SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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

For the transition period from _____ to _____

(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)

(Registrant's telephone number, including area code)



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 ~~October 30, 2015~~July 28, 2016
Common Stock, Par value $2.50		~~270,260,625~~270,483,164

~~Part~~PART I. Financial Information

Item 1. Condensed Consolidated Financial Statements

CNA Financial Corporation

Condensed Consolidated Statements of Operations (Unaudited)

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

CNA Financial Corporation

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

Periods ended September 30 Three Months Nine Months
(In millions) 2015 2014 2015 2014
Other Comprehensive Income (Loss), Net of Tax
Changes in:
Net unrealized gains on investments with other-than-temporary impairments $ 2
$ 1
$ (3 ) $ 15
Net unrealized gains on other investments (36 ) (83 ) (289 ) 424
Net unrealized gains on investments (34 ) (82 ) (292 ) 439
Net unrealized gains on discontinued operations —
(37 ) —
(22 )
Foreign currency translation adjustment (53 ) (73 ) (100 ) (39 )
Pension and postretirement benefits 4
3
52
(47 )
Other comprehensive income (loss), net of tax (83 ) (189 ) (340 ) 331
Net income 178
213
549
493
Total comprehensive income $ 95
$ 24
$ 209
$ 824

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

~~CNA Financial Corporation~~

~~Condensed Consolidated Balance Sheets~~

(In millions, except share data)
September 30, 2015 (Unaudited)
December 31,
2014
Assets
Investments:
Fixed maturity securities at fair value (amortized cost of $37,568 and $37,335) $ 40,201
$ 40,768
Equity securities at fair value (cost of $207 and $210) 212
222
Limited partnership investments 2,738
2,937
Other invested assets 45
41
Mortgage loans 640
588
Short term investments 1,482
1,706
Total investments 45,318
46,262
Cash 236
190
Reinsurance receivables (less allowance for uncollectible receivables of $48 and $48) 4,491
4,694
Insurance receivables (less allowance for uncollectible receivables of $54 and $61) 2,057
1,936
Accrued investment income 439
405
Deferred acquisition costs 606
600
Deferred income taxes 279
191
Property and equipment at cost (less accumulated depreciation of $387 and $364) 320
295
Goodwill 151
152
Other assets 915
841
Total assets $ 54,812
$ 55,566
Liabilities

Insurance reserves:
Claim and claim adjustment expenses $ 22,867
$ 23,271
Unearned premiums 3,706
3,592
Future policy benefits 9,520
9,490
Policyholders' funds —
27
Short term debt 350
—
Long term debt 2,211
2,559
Other liabilities (includes $119 and $153 due to Loews Corporation) 3,893
3,833
Total liabilities 42,547
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; 270,260,625 and 269,980,202 shares outstanding) 683
683
Additional paid-in capital 2,150
2,151
Retained earnings 9,450
9,645
Accumulated other comprehensive income 60
400
Treasury stock (2,779,618 and 3,060,041 shares), at cost (78 ) (84 )
Notes receivable for the issuance of common stock —
(1 )
Total stockholders’ equity 12,265
12,794
Total liabilities and stockholders' equity $ 54,812
$ 55,566

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

~~CNA Financial Corporation~~

~~Condensed Consolidated Statements of Cash Flows (Unaudited)~~

Nine months ended September 30
(In millions) 2015 2014
Cash Flows from Operating Activities
Net income $ 549
$ 493
Adjustments to reconcile net income to net cash flows provided by operating activities:
Loss on sale of subsidiaries —
251
Deferred income tax expense 27
81
Trading portfolio activity 17
16
Net realized investment (gains) losses 39
(72 )
Equity method investees 127
65
Net amortization of investments (17 ) (1 )
Depreciation and amortization 62
62
Changes in:
Receivables, net 70
611
Accrued investment income (34 ) (37 )
Deferred acquisition costs 11
14
Insurance reserves 195
(222 )
Other assets (61 ) (49 )
Other liabilities (32 ) (133 )
Other, net 92
(32 )
Total adjustments 496
554
Net cash flows provided by operating activities 1,045
1,047
Cash Flows from Investing Activities

Dispositions:
Fixed maturity securities - sales 3,590
4,005
Fixed maturity securities - maturities, calls and redemptions 3,101
2,901
Equity securities 43
23
Limited partnerships 156
133
Mortgage loans 22
36
Purchases:
Fixed maturity securities (7,055 ) (7,457 )
Equity securities (60 ) (44 )
Limited partnerships (120 ) (218 )
Mortgage loans (81 ) (84 )
Change in other investments 5
10
Change in short term investments 222
(556 )
Purchases of property and equipment (84 ) (42 )
Proceeds from sale of subsidiaries —
198
Other, net 7
8
Net cash flows used by investing activities $ (254 ) $ (1,087 )

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

Nine months ended September 30
(In millions) 2015 2014
Cash Flows from Financing Activities
Dividends paid to common stockholders $ (744 ) $ (473 )
Proceeds from the issuance of debt —
546
Other, net 5
22
Net cash flows provided (used) by financing activities
(739 )
95
Effect of foreign exchange rate changes on cash (6 ) (3 )
Net change in cash 46
52
Cash, beginning of year 190
195
Cash, end of period $ 236
$ 247



Periods ended June 30	Three Months						Six Months
(In millions)	2016			2015			2016			2015
Comprehensive Income (Loss)
Net income	$	209		$	138		$	275		$	371
Other Comprehensive Income (Loss), Net of Tax
Changes in:
Net unrealized gains on investments with other-than-temporary impairments	(1		)	(4		)	4			(5		)
Net unrealized gains on other investments	310			(365		)	544			(253		)
Net unrealized gains on investments	309			(369		)	548			(258		)
Foreign currency translation adjustment	(48		)	49			(34		)	(47		)
Pension and postretirement benefits	5			42			11			48
Other comprehensive income (loss), net of tax	266			(278		)	525			(257		)
Total comprehensive income (loss)	$	475		$	(140	)	$	800		$	114

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

CNA Financial Corporation

Condensed Consolidated Balance Sheets



(In millions, except share data)	June 30, 2016 (Unaudited)			December 31, 2015
Assets
Investments:
Fixed maturity securities at fair value (amortized cost of $37,838 and $37,253)	$	41,857		$	39,572
Equity securities at fair value (cost of $117 and $191)	123			197
Limited partnership investments	2,542			2,548
Other invested assets	33			44
Mortgage loans	610			678
Short term investments	1,384			1,660
Total investments	46,549			44,699
Cash	289			387
Reinsurance receivables (less allowance for uncollectible receivables of $37 and $38)	4,683			4,453
Insurance receivables (less allowance for uncollectible receivables of $45 and $51)	2,368			2,078
Accrued investment income	400			404
Deferred acquisition costs	620			598
Deferred income taxes	293			638
Property and equipment at cost (less accumulated depreciation of $224 and $382)	276			343
Goodwill	147			150
Other assets (includes $2 and $- due from Loews Corporation)	1,281			1,295
Total assets	$	56,906		$	55,045
Liabilities
Insurance reserves:
Claim and claim adjustment expenses	$	22,975		$	22,663
Unearned premiums	3,865			3,671
Future policy benefits	11,140			10,152
Short term debt	—			350
Long term debt	2,708			2,210
Other liabilities (includes $12 and $82 due to Loews Corporation)	4,332			4,243
Total liabilities	45,020			43,289
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; 270,483,164 and 270,274,361 shares outstanding)	683			683
Additional paid-in capital	2,155			2,153
Retained earnings	8,911			9,313
Accumulated other comprehensive income (loss)	210			(315		)
Treasury stock (2,557,079 and 2,765,882 shares), at cost	(73		)	(78		)
Total stockholders’ equity	11,886			11,756
Total liabilities and stockholders' equity	$	56,906		$	55,045

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

CNA Financial Corporation

Condensed Consolidated Statements of ~~Stockholders' Equity~~Cash Flows (Unaudited)

Nine months ended September 30
(In millions) 2015 2014
Common Stock
Balance, beginning of year $ 683
$ 683
Balance, end of period 683
683
Additional Paid-in Capital
Balance, beginning of year 2,151
2,145
Stock-based compensation (1 ) 4
Balance, end of period 2,150
2,149
Retained Earnings
Balance, beginning of year 9,645
9,495
Dividends paid to common stockholders (744 ) (473 )
Net income 549
493
Balance, end of period 9,450
9,515
Accumulated Other Comprehensive Income
Balance, beginning of year 400
442
Other comprehensive income (loss) (340 ) 331
Balance, end of period 60
773
Treasury Stock
Balance, beginning of year (84 ) (91 )
Stock-based compensation 6
6
Balance, end of period (78 ) (85 )
Notes Receivable for the Issuance of Common Stock
Balance, beginning of year (1 ) (23 )
Decrease in notes receivable for common stock 1
22
Balance, end of period —
(1 )
Total stockholders' equity $ 12,265
$ 13,034



Six months ended June 30
(In millions)	2016			2015
Cash Flows from Operating Activities
Net income	$	275		$	371
Adjustments to reconcile net income to net cash flows provided by operating activities:
Deferred income tax expense	63			32
Trading portfolio activity	(7		)	1
Net realized investment losses (gains)	20			(10		)
Equity method investees	230			(48		)
Net amortization of investments	(10		)	(13		)
Depreciation and amortization	39			39
Changes in:
Receivables, net	(540		)	(211		)
Accrued investment income	4			8
Deferred acquisition costs	(25		)	(8		)
Insurance reserves	666			451
Other assets	(106		)	(60		)
Other liabilities	(27		)	(94		)
Other, net	31			82
Total adjustments	338			169
Net cash flows provided by operating activities	613			540
Cash Flows from Investing Activities
Dispositions:
Fixed maturity securities - sales	3,066			2,859
Fixed maturity securities - maturities, calls and redemptions	1,247			2,304
Equity securities	72			33
Limited partnerships	124			85
Mortgage loans	109			19
Purchases:
Fixed maturity securities	(4,874		)	(5,029		)
Equity securities	—			(30		)
Limited partnerships	(206		)	(78		)
Mortgage loans	(41		)	(60		)
Change in other investments	11			8
Change in short term investments	281			33
Purchases of property and equipment	(65		)	(57		)
Disposals of property and equipment	107			—
Other, net	2			—
Net cash flows (used) provided by investing activities	$	(167	)	$	87

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



Six months ended June 30
(In millions)	2016			2015
Cash Flows from Financing Activities
Dividends paid to common stockholders	$	(677	)	$	(676	)
Proceeds from the issuance of debt	498			—
Repayment of debt	(358		)	—
Other, net	(1		)	6
Net cash flows used by financing activities	(538		)	(670		)
Effect of foreign exchange rate changes on cash	(6		)	(2		)
Net change in cash	(98		)	(45		)
Cash, beginning of year	387			190
Cash, end of period	$	289		$	145

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

CNA Financial Corporation

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)



Six months ended June 30
(In millions)	2016			2015
Common Stock
Balance, beginning of year	$	683		$	683
Balance, end of period	683			683
Additional Paid-in Capital
Balance, beginning of year	2,153			2,151
Stock-based compensation	2			(5		)
Balance, end of period	2,155			2,146
Retained Earnings
Balance, beginning of year	9,313			9,645
Dividends paid to common stockholders	(677		)	(676		)
Net income	275			371
Balance, end of period	8,911			9,340
Accumulated Other Comprehensive Income (Loss)
Balance, beginning of year	(315		)	400
Other comprehensive income (loss)	525			(257		)
Balance, end of period	210			143
Treasury Stock
Balance, beginning of year	(78		)	(84		)
Stock-based compensation	5			6
Balance, end of period	(73		)	(78		)
Notes Receivable for the Issuance of Common Stock
Balance, beginning of year	—			(1		)
Decrease in notes receivable for common stock	—			1
Balance, end of period	—			—
Total stockholders' equity	$	11,886		$	12,234

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

CNA Financial Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

Basis of Presentation

~~Sale of Continental Assurance Company (CAC)~~

Recently ~~Issued~~Adopted Accounting Standards ~~Update~~Updates (ASU) ~~- Disclosures about Short-Duration Contracts~~

In ~~May of~~April 2015, the Financial Accounting Standards Board (FASB) issued ASU No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The updated accounting guidance requires debt issuance costs to be presented as a deduction from the corresponding debt liability instead of the historical presentation as an unamortized debt issuance asset. As of January 1, 2016, the Company adopted the updated accounting guidance retrospectively. The Company adjusted its previously reported financial information included herein to reflect the change in accounting guidance for debt issuance costs. The impacts of adopting the new accounting standard on the Company’s Consolidated Balance Sheet as of December 31, 2015, were a decrease in Other assets and a decrease in Long term debt of $2 million.

In May 2015, the FASB issued ASU No. 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). The updated accounting guidance removes the requirement to categorize assets measured at fair value utilizing the net asset value per share (or equivalent) practical expedient within the fair value hierarchy. As of January 1, 2016, the Company adopted the updated accounting guidance retrospectively. The Company adjusted its previously reported financial information included herein to reflect the change in accounting guidance for assets measured using the net asset value. The impact of adopting the new accounting standard resulted in excluding overseas deposits of $28 million and $27 million from the fair value level disclosure as of June 30, 2016 and December 31, 2015.

Accounting Standards Pending Adoption

In May 2015, the FASB issued ASU No. 2015-09, Financial Services-Insurance (Topic 944): Disclosures about

Short-Duration ~~Contracts~~Contracts. . The updated accounting guidance requires enhanced disclosures to provide additional information about insurance liabilities for short-duration contracts. The ~~updated~~ guidance is effective for annual ~~financial statements issued for fiscal years~~periods beginning after December 15, 2015, and interim periods within the annual periods beginning after December 15, 2016. The Company is currently evaluating the effect the updated guidance will have on the Company's financial statement ~~disclosures.~~disclosures but expects to provide additional incurred and paid claims development information by accident year, quantitative information about claim frequency and the history of claims duration for significant lines of business within the Company’s annual financial statements.

Note B. Earnings Per Share

Note C.C. Investments

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

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



Periods ended June 30	Three Months				Six Months
(In millions)	2016		2015		2016		2015
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	13	$	11	$	29	$	16
States, municipalities and political subdivisions	—		13		—		18
Asset-backed:
Residential mortgage-backed	1		5		1		6
Other asset-backed	1		1		3		1
Total asset-backed	2		6		4		7
Total fixed maturity securities available-for-sale	15		30		33		41
Equity securities available-for-sale -- Common stock	—		—		5		1
Short term investments	—		1		—		1
OTTI losses recognized in earnings	$	15	$	31	$	38	$	43

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

13 As of June 30, 2016 and December 31, 2015, the net unrealized gains on investments included in AOCI were correspondingly reduced by Shadow Adjustments of $1,682 million and $1,111 million.

Based on current facts and circumstances, the Company believes the unrealized losses presented in the ~~September~~June 30, ~~2015~~2016 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 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 ~~September~~June 30, ~~2015.~~2016.

Contractual Maturity

Derivative Financial Instruments

September 30, 2015
Contractual/
Notional
Amount
Estimated Fair Value
(In millions) Asset Liability
Without hedge designation
Equity warrants $ 5
$ —
$ —
Embedded derivative on funds withheld liability 182
—
(5 )
Total $ —
$ (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$179 million as of ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014.~~2015 and a fair value of $8 million and $(5) million as of June 30, 2016 and December 31, 2015. The embedded derivative on funds withheld liability is accounted for separately and reported with the funds withheld liability in Other liabilities on the Condensed Consolidated Balance Sheets.

Investment Commitments

Assets and Liabilities Measured at Fair Value

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



June 30, 2016							Total Assets/Liabilities at Fair Value
(In millions)	Level 1		Level 2		Level 3		Total Assets/Liabilities at Fair Value
Assets
Fixed maturity securities:
Corporate and other bonds	$	—	$	18,972	$	242	$	19,214
States, municipalities and political subdivisions	—		13,771		2		13,773
Asset-backed:
Residential mortgage-backed	—		5,055		134		5,189
Commercial mortgage-backed	—		2,152		11		2,163
Other asset-backed	—		886		45		931
Total asset-backed	—		8,093		190		8,283
U.S. Treasury and obligations of government-sponsored enterprises	91		1		—		92
Foreign government	—		460		—		460
Redeemable preferred stock	35		—		—		35
Total fixed maturity securities	126		41,297		434		41,857
Equity securities	104		—		19		123
Other invested assets	—		5		—		5
Short term investments	339		950		—		1,289
Life settlement contracts, included in Other assets	—		—		67		67
Total assets	$	569	$	42,252	$	520	$	43,341
Liabilities
Other liabilities	$	—	$	8	$	—	$	8
Total liabilities	$	—	$	8	$	—	$	8

September 30, 2015
Total
Assets/Liabilities
at Fair Value
(In millions) Level 1 Level 2 Level 3
Assets
Fixed maturity securities:
Corporate and other bonds $ 28
$ 18,007
$ 153
$ 18,188
States, municipalities and political subdivisions —
13,236
61
13,297
Asset-backed:
Residential mortgage-backed —
4,837
204
5,041
Commercial mortgage-backed —
2,180
71
2,251
Other asset-backed —
545
471
1,016
Total asset-backed —
7,562
746
8,308
U.S. Treasury and obligations of government-sponsored enterprises 28
1
—
29
Foreign government 28
316
—
344
Redeemable preferred stock 24
11
—
35
Total fixed maturity securities 108
39,133
960
40,201
Equity securities 154
43
15
212
Other invested assets —
45
—
45
Short term investments 624
773
—
1,397
Life settlement contracts, included in Other assets —
—
74
74
Total assets $ 886
$ 39,994
$ 1,049
$ 41,929
Liabilities
Other liabilities $ —
$ (5 ) $ —
$ (5 )
Total liabilities $ —
$ (5 ) $ —
$ (5 )

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



December 31, 2015								Total Assets/Liabilities at Fair Value
(In millions)	Level 1		Level 2			Level 3		Total Assets/Liabilities at Fair Value
Assets
Fixed maturity securities:
Corporate and other bonds	$	—	$	17,592		$	168	$	17,760
States, municipalities and political subdivisions	—		13,172			2		13,174
Asset-backed:
Residential mortgage-backed	—		4,938			134		5,072
Commercial mortgage-backed	—		2,175			22		2,197
Other asset-backed	—		868			53		921
Total asset-backed	—		7,981			209		8,190
U.S. Treasury and obligations of government-sponsored enterprises	66		1			—		67
Foreign government	—		346			—		346
Redeemable preferred stock	35		—			—		35
Total fixed maturity securities	101		39,092			379		39,572
Equity securities	177		—			20		197
Other invested assets	—		17			—		17
Short term investments	448		1,134			—		1,582
Life settlement contracts, included in Other assets	—		—			74		74
Total assets	$	726	$	40,243		$	473	$	41,442
Liabilities
Other liabilities	$	—	$	(5	)	$	—	$	(5	)
Total liabilities	$	—	$	(5	)	$	—	$	(5	)

The ~~following~~ tables below 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
July 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
September 30,
2015
Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2015 recognized in Net income (loss)
Fixed maturity securities:
Corporate and other bonds $ 141
$ —
$ —
$ 27
$ (1 ) $ (11 ) $ —
$ (3 ) $ 153
$ —
States, municipalities and political subdivisions 85
—
—
—
—
—
—
(24 ) 61
—
Asset-backed:
Residential mortgage-backed 207
2
(2 ) 4
—
(7 ) —
—
204
—
Commercial mortgage-backed 87
5
(4 ) 8
—
(15 ) —
(10 ) 71
—
Other asset-backed 490
—
(6 ) 43
(20 ) (32 ) —
(4 ) 471
—
Total asset-backed 784
7
(12 ) 55
(20 ) (54 ) —
(14 ) 746
—
Total fixed maturity securities 1,010
7
(12 ) 82
(21 ) (65 ) —
(41 ) 960
—
Equity securities 16
—
(1 ) —
—
—
—
—
15
—
Life settlement contracts 75
5
—
—
—
(6 ) —
—
74
2
Total $ 1,101
$ 12
$ (13 ) $ 82
$ (21 ) $ (71 ) $ —
$ (41 ) $ 1,049
$ 2



Level 3 (In millions)	Balance as of April 1, 2016		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 June 30, 2016		Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2016 recognized in Net income (loss)*
Fixed maturity securities:
Corporate and other bonds	$	193	$	1	$	3		$	94	$	(20	)	$	(7	)	$	—	$	(22	)	$	242	$	—
States, municipalities and political subdivisions	2		—		—			—		—			—			—		—			2		—
Asset-backed:
Residential mortgage-backed	128		1		(1		)	10		—			(4		)	—		—			134		—
Commercial mortgage-backed	27		—		—			—		—			(9		)	3		(10		)	11		—
Other asset-backed	50		—		2			35		(25		)	(1		)	—		(16		)	45		—
Total asset-backed	205		1		1			45		(25		)	(14		)	3		(26		)	190		—
Total fixed maturity securities	400		2		4			139		(45		)	(21		)	3		(48		)	434		—
Equity securities	19		—		—			—		—			—			—		—			19		—
Life settlement contracts	72		6		—			—		—			(11		)	—		—			67		(3		)
Total	$	491	$	8	$	4		$	139	$	(45	)	$	(32	)	$	3	$	(48	)	$	520	$	(3	)

~~Table of Contents~~


Level 3 (In millions)	Balance as of July 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 September 30, 2014		Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2014 recognized in Net income (loss)		Balance as of April 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 June 30, 2015		Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2015 recognized in Net income (loss)*
Fixed maturity securities:
Corporate and other bonds	$	194	$	—	$	(1	)	$	4	$	—	$	(3	)	$	—	$	(21	)	$	173	$	—	$	186	$	(2	)	$	(1	)	$	—	$	—		$	(7	)	$	—	$	(35	)	$	141	$	(3	)
States, municipalities and political subdivisions	79		—		1			—		—		—			—		—			80		—		86		—			—			—		—			(1		)	—		—			85		—
Asset-backed:
Residential mortgage-backed	185		1		—			—		—		(17		)	11		(20		)	160		—		232		1			(2		)	—		—			(11		)	—		(13		)	207		—
Commercial mortgage-backed	59		2		(2		)	28		—		(21		)	31		—			97		—		64		1			(1		)	9		—			(1		)	17		(2		)	87		—
Other asset-backed	626		1		(4		)	80		—		(25		)	—		(36		)	642		—		553		2			1			47		(90		)	(17		)	—		(6		)	490		—
Total asset-backed	870		4		(6		)	108		—		(63		)	42		(56		)	899		—		849		4			(2		)	56		(90		)	(29		)	17		(21		)	784		—
Total fixed maturity securities	1,143		4		(6		)	112		—		(66		)	42		(77		)	1,152		—		1,121		2			(3		)	56		(90		)	(37		)	17		(56		)	1,010		(3		)
Equity securities	2		—		(1		)	16		—		—			—		—			17		—		13		—			3			—		—			—			—		—			16		—
Life settlement contracts	86		1		—			—		—		(1		)	—		—			86		1		79		4			—			—		—			(8		)	—		—			75		(2		)
Total	$	1,231	$	5	$	(7	)	$	128	$	—	$	(67	)	$	42	$	(77	)	$	1,255	$	1	$	1,213	$	6		$	—		$	56	$	(90	)	$	(45	)	$	17	$	(56	)	$	1,101	$	(5	)

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
September 30,
2015
Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2015 recognized in Net income (loss)
Fixed maturity securities:
Corporate and other bonds $ 162
$ (1 ) $ (1 ) $ 39
$ (13 ) $ (32 ) $ 37
$ (38 ) $ 153
$ —
States, municipalities and political subdivisions 94
1
—
—
—
(10 ) —
(24 ) 61
—
Asset-backed:
Residential mortgage-backed 189
4
(4 ) 76
—
(28 ) —
(33 ) 204
—
Commercial mortgage-backed 83
7
(4 ) 23
—
(17 ) 17
(38 ) 71
—
Other asset-backed 655
3
4
125
(254 ) (52 ) —
(10 ) 471
(1 )
Total asset-backed 927
14
(4 ) 224
(254 ) (97 ) 17
(81 ) 746
(1 )
Total fixed maturity securities 1,183
14
(5 ) 263
(267 ) (139 ) 54
(143 ) 960
(1 )
Equity securities 16
—
(1 ) —
—
—
—
—
15
—
Life settlement contracts 82
22
—
—
—
(30 ) —
—
74
1
Total $ 1,281
$ 36
$ (6 ) $ 263
$ (267 ) $ (169 ) $ 54
$ (143 ) $ 1,049
$ —

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
September 30,
2014
Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2014 recognized in Net income (loss)
Fixed maturity securities:
Corporate and other bonds $ 204
$ 2
$ —
$ 30
$ (10 ) $ (13 ) $ 8
$ (48 ) $ 173
$ —
States, municipalities and political subdivisions 71
1
3
1
(10 ) —
14
—
80
—
Asset-backed:
Residential mortgage-backed 331
(22 ) 62
47
(174 ) (57 ) 32
(59 ) 160
—
Commercial mortgage-backed 151
4
(2 ) 28
(60 ) (23 ) 43
(44 ) 97
—
Other asset-backed 446
2
—
457
(111 ) (115 ) —
(37 ) 642
(1 )
Total asset-backed 928
(16 ) 60
532
(345 ) (195 ) 75
(140 ) 899
(1 )
Total fixed maturity securities 1,203
(13 ) 63
563
(365 ) (208 ) 97
(188 ) 1,152
(1 )
Equity securities 11
3
(5 ) 16
(8 ) —
—
—
17
—
Life settlement contracts 88
23
—
—
—
(25 ) —
—
86
3
Separate account business 1
—
—
—
—
—
—
(1 ) —
—
Total $ 1,303
$ 13
$ 58
$ 579
$ (373 ) $ (233 ) $ 97
$ (189 ) $ 1,255
$ 2

~~Table of Contents~~



Level 3 (In millions)	Balance as of January 1, 2016		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 June 30, 2016		Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2016 recognized in Net income (loss)*
Fixed maturity securities:
Corporate and other bonds	$	168	$	—	$	7		$	147	$	(36	)	$	(10	)	$	—	$	(34	)	$	242	$	—
States, municipalities and political subdivisions	2		—		—			—		—			—			—		—			2		—
Asset-backed:
Residential mortgage-backed	134		2		(1		)	10		—			(9		)	—		(2		)	134		—
Commercial mortgage-backed	22		—		—			9		—			(9		)	3		(14		)	11		—
Other asset-backed	53		—		2			35		(25		)	(1		)	2		(21		)	45		—
Total asset-backed	209		2		1			54		(25		)	(19		)	5		(37		)	190		—
Total fixed maturity securities	379		2		8			201		(61		)	(29		)	5		(71		)	434		—
Equity securities	20		—		(1		)	—		—			—			—		—			19		—
Life settlement contracts	74		10		—			—		—			(17		)	—		—			67		(3		)
Total	$	473	$	12	$	7		$	201	$	(61	)	$	(46	)	$	5	$	(71	)	$	520	$	(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 June 30, 2015		Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2015 recognized in Net income (loss)*
Fixed maturity securities:
Corporate and other bonds	$	162	$	(1	)	$	(1	)	$	12	$	(12	)	$	(21	)	$	37	$	(35	)	$	141	$	(3	)
States, municipalities and political subdivisions	94		1			—			—		—			(10		)	—		—			85		—
Asset-backed:
Residential mortgage-backed	189		2			(2		)	72		—			(21		)	—		(33		)	207		—
Commercial mortgage-backed	83		2			—			15		—			(2		)	17		(28		)	87		—
Other asset-backed	655		3			10			82		(234		)	(20		)	—		(6		)	490		—
Total asset-backed	927		7			8			169		(234		)	(43		)	17		(67		)	784		—
Total fixed maturity securities	1,183		7			7			181		(246		)	(74		)	54		(102		)	1,010		(3		)
Equity securities	16		—			—			—		—			—			—		—			16		—
Life settlement contracts	82		17			—			—		—			(24		)	—		—			75		(1		)
Total	$	1,281	$	24		$	7		$	181	$	(246	)	$	(98	)	$	54	$	(102	)	$	1,101	$	(4	)

*Net realized and unrealized gains and losses ~~including those shown above,~~from Level 3 securities and derivatives 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⁽¹⁾		Net realized investment gains (losses)
Fixed maturity securities trading		Net investment income
Equity securities⁽¹⁾		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)

(1) Unrealized gains and losses are reported within AOCI.

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 and ~~nine~~six months ended ~~September~~June 30, ~~2015 there were $10 million of transfers from Level 2 to Level 1~~2016 and ~~no transfers from Level 1 to Level 2. During the three months ended September 30, 2014~~2015 there were no transfers between Level 1 and ~~Level 2. During the nine months ended September 30, 2014, there were $24 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~~exchange traded 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 a methodology based on information generated by market transactions involving identical or comparable assets, a discounted cash flow methodology, or a combination of both when necessary. 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~~primarily 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 and other pricing models utilizing market observable inputs. Level 3 securities are primarily priced using broker/dealer quotes and internal models with inputs that are not market observable.

~~Table~~Other invested assets - Federal Home Loan Bank of ~~Contents~~

~~Derivative Financial Investments~~Chicago (FHLBC) Stock

~~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 liability, which are fixed maturity securities valued with observable inputs. Currency forwards are valued using observable market forward rates.~~

~~Overseas Deposits~~

~~Overseas deposits, which~~FHLBC stock is equal to par because it can only be redeemed by the FHLBC at ~~net asset value in 90 days~~par or ~~less, are~~sold to another member of the FHLBC at par and is 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~~valued 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.

Derivative Financial Investments

Level 2 securities primarily include the embedded derivative on funds withheld liability. The embedded derivative on funds withheld liability is valued using the change in fair value of the assets supporting the funds withheld liability, which are fixed maturity securities valued with observable inputs.

Other invested assets - Overseas Deposits

As of June 30, 2016 and December 31, 2015, there were approximately $28 million and $27 million respectively of overseas deposits, which can be redeemed at net asset value in 90 days or less. Overseas deposits are excluded from the fair value hierarchy because their fair value is recorded using the net asset value per share (or equivalent) practical expedient.

Significant Unobservable Inputs

The following tables present quantitative information about the significant unobservable inputs utilized by the Company in the fair value ~~measurements~~measurement of Level 3 assets. Valuations for assets and liabilities not presented in the ~~table~~tables 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.

September 30, 2015

Estimated Fair Value

(In millions)

Valuation Technique(s)

Unobservable Input(s)

Range

(Weighted Average)

June 30, 2016

Estimated Fair Value

(In millions)

Valuation Technique(s)

Unobservable Input(s)

Range

(Weighted Average)

Fixed maturity securities

121

Discounted cash flow

Credit spread

2% - 31% (3%)

226

Discounted cash flow

Credit spread

1% - 40% (6%)

Life settlement contracts

Discounted cash flow

Discount rate risk premium

Discounted cash flow

Discount rate risk premium

Mortality assumption

55% - 1676% (164%)

Mortality assumption

55% - 1676% (162%)

December 31, 2014

Estimated Fair Value
(In millions)

Valuation Technique(s)

Unobservable Input(s)

Range

(Weighted Average)

December 31, 2015

Estimated Fair Value
(In millions)

Valuation Technique(s)

Unobservable Input(s)

Range

(Weighted Average)

Fixed maturity securities

101

Discounted cash flow

Credit spread

2% - 13% (3%)

138

Discounted cash flow

Credit spread

3% - 184% (6%)

Equity securities

Market approach

Private offering price

$12 - $4,391 per share ($600)

Life settlement contracts

Discounted cash flow

Discount rate risk premium

Discounted cash flow

Discount rate risk premium

Mortality assumption

55% - 1676% (163%)

Mortality assumption

55% - 1676% (164%)

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.

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

Note E. Claim and Claim Adjustment Expense Reserves

Catastrophes are an inherent risk of the property and casualty insurance business and ~~can contribute~~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 ~~$14~~$85 million and ~~$103~~$121 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016. Catastrophe losses in ~~2015 related~~2016 resulted primarily tofrom U.S. weather-related ~~events.~~events and the Fort McMurray wildfires. The Company reported catastrophe losses, net of reinsurance, of ~~$17~~$60 million and ~~$147~~$89 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2014.~~

Net Prior Year Development

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.

The following table presents further detail of the development recorded for the Commercial segment. A significant amount of the unfavorable development for the nine months ended September 30, 2014 relates to business classes which the Company has exited, but also includes Small Business where the Company has taken underwriting actions in an effort to improve profitability.

~~2015~~largely offsetting.

~~The nine months also included unfavorable loss development related to an extra contractual obligation loss and losses associated with premium development.~~

Overall, favorable development for property and other coverages in accident years 2011 and prior primarily related to lower than expected frequency and favorable individual claim settlements. Additionally, there was favorable development due to better than expected loss emergence in ~~catastrophe losses~~accident years 2013 through 2015.

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

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.

332014.

~~Table of Contents~~

Asbestos and Environmental Pollution Reserves (A&EP) ~~Reserves~~

In 2010, Continental Casualty Company (CCC) together with several of the Company’s insurance subsidiaries completed a transaction with National Indemnity Company (NICO), a subsidiary of Berkshire Hathaway Inc., under which substantially all of the Company’s legacy A&EP liabilities were ceded to NICO ~~(Loss~~through a Loss Portfolio Transfer ~~or LPT)~~(LPT). At the ~~transaction~~ effective date of the transaction, the Company ceded approximately $1.6 billion of net A&EP claim and allocated claim adjustment expense reserves to NICO under a retroactive reinsurance agreement with an aggregate limit of $4 billion. The $1.6 billion of claim and allocated claim adjustment expense reserves ceded to NICO was net of $1.2 billion of ceded claim and allocated claim adjustment expense reserves under existing third-party reinsurance contracts. The NICO LPT aggregate reinsurance limit also covers credit risk on the existing third-party reinsurance related to these liabilities. The Company paid NICO a reinsurance premium of $2 billion and transferred to NICO billed third-party reinsurance receivables related to A&EP claims with a net book value of $215 million, resulting in total consideration of $2.2 billion.

Through December 31, 2013, the Company ~~recorded~~recognized $0.9 billion of additional amounts ceded under the LPT. As a result, the cumulative amounts ceded under the ~~Loss Portfolio Transfer~~LPT exceeded the $2.2 billion consideration paid, resulting in the NICO LPT moving into a gain position, requiring deferred retroactive reinsurance ~~gain.~~accounting treatment. This deferred gain is recognized in earnings in proportion to actual paid recoveries under the ~~Loss Portfolio Transfer.~~LPT. Over the life of the contract, there is no economic impact as long as any additional losses incurred are within the limit ~~under~~of the ~~contract.~~LPT. In a period in which a change in the estimate of ceded incurred losses is ~~changed,~~recognized, the ~~required~~ change to the deferred gain is cumulatively recognized in earnings as if the revised estimate was available at the ~~inception~~effective date of the LPT.

The following table ~~displays~~presents the impact of the Loss Portfolio Transfer on the Condensed Consolidated Statements of Operations.


Periods ended September 30	Three Months						Nine Months
Periods ended June 30													Three Months						Six Months
(In millions)	2015			2014			2015			2014			2016			2015			2016			2015
Net A&EP adverse development before consideration of LPT	$	—		$	—		$	150		$	—		$	—		$	150		$	200		$	150
Provision for uncollectible third-party reinsurance on A&EP	—			—			—			—			—			—			—			—
Additional amounts ceded under LPT	—			—			150			—			—			150			200			150
Retroactive reinsurance benefit recognized	(4		)	(4		)	(75		)	(9		)	(9		)	(66		)	(82		)	(71		)
Pretax impact of deferred retroactive reinsurance benefit	$	(4	)	$	(4	)	$	75		$	(9	)
Pretax impact of unrecognized deferred retroactive reinsurance benefit													$	(9	)	$	84		$	118		$	79

The ~~fourth~~Company completed its reserve review of A&EP reserves in the first quarter of ~~2014 A&EP reserve~~2016. Based upon the Company's review, net unfavorable development prior to cessions to the LPT of $200 million was ~~not completed in 2014 because additional information and analysis on inuring third-party reinsurance recoveries were needed to finalize the review.~~recognized. The ~~review was finalized in the second quarter of 2015. Unfavorable~~unfavorable development was ~~due to a decrease~~driven by an increase in anticipated future ~~reinsurance recoveries related to~~expenses associated with determination of coverage, higher anticipated payouts associated with a limited number of historical accounts having significant asbestos ~~claims~~exposures and higher than expected severity on pollution claims. ~~The effect~~This unfavorable development was ceded to NICO under the LPT; however, the Company’s reported earnings were negatively affected due to the application of retroactive reinsurance accounting, as only a portion of the ~~deferred retroactive reinsurance benefit is~~additional amounts ceded under the LPT were recognized in that quarter. All amounts recognized related to the LPT are recorded inwithin Insurance claims and ~~policyholders'~~policyholders’ benefits in the Condensed Consolidated Statement of Operations.

As of ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014,~~2015, the cumulative amounts ceded under the LPT were ~~$2.6~~$2.8 billion and ~~$2.5~~$2.6 billion. The unrecognized deferred retroactive reinsurance benefit was ~~$251~~$359 million and ~~$176~~$241 million as of ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014.~~2015.

NICO established a collateral trust account as security for its obligations to the Company. The fair value of the collateral trust account was ~~$2.8~~$2.6 billion and ~~$3.4~~$2.8 billion as of ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014.~~2015. In addition, Berkshire Hathaway Inc. guaranteed the payment obligations of NICO up to the full aggregate reinsurance limit as well as certain of NICO’s performance obligations under the trust agreement. NICO is responsible for claims handling and billing and collection from third-party reinsurers related to the Company’s A&EP claims.

~~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.


Periods ended September 30	Three Months						Nine Months
Periods ended June 30													Three Months						Six Months
(In millions)	2015			2014			2015			2014			2016			2015			2016			2015
Pension cost (benefit)
Service cost	$	—		$	3		$	4		$	7		$	—		$	2		$	—		$	4
Interest cost on projected benefit obligation	29			33			85			99			28			28			56			56
Expected return on plan assets	(44		)	(48		)	(131		)	(144		)	(40		)	(44		)	(80		)	(87		)
Amortization of net actuarial loss	7			6			26			19			10			10			19			19
Net periodic pension cost (benefit)	$	(8	)	$	(6	)	$	(16	)	$	(19	)	$	(2	)	$	(4	)	$	(5	)	$	(8	)

Postretirement cost (benefit)
Interest cost on projected benefit obligation	$	—		$	—		$	—		$	1
Amortization of prior service credit	(1		)	—			(2		)	(9		)
Amortization of net actuarial loss	—			—			1			—
Curtailment gain	—			—			—			(86		)
Net periodic postretirement cost (benefit)	$	(1	)	$	—		$	(1	)	$	(94	)

Note H. Commitments, Contingencies and Guarantees

Commitments and Contingencies

~~Table of Contents~~

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

The ~~following tables present~~table below displays 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 July 1, 2015 $ 31
$ 689
$ (585 ) $ 8
$ 143
Other comprehensive income (loss) before reclassifications 2
(67 ) —
(53 ) (118 )
Amounts reclassified from Accumulated other comprehensive income (loss) after tax (expense) benefit of $-, $17, $2, $- and $19 —
(31 ) (4 ) —
(35 )
Other comprehensive income (loss) after tax (expense) benefit of $(1), $21, $(2), $- and $18 2
(36 ) 4
(53 ) (83 )
Balance as of September 30, 2015 $ 33
$ 653
$ (581 ) $ (45 ) $ 60



(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 April 1, 2016	$	32		$	624	$	(642	)	$	(70	)	$	(56	)
Other comprehensive income (loss) before reclassifications	(1		)	323		—			(48		)	274
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $-, $(6), $3, $- and $(3)	—			13		(5		)	—			8
Other comprehensive income (loss) net of tax (expense) benefit of $1, $(157), $(3), $- and $(159)	(1		)	310		5			(48		)	266
Balance as of June 30, 2016	$	31		$	934	$	(637	)	$	(118	)	$	210

(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 July 1, 2014 $ 35
$ 1,182
$ 37
$ (476 ) $ 184
$ 962
Other comprehensive income (loss) before reclassifications 1
(59 ) (3 ) (2 ) (73 ) (136 )
Amounts reclassified from Accumulated other comprehensive income (loss) after tax (expense) benefit of $-, $(12), $(23), $2, $- and $(33) —
24
34
(5 ) —
53
Other comprehensive income (loss) after tax (expense) benefit of $(1), $64, $25, $(1), $- and $87 1
(83 ) (37 ) 3
(73 ) (189 )
Balance as of September 30, 2014 $ 36
$ 1,099
$ —
$ (473 ) $ 111
$ 773



(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 April 1, 2015	$	35		$	1,054		$	(627	)	$	(41	)	$	421
Other comprehensive income (loss) before reclassifications	(4		)	(372		)	36			49			(291		)
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $-, $5, $4, $- and $9	—			(7		)	(6		)	—			(13		)
Other comprehensive income (loss) net of tax (expense) benefit of $2, $181, $(23), $- and $160	(4		)	(365		)	42			49			(278		)
Balance as of June 30, 2015	$	31		$	689		$	(585	)	$	8		$	143

~~Table of Contents~~

(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 (3 ) (318 ) 36
(100 ) (385 )
Amounts reclassified from Accumulated other comprehensive income (loss) after tax (expense) benefit of $-, $22, $9, $- and $31 —
(29 ) (16 ) —
(45 )
Other comprehensive income (loss) after tax (expense) benefit of $1, $140, $(28), $- and $113 (3 ) (289 ) 52
(100 ) (340 )
Balance as of September 30, 2015 $ 33
$ 653
$ (581 ) $ (45 ) $ 60

(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 15
462
12
(2 ) (39 ) 448
Amounts reclassified from Accumulated other comprehensive income (loss) after tax (expense) benefit of $-, $(20), $(23), $(25), $- and $(68) —
38
34
45
—
117
Other comprehensive income (loss) after tax (expense) benefit of $(8), $(209), $15, $26, $- and $(176)
15
424
(22 ) (47 ) (39 ) 331
Balance as of September 30, 2014 $ 36
$ 1,099
$ —
$ (473 ) $ 111
$ 773



(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, 2016	$	27		$	390	$	(648	)	$	(84	)	$	(315	)
Other comprehensive income (loss) before reclassifications	2			546		—			(34		)	514
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $1, $1, $6, $- and $8	(2		)	2		(11		)	—			(11		)
Other comprehensive income (loss) net of tax (expense) benefit of $(2), $(273), $(6), $- and $(281)	4			544		11			(34		)	525
Balance as of June 30, 2016	$	31		$	934	$	(637	)	$	(118	)	$	210



(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	(5		)	(251		)	36			(47		)	(267		)
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $-, $5, $7, $- and $12	—			2			(12		)	—			(10		)
Other comprehensive income (loss) net of tax (expense) benefit of $2, $119, $(26), $- and $95	(5		)	(253		)	48			(47		)	(257		)
Balance as of June 30, 2015	$	31		$	689		$	(585	)	$	8		$	143

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

~~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 and reported 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.~~2015. 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)i) net realized investment gains ~~or losses, 2)~~(losses) ii) income or loss from discontinued operations and 3)iii) 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.

~~Table of Contents~~

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


Three months ended September 30, 2015	Specialty			Commercial				International			Life & Group Non-Core				Corporate & Other Non-Core
Three months ended June 30, 2016														Specialty					Commercial				International				Life & Group Non-Core				Corporate & Other Non-Core
(In millions)	Specialty						Commercial										International									Life & Group Non-Core								Corporate & Other Non-Core				Eliminations				Total								Eliminations				Total
Operating revenues
Net earned premiums	$	706		$	705				$	203		$	137			$		—			$	—			$	1,751		$	702			$	696				$	197			$	136			$	—			$	(1	)		$	1,730
Net investment income	76			82				13			182				1				—				354			133				164				13				188				4				—				502
Other revenues	86			9				1			(1		)		4				(2		)		97			89				8				—				3				—				—				100
Total operating revenues	868			796				217			318				5				(2		)		2,202			924				868				210				327				4				(1		)		2,332
Claims, Benefits and Expenses
Net incurred claims and benefits	307			427				106			361				(3		)		—				1,198			377				469				157				340				(8		)		—				1,335
Policyholders’ dividends	1			1				—			—				—				—				2			1				3				—				—				—				—				4
Amortization of deferred acquisition costs	150			118				45			6				—				—				319			148				117				40				—				—				—				305
Other insurance related expenses	67			128				33			35				—				—				263			73				130				37				31				—				(1		)		270
Other expenses	73			10				9			1				47				(2		)		138			79				11				7				2				47				—				146
Total claims, benefits and expenses	598			684				193			403				44				(2		)		1,920			678				730				241				373				39				(1		)		2,060
Operating income (loss) before income tax	270			112				24			(85		)		(39		)		—				282			246				138				(31		)		(46		)		(35		)		—				272
Income tax (expense) benefit on operating income (loss)	(91		)	(37		)		(15		)	55				16				—				(72		)	(82		)		(46		)		4				42				11				—				(71		)
Net operating income (loss)	179			75				9			(30		)		(23		)		—				210			164				92				(27		)		(4		)		(24		)		—				201
Net realized investment gains (losses)	(22		)	(29		)		(1		)	2				1				—				(49		)	4				8				4				(2		)		2				—				16
Income tax (expense) benefit on net realized investment gains (losses)	8			8				1			—				—				—				17			(2		)		(3		)		(1		)		(3		)		1				—				(8		)
Net realized investment gains (losses), after tax	(14		)	(21		)		—			2				1				—				(32		)	2				5				3				(5		)		3				—				8
Net income (loss) from continuing operations	$	165		$	54			$	9		$	(28	)		$	(22	)		$	—			$	178
Net income (loss)																										$	166			$	97			$	(24	)		$	(9	)		$	(21	)		$	—			$	209

~~Table of Contents~~


Three months ended September 30, 2014	Specialty			Commercial				International			Life & Group Non-Core				Corporate & Other Non-Core
Three months ended June 30, 2015														Specialty					Commercial				International				Life & Group Non-Core				Corporate & Other Non-Core
(In millions)	Specialty						Commercial										International													Life & Group Non-Core					Corporate & Other Non-Core				Eliminations				Total							Eliminations				Total
Operating revenues
Net earned premiums	$	725		$	721				$	225		$	139			$		—			$	—			$	1,810		$	689			$	703			$	207			$	137			$	—			$	(1	)		$	1,735
Net investment income	126			157				15			177				5				—				480			134				169				13				179				5				—				500
Other revenues	76			10				—			(3		)		3				(2		)		84			81				9				(1		)		—				3				—				92
Total operating revenues	927			888				240			313				8				(2		)		2,374			904				881				219				316				8				(1		)		2,327
Claims, Benefits and Expenses
Net incurred claims and benefits	367			549				134			319				(18		)		—				1,351			416				507				114				344				85				—				1,466
Policyholders’ dividends	2			1				—			—				—				—				3			1				2				—				—				—				—				3
Amortization of deferred acquisition costs	151			122				52			7				—				—				332			146				117				45				6				—				—				314
Other insurance related expenses	65			125				37			33				—				—				260			66				130				31				34				(1		)		(1		)		259
Other expenses	65			10				8			36				55				(2		)		172			69				5				(5		)		5				47				—				121
Total claims, benefits and expenses	650			807				231			395				37				(2		)		2,118			698				761				185				389				131				(1		)		2,163
Operating income (loss) before income tax	277			81				9			(82		)		(29		)		—				256			206				120				34				(73		)		(123		)		—				164
Income tax (expense) benefit on operating income (loss)	(93		)	(29		)		(4		)	40				12				—				(74		)	(69		)		(42		)		(12		)		49				42				—				(32		)
Net operating income (loss)	184			52				5			(42		)		(17		)		—				182			137				78				22				(24		)		(81		)		—				132
Net realized investment gains (losses)	3			2				1			30				1				—				37			—				2				1				(5		)		2				—				—
Income tax (expense) benefit on net realized investment gains (losses)	(1		)	3				(2		)	(9		)		(1		)		—				(10		)	—				2				(1		)		6				(1		)		—				6
Net realized investment gains (losses), after tax	2			5				(1		)	21				—				—				27			—				4				—				1				1				—				6
Net income (loss) from continuing operations	$	186		$	57			$	4		$	(21	)		$	(17	)		$	—			$	209
Net income (loss)																										$	137			$	82			$	22			$	(23	)		$	(80	)		$	—			$	138

~~Table of Contents~~

Nine months ended September 30, 2015

Specialty

Commercial
International
Life &
Group
Non-Core

Corporate
& Other
Non-Core

(In millions) Eliminations Total
Operating revenues

Net earned premiums $ 2,075
$ 2,086
$ 601
$ 412
$ —
$ (1 ) $ 5,173
Net investment income 365
455
40
540
12
—
1,412
Other revenues 245
27
—
8
9
(3 ) 286
Total operating revenues 2,685
2,568
641
960
21
(4 ) 6,871
Claims, Benefits and Expenses

Net incurred claims and benefits 1,152
1,388
336
1,045
78
—
3,999
Policyholders’ dividends 3
6
—
—
—
—
9
Amortization of deferred acquisition costs 440
352
125
19
—
—
936
Other insurance related expenses 202
385
101
104
(1 ) (1 ) 790
Other expenses 209
23
9
10
140
(3 ) 388
Total claims, benefits and expenses 2,006
2,154
571
1,178
217
(4 ) 6,122
Operating income (loss) before income tax 679
414
70
(218 ) (196 ) —
749
Income tax (expense) benefit on operating income (loss) (228 ) (141 ) (30 ) 147
70
—
(182 )
Net operating income (loss) 451
273
40
(71 ) (126 ) —
567
Net realized investment gains (losses) (18 ) (23 ) 1
(2 ) 3
—
(39 )
Income tax (expense) benefit on net realized investment gains (losses) 7
7
—
8
(1 ) —
21
Net realized investment gains (losses), after tax (11 ) (16 ) 1
6
2
—
(18 )
Net income (loss) from continuing operations $ 440
$ 257
$ 41
$ (65 ) $ (124 ) $ —
$ 549

September 30, 2015
(In millions)
Reinsurance receivables $ 619
$ 664
$ 172
$ 517
$ 2,567
$ —
$ 4,539
Insurance receivables 851
996
252
10
2
—
2,111
Deferred acquisition costs 305
216
85
—
—
—
606
Goodwill 117
—
34
—
—
—
151
Insurance reserves
Claim and claim adjustment expenses 6,199
9,283
1,365
3,286
2,734
—
22,867
Unearned premiums 1,817
1,307
455
127
—
—
3,706
Future policy benefits —
—
—
9,520
—
—
9,520



Six months ended June 30, 2016	Specialty			Commercial			International			Life & Group Non-Core			Corporate & Other Non-Core
(In millions)	Specialty			Commercial			International			Life & Group Non-Core			Corporate & Other Non-Core			Eliminations			Total
Operating revenues
Net earned premiums	$	1,384		$	1,384		$	395		$	267		$	—		$	(1	)	$	3,429
Net investment income	240			290			25			375			7			—			937
Other revenues	176			14			1			3			3			—			197
Total operating revenues	1,800			1,688			421			645			10			(1		)	4,563
Claims, Benefits and Expenses
Net incurred claims and benefits	767			911			278			663			120			—			2,739
Policyholders’ dividends	2			6			—			—			—			—			8
Amortization of deferred acquisition costs	292			233			87			—			—			—			612
Other insurance related expenses	148			271			65			64			—			(1		)	547
Other expenses	154			16			16			5			101			—			292
Total claims, benefits and expenses	1,363			1,437			446			732			221			(1		)	4,198
Operating income (loss) before income tax	437			251			(25		)	(87		)	(211		)	—			365
Income tax (expense) benefit on operating income (loss)	(146		)	(85		)	4			81			73			—			(73		)
Net operating income (loss)	291			166			(21		)	(6		)	(138		)	—			292
Net realized investment gains (losses)	(7		)	(10		)	8			(5		)	(6		)	—			(20		)
Income tax (expense) benefit on net realized investment gains (losses)	2			3			(2		)	(3		)	3			—			3
Net realized investment gains (losses), after tax	(5		)	(7		)	6			(8		)	(3		)	—			(17		)
Net income (loss)	$	286		$	159		$	(15	)	$	(14	)	$	(141	)	$	—		$	275

~~Table of Contents~~

Nine months ended September 30, 2014

Specialty

Commercial
International
Life &
Group
Non-Core

Corporate
& Other
Non-Core

(In millions) Eliminations Total
Operating revenues

Net earned premiums $ 2,126
$ 2,188
$ 697
$ 417
$ —
$ (1 ) $ 5,427
Net investment income 423
549
46
521
17
—
1,556
Other revenues 218
28
—
10
10
(4 ) 262
Total operating revenues 2,767
2,765
743
948
27
(5 ) 7,245
Claims, Benefits and Expenses

Net incurred claims and benefits 1,213
1,727
382
929
(20 ) —
4,231
Policyholders’ dividends 4
6
—
—
—
—
10
Amortization of deferred acquisition costs 442
371
161
22
—
—
996
Other insurance related expenses 197
376
113
96
—
(1 ) 781
Other expenses 191
25
20
34
75
(4 ) 341
Total claims, benefits and expenses 2,047
2,505
676
1,081
55
(5 ) 6,359
Operating income (loss) before income tax 720
260
67
(133 ) (28 ) —
886
Income tax (expense) benefit on operating income (loss) (240 ) (85 ) (26 ) 98
11
—
(242 )
Net operating income (loss) 480
175
41
(35 ) (17 ) —
644
Net realized investment gains (losses) 9
7
1
42
10
—
69
Income tax (expense) benefit on net realized investment gains (losses) (3 ) (1 ) (1 ) (14 ) (4 ) —
(23 )
Net realized investment gains (losses), after tax 6
6
—
28
6
—
46
Net income (loss) from continuing operations $ 486
$ 181
$ 41
$ (7 ) $ (11 ) $ —
$ 690



June 30, 2016
(In millions)
Reinsurance receivables	$	856	$	621	$	128	$	492	$	2,623	$	—		$	4,720
Insurance receivables	1,005		1,120		274		11		3		—			2,413
Deferred acquisition costs	308		228		84		—		—		—			620
Goodwill	117		—		30		—		—		—			147
Insurance reserves
Claim and claim adjustment expenses	6,414		8,973		1,409		3,382		2,797		—			22,975
Unearned premiums	1,871		1,417		450		128		—		(1		)	3,865
Future policy benefits	—		—		—		11,140		—		—			11,140

December 31, 2014
(In millions)
Reinsurance receivables $ 567
$ 690
$ 207
$ 525
$ 2,753
$ —
$ 4,742
Insurance receivables 778
954
250
13
2
—
1,997
Deferred acquisition costs 304
213
83
—
—
—
600
Goodwill 117
—
35
—
—
—
152
Insurance reserves
Claim and claim adjustment expenses 6,229
9,514
1,441
3,183
2,904
—
23,271
Unearned premiums 1,763
1,273
431
125
—
—
3,592
Future policy benefits —
—
—
9,490
—
—
9,490
Policyholders’ funds 9
18
—
—
—
—
27



Six months ended June 30, 2015	Specialty			Commercial			International			Life & Group Non-Core			Corporate & Other Non-Core
(In millions)	Specialty			Commercial			International			Life & Group Non-Core			Corporate & Other Non-Core			Eliminations			Total
Operating revenues
Net earned premiums	$	1,369		$	1,381		$	398		$	275		$	—		$	(1	)	$	3,422
Net investment income	289			373			27			358			11			—			1,058
Other revenues	159			18			(1		)	9			5			(1		)	189
Total operating revenues	1,817			1,772			424			642			16			(2		)	4,669
Claims, Benefits and Expenses
Net incurred claims and benefits	845			961			230			684			81			—			2,801
Policyholders’ dividends	2			5			—			—			—			—			7
Amortization of deferred acquisition costs	290			234			80			13			—			—			617
Other insurance related expenses	135			257			68			69			(1		)	(1		)	527
Other expenses	136			13			—			9			93			(1		)	250
Total claims, benefits and expenses	1,408			1,470			378			775			173			(2		)	4,202
Operating income (loss) before income tax	409			302			46			(133		)	(157		)	—			467
Income tax (expense) benefit on operating income (loss)	(137		)	(104		)	(15		)	92			54			—			(110		)
Net operating income (loss)	272			198			31			(41		)	(103		)	—			357
Net realized investment gains (losses)	4			6			2			(4		)	2			—			10
Income tax (expense) benefit on net realized investment gains (losses)	(1		)	(1		)	(1		)	8			(1		)	—			4
Net realized investment gains (losses), after tax	3			5			1			4			1			—			14
Net income (loss)	$	275		$	203		$	32		$	(37	)	$	(102	)	$	—		$	371



December 31, 2015
(In millions)
Reinsurance receivables	$	724	$	639	$	144	$	497	$	2,487	$	—	$	4,491
Insurance receivables	890		993		233		11		2		—		2,129
Deferred acquisition costs	307		213		78		—		—		—		598
Goodwill	117		—		33		—		—		—		150
Insurance reserves
Claim and claim adjustment expenses	6,269		9,183		1,347		3,220		2,644		—		22,663
Unearned premiums	1,839		1,297		415		120		—		—		3,671
Future policy benefits	—		—		—		10,152		—		—		10,152

~~Table of Contents~~

The following table presents revenue by line of business for each reportable segment. Revenues are comprised of Operating revenues and Net realized investment gains and losses.


Periods ended September 30	Three Months						Nine Months
Periods ended June 30													Three Months						Six Months
(In millions)	2015			2014			2015			2014			2016			2015			2016			2015
Specialty
Management & Professional Liability	$	605		$	699		$	1,976		$	2,113		$	659		$	674		$	1,277		$	1,371
Surety	132			133			377			380			133			125			260			245
Warranty & Alternative Risks	109			98			314			283			136			105			256			205
Specialty revenues	846			930			2,667			2,776			928			904			1,793			1,821
Commercial
Middle Market	386			404			1,207			1,219			434			412			835			821
Small Business	144			170			467			535			151			158			294			323
Other Commercial Insurance	237			316			871			1,018			291			313			549			634
Commercial revenues	767			890			2,545			2,772			876			883			1,678			1,778
International
Canada	52			69			161			210			51			54			101			109
CNA Europe	78			83			232			254			81			77			159			154
Hardy	86			89			249			280			82			89			169			163
International revenues	216			241			642			744			214			220			429			426
Life & Group Non-Core revenues	320			343			958			990			325			311			640			638
Corporate & Other Non-Core revenues	6			9			24			37			6			10			4			18
Eliminations	(2		)	(2		)	(4		)	(5		)	(1		)	(1		)	(1		)	(2		)
Total revenues	$	2,153		$	2,411		$	6,832		$	7,314		$	2,348		$	2,327		$	4,543		$	4,679

~~Table of Contents~~

~~Note K. Discontinued Operations~~

~~The results of discontinued operations reflected in the Condensed Consolidated Statements of Operations are presented in the following table.~~

Periods ended September 30, 2014
(In millions) Three Months Nine Months
Revenues
Net investment income $ 14
$ 94
Net realized investment gains 1
3
Total revenues 15
97
Claims, Benefits and Expenses
Insurance claims and policyholders' benefits 12
75
Other operating expenses —
2
Total claims, benefits and expenses 12
77
Income before income tax 3
20
Income tax expense (2 ) (6 )
Income from discontinued operations, net of income tax 1
14
Loss on sale, net of income tax benefit (expense) of ($1) and $40 3
(211 )
Income (loss) from discontinued operations $ 4
$ (197 )

~~Table of Contents~~

Item 2. Management's Discussion and Analysis (MD&A) of Financial Condition and Results of Operations

Overview

The following discussion highlights significant factors affecting the Company. References to “we,” “our,” “us” or like terms refer to the business of CNA. Based on 2014 statutory net written premiums, we are the eighth largest commercial insurance writer and the 14^th largest property and casualty insurance organization in the United States of America.

The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements included under Part I, Item 1 of this Form 10-Q and Item 1A Risk Factors and Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations, which are included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, ~~2014.~~2015.

We utilize the net operating income (loss) financial measure to monitor our operations. 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. See further discussion regarding how we manage our business in Note J to the Condensed Consolidated Financial Statements included under Part I, Item 1.

In the evaluation of the results of our core Specialty, Commercial and International segments, we utilize the loss ratio, the expense ratio, the dividend ratio and the combined ratio. These ratios are calculated using GAAP financial results. The loss ratio is the percentage of net incurred claim and claim adjustment expenses to net earned premiums. The expense ratio is the percentage of insurance underwriting and acquisition expenses, including the amortization of deferred acquisition costs, to net earned premiums. The dividend ratio is the ratio of policyholders' dividends incurred to net earned premiums. The combined ratio is the sum of the loss, expense and dividend ratios. In addition we also utilize rate, retention and new business in evaluating operating trends. Rate represents the average change in price on policies that renew excluding exposure change. Retention represents the ~~expiring~~percentage of premium dollars renewed in comparison to the ~~renewal~~expiring premium dollars from policies available to renew. New business represents premiums from policies written with new customers and additional policies written with existing customers.

Changes in estimates of claim and allocated claim adjustment expense reserves and premium accruals, net of reinsurance, for prior years are defined as net prior year development within this MD&A. These changes can be favorable or unfavorable. Net prior year development does not include the effect of related acquisition expenses. Further information on our reserves is provided in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

~~Table of Contents~~

~~CONSOLIDATED OPERATIONS~~

The following table presents the consolidated results of our operations. For more detailed components of our business operations and the net operating income financial measure, see the segment discussions within this MD&A. See the Investments section of this MD&A for further discussion of Net investment income and Net realized investment results.

Periods ended September 30 Three Months Nine Months
(In millions) 2015 2014 2015 2014
Operating Revenues
Net earned premiums $ 1,751
$ 1,810
$ 5,173
$ 5,427
Net investment income 354
480
1,412
1,556
Other revenues 97
84
286
262
Total operating revenues 2,202
2,374
6,871
7,245
Claims, Benefits and Expenses
Net incurred claims and benefits 1,198
1,351
3,999
4,231
Policyholders' dividends 2
3
9
10
Amortization of deferred acquisition costs 319
332
936
996
Other insurance related expenses 263
260
790
781
Other expenses 138
172
388
341
Total claims, benefits and expenses 1,920
2,118
6,122
6,359
Operating income before income tax 282
256
749
886
Income tax expense on operating income (72 ) (74 ) (182 ) (242 )
Net operating income 210
182
567
644
Net realized investment gains (losses) (49 ) 37
(39 ) 69
Income tax (expense) benefit on net realized investment gains (losses) 17
(10 ) 21
(23 )
Net realized investment gains (losses), after tax (32 ) 27
(18 ) 46
Income from continuing operations 178
209
549
690
Income (loss) from discontinued operations, net of tax —
4
—
(197 )
Net income $ 178
$ 213
$ 549
$ 493

~~Three Month Comparison~~

Income from continuing operations decreased $31 million for the three months ended September 30, 2015 as compared with the same period in 2014. Improved net operating income was more than offset by a $59 million decrease in net realized investment results, after tax, in the current period.

Net operating income improved $28 million for the three months ended September 30, 2015 as compared with the same period in 2014, driven by our core property and casualty segments. Net operating income increased $22 million for our core segments due to improved underwriting results, partially offset by lower limited partnership results. Catastrophe losses were $10 million after tax for the three months ended September 30, 2015 and 2014. Net operating results for our non-core segments improved $6 million. Results in 2014 included a $34 million loss on the coinsurance transaction, as further discussed in Note A to the Condensed Consolidated Financial Statements included under Part I, Item 1, and a $9 million reduction in the allowance for uncollectible reinsurance receivables. Excluding these items, the decline in results for our non-core segments for the three months ended September 30, 2015 was driven by our long term care business.

Favorable net prior year development of $180 million and $23 million was recorded for the three months ended September 30, 2015 and 2014 in our Specialty, Commercial, International and Corporate & Other Non-Core segments. Further information on net prior year development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

~~Table of Contents~~

~~Nine Month Comparison~~

Income from continuing operations decreased $141 million for the nine months ended September 30, 2015 as compared with the same period in 2014. The decrease was due to lower net operating income and net realized investment results, after tax, in the current period.

Loss from discontinued operations, net of tax, for the nine months ended September 30, 2014 included a loss of $211 million related to the sale of CAC. Further information on discontinued operations is provided in Note K to the Condensed Consolidated Financial Statements included under Part I, Item 1.

Net operating income decreased $77 million for the nine months ended September 30, 2015 as compared with the same period in 2014. Net operating income increased $68 million in our core property and casualty segments due to improved underwriting results, partially offset by lower limited partnership results. Catastrophe losses were $68 million after tax for the nine months ended September 30, 2015 as compared to $95 million after tax for the same period in 2014. Net operating loss for our non-core segments increased $145 million. Results in 2015 for our non-core segments were negatively affected by decreased results in our long-term care business and a $54 million after-tax charge related to the application of retroactive reinsurance accounting to adverse reserve development ceded under the 2010 A&EP Loss Portfolio Transfer, as further discussed in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1. Results in 2014 for our non-core segments benefited from a $56 million after-tax curtailment gain related to a change in postretirement benefits, as further discussed in Note G to the Condensed Consolidated Financial Statements included under Part I, Item 1. Results in 2014 also included the $34 million loss on the coinsurance transaction, as further discussed in Note A to the Condensed Consolidated Financial Statements included under Part I, Item 1.

Favorable net prior year development of $198 million and $7 million was recorded for the nine months ended September 30, 2015 and 2014 in our Specialty, Commercial, International and Corporate & Other Non-Core segments. Further information on net prior year development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

~~Table of Contents~~

CRITICAL ACCOUNTING ESTIMATES

The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities ~~as of~~at the date of the Condensed Consolidated Financial Statements and the amounts of revenues and expenses reported during the period. Actual results may differ from those estimates.

Our Condensed Consolidated Financial Statements and accompanying notes have been prepared in accordance with GAAP applied on a consistent basis. We continually evaluate the accounting policies and estimates used to prepare the Condensed Consolidated Financial Statements. In general, our estimates are based on historical experience, evaluation of current trends, information from third-party professionals and various other assumptions that are believed to be reasonable under the known facts and circumstances.

The accounting estimates below are considered by us to be critical to an understanding of our Condensed Consolidated Financial Statements as their application places the most significant demands on our judgment.

Insurance Reserves

Reinsurance and Insurance Receivables

Valuation of Investments and Impairment of Securities

Long Term Care Policies

Pension and Postretirement Benefit Obligations

Income Taxes

Due to the inherent uncertainties involved with these types of judgments, actual results could differ significantly from estimates and may have a material adverse impact on our results of operations or equity. See the Critical Accounting Estimates section of our Management's Discussion and Analysis of Financial Condition and Results of Operations included under Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2014~~2015 for further information.

~~Table of Contents~~

~~SEGMENT RESULTS~~

The following discusses the results of continuing operations for our operating segments. Our core property and casualty commercial insurance operations are aggregated and reported in three business segments: Specialty, Commercial and International. Our non-core operations are managed and reported in two segments: Life & Group Non-Core and Corporate & Other Non-Core.

~~Specialty~~CONSOLIDATED OPERATIONS

The following table ~~presents~~includes the consolidated results of our operations. For more detailed components of our business operations and the net operating income financial measure, see the segment discussions within this MD&A. For further discussion of Net investment income and Net realized investment results, see the Investments section of this MD&A.

Periods ended September 30 Three Months Nine Months
(In millions, except ratios, rate and retention) 2015 2014 2015 2014
Net written premiums $ 707
$ 736
$ 2,077
$ 2,150
Net earned premiums 706
725
2,075
2,126
Net investment income 76
126
365
423
Net operating income 179
184
451
480
Net realized investment gains (losses), after tax (14 ) 2
(11 ) 6
Net income 165
186
440
486

Other performance metrics:
Loss and loss adjustment expense ratio 43.5 % 50.7 % 55.5 % 57.1 %
Expense ratio 30.8
29.8
30.9
30.1
Dividend ratio 0.1
0.3
0.2
0.2
Combined ratio 74.4 % 80.8 % 86.6 % 87.4 %

Rate — % 3 % 1 % 3 %
Retention 86 % 87 % 86 % 87 %
New Business $ 67
$ 87
$ 206
$ 239



Periods ended June 30	Three Months						Six Months
(In millions)	2016			2015			2016			2015
Operating Revenues
Net earned premiums	$	1,730		$	1,735		$	3,429		$	3,422
Net investment income	502			500			937			1,058
Other revenues	100			92			197			189
Total operating revenues	2,332			2,327			4,563			4,669
Claims, Benefits and Expenses
Net incurred claims and benefits	1,335			1,466			2,739			2,801
Policyholders' dividends	4			3			8			7
Amortization of deferred acquisition costs	305			314			612			617
Other insurance related expenses	270			259			547			527
Other expenses	146			121			292			250
Total claims, benefits and expenses	2,060			2,163			4,198			4,202
Operating income before income tax	272			164			365			467
Income tax expense on operating income	(71		)	(32		)	(73		)	(110		)
Net operating income	201			132			292			357
Net realized investment gains (losses)	16			—			(20		)	10
Income tax (expense) benefit on net realized investment gains (losses)	(8		)	6			3			4
Net realized investment gains (losses), after tax	8			6			(17		)	14
Net income	$	209		$	138		$	275		$	371

Three Month Comparison

Net ~~written premiums for Specialty decreased $29~~operating income increased $69 million for the three months ended ~~September~~June 30, ~~2015~~2016 as compared with the same period in ~~2014, driven by lower new business. The decrease in net earned premiums was consistent with the trend in net written premiums.~~

Net operating income decreased $5 million for the three months ended September 30, 2015 as compared with the same period in 2014. Improved underwriting results were more than offset by lower net investment income.

The combined ratio improved 6.4 points for the three months ended September 30, 2015 as compared with the same period in 2014. The loss ratio improved 7.2 points driven by higher favorable net prior year development. Catastrophe losses were $3 million, or 0.5 points of the loss ratio for the three months ended September 30, 2015, as compared to $5 million, or 0.7 points of the loss ratio for the three months ended September 30, 2014. The expense ratio increased 1.0 point for the three months ended September 30, 2015, as compared with the same period in 2014, due to the unfavorable effect of lower net earned premiums.

Favorable net prior year development of $132 million and $83 million was recorded for the three months ended September 30, 2015 and 2014. Further information on net prior year development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

~~Table of Contents~~

~~Nine Month Comparison~~

Net written premiums for Specialty decreased $73 million for the nine months ended September 30, 2015 as compared with the same period in 2014, due to lower new business and retention. The decrease in net earned premiums was consistent with the trend in net written premiums.

~~Net operating income decreased $29 million for the nine months ended September 30, 2015 as compared with the same period in 2014, primarily due to lower net investment income.~~

The combined ratio improved 0.8 points for the nine months ended September 30, 2015 as compared with the same period in 2014. The loss ratio improved 1.6 points due to higher favorable net prior year development and an improved current accident year loss ratio. Catastrophe losses were $15 million, or 0.7 points of the loss ratio for the nine months ended September 30, 2015, as compared to $21 million, or 1.0 point of the loss ratio for the nine months ended September 30, 2014. The expense ratio increased 0.8 points for the nine months ended September 30, 2015 as compared with the same period in 2014, primarily driven by increased underwriting expenses and the unfavorable effect of lower net earned premiums.

Favorable net prior year development of $151 million and $135 million was recorded for the nine months ended September 30, 2015 and 2014. Further information on net prior year development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

~~The following table presents the gross and net carried reserves.~~

September 30,
2015 December 31,
2014
(In millions)
Gross Case Reserves $ 2,108
$ 2,136
Gross IBNR Reserves 4,091
4,093
Total Gross Carried Claim and Claim Adjustment Expense Reserves $ 6,199
$ 6,229
Net Case Reserves $ 1,882
$ 1,929
Net IBNR Reserves 3,706
3,726
Total Net Carried Claim and Claim Adjustment Expense Reserves $ 5,588
$ 5,655

~~Table of Contents~~

~~Commercial~~

~~The following table presents the results of operations.~~

Periods ended September 30 Three Months Nine Months
(In millions, except ratios, rate and retention) 2015 2014 2015 2014
Net written premiums $ 642
$ 634
$ 2,118
$ 2,133
Net earned premiums 705
721
2,086
2,188
Net investment income 82
157
455
549
Net operating income 75
52
273
175
Net realized investment gains (losses), after tax
(21 ) 5
(16 ) 6
Net income 54
57
257
181

Other performance metrics:

Loss and loss adjustment expense ratio 60.6 % 75.9 % 66.5 % 78.9 %
Expense ratio 35.2
34.6
35.4
34.2
Dividend ratio —
0.2
0.2
0.3
Combined ratio 95.8 % 110.7 % 102.1 % 113.4 %

Rate 2 % 4 % 2 % 5 %
Retention 76 % 74 % 77 % 72 %
New Business $ 135
$ 116
$ 422
$ 396

~~Three Month Comparison~~

Net written premiums for Commercial increased $8 million for the three months ended September 30, 2015 as compared with the same period in 2014. Higher new business and retention as well as positive rate were substantially offset by the residual effect of previous underwriting actions undertaken in certain business classes. Net earned premiums decreased $16 million for the three months ended September 30, 2015 as compared with the same period in 2014, consistent with the trend in net written premiums in recent quarters.

Net operating income increased $23 million for the three months ended September 30, 2015 as compared with the same period in 2014, due to improved underwriting results partially offset by lower net investment income.

The combined ratio improved 14.9 points for the three months ended September 30, 2015 as compared with the same period in 2014. The loss ratio improved 15.3 points, due to favorable net prior year development for the three months ended September 30, 2015 as compared to unfavorable net prior year development for the same period in 2014 and an improved current accident year loss ratio. Catastrophe losses were $10 million, or 1.4 points of the loss ratio for the three months ended September 30, 2015, as compared to $14 million, or 2.0 points of the loss ratio for the three months ended September 30, 2014. The expense ratio increased 0.6 points for the three months ended September 30, 2015 as compared with the same period in 2014, due to the unfavorable effect of lower net earned premiums.

Favorable net prior year development of $16 million was recorded for the three months ended September 30, 2015, as compared with unfavorable net prior year development of $71 million for the three months ended September 30, 2014. Further information on net prior year development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

~~Table of Contents~~

~~Nine Month Comparison~~

Net written premiums for Commercial decreased $15 million for the nine months ended September 30, 2015 as compared with the same period in 2014, driven by the residual effect of previous underwriting actions undertaken in certain business classes, partially offset by positive rate and higher retention and new business. Net earned premiums decreased $102 million for the nine months ended September 30, 2015 as compared with the same period in 2014, consistent with the trend in net written premiums.

Net operating income increased $98 million for the nine months ended September 30, 2015 as compared with the same period in 2014, due to improved underwriting results, partially offset by lower net investment income.

The combined ratio improved 11.3 points for the nine months ended September 30, 2015 as compared with the same period in 2014. The loss ratio improved 12.4 points, due to favorable net prior year development and an improved current accident year loss ratio. Catastrophe losses were $83 million, or 4.0 points of the loss ratio for the nine months ended September 30, 2015, as compared to $121 million, or 5.6 points of the loss ratio for the nine months ended September 30, 2014. The expense ratio increased 1.2 points for the nine months ended September 30, 2015 as compared with the same period in 2014, due to the unfavorable effect of lower net earned premiums.

Favorable net prior year development of $17 million was recorded for the nine months ended September 30, 2015, as compared with unfavorable net prior year development of $155 million for the nine months ended September 30, 2014. Further information on net prior year development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

~~The following table presents the gross and net carried reserves.~~

September 30,
2015 December 31,
2014
(In millions)
Gross Case Reserves $ 5,105
$ 5,298
Gross IBNR Reserves 4,178
4,216
Total Gross Carried Claim and Claim Adjustment Expense Reserves $ 9,283
$ 9,514
Net Case Reserves $ 4,740
$ 4,947
Net IBNR Reserves 3,909
3,906
Total Net Carried Claim and Claim Adjustment Expense Reserves $ 8,649
$ 8,853

~~Table of Contents~~

~~International~~

~~The following table presents the results of operations.~~

Periods ended September 30 Three Months Nine Months
(In millions, except ratios, rate and retention) 2015 2014 2015 2014
Net written premiums $ 180
$ 190
$ 641
$ 698
Net earned premiums 203
225
601
697
Net investment income 13
15
40
46
Net operating income 9
5
40
41
Net realized investment gains (losses), after tax —
(1 ) 1
—
Net income 9
4
41
41

Other performance metrics:
Loss and loss adjustment expense ratio 52.4 % 59.7 % 55.9 % 54.8 %
Expense ratio 38.0
39.3
37.6
39.3
Dividend ratio —
—
—
—
Combined ratio 90.4 % 99.0 % 93.5 % 94.1 %

Rate (1 )% (1 )% (1 )% (1 )%
Retention 73 % 72 % 76 % 77 %
New Business $ 23
$ 21
$ 83
$ 88

~~Three Month Comparison~~

Net written premiums for International decreased $10 million for the three months ended September 30, 2015 as compared with the same period in 2014. The decrease was driven by the unfavorable effect of foreign currency exchange rates. Excluding the effect of foreign currency exchange rates, net written premiums increased 5% for the three months ended September 30, 2015 as compared with the same period in 2014 driven by higher new business. Net earned premiums decreased $22 million for the three months ended September 30, 2015 as compared with the same period in 2014, consistent with the trend in net written premiums.

Net operating income increased $4 million for the three months ended September 30, 2015 as compared with the same period in 2014 due to improved underwriting results driven by higher favorable net prior year development.

The combined ratio improved 8.6 points for the three months ended September 30, 2015 as compared with the same period in 2014. The loss ratio improved 7.3 points. This improvement was due to higher favorable net prior year development, partially offset by a higher current accident year loss ratio. The deterioration in the current accident year loss ratio was driven by large losses, including losses related to the explosion in Tianjin, China. The expense ratio improved 1.3 points for the three months ended September 30, 2015 as compared with the same period in 2014 due to lower expenses, partially offset by the unfavorable effect of lower net earned premiums.

Favorable net prior year development of $32 million and $10 million was recorded for the three months ended September 30, 2015 and 2014. Further information on net prior year development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

~~Table of Contents~~

~~Nine Month Comparison~~

Net written premiums for International decreased $57 million for the nine months ended September 30, 2015 as compared with the same period in 2014. The decrease was driven by the unfavorable effect of foreign currency exchange rates, the 2014 termination of a specialty product managing general underwriter relationship in Canada and unfavorable premium development at Hardy. Net earned premiums decreased $96 million for the nine months ended September 30, 2015 as compared with the same period in 2014, consistent with the trend in net written premiums.

The combined ratio improved 0.6 points for the nine months ended September 30, 2015 as compared with the same period in 2014. The loss ratio increased 1.1 points, primarily due to an increase in the non-catastrophe current accident year loss ratio driven by large losses. Catastrophe losses were $5 million, or 0.8 points of the loss ratio for the nine months ended September 30, 2015, as compared to $5 million, or 0.7 points of the loss ratio for the nine months ended September 30, 2014. The expense ratio improved 1.7 points for the nine months ended September 30, 2015 as compared with the same period in 2014 due to lower expenses, partially offset by the unfavorable effect of lower earned premiums.

Favorable net prior year development of $30 million and $26 million was recorded for the nine months ended September 30, 2015 and 2014. Further information on net prior year development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

~~The following table presents the gross and net carried reserves.~~

September 30,
2015 December 31,
2014
(In millions)
Gross Case Reserves $ 611
$ 752
Gross IBNR Reserves 754
689
Total Gross Carried Claim and Claim Adjustment Expense Reserves $ 1,365
$ 1,441
Net Case Reserves $ 503
$ 598
Net IBNR Reserves 711
663
Total Net Carried Claim and Claim Adjustment Expense Reserves $ 1,214
$ 1,261

~~Table of Contents~~

~~Life & Group Non-Core~~

~~The following table presents the results of operations.~~

Periods ended September 30 Three Months Nine Months
(In millions) 2015 2014 2015 2014
Net earned premiums $ 137
$ 139
$ 412
$ 417
Net investment income 182
177
540
521
Net operating loss (30 ) (42 ) (71 ) (35 )
Net realized investment gains (losses), after tax 2
21
6
28
Net loss (28 ) (21 ) (65 ) (7 )

~~Three Month Comparison~~

Net earned premiums for Life & Group Non-Core were consistent for the three months ended September 30, 2015 as compared with the same period in 2014, as the effect of policy lapses was substantially offset by rate increases.

Net operating loss decreased $12 million for the three months ended September 30, 2015 as compared with the same period in 2014. Results in 2014 included a $34 million after-tax loss on the coinsurance transaction, as further discussed in Note A to the Condensed Consolidated Financial Statements included under Part I, Item 1. The net operating loss for our long term care business increased $23 million. Long term care results in 2014 benefited from unusually favorable morbidity experience in our long term care business as compared to unfavorable morbidity experience in the current year period.

~~Nine Month Comparison~~

Net earned premiums for Life & Group Non-Core were consistent for the nine months ended September 30, 2015 as compared with the same period in 2014, due to the same reasons discussed in the three month comparison.

Net operating loss increased $36 million for the nine months ended September 30, 2015 as compared with the same period in 2014. The net operating loss for our long term care business increased $64 million. Long term care results in 2014 benefited from unusually favorable morbidity experience in our long term care business as compared to unfavorable morbidity experience in the current year period. Results in 2014 included the coinsurance transaction discussed above.

~~Table of Contents~~

~~Corporate & Other Non-Core~~

~~The following table presents the results of operations.~~

Periods ended September 30 Three Months Nine Months
(In millions) 2015 2014 2015 2014
Net investment income $ 1
$ 5
$ 12
$ 17
Interest expense 39
48
117
138
Net operating loss (23 ) (17 ) (126 ) (17 )
Net realized investment gains (losses), after tax 1
—
2
6
Net loss (22 ) (17 ) (124 ) (11 )

~~Three Month Comparison~~

~~Net operating loss increased $6 million for the three months ended September 30, 2015 as compared with the same period in 2014.~~2015. Results in 2015 included lower interest expense due to maturity of higher coupon debt in the fourth quarter of 2014. Results in 2014 were favorably affected by a $9 million after-tax reduction in the allowance for uncollectible reinsurance receivables arising from a change in estimate.

~~No net prior year development was recorded for the three months ended September 30, 2015, as compared with favorable net prior year development of $1 million for three months ended September 30, 2014.~~

~~Nine Month Comparison~~

~~Net operating loss increased $109 million for the nine months ended September 30, 2015 as compared with the same period in 2014. Results in 2015~~within our Corporate and Other Non-Core segment were negatively affected by a $54 million after-tax charge related to the application of retroactive reinsurance accounting to adverse reserve development ceded under the 2010 A&EP Loss Portfolio Transfer, as further discussed in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1. ~~Results in 2014 benefited from a $56~~Excluding the effect of the retroactive reinsurance charge, net operating results for our non-core segments improved $23 million ~~after-tax curtailment gain~~primarily driven by our long term care business. Net operating income decreased $8 million for our core segments due to improved underwriting results, largely due to favorable net prior year development, which were more than offset by foreign currency exchange rate losses and lower investment income.

Favorable net prior year development of $106 million and $20 million was recorded for the three months ended June 30, 2016 and 2015 related to our Specialty, Commercial and International segments. Further information on net prior year development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1. Catastrophe losses were $58 million after tax for the three months ended June 30, 2016 as compared to $39 million after tax for the same period in 2015.

Six Month Comparison

Net operating income decreased $65 million for the six months ended June 30, 2016 as compared with the same period in 2015. Net operating income decreased $65 million for our core segments due to a ~~change~~decrease in ~~postretirement benefits,~~net investment income, driven by lower limited partnership returns, and higher non-catastrophe current accident year losses, partially offset by higher net favorable prior year development. Results for our non-core segments were negatively affected in both periods by after tax charges related to the application of retroactive reinsurance accounting to adverse reserve development ceded under the 2010 A&EP Loss Portfolio Transfer. The Loss Portfolio Transfer drove $25 million of the period over period change, as further discussed in Note GE to the Condensed Consolidated Financial Statements included under Part I, Item 1. Excluding the effect of the retroactive reinsurance charges, net operating results for our non-core segments improved $29 million primarily driven by our long term care business.

Favorable net prior year development of $172 million and $18 million was recorded for the six months ended June 30, 2016 and 2015 related to our Specialty, Commercial and International segments. Further information on net prior year development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1. Catastrophe losses were $82 million after tax for the six months ended June 30, 2016 as compared to $58 million after tax for the same period in 2015.

SEGMENT RESULTS

The following discusses the results for our reporting segments. Our core property and casualty commercial insurance operations are aggregated and reported in three business segments: Specialty, Commercial and International. Our non-core operations are managed and reported in two segments: Life & Group Non-Core and Corporate & Other Non-Core.

Specialty

The following table presents the results of operations.



Periods ended June 30	Three Months						Six Months
(In millions, except ratios, rate and retention)	2016			2015			2016			2015
Net written premiums	$	691		$	672		$	1,375		$	1,370
Net earned premiums	702			689			1,384			1,369
Net investment income	133			134			240			289
Net operating income	164			137			291			272
Net realized investment gains (losses), after tax	2			—			(5		)	3
Net income	166			137			286			275

Other performance metrics:
Loss and loss adjustment expense ratio	53.9		%	60.3		%	55.5		%	61.7		%
Expense ratio	31.3			30.7			31.7			31.0
Dividend ratio	0.2			0.2			0.2			0.2
Combined ratio	85.4		%	91.2		%	87.4		%	92.9		%

Rate	1		%	1		%	1		%	1		%
Retention	86			86			87			86
New business	$	61		$	63		$	126		$	139

Three Month Comparison

Net written premiums for Specialty increased $19 million for the three months ended June 30, 2016 as compared with the same period in 2015, reflecting steady retention, positive rate and a modest amount of new business. The increase in net earned premiums was consistent with the trend in net written premiums.

Net operating income increased $27 million for the three months ended June 30, 2016 as compared with the same period in 2015, primarily due to higher favorable net prior year development.

The combined ratio improved 5.8 points for the three months ended June 30, 2016 as compared with the same period in 2015. The loss ratio improved 6.4 points primarily due to higher favorable net prior year reserve development partially offset by a higher non-catastrophe current accident year loss ratio. Catastrophe losses were $9 million, or 1.3 points of the loss ratio for the three months ended June 30, 2016, as compared to $5 million, or 0.7 points of the loss ratio for the three months ended June 30, 2015. The expense ratio increased 0.6 points for the three months ended June 30, 2016 as compared with the same period in 2015, primarily due to higher net commissions.

Favorable net prior year development of $72 million and $15 million was recorded in the three months ended June 30, 2016 and 2015. Further information on net prior year development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

Six Month Comparison

Net written premiums for Specialty increased $5 million for the six months ended June 30, 2016 as compared with the same period in 2015, reflecting steady retention, positive rate and a modest amount of new business. The increase in net earned premiums was consistent with the trend in net written premiums.

Net operating income increased $19 million for the six months ended June 30, 2016 as compared with the same period in 2015, primarily due to higher favorable net prior year development, partially offset by lower net investment income.

The combined ratio improved 5.5 points for the six months ended June 30, 2016 as compared with the same period in 2015. The loss ratio improved 6.2 points primarily due to higher favorable net prior year reserve development partially offset by a higher non-catastrophe current accident year loss ratio. Catastrophe losses were $13 million, or 1.0 points of the loss ratio for the six months ended June 30, 2016, as compared to $12 million, or 0.9 points of the loss ratio for the six months ended June 30, 2015. The expense ratio increased 0.7 points for the six months ended June 30, 2016 as compared with the same period in 2015, due to higher underwriting expenses and net commissions.

Favorable net prior year development of $117 million and $19 million was recorded for the six months ended June 30, 2016 and 2015. Further information on net prior year development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

The following table presents the gross and net carried reserves.



(In millions)	June 30, 2016		December 31, 2015
Gross Case Reserves	$	1,988	$	2,011
Gross IBNR Reserves	4,426		4,258
Total Gross Carried Claim and Claim Adjustment Expense Reserves	$	6,414	$	6,269
Net Case Reserves	$	1,785	$	1,810
Net IBNR Reserves	3,781		3,758
Total Net Carried Claim and Claim Adjustment Expense Reserves	$	5,566	$	5,568

Commercial

The following table presents the results of operations.



Periods ended June 30	Three Months						Six Months
(In millions, except ratios, rate and retention)	2016			2015			2016			2015
Net written premiums	$	740		$	717		$	1,488		$	1,476
Net earned premiums	696			703			1,384			1,381
Net investment income	164			169			290			373
Net operating income	92			78			166			198
Net realized investment gains (losses), after tax	5			4			(7		)	5
Net income	97			82			159			203

Other performance metrics:
Loss and loss adjustment expense ratio	67.4		%	72.1		%	65.8		%	69.6		%
Expense ratio	35.7			34.9			36.5			35.4
Dividend ratio	0.4			0.2			0.4			0.3
Combined ratio	103.5		%	107.2		%	102.7		%	105.3		%

Rate	—		%	2		%	—		%	2		%
Retention	83			79			83			77
New business	$	146		$	149		$	283		$	287

Three Month Comparison

Net written premiums for Commercial increased $23 million for the three months ended June 30, 2016 as compared with the same period in 2015, driven by higher retention and a steady level of new business. Net earned premiums decreased $7 million for the three months ended June 30, 2016 as compared with the same period in 2015. Excluding the effect of premium development, the increase in net earned premiums was consistent with the trend in net written premiums.

Net operating income increased $14 million for the three months ended June 30, 2016 as compared with the same period in 2015, primarily due to favorable net prior year reserve development.

The combined ratio improved 3.7 points for the three months ended June 30, 2016 as compared with the same period in 2015. The loss ratio improved 4.7 points due to favorable net prior year reserve development and an improved non-catastrophe current accident year loss ratio. Catastrophe losses were $55 million, or 8.0 points of the loss ratio for the three months ended June 30, 2016, as compared to $54 million, or 7.7 points of the loss ratio for the three months ended June 30, 2015. The expense ratio increased 0.8 points for the three months ended June 30, 2016 as compared with the same period in 2015, due to higher underwriting expenses.

Favorable net prior year development of $20 million was recorded for the three months ended June 30, 2016 as compared with unfavorable net prior year development of $5 million for the three months ended June 30, 2015. Further information on net prior year development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

Six Month Comparison

Net written premiums for Commercial increased $12 million for the six months ended June 30, 2016 as compared with the same period in 2015, driven by higher retention and a steady level of new business. The increase in net earned premiums was consistent with the trend in net written premiums.

Net operating income decreased $32 million for the six months ended June 30, 2016 as compared with the same period in 2015, due to lower net investment income partially offset by favorable net prior year reserve development.

The combined ratio improved 2.6 points for the six months ended June 30, 2016 as compared with the same period in 2015. The loss ratio improved 3.8 points due to favorable net prior year reserve development and an improved non-catastrophe current accident year loss ratio. Catastrophe losses were $83 million, or 6.1 points of the loss ratio for the six months ended June 30, 2016, as compared to $73 million, or 5.3 points of the loss ratio for the six months ended June 30, 2015. The expense ratio increased 1.1 points for the six months ended June 30, 2016 as compared with the same period in 2015, primarily due to higher underwriting expenses.

Favorable net prior year development of $36 million and $1 million was recorded for the six months ended June 30, 2016 and 2015. Further information on net prior year development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

The following table presents the gross and net carried reserves.



(In millions)	June 30, 2016		December 31, 2015
Gross Case Reserves	$	4,833	$	4,975
Gross IBNR Reserves	4,140		4,208
Total Gross Carried Claim and Claim Adjustment Expense Reserves	$	8,973	$	9,183
Net Case Reserves	$	4,521	$	4,651
Net IBNR Reserves	3,883		3,925
Total Net Carried Claim and Claim Adjustment Expense Reserves	$	8,404	$	8,576

International

The following table presents the results of operations.



Periods ended June 30	Three Months						Six Months
(In millions, except ratios, rate and retention)	2016			2015			2016			2015
Net written premiums	$	194		$	249		$	430		$	461
Net earned premiums	197			207			395			398
Net investment income	13			13			25			27
Net operating (loss) income	(27		)	22			(21		)	31
Net realized investment gains, after tax	3			—			6			1
Net (loss) income	(24		)	22			(15		)	32

Other performance metrics:
Loss and loss adjustment expense ratio	79.8		%	55.0		%	70.5		%	57.7		%
Expense ratio	38.8			37.2			38.3			37.4
Combined ratio	118.6		%	92.2		%	108.8		%	95.1		%

Rate	(2		)%	(2		)%	(1		)%	(1		)%
Retention	70			76			75			77
New business ⁽¹⁾	$	62		$	25		$	122		$	60

(1) Beginning in 2016, new business includes Hardy. New business for Hardy was $36 million and $67 million for the three and six months ended June 30, 2016.

Three Month Comparison

Net written premiums for International decreased $55 million for the three months ended June 30, 2016 as compared with the same period in 2015. Excluding the effect of foreign currency exchange rates and the timing of reinsurance spend, net written premiums for the three months ended June 30, 2016 decreased 12% primarily due to lower retention and rate. The decrease in net earned premiums was consistent with the trend in net written premiums.

Net operating results decreased $49 million for the three months ended June 30, 2016 as compared with the same period in 2015, primarily due to a higher level of large losses as well as higher catastrophe losses. Additionally, the comparison was negatively affected by $13 million due to fluctuations in foreign currency exchange rates.

The combined ratio increased 26.4 points for the three months ended June 30, 2016 as compared with the same period in 2015. The loss ratio increased 24.8 points due to an increase in the current accident year loss ratio driven by large losses related to political risk, property and financial institutions partially offset by higher favorable net prior year loss development. Catastrophe losses were $21 million, or 10.6 points of the loss ratio for the three months ended June 30, 2016, primarily driven by the Fort McMurray wildfires, as compared to $1 million, or 0.8 points of the loss ratio for the three months ended June 30, 2015. The expense ratio increased 1.6 points for the three months ended June 30, 2016 as compared with the same period in 2015, due to lower net earned premiums.

Favorable net prior year development of $14 million and $10 million was recorded for the three months ended June 30, 2016 and 2015. Further information on net prior year development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

Six Month Comparison

Net written premiums for International decreased $31 million for the six months ended June 30, 2016 as compared with the same period in 2015. Excluding the effect of foreign currency exchange rates and premium development, net written premiums for the six months ended June 30, 2016 decreased 6% primarily due to lower retention and rate. The decrease in net earned premiums was consistent with the trend in net written premiums.

Net operating results decreased $52 million for the six months ended June 30, 2016 as compared with the same period in 2015, primarily due to a higher level of large losses as well as higher catastrophe losses. Additionally, the comparison was negatively affected by $15 million due to fluctuations in foreign currency exchange rates.

The combined ratio increased 13.7 points for the six months ended June 30, 2016 as compared with the same period in 2015. The loss ratio increased 12.8 points due to an increase in the current accident year loss ratio driven by large losses related to political risk, property and financial institutions partially offset by favorable net prior year development. Catastrophe losses were $25 million, or 6.3 points of the loss ratio for the six months ended June 30, 2016, primarily driven by the Fort McMurray wildfires, as compared to $4 million, or 1.0 points of the loss ratio for the six months ended June 30, 2015. The expense ratio increased 0.9 points for the six months ended June 30, 2016 as compared with the same period in 2015, due to higher underwriting expenses and a decrease in net earned premiums.

Favorable net prior year development of $19 million was recorded for the six months ended June 30, 2016 as compared with unfavorable net prior year development of $2 million for the six months ended June 30, 2015. Further information on net prior year development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

The following table presents the gross and net carried reserves.



(In millions)	June 30, 2016		December 31, 2015
Gross Case Reserves	$	638	$	622
Gross IBNR Reserves	771		725
Total Gross Carried Claim and Claim Adjustment Expense Reserves	$	1,409	$	1,347
Net Case Reserves	$	567	$	531
Net IBNR Reserves	719		688
Total Net Carried Claim and Claim Adjustment Expense Reserves	$	1,286	$	1,219

Referendum on the United Kingdom's Membership in the European Union

On June 23, 2016, the United Kingdom (U.K.) held a referendum in which voters approved an exit from the European Union (E.U.), commonly referred to as "Brexit". As a result of the referendum, it is expected that the British government will formally commence the process to leave the E.U. and begin negotiating the terms of treaties that will govern the U.K.'s future relationship with the E.U. Although the terms of any future treaties are unknown, changes in our international operating platform may be required to continue to write business in the E.U. after the completion of Brexit. As a result of these changes, the complexity and cost of regulatory compliance of our European business is likely to increase.

Life & Group Non-Core

The following table presents the results of operations.



Periods ended June 30	Three Months						Six Months
(In millions)	2016			2015			2016			2015
Net earned premiums	$	136		$	137		$	267		$	275
Net investment income	188			179			375			358
Net operating loss	(4		)	(24		)	(6		)	(41		)
Net realized investment (losses) gains, after tax	(5		)	1			(8		)	4
Net loss	(9		)	(23		)	(14		)	(37		)

Due to the recognition of the premium deficiency and resetting of actuarial assumptions in the fourth quarter of 2015, the operating results for our long term care business in 2016 now reflect the variance between actual experience and the expected results contemplated in our best estimate reserves.

Three Month Comparison

The net operating loss of $4 million was generally in line with expectations, as the impact of unfavorable persistency in our long term care business was partially offset by favorable mortality experience in our structured settlements and life settlement contracts business.

Six Month Comparison

Results for the current year six month period were generally consistent with the three month summary above.

Corporate & Other Non-Core

The following table presents the results of operations.



Periods ended June 30	Three Months						Six Months
(In millions)	2016			2015			2016			2015
Net investment income	$	4		$	5		$	7		$	11
Interest expense	38			39			80			78
Net operating loss	(24		)	(81		)	(138		)	(103		)
Net realized investment gains (losses), after tax	3			1			(3		)	1
Net loss	(21		)	(80		)	(141		)	(102		)

Three Month Comparison

Net operating loss improved $57 million for the three months ended June 30, 2016 as compared with the same period in 2015. Results in 2015 were negatively affected by a $54 million after-tax charge related to the application of retroactive reinsurance accounting to adverse reserve development ceded under the 2010 A&EP Loss Portfolio Transfer, as the Company completed the reserve review in the second quarter of 2015 and in the first quarter of 2016, which is further discussed in Note E to the Condensed Consolidated Financial Statements included under Part 1, Item 1.

Six Month Comparison

Net operating loss increased $35 million for the six months ended June 30, 2016 as compared with the same period in 2015. Results in both periods were negatively affected by after-tax charges related to the application of retroactive reinsurance accounting to adverse reserve development ceded under the 2010 A&EP Loss Portfolio Transfer. The Loss Portfolio Transfer drove $25 million of the period over period change. This is further discussed in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1. Additionally, ~~2015 benefited from lower interest expense~~the 2016 net operating loss was negatively affected by the elimination of subtenant revenue and increased lease expenses due to the ~~maturity~~sale of ~~higher coupon debt~~the principal executive offices of CNAF in the ~~fourth~~first quarter of ~~2014, and results in 2014 were favorably affected by the reduction in the allowance for uncollectible reinsurance receivables arising from a change in estimate.~~

No net prior year development was recorded for the nine months ended September 30, 2015, as compared with favorable net prior year development of $1 million for the nine months ended September 30, 2014.2016.

The following table presents the gross and net carried reserves.

(In millions) September 30,
2015 December 31,
2014
Gross Case Reserves $ 1,555
$ 1,189
Gross IBNR Reserves 1,179
1,715
Total Gross Carried Claim and Claim Adjustment Expense Reserves $ 2,734
$ 2,904
Net Case Reserves $ 135
$ 144
Net IBNR Reserves 163
171
Total Net Carried Claim and Claim Adjustment Expense Reserves $ 298
$ 315



(In millions)	June 30, 2016		December 31, 2015
Gross Case Reserves	$	1,643	$	1,521
Gross IBNR Reserves	1,154		1,123
Total Gross Carried Claim and Claim Adjustment Expense Reserves	$	2,797	$	2,644
Net Case Reserves	$	106	$	130
Net IBNR Reserves	138		153
Total Net Carried Claim and Claim Adjustment Expense Reserves	$	244	$	283

~~Table of Contents~~

INVESTMENTS

Net Investment Income

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


Periods ended September 30	Three Months						Nine Months
(In millions, except yields)	2015			2014			2015			2014
Periods ended June 30													Three Months						Six Months
(In millions)													2016			2015			2016			2015
Fixed maturity securities:
Taxable	$	346		$	352		$	1,040		$	1,054		$	349		$	352		$	694		$	694
Tax-Exempt	103			101			304			302			100			100			201			201
Total fixed maturity securities	449			453			1,344			1,356			449			452			895			895
Limited partnership investments	(93		)	29			69			199			46			48			32			162
Other, net of investment expense	(2		)	(2		)	(1		)	1			7			—			10			1
Pretax net investment income	$	354		$	480		$	1,412		$	1,556
After-tax net investment income	$	265		$	346		$	1,015		$	1,108
Net investment income													$	502		$	500		$	937		$	1,058
Net investment income, after tax													$	362		$	356		$	677		$	750

Effective income yield for the fixed maturity securities portfolio, pretax	4.8		%	4.8		%	4.8		%	4.9		%	4.8		%	4.9		%	4.8		%	4.8		%
Effective income yield for the fixed maturity securities portfolio, after tax	3.5		%	3.5		%	3.5		%	3.5		%	3.5		%	3.5		%	3.4		%	3.5		%

~~After-tax net~~Net investment income, after tax, for the three months ended ~~September~~June 30, ~~2015~~2016 was in line with the same period in 2015. Income from fixed maturity securities reflects an increase in the invested asset base. Limited partnerships returned 1.8% for the three months ended June 30, 2016 as compared with 1.6% for the same period in 2015.

Net investment income, after tax, for the six months ended June 30, 2016 decreased ~~$81~~$73 million as compared with the same period in ~~2014.~~2015. The decrease was driven by limited partnership investments, which returned ~~(3.2)%~~1.2% as compared with ~~1.0%~~5.5% in the prior year period.

After-tax net investment income for the nine months ended September 30, 2015 decreased $93 million as compared with the same period in 2014. The decrease was driven by limited partnerships, which returned 2.2% as compared with 7.4% in the prior year period. Income from fixed maturity securities was unfavorably affected by a decline in the effective income yield, partially offset by favorable changes in estimates for prepayments for asset-backed securities.

Net Realized Investment Gains (Losses)

Net realized investment gains, after tax, increased $2 million for the three months ended June 30, 2016 as compared with the same period in 2015, driven by higher net realized investment gains on sales of securities and lower OTTI losses recognized in earnings, partially offset by derivative results.

Net realized investment results, after tax, decreased ~~$59~~$31 million for the ~~three~~six months ended ~~September~~June 30, ~~2015~~2016 as compared with the same period in ~~2014. This decrease was~~2015, driven by ~~higher OTTI losses recognized in earnings and lower~~derivative results. Additionally, the current period net realized investment ~~gains on sales of securities.~~

Further information on our realized gains and losses, including our OTTI losses, ~~and derivative gains,~~ is ~~included~~set forth in Note C to the Condensed Consolidated Financial Statements included under Part I, Item 1.

September 30, 2015
(In millions) Estimated Fair Value Gross Unrealized Losses
Due in one year or less $ 114
$ 4
Due after one year through five years 934
29
Due after five years through ten years 3,588
132
Due after ten years 1,554
86
Total $ 6,190
$ 251



	June 30, 2016
(In millions)	Estimated Fair Value		Gross Unrealized Losses
Due in one year or less	$	239	$	2
Due after one year through five years	724		25
Due after five years through ten years	1,520		56
Due after ten years	544		45
Total	$	3,027	$	128

Short Term Investments

(In millions) September 30,
2015 December 31,
2014
Short term investments:
Commercial paper $ 747
$ 922
U.S. Treasury securities 453
466
Money market funds 129
206
Other 153
112
Total short term investments $ 1,482
$ 1,706




(In millions)	June 30, 2016		December 31, 2015
Short term investments:
Commercial paper	$	862	$	998
U.S. Treasury securities	277		411
Money market funds	79		60
Other	166		191
Total short term investments	$	1,384	$	1,660

LIQUIDITY AND CAPITAL RESOURCES

Common Stock Dividends

During the third quarter of 2015, we entered into a new credit agreement with a syndicate of banks and simultaneously terminated our previous credit agreement. The new credit agreement established a five-year $250 million senior unsecured revolving credit facility which may be used for general corporate purposes. At our election, the commitments under the new credit agreement may be increased from time to time up to an additional aggregate amount of $100 million and the new credit agreement includes two optional one-year extensions prior to the first and second anniversary of the closing date, subject to applicable consents. Under the new credit agreement, we are required to pay a facility fee which would adjust automatically in the event of a change in our financial ratings. The new credit agreement includes several covenants, including maintenance of a minimum consolidated net worth and a defined ratio of consolidated indebtedness to consolidated total capitalization.

ACCOUNTING STANDARDS ~~UPDATE~~UPDATES

FORWARD-LOOKING STATEMENTS

Company-Specific Factors

Industry and General Market Factors

Impact of Catastrophic Events and Related Developments

Referendum on the United Kingdom's Membership in the European Union

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Item 4. Controls and Procedures

PART II. Other Information

Item 1. Legal Proceedings



		CNA Financial Corporation

Dated: ~~November 3, 2015~~August 1, 2016	By	/s/ D. Craig Mense
		D. Craig Mense Executive Vice President and Chief Financial Officer



Description of Exhibit	Exhibit Number

Credit Agreement among CNA Financial Corporation, Wells Fargo Securities, LLC, J.P. Morgan Securities LLC, Wells Fargo Bank, National Association, JPMorgan Chase Bank, N.A., Citibank, N.A., The Northern Trust Company, U.S. Bank National Association and other lenders named therein, dated August 28, 2015 (Exhibit 99.1 to August 28, 2015 Form 8-K incorporated herein by reference)	~~10.1~~

~~Second Amendment to the CNA Supplemental Executive Savings and Capital Accumulation Plan, dated July 22, 2015~~	~~10.6.2~~

Certification of Chief Executive Officer	31.1

Certification of Chief Financial Officer	31.2

Written 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)	32.1

Written 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

XBRL Instance Document	101.INS

XBRL Taxonomy Extension Schema	101.SCH

XBRL Taxonomy Extension Calculation Linkbase	101.CAL

XBRL Taxonomy Extension Definition Linkbase	101.DEF

XBRL Taxonomy Label Linkbase	101.LAB

XBRL Taxonomy Extension Presentation Linkbase	101.PRE


	September 30, 2015				December 31, 2014				June 30, 2016				December 31, 2015
(In millions)	Cost or Amortized Cost		Estimated Fair Value		Cost or Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	1,406	$	1,425	$	2,479	$	2,511	$	1,817	$	1,855	$	1,574	$	1,595
Due after one year through five years	7,772		8,186		9,054		9,605		8,616		9,114		7,721		8,070
Due after five years through ten years	14,149		14,577		12,055		12,584		14,583		15,466		14,652		14,915
Due after ten years	14,238		16,010		13,728		16,049		12,812		15,412		13,303		14,989
Total	$	37,565	$	40,198	$	37,316	$	40,749	$	37,828	$	41,847	$	37,250	$	39,569



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


Item Number		Page Number		Page Number
	PART I. Financial Information		PART I. Financial Information
1.	Condensed Consolidated Financial Statements:		Condensed Consolidated Financial Statements:
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2015 and 2014 (Unaudited)	3	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2016 and 2015 (Unaudited)	3
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2015 and 2014 (Unaudited)	4	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2016 and 2015 (Unaudited)	4
	Condensed Consolidated Balance Sheets as of September 30, 2015 (Unaudited) and December 31, 2014	5	Condensed Consolidated Balance Sheets as of June 30, 2016 (Unaudited) and December 31, 2015	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2015 and 2014 (Unaudited)	6	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015 (Unaudited)	6
	Condensed Consolidated Statements of Stockholders' Equity for the nine months ended September 30, 2015 and 2014 (Unaudited)	8	Condensed Consolidated Statements of Stockholders' Equity for the six months ended June 30, 2016 and 2015 (Unaudited)	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	9	Notes to Condensed Consolidated Financial Statements (Unaudited)	9
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	46	Management's Discussion and Analysis of Financial Condition and Results of Operations	44
3.	Quantitative and Qualitative Disclosures About Market Risk	66	Quantitative and Qualitative Disclosures About Market Risk	65
4.	Controls and Procedures	66	Controls and Procedures	65
	PART II. Other Information		PART II. Other Information
1.	Legal Proceedings	67	Legal Proceedings	66
6.	Exhibits	67	Exhibits	66



(In millions, except share data)	September 30, 2015 (Unaudited)			December 31, 2014
Assets
Investments:
Fixed maturity securities at fair value (amortized cost of $37,568 and $37,335)	$	40,201		$	40,768
Equity securities at fair value (cost of $207 and $210)	212			222
Limited partnership investments	2,738			2,937
Other invested assets	45			41
Mortgage loans	640			588
Short term investments	1,482			1,706
Total investments	45,318			46,262
Cash	236			190
Reinsurance receivables (less allowance for uncollectible receivables of $48 and $48)	4,491			4,694
Insurance receivables (less allowance for uncollectible receivables of $54 and $61)	2,057			1,936
Accrued investment income	439			405
Deferred acquisition costs	606			600
Deferred income taxes	279			191
Property and equipment at cost (less accumulated depreciation of $387 and $364)	320			295
Goodwill	151			152
Other assets	915			841
Total assets	$	54,812		$	55,566
Liabilities
Insurance reserves:
Claim and claim adjustment expenses	$	22,867		$	23,271
Unearned premiums	3,706			3,592
Future policy benefits	9,520			9,490
Policyholders' funds	—			27
Short term debt	350			—
Long term debt	2,211			2,559
Other liabilities (includes $119 and $153 due to Loews Corporation)	3,893			3,833
Total liabilities	42,547			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; 270,260,625 and 269,980,202 shares outstanding)	683			683
Additional paid-in capital	2,150			2,151
Retained earnings	9,450			9,645
Accumulated other comprehensive income	60			400
Treasury stock (2,779,618 and 3,060,041 shares), at cost	(78		)	(84		)
Notes receivable for the issuance of common stock	—			(1		)
Total stockholders’ equity	12,265			12,794
Total liabilities and stockholders' equity	$	54,812		$	55,566



Nine months ended September 30
(In millions)	2015			2014
Cash Flows from Operating Activities
Net income	$	549		$	493
Adjustments to reconcile net income to net cash flows provided by operating activities:
Loss on sale of subsidiaries	—			251
Deferred income tax expense	27			81
Trading portfolio activity	17			16
Net realized investment (gains) losses	39			(72		)
Equity method investees	127			65
Net amortization of investments	(17		)	(1		)
Depreciation and amortization	62			62
Changes in:
Receivables, net	70			611
Accrued investment income	(34		)	(37		)
Deferred acquisition costs	11			14
Insurance reserves	195			(222		)
Other assets	(61		)	(49		)
Other liabilities	(32		)	(133		)
Other, net	92			(32		)
Total adjustments	496			554
Net cash flows provided by operating activities	1,045			1,047
Cash Flows from Investing Activities
Dispositions:
Fixed maturity securities - sales	3,590			4,005
Fixed maturity securities - maturities, calls and redemptions	3,101			2,901
Equity securities	43			23
Limited partnerships	156			133
Mortgage loans	22			36
Purchases:
Fixed maturity securities	(7,055		)	(7,457		)
Equity securities	(60		)	(44		)
Limited partnerships	(120		)	(218		)
Mortgage loans	(81		)	(84		)
Change in other investments	5			10
Change in short term investments	222			(556		)
Purchases of property and equipment	(84		)	(42		)
Proceeds from sale of subsidiaries	—			198
Other, net	7			8
Net cash flows used by investing activities	$	(254	)	$	(1,087	)


September 30, 2015	Cost or Amortized Cost		Gross Unrealized Gains			Gross Unrealized Losses			Estimated Fair Value				Unrealized OTTI Losses (Gains)
June 30, 2016					Cost or Amortized Cost							Gross Unrealized Gains					Gross Unrealized Losses			Estimated Fair Value			Unrealized OTTI Losses (Gains)
(In millions)	Cost or Amortized Cost							Gross Unrealized Gains			Gross Unrealized Losses					Estimated Fair Value						Unrealized OTTI Losses (Gains)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	17,155	$	1,237		$	207		$	18,185			$	—			$	17,613		$	1,684		$	93		$	19,204		$	(1	)
States, municipalities and political subdivisions	11,978		1,336			17			13,297				(5		)	11,661			2,114			2			13,773			(25		)
Asset-backed:
Residential mortgage-backed	4,850		204			13			5,041				(46		)	4,994			215			20			5,189			(21		)
Commercial mortgage-backed	2,183		77			9			2,251				—			2,080			91			8			2,163			—
Other asset-backed	1,009		11			4			1,016				—			928			8			5			931			—
Total asset-backed	8,042		292			26			8,308				(46		)	8,002			314			33			8,283			(21		)
U.S. Treasury and obligations of government-sponsored enterprises	24		5			—			29				—			81			11			—			92			—
Foreign government	333		12			1			344				—			438			22			—			460			—
Redeemable preferred stock	33		2			—			35				—			33			2			—			35			—
Total fixed maturity securities available-for-sale	37,565		2,884			251			40,198				$	(51	)	37,828			4,147			128			41,847			$	(47	)
Total fixed maturity securities trading	3								3							10									10
Equity securities available-for-sale:
Common stock	62		3			—			65							20			5			2			23
Preferred stock	145		4			2			147							97			6			3			100
Total equity securities available-for-sale	207		7			2			212							117			11			5			123
Total	$	37,775	$	2,891		$	253		$	40,413						$	37,955		$	4,158		$	133		$	41,980


	Less than 12 Months					12 Months or Longer							Total						Less than 12 Months							12 Months or Longer							Total
September 30, 2015	Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value				Gross Unrealized Losses			Estimated Fair Value				Gross Unrealized Losses
June 30, 2016									Estimated Fair Value							Gross Unrealized Losses				Estimated Fair Value				Gross Unrealized Losses			Estimated Fair Value			Gross Unrealized Losses
(In millions)	Estimated Fair Value				Gross Unrealized Losses							Estimated Fair Value			Gross Unrealized Losses				Estimated Fair Value							Gross Unrealized Losses
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	3,744	$	177			$	188			$	30		$			3,932				$	207		$	1,032		$	43			$	562			$	50			$	1,594	$	93
States, municipalities and political subdivisions	655		11			131				6			786				17		68				2			10			—				78				2
Asset-backed:
Residential mortgage-backed	308		3			211				10			519				13		293				8			234			12				527				20
Commercial mortgage-backed	479		6			81				3			560				9		386				7			118			1				504				8
Other asset-backed	354		4			9				—			363				4		306				5			5			—				311				5
Total asset-backed	1,141		13			301				13			1,442				26		985				20			357			13				1,342				33
U.S. Treasury and obligations of government-sponsored enterprises	1		—			—				—			1				—
Foreign government	23		—			3				1			26				1		8				—			5			—				13				—
Redeemable preferred stock	3		—			—				—			3				—
Total fixed maturity securities available-for-sale	5,567		201			623				50			6,190				251		2,093				65			934			63				3,027				128
Equity securities available-for-sale:
Common stock																			4				2			—			—				4				2
Preferred stock	3		—			14				2			17				2		23				3			—			—				23				3
Total equity securities available-for-sale																			27				5			—			—				27				5
Total	$	5,570	$	201		$	637			$	52		$	6,207			$	253	$	2,120			$	70		$	934		$	63			$	3,054			$	133



September 30, 2015	Contractual/ Notional Amount		Estimated Fair Value
(In millions)	Contractual/ Notional Amount		Asset		Liability
Without hedge designation
Equity warrants	$	5	$	—	$	—
Embedded derivative on funds withheld liability	182		—		(5		)
Total			$	—	$	(5	)



Level 3 (In millions)	Balance as of July 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 September 30, 2015		Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2015 recognized in Net income (loss)
Fixed maturity securities:
Corporate and other bonds	$	141	$	—	$	—		$	27	$	(1	)	$	(11	)	$	—	$	(3	)	$	153	$	—
States, municipalities and political subdivisions	85		—		—			—		—			—			—		(24		)	61		—
Asset-backed:
Residential mortgage-backed	207		2		(2		)	4		—			(7		)	—		—			204		—
Commercial mortgage-backed	87		5		(4		)	8		—			(15		)	—		(10		)	71		—
Other asset-backed	490		—		(6		)	43		(20		)	(32		)	—		(4		)	471		—
Total asset-backed	784		7		(12		)	55		(20		)	(54		)	—		(14		)	746		—
Total fixed maturity securities	1,010		7		(12		)	82		(21		)	(65		)	—		(41		)	960		—
Equity securities	16		—		(1		)	—		—			—			—		—			15		—
Life settlement contracts	75		5		—			—		—			(6		)	—		—			74		2
Total	$	1,101	$	12	$	(13	)	$	82	$	(21	)	$	(71	)	$	—	$	(41	)	$	1,049	$	2



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 September 30, 2015		Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2015 recognized in Net income (loss)
Fixed maturity securities:
Corporate and other bonds	$	162	$	(1	)	$	(1	)	$	39	$	(13	)	$	(32	)	$	37	$	(38	)	$	153	$	—
States, municipalities and political subdivisions	94		1			—			—		—			(10		)	—		(24		)	61		—
Asset-backed:
Residential mortgage-backed	189		4			(4		)	76		—			(28		)	—		(33		)	204		—
Commercial mortgage-backed	83		7			(4		)	23		—			(17		)	17		(38		)	71		—
Other asset-backed	655		3			4			125		(254		)	(52		)	—		(10		)	471		(1		)
Total asset-backed	927		14			(4		)	224		(254		)	(97		)	17		(81		)	746		(1		)
Total fixed maturity securities	1,183		14			(5		)	263		(267		)	(139		)	54		(143		)	960		(1		)
Equity securities	16		—			(1		)	—		—			—			—		—			15		—
Life settlement contracts	82		22			—			—		—			(30		)	—		—			74		1
Total	$	1,281	$	36		$	(6	)	$	263	$	(267	)	$	(169	)	$	54	$	(143	)	$	1,049	$	—



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 September 30, 2014		Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2014 recognized in Net income (loss)
Fixed maturity securities:
Corporate and other bonds	$	204	$	2		$	—		$	30	$	(10	)	$	(13	)	$	8	$	(48	)	$	173	$	—
States, municipalities and political subdivisions	71		1			3			1		(10		)	—			14		—			80		—
Asset-backed:
Residential mortgage-backed	331		(22		)	62			47		(174		)	(57		)	32		(59		)	160		—
Commercial mortgage-backed	151		4			(2		)	28		(60		)	(23		)	43		(44		)	97		—
Other asset-backed	446		2			—			457		(111		)	(115		)	—		(37		)	642		(1		)
Total asset-backed	928		(16		)	60			532		(345		)	(195		)	75		(140		)	899		(1		)
Total fixed maturity securities	1,203		(13		)	63			563		(365		)	(208		)	97		(188		)	1,152		(1		)
Equity securities	11		3			(5		)	16		(8		)	—			—		—			17		—
Life settlement contracts	88		23			—			—		—			(25		)	—		—			86		3
Separate account business	1		—			—			—		—			—			—		(1		)	—		—
Total	$	1,303	$	13		$	58		$	579	$	(373	)	$	(233	)	$	97	$	(189	)	$	1,255	$	2


September 30, 2015	Carrying Amount		Estimated Fair Value
June 30, 2016	Carrying Amount										Carrying Amount		Estimated Fair Value
(In millions)	Carrying Amount		Level 1		Level 2		Level 3		Total		Carrying Amount		Level 1		Level 2		Level 3		Total
Assets	Carrying Amount
Mortgage loans	$	640	$	—	$	—	$	660	$	660	$	610	$	—	$	—	$	638	$	638
Liabilities
Short term debt	$	350	$	—	$	366	$	—	$	366
Long term debt	2,211		—		2,478		—		2,478		$	2,708	$	—	$	3,024	$	—	$	3,024


Nine months ended September 30, 2015
Six months ended June 30, 2016
(In millions)	Specialty			Commercial			International			Corporate & Other Non-Core		Total			Specialty			Commercial			International			Corporate & Other Non-Core		Total
Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	(141	)	$	—		$	(46	)	$	—	$	(187	)	$	(99	)	$	(32	)	$	(19	)	$	—	$	(150	)
Pretax (favorable) unfavorable premium development	(10		)	(17		)	16			—		(11		)	(18		)	(4		)	—			—		(22		)
Total pretax (favorable) unfavorable net prior year development	$	(151	)	$	(17	)	$	(30	)	$	—	$	(198	)	$	(117	)	$	(36	)	$	(19	)	$	—	$	(172	)


Nine months ended September 30, 2014
Six months ended June 30, 2015
(In millions)	Specialty			Commercial			International			Corporate & Other Non-Core			Total			Specialty			Commercial			International			Corporate & Other Non-Core		Total
Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	(123	)	$	179		$	(32	)	$	(1	)	$	23		$	(11	)	$	11		$	(12	)	$	—	$	(12	)
Pretax (favorable) unfavorable premium development	(12		)	(24		)	6			—			(30		)	(8		)	(12		)	14			—		(6		)
Total pretax (favorable) unfavorable net prior year development	$	(135	)	$	155		$	(26	)	$	(1	)	$	(7	)	$	(19	)	$	(1	)	$	2		$	—	$	(18	)



	Periods ended September 30, 2014
(In millions)	Three Months			Nine Months
Revenues
Net investment income	$	14		$	94
Net realized investment gains	1			3
Total revenues	15			97
Claims, Benefits and Expenses
Insurance claims and policyholders' benefits	12			75
Other operating expenses	—			2
Total claims, benefits and expenses	12			77
Income before income tax	3			20
Income tax expense	(2		)	(6		)
Income from discontinued operations, net of income tax	1			14
Loss on sale, net of income tax benefit (expense) of ($1) and $40	3			(211		)
Income (loss) from discontinued operations	$	4		$	(197	)



	September 30, 2015		December 31, 2014
(In millions)	September 30, 2015		December 31, 2014
Gross Case Reserves	$	2,108	$	2,136
Gross IBNR Reserves	4,091		4,093
Total Gross Carried Claim and Claim Adjustment Expense Reserves	$	6,199	$	6,229
Net Case Reserves	$	1,882	$	1,929
Net IBNR Reserves	3,706		3,726
Total Net Carried Claim and Claim Adjustment Expense Reserves	$	5,588	$	5,655