##### 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 March 31, 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 April 29, 2010Common Stock, Par value $2.50
    
    269,074,878




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##### 



CNA Financial Corporation
Index
 Item
    
    
    
    PageNumber
    
    
    
    NumberPART I. Financial Information1.
    
    Condensed Consolidated Financial Statements (Unaudited):Condensed Consolidated Statements of Operations for the
Three months ended March 31, 2010 and 2009
    
    
    3Condensed Consolidated Statements of Comprehensive Income
(Loss) for the Three months ended March 31, 2010 and 2009
    
    
    5Condensed Consolidated Balance Sheets at March 31, 2010
and December 31, 2009
    
    
    6Condensed Consolidated Statements of Cash Flows for the
Three months ended March 31, 2010 and 2009
    
    
    7Condensed Consolidated Statements of Equity for the Three
months ended March 31, 2010 and 2009
    
    
    9Notes to Condensed Consolidated Financial Statements
    
    
    102.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    423.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    584.
    
    Controls and Procedures
    
    
    59PART II. Other Information1.
    
    Legal Proceedings
    
    
    606.
    
    Exhibits
    
    
    60EX-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)
 Three months ended March 31
    
    2010
    
    
    2009(In millions, except per share data)RevenuesNet earned premiums
    
    $
    1,615
    
    
    $
    1,672Net investment income
    
    
    590
    
    
    
    420Net realized investment gains (losses), net of participating policyholders interests:Other-than-temporary impairment losses
    
    
    (90
    )
    
    
    (614
    )Portion of other-than-temporary impairment losses recognized in Other comprehensive
income
    
    
    30
    
    
    
    Net other-than-temporary impairment losses recognized in earnings
    
    
    (60
    )
    
    
    (614
    )Other net realized investment gains
    
    
    94
    
    
    
    82Net realized investment gains (losses), net of participating policyholders interests
    
    
    34
    
    
    
    (532
    )Other revenues
    
    
    76
    
    
    
    78Total revenues
    
    
    2,315
    
    
    
    1,638Claims, Benefits and ExpensesInsurance claims and policyholders benefits
    
    
    1,308
    
    
    
    1,342Amortization of deferred acquisition costs
    
    
    342
    
    
    
    349Other operating expenses
    
    
    272
    
    
    
    251Interest
    
    
    36
    
    
    
    31Total claims, benefits and expenses
    
    
    1,958
    
    
    
    1,973Income (loss) from continuing operations before income tax
    
    
    357
    
    
    
    (335
    )Income tax (expense) benefit
    
    
    (102
    )
    
    
    150Income (loss) from continuing operations
    
    
    255
    
    
    
    (185
    )Income (loss) from discontinued operations, net of income tax (expense) benefit of $0 and $0
    
    
    
    
    
    
    Net income (loss)
    
    
    255
    
    
    
    (185
    )Net income attributable to noncontrolling interests
    
    
    (10
    )
    
    
    (10
    )Net income (loss) attributable to CNA
    
    $
    245
    
    
    $
    (195
    )Income (Loss) Attributable to CNA Common StockholdersIncome (loss) from continuing operations attributable to CNA
    
    $
    245
    
    
    $
    (195
    )Dividends on 2008 Senior Preferred
    
    
    (25
    )
    
    
    (31
    )Income (loss) from continuing operations attributable to CNA common stockholders
    
    
    220
    
    
    
    (226
    )Income (loss) from discontinued operations attributable to CNA common stockholders
    
    
    
    
    
    
    Income (loss) attributable to CNA common stockholders
    
    $
    220
    
    
    $
    (226
    )
 
 3




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Three months ended March 31
    
    2010
    
    
    2009(In millions, except per share data)Basic and Diluted Earnings (Loss) Per Share Attributable to CNA Common StockholdersIncome (loss) from continuing operations attributable to CNA common stockholders
    
    $
    0.82
    
    
    $
    (0.84
    )Income (loss) from discontinued operations attributable to CNA common stockholders
    
    
    
    
    
    
    Basic and diluted earnings (loss) per share attributable to CNA common stockholders
    
    $
    0.82
    
    
    $
    (0.84
    )Weighted Average Outstanding Common Stock and Common Stock EquivalentsBasic
    
    
    269.1
    
    
    
    269.0Diluted
    
    
    269.2
    
    
    
    269.0
 
 4




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CNA Financial Corporation  
 Condensed Consolidated Statements of Comprehensive Income (Unaudited)
 Three months ended March 31
    
    2010
    
    
    2009(In millions)Other Comprehensive Income (Loss), Net of TaxChanges in:Net unrealized gains (losses) on investments with other-than-temporary impairments
    
    $
    25
    
    
    $
    Net unrealized gains (losses) on other investments
    
    
    323
    
    
    
    401Net unrealized gains (losses) on investments
    
    
    348
    
    
    
    401Net unrealized gains (losses) on discontinued operations and other
    
    
    7
    
    
    
    (2
    )Foreign currency translation adjustment
    
    
    (10
    )
    
    
    (8
    )Pension and postretirement benefits
    
    
    1
    
    
    
    2Allocation to participating policyholders
    
    
    (23
    )
    
    
    Other comprehensive income, net of tax
    
    
    323
    
    
    
    393Net income (loss)
    
    
    255
    
    
    
    (185
    )Comprehensive income
    
    
    578
    
    
    
    208Changes in:Net unrealized (gains) losses on investments attributable to noncontrolling interests
    
    
    (6
    )
    
    
    (5
    )Pension and postretirement benefits attributable to noncontrolling interests
    
    
    (3
    )
    
    
    Other comprehensive income attributable to noncontrolling interests
    
    
    (9
    )
    
    
    (5
    )Net income attributable to noncontrolling interests
    
    
    (10
    )
    
    
    (10
    )Comprehensive income attributable to noncontrolling interests
    
    
    (19
    )
    
    
    (15
    )Total comprehensive income attributable to CNA
    
    $
    559
    
    
    $
    193
 
 5




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CNA Financial Corporation  
 Condensed Consolidated Balance Sheets (Unaudited)
 March 31,
    
    
    December 31,2010
    
    
    2009(In millions, except share data)AssetsInvestments:Fixed maturity securities at fair value (amortized cost of $37,185 and $35,602)
    
    $
    37,711
    
    
    $
    35,612Equity securities at fair value (cost of $651 and $633)
    
    
    681
    
    
    
    644Limited partnership investments
    
    
    1,947
    
    
    
    1,787Other invested assets
    
    
    3
    
    
    
    4Short term investments
    
    
    2,484
    
    
    
    3,949Total investments
    
    
    42,826
    
    
    
    41,996Cash
    
    
    95
    
    
    
    140Reinsurance receivables (less allowance for uncollectible receivables of $350 and $351)
    
    
    6,328
    
    
    
    6,581Insurance receivables (less allowance for doubtful accounts of $197 and $202)
    
    
    1,645
    
    
    
    1,656Accrued investment income
    
    
    457
    
    
    
    416Deferred acquisition costs
    
    
    1,109
    
    
    
    1,108Deferred income taxes
    
    
    1,098
    
    
    
    1,333Property and equipment at cost (less accumulated depreciation of $511 and $498)
    
    
    350
    
    
    
    360Goodwill and other intangible assets
    
    
    141
    
    
    
    141Other assets
    
    
    1,188
    
    
    
    1,144Separate account business
    
    
    442
    
    
    
    423Total assets
    
    $
    55,679
    
    
    $
    55,298Liabilities and EquityLiabilities:Insurance reserves:Claim and claim adjustment expenses
    
    $
    26,559
    
    
    $
    26,816Unearned premiums
    
    
    3,283
    
    
    
    3,274Future policy benefits
    
    
    8,090
    
    
    
    7,981Policyholders funds
    
    
    177
    
    
    
    192Participating policyholders funds
    
    
    54
    
    
    
    56Long term debt
    
    
    2,304
    
    
    
    2,303Other liabilities
    
    
    3,046
    
    
    
    3,087Separate account business
    
    
    442
    
    
    
    423Total liabilities
    
    
    43,955
    
    
    
    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 269,074,878 and 269,026,759 shares outstanding)
    
    
    683
    
    
    
    683Additional paid-in capital
    
    
    2,198
    
    
    
    2,177Retained earnings
    
    
    7,484
    
    
    
    7,264Accumulated other comprehensive loss
    
    
    (11
    )
    
    
    (325
    )Treasury stock (3,965,365 and 4,013,484 shares), at cost
    
    
    (107
    )
    
    
    (109
    )Notes receivable for the issuance of common stock
    
    
    (30
    )
    
    
    (30
    )Total CNA stockholders equity
    
    
    11,217
    
    
    
    10,660Noncontrolling interests
    
    
    507
    
    
    
    506Total equity
    
    
    11,724
    
    
    
    11,166Total liabilities and equity
    
    $
    55,679
    
    
    $
    55,298
 
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CNA Financial Corporation
 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
 Three months ended March 31(In millions)
    
    2010
    
    
    2009Cash Flows from Operating ActivitiesNet income (loss)
    
    $
    255
    
    
    $
    (185
    )Adjustments to reconcile net income (loss) to net cash flows
provided by operating activities:Deferred income tax expense (benefit)
    
    
    45
    
    
    
    (139
    )Trading portfolio activity
    
    
    99
    
    
    
    (3
    )Net realized investment (gains) losses, net of participating
policyholders interests
    
    
    (34
    )
    
    
    532Equity method investees
    
    
    13
    
    
    
    104Amortization of investments
    
    
    (33
    )
    
    
    (58
    )Depreciation
    
    
    21
    
    
    
    21Changes in:Receivables, net
    
    
    264
    
    
    
    223Accrued investment income
    
    
    (41
    )
    
    
    (31
    )Deferred acquisition costs
    
    
    (1
    )
    
    
    (7
    )Insurance reserves
    
    
    (135
    )
    
    
    (139
    )Other assets
    
    
    (7
    )
    
    
    (31
    )Other liabilities
    
    
    (74
    )
    
    
    (97
    )Other, net
    
    
    (3
    )
    
    
    6Total adjustments
    
    
    114
    
    
    
    381Net cash flows provided by operating activities-continuing operations
    
    $
    369
    
    
    $
    196Net cash flows used by operating activities-discontinued operations
    
    $
    (5
    )
    
    $
    (9
    )Net cash flows provided by operating activities-total
    
    $
    364
    
    
    $
    187Cash Flows from Investing ActivitiesPurchases of fixed maturity securities
    
    $
    (5,351
    )
    
    $
    (7,079
    )Proceeds from fixed maturity securities:Sales
    
    
    2,737
    
    
    
    7,046Maturities, calls and redemptions
    
    
    846
    
    
    
    827Purchases of equity securities
    
    
    (42
    )
    
    
    (134
    )Proceeds from sales of equity securities
    
    
    25
    
    
    
    146Change in short term investments
    
    
    1,474
    
    
    
    (1,041
    )Change in other investments
    
    
    (51
    )
    
    
    55Purchases of property and equipment
    
    
    (12
    )
    
    
    (17
    )Other, net
    
    
    
    
    
    
    38Net cash flows used by investing activities-continuing operations
    
    $
    (374
    )
    
    $
    (159
    )Net cash flows provided by investing activities-discontinued operations
    
    $
    5
    
    
    $
    9Net cash flows used by investing activities-total
    
    $
    (369
    )
    
    $
    (150
    )
 
 7




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Three months ended March 31(In millions)
    
    2010
    
    
    2009Cash Flows from Financing ActivitiesDividends paid to Loews Corporation for 2008 Senior Preferred
    
    $
    (25
    )
    
    $
    (31
    )Policyholders investment contract net deposits (withdrawals)
    
    
    (2
    )
    
    
    (7
    )Other, net
    
    
    (11
    )
    
    
    12Net cash flows used by financing activities-continuing operations
    
    $
    (38
    )
    
    $
    (26
    )Net cash flows provided (used) by financing activities-discontinued operations
    
    $
    
    
    
    $
    Net cash flows used by financing activities-total
    
    $
    (38
    )
    
    $
    (26
    )Effect of foreign exchange rate changes on cash-continuing operations
    
    
    (2
    )
    
    
    (2
    )Net change in cash
    
    
    (45
    )
    
    
    9Cash, beginning of year
    
    
    140
    
    
    
    85Cash, end of period
    
    $
    95
    
    
    $
    94Cash-continuing operations
    
    $
    95
    
    
    $
    94Cash-discontinued operations
    
    
    
    
    
    
    Cash-total
    
    $
    95
    
    
    $
    94
 
 8




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CNA Financial Corporation
 
 Condensed Consolidated Statements of Equity (Unaudited)
 Three months ended March 31(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
    
    
    (1
    )
    
    
    1Other
    
    
    22
    
    
    
    Balance, end of period
    
    
    2,198
    
    
    
    2,175Retained EarningsBalance, beginning of period
    
    
    7,264
    
    
    
    6,845Dividends paid to Loews Corporation for 2008 Senior Preferred
    
    
    (25
    )
    
    
    (31
    )Net income (loss) attributable to CNA
    
    
    245
    
    
    
    (195
    )Balance, end of period
    
    
    7,484
    
    
    
    6,619Accumulated Other Comprehensive Income (Loss)Balance, beginning of period
    
    
    (325
    )
    
    
    (3,924
    )Other comprehensive income attributable to CNA
    
    
    314
    
    
    
    388Balance, end of period
    
    
    (11
    )
    
    
    (3,536
    )Treasury StockBalance, beginning of period
    
    
    (109
    )
    
    
    (109
    )Stock based compensation
    
    
    2
    
    
    
    Balance, end of period
    
    
    (107
    )
    
    
    (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
    
    
    11,217
    
    
    
    7,052Noncontrolling InterestsBalance, beginning of period
    
    
    506
    
    
    
    420Net income
    
    
    10
    
    
    
    10Other comprehensive income
    
    
    9
    
    
    
    5Other
    
    
    (18
    )
    
    
    2Balance, end of period
    
    
    507
    
    
    
    437Total Equity
    
    $
    11,724
    
    
    $
    7,489
 
 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
 Variable Interest Entities
  Recognition and Presentation of Other-Than-Temporary Impairments
  10




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




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Note D. Investments
  Net Investment Income
 Three months ended March 31
    
    2010
    
    
    2009(In millions)Fixed maturity securities
    
    $
    510
    
    
    $
    475Short term investments
    
    
    6
    
    
    
    10Limited partnerships
    
    
    72
    
    
    
    (70
    )Equity securities
    
    
    10
    
    
    
    14Trading portfolio (a)
    
    
    4
    
    
    
    Other
    
    
    2
    
    
    
    3Gross investment income
    
    
    604
    
    
    
    432Investment expense
    
    
    (14
    )
    
    
    (12
    )Net investment income
    
    $
    590
    
    
    $
    420
 
 (a)
    
    There were no net unrealized gains (losses) on trading securities still held
included in net investment income for the three months ended March 31, 2010. As of March
31, 2009, the Company did not have a trading portfolio.  Net Realized Investment Gains (Losses)
 Three months ended March 31
    
    2010
    
    
    2009(In millions)Net realized investment gains (losses):Fixed maturity securities:Gross realized gains
    
    $
    98
    
    
    $
    104Gross realized losses
    
    
    (71
    )
    
    
    (462
    )Net realized investment gains (losses) on fixed maturity securities
    
    
    27
    
    
    
    (358
    )Equity securities:Gross realized gains
    
    
    4
    
    
    
    4Gross realized losses
    
    
    (1
    )
    
    
    (220
    )Net realized investment gains (losses) on equity securities
    
    
    3
    
    
    
    (216
    )Derivatives
    
    
    
    
    
    
    31Short term investments and other
    
    
    4
    
    
    
    11Net realized investment gains (losses), net of participating
policyholders interests
    
    $
    34
    
    
    $
    (532
    )
 12




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Three months ended March 31
    
    2010
    
    
    2009(In millions)Fixed maturity securities available-for-sale:Asset-backed securities:Residential mortgage-backed securities
    
    $
    26
    
    
    $
    149Commercial mortgage-backed securities
    
    
    2
    
    
    
    16Other asset-backed securities
    
    
    
    
    
    
    31Total asset-backed securities
    
    
    28
    
    
    
    196States, municipalities and political
subdivisions  tax-exempt securities
    
    
    14
    
    
    
    Corporate and other taxable bonds
    
    
    18
    
    
    
    190Redeemable preferred stock
    
    
    
    
    
    
    9Total fixed maturity securities available-for-sale
    
    
    60
    
    
    
    395Equity securities available-for-sale:Common stock
    
    
    
    
    
    
    3Preferred stock
    
    
    
    
    
    
    216Total equity securities available-for-sale
    
    
    
    
    
    
    219Net OTTI losses recognized in earnings
    
    $
    60
    
    
    $
    614
     13




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##### Table of Contents



Summary of Fixed Maturity and Equity Securities
 Cost or
    
    
    Gross
    
    
    Gross Unrealized Losses
    
    
    Estimated
    
    
    UnrealizedAmortized
    
    
    Unrealized
    
    
    Less than
    
    
    12 Months
    
    
    Fair
    
    
    OTTIMarch 31, 2010
    
    Cost
    
    
    Gains
    
    
    12 Months
    
    
    or Greater
    
    
    Value
    
    
    Losses(In millions)Fixed maturity securities available-for-sale:U.S. Treasury securities and obligations of
government agencies
    
    $
    165
    
    
    $
    16
    
    
    $
    1
    
    
    $
    
    
    
    $
    180
    
    
    $
    Asset-backed securities:Residential mortgage-backed securities
    
    
    7,303
    
    
    
    83
    
    
    
    43
    
    
    
    406
    
    
    
    6,937
    
    
    
    265Commercial mortgage-backed
securities
    
    
    820
    
    
    
    13
    
    
    
    3
    
    
    
    101
    
    
    
    729
    
    
    
    Other asset-backed securities
    
    
    811
    
    
    
    17
    
    
    
    1
    
    
    
    18
    
    
    
    809
    
    
    
    Total asset-backed securities
    
    
    8,934
    
    
    
    113
    
    
    
    47
    
    
    
    525
    
    
    
    8,475
    
    
    
    265States, municipalities and political
subdivisions  tax-exempt securities
    
    
    6,458
    
    
    
    191
    
    
    
    24
    
    
    
    316
    
    
    
    6,309
    
    
    
    Corporate and other taxable bonds
    
    
    21,518
    
    
    
    1,276
    
    
    
    35
    
    
    
    131
    
    
    
    22,628
    
    
    
    26Redeemable preferred stock
    
    
    51
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    Total fixed maturity securities available-for-sale
    
    
    37,126
    
    
    
    1,605
    
    
    
    107
    
    
    
    972
    
    
    
    37,652
    
    
    $
    291Total fixed maturity securities trading
    
    
    59
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59Equity securities available-for-sale:Common stock
    
    
    79
    
    
    
    15
    
    
    
    
    
    
    
    2
    
    
    
    92Preferred stock
    
    
    572
    
    
    
    49
    
    
    
    
    
    
    
    32
    
    
    
    589Total equity securities available-for-sale
    
    
    651
    
    
    
    64
    
    
    
    
    
    
    
    34
    
    
    
    681Total
    
    $
    37,836
    
    
    $
    1,669
    
    
    $
    107
    
    
    $
    1,006
    
    
    $
    38,392
 14




---



##### Table of Contents



Summary of Fixed Maturity and Equity Securities
 Cost or
    
    
    Gross
    
    
    Gross Unrealized Losses
    
    
    Estimated
    
    
    UnrealizedAmortized
    
    
    Unrealized
    
    
    Less than
    
    
    12 Months
    
    
    Fair
    
    
    OTTIDecember 31, 2009
    
    Cost
    
    
    Gains
    
    
    12 Months
    
    
    or Greater
    
    
    Value
    
    
    Losses(In millions)Fixed 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  tax-exempt securities
    
    
    7,142
    
    
    
    201
    
    
    
    25
    
    
    
    325
    
    
    
    6,993
    
    
    
    Corporate and other taxable bonds
    
    
    19,015
    
    
    
    1,123
    
    
    
    50
    
    
    
    249
    
    
    
    19,839
    
    
    
    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 ended(In millions)
    
    March 31, 2010Beginning balance of credit losses on fixed maturity securities
    
    $
    164Additional credit losses for which an OTTI loss was previously recognized
    
    
    11Additional credit losses for which an OTTI loss was not previously recognized
    
    
    5Reductions for securities sold during the period
    
    
    (9
    )Ending balance of credit losses on fixed maturity securities
    
    $
    171
   15




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##### Table of Contents



Asset-Backed Securities
      Gross Unrealized Losses by Ratings Distribution
 March 31, 2010
 GrossUnrealizedRating
    
    Amortized Cost
    
    
    Estimated Fair Value
    
    
    LossesU.S. Government Agencies
    
    $
    1,568
    
    
    $
    1,549
    
    
    $
    19AAA
    
    
    1,933
    
    
    
    1,752
    
    
    
    181AA
    
    
    485
    
    
    
    420
    
    
    
    65A
    
    
    302
    
    
    
    243
    
    
    
    59BBB
    
    
    436
    
    
    
    392
    
    
    
    44Non-investment grade and equity tranches
    
    
    1,330
    
    
    
    1,126
    
    
    
    204Total
    
    $
    6,054
    
    
    $
    5,482
    
    
    $
    572
  16




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##### Table of Contents



States, Municipalities and Political Subdivisions  Tax-Exempt Securities
    Gross Unrealized Losses by Ratings Distribution
 March 31, 2010
 GrossAmortized
    
    
    Estimated
    
    
    UnrealizedRating
    
    Cost
    
    
    Fair Value
    
    
    LossesAAA
    
    $
    1,195
    
    
    $
    1,130
    
    
    $
    65AA
    
    
    801
    
    
    
    666
    
    
    
    135A
    
    
    424
    
    
    
    402
    
    
    
    22BBB
    
    
    480
    
    
    
    363
    
    
    
    117Non-investment grade
    
    
    21
    
    
    
    20
    
    
    
    1Total
    
    $
    2,921
    
    
    $
    2,581
    
    
    $
    340
   17




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##### Table of Contents



Corporate and Other Taxable Bonds
   Gross Unrealized Losses by Ratings Distribution
 March 31, 2010
 GrossAmortized
    
    
    Estimated
    
    
    UnrealizedRating
    
    Cost
    
    
    Fair Value
    
    
    LossesAAA
    
    $
    322
    
    
    $
    316
    
    
    $
    6AA
    
    
    791
    
    
    
    785
    
    
    
    6A
    
    
    1,368
    
    
    
    1,332
    
    
    
    36BBB
    
    
    1,691
    
    
    
    1,617
    
    
    
    74Non-investment grade
    
    
    680
    
    
    
    636
    
    
    
    44Total
    
    $
    4,852
    
    
    $
    4,686
    
    
    $
    166
   Contractual Maturity
  Contractual Maturity
    
    March 31, 2010
    
    
    December 31, 2009Cost or
    
    
    Estimated
    
    
    Cost or
    
    
    EstimatedAmortized
    
    
    Fair
    
    
    Amortized
    
    
    Fair(In millions)
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    ValueDue in one year or less
    
    $
    1,333
    
    
    $
    1,325
    
    
    $
    1,240
    
    
    $
    1,219Due after one year through five years
    
    
    11,371
    
    
    
    11,679
    
    
    
    10,046
    
    
    
    10,244Due after five years through ten years
    
    
    10,469
    
    
    
    10,567
    
    
    
    10,646
    
    
    
    10,538Due after ten years
    
    
    13,953
    
    
    
    14,081
    
    
    
    13,496
    
    
    
    13,437Total
    
    $
    37,126
    
    
    $
    37,652
    
    
    $
    35,428
    
    
    $
    35,438
 18




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##### Table of Contents



Investment Commitments
   19




---



##### Table of Contents



Note E. Derivative Financial Instruments
         20




---



##### Table of Contents



Credit Ratings of Underlying Reference Obligations
 March 31, 2010
 Fair Value of
    
    
    Maximum Amount of
    
    
    WeightedCredit Default
    
    
    Future Payments under
    
    
    Average YearsSwaps
    
    
    Credit Default Swaps
    
    
    to MaturityB
    
    $
    1
    
    
    $
    8
    
    
    
    2.9Total
    
    $
    1
    
    
    $
    8
    
    
    
    2.9
 Credit Ratings of Underlying Reference Obligations
 December 31, 2009
 Fair Value of
    
    
    Maximum Amount of
    
    
    WeightedCredit Default
    
    
    Future Payments under
    
    
    Average YearsSwaps
    
    
    Credit Default Swaps
    
    
    to MaturityB
    
    $
    
    
    
    $
    8
    
    
    
    3.1Total
    
    $
    
    
    
    $
    8
    
    
    
    3.1
   21




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##### Table of Contents



Recognized Gains (Losses)
 Three months ended March 31
    
    2010
    
    
    2009(In millions)Without hedge designationInterest rate swaps
    
    $
    
    
    
    $
    21Credit default swaps  purchased protection
    
    
    
    
    
    
    (9
    )Credit default swaps  sold protection
    
    
    
    
    
    
    (6
    )Futures sold, not yet purchased
    
    
    
    
    
    
    14Options written
    
    
    
    
    
    
    11Total without hedge designation
    
    
    
    
    
    
    31Trading activitiesFutures sold, not yet purchased
    
    
    (3
    )
    
    
    Total
    
    $
    (3
    )
    
    $
    31
  Derivative Financial Instruments
 Contractual/March 31, 2010
    
    Notional
    
    
    Estimated Fair Value(In millions)
    
    Amount
    
    
    Asset
    
    
    (Liability)Without hedge designationCredit default swaps  purchased protection
    
    $
    70
    
    
    $
    
    
    
    $
    (5
    )Credit default swaps  sold protection
    
    
    8
    
    
    
    1
    
    
    
    Currency forwards
    
    
    3
    
    
    
    
    
    
    
    Equity warrants
    
    
    5
    
    
    
    
    
    
    
    Total without hedge designation
    
    
    86
    
    
    
    1
    
    
    
    (5
    )Trading activitiesFutures sold, not yet purchased
    
    
    52
    
    
    
    
    
    
    
    Total
    
    $
    138
    
    
    $
    1
    
    
    $
    (5
    )
 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
    )
  22




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##### Table of Contents



Note F. Fair Value
      23




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##### Table of Contents



Assets and Liabilities Measured at Fair Value
  TotalAssets/(Liabilities)March 31, 2010
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    at Fair Value(In millions)AssetsFixed maturity securities:U.S. Treasury securities and obligations of
government agencies
    
    $
    179
    
    
    $
    50
    
    
    $
    
    
    
    $
    229Asset-backed securities:Residential mortgage-backed securities
    
    
    
    
    
    
    6,258
    
    
    
    679
    
    
    
    6,937Commercial mortgage-backed securities
    
    
    
    
    
    
    617
    
    
    
    112
    
    
    
    729Other asset-backed securities
    
    
    
    
    
    
    441
    
    
    
    368
    
    
    
    809Total asset-backed securities
    
    
    
    
    
    
    7,316
    
    
    
    1,159
    
    
    
    8,475States, municipalities and political subdivisions -
tax-exempt securities
    
    
    
    
    
    
    5,572
    
    
    
    737
    
    
    
    6,309Corporate and other taxable bonds
    
    
    118
    
    
    
    21,836
    
    
    
    684
    
    
    
    22,638Redeemable preferred stock
    
    
    3
    
    
    
    53
    
    
    
    4
    
    
    
    60Total fixed maturity securities
    
    
    300
    
    
    
    34,827
    
    
    
    2,584
    
    
    
    37,711Equity securities
    
    
    526
    
    
    
    147
    
    
    
    8
    
    
    
    681Derivative financial instruments, included in Other
invested assets
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Short term investments
    
    
    1,973
    
    
    
    510
    
    
    
    1
    
    
    
    2,484Life settlement contracts, included in Other assets
    
    
    
    
    
    
    
    
    
    
    131
    
    
    
    131Discontinued operations investments, included in Other
assets
    
    
    14
    
    
    
    110
    
    
    
    15
    
    
    
    139Separate account business
    
    
    44
    
    
    
    358
    
    
    
    40
    
    
    
    442Total assets
    
    $
    2,857
    
    
    $
    35,952
    
    
    $
    2,780
    
    
    $
    41,589LiabilitiesDerivative financial instruments, included in Other
liabilities
    
    $
    
    
    
    $
    
    
    
    $
    (5
    )
    
    $
    (5
    )Total liabilities
    
    $
    
    
    
    $
    
    
    
    $
    (5
    )
    
    $
    (5
    )
 24




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##### Table of Contents



TotalAssets/(Liabilities) atDecember 31, 2009
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Fair Value(In millions)AssetsFixed 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 -
tax-exempt securities
    
    
    
    
    
    
    6,273
    
    
    
    756
    
    
    
    7,029Corporate and other taxable bonds
    
    
    139
    
    
    
    19,127
    
    
    
    609
    
    
    
    19,875Redeemable 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
    )
 25




---



##### Table of Contents



Net realizedinvestment gains
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealized gains(losses) and net
    
    
    Net change in
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (losses) onchange in unrealized
    
    
    unrealized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Level 3 assets andappreciation
    
    
    appreciation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    liabilities held at(depreciation)
    
    
    (depreciation)
    
    
    Purchases, sales,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    March 31, 2010Balance at
    
    
    included in net
    
    
    included in other
    
    
    issuances and
    
    
    Transfers into
    
    
    Transfers out of
    
    
    Balance at
    
    
    recognized inLevel 3
    
    January 1, 2010
    
    
    income*
    
    
    comprehensive income
    
    
    settlements
    
    
    Level 3
    
    
    Level 3
    
    
    March 31, 2010
    
    
    net income*(In millions)Fixed maturity securities:Asset-backed securities:Residential mortgage-backed
securities
    
    $
    629
    
    
    $
    (10
    )
    
    $
    26
    
    
    $
    42
    
    
    $
    
    
    
    $
    (8
    )
    
    $
    679
    
    
    $
    (11
    )Commercial mortgage-backed
securities
    
    
    123
    
    
    
    (1
    )
    
    
    (4
    )
    
    
    (5
    )
    
    
    7
    
    
    
    (8
    )
    
    
    112
    
    
    
    (2
    )Other asset-backed securities
    
    
    348
    
    
    
    4
    
    
    
    21
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    368
    
    
    
    Total asset-backed securities
    
    
    1,100
    
    
    
    (7
    )
    
    
    43
    
    
    
    32
    
    
    
    7
    
    
    
    (16
    )
    
    
    1,159
    
    
    
    (13
    )States, municipalities and political
subdivisions  tax-exempt
securities
    
    
    756
    
    
    
    
    
    
    
    2
    
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    737
    
    
    
    Corporate and other taxable bonds
    
    
    609
    
    
    
    2
    
    
    
    29
    
    
    
    59
    
    
    
    9
    
    
    
    (24
    )
    
    
    684
    
    
    
    Redeemable preferred stock
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    Total fixed maturity securities
    
    
    2,467
    
    
    
    (5
    )
    
    
    76
    
    
    
    70
    
    
    
    16
    
    
    
    (40
    )
    
    
    2,584
    
    
    
    (13
    )Equity securities
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    (5
    )
    
    
    8
    
    
    
    Derivative financial instruments, net
    
    
    (11
    )
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    Short term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    Life settlement contracts
    
    
    130
    
    
    
    10
    
    
    
    
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    131
    
    
    
    3Discontinued operations investments
    
    
    16
    
    
    
    
    
    
    
    1
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    Separate account business
    
    
    38
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    40
    
    
    
    Total
    
    $
    2,651
    
    
    $
    5
    
    
    $
    77
    
    
    $
    68
    
    
    $
    19
    
    
    $
    (45
    )
    
    $
    2,775
    
    
    $
    (10
    )
 26




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##### Table of Contents



Net realizedinvestment gains(losses) and net
    
    
    Net change in
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealized gainschange in
    
    
    unrealized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (losses) on Level 3unrealized
    
    
    appreciation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    assets andappreciation
    
    
    (depreciation)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    liabilities held at(depreciation)
    
    
    included in other
    
    
    Purchases, sales,
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    March 31, 2009Balance at
    
    
    included in net
    
    
    comprehensive
    
    
    issuances and
    
    
    Transfers into
    
    
    Transfers out of
    
    
    Balance at
    
    
    recognized in netLevel 3
    
    January 1, 2009
    
    
    loss*
    
    
    income
    
    
    settlements
    
    
    Level 3
    
    
    Level 3
    
    
    March 31, 2009
    
    
    loss*(In millions)Fixed maturity securities:Asset-backed securities:Residential mortgage-backed
securities
    
    $
    782
    
    
    $
    (17
    )
    
    $
    1
    
    
    $
    (23
    )
    
    $
    
    
    
    $
    
    
    
    $
    743
    
    
    $
    (19
    )Commercial mortgage-backed
securities
    
    
    186
    
    
    
    (10
    )
    
    
    (13
    )
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    158
    
    
    
    (9
    )Other asset-backed securities
    
    
    139
    
    
    
    (30
    )
    
    
    30
    
    
    
    (40
    )
    
    
    153
    
    
    
    
    
    
    
    252
    
    
    
    (32
    )Total asset-backed securities
    
    
    1,107
    
    
    
    (57
    )
    
    
    18
    
    
    
    (68
    )
    
    
    153
    
    
    
    
    
    
    
    1,153
    
    
    
    (60
    )States, municipalities and
political
subdivisions  tax-exempt
securities
    
    
    750
    
    
    
    
    
    
    
    37
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    784
    
    
    
    Corporate and other taxable bonds
    
    
    622
    
    
    
    (5
    )
    
    
    (1
    )
    
    
    204
    
    
    
    2
    
    
    
    (13
    )
    
    
    809
    
    
    
    (6
    )Redeemable preferred stock
    
    
    13
    
    
    
    (9
    )
    
    
    8
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    19
    
    
    
    (9
    )Total fixed maturity securities
    
    
    2,492
    
    
    
    (71
    )
    
    
    62
    
    
    
    140
    
    
    
    155
    
    
    
    (13
    )
    
    
    2,765
    
    
    
    (75
    )Equity securities
    
    
    210
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    210
    
    
    
    Derivative financial instruments, net
    
    
    (87
    )
    
    
    6
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    (63
    )
    
    
    24Life settlement contracts
    
    
    129
    
    
    
    11
    
    
    
    
    
    
    
    (13
    )
    
    
    
    
    
    
    
    
    
    
    127
    
    
    
    2Discontinued operations investments
    
    
    15
    
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    Separate account business
    
    
    38
    
    
    
    
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    38
    
    
    
    Total
    
    $
    2,797
    
    
    $
    (54
    )
    
    $
    62
    
    
    $
    143
    
    
    $
    155
    
    
    $
    (13
    )
    
    $
    3,090
    
    
    $
    (49
    )
 27




---



##### 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
  28




---



##### Table of Contents



Short Term Investments
  Life Settlement Contracts
  Discontinued Operations Investments
  Separate Account Business
  Financial Assets and Liabilities Not Measured at Fair Value
  March 31, 2010
    
    
    December 31, 2009Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair Value(In millions)Financial assetsNotes receivable for the issuance of common stock
    
    $
    30
    
    
    $
    29
    
    
    $
    30
    
    
    $
    29Financial liabilitiesPremium deposits and annuity contracts
    
    $
    104
    
    
    $
    105
    
    
    $
    105
    
    
    $
    106Long term debt
    
    
    2,304
    
    
    
    2,369
    
    
    
    2,303
    
    
    
    2,290
      29




---



##### Table of Contents



Note G. Claim and Claim Adjustment Expense Reserves
     A&E Reserves
   A&E Reserves
 March 31, 2010
    
    
    December 31, 2009Environmental
    
    
    
    
    
    
    EnvironmentalAsbestos
    
    
    Pollution
    
    
    Asbestos
    
    
    Pollution(In millions)Gross reserves
    
    $
    1,991
    
    
    $
    467
    
    
    $
    2,046
    
    
    $
    482Ceded reserves
    
    
    (895
    )
    
    
    (195
    )
    
    
    (909
    )
    
    
    (196
    )Net reserves
    
    $
    1,096
    
    
    $
    272
    
    
    $
    1,137
    
    
    $
    286
 30




---



##### Table of Contents



Asbestos
  Asbestos Reserves
 Three months ended March 31
    
    2010
    
    
    2009(In millions)Beginning 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
    
    
    (41
    )
    
    
    (51
    )Ending net reserves
    
    $
    1,096
    
    
    $
    1,151
    A.P. Green:
 Direct Action Case  Montana: Pennock, et
al. v. Maryland Casualty, et al.
 31




---



##### Table of Contents



Environmental Pollution
  Environmental Pollution Reserves
 Three months ended March 31
    
    2010
    
    
    2009(In millions)Beginning net reserves
    
    $
    286
    
    
    $
    262Pretax (favorable) unfavorable net prior
year claim and allocated claim adjustment
expense reserve development
    
    
    
    
    
    
    Paid claims, net of reinsurance recoveries
    
    
    (14
    )
    
    
    (14
    )Ending net reserves
    
    $
    272
    
    
    $
    248
 32




---



##### Table of Contents



Net Prior Year Development
  Net Prior Year Development  Three months ended March 31, 2010
 CNA
    
    
    
    
    
    
    Corporate & OtherSpecialty
    
    
    CNA Commercial
    
    
    Non-Core
    
    
    Total(In millions)Pretax (favorable) unfavorable net prior year claim and
allocated claim adjustment expense reserve development:Core (Non-A&E)
    
    $
    (25
    )
    
    $
    (28
    )
    
    $
    2
    
    
    $
    (51
    )A&E
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Pretax (favorable) unfavorable net prior year development before
impact of premium development
    
    
    (25
    )
    
    
    (28
    )
    
    
    2
    
    
    
    (51
    )Pretax (favorable) unfavorable premium development
    
    
    (4
    )
    
    
    21
    
    
    
    (1
    )
    
    
    16Total pretax (favorable) unfavorable net prior year
development
    
    $
    (29
    )
    
    $
    (7
    )
    
    $
    1
    
    
    $
    (35
    )
 Net Prior Year Development
Three months ended March 31, 2009
 CNA
    
    
    
    
    
    
    Corporate & OtherSpecialty
    
    
    CNA Commercial
    
    
    Non-Core
    
    
    Total(In millions)Pretax (favorable) unfavorable net prior year claim and
allocated claim adjustment expense reserve development:Core (Non-A&E)
    
    $
    (29
    )
    
    $
    (42
    )
    
    $
    1
    
    
    $
    (70
    )A&E
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Pretax (favorable) unfavorable net prior year development before
impact of premium development
    
    
    (29
    )
    
    
    (42
    )
    
    
    1
    
    
    
    (70
    )Pretax (favorable) unfavorable premium development
    
    
    (5
    )
    
    
    20
    
    
    
    (1
    )
    
    
    14Total pretax (favorable) unfavorable net prior year
development
    
    $
    (34
    )
    
    $
    (22
    )
    
    $
    
    
    
    $
    (56
    )
 33




---



##### Table of Contents



2010 Net Prior Year Development
 CNA Specialty
  CNA Commercial
  2009 Net Prior Year Development
 CNA Specialty
   CNA Commercial
  34




---



##### Table of Contents



Note H Legal Proceedings and Contingent Liabilities
 Insurance Brokerage Antitrust Litigation
 In re Insurance Brokerage Antitrust Litigation
  Asbestos and Environmental Pollution (A&E) Reserves
  Other Litigation
  Note I. Benefit Plans
  Net Periodic Cost (Benefit)
 Three months ended March 31
    
    2010
    
    
    2009(In millions)Pension costService cost
    
    $
    4
    
    
    $
    5Interest cost on projected
benefit obligation
    
    
    38
    
    
    
    38Expected return on plan assets
    
    
    (41
    )
    
    
    (36
    )Actuarial loss amortization
    
    
    6
    
    
    
    6Net periodic pension cost
    
    $
    7
    
    
    $
    13Postretirement benefitService cost
    
    $
    1
    
    
    $
    1Interest cost on projected
benefit obligation
    
    
    2
    
    
    
    2Prior service cost amortization
    
    
    (4
    )
    
    
    (4
    )Net periodic postretirement benefit
    
    $
    (1
    )
    
    $
    (1
    )
 35




---



##### Table of Contents



Note J. Commitments, Contingencies, and Guarantees
 Commitments and Contingencies
    Guarantees
    36




---



##### Table of Contents



Note K. Business Segments
       37




---



##### Table of Contents



Three months ended
    
    CNA
    
    
    CNA
    
    
    Life & Group
    
    
    Corporate & OtherMarch 31, 2010
    
    Specialty
    
    
    Commercial
    
    
    Non-Core
    
    
    Non-Core
    
    
    Eliminations
    
    
    Total(In millions)RevenuesNet earned premiums
    
    $
    654
    
    
    $
    816
    
    
    $
    145
    
    
    $
    1
    
    
    $
    (1
    )
    
    $
    1,615Net investment income
    
    
    147
    
    
    
    218
    
    
    
    175
    
    
    
    50
    
    
    
    
    
    
    
    590Other revenues
    
    
    52
    
    
    
    18
    
    
    
    4
    
    
    
    2
    
    
    
    
    
    
    
    76Total operating revenues
    
    
    853
    
    
    
    1,052
    
    
    
    324
    
    
    
    53
    
    
    
    (1
    )
    
    
    2,281Claims, benefits and expensesNet incurred claims and benefits
    
    
    402
    
    
    
    602
    
    
    
    281
    
    
    
    21
    
    
    
    
    
    
    
    1,306Policyholders dividends
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Amortization of deferred acquisition costs
    
    
    155
    
    
    
    183
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    342Other insurance related expenses
    
    
    47
    
    
    
    107
    
    
    
    51
    
    
    
    2
    
    
    
    (1
    )
    
    
    206Other expenses
    
    
    44
    
    
    
    17
    
    
    
    6
    
    
    
    35
    
    
    
    
    
    
    
    102Total claims, benefits and expenses
    
    
    649
    
    
    
    910
    
    
    
    342
    
    
    
    58
    
    
    
    (1
    )
    
    
    1,958Operating income (loss) from continuing operations before
income tax
    
    
    204
    
    
    
    142
    
    
    
    (18
    )
    
    
    (5
    )
    
    
    
    
    
    
    323Income tax (expense) benefit on operating income (loss)
    
    
    (68
    )
    
    
    (43
    )
    
    
    19
    
    
    
    2
    
    
    
    
    
    
    
    (90
    )Net operating income, after-tax, attributable to
noncontrolling interests
    
    
    (8
    )
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10
    )Net operating income (loss) from continuing operations
attributable to CNA
    
    
    128
    
    
    
    97
    
    
    
    1
    
    
    
    (3
    )
    
    
    
    
    
    
    223Net realized investment gains (losses), net of
participating policyholders interests
    
    
    13
    
    
    
    21
    
    
    
    (4
    )
    
    
    4
    
    
    
    
    
    
    
    34Income tax expense on net realized investment gains (losses)
    
    
    (4
    )
    
    
    (7
    )
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (12
    )Net realized investment (gains) losses, after-tax,
attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net realized investment gains (losses) attributable to CNA
    
    
    9
    
    
    
    14
    
    
    
    (4
    )
    
    
    3
    
    
    
    
    
    
    
    22Net income (loss) from continuing operations attributable
to CNA
    
    $
    137
    
    
    $
    111
    
    
    $
    (3
    )
    
    $
    
    
    
    $
    
    
    
    $
    245
 March 31, 2010(In millions)Reinsurance receivables
    
    $
    1,084
    
    
    $
    2,200
    
    
    $
    1,602
    
    
    $
    1,792
    
    
    $
    
    
    
    $
    6,678Insurance receivables
    
    $
    626
    
    
    $
    1,204
    
    
    $
    10
    
    
    $
    2
    
    
    $
    
    
    
    $
    1,842Deferred acquisition costs
    
    $
    324
    
    
    $
    335
    
    
    $
    450
    
    
    $
    
    
    
    $
    
    
    
    $
    1,109Insurance reservesClaim and claim adjustment expenses
    
    $
    6,993
    
    
    $
    12,980
    
    
    $
    2,729
    
    
    $
    3,857
    
    
    $
    
    
    
    $
    26,559Unearned premiums
    
    
    1,534
    
    
    
    1,599
    
    
    
    150
    
    
    
    2
    
    
    
    (2
    )
    
    
    3,283Future policy benefits
    
    
    
    
    
    
    
    
    
    
    8,090
    
    
    
    
    
    
    
    
    
    
    
    8,090Policyholders funds
    
    
    11
    
    
    
    10
    
    
    
    156
    
    
    
    
    
    
    
    
    
    
    
    177
 38




---



##### Table of Contents



Three months ended
    
    CNA
    
    
    CNA
    
    
    Life & Group
    
    
    Corporate & OtherMarch 31, 2009
    
    Specialty
    
    
    Commercial
    
    
    Non-Core
    
    
    Non-Core
    
    
    Eliminations
    
    
    Total(In millions)RevenuesNet earned premiums
    
    $
    659
    
    
    $
    863
    
    
    $
    150
    
    
    $
    1
    
    
    $
    (1
    )
    
    $
    1,672Net investment income
    
    
    85
    
    
    
    143
    
    
    
    159
    
    
    
    33
    
    
    
    
    
    
    
    420Other revenues
    
    
    55
    
    
    
    15
    
    
    
    6
    
    
    
    2
    
    
    
    
    
    
    
    78Total operating revenues
    
    
    799
    
    
    
    1,021
    
    
    
    315
    
    
    
    36
    
    
    
    (1
    )
    
    
    2,170Claims, benefits and expensesNet incurred claims and benefits
    
    
    395
    
    
    
    614
    
    
    
    305
    
    
    
    21
    
    
    
    
    
    
    
    1,335Policyholders dividends
    
    
    3
    
    
    
    3
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    7Amortization of deferred acquisition costs
    
    
    148
    
    
    
    195
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    349Other insurance related expenses
    
    
    41
    
    
    
    94
    
    
    
    46
    
    
    
    1
    
    
    
    (1
    )
    
    
    181Other expenses
    
    
    49
    
    
    
    16
    
    
    
    6
    
    
    
    30
    
    
    
    
    
    
    
    101Total claims, benefits and expenses
    
    
    636
    
    
    
    922
    
    
    
    364
    
    
    
    52
    
    
    
    (1
    )
    
    
    1,973Operating income (loss) from continuing operations
before income tax
    
    
    163
    
    
    
    99
    
    
    
    (49
    )
    
    
    (16
    )
    
    
    
    
    
    
    197Income tax (expense) benefit on operating income (loss)
    
    
    (46
    )
    
    
    (25
    )
    
    
    27
    
    
    
    7
    
    
    
    
    
    
    
    (37
    )Net operating income, after-tax, attributable to
noncontrolling interests
    
    
    (8
    )
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11
    )Net operating income (loss) from continuing operations
attributable to CNA
    
    
    109
    
    
    
    71
    
    
    
    (22
    )
    
    
    (9
    )
    
    
    
    
    
    
    149Net realized investment losses, net of participating
policyholders interests
    
    
    (109
    )
    
    
    (186
    )
    
    
    (190
    )
    
    
    (47
    )
    
    
    
    
    
    
    (532
    )Income tax benefit on net realized investment losses
    
    
    38
    
    
    
    65
    
    
    
    66
    
    
    
    18
    
    
    
    
    
    
    
    187Net realized investment losses, after-tax,
attributable to noncontrolling interests
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Net realized investment losses attributable to CNA
    
    
    (71
    )
    
    
    (120
    )
    
    
    (124
    )
    
    
    (29
    )
    
    
    
    
    
    
    (344
    )Net income (loss) from continuing operations
attributable to CNA
    
    $
    38
    
    
    $
    (49
    )
    
    $
    (146
    )
    
    $
    (38
    )
    
    $
    
    
    
    $
    (195
    )
 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
 39




---



##### Table of Contents



Revenues by Line of Business
 Three months ended March 31
    
    2010
    
    
    2009(In millions)CNA SpecialtyProfessional & Management Liability
    
    $
    631
    
    
    $
    488International
    
    
    51
    
    
    
    37Surety
    
    
    114
    
    
    
    113Warranty & Alternative Risks
    
    
    70
    
    
    
    52CNA Specialty revenues
    
    
    866
    
    
    
    690CNA CommercialCommercial Insurance
    
    
    713
    
    
    
    525Business Insurance
    
    
    141
    
    
    
    130International
    
    
    155
    
    
    
    142CNA Select Risk
    
    
    64
    
    
    
    38CNA Commercial revenues
    
    
    1,073
    
    
    
    835Life & Group Non-CoreLife & Annuity
    
    
    64
    
    
    
    24Health
    
    
    254
    
    
    
    97Other
    
    
    2
    
    
    
    4Life & Group Non-Core revenues
    
    
    320
    
    
    
    125Corporate & Other Non-Core revenues
    
    
    57
    
    
    
    (11
    )Eliminations
    
    
    (1
    )
    
    
    (1
    )Total revenues
    
    $
    2,315
    
    
    $
    1,638
 40




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##### Table of Contents



Note L. IT Transformation
   IT Transformation Costs by Segment
 Three months ended March 31
    
    2010(In millions)CNA Specialty
    
    $
    5CNA Commercial
    
    
    11Life & Group Non-Core
    
    
    7Corporate & Other Non-Core
    
    
    2Total IT Transformation Costs
    
    $
    25
 41




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##### Table of Contents



CNA Financial Corporation
 
 Item 2. Managements Discussion and Analysis (MD&A) of Financial Condition and Results of
Operations
 Overview
 th
    42




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##### Table of Contents



CONSOLIDATED OPERATIONS
 Results of Operations
  Three months ended March 31
    
    2010
    
    
    2009(In millions)RevenuesNet earned premiums
    
    $
    1,615
    
    
    $
    1,672Net investment income
    
    
    590
    
    
    
    420Other revenues
    
    
    76
    
    
    
    78Total operating revenues
    
    
    2,281
    
    
    
    2,170Claims, benefits and expensesNet incurred claims and benefits
    
    
    1,306
    
    
    
    1,335Policyholders dividends
    
    
    2
    
    
    
    7Amortization of deferred acquisition costs
    
    
    342
    
    
    
    349Other insurance related expenses
    
    
    206
    
    
    
    181Other expenses
    
    
    102
    
    
    
    101Total claims, benefits and expenses
    
    
    1,958
    
    
    
    1,973Operating income from continuing operations before income tax
    
    
    323
    
    
    
    197Income tax expense on operating income
    
    
    (90
    )
    
    
    (37
    )Net operating income, after-tax, attributable to noncontrolling interests
    
    
    (10
    )
    
    
    (11
    )Net operating income from continuing operations attributable to CNA
    
    
    223
    
    
    
    149Net realized investment gains (losses), net of participating policyholders interests
    
    
    34
    
    
    
    (532
    )Income tax (expense) benefit on net realized investment gains (losses)
    
    
    (12
    )
    
    
    187Net realized investment (gains) losses, after-tax, attributable to noncontrolling interests
    
    
    
    
    
    
    1Net realized investment gains (losses) attributable to CNA
    
    
    22
    
    
    
    (344
    )Income (loss) from continuing operations attributable to CNA
    
    
    245
    
    
    
    (195
    )Income (loss) from discontinued operations attributable to CNA, net of income tax
(expense) benefit of $0 and $0
    
    
    
    
    
    
    Net income (loss) attributable to CNA
    
    $
    245
    
    
    $
    (195
    )
    43




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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
  44




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##### Table of Contents



SEGMENT RESULTS
  CNA SPECIALTY
  Results of Operations
 Three months ended March 31
    
    2010
    
    
    2009(In millions)Net written premiums
    
    $
    656
    
    
    $
    672Net earned premiums
    
    
    654
    
    
    
    659Net investment income
    
    
    147
    
    
    
    85Net operating income
    
    
    128
    
    
    
    109Net realized investment gains (losses), after-tax
    
    
    9
    
    
    
    (71
    )Net income
    
    
    137
    
    
    
    38RatiosLoss and loss adjustment expense
    
    
    61.5
    %
    
    
    60.0
    %Expense
    
    
    30.8
    
    
    
    28.7Dividend
    
    
    0.2
    
    
    
    0.4Combined
    
    
    92.5
    %
    
    
    89.1
    %
       45




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##### Table of Contents



Gross and Net Carried  Claim and Claim Adjustment Expense Reserves
 (In millions)
    
    March 31, 2010
    
    
    December 31, 2009Gross Case Reserves
    
    $
    2,248
    
    
    $
    2,208Gross IBNR Reserves
    
    
    4,745
    
    
    
    4,714Total Gross Carried Claim and Claim Adjustment Expense Reserves
    
    $
    6,993
    
    
    $
    6,922Net Case Reserves
    
    $
    1,818
    
    
    $
    1,781Net IBNR Reserves
    
    
    4,113
    
    
    
    4,085Total Net Carried Claim and Claim Adjustment Expense Reserves
    
    $
    5,931
    
    
    $
    5,866
 46




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##### Table of Contents



CNA COMMERCIAL
  Results of Operations
 Three months ended March 31(In millions)
    
    2010
    
    
    2009Net written premiums
    
    $
    829
    
    
    $
    920Net earned premiums
    
    
    816
    
    
    
    863Net investment income
    
    
    218
    
    
    
    143Net operating income
    
    
    97
    
    
    
    71Net realized investment gains (losses), after-tax
    
    
    14
    
    
    
    (120
    )Net income (loss)
    
    
    111
    
    
    
    (49
    )RatiosLoss and loss adjustment expense
    
    
    73.8
    %
    
    
    71.1
    %Expense
    
    
    35.6
    
    
    
    33.5Dividend
    
    
    0.1
    
    
    
    0.4Combined
    
    
    109.5
    %
    
    
    105.0
    %
        47




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##### Table of Contents



Gross and Net Carried  Claim and Claim Adjustment Expense Reserves
 (In millions)
    
    March 31, 2010
    
    
    December 31, 2009Gross Case Reserves
    
    $
    6,635
    
    
    $
    6,510Gross IBNR Reserves
    
    
    6,345
    
    
    
    6,495Total Gross Carried Claim and Claim Adjustment Expense Reserves
    
    $
    12,980
    
    
    $
    13,005Net Case Reserves
    
    $
    5,398
    
    
    $
    5,269Net IBNR Reserves
    
    
    5,468
    
    
    
    5,580Total Net Carried Claim and Claim Adjustment Expense Reserves
    
    $
    10,866
    
    
    $
    10,849
 LIFE & GROUP NON-CORE
  Results of Operations
 Three months ended March 31(In millions)
    
    2010
    
    
    2009Net earned premiums
    
    $
    145
    
    
    $
    150Net investment income
    
    
    175
    
    
    
    159Net operating income (loss)
    
    
    1
    
    
    
    (22
    )Net realized investment losses, after-tax
    
    
    (4
    )
    
    
    (124
    )Net loss
    
    
    (3
    )
    
    
    (146
    )
    48




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##### Table of Contents



CORPORATE & OTHER NON-CORE
  Results of Operations
 Three months ended March 31(In millions)
    
    2010
    
    
    2009Net investment income
    
    $
    50
    
    
    $
    33Net operating loss
    
    
    (3
    )
    
    
    (9
    )Net realized investment gains (losses), after-tax
    
    
    3
    
    
    
    (29
    )Net income (loss)
    
    
    
    
    
    
    (38
    )
    Gross and Net Carried Claim and Claim Adjustment Expense Reserves
 (In millions)
    
    March 31, 2010
    
    
    December 31, 2009Gross Case Reserves
    
    $
    1,479
    
    
    $
    1,548Gross IBNR Reserves
    
    
    2,378
    
    
    
    2,458Total Gross Carried Claim and Claim Adjustment Expense Reserves
    
    $
    3,857
    
    
    $
    4,006Net Case Reserves
    
    $
    952
    
    
    $
    972Net IBNR Reserves
    
    
    1,457
    
    
    
    1,515Total Net Carried Claim and Claim Adjustment Expense Reserves
    
    $
    2,409
    
    
    $
    2,487
 49




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##### Table of Contents



INVESTMENTS
 Net Investment Income
  Net Investment Income
 Three months ended March 31(In millions)
    
    2010
    
    
    2009Fixed maturity securities
    
    $
    510
    
    
    $
    475Short term investments
    
    
    6
    
    
    
    10Limited partnerships
    
    
    72
    
    
    
    (70
    )Equity securities
    
    
    10
    
    
    
    14Trading portfolio
    
    
    4
    
    
    
    Other
    
    
    2
    
    
    
    3Gross investment income
    
    
    604
    
    
    
    432Investment expense
    
    
    (14
    )
    
    
    (12
    )Net investment income
    
    $
    590
    
    
    $
    420
   Net Realized Investment Gains (Losses)
  Net Realized Investment Gains (Losses)
 Three months ended March 31(In millions)
    
    2010
    
    
    2009Fixed maturity securities:U.S. Treasury securities and obligations of government agencies
    
    $
    
    
    
    $
    (21
    )Corporate and other taxable bonds
    
    
    35
    
    
    
    (173
    )States, municipalities and political subdivisions  tax-exempt securities
    
    
    (3
    )
    
    
    37Asset-backed securities
    
    
    (5
    )
    
    
    (192
    )Redeemable preferred stock
    
    
    
    
    
    
    (9
    )Total fixed maturity securities
    
    
    27
    
    
    
    (358
    )Equity securities
    
    
    3
    
    
    
    (216
    )Derivative securities
    
    
    
    
    
    
    31Short term investments and other
    
    
    4
    
    
    
    11Net realized investment gains (losses), net of participating policyholders interests
    
    
    34
    
    
    
    (532
    )Income tax (expense) benefit on net realized investment gains (losses)
    
    
    (12
    )
    
    
    187Net realized investment (gains) losses, after-tax, attributable to noncontrolling interests
    
    
    
    
    
    
    1Net realized investment gains (losses) attributable to CNA
    
    $
    22
    
    
    $
    (344
    )
  50




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##### Table of Contents



Fixed Maturity Ratings
 March 31,
    
    
    
    
    
    
    December 31,(In millions)
    
    2010
    
    
    %
    
    
    2009
    
    
    %U.S. Government and Agencies
    
    $
    3,799
    
    
    
    10
    %
    
    $
    3,705
    
    
    
    10
    %AAA rated
    
    
    5,514
    
    
    
    15
    
    
    
    5,855
    
    
    
    17AA and A rated
    
    
    13,655
    
    
    
    36
    
    
    
    12,464
    
    
    
    35BBB rated
    
    
    10,976
    
    
    
    29
    
    
    
    10,122
    
    
    
    28Non-investment grade
    
    
    3,767
    
    
    
    10
    
    
    
    3,466
    
    
    
    10Total
    
    $
    37,711
    
    
    
    100
    %
    
    $
    35,612
    
    
    
    100
    %
  Non-investment Grade
 Rating
    
    March 31,(In millions)
    
    2010
    
    
    %
    
    
    December 31, 2009
    
    
    %BB
    
    $
    1,332
    
    
    
    35
    %
    
    $
    1,352
    
    
    
    39
    %B
    
    
    1,223
    
    
    
    33
    
    
    
    1,255
    
    
    
    36CCC  C
    
    
    1,082
    
    
    
    29
    
    
    
    761
    
    
    
    22D
    
    
    130
    
    
    
    3
    
    
    
    98
    
    
    
    3Total
    
    $
    3,767
    
    
    
    100
    %
    
    $
    3,466
    
    
    
    100
    %
    51




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##### Table of Contents



Maturity Profile
 Percent of
    
    
    Percent ofFair Value
    
    
    Unrealized LossDue in one year or less
    
    
    4
    %
    
    
    3
    %Due after one year through five years
    
    
    23
    
    
    
    13Due after five years through ten years
    
    
    32
    
    
    
    33Due after ten years
    
    
    41
    
    
    
    51Total
    
    
    100
    %
    
    
    100
    %
 Duration
    Effective Durations
 March 31, 2010
    
    
    December 31, 2009Effective Duration
    
    
    
    
    
    
    Effective Duration(In millions)
    
    Fair Value
    
    
    (In years)
    
    
    Fair Value
    
    
    (In years)Segregated investments
    
    $
    10,830
    
    
    
    11.0
    
    
    $
    10,376
    
    
    
    11.2Other interest sensitive investments
    
    
    29,855
    
    
    
    4.4
    
    
    
    29,665
    
    
    
    4.0Total Fair Value
    
    $
    40,685
    
    
    
    6.1
    
    
    $
    40,041
    
    
    
    5.8
  52




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##### Table of Contents



Asset-Backed Exposure
 Asset-Backed Distribution
 March 31, 2010
    
    Security Type(In millions)
    
    RMBS (a)
    
    
    CMBS (b)
    
    
    Other ABS (c)
    
    
    TotalU.S. Government Agencies
    
    $
    3,536
    
    
    $
    34
    
    
    $
    
    
    
    $
    3,570AAA
    
    
    1,416
    
    
    
    284
    
    
    
    610
    
    
    
    2,310AA
    
    
    249
    
    
    
    183
    
    
    
    90
    
    
    
    522A
    
    
    157
    
    
    
    121
    
    
    
    26
    
    
    
    304BBB
    
    
    351
    
    
    
    91
    
    
    
    71
    
    
    
    513Non-investment grade and equity tranches
    
    
    1,228
    
    
    
    16
    
    
    
    12
    
    
    
    1,256Total Fair Value
    
    $
    6,937
    
    
    $
    729
    
    
    $
    809
    
    
    $
    8,475Total Amortized Cost
    
    $
    7,303
    
    
    $
    820
    
    
    $
    811
    
    
    $
    8,934Sub-prime (included above)Fair Value
    
    $
    624
    
    
    $
    
    
    
    $
    
    
    
    $
    624Amortized Cost
    
    $
    706
    
    
    $
    
    
    
    $
    
    
    
    $
    706Alt-A (included above)Fair Value
    
    $
    668
    
    
    $
    
    
    
    $
    
    
    
    $
    668Amortized Cost
    
    $
    762
    
    
    $
    
    
    
    $
    
    
    
    $
    762
 
 (a)
    
    Residential mortgage-backed securities (RMBS)(b)
    
    Commercial mortgage-backed securities (CMBS)(c)
    
    Other asset-backed securities (Other ABS)   Short Term Investments
  Short Term Investments
    
    March 31,
    
    
    December 31,(In millions)
    
    2010
    
    
    2009Short term investments available-for-sale:Commercial paper
    
    $
    383
    
    
    $
    185U.S. Treasury securities
    
    
    1,576
    
    
    
    3,025Money market funds
    
    
    169
    
    
    
    179Other
    
    
    356
    
    
    
    560Total short term investments
    
    $
    2,484
    
    
    $
    3,949
  53




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
 Cash Flows
       Liquidity
   54




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##### Table of Contents



Accounting Standards Updates
  Proposed Clarification of the Definition of Deferred Acquisition Costs of Insurance Entities
  55




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##### Table of Contents



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;
    
    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 assertion of public nuisance theories of liability, pursuant to which
plaintiffs seek to recover monies spent to administer public health care programs and/or to
abate hazards to public health and safety;
    
    the effectiveness of current initiatives by claims management to reduce loss and
expense ratios through more efficacious claims handling techniques;
    
    the performance of reinsurance companies under reinsurance contracts with us;
    
    conditions in the capital and credit markets that may limit our ability to raise
significant amounts of capital on favorable terms, as well as restrictions on the ability or
willingness of Loews to provide additional capital support to us;
 56




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##### Table of Contents




    
    weather and other natural physical events, including the severity and frequency of
storms, hail, snowfall and other winter conditions, natural disasters such as hurricanes and
earthquakes, as well as climate change, including effects on weather patterns, greenhouse
gases, sea, land and air temperatures, sea levels, rain and snow;
    
    regulatory requirements imposed by coastal state regulators in the wake of
hurricanes or other natural disasters, including limitations on the ability to exit markets or
to non-renew, cancel or change terms and conditions in policies, as well as mandatory
assessments to fund any shortfalls arising from the inability of quasi-governmental insurers
to pay claims;
    
    man-made disasters, including the possible occurrence of terrorist attacks and the
effect of the absence or insufficiency of applicable terrorism legislation on coverages;
    
    the unpredictability of the nature, targets, severity or frequency of potential
terrorist events, as well as the uncertainty as to our ability to contain our terrorism
exposure effectively, notwithstanding the extension through December 31, 2014 of the Terrorism
Risk Insurance Act of 2002;
    
    the occurrence of epidemics;
    
    exposure to liabilities due to claims made by insureds and others relating to
asbestos remediation and health-based asbestos impairments, as well as exposure to liabilities
for environmental pollution, construction defect claims and exposure to liabilities due to
claims made by insureds and others relating to lead-based paint and other mass torts;
    
    the risks and uncertainties associated with our loss reserves, as outlined in the
Critical Accounting Estimates and the Reserves  Estimates and Uncertainties sections of our
Annual Report on Form 10-K, 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
    
    the actual closing of contemplated transactions and agreements.
  57




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##### Table of Contents



CNA Financial Corporation
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  58




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##### Table of Contents



CNA Financial Corporation
 
 Item 4. Controls and Procedures
    59




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##### Table of Contents



CNA Financial Corporation
 
 Part II. Other Information
 
 Item 1. Legal Proceedings
  
 Item 6. Exhibits
  Description of Exhibit
    
    Exhibit NumberSecond Amendment to Employment Agreement, dated March 3, 2010, by and between CNA
Financial Corporation and Thomas F. Motamed
    
    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
 60




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##### Table of Contents



CNA Financial Corporation
 Part II. Other Information
 SIGNATURES
  CNA Financial CorporationDated:  May 3, 2010
    By
    /s/ D. Craig MenseD. Craig MenseExecutive Vice President and
Chief Financial Officer 61