         23




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##### Table of Contents



Credit Ratings of Underlying Reference  Obligations
 June 30,
2009
 WeightedFair Value of
    
    
    Maximum Amount of
    
    
    AverageCredit Default
    
    
    Future Payments under
    
    
    YearsSwaps
    
    
    Credit Default Swaps
    
    
    to MaturityBBB
    
    $
    
    
    
    $
    25
    
    
    
    0.5B
    
    
    (1
    )
    
    
    8
    
    
    
    3.6Total
    
    $
    (1
    )
    
    $
    33
    
    
    
    1.2
 Credit Ratings of Underlying Reference  Obligations
 December 31,
2008
 WeightedFair Value of
    
    
    Maximum Amount of
    
    
    AverageCredit Default
    
    
    Future Payments under
    
    
    YearsSwaps
    
    
    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
  24




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##### Table of Contents



Recognized Gains (Losses)
 Periods ended June 30
    
    Three Months
    
    
    Six Months(In millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Without hedge designationInterest rate swaps
    
    $
    40
    
    
    $
    25
    
    
    $
    61
    
    
    $
    2Credit default swaps  purchased protection
    
    
    (26
    )
    
    
    (5
    )
    
    
    (35
    )
    
    
    11Credit default swaps  sold protection
    
    
    8
    
    
    
    6
    
    
    
    2
    
    
    
    (9
    )Total return swaps
    
    
    (2
    )
    
    
    
    
    
    
    (2
    )
    
    
    Futures sold, not yet purchased
    
    
    9
    
    
    
    32
    
    
    
    23
    
    
    
    11Currency forwards
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    Equity warrants
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    (2
    )Options written
    
    
    4
    
    
    
    
    
    
    
    15
    
    
    
    Trading activitiesFutures purchased
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    (78
    )Futures sold, not yet purchased
    
    
    (1
    )
    
    
    1
    
    
    
    (1
    )
    
    
    1Currency forwards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Total
    
    $
    32
    
    
    $
    52
    
    
    $
    63
    
    
    $
    (63
    )
   25




---



##### Table of Contents



Derivative Financial Instruments
 June 30,
2009
 Contractual/Notional
    
    
    Estimated Fair ValueAmount
    
    
    Asset
    
    
    (Liability)Without hedge designationCredit default swaps  purchased protection
    
    $
    328
    
    
    $
    5
    
    
    $
    (14
    )Credit default swaps  sold protection
    
    
    33
    
    
    
    
    
    
    
    (1
    )Futures sold, not yet purchased
    
    
    414
    
    
    
    
    
    
    
    Equity warrants
    
    
    3
    
    
    
    
    
    
    
    Trading activitiesFutures sold, not yet purchased
    
    
    118
    
    
    
    
    
    
    
    Total
    
    $
    896
    
    
    $
    5
    
    
    $
    (15
    )
 Derivative Financial Instruments
 December 31, 2008
 Contractual/Notional
    
    
    Estimated Fair ValueAmount
    
    
    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
    )
  26




---



##### Table of Contents



Note F. Fair Value
      27




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##### Table of Contents



Assets and Liabilities Measured at Fair Value
  TotalJune 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
    
    $
    253
    
    
    $
    787
    
    
    $
    
    
    
    $
    1,040Asset-backed securities:Residential mortgage-backed securities
    
    
    
    
    
    
    5,456
    
    
    
    808
    
    
    
    6,264Commercial mortgage-backed securities
    
    
    
    
    
    
    477
    
    
    
    175
    
    
    
    652Other asset-backed securities
    
    
    
    
    
    
    289
    
    
    
    141
    
    
    
    430Total asset-backed securities
    
    
    
    
    
    
    6,222
    
    
    
    1,124
    
    
    
    7,346States, municipalities and political subdivisions -
tax-exempt securities
    
    
    
    
    
    
    6,853
    
    
    
    785
    
    
    
    7,638Corporate and other taxable bonds
    
    
    105
    
    
    
    14,119
    
    
    
    730
    
    
    
    14,954Redeemable preferred stock
    
    
    21
    
    
    
    40
    
    
    
    1
    
    
    
    62Total fixed maturity securities
    
    
    379
    
    
    
    28,021
    
    
    
    2,640
    
    
    
    31,040Equity securities
    
    
    452
    
    
    
    87
    
    
    
    209
    
    
    
    748Derivative financial instruments, included in Other
invested assets
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    5Short term investments
    
    
    3,410
    
    
    
    1,071
    
    
    
    
    
    
    
    4,481Life settlement contracts, included in Other assets
    
    
    
    
    
    
    
    
    
    
    126
    
    
    
    126Discontinued operations investments, included in Other
liabilities
    
    
    79
    
    
    
    52
    
    
    
    13
    
    
    
    144Separate account business
    
    
    55
    
    
    
    320
    
    
    
    38
    
    
    
    413Total assets
    
    $
    4,375
    
    
    $
    29,551
    
    
    $
    3,031
    
    
    $
    36,957LiabilitiesDerivative financial instruments, included in Other
liabilities
    
    $
    
    
    
    $
    
    
    
    $
    (15
    )
    
    $
    (15
    )Total liabilities
    
    $
    
    
    
    $
    
    
    
    $
    (15
    )
    
    $
    (15
    )
 28




---



##### 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
    )
 29




---



##### Table of Contents



Net realizedinvestmentNet realized
    
    
    gains (losses)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealisedinvestment
    
    
    and net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    gains (losses)gains (losses)
    
    
    change in
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    on Level 3and net
    
    
    unrealized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    assets andchange in
    
    
    appreciation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    liabilitiesunrealized
    
    
    (depreciation)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    held atappreciation
    
    
    included in
    
    
    Purchases,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    June 30,Balance at
    
    
    (depreciation)
    
    
    other
    
    
    sales,
    
    
    Transfers
    
    
    Transfers
    
    
    Balance at
    
    
    2009Level 3
    
    April 1,
    
    
    included in
    
    
    comprehensive
    
    
    issuances and
    
    
    into
    
    
    out of
    
    
    June 30,
    
    
    recognized(in millions)
    
    2009
    
    
    net income*
    
    
    income
    
    
    settlements
    
    
    Level 3
    
    
    Level 3
    
    
    2009
    
    
    in net income*Fixed maturity securities:Asset-backed securities:Residential mortgage-backed
securities
    
    $
    743
    
    
    $
    (6
    )
    
    $
    35
    
    
    $
    (25
    )
    
    $
    71
    
    
    $
    (10
    )
    
    $
    808
    
    
    $
    (5
    )Commercial mortgage-backed
securities
    
    
    158
    
    
    
    (155
    )
    
    
    155
    
    
    
    (9
    )
    
    
    26
    
    
    
    
    
    
    
    175
    
    
    
    (155
    )Other asset-backed securities
    
    
    252
    
    
    
    
    
    
    
    10
    
    
    
    (2
    )
    
    
    
    
    
    
    (119
    )
    
    
    141
    
    
    
    Total asset-backed securities
    
    
    1,153
    
    
    
    (161
    )
    
    
    200
    
    
    
    (36
    )
    
    
    97
    
    
    
    (129
    )
    
    
    1,124
    
    
    
    (160
    )States, municipalities and
political
subdivisions -
tax-exempt
securities
    
    
    784
    
    
    
    
    
    
    
    18
    
    
    
    (17
    )
    
    
    
    
    
    
    
    
    
    
    785
    
    
    
    Corporate and other taxable bonds
    
    
    809
    
    
    
    
    
    
    
    47
    
    
    
    (137
    )
    
    
    16
    
    
    
    (5
    )
    
    
    730
    
    
    
    (1
    )Redeemable preferred stock
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18
    )
    
    
    1
    
    
    
    Total fixed maturity securities
    
    
    2,765
    
    
    
    (161
    )
    
    
    265
    
    
    
    (190
    )
    
    
    113
    
    
    
    (152
    )
    
    
    2,640
    
    
    
    (161
    )Equity securities
    
    
    210
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    209
    
    
    
    Derivative financial instruments, net
    
    
    (63
    )
    
    
    19
    
    
    
    
    
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    (11
    )Life settlement contracts
    
    
    127
    
    
    
    5
    
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    126
    
    
    
    Discontinued operations investments
    
    
    13
    
    
    
    
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    Separate account business
    
    
    38
    
    
    
    
    
    
    
    3
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    38
    
    
    
    Total
    
    $
    3,090
    
    
    $
    (137
    )
    
    $
    268
    
    
    $
    (166
    )
    
    $
    113
    
    
    $
    (152
    )
    
    $
    3,016
    
    
    $
    (172
    )
 30




---



##### Table of Contents



Net realized
    
    
    Net realizedinvestment
    
    
    investment gains
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealizedgains (losses)
    
    
    (losses) and net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    gains (losses)and net
    
    
    change in
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    on Level 3change in
    
    
    unrealized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    assets andunrealized
    
    
    appreciation
    
    
    Purchases,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    liabilitiesappreciation
    
    
    (depreciation)
    
    
    sales,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    held at June(depreciation)
    
    
    included in other
    
    
    issuances
    
    
    Transfers
    
    
    Transfers
    
    
    
    
    
    
    30, 2008Level 3
    
    Balance at
    
    
    included in
    
    
    comprehensive
    
    
    and
    
    
    into
    
    
    out of
    
    
    Balance at
    
    
    recognized in(in millions)
    
    April 1, 2008
    
    
    net income*
    
    
    income
    
    
    settlements
    
    
    Level 3
    
    
    Level 3
    
    
    June 30, 2008
    
    
    net income*Fixed maturity securities
    
    $
    2,245
    
    
    $
    (85
    )
    
    $
    (55
    )
    
    $
    89
    
    
    $
    1,159
    
    
    $
    (140
    )
    
    $
    3,213
    
    
    $
    (91
    )Equity securities
    
    
    193
    
    
    
    
    
    
    
    (2
    )
    
    
    48
    
    
    
    22
    
    
    
    
    
    
    
    261
    
    
    
    (2
    )Derivative financial instruments, net
    
    
    (82
    )
    
    
    23
    
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    (67
    )
    
    
    15Short term investments
    
    
    85
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (85
    )
    
    
    
    
    
    
    Life settlement contracts
    
    
    118
    
    
    
    12
    
    
    
    
    
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    118
    
    
    
    1Discontinued operations investments
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (17
    )
    
    
    23
    
    
    
    Separate account business
    
    
    47
    
    
    
    
    
    
    
    (4
    )
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    45
    
    
    
    Total
    
    $
    2,647
    
    
    $
    (50
    )
    
    $
    (61
    )
    
    $
    118
    
    
    $
    1,181
    
    
    $
    (242
    )
    
    $
    3,593
    
    
    $
    (77
    )
 31




---



##### Table of Contents



UnrealizedNet realized
    
    
    Net realized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    gainsinvestment
    
    
    investment gains
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (losses) ongains (losses)
    
    
    (losses) and net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Level 3and net
    
    
    change in
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    assets andchange in
    
    
    unrealized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    liabilitiesunrealized
    
    
    appreciation
    
    
    Purchases,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    held atappreciation
    
    
    (depreciation)
    
    
    sales,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    June 30,(depreciation)
    
    
    included in other
    
    
    issuances
    
    
    Transfers
    
    
    Transfers
    
    
    
    
    
    
    2009Level 3
    
    Balance at
    
    
    included in
    
    
    comprehensive
    
    
    and
    
    
    into
    
    
    out of
    
    
    Balance at
    
    
    recognized(in millions)
    
    January 1, 2009
    
    
    net loss*
    
    
    income
    
    
    settlements
    
    
    Level 3
    
    
    Level 3
    
    
    June 30, 2009
    
    
    in net loss*Fixed maturity securities:Asset-backed securities:Residential mortgage-backed
securities
    
    $
    782
    
    
    $
    (23
    )
    
    $
    36
    
    
    $
    (48
    )
    
    $
    71
    
    
    $
    (10
    )
    
    $
    808
    
    
    $
    (12
    )Commercial mortgage-backed
securities
    
    
    186
    
    
    
    (165
    )
    
    
    142
    
    
    
    (14
    )
    
    
    26
    
    
    
    
    
    
    
    175
    
    
    
    (165
    )Other asset-backed securities
    
    
    139
    
    
    
    (30
    )
    
    
    40
    
    
    
    (42
    )
    
    
    153
    
    
    
    (119
    )
    
    
    141
    
    
    
    (31
    )Total asset-backed securities
    
    
    1,107
    
    
    
    (218
    )
    
    
    218
    
    
    
    (104
    )
    
    
    250
    
    
    
    (129
    )
    
    
    1,124
    
    
    
    (208
    )States, municipalities and
political
subdivisions  tax-exempt
securities
    
    
    750
    
    
    
    
    
    
    
    55
    
    
    
    (20
    )
    
    
    
    
    
    
    
    
    
    
    785
    
    
    
    Corporate and other taxable bonds
    
    
    622
    
    
    
    (5
    )
    
    
    46
    
    
    
    67
    
    
    
    18
    
    
    
    (18
    )
    
    
    730
    
    
    
    (7
    )Redeemable preferred stock
    
    
    13
    
    
    
    (9
    )
    
    
    8
    
    
    
    7
    
    
    
    
    
    
    
    (18
    )
    
    
    1
    
    
    
    (9
    )Total fixed maturity securities
    
    
    2,492
    
    
    
    (232
    )
    
    
    327
    
    
    
    (50
    )
    
    
    268
    
    
    
    (165
    )
    
    
    2,640
    
    
    
    (224
    )Equity securities
    
    
    210
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    209
    
    
    
    Derivative financial instruments, net
    
    
    (87
    )
    
    
    25
    
    
    
    
    
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    (15
    )Life settlement contracts
    
    
    129
    
    
    
    16
    
    
    
    
    
    
    
    (19
    )
    
    
    
    
    
    
    
    
    
    
    126
    
    
    
    2Discontinued operations investments
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    Separate account business
    
    
    38
    
    
    
    
    
    
    
    4
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    38
    
    
    
    Total
    
    $
    2,797
    
    
    $
    (191
    )
    
    $
    330
    
    
    $
    (23
    )
    
    $
    268
    
    
    $
    (165
    )
    
    $
    3,016
    
    
    $
    (237
    )
 32




---



##### Table of Contents



Net realized
    
    
    Net realizedinvestment
    
    
    investment gains
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealizedgains (losses)
    
    
    (losses) and net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    gains (losses)and net
    
    
    change in
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    on Level 3change in
    
    
    unrealized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    assets andunrealized
    
    
    appreciation
    
    
    Purchases,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    liabilities heldappreciation
    
    
    (depreciation)
    
    
    sales,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    at June 30,Balance at
    
    
    (depreciation)
    
    
    included in other
    
    
    issuances
    
    
    Transfers
    
    
    Transfers
    
    
    
    
    
    
    2008Level 3
    
    January 1,
    
    
    included in
    
    
    comprehensive
    
    
    and
    
    
    into
    
    
    out of
    
    
    Balance at
    
    
    recognized in(in millions)
    
    2008
    
    
    net income*
    
    
    loss
    
    
    settlements
    
    
    Level 3
    
    
    Level 3
    
    
    June 30, 2008
    
    
    net income*Fixed maturity securities
    
    $
    2,684
    
    
    $
    (123
    )
    
    $
    (270
    )
    
    $
    84
    
    
    $
    1,254
    
    
    $
    (416
    )
    
    $
    3,213
    
    
    $
    (135
    )Equity securities
    
    
    196
    
    
    
    (2
    )
    
    
    (3
    )
    
    
    48
    
    
    
    22
    
    
    
    
    
    
    
    261
    
    
    
    (4
    )Derivative financial instruments, net
    
    
    2
    
    
    
    1
    
    
    
    
    
    
    
    (70
    )
    
    
    
    
    
    
    
    
    
    
    (67
    )
    
    
    (69
    )Short term investments
    
    
    85
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (85
    )
    
    
    
    
    
    
    Life settlement contracts
    
    
    115
    
    
    
    30
    
    
    
    
    
    
    
    (27
    )
    
    
    
    
    
    
    
    
    
    
    118
    
    
    
    5Discontinued operations investments
    
    
    42
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    (17
    )
    
    
    23
    
    
    
    Separate account business
    
    
    30
    
    
    
    
    
    
    
    (4
    )
    
    
    (1
    )
    
    
    20
    
    
    
    
    
    
    
    45
    
    
    
    Total
    
    $
    3,154
    
    
    $
    (94
    )
    
    $
    (277
    )
    
    $
    32
    
    
    $
    1,296
    
    
    $
    (518
    )
    
    $
    3,593
    
    
    $
    (203
    )
 33




---



##### 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
  Equity Securities
   Derivative Financial Instruments
  34




---



##### Table of Contents



Short Term Investments
  Life Settlement Contracts
  Discontinued Operations Investments
  Separate Account Business
  Financial Assets and Liabilities Not Measured at Fair Value
  June 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
    
    $
    106
    
    
    $
    107
    
    
    $
    111
    
    
    $
    113Long term debt
    
    
    2,058
    
    
    
    1,754
    
    
    
    2,058
    
    
    
    1,585
      35




---



##### Table of Contents



Note G. Claim and Claim Adjustment Expense Reserves
     A&E Reserves
  A&E Reserves
 June 30, 2009
    
    
    December 31, 2008Environmental
    
    
    
    
    
    
    Environmental(In millions)
    
    Asbestos
    
    
    Pollution
    
    
    Asbestos
    
    
    PollutionGross reserves
    
    $
    1,964
    
    
    $
    366
    
    
    $
    2,112
    
    
    $
    392Ceded reserves
    
    
    (851
    )
    
    
    (126
    )
    
    
    (910
    )
    
    
    (130
    )Net reserves
    
    $
    1,113
    
    
    $
    240
    
    
    $
    1,202
    
    
    $
    262
 Asbestos
  36




---



##### Table of Contents



37




---



##### Table of Contents



In re:
Burns & Roe Enterprises, Inc
 Boson v. Union Carbide
Corp.,
 38




---



##### Table of Contents



Pennock, et al. v. Maryland Casualty,
et al.
  Environmental Pollution
  Net Prior Year Development
  39




---



##### Table of Contents



Three Month Comparison
 Net Prior Year Development
Three months ended June 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)
    
    $
    (80
    )
    
    $
    (40
    )
    
    $
    4
    
    
    $
    (116
    )A&E
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Pretax (favorable) unfavorable net prior year development
before impact of premium development
    
    
    (80
    )
    
    
    (40
    )
    
    
    4
    
    
    
    (116
    )Pretax (favorable) unfavorable premium development
    
    
    59
    
    
    
    (1
    )
    
    
    (2
    )
    
    
    56Total pretax (favorable) unfavorable net prior year development
    
    $
    (21
    )
    
    $
    (41
    )
    
    $
    2
    
    
    $
    (60
    )
 Net Prior Year Development
Three months ended June 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)
    
    $
    (15
    )
    
    $
    1
    
    
    $
    5
    
    
    $
    (9
    )A&E
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    6Pretax (favorable) unfavorable net prior year
development before impact of premium development
    
    
    (15
    )
    
    
    1
    
    
    
    11
    
    
    
    (3
    )Pretax (favorable) unfavorable premium development
    
    
    (8
    )
    
    
    1
    
    
    
    1
    
    
    
    (6
    )Total pretax (favorable) unfavorable net prior
year development
    
    $
    (23
    )
    
    $
    2
    
    
    $
    12
    
    
    $
    (9
    )
 40




---



##### Table of Contents



2009 Net Prior Year Development
 Standard Lines
    Specialty Lines
   2008 Net Prior Year Development
 Standard Lines
   Corporate & Other Non-Core
  41




---



##### Table of Contents



Six Month Comparison
 Net Prior Year Development
Six months ended June 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)
    
    $
    (110
    )
    
    $
    (81
    )
    
    $
    5
    
    
    $
    (186
    )A&E
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Pretax (favorable) unfavorable net prior year development
before impact of premium development
    
    
    (110
    )
    
    
    (81
    )
    
    
    5
    
    
    
    (186
    )Pretax (favorable) unfavorable premium development
    
    
    76
    
    
    
    (3
    )
    
    
    (3
    )
    
    
    70Total pretax (favorable) unfavorable net prior year development
    
    $
    (34
    )
    
    $
    (84
    )
    
    $
    2
    
    
    $
    (116
    )
 Net Prior Year Development
Six months ended June 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)
    
    $
    (50
    )
    
    $
    18
    
    
    $
    8
    
    
    $
    (24
    )A&E
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    8Pretax (favorable) unfavorable net prior year development
before impact of premium development
    
    
    (50
    )
    
    
    18
    
    
    
    16
    
    
    
    (16
    )Pretax (favorable) unfavorable premium development
    
    
    1
    
    
    
    (18
    )
    
    
    
    
    
    
    (17
    )Total pretax (favorable) unfavorable net prior year development
    
    $
    (49
    )
    
    $
    
    
    
    $
    16
    
    
    $
    (33
    )
 42




---



##### Table of Contents



2009 Net Prior Year Development
 Standard Lines
    Specialty Lines
    2008 Net Prior Year Development
 Standard Lines
    43




---



##### Table of Contents



Specialty Lines
  Corporate & Other Non-Core
  Note H Legal Proceedings and Contingent Liabilities
 Insurance Brokerage Antitrust Litigation
 In re Insurance Brokerage Antitrust Litigation
  Global Crossing Limited Litigation
 Global Crossing Estate Representative, for itself and as the Liquidating Trustee of the
Global Crossing Liquidating Trust v. Gary Winnick, et al.,
 California Long Term Care Litigation
 Shaffer v. Continental Casualty Company
 44




---



##### Table of Contents



Asbestos and Environmental Pollution (A&E) Reserves
  Other Litigation
  Note I. Benefit Plans
  Net Periodic Cost (Benefit)
 Three Months
    
    
    Six MonthsPeriods ended June 30
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008(In millions)Pension cost (benefit)Service cost
    
    $
    3
    
    
    $
    4
    
    
    $
    8
    
    
    $
    10Interest cost on projected benefit obligation
    
    
    39
    
    
    
    37
    
    
    
    77
    
    
    
    73Expected return on plan assets
    
    
    (36
    )
    
    
    (44
    )
    
    
    (72
    )
    
    
    (89
    )Actuarial loss
    
    
    6
    
    
    
    1
    
    
    
    12
    
    
    
    2Net periodic pension cost (benefit)
    
    $
    12
    
    
    $
    (2
    )
    
    $
    25
    
    
    $
    (4
    )Postretirement benefitService cost
    
    $
    
    
    
    $
    
    
    
    $
    1
    
    
    $
    1Interest cost on projected benefit obligation
    
    
    2
    
    
    
    2
    
    
    
    4
    
    
    
    4Prior service cost amortization
    
    
    (4
    )
    
    
    (4
    )
    
    
    (8
    )
    
    
    (8
    )Actuarial loss
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Net periodic postretirement benefit
    
    $
    (2
    )
    
    $
    (1
    )
    
    $
    (3
    )
    
    $
    (2
    )
 45




---



##### Table of Contents



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




---



##### Table of Contents



Note K. Business Segments
       47




---



##### Table of Contents



Three months ended
    
    
    
    
    
    
    
    
    
    
    
    
    
    CorporateJune 30, 2009
    
    Standard
    
    
    Specialty
    
    
    Life & Group
    
    
    & Other(In millions)
    
    Lines
    
    
    Lines
    
    
    Non-Core
    
    
    Non-Core
    
    
    Eliminations
    
    
    TotalRevenues:Net earned premiums
    
    $
    671
    
    
    $
    834
    
    
    $
    148
    
    
    $
    4
    
    
    $
    (1
    )
    
    $
    1,656Net investment income
    
    
    252
    
    
    
    188
    
    
    
    168
    
    
    
    67
    
    
    
    
    
    
    
    675Other revenues
    
    
    16
    
    
    
    48
    
    
    
    (1
    )
    
    
    (1
    )
    
    
    
    
    
    
    62Total operating revenues
    
    
    939
    
    
    
    1,070
    
    
    
    315
    
    
    
    70
    
    
    
    (1
    )
    
    
    2,393Claims, benefits and expenses:Net incurred claims and benefits
    
    
    478
    
    
    
    522
    
    
    
    269
    
    
    
    23
    
    
    
    
    
    
    
    1,292Policyholders dividends
    
    
    (1
    )
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Amortization of deferred acquisition costs
    
    
    163
    
    
    
    182
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    349Other insurance related expenses
    
    
    68
    
    
    
    63
    
    
    
    47
    
    
    
    1
    
    
    
    (1
    )
    
    
    178Other expenses
    
    
    22
    
    
    
    40
    
    
    
    51
    
    
    
    30
    
    
    
    
    
    
    
    143Total claims, benefits and expenses
    
    
    730
    
    
    
    810
    
    
    
    371
    
    
    
    54
    
    
    
    (1
    )
    
    
    1,964Operating income (loss) from continuing operations before
income tax
    
    
    209
    
    
    
    260
    
    
    
    (56
    )
    
    
    16
    
    
    
    
    
    
    
    429Income tax (expense) benefit on operating income (loss)
    
    
    (64
    )
    
    
    (73
    )
    
    
    30
    
    
    
    (3
    )
    
    
    
    
    
    
    (110
    )Net operating income attributable to noncontrolling interests
    
    
    
    
    
    
    (14
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14
    )Net operating income (loss) from continuing operations
attributable to CNAF
    
    
    145
    
    
    
    173
    
    
    
    (26
    )
    
    
    13
    
    
    
    
    
    
    
    305Net realized investment gains (losses), net of participating
policyholders interests
    
    
    (170
    )
    
    
    (96
    )
    
    
    13
    
    
    
    (44
    )
    
    
    
    
    
    
    (297
    )Income tax (expense) benefit on net realized investment
gains (losses)
    
    
    60
    
    
    
    28
    
    
    
    (4
    )
    
    
    14
    
    
    
    
    
    
    
    98Net realized investment (gains) losses, after-tax,
attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net realized investment gains (losses) attributable to CNAF
    
    
    (110
    )
    
    
    (68
    )
    
    
    9
    
    
    
    (30
    )
    
    
    
    
    
    
    (199
    )Net income (loss) from continuing operations attributable to
CNAF
    
    $
    35
    
    
    $
    105
    
    
    $
    (17
    )
    
    $
    (17
    )
    
    $
    
    
    
    $
    106
 48




---



##### Table of Contents



Three months ended
    
    
    
    
    
    
    
    
    
    
    
    
    
    CorporateJune 30, 2008
    
    Standard
    
    
    Specialty
    
    
    Life & Group
    
    
    & Other(In millions)
    
    Lines
    
    
    Lines
    
    
    Non-Core
    
    
    Non-Core
    
    
    Eliminations
    
    
    TotalRevenues:Net earned premiums
    
    $
    768
    
    
    $
    859
    
    
    $
    149
    
    
    $
    (1
    )
    
    $
    (1
    )
    
    $
    1,774Net investment income
    
    
    199
    
    
    
    155
    
    
    
    157
    
    
    
    65
    
    
    
    
    
    
    
    576Other revenues
    
    
    15
    
    
    
    54
    
    
    
    8
    
    
    
    5
    
    
    
    
    
    
    
    82Total operating revenues
    
    
    982
    
    
    
    1,068
    
    
    
    314
    
    
    
    69
    
    
    
    (1
    )
    
    
    2,432Claims, benefits and expenses:Net incurred claims and benefits
    
    
    566
    
    
    
    559
    
    
    
    316
    
    
    
    26
    
    
    
    
    
    
    
    1,467Policyholders dividends
    
    
    3
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    5Amortization of deferred acquisition costs
    
    
    175
    
    
    
    184
    
    
    
    2
    
    
    
    (1
    )
    
    
    
    
    
    
    360Other insurance related expenses
    
    
    48
    
    
    
    53
    
    
    
    51
    
    
    
    (2
    )
    
    
    (1
    )
    
    
    149Other expenses
    
    
    12
    
    
    
    41
    
    
    
    5
    
    
    
    29
    
    
    
    
    
    
    
    87Total claims, benefits and expenses
    
    
    804
    
    
    
    838
    
    
    
    375
    
    
    
    52
    
    
    
    (1
    )
    
    
    2,068Operating income (loss) from continuing operations before
income tax
    
    
    178
    
    
    
    230
    
    
    
    (61
    )
    
    
    17
    
    
    
    
    
    
    
    364Income tax (expense) benefit on operating income (loss)
    
    
    (54
    )
    
    
    (74
    )
    
    
    31
    
    
    
    (5
    )
    
    
    
    
    
    
    (102
    )Net operating income attributable to noncontrolling interests
    
    
    
    
    
    
    (11
    )
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (12
    )Net operating income (loss) from continuing operations
attributable to CNAF
    
    
    124
    
    
    
    145
    
    
    
    (30
    )
    
    
    11
    
    
    
    
    
    
    
    250Net realized investment losses, net of participating
policyholders interests
    
    
    (60
    )
    
    
    (29
    )
    
    
    (6
    )
    
    
    (16
    )
    
    
    
    
    
    
    (111
    )Income tax benefit on net realized investment losses
    
    
    21
    
    
    
    10
    
    
    
    2
    
    
    
    7
    
    
    
    
    
    
    
    40Net realized investment (gains) losses, after-tax,
attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net realized investment losses attributable to CNAF
    
    
    (39
    )
    
    
    (19
    )
    
    
    (4
    )
    
    
    (9
    )
    
    
    
    
    
    
    (71
    )Net income (loss) from continuing operations attributable to
CNAF
    
    $
    85
    
    
    $
    126
    
    
    $
    (34
    )
    
    $
    2
    
    
    $
    
    
    
    $
    179
 49




---



##### Table of Contents



Six months ended
    
    
    
    
    
    
    
    
    
    
    
    
    
    CorporateJune 30, 2009
    
    Standard
    
    
    Specialty
    
    
    Life & Group
    
    
    & Other(In millions)
    
    Lines
    
    
    Lines
    
    
    Non-Core
    
    
    Non-Core
    
    
    Eliminations
    
    
    TotalRevenues:Net earned premiums
    
    $
    1,381
    
    
    $
    1,646
    
    
    $
    298
    
    
    $
    5
    
    
    $
    (2
    )
    
    $
    3,328Net investment income
    
    
    372
    
    
    
    296
    
    
    
    327
    
    
    
    100
    
    
    
    
    
    
    
    1,095Other revenues
    
    
    29
    
    
    
    105
    
    
    
    5
    
    
    
    1
    
    
    
    
    
    
    
    140Total operating revenues
    
    
    1,782
    
    
    
    2,047
    
    
    
    630
    
    
    
    106
    
    
    
    (2
    )
    
    
    4,563Claims, benefits and expenses:Net incurred claims and benefits
    
    
    988
    
    
    
    1,021
    
    
    
    574
    
    
    
    44
    
    
    
    
    
    
    
    2,627Policyholders dividends
    
    
    2
    
    
    
    6
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    9Amortization of deferred acquisition costs
    
    
    329
    
    
    
    359
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    698Other insurance related expenses
    
    
    144
    
    
    
    122
    
    
    
    93
    
    
    
    2
    
    
    
    (2
    )
    
    
    359Other expenses
    
    
    31
    
    
    
    96
    
    
    
    57
    
    
    
    60
    
    
    
    
    
    
    
    244Total claims, benefits and expenses
    
    
    1,494
    
    
    
    1,604
    
    
    
    735
    
    
    
    106
    
    
    
    (2
    )
    
    
    3,937Operating income (loss) from continuing operations before
income tax
    
    
    288
    
    
    
    443
    
    
    
    (105
    )
    
    
    
    
    
    
    
    
    
    
    626Income tax (expense) benefit on operating income (loss)
    
    
    (82
    )
    
    
    (126
    )
    
    
    57
    
    
    
    4
    
    
    
    
    
    
    
    (147
    )Net operating income attributable to noncontrolling interests
    
    
    
    
    
    
    (25
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25
    )Net operating income (loss) from continuing operations
attributable to CNAF
    
    
    206
    
    
    
    292
    
    
    
    (48
    )
    
    
    4
    
    
    
    
    
    
    
    454Net realized investment losses, net of participating
policyholders interests
    
    
    (349
    )
    
    
    (212
    )
    
    
    (177
    )
    
    
    (91
    )
    
    
    
    
    
    
    (829
    )Income tax benefit on net realized investment losses
    
    
    122
    
    
    
    69
    
    
    
    62
    
    
    
    32
    
    
    
    
    
    
    
    285Net realized investment (gains) losses, after-tax,
attributable to noncontrolling interests
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Net realized investment losses attributable to CNAF
    
    
    (227
    )
    
    
    (142
    )
    
    
    (115
    )
    
    
    (59
    )
    
    
    
    
    
    
    (543
    )Net income (loss) from continuing operations attributable to
CNAF
    
    $
    (21
    )
    
    $
    150
    
    
    $
    (163
    )
    
    $
    (55
    )
    
    $
    
    
    
    $
    (89
    )June 30, 2009(In millions)Reinsurance receivables
    
    $
    2,123
    
    
    $
    1,417
    
    
    $
    1,830
    
    
    $
    1,967
    
    
    $
    
    
    
    $
    7,337Insurance receivables
    
    $
    1,258
    
    
    $
    796
    
    
    $
    9
    
    
    $
    (3
    )
    
    $
    
    
    
    $
    2,060Deferred acquisition costs
    
    $
    307
    
    
    $
    376
    
    
    $
    462
    
    
    $
    
    
    
    $
    
    
    
    $
    1,145Insurance reserves:Claim and claim adjustment expenses
    
    $
    11,705
    
    
    $
    8,462
    
    
    $
    2,862
    
    
    $
    4,071
    
    
    $
    
    
    
    $
    27,100Unearned premiums
    
    
    1,481
    
    
    
    1,872
    
    
    
    154
    
    
    
    3
    
    
    
    (2
    )
    
    
    3,508Future policy benefits
    
    
    
    
    
    
    
    
    
    
    7,746
    
    
    
    
    
    
    
    
    
    
    
    7,746Policyholders funds
    
    
    10
    
    
    
    13
    
    
    
    194
    
    
    
    
    
    
    
    
    
    
    
    217
 50




---



##### Table of Contents



Six months ended
    
    
    
    
    
    
    
    
    
    
    
    
    
    CorporateJune 30, 2008
    
    Standard
    
    
    Specialty
    
    
    Life & Group
    
    
    & Other(In millions)
    
    Lines
    
    
    Lines
    
    
    Non-Core
    
    
    Non-Core
    
    
    Eliminations
    
    
    TotalRevenues:Net earned premiums
    
    $
    1,551
    
    
    $
    1,732
    
    
    $
    306
    
    
    $
    
    
    
    $
    (2
    )
    
    $
    3,587Net investment income
    
    
    363
    
    
    
    287
    
    
    
    241
    
    
    
    119
    
    
    
    
    
    
    
    1,010Other revenues
    
    
    29
    
    
    
    107
    
    
    
    21
    
    
    
    11
    
    
    
    
    
    
    
    168Total operating revenues
    
    
    1,943
    
    
    
    2,126
    
    
    
    568
    
    
    
    130
    
    
    
    (2
    )
    
    
    4,765Claims, benefits and expenses:Net incurred claims and benefits
    
    
    1,143
    
    
    
    1,125
    
    
    
    528
    
    
    
    47
    
    
    
    
    
    
    
    2,843Policyholders dividends
    
    
    7
    
    
    
    8
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    18Amortization of deferred acquisition costs
    
    
    354
    
    
    
    368
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    728Other insurance related expenses
    
    
    106
    
    
    
    103
    
    
    
    101
    
    
    
    2
    
    
    
    (2
    )
    
    
    310Other expenses
    
    
    24
    
    
    
    92
    
    
    
    10
    
    
    
    61
    
    
    
    
    
    
    
    187Total claims, benefits and expenses
    
    
    1,634
    
    
    
    1,696
    
    
    
    648
    
    
    
    110
    
    
    
    (2
    )
    
    
    4,086Operating income (loss) from continuing operations before
income tax
    
    
    309
    
    
    
    430
    
    
    
    (80
    )
    
    
    20
    
    
    
    
    
    
    
    679Income tax (expense) benefit on operating income (loss)
    
    
    (90
    )
    
    
    (138
    )
    
    
    47
    
    
    
    (3
    )
    
    
    
    
    
    
    (184
    )Net operating income attributable to noncontrolling interests
    
    
    
    
    
    
    (23
    )
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (24
    )Net operating income (loss) from continuing operations
attributable to CNAF
    
    
    219
    
    
    
    269
    
    
    
    (33
    )
    
    
    16
    
    
    
    
    
    
    
    471Net realized investment losses, net of participating
policyholders interests
    
    
    (76
    )
    
    
    (38
    )
    
    
    (23
    )
    
    
    (25
    )
    
    
    
    
    
    
    (162
    )Income tax benefit on net realized investment losses
    
    
    26
    
    
    
    14
    
    
    
    8
    
    
    
    10
    
    
    
    
    
    
    
    58Net realized investment (gains) losses, after-tax,
attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net realized investment losses attributable to CNAF
    
    
    (50
    )
    
    
    (24
    )
    
    
    (15
    )
    
    
    (15
    )
    
    
    
    
    
    
    (104
    )Net income (loss) from continuing operations attributable to
CNAF
    
    $
    169
    
    
    $
    245
    
    
    $
    (48
    )
    
    $
    1
    
    
    $
    
    
    
    $
    367December 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 reserves:Claim 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
 51




---



##### Table of Contents



Revenue by Line of Business
 Periods ended June 30
    
    Three Months
    
    
    Six Months(In millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Standard LinesBusiness Insurance
    
    $
    113
    
    
    $
    155
    
    
    $
    243
    
    
    $
    310Commercial Insurance
    
    
    656
    
    
    
    767
    
    
    
    1,190
    
    
    
    1,557Standard Lines revenue
    
    
    769
    
    
    
    922
    
    
    
    1,433
    
    
    
    1,867Specialty LinesU.S. Specialty Lines
    
    
    602
    
    
    
    640
    
    
    
    1,119
    
    
    
    1,287Surety
    
    
    119
    
    
    
    120
    
    
    
    232
    
    
    
    235Warranty
    
    
    69
    
    
    
    75
    
    
    
    121
    
    
    
    148CNA Global
    
    
    184
    
    
    
    204
    
    
    
    363
    
    
    
    418Specialty Lines revenue
    
    
    974
    
    
    
    1,039
    
    
    
    1,835
    
    
    
    2,088Life & Group Non-CoreLife & Annuity
    
    
    63
    
    
    
    54
    
    
    
    87
    
    
    
    33Health
    
    
    266
    
    
    
    242
    
    
    
    363
    
    
    
    480Other
    
    
    (1
    )
    
    
    12
    
    
    
    3
    
    
    
    32Life & Group Non-Core revenue
    
    
    328
    
    
    
    308
    
    
    
    453
    
    
    
    545Corporate & Other Non-CoreCNA Re
    
    
    9
    
    
    
    15
    
    
    
    9
    
    
    
    32Other
    
    
    17
    
    
    
    38
    
    
    
    6
    
    
    
    73Corporate & Other Non-Core revenue
    
    
    26
    
    
    
    53
    
    
    
    15
    
    
    
    105Eliminations
    
    
    (1
    )
    
    
    (1
    )
    
    
    (2
    )
    
    
    (2
    )Total revenue
    
    $
    2,096
    
    
    $
    2,321
    
    
    $
    3,734
    
    
    $
    4,603
 52




---



##### Table of Contents



Note L Discontinued Operations
   Discontinued Operations
 Periods ended June 30
    
    Three Months
    
    
    Six Months(In millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues:Net investment income
    
    $
    2
    
    
    $
    2
    
    
    $
    3
    
    
    $
    4Net realized investment gains and other
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    2Total revenues
    
    
    2
    
    
    
    3
    
    
    
    3
    
    
    
    6Insurance related expenses
    
    
    3
    
    
    
    1
    
    
    
    4
    
    
    
    5Income (loss) before income taxes
    
    
    (1
    )
    
    
    2
    
    
    
    (1
    )
    
    
    1Income tax (expense) benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income (loss) from discontinued operations, net of tax
    
    $
    (1
    )
    
    $
    2
    
    
    $
    (1
    )
    
    $
    1
  Discontinued Operations
 (In millions)
    
    June 30, 2009
    
    
    December 31, 2008Assets:Investments
    
    $
    144
    
    
    $
    157Reinsurance receivables
    
    
    5
    
    
    
    6Cash
    
    
    
    
    
    
    Other assets
    
    
    1
    
    
    
    1Total assets
    
    
    150
    
    
    
    164Liabilities:Insurance reserves
    
    
    154
    
    
    
    162Other liabilities
    
    
    4
    
    
    
    8Total liabilities
    
    
    158
    
    
    
    170Net liabilities of discontinued operations
    
    $
    (8
    )
    
    $
    (6
    )
 Reporting the Results of Operations  Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions
 53




---



##### Table of Contents



CNA Financial Corporation
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
    54




---



##### Table of Contents



CONSOLIDATED OPERATIONS
 Results of Operations
  Periods ended June 30
    
    Three Months
    
    
    Six Months(In millions, except per share data)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008RevenuesNet earned premiums
    
    $
    1,656
    
    
    $
    1,774
    
    
    $
    3,328
    
    
    $
    3,587Net investment income
    
    
    675
    
    
    
    576
    
    
    
    1,095
    
    
    
    1,010Other revenues
    
    
    62
    
    
    
    82
    
    
    
    140
    
    
    
    168Total operating revenues
    
    
    2,393
    
    
    
    2,432
    
    
    
    4,563
    
    
    
    4,765Claims, benefits and expensesNet incurred claims and benefits
    
    
    1,292
    
    
    
    1,467
    
    
    
    2,627
    
    
    
    2,843Policyholders dividends
    
    
    2
    
    
    
    5
    
    
    
    9
    
    
    
    18Amortization of deferred acquisition costs
    
    
    349
    
    
    
    360
    
    
    
    698
    
    
    
    728Other insurance related expenses
    
    
    178
    
    
    
    149
    
    
    
    359
    
    
    
    310Other expenses
    
    
    143
    
    
    
    87
    
    
    
    244
    
    
    
    187Total claims, benefits and expenses
    
    
    1,964
    
    
    
    2,068
    
    
    
    3,937
    
    
    
    4,086Operating income from continuing operations before
income tax
    
    
    429
    
    
    
    364
    
    
    
    626
    
    
    
    679Income tax expense on operating income
    
    
    (110
    )
    
    
    (102
    )
    
    
    (147
    )
    
    
    (184
    )Net operating income attributable to noncontrolling
interests
    
    
    (14
    )
    
    
    (12
    )
    
    
    (25
    )
    
    
    (24
    )Net operating income from continuing operations
attributable to CNAF
    
    
    305
    
    
    
    250
    
    
    
    454
    
    
    
    471Net realized investment losses, net of participating
policyholders interests
    
    
    (297
    )
    
    
    (111
    )
    
    
    (829
    )
    
    
    (162
    )Income tax benefit on net realized investment losses
    
    
    98
    
    
    
    40
    
    
    
    285
    
    
    
    58Net realized investment losses, after-tax,
attributable to
noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    Net realized investment losses attributable to CNAF
    
    
    (199
    )
    
    
    (71
    )
    
    
    (543
    )
    
    
    (104
    )Income (loss) from continuing operations
attributable to
CNAF
    
    
    106
    
    
    
    179
    
    
    
    (89
    )
    
    
    367Income (loss) from discontinued operations
attributable
to CNAF, net of income tax (expense) benefit of $0,
$0, $0 and $0
    
    
    (1
    )
    
    
    2
    
    
    
    (1
    )
    
    
    1Net income (loss) attributable to CNAF
    
    $
    105
    
    
    $
    181
    
    
    $
    (90
    )
    
    $
    368
 Three Month Comparison
   55




---



##### Table of Contents



Six Month Comparison
       56




---



##### 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
 FSP FAS 115-2 and FAS 124-2 Recognition
and Presentation of Other-Than-Temporary Impairments
 57




---



##### Table of Contents



SEGMENT RESULTS
  58




---



##### Table of Contents



STANDARD LINES
  Results of Operations
 Periods ended June 30
    
    Three Months
    
    
    Six Months(In millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Net written premiums
    
    $
    761
    
    
    $
    848
    
    
    $
    1,524
    
    
    $
    1,619Net earned premiums
    
    
    671
    
    
    
    768
    
    
    
    1,381
    
    
    
    1,551Net investment income
    
    
    252
    
    
    
    199
    
    
    
    372
    
    
    
    363Net operating income
    
    
    145
    
    
    
    124
    
    
    
    206
    
    
    
    219Net realized investment losses, after-tax
    
    
    (110
    )
    
    
    (39
    )
    
    
    (227
    )
    
    
    (50
    )Net income (loss) attributable to CNAF
    
    
    35
    
    
    
    85
    
    
    
    (21
    )
    
    
    169RatiosLoss and loss adjustment expense
    
    
    71.3
    %
    
    
    73.7
    %
    
    
    71.5
    %
    
    
    73.7
    %Expense
    
    
    34.4
    
    
    
    29.0
    
    
    
    34.2
    
    
    
    29.6Dividend
    
    
    (0.2
    )
    
    
    0.5
    
    
    
    0.2
    
    
    
    0.5Combined
    
    
    105.5
    %
    
    
    103.2
    %
    
    
    105.9
    %
    
    
    103.8
    %
 Three Month Comparison
        59




---



##### Table of Contents



Six Month Comparison
         Gross and Net Carried  Claim and Claim Adjustment Expense Reserves
 (In millions)
    
    June 30, 2009
    
    
    December 31, 2008Gross Case Reserves
    
    $
    6,030
    
    
    $
    6,158Gross IBNR Reserves
    
    
    5,675
    
    
    
    5,890Total Gross Carried Claim and Claim Adjustment Expense Reserves
    
    $
    11,705
    
    
    $
    12,048Net Case Reserves
    
    $
    4,838
    
    
    $
    4,995Net IBNR Reserves
    
    
    4,817
    
    
    
    4,875Total Net Carried Claim and Claim Adjustment Expense Reserves
    
    $
    9,655
    
    
    $
    9,870
 60




---



##### Table of Contents



SPECIALTY LINES
  Results of Operations
 Periods ended June 30
    
    Three Months
    
    
    Six Months(In millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Net written premiums
    
    $
    834
    
    
    $
    860
    
    
    $
    1,663
    
    
    $
    1,708Net earned premiums
    
    
    834
    
    
    
    859
    
    
    
    1,646
    
    
    
    1,732Net investment income
    
    
    188
    
    
    
    155
    
    
    
    296
    
    
    
    287Net operating income
    
    
    173
    
    
    
    145
    
    
    
    292
    
    
    
    269Net realized investment losses, after-tax
    
    
    (68
    )
    
    
    (19
    )
    
    
    (142
    )
    
    
    (24
    )Net income attributable to CNAF
    
    
    105
    
    
    
    126
    
    
    
    150
    
    
    
    245RatiosLoss and loss adjustment expense
    
    
    62.5
    %
    
    
    65.2
    %
    
    
    62.0
    %
    
    
    65.0
    %Expense
    
    
    29.2
    
    
    
    27.6
    
    
    
    29.2
    
    
    
    27.1Dividend
    
    
    0.4
    
    
    
    0.1
    
    
    
    0.4
    
    
    
    0.5Combined
    
    
    92.1
    %
    
    
    92.9
    %
    
    
    91.6
    %
    
    
    92.6
    %
 Three Month Comparison
        61




---



##### Table of Contents



Six Month Comparison
        Gross and Net Carried  Claim and Claim Adjustment Expense Reserves
 (In millions)
    
    June 30, 2009
    
    
    December 31, 2008Gross Case Reserves
    
    $
    2,719
    
    
    $
    2,719Gross IBNR Reserves
    
    
    5,743
    
    
    
    5,563Total Gross Carried Claim and Claim Adjustment Expense Reserves
    
    $
    8,462
    
    
    $
    8,282Net Case Reserves
    
    $
    2,194
    
    
    $
    2,149Net IBNR Reserves
    
    
    4,894
    
    
    
    4,694Total Net Carried Claim and Claim Adjustment Expense Reserves
    
    $
    7,088
    
    
    $
    6,843
 62




---



##### Table of Contents



LIFE & GROUP NON-CORE
  Results of Operations
 Periods ended June 30
    
    Three Months
    
    Six Months(In millions)
    
    2009
    
    2008
    
    2009
    
    2008Net earned premiums
    
    $
    148
    
    
    $
    149
    
    
    $
    298
    
    
    $
    306Net investment income
    
    
    168
    
    
    
    157
    
    
    
    327
    
    
    
    241Net operating loss
    
    
    (26
    )
    
    
    (30
    )
    
    
    (48
    )
    
    
    (33
    )Net realized investment gains (losses), after-tax
    
    
    9
    
    
    
    (4
    )
    
    
    (115
    )
    
    
    (15
    )Net loss attributable to CNAF
    
    
    (17
    )
    
    
    (34
    )
    
    
    (163
    )
    
    
    (48
    )
 Three Month Comparison
   Six Month Comparison
    63




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##### Table of Contents



CORPORATE & OTHER NON-CORE
  Results of Operations
 Periods ended June 30
    
    Three Months
    
    Six Months(In millions)
    
    2009
    
    2008
    
    2009
    
    2008Net investment income
    
    $
    67
    
    
    $
    65
    
    
    $
    100
    
    
    $
    119Net operating income
    
    
    13
    
    
    
    11
    
    
    
    4
    
    
    
    16Net realized investment losses, after-tax
    
    
    (30
    )
    
    
    (9
    )
    
    
    (59
    )
    
    
    (15
    )Net income (loss) attributable to CNAF
    
    
    (17
    )
    
    
    2
    
    
    
    (55
    )
    
    
    1
 Three Month Comparison
   Six Month Comparison
    Gross and Net Carried  Claim and Claim Adjustment Expense Reserves
 (In millions)
    
    June 30, 2009
    
    
    December 31, 2008Gross Case Reserves
    
    $
    1,685
    
    
    $
    1,823Gross IBNR Reserves
    
    
    2,386
    
    
    
    2,578Total Gross Carried Claim and Claim Adjustment Expense Reserves
    
    $
    4,071
    
    
    $
    4,401Net Case Reserves
    
    $
    1,000
    
    
    $
    1,126Net IBNR Reserves
    
    
    1,481
    
    
    
    1,561Total Net Carried Claim and Claim Adjustment Expense Reserves
    
    $
    2,481
    
    
    $
    2,687
 64




---



##### Table of Contents



A&E Reserves
  Asbestos
       65




---



##### Table of Contents



Pending Asbestos Accounts and Associated Reserves
 Net Paid Losses
    
    
    Net Asbestos
    
    
    Percent ofNumber of
    
    
    in 2009
    
    
    Reserves
    
    
    AsbestosJune 30, 2009
    
    Policyholders
    
    
    (In millions)
    
    
    (In millions)
    
    
    Net ReservesPolicyholders with settlement agreementsStructured settlements
    
    
    18
    
    
    $
    19
    
    
    $
    132
    
    
    
    12
    %Wellington
    
    
    3
    
    
    
    1
    
    
    
    8
    
    
    
    1Coverage in place
    
    
    38
    
    
    
    6
    
    
    
    101
    
    
    
    9Total with settlement agreements
    
    
    59
    
    
    
    26
    
    
    
    241
    
    
    
    22Other policyholders with active accountsLarge asbestos accounts
    
    
    244
    
    
    
    47
    
    
    
    208
    
    
    
    18Small asbestos accounts
    
    
    981
    
    
    
    10
    
    
    
    77
    
    
    
    7Total other policyholders
    
    
    1,225
    
    
    
    57
    
    
    
    285
    
    
    
    25Assumed reinsurance and pools
    
    
    
    
    
    
    6
    
    
    
    108
    
    
    
    10Unassigned IBNR
    
    
    
    
    
    
    
    
    
    
    479
    
    
    
    43Total
    
    
    1,284
    
    
    $
    89
    
    
    $
    1,113
    
    
    
    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
    %
  66




---



##### Table of Contents



Environmental Pollution
      67




---



##### Table of Contents



Pending Environmental Pollution Accounts and Associated Reserves
 NetEnvironmental
    
    
    Percent ofNet Paid
    
    
    Pollution
    
    
    EnvironmentalNumber of
    
    
    Losses in 2009
    
    
    Reserves
    
    
    Pollution NetJune 30, 2009
    
    Policyholders
    
    
    (In millions)
    
    
    (In millions)
    
    
    ReservePolicyholders with settlement agreementsStructured settlements
    
    
    13
    
    
    $
    6
    
    
    $
    19
    
    
    
    8
    %Coverage in place
    
    
    16
    
    
    
    1
    
    
    
    12
    
    
    
    5Total with settlement agreements
    
    
    29
    
    
    
    7
    
    
    
    31
    
    
    
    13Other policyholders with active accountsLarge pollution accounts
    
    
    115
    
    
    
    8
    
    
    
    41
    
    
    
    17Small pollution accounts
    
    
    322
    
    
    
    7
    
    
    
    41
    
    
    
    17Total other policyholders
    
    
    437
    
    
    
    15
    
    
    
    82
    
    
    
    34Assumed reinsurance and pools
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    11Unassigned IBNR
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    42Total
    
    
    466
    
    
    $
    22
    
    
    $
    240
    
    
    
    100
    %
 Pending Environmental Pollution Accounts and Associated Reserves
 Net
    
    
    Percent ofNet Paid Losses
    
    
    Environmental
    
    
    EnvironmentalNumber of
    
    
    in 2008
    
    
    Pollution 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
    %
 68




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##### Table of Contents



INVESTMENTS
   Net Investment Income
  Net Investment Income
 Three Months
    
    
    Six MonthsPeriods ended June 30
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008(In millions)Fixed maturity securities
    
    $
    487
    
    
    $
    476
    
    
    $
    962
    
    
    $
    994Short term investments
    
    
    11
    
    
    
    26
    
    
    
    21
    
    
    
    65Limited partnerships
    
    
    165
    
    
    
    46
    
    
    
    95
    
    
    
    7Equity securities
    
    
    14
    
    
    
    39
    
    
    
    28
    
    
    
    44Trading portfolio  Indexed Group Annuity
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    (81
    )Trading portfolio  Other
    
    
    8
    
    
    
    1
    
    
    
    8
    
    
    
    Other
    
    
    1
    
    
    
    5
    
    
    
    4
    
    
    
    11Gross investment income
    
    
    686
    
    
    
    588
    
    
    
    1,118
    
    
    
    1,040Investment expense
    
    
    (11
    )
    
    
    (12
    )
    
    
    (23
    )
    
    
    (30
    )Net investment income
    
    $
    675
    
    
    $
    576
    
    
    $
    1,095
    
    
    $
    1,010
    69




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##### Table of Contents



Net Realized Investment Gains (Losses)
  Three Months
    
    
    Six MonthsPeriods ended June 30
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008(In millions)Fixed maturity securities:U.S. Treasury securities and obligations of government agencies
    
    $
    (6
    )
    
    $
    (46
    )
    
    $
    (27
    )
    
    $
    (14
    )Corporate and other taxable bonds
    
    
    (96
    )
    
    
    (8
    )
    
    
    (269
    )
    
    
    (39
    )States, municipalities and political subdivisions  tax-exempt
securities
    
    
    17
    
    
    
    10
    
    
    
    54
    
    
    
    50Asset-backed securities
    
    
    (307
    )
    
    
    (118
    )
    
    
    (499
    )
    
    
    (157
    )Redeemable preferred stock
    
    
    
    
    
    
    4
    
    
    
    (9
    )
    
    
    Total fixed maturity securities
    
    
    (392
    )
    
    
    (158
    )
    
    
    (750
    )
    
    
    (160
    )Equity securities
    
    
    64
    
    
    
    (14
    )
    
    
    (152
    )
    
    
    (29
    )Derivative securities
    
    
    33
    
    
    
    56
    
    
    
    64
    
    
    
    12Short term investments
    
    
    (5
    )
    
    
    5
    
    
    
    8
    
    
    
    7Other
    
    
    3
    
    
    
    
    
    
    
    1
    
    
    
    8Realized investment losses, net of participating policyholders
interests
    
    
    (297
    )
    
    
    (111
    )
    
    
    (829
    )
    
    
    (162
    )Income tax benefit
    
    
    98
    
    
    
    40
    
    
    
    285
    
    
    
    58Realized investment losses, after-tax, attributable to
noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    Net realized investment losses attributable to CNAF
    
    $
    (199
    )
    
    $
    (71
    )
    
    $
    (543
    )
    
    $
    (104
    )
 FSP FAS 115-2 and FAS 124-2 Recognition and Presentation of Other-Than-Temporary
Impairments
   Fixed Maturity Ratings
 June 30,
    
    
    
    
    
    
    December 31,2009
    
    
    %
    
    
    2008
    
    
    %(In millions)U.S. Government and Agencies
    
    $
    3,128
    
    
    
    10
    %
    
    $
    4,611
    
    
    
    16
    %AAA rated
    
    
    7,165
    
    
    
    23
    
    
    
    8,494
    
    
    
    29AA and A rated
    
    
    10,436
    
    
    
    34
    
    
    
    8,166
    
    
    
    29BBB rated
    
    
    7,324
    
    
    
    23
    
    
    
    5,029
    
    
    
    17Non-investment grade
    
    
    2,987
    
    
    
    10
    
    
    
    2,587
    
    
    
    9Total
    
    $
    31,040
    
    
    
    100
    %
    
    $
    28,887
    
    
    
    100
    %
 70




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##### Table of Contents



Non-investment Grade
 June 30,
    
    
    
    
    
    
    December 31,Rating
    
    2009
    
    
    %
    
    
    2008
    
    
    %(In millions)BB
    
    $
    1,244
    
    
    
    42
    %
    
    $
    1,585
    
    
    
    61
    %B
    
    
    1,084
    
    
    
    36
    %
    
    
    754
    
    
    
    29
    %CCC  C
    
    
    602
    
    
    
    20
    %
    
    
    232
    
    
    
    9
    %D
    
    
    57
    
    
    
    2
    %
    
    
    16
    
    
    
    1
    %Total
    
    $
    2,987
    
    
    
    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
    
    
    23
    
    
    
    21Due after five years through ten years
    
    
    21
    
    
    
    23Due after ten years
    
    
    52
    
    
    
    53Total
    
    
    100
    %
    
    
    100
    %
 Duration
  71




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##### Table of Contents



Effective Durations
 June 30, 2009
    
    
    December 31, 2008Effective Duration
    
    
    
    
    
    
    Effective DurationFair Value
    
    
    (In years)
    
    
    Fair Value
    
    
    (In years)(In millions)Segregated investments
    
    $
    9,161
    
    
    
    10.5
    
    
    $
    8,168
    
    
    
    9.9Other interest sensitive investments
    
    
    26,705
    
    
    
    4.0
    
    
    
    25,194
    
    
    
    4.5Total
    
    $
    35,866
    
    
    
    5.6
    
    
    $
    33,362
    
    
    
    5.8
  72




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##### Table of Contents



Asset-Backed Mortgage Exposure
 Asset-Backed Distribution
 Security TypeJune 30, 2009
    
    RMBS(a)
    
    
    CMBS(b)
    
    
    Other ABS(c)
    
    
    Total(In millions)U.S. Government Agencies
    
    $
    2,089
    
    
    $
    
    
    
    $
    
    
    
    $
    2,089AAA
    
    
    2,864
    
    
    
    511
    
    
    
    328
    
    
    
    3,703AA
    
    
    244
    
    
    
    72
    
    
    
    6
    
    
    
    322A
    
    
    203
    
    
    
    50
    
    
    
    9
    
    
    
    262BBB
    
    
    255
    
    
    
    7
    
    
    
    87
    
    
    
    349Non-investment grade and equity tranches
    
    
    609
    
    
    
    12
    
    
    
    
    
    
    
    621Total Fair Value
    
    $
    6,264
    
    
    $
    652
    
    
    $
    430
    
    
    $
    7,346Total Amortized Cost
    
    $
    7,457
    
    
    $
    901
    
    
    $
    476
    
    
    $
    8,834Sub-prime (included above)Fair Value
    
    $
    715
    
    
    $
    
    
    
    $
    
    
    
    $
    715Amortized Cost
    
    $
    1,109
    
    
    $
    
    
    
    $
    
    
    
    $
    1,109Alt-A (included above)Fair Value
    
    $
    838
    
    
    $
    
    
    
    $
    
    
    
    $
    838Amortized Cost
    
    $
    1,055
    
    
    $
    
    
    
    $
    
    
    
    $
    1,055
 
 (a)
    
    Residential mortgage-backed securities (RMBS)(b)
    
    Commercial mortgage-backed securities (CMBS)(c)
    
    Other asset-backed securities (Other ABS)   73




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Short Term Investments
  Short Term Investments
 June 30,
    
    
    December 31,(In millions)
    
    2009
    
    
    2008Short term investments available-for-sale:Commercial paper
    
    $
    986
    
    
    $
    563U.S. Treasury securities
    
    
    2,483
    
    
    
    2,258Money market funds
    
    
    238
    
    
    
    329Other, including collateral held related to securities lending
    
    
    774
    
    
    
    384Total short term investments
    
    $
    4,481
    
    
    $
    3,534
  LIQUIDITY AND CAPITAL RESOURCES
 Cash Flows
       74




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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 June 30, 2009, our holding company held short term investments of $454 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 holding company has sufficient
liquidity to fund our preferred stock dividend and debt service payments in 2009.
  Accounting Pronouncements
  75




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##### Table of Contents



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;
    
    development of claims and the impact on loss reserves, including changes in claim
settlement policies;
    
    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;
 76




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##### Table of Contents




    
    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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##### Table of Contents



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




---



##### Table of Contents



CNA Financial Corporation
 
 Item 4. Controls and Procedures
   
 79




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##### Table of Contents



Item 1. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
      Votes For
    
    Votes WithheldThomas F. Motamed
    
    
    252,718,837
    
    
    
    12,992,552Paul J. Liska
    
    
    265,352,098
    
    
    
    359,291Jose O. Montemayor
    
    
    265,463,309
    
    
    
    248,080Don M. Randel
    
    
    255,329,455
    
    
    
    10,381,934Joseph Rosenberg
    
    
    252,902,347
    
    
    
    12,809,042Andrew H. Tisch
    
    
    252,199,288
    
    
    
    13,512,101James S. Tisch
    
    
    251,930,300
    
    
    
    13,781,089Marvin Zonis
    
    
    255,145,502
    
    
    
    10,565,887
    Votes For
    
    Votes Against
    
    Votes AbstainedDeloitte & Touche LLP
    
    
    265,838,065
    
    
    
    224,677
    
    
    
    4,741
 80




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##### Table of Contents



Item 6. Exhibits
  Description of Exhibit
    
    Exhibit NumberAmended and Restated Group Life and Health Indemnity Reinsurance Agreement, dated
as of December 31, 2003, by and between Continental Assurance Company and Valley
Forge Life Insurance Company and CNA Group Life Assurance Company
    
    
    10.1Amended and Restated Group Health Indemnity Reinsurance Agreement, dated as of
December 31, 2003, by and between Continental Casualty Company and American
Casualty Company of Reading, Pennsylvania and CNA Group Life Assurance Company
    
    
    10.2CAC Life and Annuity Indemnity Reinsurance Agreement, dated as of April 30, 2004,
by and between Continental Assurance Company and Swiss Re Life & Health America Inc
    
    
    10.3Certification 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
 81




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##### Table of Contents



SIGNATURES
  CNA Financial CorporationDated:  August 3, 2009
    By
    /s/ D. Craig MenseD. Craig MenseExecutive Vice President and
Chief Financial Officer 82