loews 2 cna lilienthal mense

Copyright © 2008 CNA Financial Corporation. All rights reserved.

Loews Corporation 2008 Investor Meeting

Stephen W. Lilienthal, CPCUChief Executive Officer

D. Craig MenseChief Financial Officer

November 5, 2008

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Loews Corporation 2008 Investor MeetingNovember 5, 2008

CNA Financial Corporation

• Much improved level of financial performance

• Solid P&C operating earnings and strong competitive position

• Highly diversified product portfolio and market leadership

• Controlled, orderly run-off operations

• Strong balance sheet and capital position

Solid foundation built…

…consistent, sustained progress

2


CNAF Financial Review

Strong operating earnings drive…

…growth in book value

Net Operating Income Book Value Per Share excluding AOCI

$251ex cats

$846ex cats &

commutations

$1,060

$221

$1,070

$599

$253 $250$83

3.0%

12.0% 11.0% 8.8% 9.8%3.3%

7.4%

2004 2005 2006 2007 Q1 08 Q2 08 Q3 08

$m

NOI Operating ROE (as reported)

Full Year Quarterly

$29.05 $29.85

$36.98 $37.63 $38.16 $36.79$34.00

2004 2005 2006 2007 Mar 312008

Jun 302008

Sep 302008

3


CNAF Financial Review

Steady performance in core securities income…

…with solid long-term returns from limited partnerships

Core Securities Net Investment Income Limited Partnership Investment Income

$1,757

$2,089$2,240

$550 $534 $539

2005 2006 2007 Q1 08 Q2 08 Q3 08

Pretax $m

Full Year Quarterly

$254$288

$183

$46

($77)($39)

16.2% 17.1%9.1%

(1.8%) (3.5%)2.0%

2005 2006 2007 Q1 08 Q2 08 Q3 08

Pretax $m

Return (%)Full Year Quarterly

4


Net Operating Income

CNA Financial Corporation Property & Casualty Operations

$846ex cats &

commutations

$251ex cats

$817ex cats &

commutations

$260ex cats

Solid Property & Casualty earnings…

…drive the Company’s results

$253

$1,070 $1,060

$221 $250

$83

2005 2006 2007 Q1 08 Q2 08 Q3 08

$m

Full Year Quarterly

$295

$1,081$1,221

$219 $269

$92

2005 2006 2007 Q1 08 Q2 08 Q3 08

$m

Full Year Quarterly

5


Life & Group Corporate Segment

Net Operating Income

$80ex commutations

Controlled, orderly run-off operations…

… mitigate earnings risks

($51)

($14)

($159)

($3)

($30) ($36)

2005 2006 2007 Q1 08 Q2 08 Q3 08

$m

Full Year Quarterly

$9$3

($2)

$5$11

$27

2005 2006 2007 Q1 08 Q2 08 Q3 08

$m

Full Year Quarterly

6


P&C Operations – Key Ratios

…generates solid results despite softening market

Focus on operating fundamentals…

Combined Ratio Expense Ratio

91.3%ex cats

110.0%

96.4% 94.8% 98.1% 97.7%107.0%

2005 2006 2007 Q1 08 Q2 08 Q3 08Full Year Quarterly

30.2% 29.5% 29.5% 28.4% 28.2%31.5%

2005 2006 2007 Q1 08 Q2 08 Q3 08Full Year Quarterly

98.4%ex cats &

commutations

7


P&C Operations – Premium Metrics

Net Written Premium Rate and Retention

Disciplined participation in the marketplace…

…with solid retention and rational pricing

$6.8 $7.0 $6.8

$1.6 $1.7 $1.6

2005 2006 2007 Q1 08 Q2 08 Q3 08

$B

Full Year Quarterly

(0%) (0%)(4%) (4%) (5%) (4%)

80% 83% 80% 83% 82% 82%

2005 2006 2007 Q1 08 Q2 08 Q3 08

Rate RetentionFull Year Quarterly

8


P&C Operations – Disciplined Underwriting

Net Written Premium – New Business New Business – Cross Sell

Appropriate levels of new business…

…enhanced by cross sell successes

$6.8 $7.0 $6.8

$1.6 $1.7 $1.6

19% 17% 17% 17%21% 18%

2005 2006 2007 Q1 08 Q2 08 Q3 08

$B

Net Written Premium New Business %

Full Year Quarterly

$1.5 $1.4$1.2

$0.3 $0.3 $0.3

40%

29%35% 33%

41%37%

2005 2006 2007 Q1 08 Q2 08 Q3 08

$B

New Business Cross Sell %Full Year Quarterly

9


P&C Operations – Diversified Portfolio

DistributionGeographic

BusinessIndustry

Leveraging our highly diversified portfolio…

…to reduce volatility and to optimize earnings

Source: Company filings

Commercial LinesRanking

1 to 56 to 1011 to 1516 to 20

Source: Company filings

21 to 25

10


P&C Market Leadership

Specialty Market Rankings

• Accountants: 1st

• Aging Services: 1st

• Architects & Engineers: 1st

• Dentists: 1st

• Law firms: 1st

• Nurses: 1st

• Real estate agents: 1st

• Surety: 3rd

A highly respected industry leader in many specialty businesses…

…with strong financial results

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Claim Business Model

…drive effective and efficient claim handling

Consistent metrics and reporting…• People/Culture

– Assigning the right level of work to the right level of employee

• Customer Service– Simplified intake process with reduced handoffs– Single point of contact for claim inquiries– Improved claim access through CNA Central– Consistent experience no matter where claims

are handled• Business Partnership

– Recognizing the different needs of different customers

• Total Claim Outcome – Reduced number of non-integrated systems– Streamlined workflows– Improving fraud detection

Four Cornerstones

Craig MenseChief Financial Officer

13


Key P&C Reserve Metrics

Better than industry reserve adequacy metrics for long-tailed lines…

…reflective of CNA’s solid reserve position

Source: CNA data is from 2007 filed annual statutory statementsIndustry data is from A.M. Best 2007 total P/C industry

• The lower the net paid-to-ultimate incurred ratios, all other things being equal, the stronger the reserves

• The higher the IBNR-to-ultimate incurred ratios, all other things being equal, the stronger the reserves

AY CNA Industry2002 77.3% 82.4%2003 71.5% 75.5%2004 65.0% 66.0%2005 51.9% 53.1%2006 31.4% 36.5%2007 14.0% 18.7%

AY CNA Industry2002 10.6% 9.0%2003 16.6% 12.9%2004 18.8% 20.4%2005 28.8% 29.6%2006 47.1% 43.2%2007 67.6% 60.1%

Ratio of Paid Loss to Ultimate Incurred Ratio of Bulk IBNR Reserves to Ultimate Incurred

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Reinsurance Recoverables

Reinsurance Recoverables Reinsurance Recoverables – Secured and Unsecured

Reduced reliance on reinsurance…

…mitigates counterparty credit risk

$15.9

$12.4

$9.9$8.7

$8.0

2004 2005 2006 2007 Sep 302008

$B

$9.7 $8.3 $7.2 $6.3 $5.9

$6.2$4.1

$2.7 $2.4 $2.1

$15.9

$12.4$9.9 $8.7 $8.0

6.5%7.4%

6.6%5.7% 6.2%

2004 2005 2006 2007 Sep 302008

$B

Unsecured Secured Bad Debt Reserve as % of Unsecured

15


Highly liquid investment portfolio…

Investment Portfolio

Quality & Sector Profile Liquidity Profile

September 30, 2008

Total Invested Assets: $37.1B Fair Value

…AA- average credit quality

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MBS: Mortgage-backed securities CMO: Collateralized mortgage obligations ABS: Asset-backed securities CDO: Collateralized debt obligation

September 30, 2008MBS/CMO/ABS/CDO Fair Value Distribution

MBS CMO ABS CDO Total % of TotalInvestments

U.S. Government Agencies — — — — 4.1%

AAA — — 49.8% 9 17.0%

AA — — 25 1.0%

A — — 1 0.0% 71 0.8% 0.5%

BBB — — 33 0.4% 0.1% 0.9%

<BBB & Equity Tranches — — 27 23 0.2%

Total MBS/CMO/ABS/CDO 5,543 2,664 138 1.6% 8,793 23.7%

Sub- prime (Included above) — — 1,371 7 3.7%

Alt - A (Included above) — — 4 2.9%

MBS/CMO/ABS/CDO Fair Value Distribution

MBS CMO ABS CDO Total % of TotalInvestments

Total MBS/CMO/ABS/CDO

($m)

High quality structured portfolio…

Structured Securities Portfolio

…generating over $150 million of principal cash flow per month

89%

448 5.1% 1,061 12.1% 1,509 17.2%

4,379 1,929 21.9% 0.1% 6,317 71.8%

42 0.5% 294 3.3% 0.3% 361 4.1%

107 1.2% 179 2.0%

291 3.3% 10 334 3.8%

0.3% 43 0.5% 0.3% 93 1.1%

448 5.1% 63.1% 30.2% 100.0%

1,378 15.7%

1,084 1,088 12.4%

— — — — 4.1%

— — 49.8% 9 17.0%

— — 25 1.0%

— — 1 0.0% 0.8% 0.5%

— — 33 0.4% 0.1% 0.9%

— — 27 23 0.2%

5,543 2,664 138 8,793 23.7%

— — 1,371 7 3.7%

— — 4 2.9%

71

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Extreme market valuations drive unrealized losses…

Net Unrealized Gains/(Losses) by Quality

...90% in investment grade holdings

Book Market Net Unrealized ($m) Rating Value Value

Investment GradeU.S. Govts/Agencies 4,490 4,574 84AAA 12,336 11,477 (859)AA 5,232 4,684 (548)A 5,649 4,813 (836)BBB 6,679 5,777 (902)Total Investment Grade 34,386 31,325 (3,061)

Gain / (Loss)

Below Investment GradeBBBCCCCC and belowTotal Below Inv Grade

2,1891,191

26628

3,674

1,935992218

273,172

(254)(199)(48)

(1)(502)

Common Stock 213 390 177

Total 38,273 34,887 (3,386)

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Liquidity

Healthy level of cash flow…

…generates significant investable cash

Operating Cash Flow

Principal & Maturity Payments

$1.9 $1.7$1.2 $0.9

$2.8$2.7

$2.7

$2.2

$4.7$4.4

$3.9

$3.1

2005 2006 2007 Sep 302008 YTD

$B

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• CNAF to issue $1.25B in perpetual preferred securities

to Loews at 10% annual dividend

–Callable at Par, in whole or in part

–Dividend reset every 5 years at 700 bps over then

current 10 year Treasury subject to 10% minimum

• CNAF suspends $0.15 quarterly shareholder dividend

• CCC to issue $1B surplus note to CNAF with 10%

coupon

Anticipatory actions taken…

…positioned to act on expected opportunities

Capital Actions

Capital Structure Key Terms/Actions

CommonEquity

PreferredDebt

Common Equity

DebtPreferred

$8.2 $9.8 $10.2$7.7

$0.7$1.7

$2.1 $2.1$2.0$1.25

$10.6$11.9

$11.0$12.3

15.9%18.1% 17.5% 18.3%

2005 2006 2007 Sep 30 2008Proforma

$B

Debt-to-Capital

20


• Establish unquestioned financial strength

• Strengthen capital and liquidity in highly volatile environment

• Protect against further financial market stress

• Positions us to act on opportunities likely to emerge in marketplace

• Reasonable cost

Capital Actions Rationale

21


Financial Flexibility

CNAF Holding Company Cash & Short Term Statutory Surplus & Risk Based Capital

Abundant holding company cash and strong surplus…

Continental Casualty Company

…add higher level of protection during abnormal markets

$198$280

$359

$960

2005 2006 2007 Sep 30 2008Proforma

$m

$6.7$7.9 $8.3 $7.8

333%377% 400%

370%

2005 2006 2007 Sep 30 2008Estimate

$B

Surplus RBC Ratio (Authorized Control Level)

22


CNA Financial Corporation

• Has strong, competitive property & casualty operations

• Is producing steady, meaningful operating income

• Is generating significant positive cash flow

• Has abundant liquidity

• Has a strong balance sheet to mitigate additional financial market stresses

and to act on likely market opportunities

CNA is a company that…

…is positioned for future success

23


Notices and Disclaimers

Forward Looking StatementsThe statements made in the course of this presentation and/or contained in the presentation materials may include statements which relate to anticipated future events (forward-looking statements) rather than actual present conditions or historical events. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and generally include words such as “believes”, “expects”, “intends”, “anticipates”, “estimates”, and similar expressions. Forward-looking statements, by their nature, are subject to a variety of inherent risks and uncertainties that could cause actual results to differ materially from the results projected. Many of these risks and uncertainties cannot be controlled by CNA. For a detailed description of these risks and uncertainties, please refer to CNA’s filings with the Securities and Exchange Commission available at www.cna.com. As such, any forward-looking statements and other financial information contained in this presentation speak only as of the date of this presentation. Further, CNA does not have any obligation to update or revise any forward-looking statement made in the course of this presentation and/or contained in the presentation materials even if CNA’s expectations or any related events, conditions or circumstances change.

Non-GAAP MeasuresThis presentation, along with the presentation materials, may also reference or contain financial measures that are not in accordance with generally accepted accounting principles (GAAP). For reconciliations of non-GAAP measures to the most comparable GAAP measures, please refer to CNA's Supplemental Financial Information. CNA's Supplemental Financial Information is available at www.cna.com

CNA is a registered service mark, trade name and domain name of CNA Financial Corporation. Copyright © 2008 CNA Financial Corporation. All rights reserved.

http://www.cna.com/

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loews 2 cna lilienthal mense

Economy & Finance

investor meetingnovember

commutations ex cats

2007q1 08q2 08q3

ex commutations

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strong financial results

pc market leadership

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