##### 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, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from to
 Commission File Number 1-5823
 
 CNA FINANCIAL CORPORATION
  Delaware
    
    36-6169860(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)333 S. WabashChicago, Illinois
    
    60604(Address of principal executive offices)
    
    (Zip Code)
 (312) 822-5000
  þ o
  o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
  Class
    
    

Outstanding
at July 30, 2010Common
Stock, Par value $2.50
    
    
    269,188,098




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##### 



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, 2010 and 2009
    
    
    3Condensed Consolidated Statements of Comprehensive Income
for the Three and Six months ended June 30, 2010 and 2009
    
    
    5Condensed Consolidated Balance Sheets at June 30, 2010
and December 31, 2009
    
    
    6Condensed Consolidated Statements of Cash Flows for the
Six months ended June 30, 2010 and 2009
    
    
    7Condensed Consolidated Statements of Equity for the Six
months ended June 30, 2010 and 2009
    
    
    9Notes to Condensed Consolidated Financial Statements
    
    
    102.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    533.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    734.
    
    Controls and Procedures
    
    
    74PART II. Other Information1.
    
    Legal Proceedings
    
    
    751A.
    
    Risk Factors
    
    
    756.
    
    Exhibits
    
    
    75EX-10.1EX-31.1EX-31.2EX-32.1EX-32.2




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##### Table of Contents



CNA Financial Corporation
  Part I. Financial Information
  Item 1. Condensed Consolidated Financial Statements
  Condensed Consolidated Statements of Operations (Unaudited)
 Periods ended June 30
    
    Three Months
    
    
    Six Months(In millions, except per share data)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009RevenuesNet earned premiums
    
    $
    1,608
    
    
    $
    1,656
    
    
    $
    3,223
    
    
    $
    3,328Net investment income
    
    
    521
    
    
    
    675
    
    
    
    1,111
    
    
    
    1,095Net realized investment gains (losses), net of
participating policyholders interests:Other-than-temporary impairment losses
    
    
    (58
    )
    
    
    (484
    )
    
    
    (148
    )
    
    
    (1,098
    )Portion of other-than-temporary impairment losses
recognized in Other comprehensive income
    
    
    1
    
    
    
    89
    
    
    
    31
    
    
    
    89Net other-than-temporary impairment losses recognized
in earnings
    
    
    (57
    )
    
    
    (395
    )
    
    
    (117
    )
    
    
    (1,009
    )Other net realized investment gains
    
    
    86
    
    
    
    98
    
    
    
    180
    
    
    
    180Net realized investment gains (losses), net of
participating policyholders interests
    
    
    29
    
    
    
    (297
    )
    
    
    63
    
    
    
    (829
    )Other revenues
    
    
    75
    
    
    
    62
    
    
    
    151
    
    
    
    140Total revenues
    
    
    2,233
    
    
    
    2,096
    
    
    
    4,548
    
    
    
    3,734Claims, Benefits and ExpensesInsurance claims and policyholders benefits
    
    
    1,147
    
    
    
    1,294
    
    
    
    2,455
    
    
    
    2,636Amortization of deferred acquisition costs
    
    
    345
    
    
    
    349
    
    
    
    687
    
    
    
    698Other operating expenses
    
    
    258
    
    
    
    291
    
    
    
    530
    
    
    
    542Interest
    
    
    37
    
    
    
    30
    
    
    
    73
    
    
    
    61Total claims, benefits and expenses
    
    
    1,787
    
    
    
    1,964
    
    
    
    3,745
    
    
    
    3,937Income (loss) from continuing operations before income tax
    
    
    446
    
    
    
    132
    
    
    
    803
    
    
    
    (203
    )Income tax (expense) benefit
    
    
    (145
    )
    
    
    (12
    )
    
    
    (247
    )
    
    
    138Income (loss) from continuing operations
    
    
    301
    
    
    
    120
    
    
    
    556
    
    
    
    (65
    )Income (loss) from discontinued operations, net of income
tax (expense) benefit of $0, $0, $0 and $0
    
    
    1
    
    
    
    (1
    )
    
    
    1
    
    
    
    (1
    )Net income (loss)
    
    
    302
    
    
    
    119
    
    
    
    557
    
    
    
    (66
    )Net (income) loss attributable to noncontrolling interests
    
    
    (19
    )
    
    
    (14
    )
    
    
    (29
    )
    
    
    (24
    )Net income (loss) attributable to CNA
    
    $
    283
    
    
    $
    105
    
    
    $
    528
    
    
    $
    (90
    )Income (Loss) Attributable to CNA Common StockholdersIncome (loss) from continuing operations attributable to CNA
    
    $
    282
    
    
    $
    106
    
    
    $
    527
    
    
    $
    (89
    )Dividends on 2008 Senior Preferred
    
    
    (25
    )
    
    
    (32
    )
    
    
    (50
    )
    
    
    (63
    )Income (loss) from continuing operations attributable to
CNA common stockholders
    
    
    257
    
    
    
    74
    
    
    
    477
    
    
    
    (152
    )Income (loss) from discontinued operations attributable to
CNA common stockholders
    
    
    1
    
    
    
    (1
    )
    
    
    1
    
    
    
    (1
    )Income (loss) attributable to CNA common stockholders
    
    $
    258
    
    
    $
    73
    
    
    $
    478
    
    
    $
    (153
    )
 
 3




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##### Table of Contents



Periods ended June 30
    
    Three Months
    
    
    Six Months(In millions, except per share data)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Basic and Diluted Earnings (Loss)
Per Share Attributable to CNA
Common StockholdersIncome (loss) from continuing
operations attributable to CNA
common stockholders
    
    $
    0.96
    
    
    $
    0.28
    
    
    $
    1.77
    
    
    $
    (0.56
    )Income (loss) from discontinued
operations attributable to CNA
common stockholders
    
    
    
    
    
    
    (0.01
    )
    
    
    0.01
    
    
    
    (0.01
    )Basic and diluted earnings (loss)
per share attributable to CNA
common stockholders
    
    $
    0.96
    
    
    $
    0.27
    
    
    $
    1.78
    
    
    $
    (0.57
    )Weighted Average Outstanding Common
Stock and Common Stock EquivalentsBasic
    
    
    269.1
    
    
    
    269.0
    
    
    
    269.1
    
    
    
    269.0Diluted
    
    
    269.3
    
    
    
    269.0
    
    
    
    269.3
    
    
    
    269.0
 
 4




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##### Table of Contents



CNA Financial Corporation
 
 Condensed Consolidated Statements of Comprehensive Income (Unaudited)
 Periods ended June 30
    
    Three Months
    
    
    Six Months(In millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Other Comprehensive Income (Loss), Net of TaxChanges in:Net unrealized gains (losses) on investments with
other-than-temporary impairments
    
    $
    17
    
    
    $
    (34
    )
    
    $
    42
    
    
    $
    (34
    )Net unrealized gains on other investments
    
    
    377
    
    
    
    1,508
    
    
    
    700
    
    
    
    1,909Net unrealized gains on investments
    
    
    394
    
    
    
    1,474
    
    
    
    742
    
    
    
    1,875Net unrealized gains on discontinued operations and other
    
    
    1
    
    
    
    2
    
    
    
    8
    
    
    
    Foreign currency translation adjustment
    
    
    17
    
    
    
    79
    
    
    
    7
    
    
    
    71Pension and postretirement benefits
    
    
    2
    
    
    
    1
    
    
    
    3
    
    
    
    3Allocation to participating policyholders
    
    
    (5
    )
    
    
    (19
    )
    
    
    (28
    )
    
    
    (19
    )Other comprehensive income, net of tax
    
    
    409
    
    
    
    1,537
    
    
    
    732
    
    
    
    1,930Net income (loss)
    
    
    302
    
    
    
    119
    
    
    
    557
    
    
    
    (66
    )Comprehensive income
    
    
    711
    
    
    
    1,656
    
    
    
    1,289
    
    
    
    1,864Changes in:Net unrealized (gains) losses on investments
attributable to noncontrolling interests
    
    
    (8
    )
    
    
    (6
    )
    
    
    (14
    )
    
    
    (11
    )Pension and postretirement benefits attributable to
noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    Other comprehensive (income) loss attributable to
noncontrolling interests
    
    
    (8
    )
    
    
    (6
    )
    
    
    (17
    )
    
    
    (11
    )Net (income) loss attributable to noncontrolling interests
    
    
    (19
    )
    
    
    (14
    )
    
    
    (29
    )
    
    
    (24
    )Comprehensive (income) loss attributable to noncontrolling
interests
    
    
    (27
    )
    
    
    (20
    )
    
    
    (46
    )
    
    
    (35
    )Total comprehensive income attributable to CNA
    
    $
    684
    
    
    $
    1,636
    
    
    $
    1,243
    
    
    $
    1,829
 
 5




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##### Table of Contents



CNA Financial Corporation
 
 Condensed Consolidated Balance Sheets (Unaudited)
 June 30,
    
    
    December 31,(In millions, except share data)
    
    2010
    
    
    2009AssetsInvestments:Fixed maturity securities at fair value (amortized cost of $36,410 and $35,602)
    
    $
    37,565
    
    
    $
    35,612Equity securities at fair value (cost of $540 and $633)
    
    
    549
    
    
    
    644Limited partnership investments
    
    
    2,059
    
    
    
    1,787Other invested assets
    
    
    1
    
    
    
    4Mortgage loans
    
    
    14
    
    
    
    Short term investments
    
    
    3,040
    
    
    
    3,949Total investments
    
    
    43,228
    
    
    
    41,996Cash
    
    
    72
    
    
    
    140Reinsurance receivables (less allowance for uncollectible receivables of $348 and $351)
    
    
    6,209
    
    
    
    6,581Insurance receivables (less allowance for doubtful accounts of $185 and $202)
    
    
    1,707
    
    
    
    1,656Accrued investment income
    
    
    419
    
    
    
    416Deferred acquisition costs
    
    
    1,095
    
    
    
    1,108Deferred income taxes
    
    
    846
    
    
    
    1,333Property and equipment at cost (less accumulated depreciation of $519 and $498)
    
    
    340
    
    
    
    360Goodwill and other intangible assets
    
    
    141
    
    
    
    141Other assets
    
    
    1,170
    
    
    
    1,144Separate account business
    
    
    447
    
    
    
    423Total assets
    
    $
    55,674
    
    
    $
    55,298Liabilities and EquityLiabilities:Insurance reserves:Claim and claim adjustment expenses
    
    $
    25,968
    
    
    $
    26,816Unearned premiums
    
    
    3,303
    
    
    
    3,274Future policy benefits
    
    
    8,217
    
    
    
    7,981Policyholders funds
    
    
    172
    
    
    
    192Participating policyholders funds
    
    
    61
    
    
    
    56Long term debt
    
    
    2,254
    
    
    
    2,303Other liabilities
    
    
    2,847
    
    
    
    3,087Separate account business
    
    
    447
    
    
    
    423Total liabilities
    
    
    43,269
    
    
    
    44,132Commitments 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; 10,000 shares issued and outstanding held by Loews
Corporation)
    
    
    1,000
    
    
    
    1,000Common stock ($2.50 par value; 500,000,000 shares authorized; 273,040,243 shares
issued; and 269,085,821 and 269,026,759 shares outstanding)
    
    
    683
    
    
    
    683Additional paid-in capital
    
    
    2,200
    
    
    
    2,177Retained earnings
    
    
    7,742
    
    
    
    7,264Accumulated other comprehensive income (loss)
    
    
    390
    
    
    
    (325
    )Treasury stock (3,954,422 and 4,013,484 shares), at cost
    
    
    (106
    )
    
    
    (109
    )Notes receivable for the issuance of common stock
    
    
    (30
    )
    
    
    (30
    )Total CNA stockholders equity
    
    
    11,879
    
    
    
    10,660Noncontrolling interests
    
    
    526
    
    
    
    506Total equity
    
    
    12,405
    
    
    
    11,166Total liabilities and equity
    
    $
    55,674
    
    
    $
    55,298
 
 6




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##### Table of Contents



CNA Financial Corporation
 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
 Six months ended June 30(In millions)
    
    2010
    
    
    2009Cash Flows from Operating ActivitiesNet income (loss)
    
    $
    557
    
    
    $
    (66
    )Adjustments to reconcile net income (loss) to net cash flows
provided by operating activities:(Income) loss from discontinued operations
    
    
    (1
    )
    
    
    1Loss on disposal of property and equipment
    
    
    
    
    
    
    8Deferred income tax expense (benefit)
    
    
    82
    
    
    
    (59
    )Trading portfolio activity
    
    
    153
    
    
    
    (142
    )Net realized investment (gains) losses, net of participating
policyholders interests
    
    
    (63
    )
    
    
    829Equity method investees
    
    
    14
    
    
    
    (47
    )Amortization of investments
    
    
    (59
    )
    
    
    (115
    )Depreciation
    
    
    41
    
    
    
    42Changes in:Receivables, net
    
    
    314
    
    
    
    386Accrued investment income
    
    
    (9
    )
    
    
    (27
    )Deferred acquisition costs
    
    
    13
    
    
    
    (20
    )Insurance reserves
    
    
    (437
    )
    
    
    (245
    )Other assets
    
    
    40
    
    
    
    (124
    )Other liabilities
    
    
    (52
    )
    
    
    (125
    )Other, net
    
    
    2
    
    
    
    3Total adjustments
    
    
    38
    
    
    
    365Net cash flows provided by operating activities-continuing operations
    
    $
    595
    
    
    $
    299Net cash flows used by operating activities-discontinued operations
    
    $
    (14
    )
    
    $
    (12
    )Net cash flows provided by operating activities-total
    
    $
    581
    
    
    $
    287Cash Flows from Investing ActivitiesPurchases of fixed maturity securities
    
    $
    (9,478
    )
    
    $
    (12,402
    )Proceeds from fixed maturity securities:Sales
    
    
    6,388
    
    
    
    11,083Maturities, calls and redemptions
    
    
    1,866
    
    
    
    1,723Purchases of equity securities
    
    
    (62
    )
    
    
    (240
    )Proceeds from sales of equity securities
    
    
    128
    
    
    
    440Origination of mortgage loans
    
    
    (14
    )
    
    
    Change in short term investments
    
    
    789
    
    
    
    (895
    )Change in other investments
    
    
    (199
    )
    
    
    102Purchases of property and equipment
    
    
    (23
    )
    
    
    (33
    )Dispositions
    
    
    65
    
    
    
    Other, net
    
    
    3
    
    
    
    (10
    )Net cash flows used by investing activities-continuing operations
    
    $
    (537
    )
    
    $
    (232
    )Net cash flows provided by investing activities-discontinued operations
    
    $
    14
    
    
    $
    12Net cash flows used by investing activities-total
    
    $
    (523
    )
    
    $
    (220
    )
 
 7




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##### Table of Contents



Six months ended June 30(In millions)
    
    2010
    
    
    2009Cash Flows from Financing ActivitiesDividends paid to Loews Corporation for 2008 Senior Preferred
    
    $
    (50
    )
    
    $
    (63
    )Principal payments on debt
    
    
    (50
    )
    
    
    Policyholders investment contract net deposits (withdrawals)
    
    
    (6
    )
    
    
    (8
    )Stock options exercised
    
    
    1
    
    
    
    Other, net
    
    
    (19
    )
    
    
    12Net cash flows used by financing activities-continuing operations
    
    $
    (124
    )
    
    $
    (59
    )Net cash flows provided (used) by financing activities-discontinued operations
    
    $
    
    
    
    $
    Net cash flows used by financing activities-total
    
    $
    (124
    )
    
    $
    (59
    )Effect of foreign exchange rate changes on cash-continuing operations
    
    
    (2
    )
    
    
    5Net change in cash
    
    
    (68
    )
    
    
    13Cash, beginning of year
    
    
    140
    
    
    
    85Cash, end of period
    
    $
    72
    
    
    $
    98Cash-continuing operations
    
    $
    72
    
    
    $
    98Cash-discontinued operations
    
    
    
    
    
    
    Cash-total
    
    $
    72
    
    
    $
    98
 
 8




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##### Table of Contents



CNA Financial Corporation
 
 Condensed Consolidated Statements of Equity (Unaudited)
 Six months ended June 30(In millions)
    
    2010
    
    
    2009Preferred StockBalance, beginning and end of period
    
    $
    1,000
    
    
    $
    1,250Common StockBalance, beginning and end of period
    
    
    683
    
    
    
    683Additional Paid-in CapitalBalance, beginning of period
    
    
    2,177
    
    
    
    2,174Stock-based compensation
    
    
    
    
    
    
    1Other
    
    
    23
    
    
    
    Balance, end of period
    
    
    2,200
    
    
    
    2,175Retained EarningsBalance, beginning of period
    
    
    7,264
    
    
    
    6,845Cumulative effect adjustment from change in
other-than-temporary impairment accounting guidance
    
    
    
    
    
    
    122Dividends paid to Loews Corporation for 2008 Senior Preferred
    
    
    (50
    )
    
    
    (63
    )Net income (loss) attributable to CNA
    
    
    528
    
    
    
    (90
    )Balance, end of period
    
    
    7,742
    
    
    
    6,814Accumulated Other Comprehensive Income (Loss)Balance, beginning of period
    
    
    (325
    )
    
    
    (3,924
    )Cumulative effect adjustment from change in
other-than-temporary impairment accounting guidance
    
    
    
    
    
    
    (122
    )Other comprehensive income attributable to CNA
    
    
    715
    
    
    
    1,919Balance, end of period
    
    
    390
    
    
    
    (2,127
    )Treasury StockBalance, beginning of period
    
    
    (109
    )
    
    
    (109
    )Stock-based compensation
    
    
    3
    
    
    
    Balance, end of period
    
    
    (106
    )
    
    
    (109
    )Notes Receivable for the Issuance of Common StockBalance, beginning of period
    
    
    (30
    )
    
    
    (42
    )Decrease in notes receivable for the issuance of common stock
    
    
    
    
    
    
    12Balance, end of period
    
    
    (30
    )
    
    
    (30
    )Total CNA Stockholders Equity
    
    
    11,879
    
    
    
    8,656Noncontrolling InterestsBalance, beginning of period
    
    
    506
    
    
    
    420Net income
    
    
    29
    
    
    
    24Other comprehensive income
    
    
    17
    
    
    
    11Other
    
    
    (26
    )
    
    
    Balance, end of period
    
    
    526
    
    
    
    455Total Equity
    
    $
    12,405
    
    
    $
    9,111
 
 9




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##### Table of Contents



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




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##### Table of Contents



Recently issued accounting standards to be adopted
 Scope Exception Related To Credit Derivatives
  Note C. Earnings (Loss) Per Share
     11




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##### Table of Contents



Note D. Investments
  Net Investment Income
 Periods ended June 30
    
    Three Months
    
    
    Six Months(In millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Fixed maturity securities
    
    $
    519
    
    
    $
    487
    
    
    $
    1,029
    
    
    $
    962Short term investments
    
    
    5
    
    
    
    11
    
    
    
    11
    
    
    
    21Limited partnerships
    
    
    (4
    )
    
    
    165
    
    
    
    68
    
    
    
    95Equity securities
    
    
    9
    
    
    
    14
    
    
    
    19
    
    
    
    28Trading portfolio (a)
    
    
    2
    
    
    
    8
    
    
    
    6
    
    
    
    8Other
    
    
    3
    
    
    
    1
    
    
    
    5
    
    
    
    4Gross investment income
    
    
    534
    
    
    
    686
    
    
    
    1,138
    
    
    
    1,118Investment expense
    
    
    (13
    )
    
    
    (11
    )
    
    
    (27
    )
    
    
    (23
    )Net investment income
    
    $
    521
    
    
    $
    675
    
    
    $
    1,111
    
    
    $
    1,095
 
 (a)
    
    There were no net unrealized gains (losses) on trading securities still held
included in net investment income for the three and six months ended June 30, 2010. 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)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Net realized investment gains (losses):Fixed maturity securities:Gross realized gains
    
    $
    133
    
    
    $
    100
    
    
    $
    231
    
    
    $
    204Gross realized losses
    
    
    (67
    )
    
    
    (492
    )
    
    
    (138
    )
    
    
    (954
    )Net realized investment gains (losses) on fixed maturity
securities
    
    
    66
    
    
    
    (392
    )
    
    
    93
    
    
    
    (750
    )Equity securities:Gross realized gains
    
    
    
    
    
    
    73
    
    
    
    4
    
    
    
    77Gross realized losses
    
    
    (28
    )
    
    
    (9
    )
    
    
    (29
    )
    
    
    (229
    )Net realized investment gains (losses) on equity securities
    
    
    (28
    )
    
    
    64
    
    
    
    (25
    )
    
    
    (152
    )Derivatives
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    64Short term investments and other
    
    
    (9
    )
    
    
    (2
    )
    
    
    (5
    )
    
    
    9Net realized investment gains (losses), net of
participating policyholders interests
    
    $
    29
    
    
    $
    (297
    )
    
    $
    63
    
    
    $
    (829
    )
 12




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##### Table of Contents



Periods ended June 30
    
    Three Months
    
    
    Six Months(In millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Fixed maturity securities available-for-sale:Asset-backed securities:Residential mortgage-backed securities
    
    $
    11
    
    
    $
    119
    
    
    $
    37
    
    
    $
    268Commercial mortgage-backed securities
    
    
    
    
    
    
    165
    
    
    
    2
    
    
    
    181Other asset-backed securities
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    31Total asset-backed securities
    
    
    13
    
    
    
    284
    
    
    
    41
    
    
    
    480States, municipalities and political subdivisions securities
    
    
    6
    
    
    
    15
    
    
    
    20
    
    
    
    15Corporate and other bonds
    
    
    24
    
    
    
    94
    
    
    
    42
    
    
    
    284Redeemable preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9Total fixed maturity securities available-for-sale
    
    
    43
    
    
    
    393
    
    
    
    103
    
    
    
    788Equity securities available-for-sale:Common stock
    
    
    5
    
    
    
    1
    
    
    
    5
    
    
    
    4Preferred stock
    
    
    9
    
    
    
    1
    
    
    
    9
    
    
    
    217Total equity securities available-for-sale
    
    
    14
    
    
    
    2
    
    
    
    14
    
    
    
    221Net OTTI losses recognized in earnings
    
    $
    57
    
    
    $
    395
    
    
    $
    117
    
    
    $
    1,009
    13




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##### Table of Contents



Summary of Fixed Maturity and Equity Securities
 Cost or
    
    
    Gross
    
    
    Gross Unrealized Losses
    
    
    Estimated
    
    
    UnrealizedJune 30, 2010
    
    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
    
    $
    146
    
    
    $
    19
    
    
    $
    
    
    
    $
    
    
    
    $
    165
    
    
    $
    Asset-backed securities:Residential mortgage-backed securities
    
    
    6,526
    
    
    
    133
    
    
    
    11
    
    
    
    326
    
    
    
    6,322
    
    
    
    252Commercial mortgage-backed securities
    
    
    1,052
    
    
    
    18
    
    
    
    2
    
    
    
    77
    
    
    
    991
    
    
    
    Other asset-backed securities
    
    
    733
    
    
    
    17
    
    
    
    
    
    
    
    17
    
    
    
    733
    
    
    
    Total asset-backed securities
    
    
    8,311
    
    
    
    168
    
    
    
    13
    
    
    
    420
    
    
    
    8,046
    
    
    
    252States, municipalities and political
subdivisions securities
    
    
    7,617
    
    
    
    274
    
    
    
    20
    
    
    
    292
    
    
    
    7,579
    
    
    
    Foreign government securities
    
    
    577
    
    
    
    15
    
    
    
    1
    
    
    
    
    
    
    
    591
    
    
    
    Corporate and other bonds
    
    
    19,705
    
    
    
    1,591
    
    
    
    46
    
    
    
    123
    
    
    
    21,127
    
    
    
    26Redeemable preferred stock
    
    
    48
    
    
    
    4
    
    
    
    
    
    
    
    1
    
    
    
    51
    
    
    
    Total fixed maturity securities
available-for-sale
    
    
    36,404
    
    
    
    2,071
    
    
    
    80
    
    
    
    836
    
    
    
    37,559
    
    
    $
    278Total fixed maturity securities trading
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6Equity securities available-for-sale:Common stock
    
    
    77
    
    
    
    12
    
    
    
    1
    
    
    
    
    
    
    
    88Preferred stock
    
    
    463
    
    
    
    42
    
    
    
    2
    
    
    
    42
    
    
    
    461Total equity securities available-for-sale
    
    
    540
    
    
    
    54
    
    
    
    3
    
    
    
    42
    
    
    
    549Total
    
    $
    36,950
    
    
    $
    2,125
    
    
    $
    83
    
    
    $
    878
    
    
    $
    38,114
 14




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##### Table of Contents



Summary of Fixed Maturity and Equity Securities
 Cost or
    
    
    Gross
    
    
    Gross Unrealized Losses
    
    
    Estimated
    
    
    UnrealizedDecember 31, 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
    
    $
    184
    
    
    $
    16
    
    
    $
    1
    
    
    $
    
    
    
    $
    199
    
    
    $
    Asset-backed securities:Residential mortgage-backed securities
    
    
    7,469
    
    
    
    72
    
    
    
    43
    
    
    
    561
    
    
    
    6,937
    
    
    
    246Commercial mortgage-backed securities
    
    
    709
    
    
    
    10
    
    
    
    1
    
    
    
    134
    
    
    
    584
    
    
    
    3Other asset-backed securities
    
    
    858
    
    
    
    14
    
    
    
    1
    
    
    
    39
    
    
    
    832
    
    
    
    Total asset-backed securities
    
    
    9,036
    
    
    
    96
    
    
    
    45
    
    
    
    734
    
    
    
    8,353
    
    
    
    249States, municipalities and political
subdivisions securities
    
    
    7,280
    
    
    
    203
    
    
    
    30
    
    
    
    329
    
    
    
    7,124
    
    
    
    Foreign government securities
    
    
    467
    
    
    
    14
    
    
    
    1
    
    
    
    1
    
    
    
    479
    
    
    
    Corporate and other bonds
    
    
    18,410
    
    
    
    1,107
    
    
    
    44
    
    
    
    244
    
    
    
    19,229
    
    
    
    26Redeemable preferred stock
    
    
    51
    
    
    
    4
    
    
    
    
    
    
    
    1
    
    
    
    54
    
    
    
    Total fixed maturity securities
available-for-sale
    
    
    35,428
    
    
    
    1,440
    
    
    
    121
    
    
    
    1,309
    
    
    
    35,438
    
    
    $
    275Total fixed maturity securities trading
    
    
    174
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    174Equity securities available-for-sale:Common stock
    
    
    61
    
    
    
    14
    
    
    
    1
    
    
    
    1
    
    
    
    73Preferred stock
    
    
    572
    
    
    
    40
    
    
    
    
    
    
    
    41
    
    
    
    571Total equity securities available-for-sale
    
    
    633
    
    
    
    54
    
    
    
    1
    
    
    
    42
    
    
    
    644Total
    
    $
    36,235
    
    
    $
    1,494
    
    
    $
    122
    
    
    $
    1,351
    
    
    $
    36,256
   Three Months
    
    
    Six Monthsended
    
    
    ended(In millions)
    
    June 30, 2010
    
    
    June 30, 2010Beginning balance of credit losses on fixed maturity securities
    
    $
    171
    
    
    $
    164Additional credit losses for which an OTTI loss was previously recognized
    
    
    11
    
    
    
    22Credit losses for which an OTTI loss was not previously recognized
    
    
    3
    
    
    
    8Reductions for securities sold during the period
    
    
    (14
    )
    
    
    (23
    )Reductions for securities the Company intends to sell or more likely
than not will be required to sell
    
    
    
    
    
    
    Ending balance of credit losses on fixed maturity securities
    
    $
    171
    
    
    $
    171
 15




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##### Table of Contents



Three Monthsended(In millions)
    
    June 30, 2009Beginning balance of credit losses on fixed maturity securities
    
    $
    192Additional credit losses for which an OTTI loss was previously recognized
    
    
    21Credit 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
     16




---



##### Table of Contents



Gross Unrealized Losses by Ratings Distribution
 June 30, 2010
 GrossAmortized
    
    
    Estimated
    
    
    UnrealizedRating
    
    Cost
    
    
    Fair Value
    
    
    LossesU.S. Government Agencies
    
    $
    47
    
    
    $
    42
    
    
    $
    5AAA
    
    
    1,697
    
    
    
    1,571
    
    
    
    126AA
    
    
    411
    
    
    
    371
    
    
    
    40A
    
    
    324
    
    
    
    270
    
    
    
    54BBB
    
    
    342
    
    
    
    311
    
    
    
    31Non-investment grade and equity tranches
    
    
    1,245
    
    
    
    1,068
    
    
    
    177Total
    
    $
    4,066
    
    
    $
    3,633
    
    
    $
    433
  States, Municipalities and Political Subdivisions Securities
    Gross Unrealized Losses by Ratings Distribution
 June 30, 2010
 GrossAmortized
    
    
    Estimated
    
    
    UnrealizedRating
    
    Cost
    
    
    Fair Value
    
    
    LossesAAA
    
    $
    868
    
    
    $
    819
    
    
    $
    49AA
    
    
    708
    
    
    
    588
    
    
    
    120A
    
    
    438
    
    
    
    416
    
    
    
    22BBB
    
    
    481
    
    
    
    362
    
    
    
    119Non-investment grade
    
    
    22
    
    
    
    20
    
    
    
    2Total
    
    $
    2,517
    
    
    $
    2,205
    
    
    $
    312
  17




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##### Table of Contents



Corporate and Other Bonds
   Gross Unrealized Losses by Ratings Distribution
 June 30, 2010
 GrossAmortized
    
    
    Estimated
    
    
    UnrealizedRating
    
    Cost
    
    
    Fair Value
    
    
    LossesAAA
    
    $
    36
    
    
    $
    33
    
    
    $
    3AA
    
    
    149
    
    
    
    148
    
    
    
    1A
    
    
    745
    
    
    
    714
    
    
    
    31BBB
    
    
    1,243
    
    
    
    1,153
    
    
    
    90Non-investment grade
    
    
    761
    
    
    
    717
    
    
    
    44Total
    
    $
    2,934
    
    
    $
    2,765
    
    
    $
    169
   18




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##### Table of Contents



Contractual Maturity
  Contractual Maturity
 June 30, 2010
    
    
    December 31, 2009Cost or
    
    
    Estimated
    
    
    Cost or
    
    
    EstimatedAmortized
    
    
    Fair
    
    
    Amortized
    
    
    Fair(In millions)
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    ValueDue in one year or less
    
    $
    2,096
    
    
    $
    2,056
    
    
    $
    1,240
    
    
    $
    1,219Due after one year through five years
    
    
    11,391
    
    
    
    11,817
    
    
    
    10,046
    
    
    
    10,244Due after five years through ten years
    
    
    9,106
    
    
    
    9,423
    
    
    
    10,646
    
    
    
    10,538Due after ten years
    
    
    13,811
    
    
    
    14,263
    
    
    
    13,496
    
    
    
    13,437Total
    
    $
    36,404
    
    
    $
    37,559
    
    
    $
    35,428
    
    
    $
    35,438
 Investment Commitments
   Mortgage Loans
   19




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##### Table of Contents



Note E. Derivative Financial Instruments
         20




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##### Table of Contents



Credit
Ratings of Underlying Reference Obligations
 Fair Value of
    
    
    Maximum Amount of
    
    
    WeightedJune 30, 2010
    
    Credit Default
    
    
    Future Payments under
    
    
    Average Years(In millions)
    
    Swaps
    
    
    Credit Default Swaps
    
    
    to MaturityB-rated
    
    $
    1
    
    
    $
    8
    
    
    
    2.6Total
    
    $
    1
    
    
    $
    8
    
    
    
    2.6
 Credit Ratings of Underlying Reference
Obligations
 Fair Value of
    
    
    Maximum Amount of
    
    
    WeightedDecember 31, 2009
    
    Credit Default
    
    
    Future Payments under
    
    
    Average Years(In millions)
    
    Swaps
    
    
    Credit Default Swaps
    
    
    to MaturityB-rated
    
    $
    
    
    
    $
    8
    
    
    
    3.1Total
    
    $
    
    
    
    $
    8
    
    
    
    3.1
   21




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##### Table of Contents



Recognized Gains
 Periods ended June 30
    
    Three Months
    
    
    Six Months(In millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Without hedge designationInterest rate swaps
    
    $
    
    
    
    $
    40
    
    
    $
    
    
    
    $
    61Credit default swaps  purchased protection
    
    
    
    
    
    
    (26
    )
    
    
    
    
    
    
    (35
    )Credit default swaps  sold protection
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    2Total return swaps
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    (2
    )Futures sold, not yet purchased
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    23Options written
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    15Total without hedge designation
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    64Trading activitiesFutures sold, not yet purchased
    
    
    4
    
    
    
    (1
    )
    
    
    1
    
    
    
    (1
    )Total
    
    $
    4
    
    
    $
    32
    
    
    $
    1
    
    
    $
    63
  Derivative Financial Instruments
 Contractual/June 30, 2010
    
    Notional
    
    
    Estimated Fair Value(In millions)
    
    Amount
    
    
    Asset
    
    
    (Liability)Without hedge designationCredit default swaps  purchased protection
    
    $
    35
    
    
    $
    
    
    
    $
    (3
    )Credit default swaps  sold protection
    
    
    8
    
    
    
    1
    
    
    
    Currency forwards
    
    
    3
    
    
    
    
    
    
    
    Equity warrants
    
    
    5
    
    
    
    
    
    
    
    Total without hedge designation
    
    
    51
    
    
    
    1
    
    
    
    (3
    )Trading activitiesFutures sold, not yet purchased
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    51
    
    
    $
    1
    
    
    $
    (3
    )
 22




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##### Table of Contents



Derivative Financial Instruments
 Contractual/December 31, 2009
    
    Notional
    
    
    Estimated Fair Value(In millions)
    
    Amount
    
    
    Asset
    
    
    (Liability)Without hedge designationCredit default swaps  purchased protection
    
    $
    116
    
    
    $
    
    
    
    $
    (11
    )Credit default swaps  sold protection
    
    
    8
    
    
    
    
    
    
    
    Equity warrants
    
    
    2
    
    
    
    
    
    
    
    Total without hedge designation
    
    
    126
    
    
    
    
    
    
    
    (11
    )Trading activitiesFutures sold, not yet purchased
    
    
    132
    
    
    
    
    
    
    
    Total
    
    $
    258
    
    
    $
    
    
    
    $
    (11
    )
  23




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##### Table of Contents



Note F. Fair Value
      24




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##### Table of Contents



Assets and Liabilities Measured at Fair Value
  TotalJune 30, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    Assets/(Liabilities)(In millions)
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    at Fair ValueAssetsFixed maturity securities:U.S. Treasury securities and obligations of
government agencies
    
    $
    96
    
    
    $
    69
    
    
    $
    
    
    
    $
    165Asset-backed securities:Residential mortgage-backed securities
    
    
    
    
    
    
    5,663
    
    
    
    659
    
    
    
    6,322Commercial mortgage-backed securities
    
    
    
    
    
    
    896
    
    
    
    95
    
    
    
    991Other asset-backed securities
    
    
    
    
    
    
    427
    
    
    
    306
    
    
    
    733Total asset-backed securities
    
    
    
    
    
    
    6,986
    
    
    
    1,060
    
    
    
    8,046States, municipalities and political
subdivisions securities
    
    
    
    
    
    
    7,040
    
    
    
    539
    
    
    
    7,579Foreign government securities
    
    
    92
    
    
    
    499
    
    
    
    
    
    
    
    591Corporate and other bonds
    
    
    
    
    
    
    20,415
    
    
    
    718
    
    
    
    21,133Redeemable preferred stock
    
    
    3
    
    
    
    47
    
    
    
    1
    
    
    
    51Total fixed maturity securities
    
    
    191
    
    
    
    35,056
    
    
    
    2,318
    
    
    
    37,565Equity securities
    
    
    415
    
    
    
    130
    
    
    
    4
    
    
    
    549Derivative financial instruments, included in Other
invested assets
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Short term investments
    
    
    1,621
    
    
    
    1,408
    
    
    
    11
    
    
    
    3,040Life settlement contracts, included in Other assets
    
    
    
    
    
    
    
    
    
    
    134
    
    
    
    134Discontinued operations investments, included in
Other
assets
    
    
    8
    
    
    
    124
    
    
    
    
    
    
    
    132Separate account business
    
    
    32
    
    
    
    378
    
    
    
    37
    
    
    
    447Total assets
    
    $
    2,267
    
    
    $
    37,096
    
    
    $
    2,505
    
    
    $
    41,868LiabilitiesDerivative financial instruments, included in Other
liabilities
    
    $
    
    
    
    $
    
    
    
    $
    (3
    )
    
    $
    (3
    )Total liabilities
    
    $
    
    
    
    $
    
    
    
    $
    (3
    )
    
    $
    (3
    )
 25




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##### Table of Contents



TotalDecember 31, 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
    
    $
    247
    
    
    $
    54
    
    
    $
    
    
    
    $
    301Asset-backed securities:Residential mortgage-backed securities
    
    
    
    
    
    
    6,308
    
    
    
    629
    
    
    
    6,937Commercial mortgage-backed securities
    
    
    
    
    
    
    461
    
    
    
    123
    
    
    
    584Other asset-backed securities
    
    
    
    
    
    
    484
    
    
    
    348
    
    
    
    832Total asset-backed securities
    
    
    
    
    
    
    7,253
    
    
    
    1,100
    
    
    
    8,353States, municipalities and political
subdivisions securities
    
    
    
    
    
    
    6,424
    
    
    
    756
    
    
    
    7,180Foreign government securities
    
    
    139
    
    
    
    340
    
    
    
    
    
    
    
    479Corporate and other bonds
    
    
    
    
    
    
    18,636
    
    
    
    609
    
    
    
    19,245Redeemable preferred stock
    
    
    3
    
    
    
    49
    
    
    
    2
    
    
    
    54Total fixed maturity securities
    
    
    389
    
    
    
    32,756
    
    
    
    2,467
    
    
    
    35,612Equity securities
    
    
    503
    
    
    
    130
    
    
    
    11
    
    
    
    644Short term investments
    
    
    3,552
    
    
    
    397
    
    
    
    
    
    
    
    3,949Life settlement contracts, included in Other assets
    
    
    
    
    
    
    
    
    
    
    130
    
    
    
    130Discontinued operations investments, included in
Other
liabilities
    
    
    19
    
    
    
    106
    
    
    
    16
    
    
    
    141Separate account business
    
    
    43
    
    
    
    342
    
    
    
    38
    
    
    
    423Total assets
    
    $
    4,506
    
    
    $
    33,731
    
    
    $
    2,662
    
    
    $
    40,899LiabilitiesDerivative financial instruments, included in Other
liabilities
    
    $
    
    
    
    $
    
    
    
    $
    (11
    )
    
    $
    (11
    )Total liabilities
    
    $
    
    
    
    $
    
    
    
    $
    (11
    )
    
    $
    (11
    )
 26




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##### Table of Contents



Net realizedinvestmentgains (losses)
    
    
    Net change in
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealized gainsand net
    
    
    unrealized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (losses) onchange in
    
    
    appreciation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Level 3 assetsunrealized
    
    
    (depreciation)
    
    
    Purchases,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    and liabilitiesappreciation
    
    
    included in
    
    
    sales,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    held at(depreciation)
    
    
    other
    
    
    issuances
    
    
    Transfers
    
    
    Transfers
    
    
    
    
    
    
    June 30, 2010Level 3
    
    Balance at
    
    
    included in
    
    
    comprehensive
    
    
    and
    
    
    into
    
    
    out of
    
    
    Balance at
    
    
    recognized in(In millions)
    
    April 1, 2010
    
    
    net income*
    
    
    income
    
    
    settlements
    
    
    Level 3
    
    
    Level 3
    
    
    June 30, 2010
    
    
    net income*Fixed maturity securities:Asset-backed securities:Residential mortgage-backed
securities
    
    $
    679
    
    
    $
    2
    
    
    $
    3
    
    
    $
    13
    
    
    $
    
    
    
    $
    (38
    )
    
    $
    659
    
    
    $
    Commercial mortgage-backed
securities
    
    
    112
    
    
    
    
    
    
    
    2
    
    
    
    11
    
    
    
    
    
    
    
    (30
    )
    
    
    95
    
    
    
    Other asset-backed securities
    
    
    368
    
    
    
    
    
    
    
    1
    
    
    
    (18
    )
    
    
    
    
    
    
    (45
    )
    
    
    306
    
    
    
    (2
    )Total asset-backed securities
    
    
    1,159
    
    
    
    2
    
    
    
    6
    
    
    
    6
    
    
    
    
    
    
    
    (113
    )
    
    
    1,060
    
    
    
    (2
    )States, municipalities and
political
subdivisions securities
    
    
    737
    
    
    
    
    
    
    
    4
    
    
    
    (202
    )
    
    
    
    
    
    
    
    
    
    
    539
    
    
    
    Corporate and other bonds
    
    
    684
    
    
    
    7
    
    
    
    9
    
    
    
    53
    
    
    
    14
    
    
    
    (49
    )
    
    
    718
    
    
    
    (3
    )Redeemable preferred stock
    
    
    4
    
    
    
    6
    
    
    
    (2
    )
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    Total fixed maturity securities
    
    
    2,584
    
    
    
    15
    
    
    
    17
    
    
    
    (150
    )
    
    
    14
    
    
    
    (162
    )
    
    
    2,318
    
    
    
    (5
    )Equity securities
    
    
    8
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (2
    )
    
    
    4
    
    
    
    (1
    )Derivative financial instruments, net
    
    
    (4
    )
    
    
    (1
    )
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    Short term investments
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    Life settlement contracts
    
    
    131
    
    
    
    7
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    134
    
    
    
    5Discontinued operations investments
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15
    )
    
    
    
    
    
    
    Separate account business
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    Total
    
    $
    2,775
    
    
    $
    20
    
    
    $
    17
    
    
    $
    (145
    )
    
    $
    14
    
    
    $
    (179
    )
    
    $
    2,502
    
    
    $
    (1
    )
 27




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##### Table of Contents



Net realizedinvestmentgains (losses)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealizedand net
    
    
    Net change in
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    gains (losses) onchange in
    
    
    unrealized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Level 3 assetsunrealized
    
    
    appreciation
    
    
    Purchases,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    and liabilitiesappreciation
    
    
    (depreciation)
    
    
    sales,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    held at(depreciation)
    
    
    included in other
    
    
    issuances
    
    
    Transfers
    
    
    Transfers
    
    
    
    
    
    
    June 30, 2009Level 3
    
    Balance at
    
    
    included in
    
    
    comprehensive
    
    
    and
    
    
    into
    
    
    out of
    
    
    Balance at
    
    
    recognized in(In millions)
    
    April 1, 2009
    
    
    net income*
    
    
    income
    
    
    settlements
    
    
    Level 3
    
    
    Level 3
    
    
    June 30, 2009
    
    
    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 securities
    
    
    784
    
    
    
    
    
    
    
    18
    
    
    
    (17
    )
    
    
    
    
    
    
    
    
    
    
    785
    
    
    
    Corporate and other 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
    )
 28




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##### Table of Contents



Net realizedinvestmentgains (losses)
    
    
    Net change in
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealized gainsand net
    
    
    unrealized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (losses) onchange in
    
    
    appreciation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Level 3 assetsunrealized
    
    
    (depreciation)
    
    
    Purchases,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    and liabilitiesappreciation
    
    
    included in
    
    
    sales,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    held at(depreciation)
    
    
    other
    
    
    issuances
    
    
    Transfers
    
    
    Transfers
    
    
    
    
    
    
    June 30, 2010Level 3
    
    Balance at
    
    
    included in
    
    
    comprehensive
    
    
    and
    
    
    into
    
    
    out of
    
    
    Balance at
    
    
    recognized in(In millions)
    
    January 1, 2010
    
    
    net income*
    
    
    income
    
    
    settlements
    
    
    Level 3
    
    
    Level 3
    
    
    June 30, 2010
    
    
    net income*Fixed maturity securities:Asset-backed securities:Residential mortgage-backed
securities
    
    $
    629
    
    
    $
    (8
    )
    
    $
    29
    
    
    $
    55
    
    
    $
    
    
    
    $
    (46
    )
    
    $
    659
    
    
    $
    (10
    )Commercial mortgage-backed
securities
    
    
    123
    
    
    
    (1
    )
    
    
    (2
    )
    
    
    6
    
    
    
    7
    
    
    
    (38
    )
    
    
    95
    
    
    
    (1
    )Other asset-backed securities
    
    
    348
    
    
    
    4
    
    
    
    22
    
    
    
    (23
    )
    
    
    
    
    
    
    (45
    )
    
    
    306
    
    
    
    (2
    )Total asset-backed securities
    
    
    1,100
    
    
    
    (5
    )
    
    
    49
    
    
    
    38
    
    
    
    7
    
    
    
    (129
    )
    
    
    1,060
    
    
    
    (13
    )States, municipalities and
political
subdivisions securities
    
    
    756
    
    
    
    
    
    
    
    6
    
    
    
    (223
    )
    
    
    
    
    
    
    
    
    
    
    539
    
    
    
    Corporate and other bonds
    
    
    609
    
    
    
    9
    
    
    
    38
    
    
    
    112
    
    
    
    23
    
    
    
    (73
    )
    
    
    718
    
    
    
    (4
    )Redeemable preferred stock
    
    
    2
    
    
    
    6
    
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    Total fixed maturity securities
    
    
    2,467
    
    
    
    10
    
    
    
    93
    
    
    
    (80
    )
    
    
    30
    
    
    
    (202
    )
    
    
    2,318
    
    
    
    (17
    )Equity securities
    
    
    11
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    2
    
    
    
    (7
    )
    
    
    4
    
    
    
    (1
    )Derivative financial instruments, net
    
    
    (11
    )
    
    
    (1
    )
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    Short term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    1
    
    
    
    
    
    
    
    11
    
    
    
    Life settlement contracts
    
    
    130
    
    
    
    17
    
    
    
    
    
    
    
    (13
    )
    
    
    
    
    
    
    
    
    
    
    134
    
    
    
    7Discontinued operations investments
    
    
    16
    
    
    
    
    
    
    
    1
    
    
    
    (2
    )
    
    
    
    
    
    
    (15
    )
    
    
    
    
    
    
    Separate account business
    
    
    38
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    Total
    
    $
    2,651
    
    
    $
    25
    
    
    $
    94
    
    
    $
    (77
    )
    
    $
    33
    
    
    $
    (224
    )
    
    $
    2,502
    
    
    $
    (11
    )
 29




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##### Table of Contents



Net realizedinvestmentgains (losses)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealizedand net
    
    
    Net change in
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    gains (losses) onchange in
    
    
    unrealized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Level 3 assetsunrealized
    
    
    appreciation
    
    
    Purchases,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    and liabilitiesappreciation
    
    
    (depreciation)
    
    
    sales,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    held atBalance at
    
    
    (depreciation)
    
    
    included in other
    
    
    issuances
    
    
    Transfers
    
    
    Transfers
    
    
    
    
    
    
    June 30, 2009Level 3
    
    January 1,
    
    
    included in
    
    
    comprehensive
    
    
    and
    
    
    into
    
    
    out of
    
    
    Balance at
    
    
    recognized in(In millions)
    
    2009
    
    
    net loss*
    
    
    income
    
    
    settlements
    
    
    Level 3
    
    
    Level 3
    
    
    June 30, 2009
    
    
    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 securities
    
    
    750
    
    
    
    
    
    
    
    55
    
    
    
    (20
    )
    
    
    
    
    
    
    
    
    
    
    785
    
    
    
    Foreign government
securities
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    Corporate and other bonds
    
    
    616
    
    
    
    (5
    )
    
    
    46
    
    
    
    67
    
    
    
    18
    
    
    
    (12
    )
    
    
    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
    )
 30




---



##### 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
  31




---



##### 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, 2010
    
    December 31, 2009Carrying
    
    Estimated
    
    Carrying
    
    Estimated(In millions)
    
    Amount
    
    Fair Value
    
    Amount
    
    Fair ValueFinancial assetsNotes receivable for the issuance of common stock
    
    $
    30
    
    
    $
    29
    
    
    $
    30
    
    
    $
    29Mortgage loans
    
    
    14
    
    
    
    14
    
    
    
    
    
    
    
    Financial liabilitiesPremium deposits and annuity contracts
    
    $
    101
    
    
    $
    103
    
    
    $
    105
    
    
    $
    106Long term debt
    
    
    2,254
    
    
    
    2,341
    
    
    
    2,303
    
    
    
    2,290
       32




---



##### Table of Contents



Note G. Claim and Claim Adjustment Expense Reserves
    33




---



##### Table of Contents



A&E Reserves
   A&E Reserves
 June 30, 2010
    
    
    December 31, 2009Environmental
    
    
    
    
    
    
    Environmental(In millions)
    
    Asbestos
    
    
    Pollution
    
    
    Asbestos
    
    
    PollutionGross reserves
    
    $
    1,937
    
    
    $
    412
    
    
    $
    2,046
    
    
    $
    482Ceded reserves
    
    
    (875
    )
    
    
    (174
    )
    
    
    (909
    )
    
    
    (196
    )Net reserves
    
    $
    1,062
    
    
    $
    238
    
    
    $
    1,137
    
    
    $
    286
  Asbestos
  Asbestos Reserves
 Six months ended June 30(In millions)
    
    2010
    
    
    2009Beginning net reserves
    
    $
    1,137
    
    
    $
    1,202Pretax (favorable) unfavorable net prior year claim
and allocated claim adjustment expense reserve
development
    
    
    
    
    
    
    Paid claims, net of reinsurance recoveries
    
    
    (75
    )
    
    
    (89
    )Ending net reserves
    
    $
    1,062
    
    
    $
    1,113
   34




---



##### Table of Contents



A.P. Green:
 Direct Action Case  Montana: Pennock, et al. v. Maryland Casualty, et al.
  35




---



##### Table of Contents



Environmental Pollution
  Environmental Pollution Reserves
 Six months ended June 30(In millions)
    
    2010
    
    
    2009Beginning net reserves
    
    $
    286
    
    
    $
    262Pretax (favorable) unfavorable net prior year claim and
allocated claim adjustment expense reserve development
    
    
    
    
    
    
    Paid claims, net of reinsurance recoveries
    
    
    (48
    )
    
    
    (22
    )Ending net reserves
    
    $
    238
    
    
    $
    240
 Net Prior Year Development
  36




---



##### Table of Contents



Three Month Comparison
 Net Prior Year Development
Three months ended June 30, 2010
 Corporate &CNA
    
    
    CNA
    
    
    Other Non-(In millions)
    
    Specialty
    
    
    Commercial
    
    
    Core
    
    
    TotalPretax (favorable) unfavorable net prior year claim and
allocated claim adjustment expense reserve development:Core (Non-A&E)
    
    $
    (125
    )
    
    $
    (175
    )
    
    $
    1
    
    
    $
    (299
    )A&E
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Pretax (favorable) unfavorable net prior year development before
impact of premium development
    
    
    (125
    )
    
    
    (175
    )
    
    
    1
    
    
    
    (299
    )Pretax (favorable) unfavorable premium development
    
    
    1
    
    
    
    35
    
    
    
    (2
    )
    
    
    34Total pretax (favorable) unfavorable net prior year
development
    
    $
    (124
    )
    
    $
    (140
    )
    
    $
    (1
    )
    
    $
    (265
    )
 Net Prior Year Development
Three months ended June 30, 2009
 Corporate &CNA
    
    
    CNA
    
    
    Other Non-(In millions)
    
    Specialty
    
    
    Commercial
    
    
    Core
    
    
    TotalPretax (favorable) unfavorable net prior year claim and
allocated claim adjustment expense reserve development:Core (Non-A&E)
    
    $
    (35
    )
    
    $
    (85
    )
    
    $
    4
    
    
    $
    (116
    )A&E
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Pretax (favorable) unfavorable net prior year development before
impact of premium development
    
    
    (35
    )
    
    
    (85
    )
    
    
    4
    
    
    
    (116
    )Pretax (favorable) unfavorable premium development
    
    
    2
    
    
    
    56
    
    
    
    (2
    )
    
    
    56Total pretax (favorable) unfavorable net prior year
development
    
    $
    (33
    )
    
    $
    (29
    )
    
    $
    2
    
    
    $
    (60
    )
 37




---



##### Table of Contents



2010 Net Prior Year Development
 CNA Specialty
    CNA Commercial
       38




---



##### Table of Contents



2009 Net Prior Year Development
 CNA Specialty
   CNA Commercial
    39




---



##### Table of Contents



Six Month Comparison
 Net Prior Year Development
Six months ended June 30, 2010
 Corporate &CNA
    
    
    CNA
    
    
    Other Non-(In millions)
    
    Specialty
    
    
    Commercial
    
    
    Core
    
    
    TotalPretax (favorable) unfavorable net prior year claim and
allocated claim adjustment expense reserve development:Core (Non-A&E)
    
    $
    (150
    )
    
    $
    (203
    )
    
    $
    3
    
    
    $
    (350
    )A&E
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Pretax (favorable) unfavorable net prior year development before
impact of premium development
    
    
    (150
    )
    
    
    (203
    )
    
    
    3
    
    
    
    (350
    )Pretax (favorable) unfavorable premium development
    
    
    (3
    )
    
    
    56
    
    
    
    (3
    )
    
    
    50Total pretax (favorable) unfavorable net prior year
development
    
    $
    (153
    )
    
    $
    (147
    )
    
    $
    
    
    
    $
    (300
    )
 Net Prior Year Development
Six months ended June 30, 2009
 Corporate &CNA
    
    
    CNA
    
    
    Other Non-(In millions)
    
    Specialty
    
    
    Commercial
    
    
    Core
    
    
    TotalPretax (favorable) unfavorable net prior year claim and
allocated claim adjustment expense reserve development:Core (Non-A&E)
    
    $
    (64
    )
    
    $
    (127
    )
    
    $
    5
    
    
    $
    (186
    )A&E
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Pretax (favorable) unfavorable net prior year development before
impact of premium development
    
    
    (64
    )
    
    
    (127
    )
    
    
    5
    
    
    
    (186
    )Pretax (favorable) unfavorable premium development
    
    
    (3
    )
    
    
    76
    
    
    
    (3
    )
    
    
    70Total pretax (favorable) unfavorable net prior year
development
    
    $
    (67
    )
    
    $
    (51
    )
    
    $
    2
    
    
    $
    (116
    )
 40




---



##### Table of Contents



2010 Net Prior Year Development
 CNA Specialty
    CNA Commercial
       41




---



##### Table of Contents



2009 Net Prior Year Development
 CNA Specialty
    CNA Commercial
    42




---



##### Table of Contents



Note H Legal Proceedings and Contingent Liabilities
 Insurance Brokerage Antitrust Litigation
 In re Insurance Brokerage Antitrust Litigation
  A&E Reserves
  Other Litigation
  Note I. Benefit Plans
  Net Periodic Cost (Benefit)
 Periods ended June 30
    
    Three Months
    
    
    Six Months(In millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Pension costService cost
    
    $
    4
    
    
    $
    3
    
    
    $
    8
    
    
    $
    8Interest cost on projected benefit obligation
    
    
    36
    
    
    
    39
    
    
    
    74
    
    
    
    77Expected return on plan assets
    
    
    (40
    )
    
    
    (36
    )
    
    
    (81
    )
    
    
    (72
    )Actuarial loss amortization
    
    
    6
    
    
    
    6
    
    
    
    12
    
    
    
    12Net periodic pension cost
    
    $
    6
    
    
    $
    12
    
    
    $
    13
    
    
    $
    25Postretirement benefitService cost
    
    $
    
    
    
    $
    
    
    
    $
    1
    
    
    $
    1Interest cost on projected benefit obligation
    
    
    2
    
    
    
    2
    
    
    
    4
    
    
    
    4Prior service cost amortization
    
    
    (4
    )
    
    
    (4
    )
    
    
    (8
    )
    
    
    (8
    )Actuarial loss amortization
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    Net periodic postretirement benefit
    
    $
    (1
    )
    
    $
    (2
    )
    
    $
    (2
    )
    
    $
    (3
    )
 43




---



##### Table of Contents



Note J. Commitments, Contingencies, and Guarantees
 Commitments and Contingencies
    Guarantees
    44




---



##### Table of Contents



Note K. Business Segments
       45




---



##### Table of Contents



Three months endedJune 30, 2010
    
    CNA
    
    
    CNA
    
    
    Life & Group
    
    
    Corporate & Other(In millions)
    
    Specialty
    
    
    Commercial
    
    
    Non-Core
    
    
    Non-Core
    
    
    Eliminations
    
    
    TotalRevenuesNet earned premiums
    
    $
    665
    
    
    $
    797
    
    
    $
    146
    
    
    $
    1
    
    
    $
    (1
    )
    
    $
    1,608Net investment income
    
    
    125
    
    
    
    181
    
    
    
    174
    
    
    
    41
    
    
    
    
    
    
    
    521Other revenues
    
    
    53
    
    
    
    16
    
    
    
    2
    
    
    
    4
    
    
    
    
    
    
    
    75Total operating revenues
    
    
    843
    
    
    
    994
    
    
    
    322
    
    
    
    46
    
    
    
    (1
    )
    
    
    2,204Claims, benefits and expensesNet incurred claims and benefits
    
    
    320
    
    
    
    484
    
    
    
    314
    
    
    
    19
    
    
    
    
    
    
    
    1,137Policyholders dividends
    
    
    3
    
    
    
    6
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    10Amortization of deferred acquisition costs
    
    
    154
    
    
    
    186
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    345Other insurance related expenses
    
    
    47
    
    
    
    107
    
    
    
    45
    
    
    
    (1
    )
    
    
    (1
    )
    
    
    197Other expenses
    
    
    50
    
    
    
    11
    
    
    
    
    
    
    
    37
    
    
    
    
    
    
    
    98Total claims, benefits and expenses
    
    
    574
    
    
    
    794
    
    
    
    365
    
    
    
    55
    
    
    
    (1
    )
    
    
    1,787Operating income (loss) from continuing operations before
income tax
    
    
    269
    
    
    
    200
    
    
    
    (43
    )
    
    
    (9
    )
    
    
    
    
    
    
    417Income tax (expense) benefit on operating income (loss)
    
    
    (90
    )
    
    
    (68
    )
    
    
    25
    
    
    
    4
    
    
    
    
    
    
    
    (129
    )Net operating (income) loss, after-tax, attributable to
noncontrolling interests
    
    
    (11
    )
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19
    )Net operating income (loss) from continuing operations
attributable to CNA
    
    
    168
    
    
    
    124
    
    
    
    (18
    )
    
    
    (5
    )
    
    
    
    
    
    
    269Net realized investment gains (losses), net of
participating policyholders interests
    
    
    32
    
    
    
    (13
    )
    
    
    (1
    )
    
    
    11
    
    
    
    
    
    
    
    29Income tax (expense) benefit on net realized investment
gains (losses)
    
    
    (11
    )
    
    
    (1
    )
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    (16
    )Net realized investment (gains) losses, after-tax,
attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net realized investment gains (losses) attributable to CNA
    
    
    21
    
    
    
    (14
    )
    
    
    (1
    )
    
    
    7
    
    
    
    
    
    
    
    13Net income (loss) from continuing operations attributable
to CNA
    
    $
    189
    
    
    $
    110
    
    
    $
    (19
    )
    
    $
    2
    
    
    $
    
    
    
    $
    282
 46




---



##### Table of Contents



Three months endedJune 30, 2009

    
    CNA
    
    
    CNA
    
    
    Life & Group
    
    
    Corporate & Other(In millions)
    
    Specialty
    
    
    Commercial
    
    
    Non-Core
    
    
    Non-Core
    
    
    Eliminations
    
    
    TotalRevenuesNet earned premiums
    
    $
    668
    
    
    $
    837
    
    
    $
    148
    
    
    $
    4
    
    
    $
    (1
    )
    
    $
    1,656Net investment income
    
    
    157
    
    
    
    283
    
    
    
    168
    
    
    
    67
    
    
    
    
    
    
    
    675Other revenues
    
    
    45
    
    
    
    19
    
    
    
    (1
    )
    
    
    (1
    )
    
    
    
    
    
    
    62Total operating revenues
    
    
    870
    
    
    
    1,139
    
    
    
    315
    
    
    
    70
    
    
    
    (1
    )
    
    
    2,393Claims, benefits and expensesNet incurred claims and benefits
    
    
    404
    
    
    
    596
    
    
    
    269
    
    
    
    23
    
    
    
    
    
    
    
    1,292Policyholders dividends
    
    
    3
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Amortization of deferred acquisition costs
    
    
    152
    
    
    
    193
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    349Other insurance related expenses
    
    
    42
    
    
    
    89
    
    
    
    47
    
    
    
    1
    
    
    
    (1
    )
    
    
    178Other expenses
    
    
    39
    
    
    
    23
    
    
    
    51
    
    
    
    30
    
    
    
    
    
    
    
    143Total claims, benefits and expenses
    
    
    640
    
    
    
    900
    
    
    
    371
    
    
    
    54
    
    
    
    (1
    )
    
    
    1,964Operating income (loss) from continuing operations before
income tax
    
    
    230
    
    
    
    239
    
    
    
    (56
    )
    
    
    16
    
    
    
    
    
    
    
    429Income tax (expense) benefit on operating income (loss)
    
    
    (71
    )
    
    
    (66
    )
    
    
    30
    
    
    
    (3
    )
    
    
    
    
    
    
    (110
    )Net operating (income) loss, after-tax, attributable to
noncontrolling interests
    
    
    (8
    )
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14
    )Net operating income (loss) from continuing operations
attributable to CNA
    
    
    151
    
    
    
    167
    
    
    
    (26
    )
    
    
    13
    
    
    
    
    
    
    
    305Net realized investment gains (losses), net of
participating policyholders interests
    
    
    (83
    )
    
    
    (183
    )
    
    
    13
    
    
    
    (44
    )
    
    
    
    
    
    
    (297
    )Income tax (expense) benefit on net realized investment
gains (losses)
    
    
    27
    
    
    
    61
    
    
    
    (4
    )
    
    
    14
    
    
    
    
    
    
    
    98Net realized investment (gains) losses, after-tax,
attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net realized investment gains (losses) attributable to CNA
    
    
    (56
    )
    
    
    (122
    )
    
    
    9
    
    
    
    (30
    )
    
    
    
    
    
    
    (199
    )Net income (loss) from continuing operations attributable
to CNA
    
    $
    95
    
    
    $
    45
    
    
    $
    (17
    )
    
    $
    (17
    )
    
    $
    
    
    
    $
    106
 47




---



##### Table of Contents



Six months endedJune 30, 2010
    
    CNA
    
    
    CNA
    
    
    Life & Group
    
    
    Corporate & Other(In millions)
    
    Specialty
    
    
    Commercial
    
    
    Non-Core
    
    
    Non-Core
    
    
    Eliminations
    
    
    TotalRevenuesNet earned premiums
    
    $
    1,319
    
    
    $
    1,613
    
    
    $
    291
    
    
    $
    2
    
    
    $
    (2
    )
    
    $
    3,223Net investment income
    
    
    272
    
    
    
    399
    
    
    
    349
    
    
    
    91
    
    
    
    
    
    
    
    1,111Other revenues
    
    
    105
    
    
    
    34
    
    
    
    6
    
    
    
    6
    
    
    
    
    
    
    
    151Total operating revenues
    
    
    1,696
    
    
    
    2,046
    
    
    
    646
    
    
    
    99
    
    
    
    (2
    )
    
    
    4,485Claims, benefits and expensesNet incurred claims and benefits
    
    
    722
    
    
    
    1,086
    
    
    
    595
    
    
    
    40
    
    
    
    
    
    
    
    2,443Policyholders dividends
    
    
    4
    
    
    
    7
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    12Amortization of deferred acquisition costs
    
    
    309
    
    
    
    369
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    687Other insurance related expenses
    
    
    94
    
    
    
    214
    
    
    
    96
    
    
    
    1
    
    
    
    (2
    )
    
    
    403Other expenses
    
    
    94
    
    
    
    28
    
    
    
    6
    
    
    
    72
    
    
    
    
    
    
    
    200Total claims, benefits and expenses
    
    
    1,223
    
    
    
    1,704
    
    
    
    707
    
    
    
    113
    
    
    
    (2
    )
    
    
    3,745Operating income (loss) from continuing operations before
income tax
    
    
    473
    
    
    
    342
    
    
    
    (61
    )
    
    
    (14
    )
    
    
    
    
    
    
    740Income tax (expense) benefit on operating income (loss)
    
    
    (158
    )
    
    
    (111
    )
    
    
    44
    
    
    
    6
    
    
    
    
    
    
    
    (219
    )Net operating (income) loss, after-tax, attributable to
noncontrolling interests
    
    
    (19
    )
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29
    )Net operating income (loss) from continuing operations
attributable to CNA
    
    
    296
    
    
    
    221
    
    
    
    (17
    )
    
    
    (8
    )
    
    
    
    
    
    
    492Net realized investment gains (losses), net of
participating policyholders interests
    
    
    45
    
    
    
    8
    
    
    
    (5
    )
    
    
    15
    
    
    
    
    
    
    
    63Income tax (expense) benefit on net realized investment
gains (losses)
    
    
    (15
    )
    
    
    (8
    )
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    (28
    )Net realized investment (gains) losses, after-tax,
attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net realized investment gains (losses) attributable to CNA
    
    
    30
    
    
    
    
    
    
    
    (5
    )
    
    
    10
    
    
    
    
    
    
    
    35Net income (loss) from continuing operations attributable
to CNA
    
    $
    326
    
    
    $
    221
    
    
    $
    (22
    )
    
    $
    2
    
    
    $
    
    
    
    $
    527June 30,
2010(In millions)Reinsurance receivables
    
    $
    1,049
    
    
    $
    2,137
    
    
    $
    1,577
    
    
    $
    1,794
    
    
    $
    
    
    
    $
    6,557Insurance receivables
    
    $
    677
    
    
    $
    1,201
    
    
    $
    9
    
    
    $
    5
    
    
    $
    
    
    
    $
    1,892Deferred acquisition costs
    
    $
    320
    
    
    $
    331
    
    
    $
    444
    
    
    $
    
    
    
    $
    
    
    
    $
    1,095Insurance reservesClaim and claim adjustment expenses
    
    $
    6,916
    
    
    $
    12,575
    
    
    $
    2,734
    
    
    $
    3,743
    
    
    $
    
    
    
    $
    25,968Unearned premiums
    
    
    1,522
    
    
    
    1,637
    
    
    
    144
    
    
    
    2
    
    
    
    (2
    )
    
    
    3,303Future policy benefits
    
    
    
    
    
    
    
    
    
    
    8,217
    
    
    
    
    
    
    
    
    
    
    
    8,217Policyholders funds
    
    
    13
    
    
    
    13
    
    
    
    146
    
    
    
    
    
    
    
    
    
    
    
    172
 48




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##### Table of Contents



Six months endedJune 30, 2009
    
    CNA
    
    
    CNA
    
    
    Life & Group
    
    
    Corporate & Other(In millions)
    
    Specialty
    
    
    Commercial
    
    
    Non-Core
    
    
    Non-Core
    
    
    Eliminations
    
    
    TotalRevenuesNet earned premiums
    
    $
    1,327
    
    
    $
    1,700
    
    
    $
    298
    
    
    $
    5
    
    
    $
    (2
    )
    
    $
    3,328Net investment income
    
    
    242
    
    
    
    426
    
    
    
    327
    
    
    
    100
    
    
    
    
    
    
    
    1,095Other revenues
    
    
    100
    
    
    
    34
    
    
    
    5
    
    
    
    1
    
    
    
    
    
    
    
    140Total operating revenues
    
    
    1,669
    
    
    
    2,160
    
    
    
    630
    
    
    
    106
    
    
    
    (2
    )
    
    
    4,563Claims, benefits and expensesNet incurred claims and benefits
    
    
    799
    
    
    
    1,210
    
    
    
    574
    
    
    
    44
    
    
    
    
    
    
    
    2,627Policyholders dividends
    
    
    6
    
    
    
    2
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    9Amortization of deferred acquisition costs
    
    
    300
    
    
    
    388
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    698Other insurance related expenses
    
    
    83
    
    
    
    183
    
    
    
    93
    
    
    
    2
    
    
    
    (2
    )
    
    
    359Other expenses
    
    
    88
    
    
    
    39
    
    
    
    57
    
    
    
    60
    
    
    
    
    
    
    
    244Total claims, benefits and expenses
    
    
    1,276
    
    
    
    1,822
    
    
    
    735
    
    
    
    106
    
    
    
    (2
    )
    
    
    3,937Operating income (loss) from continuing operations
before income tax
    
    
    393
    
    
    
    338
    
    
    
    (105
    )
    
    
    
    
    
    
    
    
    
    
    626Income tax (expense) benefit on operating income (loss)
    
    
    (117
    )
    
    
    (91
    )
    
    
    57
    
    
    
    4
    
    
    
    
    
    
    
    (147
    )Net operating (income) loss, after-tax, attributable
to noncontrolling interests
    
    
    (16
    )
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25
    )Net operating income (loss) from continuing operations
attributable to CNA
    
    
    260
    
    
    
    238
    
    
    
    (48
    )
    
    
    4
    
    
    
    
    
    
    
    454Net realized investment losses, net of participating
policyholders interests
    
    
    (192
    )
    
    
    (369
    )
    
    
    (177
    )
    
    
    (91
    )
    
    
    
    
    
    
    (829
    )Income tax benefit on net realized investment losses
    
    
    65
    
    
    
    126
    
    
    
    62
    
    
    
    32
    
    
    
    
    
    
    
    285Net realized investment (gains) losses, after-tax,
attributable to noncontrolling interests
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Net realized investment losses attributable to CNA
    
    
    (127
    )
    
    
    (242
    )
    
    
    (115
    )
    
    
    (59
    )
    
    
    
    
    
    
    (543
    )Net income (loss) from continuing operations
attributable to CNA
    
    $
    133
    
    
    $
    (4
    )
    
    $
    (163
    )
    
    $
    (55
    )
    
    $
    
    
    
    $
    (89
    )December 31, 2009(In millions)Reinsurance receivables
    
    $
    1,077
    
    
    $
    2,234
    
    
    $
    1,744
    
    
    $
    1,877
    
    
    $
    
    
    
    $
    6,932Insurance receivables
    
    $
    613
    
    
    $
    1,234
    
    
    $
    9
    
    
    $
    2
    
    
    $
    
    
    
    $
    1,858Deferred acquisition costs
    
    $
    318
    
    
    $
    336
    
    
    $
    454
    
    
    $
    
    
    
    $
    
    
    
    $
    1,108Insurance reservesClaim and claim adjustment expenses
    
    $
    6,922
    
    
    $
    13,005
    
    
    $
    2,883
    
    
    $
    4,006
    
    
    $
    
    
    
    $
    26,816Unearned premiums
    
    
    1,528
    
    
    
    1,603
    
    
    
    140
    
    
    
    3
    
    
    
    
    
    
    
    3,274Future policy benefits
    
    
    
    
    
    
    
    
    
    
    7,981
    
    
    
    
    
    
    
    
    
    
    
    7,981Policyholders funds
    
    
    11
    
    
    
    11
    
    
    
    170
    
    
    
    
    
    
    
    
    
    
    
    192
 49




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##### Table of Contents



Revenues by Line of Business
 Periods ended June 30
    
    Three Months
    
    
    Six Months(In millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009CNA SpecialtyProfessional & Management Liability
    
    $
    634
    
    
    $
    566
    
    
    $
    1,265
    
    
    $
    1,054International
    
    
    48
    
    
    
    33
    
    
    
    99
    
    
    
    70Surety
    
    
    119
    
    
    
    119
    
    
    
    233
    
    
    
    232Warranty & Alternative Risks
    
    
    74
    
    
    
    69
    
    
    
    144
    
    
    
    121CNA Specialty revenues
    
    
    875
    
    
    
    787
    
    
    
    1,741
    
    
    
    1,477CNA CommercialCommercial Insurance
    
    
    690
    
    
    
    648
    
    
    
    1,403
    
    
    
    1,173Business Insurance
    
    
    140
    
    
    
    113
    
    
    
    281
    
    
    
    243International
    
    
    89
    
    
    
    151
    
    
    
    244
    
    
    
    293CNA Select Risk
    
    
    62
    
    
    
    44
    
    
    
    126
    
    
    
    82CNA Commercial revenues
    
    
    981
    
    
    
    956
    
    
    
    2,054
    
    
    
    1,791Life & Group Non-CoreLife & Annuity
    
    
    52
    
    
    
    63
    
    
    
    116
    
    
    
    87Health
    
    
    266
    
    
    
    266
    
    
    
    520
    
    
    
    363Other
    
    
    3
    
    
    
    (1
    )
    
    
    5
    
    
    
    3Life & Group Non-Core revenues
    
    
    321
    
    
    
    328
    
    
    
    641
    
    
    
    453Corporate & Other Non-Core revenues
    
    
    57
    
    
    
    26
    
    
    
    114
    
    
    
    15Eliminations
    
    
    (1
    )
    
    
    (1
    )
    
    
    (2
    )
    
    
    (2
    )Total revenues
    
    $
    2,233
    
    
    $
    2,096
    
    
    $
    4,548
    
    
    $
    3,734
 50




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##### Table of Contents



Note L. IT Transformation
   IT Transformation Costs by Segment
 Six months ended June 30(In millions)
    
    2010CNA Specialty
    
    $
    6CNA Commercial
    
    
    13Life & Group Non-Core
    
    
    8Corporate & Other Non-Core
    
    
    2Total IT Transformation Costs
    
    $
    29
 51




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##### Table of Contents



Note M. Subsequent Event
 Agreement To Cede A&E Liabilities To National Indemnity Company
      52




---



##### Table of Contents



CNA Financial Corporation
 
 Item 2.
Managements Discussion and Analysis (MD&A) of Financial Condition and Results of Operations
 Overview
 th
    Agreement To Cede A&E Liabilities To National Indemnity Company
    53




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54




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CONSOLIDATED OPERATIONS
 Results of Operations
  Periods ended June 30
    
    Three Months
    
    
    Six Months(In millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009RevenuesNet earned premiums
    
    $
    1,608
    
    
    $
    1,656
    
    
    $
    3,223
    
    
    $
    3,328Net investment income
    
    
    521
    
    
    
    675
    
    
    
    1,111
    
    
    
    1,095Other revenues
    
    
    75
    
    
    
    62
    
    
    
    151
    
    
    
    140Total operating revenues
    
    
    2,204
    
    
    
    2,393
    
    
    
    4,485
    
    
    
    4,563Claims, benefits and expensesNet incurred claims and benefits
    
    
    1,137
    
    
    
    1,292
    
    
    
    2,443
    
    
    
    2,627Policyholders dividends
    
    
    10
    
    
    
    2
    
    
    
    12
    
    
    
    9Amortization of deferred acquisition costs
    
    
    345
    
    
    
    349
    
    
    
    687
    
    
    
    698Other insurance related expenses
    
    
    197
    
    
    
    178
    
    
    
    403
    
    
    
    359Other expenses
    
    
    98
    
    
    
    143
    
    
    
    200
    
    
    
    244Total claims, benefits and expenses
    
    
    1,787
    
    
    
    1,964
    
    
    
    3,745
    
    
    
    3,937Operating income from continuing operations
before income tax
    
    
    417
    
    
    
    429
    
    
    
    740
    
    
    
    626Income tax expense on operating income
    
    
    (129
    )
    
    
    (110
    )
    
    
    (219
    )
    
    
    (147
    )Net operating (income) loss, after-tax,
attributable to noncontrolling interests
    
    
    (19
    )
    
    
    (14
    )
    
    
    (29
    )
    
    
    (25
    )Net operating income from continuing
operations attributable to CNA
    
    
    269
    
    
    
    305
    
    
    
    492
    
    
    
    454Net realized investment gains (losses), net
of participating policyholders interests
    
    
    29
    
    
    
    (297
    )
    
    
    63
    
    
    
    (829
    )Income tax (expense) benefit on net
realized investment gains (losses)
    
    
    (16
    )
    
    
    98
    
    
    
    (28
    )
    
    
    285Net realized investment (gains) losses,
after-tax, attributable to noncontrolling
interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Net realized investment gains (losses)
attributable to CNA
    
    
    13
    
    
    
    (199
    )
    
    
    35
    
    
    
    (543
    )Income (loss) from continuing operations
attributable to CNA
    
    
    282
    
    
    
    106
    
    
    
    527
    
    
    
    (89
    )Income (loss) from discontinued operations
attributable to CNA, net of income tax
(expense) benefit of $0, $0, $0 and $0
    
    
    1
    
    
    
    (1
    )
    
    
    1
    
    
    
    (1
    )Net income (loss) attributable to CNA
    
    $
    283
    
    
    $
    105
    
    
    $
    528
    
    
    $
    (90
    )
 Three Month Comparison
   55




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##### Table of Contents



Six Month Comparison
       56




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##### Table of Contents



Critical Accounting Estimates
    
    
    Insurance Reserves
    
    Reinsurance
    
    Valuation of Investments and Impairment of Securities
    
    Long Term Care Products
    
    Payout Annuity Contracts
    
    Pension and Postretirement Benefit Obligations
    
    Legal Proceedings
    
    Income Taxes
  57




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##### Table of Contents



SEGMENT RESULTS
  CNA SPECIALTY
  Results of Operations
 Periods ended June 30
    
    Three Months
    
    
    Six Months(In millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Net written premiums
    
    $
    647
    
    
    $
    655
    
    
    $
    1,303
    
    
    $
    1,327Net earned premiums
    
    
    665
    
    
    
    668
    
    
    
    1,319
    
    
    
    1,327Net investment income
    
    
    125
    
    
    
    157
    
    
    
    272
    
    
    
    242Net operating income
    
    
    168
    
    
    
    151
    
    
    
    296
    
    
    
    260Net realized investment gains (losses), after-tax
    
    
    21
    
    
    
    (56
    )
    
    
    30
    
    
    
    (127
    )Net income
    
    
    189
    
    
    
    95
    
    
    
    326
    
    
    
    133RatiosLoss and loss adjustment expense
    
    
    48.2
    %
    
    
    60.4
    %
    
    
    54.8
    %
    
    
    60.2
    %Expense
    
    
    30.3
    
    
    
    29.0
    
    
    
    30.6
    
    
    
    28.9Dividend
    
    
    0.5
    
    
    
    0.4
    
    
    
    0.3
    
    
    
    0.4Combined
    
    
    79.0
    %
    
    
    89.8
    %
    
    
    85.7
    %
    
    
    89.5
    %
 Three Month Comparison
       58




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Six Month Comparison
        Gross and Net Carried  Claim and Claim Adjustment Expense Reserves
 (In millions)
    
    June 30, 2010
    
    
    December 31, 2009Gross Case Reserves
    
    $
    2,329
    
    
    $
    2,208Gross IBNR Reserves
    
    
    4,587
    
    
    
    4,714Total Gross Carried Claim and Claim Adjustment Expense Reserves
    
    $
    6,916
    
    
    $
    6,922Net Case Reserves
    
    $
    1,918
    
    
    $
    1,781Net IBNR Reserves
    
    
    3,990
    
    
    
    4,085Total Net Carried Claim and Claim Adjustment Expense Reserves
    
    $
    5,908
    
    
    $
    5,866
 59




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##### Table of Contents



CNA COMMERCIAL
  Results
of Operations
 Periods ended June 30
    
    Three Months
    
    
    Six Months(In millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Net written premiums
    
    $
    838
    
    
    $
    940
    
    
    $
    1,667
    
    
    $
    1,860Net earned premiums
    
    
    797
    
    
    
    837
    
    
    
    1,613
    
    
    
    1,700Net investment income
    
    
    181
    
    
    
    283
    
    
    
    399
    
    
    
    426Net operating income
    
    
    124
    
    
    
    167
    
    
    
    221
    
    
    
    238Net realized investment gains (losses), after-tax
    
    
    (14
    )
    
    
    (122
    )
    
    
    
    
    
    
    (242
    )Net income (loss)
    
    
    110
    
    
    
    45
    
    
    
    221
    
    
    
    (4
    )RatiosLoss and loss adjustment expense
    
    
    60.7
    %
    
    
    71.2
    %
    
    
    67.4
    %
    
    
    71.2
    %Expense
    
    
    36.7
    
    
    
    33.6
    
    
    
    36.1
    
    
    
    33.6Dividend
    
    
    0.8
    
    
    
    (0.2
    )
    
    
    0.4
    
    
    
    0.1Combined
    
    
    98.2
    %
    
    
    104.6
    %
    
    
    103.9
    %
    
    
    104.9
    %
 Three Month Comparison
        60




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##### Table of Contents



Six Month Comparison
         Gross and Net Carried
 Claim
and Claim Adjustment Expense Reserves
 (In millions)
    
    June 30, 2010
    
    
    December 31, 2009Gross Case Reserves
    
    $
    6,462
    
    
    $
    6,510Gross IBNR Reserves
    
    
    6,113
    
    
    
    6,495Total Gross Carried Claim and Claim Adjustment Expense Reserves
    
    $
    12,575
    
    
    $
    13,005Net Case Reserves
    
    $
    5,255
    
    
    $
    5,269Net IBNR Reserves
    
    
    5,274
    
    
    
    5,580Total Net Carried Claim and Claim Adjustment Expense Reserves
    
    $
    10,529
    
    
    $
    10,849
 61




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LIFE & GROUP NON-CORE
  Results of Operations
 Periods ended June 30
    
    Three Months
    
    
    Six Months(In millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Net earned premiums
    
    $
    146
    
    
    $
    148
    
    
    $
    291
    
    
    $
    298Net investment income
    
    
    174
    
    
    
    168
    
    
    
    349
    
    
    
    327Net operating loss
    
    
    (18
    )
    
    
    (26
    )
    
    
    (17
    )
    
    
    (48
    )Net realized investment gains (losses), after-tax
    
    
    (1
    )
    
    
    9
    
    
    
    (5
    )
    
    
    (115
    )Net loss
    
    
    (19
    )
    
    
    (17
    )
    
    
    (22
    )
    
    
    (163
    )
 Three Month Comparison
    Six Month Comparison
   62




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CORPORATE & OTHER NON-CORE
  Results of Operations
 Periods ended June 30
    
    Three Months
    
    
    Six Months(In millions)
    
    2010
    
    


    2009
    
    
    2010
    
    
    2009Net investment income
    
    $
    41
    
    
    $
    67
    
    
    $
    91
    
    
    $
    100Net operating income (loss)
    
    
    (5
    )
    
    
    13
    
    
    
    (8
    )
    
    
    4Net realized investment gains (losses), after-tax
    
    
    7
    
    
    
    (30
    )
    
    
    10
    
    
    
    (59
    )Net income (loss)
    
    
    2
    
    
    
    (17
    )
    
    
    2
    
    
    
    (55
    )
 Three Month Comparison
   Six Month Comparison
    Gross and Net Carried  Claim and Claim Adjustment Expense Reserves
 (In millions)
    
    June 30, 2010
    
    
    December 31, 2009Gross Case Reserves
    
    $
    1,497
    
    
    $
    1,548Gross IBNR Reserves
    
    
    2,246
    
    
    
    2,458Total Gross Carried Claim and Claim Adjustment Expense Reserves
    
    $
    3,743
    
    
    $
    4,006Net Case Reserves
    
    $
    967
    
    
    $
    972Net IBNR Reserves
    
    
    1,347
    
    
    
    1,515Total Net Carried Claim and Claim Adjustment Expense Reserves
    
    $
    2,314
    
    
    $
    2,487
 63




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##### Table of Contents



INVESTMENTS
 Net Investment Income
  Net
Investment Income
 Periods ended June 30
    
    Three Months
    
    
    Six Months(In millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Fixed maturity securities
    
    $
    519
    
    
    $
    487
    
    
    $
    1,029
    
    
    $
    962Short term investments
    
    
    5
    
    
    
    11
    
    
    
    11
    
    
    
    21Limited partnerships
    
    
    (4
    )
    
    
    165
    
    
    
    68
    
    
    
    95Equity securities
    
    
    9
    
    
    
    14
    
    
    
    19
    
    
    
    28Trading portfolio
    
    
    2
    
    
    
    8
    
    
    
    6
    
    
    
    8Other
    
    
    3
    
    
    
    1
    
    
    
    5
    
    
    
    4Gross investment income
    
    
    534
    
    
    
    686
    
    
    
    1,138
    
    
    
    1,118Investment expense
    
    
    (13
    )
    
    
    (11
    )
    
    
    (27
    )
    
    
    (23
    )Net investment income
    
    $
    521
    
    
    $
    675
    
    
    $
    1,111
    
    
    $
    1,095
    64




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Net Realized Investment Gains (Losses)
  Net Realized Investment Gains (Losses)
 Periods ended June 30
    
    Three Months
    
    
    Six Months(In millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Fixed maturity securities:U.S. Treasury securities and obligations of government
agencies
    
    $
    4
    
    
    $
    (6
    )
    
    $
    4
    
    
    $
    (27
    )Asset-backed securities
    
    
    15
    
    
    
    (307
    )
    
    
    10
    
    
    
    (499
    )States, municipalities and political subdivisions securities
    
    
    11
    
    
    
    18
    
    
    
    8
    
    
    
    55Foreign government securities
    
    
    (1
    )
    
    
    8
    
    
    
    1
    
    
    
    26Corporate and other bonds
    
    
    30
    
    
    
    (105
    )
    
    
    63
    
    
    
    (296
    )Redeemable preferred stock
    
    
    7
    
    
    
    
    
    
    
    7
    
    
    
    (9
    )Total fixed maturity securities
    
    
    66
    
    
    
    (392
    )
    
    
    93
    
    
    
    (750
    )Equity securities
    
    
    (28
    )
    
    
    64
    
    
    
    (25
    )
    
    
    (152
    )Derivative securities
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    64Short term investments and other
    
    
    (9
    )
    
    
    (2
    )
    
    
    (5
    )
    
    
    9Net realized investment gains (losses), net of participating
policyholders interests
    
    
    29
    
    
    
    (297
    )
    
    
    63
    
    
    
    (829
    )Income tax (expense) benefit on net realized investment gains
(losses)
    
    
    (16
    )
    
    
    98
    
    
    
    (28
    )
    
    
    285Net realized investment (gains) losses, after-tax,
attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Net realized investment gains (losses) attributable to CNA
    
    $
    13
    
    
    $
    (199
    )
    
    $
    35
    
    
    $
    (543
    )
    Fixed Maturity Ratings
 June 30,
    
    
    
    
    
    
    December 31,(In millions)
    
    2010
    
    
    %
    
    
    2009
    
    
    %U.S. Government and Agencies
    
    $
    3,394
    
    
    
    9
    %
    
    $
    3,705
    
    
    
    10
    %AAA rated
    
    
    5,235
    
    
    
    14
    
    
    
    5,855
    
    
    
    17AA and A rated
    
    
    14,289
    
    
    
    38
    
    
    
    12,464
    
    
    
    35BBB rated
    
    
    10,844
    
    
    
    29
    
    
    
    10,122
    
    
    
    28Non-investment grade
    
    
    3,803
    
    
    
    10
    
    
    
    3,466
    
    
    
    10Total
    
    $
    37,565
    
    
    
    100
    %
    
    $
    35,612
    
    
    
    100
    %
 65




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Non-investment Grade
 Rating
    
    June 30,
    
    
    
    
    
    
    December 31,(In millions)
    
    2010
    
    
    %
    
    
    2009
    
    
    %BB
    
    $
    1,390
    
    
    
    37
    %
    
    $
    1,352
    
    
    
    39
    %B
    
    
    1,306
    
    
    
    34
    
    
    
    1,255
    
    
    
    36CCC  C
    
    
    1,023
    
    
    
    27
    
    
    
    761
    
    
    
    22D
    
    
    84
    
    
    
    2
    
    
    
    98
    
    
    
    3Total
    
    $
    3,803
    
    
    
    100
    %
    
    $
    3,466
    
    
    
    100
    %
     Maturity Profile
 Percent of
    
    
    Percent ofFair Value
    
    
    Unrealized LossDue in one year or less
    
    
    12
    %
    
    
    8
    %Due after one year through five years
    
    
    16
    
    
    
    12Due after five years through ten years
    
    
    26
    
    
    
    27Due after ten years
    
    
    46
    
    
    
    53Total
    
    
    100
    %
    
    
    100
    %
 Duration
   66




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Effective Durations
 June 30, 2010
    
    
    December 31, 2009Effective Duration
    
    
    
    
    
    
    Effective Duration(In millions)
    
    Fair Value
    
    
    (In years)
    
    
    Fair Value
    
    
    (In years)Segregated investments
    
    $
    11,267
    
    
    
    11.0
    
    
    $
    10,376
    
    
    
    11.2Other interest sensitive investments
    
    
    29,924
    
    
    
    4.2
    
    
    
    29,665
    
    
    
    4.0Total Fair Value
    
    $
    41,191
    
    
    
    6.1
    
    
    $
    40,041
    
    
    
    5.8
  Asset-Backed Exposure
 Asset-Backed Distribution
 June 30, 2010
    
    Security Type(In millions)
    
    RMBS (a)
    
    
    CMBS (b)
    
    
    Other ABS (c)
    
    
    TotalU.S. Government Agencies
    
    $
    3,198
    
    
    $
    31
    
    
    $
    
    
    
    $
    3,229AAA
    
    
    1,276
    
    
    
    394
    
    
    
    569
    
    
    
    2,239AA
    
    
    246
    
    
    
    218
    
    
    
    52
    
    
    
    516A
    
    
    165
    
    
    
    236
    
    
    
    29
    
    
    
    430BBB
    
    
    244
    
    
    
    82
    
    
    
    67
    
    
    
    393Non-investment grade and equity tranches
    
    
    1,193
    
    
    
    30
    
    
    
    16
    
    
    
    1,239Total Fair Value
    
    $
    6,322
    
    
    $
    991
    
    
    $
    733
    
    
    $
    8,046Total Amortized Cost
    
    $
    6,526
    
    
    $
    1,052
    
    
    $
    733
    
    
    $
    8,311Sub-prime (included above)Fair Value
    
    $
    527
    
    
    $
    
    
    
    $
    
    
    
    $
    527Amortized Cost
    
    $
    594
    
    
    $
    
    
    
    $
    
    
    
    $
    594Alt-A (included above)Fair Value
    
    $
    694
    
    
    $
    
    
    
    $
    
    
    
    $
    694Amortized Cost
    
    $
    755
    
    
    $
    
    
    
    $
    
    
    
    $
    755
 
 (a)
    
    Residential mortgage-backed securities (RMBS)(b)
    
    Commercial mortgage-backed securities (CMBS)(c)
    
    Other asset-backed securities (Other ABS)  67




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Short Term Investments
  Short
Term Investments
 June 30,
    
    
    December 31,(In millions)
    
    2010
    
    
    2009Short term investments available-for-sale:Commercial paper
    
    $
    1,275
    
    
    $
    185U.S. Treasury securities
    
    
    1,259
    
    
    
    3,025Money market funds
    
    
    144
    
    
    
    179Other
    
    
    362
    
    
    
    560Total short term investments
    
    $
    3,040
    
    
    $
    3,949
  68




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LIQUIDITY AND CAPITAL RESOURCES
 Cash Flows
       Liquidity
   69




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Accounting Standards Updates
  70




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FORWARD-LOOKING STATEMENTS
  
    
    conditions in the capital and credit markets, including continuing uncertainty and
instability in these markets, as well as the overall economy, and their impact on the returns,
types, liquidity and valuation of our investments;
    
    general economic and business conditions, including recessionary conditions that
may decrease the size and number of our insurance customers and create additional losses to
our lines of business, especially those that provide management and professional liability
insurance, as well as surety bonds, to businesses engaged in real estate, financial services
and professional services, and inflationary pressures on medical care costs, construction
costs and other economic sectors that increase the severity of claims;
    
    the effects of failures in the financial services industry, as well
as irregularities in financial reporting and other corporate governance matters, on the
markets for directors and officers and errors and omissions coverages, as well as on capital
and credit markets;
    
    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, as well as the new federal financial regulatory reform of the insurance
industry established by the Dodd-Frank Wall Street Reform and Consumer Protection Act;
    
    increased operating costs and underwriting losses arising from the Patient
Protection and Affordable Care Act and the related amendments in the Health Care and Education
Reconciliation Act, as well as health care reform proposals at the state level;
    
    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 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 to provide additional capital support to us;
 71




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
    
    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;
    
    mass tort claims, including bodily injury claims related to welding rods, benzene,
lead and noise induced hearing loss claims, as well as claims relating to various medical
products including pharmaceuticals;
    
    the risks and uncertainties associated with our loss reserves, as outlined in the
Critical Accounting Estimates and the Reserves  Estimates and Uncertainties sections under
Item 7 of our Annual Report on Form 10-K, including the sufficiency of the reserves and the
possibility for future increases;
    
    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 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
    
    with respect to the agreement to cede asbestos and environmental pollution (A&E)
liabilities referenced in this document, the satisfaction of the conditions to closing,
including receipt of regulatory approvals, whether the contemplated transaction will close,
whether the other parties to the contemplated transaction will fully perform their obligations
to CNA, the uncertainty in estimating loss reserves for A&E claims and the possible continued
exposure of CNA to liabilities for A&E claims.
  72




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CNA Financial Corporation
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  73




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CNA Financial Corporation
 
 Item 4. Controls and Procedures
    74




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CNA Financial Corporation
 
 Part II. Other Information
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  We may face increased operating costs and underwriting losses arising from the federal health care
reform legislation, as well as health care reform proposals at the state level.
  We are unable to predict the impact on us of the new federal financial regulatory reform.
  
 Item 6. Exhibits
  75




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CNA Financial Corporation
Part II. Other Information
 
 SIGNATURES
  CNA Financial CorporationDated:  August 3, 2010
    By
    /s/ D. Craig MenseD. Craig MenseExecutive Vice President and
Chief Financial Officer 76




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EXHIBIT INDEX
 Description of Exhibit
    
    Exhibit NumberForm of Long-Term Incentive Award Terms for Grant Under the CNA Financial
Corporation Incentive Compensation Plan
    
    10.1Certification 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