UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015

OR

[ ] 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

(Exact name of registrant as specified in its charter)

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

333 S. Wabash Chicago, Illinois (Address of principal executive offices)		60604 (Zip Code)

(312) 822-5000

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [x] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [x] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [x]		Accelerated filer [ ]		Non-accelerated filer [ ] (Do not check if a smaller reporting company)		Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [x]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class		Outstanding at May 1, 2015
Common Stock, Par value $2.50		270,245,346

---

Item Number		Page Number
	PART I. Financial Information
1.	Condensed Consolidated Financial Statements:
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2015 and 2014 (Unaudited)	3
	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2015 and 2014 (Unaudited)	4
	Condensed Consolidated Balance Sheets as of March 31, 2015 (Unaudited) and December 31, 2014	5
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014 (Unaudited)	6
	Condensed Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2015 and 2014 (Unaudited)	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	9
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	35
3.	Quantitative and Qualitative Disclosures About Market Risk	49
4.	Controls and Procedures	49
	PART II. Other Information
1.	Legal Proceedings	50
4.	Mine Safety Disclosures	50
6.	Exhibits	50

2

---

Table of Contents

Part I. Financial Information

Item 1. Condensed Consolidated Financial Statements

CNA Financial Corporation

Condensed Consolidated Statements of Operations (Unaudited)

Three months ended March 31
(In millions, except per share data)	2015				2014
Revenues
Net earned premiums	$	1,687			$	1,806
Net investment income	558				526
Net realized investment gains:
Other-than-temporary impairment losses	(12		)		(2		)
Portion of other-than-temporary impairments recognized in Other comprehensive income	—				—
Net other-than-temporary impairment losses recognized in earnings	(12		)		(2		)
Other net realized investment gains	22				48
Net realized investment gains	10				46
Other revenues	97				85
Total revenues	2,352				2,463
Claims, Benefits and Expenses
Insurance claims and policyholders’ benefits	1,339				1,446
Amortization of deferred acquisition costs	303				329
Other operating expenses	358				346
Interest	39				44
Total claims, benefits and expenses	2,039				2,165
Income from continuing operations before income tax	313				298
Income tax expense	(80		)		(78		)
Income from continuing operations	233				220
Loss from discontinued operations, net of income tax benefit of $0 and $38	—				(207		)
Net income	$	233			$	13
Basic Earnings Per Share
Income from continuing operations	$	0.86			$	0.82
Loss from discontinued operations	—				(0.77		)
Basic earnings per share	$	0.86			$	0.05
Diluted Earnings Per Share
Income from continuing operations	$	0.86			$	0.81
Loss from discontinued operations	—				(0.76		)
Diluted earnings per share	$	0.86			$	0.05
Dividends per share	$	2.25			$	1.25
Weighted Average Outstanding Common Stock and Common Stock Equivalents
Basic	270.1				269.8
Diluted	270.7				270.5

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).

3

---

Table of Contents

CNA Financial Corporation

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Three months ended March 31
(In millions)	2015				2014
Other Comprehensive Income, Net of Tax
Changes in:
Net unrealized gains on investments with other-than-temporary impairments	$	(1	)		$	12
Net unrealized gains on other investments	112				237
Net unrealized gains on investments	111				249
Net unrealized gains on discontinued operations	—				8
Foreign currency translation adjustment	(96		)		(8		)
Pension and postretirement benefits	6				1
Other comprehensive income, net of tax	21				250
Net income	233				13
Total comprehensive income	$	254			$	263

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).

4

---

Table of Contents

CNA Financial Corporation

Condensed Consolidated Balance Sheets

(In millions, except share data)	March 31, 2015 (Unaudited)				December 31, 2014
Assets
Investments:
Fixed maturity securities at fair value (amortized cost of $36,875 and $37,335)	$	40,605			$	40,768
Equity securities at fair value (cost of $213 and $210)	225				222
Limited partnership investments	2,967				2,937
Other invested assets	43				41
Mortgage loans	586				588
Short term investments	1,506				1,706
Total investments	45,932				46,262
Cash	201				190
Reinsurance receivables (less allowance for uncollectible receivables of $48 and $48)	4,720				4,694
Insurance receivables (less allowance for uncollectible receivables of $59 and $61)	2,050				1,936
Accrued investment income	430				405
Deferred acquisition costs	616				600
Deferred income taxes	57				191
Property and equipment at cost (less accumulated depreciation of $364 and $364)	298				295
Goodwill	151				152
Other assets	1,010				841
Total assets	$	55,465			$	55,566
Liabilities
Insurance reserves:
Claim and claim adjustment expenses	$	23,248			$	23,271
Unearned premiums	3,710				3,592
Future policy benefits	9,747				9,490
Policyholders' funds	—				27
Long term debt	2,560				2,559
Other liabilities (includes $6 and $153 due to Loews Corporation)	3,763				3,833
Total liabilities	43,028				42,772
Commitments and contingencies (Notes C, F and H)
Stockholders' Equity
Common stock ($2.50 par value; 500,000,000 shares authorized; 273,040,243 shares issued; 270,241,545 and 269,980,202 shares outstanding)	683				683
Additional paid-in capital	2,143				2,151
Retained earnings	9,270				9,645
Accumulated other comprehensive income	421				400
Treasury stock (2,798,698 and 3,060,041 shares), at cost	(79		)		(84		)
Notes receivable for the issuance of common stock	(1		)		(1		)
Total stockholders’ equity	12,437				12,794
Total liabilities and stockholders' equity	$	55,465			$	55,566

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).

5

---

Table of Contents

CNA Financial Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)

Three months ended March 31
(In millions)	2015				2014
Cash Flows from Operating Activities
Net income	$	233			$	13
Adjustments to reconcile net income to net cash flows provided by operating activities:
Impairment loss on sale of subsidiary	—				255
Deferred income tax expense	71				25
Trading portfolio activity	13				21
Net realized investment gains	(10		)		(47		)
Equity method investees	(91		)		132
Net amortization of investments	—				(1		)
Depreciation and amortization	19				20
Changes in:
Receivables, net	(157		)		126
Accrued investment income	(25		)		(36		)
Deferred acquisition costs	(13		)		(21		)
Insurance reserves	304				85
Other assets	(34		)		(35		)
Other liabilities	(235		)		(372		)
Other, net	19				3
Total adjustments	(139		)		155
Net cash flows provided by operating activities	94				168
Cash Flows from Investing Activities
Dispositions:
Fixed maturity securities - sales	1,144				1,550
Fixed maturity securities - maturities, calls and redemptions	1,144				851
Equity securities	2				11
Limited partnerships	20				68
Mortgage loans	3				13
Purchases:
Fixed maturity securities	(1,919		)		(2,072		)
Equity securities	(5		)		(5		)
Limited partnerships	(34		)		(73		)
Mortgage loans	(8		)		—
Change in other investments	7				—
Change in short term investments	190				(688		)
Purchases of property and equipment	(20		)		(10		)
Other, net	2				1
Net cash flows provided (used) by investing activities	$	526			$	(354	)

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).

6

---

Table of Contents

Three months ended March 31
(In millions)	2015				2014
Cash Flows from Financing Activities
Dividends paid to common stockholders	$	(608	)		$	(338	)
Proceeds from the issuance of debt	—				546
Other, net	5				2
Net cash flows provided (used) by financing activities	(603		)		210
Effect of foreign exchange rate changes on cash	(6		)		1
Transfer of cash to assets held for sale	—				(14		)
Net change in cash	11				11
Cash, beginning of year	190				195
Cash, end of period	$	201			$	206

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).

7

---

Table of Contents

CNA Financial Corporation

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)

Three months ended March 31
(In millions)	2015				2014
Common Stock
Balance, beginning of period	$	683			$	683
Balance, end of period	683				683
Additional Paid-in Capital
Balance, beginning of period	2,151				2,145
Stock-based compensation	(8		)		(1		)
Balance, end of period	2,143				2,144
Retained Earnings
Balance, beginning of period	9,645				9,495
Dividends paid to common stockholders	(608		)		(338		)
Net income	233				13
Balance, end of period	9,270				9,170
Accumulated Other Comprehensive Income
Balance, beginning of period	400				442
Other comprehensive income	21				250
Balance, end of period	421				692
Treasury Stock
Balance, beginning of period	(84		)		(91		)
Stock-based compensation	5				6
Balance, end of period	(79		)		(85		)
Notes Receivable for the Issuance of Common Stock
Balance, beginning of period	(1		)		(23		)
Decrease in notes receivable for common stock	—				1
Balance, end of period	(1		)		(22		)
Total Stockholders' Equity	$	12,437			$	12,582

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).

8

---

Table of Contents

CNA Financial Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note A. General

Basis of Presentation

The Condensed Consolidated Financial Statements (Unaudited) include the accounts of CNA Financial Corporation (CNAF) and its subsidiaries. Collectively, CNAF and its subsidiaries are referred to as CNA or the Company. Loews Corporation (Loews) owned approximately 90% of the outstanding common stock of CNAF as of March 31, 2015.

The accompanying Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Intercompany amounts have been eliminated. Certain financial information that is normally included in annual financial statements, including certain financial statement notes, prepared in accordance with GAAP, is not required for interim reporting purposes and has been condensed or omitted. These statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in CNAF's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2014, including the summary of significant accounting policies in Note A. The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting periods. Actual results may differ from those estimates.

The interim financial data as of March 31, 2015 and for the three months ended March 31, 2015 and 2014 is unaudited. However, in the opinion of management, the interim data includes all adjustments, including normal recurring adjustments, necessary for a fair statement of the Company's results for the interim periods. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.

Sale of Continental Assurance Company (CAC)

On August 1, 2014, the Company completed the sale of the common stock of CAC, the Company's former life insurance subsidiary. In the first quarter of 2014, the Company recorded an after-tax impairment loss of $214 million related to the sale. The Company elected to include CAC cash flow activity in the comparative Condensed Consolidated Statement of Cash Flows. Further information on discontinued operations is provided in Note K to the Condensed Consolidated Financial Statements.

Note B. Earnings Per Share

Earnings per share is based on the weighted average number of outstanding common shares. Basic earnings (loss) per share excludes the effect of dilutive securities and is computed by dividing Net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

For the three months ended March 31, 2015 and 2014, approximately 654 thousand and 660 thousand potential shares attributable to exercises under stock-based employee compensation plans were included in the calculation of diluted earnings per share. For those same periods, approximately 182 thousand and 110 thousand potential shares attributable to exercises under stock-based employee compensation plans were not included in the calculation of diluted earnings per share because the effect would have been antidilutive.

9

---

Table of Contents

Note C. Investments

The significant components of Net investment income are presented in the following table.

Three months ended March 31
(In millions)	2015				2014
Fixed maturity securities	$	443			$	452
Short term investments	2				1
Limited partnership investments	114				73
Equity securities	3				2
Mortgage loans	8				6
Trading portfolio	2				3
Other	—				2
Gross investment income	572				539
Investment expense	(14		)		(13		)
Net investment income	$	558			$	526

Net realized investment gains (losses) are presented in the following table.

Three months ended March 31
(In millions)	2015				2014
Net realized investment gains (losses):
Fixed maturity securities:
Gross realized gains	$	33			$	53
Gross realized losses	(21		)		(15		)
Net realized investment gains (losses) on fixed maturity securities	12				38
Equity securities:
Gross realized gains	1				5
Gross realized losses	(1		)		—
Net realized investment gains (losses) on equity securities	—				5
Derivatives	(1		)		—
Short term investments and other	(1		)		3
Net realized investment gains (losses)	$	10			$	46

The components of Net other-than-temporary impairment (OTTI) losses recognized in earnings by asset type are presented in the following table.

Three months ended March 31
(In millions)	2015				2014
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	5			$	1
States, municipalities and political subdivisions	5				—
Asset-backed - residential mortgage-backed	1				1
Total fixed maturity securities available-for-sale	11				2
Equity securities available-for-sale:
Common stock	1				—
Net OTTI losses recognized in earnings	$	12			$	2

10

---

Table of Contents

The following tables present a summary of fixed maturity and equity securities.

March 31, 2015	Cost or Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Estimated Fair Value				Unrealized OTTI Losses (Gains)
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	16,721			$	1,867			$	43			$	18,545			$	—
States, municipalities and political subdivisions	11,407				1,536				9				12,934				—
Asset-backed:
Residential mortgage-backed	4,998				241				13				5,226				(51		)
Commercial mortgage-backed	2,151				114				5				2,260				(3		)
Other asset-backed	1,109				15				1				1,123				—
Total asset-backed	8,258				370				19				8,609				(54		)
U.S. Treasury and obligations of government-sponsored enterprises	24				6				—				30				—
Foreign government	390				19				—				409				—
Redeemable preferred stock	39				3				—				42				—
Total fixed maturity securities available-for-sale	36,839				3,801				71				40,569				$	(54	)
Total fixed maturity securities trading	36												36
Equity securities available-for-sale:
Common stock	41				9				—				50
Preferred stock	172				7				4				175
Total equity securities available-for-sale	213				16				4				225
Total	$	37,088			$	3,817			$	75			$	40,830

December 31, 2014	Cost or Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Estimated Fair Value				Unrealized OTTI Losses (Gains)
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	17,210			$	1,721			$	61			$	18,870			$	—
States, municipalities and political subdivisions	11,285				1,463				8				12,740				—
Asset-backed:
Residential mortgage-backed	5,028				218				13				5,233				(53		)
Commercial mortgage-backed	2,056				93				5				2,144				(2		)
Other asset-backed	1,234				11				10				1,235				—
Total asset-backed	8,318				322				28				8,612				(55		)
U.S. Treasury and obligations of government-sponsored enterprises	26				5				—				31				—
Foreign government	438				16				—				454				—
Redeemable preferred stock	39				3				—				42				—
Total fixed maturity securities available-for-sale	37,316				3,530				97				40,749				$	(55	)
Total fixed maturity securities trading	19												19
Equity securities available-for-sale:
Common stock	38				9				—				47
Preferred stock	172				5				2				175
Total equity securities available-for-sale	210				14				2				222
Total	$	37,545			$	3,544			$	99			$	40,990

11

---

Table of Contents

The net unrealized gains on investments included in the tables above are recorded as a component of Accumulated other comprehensive income (AOCI). When presented in AOCI, these amounts are net of tax and any required Shadow Adjustments. As of March 31, 2015 and December 31, 2014, the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $1,370 million and $1,288 million. To the extent that unrealized gains on fixed income securities supporting certain products within the Life & Group Non-Core segment would result in a premium deficiency if realized, a related decrease in Deferred acquisition costs and/or increase in Insurance reserves are recorded, net of tax, as a reduction of net unrealized gains through Other comprehensive income (loss) (Shadow Adjustments).

12

---

Table of Contents

The following tables present the estimated fair value and gross unrealized losses of fixed maturity and equity securities in a gross unrealized loss position by the length of time in which the securities have continuously been in that position.

	Less than 12 Months								12 Months or Longer								Total
March 31, 2015	Estimated Fair Value				Gross Unrealized Losses				Estimated Fair Value				Gross Unrealized Losses				Estimated Fair Value				Gross Unrealized Losses
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	840			$	31			$	139			$	12			$	979			$	43
States, municipalities and political subdivisions	479				6				100				3				579				9
Asset-backed:
Residential mortgage-backed	318				5				148				8				466				13
Commercial mortgage-backed	175				3				62				2				237				5
Other asset-backed	187				1				5				—				192				1
Total asset-backed	680				9				215				10				895				19
U.S. Treasury and obligations of government-sponsored enterprises	3				—				—				—				3				—
Foreign government	13				—				1				—				14				—
Total fixed maturity securities available-for-sale	2,015				46				455				25				2,470				71
Equity securities available-for-sale:
Preferred stock	15				4				—				—				15				4
Total	$	2,030			$	50			$	455			$	25			$	2,485			$	75

	Less than 12 Months								12 Months or Longer								Total
December 31, 2014	Estimated Fair Value				Gross Unrealized Losses				Estimated Fair Value				Gross Unrealized Losses				Estimated Fair Value				Gross Unrealized Losses
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	1,330			$	46			$	277			$	15			$	1,607			$	61
States, municipalities and political subdivisions	335				5				127				3				462				8
Asset-backed:
Residential mortgage-backed	293				5				189				8				482				13
Commercial mortgage-backed	264				2				99				3				363				5
Other asset-backed	607				10				7				—				614				10
Total asset-backed	1,164				17				295				11				1,459				28
U.S. Treasury and obligations of government-sponsored enterprises	3				—				4				—				7				—
Foreign government	3				—				3				—				6				—
Redeemable preferred stock	3				—				—				—				3				—
Total fixed maturity securities available-for-sale	2,838				68				706				29				3,544				97
Equity securities available-for-sale:
Preferred stock	17				2				1				—				18				2
Total	$	2,855			$	70			$	707			$	29			$	3,562			$	99

13

---

Table of Contents

Based on current facts and circumstances, the Company believes the unrealized losses presented in the March 31, 2015 table above, are not indicative of the ultimate collectibility of the current amortized cost of the securities, but rather are primarily attributable to changes in interest rates and credit spreads, market illiquidity and other factors. The Company has no current intent to sell securities with unrealized losses, nor is it more likely than not that it will be required to sell prior to recovery of amortized cost; accordingly, the Company has determined that there are no additional OTTI losses to be recorded as of March 31, 2015.

The following table presents the activity related to the pretax credit loss component reflected in Retained earnings on fixed maturity securities still held as of March 31, 2015 and 2014 for which a portion of an OTTI loss was recognized in Other comprehensive income.

Three months ended March 31
(In millions)	2015				2014
Beginning balance of credit losses on fixed maturity securities	$	62			$	74
Reductions for securities sold during the period	(1		)		(2		)
Reductions for securities the Company intends to sell or more likely than not will be required to sell	—				(3		)
Ending balance of credit losses on fixed maturity securities	$	61			$	69

Contractual Maturity

The following table presents available-for-sale fixed maturity securities by contractual maturity.

	March 31, 2015								December 31, 2014
(In millions)	Cost or Amortized Cost				Estimated Fair Value				Cost or Amortized Cost				Estimated Fair Value
Due in one year or less	$	2,011			$	2,043			$	2,479			$	2,511
Due after one year through five years	8,760				9,340				9,054				9,605
Due after five years through ten years	12,401				13,108				12,055				12,584
Due after ten years	13,667				16,078				13,728				16,049
Total	$	36,839			$	40,569			$	37,316			$	40,749

Actual maturities may differ from contractual maturities because certain securities may be called or prepaid with or without call or prepayment penalties. Securities not due at a single date are allocated based on weighted average life.

14

---

Table of Contents

Derivative Financial Instruments

The following tables present the aggregate contractual or notional amounts and estimated fair values related to derivative financial instruments.

March 31, 2015	Contractual/ Notional Amount				Estimated Fair Value
(In millions)					Asset				Liability
Without hedge designation
Currency forwards	$	18			$	2			$	—
Equity warrants	5				—				—
Embedded derivative on funds withheld liability	184				—				5
Total					$	2			$	5

December 31, 2014	Contractual/ Notional Amount				Estimated Fair Value
(In millions)					Asset				Liability
Without hedge designation
Currency forwards	$	9			$	—			$	—
Equity warrants	5				—				—
Embedded derivative on funds withheld liability	184				—				3
Total					$	—			$	3

Derivative financial instruments are presented gross in Other invested assets and Other liabilities on the Condensed Consolidated Balance Sheets. There would be no significant difference in the balance included in such accounts if the estimated fair values were presented net as of March 31, 2015 and December 31, 2014.

Investment Commitments

As of March 31, 2015, the Company had committed approximately $338 million to future capital calls from various third-party limited partnership investments in exchange for an ownership interest in the related partnerships.

As of March 31, 2015, the Company had mortgage loan commitments of $41 million representing signed loan applications received and accepted.

The Company invests in various privately placed debt securities, including bank loans, as part of its overall investment strategy and has committed to additional future purchases, sales and funding. As of March 31, 2015, the Company had commitments to purchase or fund additional amounts of $82 million and sell $71 million under the terms of such securities.

15

---

Table of Contents

Note D. Fair Value

Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy is used in selecting inputs, with the highest priority given to Level 1, as these are the most transparent or reliable.

Level 1 - Quoted prices for identical instruments in active markets.

Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.

Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are not observable.

Prices may fall within Level 1, 2 or 3 depending upon the methodologies and inputs used to estimate fair value for each specific security. In general the Company seeks to price securities using third-party pricing services. Securities not priced by pricing services are submitted to independent brokers for valuation and, if those are not available, internally developed pricing models are used to value assets using methodologies and inputs the Company believes market participants would use to value the assets. Prices obtained from third-party pricing services or brokers are not adjusted by the Company.

The Company performs control procedures over information obtained from pricing services and brokers to ensure prices received represent a reasonable estimate of fair value and to confirm representations regarding whether inputs are observable or unobservable. Procedures include i) the review of pricing service or broker pricing methodologies, ii) back-testing, where past fair value estimates are compared to actual transactions executed in the market on similar dates, iii) exception reporting, where changes in price, period-over-period, are reviewed and challenged with the pricing service or broker based on exception criteria, iv) deep dives, where the Company performs an independent analysis of the inputs and assumptions used to price individual securities and v) pricing validation, where prices received are compared to prices independently estimated by the Company.

16

---

Table of Contents

Assets and Liabilities Measured at Fair Value

Assets and liabilities measured at fair value on a recurring basis are presented in the following tables.

March 31, 2015													Total Assets/ Liabilities at Fair Value
(In millions)	Level 1				Level 2				Level 3
Assets
Fixed maturity securities:
Corporate and other bonds	$	29			$	18,337			$	186			$	18,552
States, municipalities and political subdivisions	—				12,877				86				12,963
Asset-backed:
Residential mortgage-backed	—				4,994				232				5,226
Commercial mortgage-backed	—				2,196				64				2,260
Other asset-backed	—				570				553				1,123
Total asset-backed	—				7,760				849				8,609
U.S. Treasury and obligations of government-sponsored enterprises	29				1				—				30
Foreign government	37				372				—				409
Redeemable preferred stock	30				12				—				42
Total fixed maturity securities	125				39,359				1,121				40,605
Equity securities	149				63				13				225
Derivative financial instruments	—				2				—				2
Other invested assets, excluding derivative financial instruments	—				41				—				41
Short term investments	742				678				—				1,420
Life settlement contracts, included in Other assets	—				—				79				79
Total assets	$	1,016			$	40,143			$	1,213			$	42,372
Liabilities
Other liabilities	$	—			$	5			$	—			$	5
Total liabilities	$	—			$	5			$	—			$	5

17

---

Table of Contents

December 31, 2014													Total Assets/Liabilities at Fair Value
(In millions)	Level 1				Level 2				Level 3
Assets
Fixed maturity securities:
Corporate and other bonds	$	32			$	18,695			$	162			$	18,889
States, municipalities and political subdivisions	—				12,646				94				12,740
Asset-backed:
Residential mortgage-backed	—				5,044				189				5,233
Commercial mortgage-backed	—				2,061				83				2,144
Other asset-backed	—				580				655				1,235
Total asset-backed	—				7,685				927				8,612
U.S. Treasury and obligations of government-sponsored enterprises	28				3				—				31
Foreign government	41				413				—				454
Redeemable preferred stock	30				12				—				42
Total fixed maturity securities	131				39,454				1,183				40,768
Equity securities	145				61				16				222
Other invested assets	—				41				—				41
Short term investments	681				963				—				1,644
Life settlement contracts, included in Other assets	—				—				82				82
Total assets	$	957			$	40,519			$	1,281			$	42,757
Liabilities
Other liabilities	$	—			$	3			$	—			$	3
Total liabilities	$	—			$	3			$	—			$	3

18

---

Table of Contents

The following tables present a reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

Level 3 (In millions)	Balance as of January 1, 2015				Net realized investment gains (losses) and net change in unrealized appreciation (depreciation) included in Net income (loss)				Net change in unrealized appreciation (depreciation) included in Other comprehensive income (loss)				Purchases				Sales				Settlements				Transfers into Level 3				Transfers out of Level 3				Balance as of March 31, 2015				Unrealized gains (losses) on Level 3 assets and liabilities held as of March 31, 2015 recognized in Net income (loss)
Fixed maturity securities:
Corporate and other bonds	$	162			$	1			$	—			$	12			$	(12	)		$	(14	)		$	37			$	—			$	186			$	—
States, municipalities and political subdivisions	94				1				—				—				—				(9		)		—				—				86				—
Asset-backed:
Residential mortgage-backed	189				1				—				72				—				(10		)		—				(20		)		232				—
Commercial mortgage-backed	83				1				1				6				—				(1		)		—				(26		)		64				—
Other asset-backed	655				1				9				35				(144		)		(3		)		—				—				553				—
Total asset-backed	927				3				10				113				(144		)		(14		)		—				(46		)		849				—
Total fixed maturity securities	1,183				5				10				125				(156		)		(37		)		37				(46		)		1,121				—
Equity securities	16				—				(3		)		—				—				—				—				—				13				—
Life settlement contracts	82				13				—				—				—				(16		)		—				—				79				1
Total	$	1,281			$	18			$	7			$	125			$	(156	)		$	(53	)		$	37			$	(46	)		$	1,213			$	1

19

---

Table of Contents

Level 3 (In millions)	Balance as of January 1, 2014				Net realized investment gains (losses) and net change in unrealized appreciation (depreciation) included in Net income (loss)				Net change in unrealized appreciation (depreciation) included in Other comprehensive income (loss)				Purchases				Sales				Settlements				Transfers into Level 3				Transfers out of Level 3				Balance as of March 31, 2014				Unrealized gains (losses) on Level 3 assets and liabilities held as of March 31, 2014 recognized in Net income (loss)
Fixed maturity securities:
Corporate and other bonds	$	204			$	1			$	1			$	5			$	(4	)		$	(5	)		$	3			$	(16	)		$	189			$	—
States, municipalities and political subdivisions	71				—				1				—				—				—				14				—				86				—
Asset-backed:
Residential mortgage-backed	331				1				15				25				—				(21		)		21				(13		)		359				—
Commercial mortgage-backed	151				1				(1		)		—				—				(1		)		—				(24		)		126				—
Other asset-backed	446				1				—				148				(83		)		(72		)		—				(1		)		439				—
Total asset-backed	928				3				14				173				(83		)		(94		)		21				(38		)		924				—
Total fixed maturity securities	1,203				4				16				178				(87		)		(99		)		38				(54		)		1,199				—
Equity securities	11				3				(4		)		—				(8		)		—				—				—				2				—
Life settlement contracts	88				10				—				—				—				(11		)		—				—				87				1
Separate account business	1				—				—				—				—				—				—				(1		)		—				—
Total	$	1,303			$	17			$	12			$	178			$	(95	)		$	(110	)		$	38			$	(55	)		$	1,288			$	1

20

---

Table of Contents

Net realized and unrealized gains and losses, including those shown above, are reported in Net income (loss) as follows:

Major Category of Assets and Liabilities		Condensed Consolidated Statements of Operations Line Items
Fixed maturity securities available-for-sale		Net realized investment gains (losses)
Fixed maturity securities trading		Net investment income
Equity securities		Net realized investment gains (losses)
Other invested assets - Derivative financial instruments held in a trading portfolio		Net investment income
Other invested assets - Derivative financial instruments not held in a trading portfolio		Net realized investment gains (losses)
Other invested assets - Overseas deposits		Net investment income
Life settlement contracts		Other revenues
Other liabilities - Derivative financial instruments		Net realized investment gains (losses)

Securities shown on the previous pages may be transferred in or out of levels within the fair value hierarchy based on the availability of observable market information and quoted prices used to determine the fair value of the security. The availability of observable market information and quoted prices varies based on market conditions and trading volume. During the three months ended March 31, 2015 there were no transfers between Level 1 and Level 2. During the three months ended March 31, 2014 there were $23 million of transfers from Level 2 to Level 1 and $1 million from Level 1 to Level 2. The Company's policy is to recognize transfers between levels at the beginning of quarterly reporting periods.

Valuation Methodologies and Inputs

The following section describes the valuation methodologies and relevant inputs used to measure different financial instruments at fair value, including an indication of the level in the fair value hierarchy in which the instruments are generally classified.

Fixed Maturity Securities

Level 1 securities include exchange traded bonds, highly liquid U.S. and foreign government bonds and redeemable preferred stock, valued using quoted market prices. Level 2 securities include most other fixed maturity securities as the significant inputs are observable in the marketplace. All classes of Level 2 fixed maturity securities are valued using methodologies that model information generated by market transactions involving identical or comparable assets, as well as discounted cash flow methodologies. Common inputs for all classes of fixed maturity securities include prices from recently executed transactions of similar securities, marketplace quotes, benchmark yields, spreads off benchmark yields, interest rates and U.S. Treasury or swap curves. Specifically for asset-backed securities, key inputs include prepayment and default projections based on past performance of the underlying collateral and current market data. Fixed maturity securities are generally assigned to Level 3 in cases where broker/dealer quotes are significant inputs to the valuation and there is a lack of transparency as to whether these quotes are based on information that is observable in the marketplace. Level 3 securities also include private placement debt securities whose fair value is determined using internal models with inputs that are not market observable.

Equity Securities

Level 1 equity securities include publicly traded securities valued using quoted market prices. Level 2 securities are primarily non-redeemable preferred stocks and common stocks valued using pricing for similar securities, recently executed transactions, broker/dealer quotes and other pricing models utilizing market observable inputs. Level 3 securities are priced using internal models with inputs that are not market observable.

21

---

Table of Contents

Derivative Financial Investments

Level 1 securities include exchange traded derivatives, primarily futures, valued using quoted market prices. Level 2 securities primarily include the embedded derivative on funds withheld liability and currency forwards. The embedded derivative on funds withheld liability is valued using the change in fair value of the assets supporting the funds withheld payable, which are fixed maturity securities valued with observable inputs. Currency forwards are valued using observable market forward rates. Over-the-counter derivatives, principally interest rate swaps, total return swaps, equity warrants and options, are valued using inputs including broker/dealer quotes and are classified within Level 3 of the valuation hierarchy due to a lack of transparency as to whether these quotes are based on information that is observable in the marketplace.

Overseas Deposits

Overseas deposits, which can be redeemed at net asset value in 90 days or less, are classified as Level 2.

Short Term Investments

Securities that are actively traded or have quoted prices are classified as Level 1. These securities include money market funds and treasury bills. Level 2 primarily includes commercial paper, for which all inputs are market observable. Fixed maturity securities purchased within one year of maturity are classified consistent with fixed maturity securities discussed above. Short term investments as presented in the tables above differ from the amounts presented on the Condensed Consolidated Balance Sheets because certain short term investments, such as time deposits, are not measured at fair value.

Life Settlement Contracts

The fair values of life settlement contracts are determined as the present value of the anticipated death benefits less anticipated premium payments based on contract terms that are distinct for each insured, as well as the Company's own assumptions for mortality, premium expense and the rate of return that a buyer would require on the contracts, as no comparable market pricing data is available.

Significant Unobservable Inputs

The following tables present quantitative information about the significant unobservable inputs utilized by the Company in the fair value measurements of Level 3 assets. Valuations for assets and liabilities not presented in the table below are primarily based on broker/dealer quotes for which there is a lack of transparency as to inputs used to develop the valuations. The quantitative detail of these unobservable inputs is neither provided nor reasonably available to the Company.

March 31, 2015
(In millions)	Fair Value				Valuation Technique(s)		Unobservable Input(s)		Range  (Weighted Average)
Fixed maturity securities	$	102			Discounted cash flow		Credit spread		2% - 13% (3%)
Equity securities	13				Market approach		Private offering price		$10 - $4,400 per share ($682)
Life settlement contracts	79				Discounted cash flow		Discount rate risk premium		9%
							Mortality assumption		55% - 1676% (164%)

December 31, 2014
(In millions)	Fair Value				Valuation Technique(s)		Unobservable Input(s)		Range  (Weighted Average)
Fixed maturity securities	$	101			Discounted cash flow		Credit spread		2% - 13% (3%)
Equity securities	16				Market approach		Private offering price		$12 - $4,391 per share ($600)
Life settlement contracts	82				Discounted cash flow		Discount rate risk premium		9%
							Mortality assumption		55% - 1676% (163%)

22

---

Table of Contents

For fixed maturity securities, an increase to the credit spread assumptions would result in a lower fair value measurement. For equity securities, an increase in the private offering price would result in a higher fair value measurement. For life settlement contracts, an increase in the discount rate risk premium or decrease in the mortality assumption would result in a lower fair value measurement.

Financial Assets and Liabilities Not Measured at Fair Value

The carrying amount and estimated fair value of the Company's financial assets and liabilities which are not measured at fair value on the Condensed Consolidated Balance Sheets are presented in the following tables.

March 31, 2015	Carrying Amount				Estimated Fair Value
(In millions)					Level 1				Level 2				Level 3				Total
Assets
Notes receivable for the issuance of common stock	$	1			$	—			$	—			$	1			$	1
Mortgage loans	586				—				—				612				612
Liabilities
Long term debt	$	2,560			$	—			$	2,908			$	—			$	2,908

December 31, 2014	Carrying Amount				Estimated Fair Value
(In millions)					Level 1				Level 2				Level 3				Total
Assets
Notes receivable for the issuance of common stock	$	1			$	—			$	—			$	1			$	1
Mortgage loans	588				—				—				608				608
Liabilities
Long term debt	$	2,559			$	—			$	2,883			$	—			$	2,883

The following methods and assumptions were used to estimate the fair value of these financial assets and liabilities.

The fair values of Mortgage loans were based on the present value of the expected future cash flows discounted at the current interest rate for origination of similar quality loans, adjusted for specific loan risk.

The Company's senior notes and debentures were valued based on observable market prices. The fair value for other debt was estimated using discounted cash flows based on current incremental borrowing rates for similar borrowing arrangements.

The carrying amounts reported on the Condensed Consolidated Balance Sheets for Cash, Short term investments not carried at fair value, Accrued investment income and certain Other assets and Other liabilities approximate fair value due to the short term nature of these items. These assets and liabilities are not listed in the tables above.

23

---

Table of Contents

Note E. Claim and Claim Adjustment Expense Reserves

The Company's property and casualty insurance claim and claim adjustment expense reserves represent the estimated amounts necessary to resolve all outstanding claims, including incurred but not reported (IBNR) claims as of the reporting date. The Company's reserve projections are based primarily on detailed analysis of the facts in each case, the Company's experience with similar cases and various historical development patterns. Consideration is given to such historical patterns as field reserving trends and claims settlement practices, loss payments, pending levels of unpaid claims and product mix, as well as court decisions, economic conditions including inflation and public attitudes. All of these factors can affect the estimation of claim and claim adjustment expense reserves.

Establishing claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves for catastrophic events that have occurred, is an estimation process. Many factors can ultimately affect the final settlement of a claim and, therefore, the necessary reserve. Changes in the law, results of litigation, medical costs, the cost of repair materials and labor rates can all affect ultimate claim costs. In addition, time can be a critical part of reserving determinations since the longer the span between the incidence of a loss and the payment or settlement of the claim, the more variable the ultimate settlement amount can be. Accordingly, short-tail claims, such as property damage claims, tend to be more reasonably estimable than long-tail claims, such as workers' compensation, general liability and professional liability claims. Adjustments to prior year reserve estimates, if necessary, are reflected in the results of operations in the period that the need for such adjustments is determined. There can be no assurance that the Company's ultimate cost for insurance losses will not exceed current estimates.

Catastrophes are an inherent risk of the property and casualty insurance business and have contributed to material period-to-period fluctuations in the Company's results of operations and/or equity. The Company reported catastrophe losses, net of reinsurance, of $29 million for the three months ended March 31, 2015. Catastrophe losses in 2015 related primarily to U.S. weather-related events. The Company reported catastrophe losses, net of reinsurance, of $74 million for the three months ended March 31, 2014.

The fourth quarter of 2014 asbestos and environmental pollution (A&EP) reserve review was not completed because additional information and analysis on inuring third-party reinsurance recoveries were needed to finalize the review. The review and analysis of this information continues, and the Company expects to complete the review in the second quarter of 2015. Given the significance of the information and analysis needed to finalize the remaining elements of the review, the Company is not able to estimate the impact, if any, of this uncertainty on the Company's Condensed Consolidated Financial Statements.

24

---

Table of Contents

Net Prior Year Development

The following tables and discussion present net prior year development recorded for Specialty, Commercial, International and Corporate & Other Non-Core segments.

Three months ended March 31, 2015
(In millions)	Specialty				Commercial				International				Corporate & Other Non-Core				Total
Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	2			$	(5	)		$	(4	)		$	—			$	(7	)
Pretax (favorable) unfavorable premium development	(6		)		(1		)		16				—				9
Total pretax (favorable) unfavorable net prior year development	$	(4	)		$	(6	)		$	12			$	—			$	2

Three months ended March 31, 2014
(In millions)	Specialty				Commercial				International				Corporate & Other Non-Core				Total
Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	(3	)		$	18			$	10			$	—			$	25
Pretax (favorable) unfavorable premium development	(6		)		(18		)		(7		)		—				(31		)
Total pretax (favorable) unfavorable net prior year development	$	(9	)		$	—			$	3			$	—			$	(6	)

Specialty

The following table presents further detail of the net prior year claim and allocated claim adjustment expense reserve development (development) recorded for the Specialty segment.

Three months ended March 31
(In millions)	2015				2014
Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development:
Medical Professional Liability	$	14			$	—
Other Professional Liability and Management Liability	(3		)		(6		)
Surety	1				1
Warranty	—				—
Other	(10		)		2
Total pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	2			$	(3	)

2015

Overall, unfavorable development for medical professional liability was primarily related to increased frequency in the Aging Services book for accident years 2013 and 2014, partially offset by better than expected severity in accident years 2010 and prior.

Favorable development for other coverages was primarily due to better than expected frequency in property coverages provided to Specialty customers in accident year 2014.

2014

Favorable development for other professional liability and management liability was related to better than expected loss emergence in accident years 2004 and prior.

25

---

Table of Contents

Commercial

The following table presents further detail of the development recorded for the Commercial segment.

Three months ended March 31
(In millions)	2015				2014
Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development:
Commercial Auto	$	—			$	20
General Liability	4				—
Workers' Compensation	(1		)		11
Property and Other	(8		)		(13		)
Total pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	(5	)		$	18

2015

Favorable development for property and other was due to lower than expected loss emergence from 2014 catastrophe events.

2014

Unfavorable development for commercial auto was primarily related to higher than expected frequency in accident years 2012 and 2013 and higher than expected loss emergence in accident years 2010 and 2011.

Unfavorable development for workers' compensation was primarily due to the recognition of losses related to favorable premium development in accident year 2013.

Favorable development for property and other was primarily due to better than expected loss emergence in catastrophe losses in accident year 2013.

International

The following table presents further detail of the development recorded for the International segment.

Three months ended March 31
(In millions)	2015				2014
Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development:
Medical Professional Liability	$	—			$	1
Other Professional Liability	—				(1		)
Liability	(5		)		(2		)
Property & Marine	(6		)		8
Other	7				(6		)
Commutations	—				10
Total pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	(4	)		$	10

2014

Reinsurance commutations in the first quarter of 2014 reduced ceded losses from prior years. Overall the commutations increased net operating income because of the release of the related allowance for uncollectible reinsurance.

26

---

Table of Contents

Note F. Legal Proceedings and Contingent Liabilities

The Company is a party to routine litigation incidental to its business, which, based on the facts and circumstances currently known, is not material to the Condensed Consolidated Financial Statements.

Note G. Benefit Plans

The components of net periodic cost (benefit) are presented in the following table.

Three months ended March 31
(In millions)	2015				2014
Pension cost (benefit)
Service cost	$	2			$	3
Interest cost on projected benefit obligation	28				33
Expected return on plan assets	(43		)		(48		)
Amortization of net actuarial loss	9				6
Net periodic pension cost (benefit)	$	(4	)		$	(6	)
Postretirement cost (benefit)
Amortization of prior service credit	$	—			$	(4	)
Net periodic postretirement cost (benefit)	$	—			$	(4	)

27

---

Table of Contents

Note H. Commitments, Contingencies and Guarantees

Commitments and Contingencies

The Company holds an investment in a real estate joint venture. In the normal course of business, the Company, on a joint and several basis with other unrelated insurance company shareholders, has committed to continue funding the operating deficits of this joint venture. Additionally, the Company and the other unrelated shareholders, on a joint and several basis, have guaranteed an operating lease for an office building, which expires in 2016. The guarantee of the operating lease is a parallel guarantee to the commitment to fund operating deficits; consequently, the separate guarantee to the lessor is not expected to be triggered as long as the joint venture continues to be funded by its shareholders which provide liquidity to make its annual lease payments.

In the event that the other parties to the joint venture are unable to meet their commitments in funding the operations of this joint venture, the Company would be required to assume the obligation for the entire office building operating lease. The Company does not believe it is likely that it will be required to do so.  However, as of March 31, 2015, the maximum potential future lease payments and other related costs that the Company could be required to pay under this guarantee, in excess of amounts already recorded, were approximately $41 million. If the Company were required to assume the entire lease obligation, the Company would have the right to pursue reimbursement from the other shareholders and the right to all sublease revenues.

Guarantees

As of March 31, 2015 and December 31, 2014, the Company had recorded liabilities of approximately $5 million related to guarantee and indemnification agreements and management believes that it is not likely that any future indemnity claims will be significantly greater than the amounts recorded.

In the course of selling business entities and assets to third parties, the Company agreed to guarantee the performance of certain obligations of a previously owned subsidiary and to indemnify purchasers for losses arising out of breaches of representation and warranties with respect to the business entities or assets being sold, including, in certain cases, losses arising from undisclosed liabilities or certain named litigation.  Such guarantee and indemnification agreements in effect for sales of business entities, assets and third-party loans may include provisions that survive indefinitely. As of March 31, 2015, the aggregate amount related to quantifiable guarantees was $375 million and the aggregate amount related to indemnification agreements was $324 million. Should the Company be required to make payments under the guarantee, it would have the right to seek reimbursement in certain cases from an affiliate of a previously owned subsidiary.

In addition, the Company has agreed to provide indemnification to third-party purchasers for certain losses associated with sold business entities or assets that are not limited by a contractual monetary amount. As of March 31, 2015, the Company had outstanding unlimited indemnifications in connection with the sales of certain of its business entities or assets that included tax liabilities arising prior to a purchaser's ownership of an entity or asset, defects in title at the time of sale, employee claims arising prior to closing and in some cases losses arising from certain litigation and undisclosed liabilities. Certain provisions of the indemnification agreements survive indefinitely while others survive until the applicable statutes of limitation expire or until the agreed-upon contract terms expire.

In the normal course of business, the Company also provided guarantees, if the primary obligor fails to perform, to holders of structured settlement annuities provided by a previously owned subsidiary, which are estimated to mature through 2120. The potential amount of future payments the Company could be required to pay under these guarantees was approximately $2.0 billion as of March 31, 2015. The Company does not believe a payable is likely under these guarantees, as the Company is the beneficiary of a trust that must be maintained at a level that approximates the discounted reserves for these annuities.

28

---

Table of Contents

Note I. Accumulated Other Comprehensive Income (Loss) by Component

The following tables present the changes in Accumulated other comprehensive income (loss) by component.

(In millions)	Net unrealized gains (losses) on investments with OTTI losses				Net unrealized gains (losses) on other investments				Pension and postretirement benefits				Cumulative foreign currency translation adjustment				Total
Balance as of January 1, 2015	$	36			$	942			$	(633	)		$	55			$	400
Other comprehensive income (loss) before reclassifications	(1		)		121				—				(96		)		24
Amounts reclassified from Accumulated other comprehensive income (loss) after tax (expense) benefit of $0, $0, $3, $0 and $3	—				9				(6		)		—				3
Other comprehensive income (loss) after tax (expense) benefit of $0, $(62), $(3), $0 and $(65)	(1		)		112				6				(96		)		21
Balance as of March 31, 2015	$	35			$	1,054			$	(627	)		$	(41	)		$	421

(In millions)	Net unrealized gains (losses) on investments with OTTI losses				Net unrealized gains (losses) on other investments				Net unrealized gains (losses) on discontinued operations				Pension and postretirement benefits				Cumulative foreign currency translation adjustment				Total
Balance as of January 1, 2014	$	26			$	692			$	—			$	(426	)		$	150			$	442
Transfer to net assets held for sale	(5		)		(17		)		22				—				—				—
Other comprehensive income (loss) before reclassifications	12				264				8				—				(8		)		276
Amounts reclassified from Accumulated other comprehensive income (loss) after tax (expense) benefit of $0, $(14), $0, $1, $0 and $(13)	—				27				—				(1		)		—				26
Other comprehensive income (loss) after tax (expense) benefit of $(6), $(127), $(5), $(1), $0 and $(139)	12				237				8				1				(8		)		250
Balance as of March 31, 2014	$	33			$	912			$	30			$	(425	)		$	142			$	692

Amounts reclassified from Accumulated other comprehensive income (loss) shown above are reported in Net income (loss) as follows:

Component of AOCI		Condensed Consolidated Statements of Operations Line Item Affected by Reclassifications
Net unrealized gains (losses) on investments with OTTI losses		Net realized investment gains (losses)
Net unrealized gains (losses) on other investments		Net realized investment gains (losses)
Net unrealized gains (losses) on discontinued operations		Income (loss) from discontinued operations
Pension and postretirement benefits		Other operating expenses

29

---

Table of Contents

Note J. Business Segments

The Company's core property and casualty commercial insurance operations are aggregated and reported in three business segments: Specialty, Commercial and International. The Company's non-core operations are managed in two segments: Life & Group Non-Core and Corporate & Other Non-Core.

The accounting policies of the segments are the same as those described in Note A to the Consolidated Financial Statements within CNAF's Annual Report on Form 10-K for the year ended December 31, 2014. The Company manages most of its assets on a legal entity basis, while segment operations are generally conducted across legal entities. As such, only Insurance and Reinsurance receivables, Insurance reserves, Deferred acquisition costs and Goodwill are readily identifiable for all individual segments. Distinct investment portfolios are not maintained for every individual segment; accordingly, allocation of assets to each segment is not performed. Therefore, a significant portion of Net investment income and Realized investment gains or losses are allocated primarily based on each segment's net carried insurance reserves, as adjusted. All significant intersegment income and expense has been eliminated. Income taxes have been allocated on the basis of the taxable income of the segments.

In the following tables, certain financial measures are presented to provide information used by management to monitor the Company's operating performance. Management utilizes these financial measures to monitor the Company's insurance operations and investment portfolio. Net operating income (loss), which is derived from certain income statement amounts, is used by management to monitor performance of the Company's insurance operations. The Company's investment portfolio is monitored by management through analysis of various factors including unrealized gains and losses on securities, portfolio duration and exposure to market and credit risk. Based on such analyses, the Company may recognize an OTTI loss on an investment security in accordance with its policy, or sell a security, which may produce realized gains and losses.

Net operating income (loss) is calculated by excluding from net income (loss) the after-tax effects of 1) net realized investment gains or losses, 2) income or loss from discontinued operations and 3) any cumulative effects of changes in accounting guidance. The calculation of net operating income excludes net realized investment gains (losses) because net realized investment gains (losses) are largely discretionary, except for some losses related to OTTI, and are generally driven by economic factors that are not necessarily consistent with key drivers of underwriting performance, and are therefore not considered an indication of trends in insurance operations.

The Company's results of continuing operations and selected balance sheet items by segment are presented in the following tables.

30

---

Table of Contents

Three months ended March 31, 2015	Specialty				Commercial				International				Life & Group Non-Core				Corporate & Other Non-Core
(In millions)																					Eliminations				Total
Operating revenues
Net earned premiums	$	680			$	678			$	191			$	138			$	—			$	—			$	1,687
Net investment income	155				204				14				179				6				—				558
Other revenues	78				9				—				9				2				(1		)		97
Total operating revenues	913				891				205				326				8				(1		)		2,342
Claims, Benefits and Expenses
Net incurred claims and benefits	429				454				116				340				(4		)		—				1,335
Policyholders’ dividends	1				3				—				—				—				—				4
Amortization of deferred acquisition costs	144				117				35				7				—				—				303
Other insurance related expenses	69				127				37				35				—				—				268
Other expenses	67				8				5				4				46				(1		)		129
Total claims, benefits and expenses	710				709				193				386				42				(1		)		2,039
Operating income (loss) before income tax	203				182				12				(60		)		(34		)		—				303
Income tax (expense) benefit on operating income (loss)	(68		)		(62		)		(3		)		43				12				—				(78		)
Net operating income (loss)	135				120				9				(17		)		(22		)		—				225
Net realized investment gains (losses)	4				4				1				1				—				—				10
Income tax (expense) benefit on net realized investment gains (losses)	(1		)		(3		)		—				2				—				—				(2		)
Net realized investment gains (losses), after tax	3				1				1				3				—				—				8
Net income (loss) from continuing operations	$	138			$	121			$	10			$	(14	)		$	(22	)		$	—			$	233

March 31, 2015
(In millions)
Reinsurance receivables	$	671			$	675			$	207			$	543			$	2,672			$	—			$	4,768
Insurance receivables	808				1,004				282				13				2				—				2,109
Deferred acquisition costs	307				225				84				—				—				—				616
Goodwill	117				—				34				—				—				—				151
Insurance reserves
Claim and claim adjustment expenses	6,352				9,441				1,377				3,237				2,841				—				23,248
Unearned premiums	1,794				1,329				449				139				—				(1		)		3,710
Future policy benefits	—				—				—				9,747				—				—				9,747

31

---

Table of Contents

Three months ended March 31, 2014	Specialty				Commercial				International				Life & Group Non-Core				Corporate & Other Non-Core
(In millions)																					Eliminations				Total
Operating revenues
Net earned premiums	$	692			$	735			$	241			$	139			$	—			$	(1	)		$	1,806
Net investment income	144				191				15				171				5				—				526
Other revenues	68				10				—				5				2				—				85
Total operating revenues	904				936				256				315				7				(1		)		2,417
Claims, Benefits and Expenses
Net incurred claims and benefits	442				568				130				306				(3		)		—				1,443
Policyholders’ dividends	1				2				—				—				—				—				3
Amortization of deferred acquisition costs	143				123				55				8				—				—				329
Other insurance related expenses	65				126				40				32				—				(1		)		262
Other expenses	61				8				7				1				51				—				128
Total claims, benefits and expenses	712				827				232				347				48				(1		)		2,165
Operating income (loss) before income tax	192				109				24				(32		)		(41		)		—				252
Income tax (expense) benefit on operating income (loss)	(63		)		(35		)		(8		)		30				14				—				(62		)
Net operating income (loss)	129				74				16				(2		)		(27		)		—				190
Net realized investment gains (losses)	11				10				3				16