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Cna Financial Corp – ‘DEF 14A’ for 4/28/10

On:  Friday, 4/2/10, at 12:44pm ET   ·   Effective:  4/2/10   ·   For:  4/28/10   ·   Accession #:  1193125-10-75763   ·   File #:  1-05823

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 4/02/10  Cna Financial Corp                DEF 14A     4/28/10    1:821K                                   Donnelley … Solutions/FA

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 1: DEF 14A     Definitive Proxy Statement                          HTML    681K 

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.      )

Filed by the Registrant ¨                            Filed by a Party other than the Registrant ¨

Check the appropriate box:

CNA FINANCIAL CORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

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CNA FINANCIAL CORPORATION

Notice of Annual Meeting April 28, 2010

To the Stockholders of

CNA FINANCIAL CORPORATION:

The Annual Meeting of Stockholders of CNA Financial Corporation, a Delaware corporation, will be held at 333 South Wabash Avenue, Room 208N, Chicago, Illinois, on Wednesday, April 28, 2010, at 8:30 a.m., Chicago time, for the following purposes:

Only Stockholders of record at the close of business on March 12, 2010 are entitled to notice of, and to vote at this meeting.

We urge you to complete, date and sign the enclosed proxy and mail it promptly in the accompanying envelope, which requires no postage if mailed in the United States. You may revoke the proxy at any time before the authority granted therein is exercised.

Chicago, Illinois

April 2, 2010

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be held on April 28, 2010. This Proxy Statement and the 2009 Annual Report to Stockholders are posted on the Company’s website at www.cna.com.

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CNA FINANCIAL CORPORATION

333 SOUTH WABASH AVENUE, CHICAGO, ILLINOIS 60604

Proxy Statement

Annual Meeting, April 28, 2010

The Board of Directors of CNA Financial Corporation (“CNA” or the “Company”) submits this Proxy Statement in connection with the solicitation of proxies from the Stockholders in the form enclosed.

The persons named in this Proxy Statement as nominees for election as Directors have been designated by the Board of Directors.

Any Stockholder giving a proxy has the power to revoke it at any time before it is exercised. A subsequently dated proxy, duly received, will revoke an earlier dated proxy. A Stockholder may also revoke his or her proxy and vote in person at the Annual Meeting. Proxies will be voted in accordance with the Stockholder’s specifications and, if no specifications are made, proxies will be voted in accordance with the Board of Directors’ recommendations. The approximate date of the mailing of this Proxy Statement is April 2, 2010.

Whether or not you plan to attend the meeting, Stockholders are encouraged to submit a proxy to vote their shares by the Internet, telephone or mail, all as more fully described below.

On March 12, 2010, we had outstanding 269,074,707 shares of common stock (“Common Stock”). The holders of Common Stock have one vote for each share of stock held. Stockholders of record at the close of business on March 12, 2010 will be entitled to notice of, and to vote at, this meeting. The holders of a majority of shares of Common Stock issued and outstanding and entitled to vote when present in person or represented by proxy constitute a quorum at all meetings of Stockholders.

In accordance with the Company’s By-Laws and applicable law, the election of Directors will be determined by a plurality of the votes cast by the holders of shares present in person or by proxy and entitled to vote. Consequently, the eight nominees who receive the greatest number of votes cast for election as Directors will be elected as Directors of the Company. Shares present which are properly withheld as to voting with respect to any one or more nominees, and shares present with respect to which a broker indicates that it does not have authority to vote (“broker non-votes”), will be counted for determining the presence of a quorum, but will not have any effect on the outcome of the election. The affirmative vote of shares representing a majority of the shares present and entitled to vote is required to approve the other matters to be voted on at the Annual Meeting. Shares which are voted to abstain will be considered present at the meeting, but since they are not affirmative votes for the matter they will have the same effect as votes against the matter.

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Principal Stockholders

The following table contains certain information as to all entities which, to the knowledge of the Company, were the beneficial owners of 5% or more of the outstanding shares of Common Stock as of February 28, 2010 (unless otherwise noted) based on filings with the Securities and Exchange Commission (“SEC”). Each such entity has sole voting and investment power with respect to the shares set forth:

Because Loews holds a majority of our outstanding Common Stock, Loews has the power to approve matters submitted for consideration at the Annual Meeting without regard to the votes of the other Stockholders. Loews has advised the Company’s Board of Directors that it intends to vote FOR the election of the Board’s nominees for Director, FOR the proposal to amend and approve the CNA Financial Corporation Incentive Compensation Plan and FOR the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accountants for 2010. There are no agreements between CNA and Loews with respect to the election of CNA Directors or Officers or with respect to the other matters to come before the meeting.

Director and Officer Holdings

The following table sets forth certain information as to the shares of our Common Stock beneficially owned by each Director and nominee, and each Named Executive Officer included in the Summary Compensation Table below (individually, an “NEO” and collectively, the “NEOs”), and by all Executive Officers and Directors of the Company as a group as of February 28, 2010, based on data furnished by them:

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Each holding represents less than 1% of the outstanding shares of Common Stock. For information with respect to the stock holdings of Loews, please see the “Principal Stockholders” section above.

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ELECTION OF DIRECTORS

(Proposal No. 1)

Pursuant to the By-Laws of the Company, the number of Directors constituting the full Board of Directors has been fixed by the Board at eight. Each Director shall be elected at the Annual Meeting of Stockholders and each Director elected shall hold office until the next Annual Meeting of Stockholders and until his or her successor is elected and qualified. Directors need not be Stockholders. Unless authority to do so is withheld, the persons named in the enclosed proxy intend to vote the shares represented by the proxies given to them for the eight nominees hereinafter named.

Should any nominee or nominees become unavailable, the proxy holders will vote for the nominee or nominees designated by the Board of Directors. The Board of Directors has no reason to believe that any of the nominees will become unavailable.

Set forth below is the name, principal occupation and business experience during the time period that, at a minimum, includes the past five years, as well as certain other information for each nominee. Also included below is information regarding the qualifications, attributes and skills that led to the conclusion that each of these individuals should be nominated to serve as a Director.

Paul J. Liska, private investor. From March 2008 until January 2009, Executive Vice President and Chief Financial Officer of Motorola, Inc. From 2006 until joining Motorola, Mr. Liska served as an industrial partner for various private equity firms including MidOcean Partners, CVC Capital Holdings and Ripplewood Holdings LLC. From 2004 to 2006, Mr. Liska served as Executive Chairman of USF Corporation until its acquisition by Yellow Roadway Corporation and in various capacities with WRC Media, Inc., including Executive Chairman. From 2001 to 2004, Mr. Liska held several positions with Sears, Roebuck and Co., including President of Credit and Financial Products and Executive Vice President and Chief Financial Officer. Prior to that time, Mr. Liska served as Executive Vice President and Chief Financial Officer of The St. Paul Companies from 1997 to 2001. He has a Master of Management degree from the Kellogg School of Management at Northwestern University and is a certified public accountant. His financial knowledge and management experience are key attributes which Mr. Liska brings to our Board. Mr. Liska has been a Director since February 2004, serves on the Compensation, Executive and Finance Committees and is the Chairman of the Audit Committee. Age 54.

Jose O. Montemayor, Principal of Black Diamond Capital Partners I, LP since 2005. From 1999 to 2005, he was Insurance Commissioner for the State of Texas. He is a certified public accountant and a member of the Society of Financial Examiners, the Texas Society of Certified Public Accountants and the American Institute of Certified Public Accountants. His extensive knowledge and experience of the insurance industry, including 12 years as a senior insurance regulator, is valuable to our Board. He has been a Director since February 2007 and serves on the Audit, Compensation, Executive and Finance Committees. Age 59.

Thomas F. Motamed, Chairman of the Board and Chief Executive Officer of the Company since January 1, 2009. From December 2002 to June 2008, he served as Vice Chairman and Chief Operating Officer of The Chubb Corporation and President and Chief Operating Officer of Chubb & Son. Mr. Motamed began his career with Chubb in 1977 and held various management positions, including managing attorney in-house counsel, litigation manager and national claim audit manager. He also served in Chubb’s field organization and held positions including marketing manager, branch manager and Western Zone officer. His extensive experience has provided him with a deep knowledge of the insurance industry. Mr. Motamed is a member of the Executive and Finance Committees. He has been a Director since January 1, 2009. Age 61.

Don M. Randel, President of the Andrew W. Mellon Foundation since July 2006. Prior to that, President of the University of Chicago since July 2000. Mr. Randel’s experience as a senior leader of a large institution is of great value to our Board. He is a member of the Audit, Compensation, Executive and Finance Committees. Mr. Randel has been a Director since May 2002. Age 69.

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Joseph Rosenberg, Chief Investment Strategist of Loews since 1995. Prior to that time, he served as Chief Investment Officer of Loews for 22 years. Mr. Rosenberg’s extensive investment experience provides particular insight and guidance as to many of the investment matters that come before the Board. He serves on the Executive and Finance Committees. He has been a Director since August 1995. Age 76.

Andrew H. Tisch, Co-Chairman of the Board of Loews since 2006. Also, Chairman of the Executive Committee and a member of the Office of the President of Loews. He is a Director of the general partner of Boardwalk Pipeline Partners LP. (“Boardwalk”), a 66% owned subsidiary of Loews. He is Chairman of the Board of K12, Inc., a technology based education company. Mr. Tisch’s positions with Loews, the majority stockholder of the Company, allow him to provide valuable perspective and advice to our Board. He is Chairman of the Executive Committee and serves on the Finance Committee. Mr. Tisch has served as a Director since February 2006. He is the brother of James S. Tisch. Age 60.

James S. Tisch, President and Chief Executive Officer and a member of the Office of the President of Loews. He is a Director of Loews and Chairman of the Board of Diamond Offshore Drilling, Inc. (“Diamond”), a 51% owned subsidiary of Loews. Mr. Tisch served as Chief Executive Officer of Diamond until May, 2008. He was also a director of BKF Capital Group, Inc., an investment advisor and asset management holding company, until 2006. Mr. Tisch’s positions with Loews, as the majority stockholder of the Company, allow him to provide valuable perspective and advice to our Board. He is Chairman of the Finance Committee and serves on the Executive Committee. Mr. Tisch has served as a Director since 1985. He is the brother of Andrew H. Tisch. Age 57.

Marvin Zonis, Professor Emeritus of International Political Economy, Leadership and E-Commerce at the Booth School of Business of the University of Chicago since 1989. He has been a principal of Marvin Zonis & Associates, Inc., an international consulting firm, since its incorporation in 1978. Mr. Zonis provides advice to various businesses and professional asset management firms all over the world, helping them to identify, assess and manage their risks in the changing global political environment. He has written extensively on globalization, digital technologies and emerging markets. Mr. Zonis brings to our Board broad experience in international economic and monetary affairs. He has been a Director since 1993, is the Chairman of the Compensation Committee and serves on the Audit, Executive and Finance Committees. Age 73.

Director Independence

Under the rules of the New York Stock Exchange (“NYSE”), listed companies like CNA that have a controlling stockholder are not required to have a majority of independent directors. Because Loews holds more than 50% of the voting power of CNA, we are a controlled company within the meaning of the rules of the NYSE. Accordingly, our Board of Directors is not composed of a majority of Directors who are independent. Nevertheless, our Board of Directors has determined that the following Directors are independent under the listing standards of the NYSE (each, an “Independent Director” and collectively, the “Independent Directors”): Paul J. Liska; Jose O. Montemayor; Don M. Randel; and Marvin Zonis. In assessing independence, each year our Board affirmatively determines whether or not each Director or nominee has any material relationship with the Company. In assessing the materiality of any relationship, our Board considers all relevant facts and circumstances, not merely from the standpoint of the Director or nominee, but from that of any person or organization with which the Director or nominee has an affiliation. Our Board considers the frequency and regularity of any services provided by or to, or other transactions between, our Company and the Director or nominee or affiliated organization, whether they are being carried out at arms’ length in the ordinary course of business and whether they are being provided or conducted substantially on the same terms as those prevailing at the time with unrelated parties for comparable transactions. Material relationships can include commercial banking, industrial, legal, accounting, charitable and familial relationships.

Our Board has established guidelines to assist it in determining Director independence under these listing standards. Under our Board’s guidelines, a Director would not be considered independent if any of the following relationships exists: (i) during the past three years the Director has been an employee, or an immediate family

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member has been an executive officer, of the Company; (ii) the Director or an immediate family member received, during any twelve month period within the past three years, more than $120,000 in direct compensation from the Company, excluding Director and committee fees, pension payments and certain forms of deferred compensation; (iii) the Director is a current partner or employee, or an immediate family member is a current partner of a firm that is the Company’s internal or external auditor, or an immediate family member is a current employee of such a firm and personally works on the Company’s audit, or, within the last three years, the Director or an immediate family member was a partner or employee of such a firm and personally worked on the Company’s audit within that time; (iv) the Director or an immediate family member has at any time during the past three years been employed as an executive officer of another company where any of the Company’s present executive officers at the same time serves or served on that company’s compensation committee; or (v) the Director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three years, exceeds the greater of $1 million, or 2% of the other company’s consolidated gross revenues.

Leadership Structure

From 1992 to 2004, the Company had separate individuals serving as Chairman of the Board and as Chief Executive Officer. This structure reflected the continuing involvement and leadership of two of the Company’s former Chief Executive Officers who had previously retired from the day to day business of managing the Company. In 2004, the Board approved the combination of the role of Chairman of the Board and Chief Executive Officer. The Board continues to believe that this combined structure promotes unified leadership and direction for the Company. Notably, the Chairman of the Board recently instituted a process whereby the Board meets regularly in executive session with the Chairman, but without the presence of any other management of the Company. In addition, the Board has complete access to the Company’s entire management team.

Our Independent Directors meet regularly in executive session without management participation. We have a position of presiding director (“Presiding Director”) whose primary responsibility is to preside over the executive sessions of the Independent Directors. The Chairmen of our Audit and Compensation Committees alternate annually as the Presiding Director. Mr. Zonis, as Chairman of our Compensation Committee, serves as Presiding Director until the annual meeting on April 28, 2010.

Board Oversight of Risk Management

Our Board recognizes the importance of understanding, evaluating and, to the extent practicable, managing enterprise risk in the insurance business. As part of its oversight responsibility, the Company’s management provides periodic reports to our Board which, among other things, seek to systematically identify the principal risks facing the Company, identify and evaluate policies and practices which promote a culture that actively balances risk and reward, and evaluate risk management practices. These reports enable the full Board to conduct meaningful and substantive discussions and deliberations with senior management on these issues.

Committees and Meetings

Our Board of Directors has an Audit, Compensation, Executive and Finance Committee. We do not have a Nominating Committee. Under the rules of the NYSE, listed companies like CNA that have a controlling Stockholder are not required to have a Nominating Committee. Our Board of Directors as a whole therefore performs the functions of a Nominating Committee. Our Company does not have a specific policy regarding Stockholder nominations of potential Directors to our Board of Directors other than through the process described below in the “Stockholder Proposals for the 2011 Annual Meeting” section. Nominations for membership to our Board of Directors are determined by our Board in consultation with our Executive Officers and other members of senior management. Possible nominees to our Board of Directors may be suggested by any Director to our Chairman of the Board or by any Stockholder in the manner indicated above. Although our Board of Directors does not have a formal policy on Director diversity, our Board recognizes its importance and does take it into account in identifying Director nominees.

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Audit Committee

The primary function of our Audit Committee is to assist our Board of Directors in fulfilling its responsibility to oversee management’s conduct of our Company’s financial reporting process, including review of the financial reports and other financial information of our Company, our Company’s systems of internal control over financial reporting, our Company’s disclosure controls and procedures, and the annual independent audit of our Company’s financial statements. Our Audit Committee has sole authority to directly appoint, retain, compensate, evaluate and terminate our Company’s independent registered public accounting firm and to approve all engagement fees and terms, including mandatory pre-approval of all engagements of the independent registered public accounting firm in accordance with policies and procedures adopted by our Audit Committee from time to time or as otherwise required. The Charter of our Audit Committee is posted on the Company’s website at www.cna.com and is also available in print free of charge to any Stockholder who requests it. Our management is responsible for the Company’s financial statements and reporting process, including its system of internal control over financial reporting. Our independent registered public accounting firm is responsible for expressing an opinion on the conformity of our audited financial statements with accounting principles generally accepted in the United States of America.

The current members of our Audit Committee are Paul J. Liska (Chairman), Jose O. Montemayor, Don M. Randel and Marvin Zonis, each of whom is an Independent Director and also meets the additional independence requirements of applicable listing standards of the NYSE and SEC regulations. Each of the current members is financially literate, as determined by our Board. Our Board has determined that Mr. Montemayor is an “audit committee financial expert” under NYSE and SEC standards.

Our Directors are asked annually to report to our Company the number of audit committees on which such Director serves. During 2009, no Director reported serving on more than three audit committees.

Compensation Committee

Under the rules of the NYSE, listed companies like CNA that have a controlling stockholder are not required to have a Compensation Committee. Nonetheless, the Company’s Board does maintain a Compensation Committee that administers the Incentive Compensation Plan and approves the total compensation of the NEOs. The Charter of the Compensation Committee is posted on the Company’s website at www.cna.com and is also available in print free of charge to any Stockholder who requests it. The current members of our Compensation Committee are Paul J. Liska, Jose O. Montemayor, Don M. Randel and Marvin Zonis (Chairman), each of whom is an Independent Director.

In February of 2007 our Board of Directors renamed the Incentive Compensation Committee as the Compensation Committee and approved a new Compensation Committee Charter establishing its purpose, structure and responsibilities. Pursuant to its Charter, the Compensation Committee, in response to Company management recommendations, determines all elements of compensation for the NEOs and all stock-based compensation awards to senior officers of the Company. The Compensation Committee also reviews and approves the terms and conditions of written employment agreements between the NEOs and the Company or its subsidiaries.

The Company is proposing certain changes to the Incentive Compensation Plan, all of which have already been approved by the Compensation Committee and the Company’s Board—please see Proposal No. 2.

Code of Business Conduct and Ethics

We have a Code of Business Conduct and Ethics (the “Code”) which applies to all of our Directors, officers and employees, including our principal financial officer and principal accounting officer. This Code, as well as the Corporate Governance Guidelines, are posted on the Company’s website at www.cna.com and are also available in print free of charge to any Stockholder who requests them. We intend to post on our website any changes to or waivers of this Code for our principal executive officer, principal financial officer and principal accounting officer.

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Meetings

During 2009 there were four meetings of our Board of Directors, one meeting of our Finance Committee (Finance Committee matters were also addressed at our Board meetings), five meetings of our Audit Committee, six meetings of our Compensation Committee, three meetings of a Special Review Committee and one meeting of the Special Securities Committee (both the Special Review Committee and the Special Securities Committee were in connection with the issuance of debt). Each individual who served as a Director of the Company in 2009 attended not less than 75% of the total number of meetings of our Board of Directors and Committees of our Board on which that Director served during 2009. Our Board recommends, but does not require, that all Directors attend our Stockholders’ meetings. All individuals who served as Directors in 2009 attended our 2009 Annual Meeting of Stockholders.

Audit Committee Report

The role of our Audit Committee is to assist our Board of Directors with the responsibility of administering corporate policy in matters of accounting and control in its oversight of our financial reporting process. As set forth in the Charter of our Audit Committee, management of our Company is responsible for the preparation, presentation and integrity of the Company’s financial statements. Our Company’s accounting and financial reporting principles and internal control over financial reporting and our disclosure controls and procedures are designed to assure compliance with accounting standards and applicable laws and regulations. Our Audit Committee functions as the liaison with our Company’s internal audit area and our independent registered public accounting firm. The independent registered public accounting firm is responsible for auditing our Company’s financial statements and expressing an opinion as to their conformity with accounting principles generally accepted in the United States of America.

In the performance of its oversight function, the Audit Committee has considered and discussed the audited financial statements with management and the independent registered public accounting firm. Our Audit Committee has also discussed with the independent registered public accounting firm the matters required to be discussed by the standard adopted or referenced by the Public Company Accounting Oversight Board (“PCAOB”) and SEC Rule 2-07, Communication with Audit Committees, as currently in effect, as well as the firm’s independence. Finally, our Audit Committee has received the written disclosures and the annual letter from the independent registered public accounting firm required by the PCAOB.

The members of the Audit Committee rely, without independent verification, on the information provided to them by management and the independent registered public accounting firm and on management’s representation that our financial statements have been prepared with integrity and objectivity. They do not provide any expert or special assurance as to our financial statements or any professional certification as to the independent registered public accounting firm’s work. Accordingly, our Audit Committee’s oversight does not provide an independent basis to determine that management has applied appropriate accounting and financial reporting principles or internal control over financial reporting and our disclosure controls and procedures, that the audit of our financial statements has been carried out in accordance with the standards of the PCAOB, that our financial statements are presented in accordance with accounting principles generally accepted in the United States of America, or that our independent registered public accounting firm is in fact “independent.”

Based upon the reports and discussions described in this report, and subject to the limitations on the role and responsibilities of our Audit Committee referred to above and in the Audit Committee’s Charter, our Audit Committee has recommended to our Board that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2009 filed with the SEC and determined that the provision of non-audit services by Deloitte & Touche LLP to the Company in 2009 was compatible with maintaining the independence of Deloitte & Touche LLP in its audit of the Company.

SUBMITTED BY THE AUDIT COMMITTEE

Paul J. Liska (Chairman)

Jose O. Montemayor

Don M. Randel

Marvin Zonis

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Director Compensation

Our Directors who are not employees of CNA or any of its subsidiaries (i.e., all of our Directors except our Chairman of the Board) received an annual retainer in 2009 of $50,000. In addition, members of our committees received the following annual retainers: Finance $4,000; Executive $4,000; Compensation $10,000 (Chairman received $15,000); and Audit $40,000 (Chairman received $60,000). In addition, a meeting fee of $600 per meeting was paid to the Chairmen of the Audit and Compensation Committees for each meeting with management, the independent registered public accountants, advisors and other appropriate persons held to carry out their respective duties between regularly scheduled quarterly meetings of the Committees. In addition, the members of the Special Review Committee received $7,500 (Chairman received $10,000) and the Special Securities Committee received $2,000.

The following table shows, for each non-employee Director, the amount of cash compensation paid for his service during 2009:

Director Compensation

Compensation Discussion and Analysis

The Board of Directors believes that our success is dependent upon the quality of senior management, and that compensation programs are important in attracting and retaining NEOs of superior ability and motivating their efforts on behalf of the Company’s interests. To that end, its compensation program for NEOs recognizes individual performance and contributions, as reflected both in the Company’s overall results and in each NEO’s contribution to them. To meet these objectives, the Company has established an approach to NEO compensation that combines elements of base salary and both cash and stock-based incentive compensation, as well as other benefits. In selecting these elements of NEO compensation, the Company has considered its historical compensation practices as they have evolved over the years, national surveys of executive compensation at comparable companies and the executive compensation programs of various peer companies, as well as applicable tax and accounting impacts of executive compensation. The Company’s NEOs for 2009 are identified below in the Compensation of Executive Officers Tables.

Since the Company maintains written agreements, either directly or through one of its subsidiaries, with each of its NEOs, these agreements, along with the CNA Financial Corporation Incentive Compensation Plan (the “Incentive Compensation Plan”), are the principal guides to structuring compensation for those executives. In preparing and negotiating the terms of these agreements, the Company seeks to realize the goals and objectives described in the preceding paragraph and to include the elements of compensation described in this Compensation Discussion and Analysis. These agreements are described in the “Narrative Supplement to the 2009 Summary Compensation Table and the 2009 Grants of Plan-Based Awards Table” section.

The principal components of compensation for the Company’s NEOs are:

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In establishing the aggregate amount of compensation for each NEO, the primary factor is an evaluation of the individual’s performance in the context of any contractual commitments to the individual executive, and the Company’s performance during the period in question. The Company’s past compensation policies are reflected in the terms agreed to in the NEOs’ respective agreements. As noted above, the Company also reviews and considers compensation levels and practices as shown in surveys and other materials. Based on these factors, the Company determines an overall level of cash compensation—a portion of which is to be paid as base salary and the balance of which would be incentive-based—and equity-based awards, which are described in further detail in the “Narrative Supplement to the 2009 Summary Compensation Table and the 2009 Grants of Plan-Based Awards Table” section.

Base Salary. As a result of the performance reviews and other factors described below, and the impact of limits on the deductibility of compensation as described below, the annual base salary of each of the Company’s NEOs has been effectively limited to a maximum of $1 million.

Incentive Compensation Awards. The Incentive Compensation Plan provides for annual and long-term cash and share-related incentive compensation for the NEOs of the Company, among other executives. It is designed to qualify the amounts paid from time to time under the Incentive Compensation Plan to certain of the Company’s officers as “qualified performance-based compensation” under Section 162(m) of the Internal Revenue Code (“IRC”). The elements of any incentive compensation recited in the agreements with each NEO are subject to the terms and conditions of the Incentive Compensation Plan and the approval of the Compensation Committee.

The Incentive Compensation Plan is intended to assist us in retaining effective senior executives and attracting new senior leadership, and provide a means of rewarding NEOs, among other employees, with equity and cash compensation which, when coupled with a base salary, produces a competitive level of total compensation that reflects their individual performance and their contributions to the overall short-term and long-term enhancement of the value of the Company and its subsidiaries. The Incentive Compensation Plan is administered by the Compensation Committee, which has sole discretion to make all determinations on any matter relating to the Incentive Compensation Plan or any award granted under it. Under the Incentive Compensation Plan, the measures to be used for purposes of incentive awards may include one or more or any combination of a wide variety of corporate and personal performance components, as described more fully in the Incentive Compensation Plan.

Annual and long-term 2009 cash incentive awards under the Incentive Compensation Plan for the NEOs were based upon our net operating income for that year, as defined by the Compensation Committee (“NOI”) at its meetings in February and March of 2009. The following is the definition of NOI approved at the meetings:

“Net Operating Income” is defined as net income to be reported to the Stockholders in the Annual Report for 2009.

In addition, the Compensation Committee determined that the following items shall also be excluded from the definition of NOI:

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No changes were made either to the enumerated exclusions from net income or to the 2009 NOI definition as a whole after its approval by the Compensation Committee at the February and March 2009 meetings. The foregoing NOI definition was approved by the Compensation Committee to be applied in the determination of both the annual incentive cash awards for 2009 payable in 2010 to the NEOs and the long term incentive cash awards payable in 2010 to the NEOs, as explained below.

With regard to 2009 incentive cash awards to NEOs, the Compensation Committee retained the authority to exercise negative discretion on any of the exclusions listed above except as specified in an employment agreement between the Company or one of its subsidiaries and an NEO. Although NOI as determined under this definition is derived from the Company’s net income as recorded in our Annual Report for 2009, it is different from both that net income amount and our net operating income as reported in the Company’s earnings release for 2009. The primary purpose of the exclusions from net income reflected in the above definition of NOI is to remove those elements of income or loss which relate to one-time or extraordinary events or developments or other matters that, in the judgment of the Compensation Committee, are not appropriate to consider for purposes of assessing an NEO’s performance and contribution to our operating results. At its January 2010 meeting, the Compensation Committee established that NOI for 2009, determined pursuant to the above definition, was $987 million. Net operating income as reported by the Company in our earnings release for 2009 was $5 million lower than NOI as determined by the Compensation Committee for 2009.

Annual Incentive Cash Compensation Awards

The annual incentive cash compensation awards under the Incentive Compensation Plan for the NEOs for 2009 were primarily determined by performance compared to preset quantifiable financial goals based upon NOI as determined by the Compensation Committee, which also set the level or levels of cash incentive award opportunity within those goals for each NEO. Typical primary recurring factors taken into account for purposes of determining annual incentive cash compensation award levels assigned for each NEO for a given year include such elements as: combined ratios; expense ratios; return on equity; catastrophe loss experience; handling of legal exposures; and net written premium production. As to any particular NEO, these factors may be considered both from an overall corporate viewpoint or in terms of performance for a particular factor within that executive’s individual areas of responsibility, or both. For 2009, non-recurring developments taken into account for purposes of determining annual NEO incentive cash compensation awards included: financial market instability; and a settlement reached with Willis Limited that resolved litigation related to the placement of personal accident reinsurance.

For Mr. Motamed, the annual incentive cash compensation opportunity for 2009 was based upon a payout formula of 1.2% of 2009 NOI, as defined by the Compensation Committee, limited by his individual maximum payment amount of $4.0 million.

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For Messrs. Kantor, Mense, Pontarelli and Wilson, the annual incentive cash compensation opportunities for 2009 were based upon a payout formula in each case of one-third of one percent of 2009 NOI as defined by the Compensation Committee, limited by individual maximum payment amounts of $1.6 million, $1.6 million, $1.150 million and $1.3 million, respectively. For the NEOs, assessment of individual performance in prior years and their respective responsibilities in 2009 are reflected as factors in the maximum individual payout amounts established as to each. The following table provides additional information:

For all NEOs, the Compensation Committee retained the power to exercise negative discretion for 2009 annual incentive cash compensation amounts up to 100% of the amount produced by the applicable payout formula or NOI target ranges or amounts, as applicable. Thus for all NEOs the Compensation Committee’s exercise of negative discretion in any particular case is an additional factor reflecting that executive’s individual performance as assessed by the Compensation Committee and Company management. In making recommendations to the Compensation Committee for 2009 annual incentive bonus payment amounts within the above parameters for the NEOs at its meeting in January of 2010, the Compensation Committee reviewed specific 2009 performance achievements of each executive and explained why in the Compensation Committee’s view the proposed bonus amounts were warranted.

For Messrs. Motamed, Kantor, Mense, Pontarelli and Wilson, there is no requirement to reach a particular performance goal or payout formula in order to qualify for the 2009 annual incentive cash compensation opportunity, but payouts are limited by both actual 2009 NOI production and the individual pre-determined maximum payout amounts. For all NEOs, the potential for exercise of negative discretion by the Compensation Committee, as described above, is a further limiting factor.

Company management performs an analytical and advisory role in the process of determining incentive compensation for its NEOs. The Chairman of the Board and Chief Executive Officer reviews all elements of incentive compensation for NEOs (other than himself) with the Company’s Senior Human Resources officer, and approves all recommendations to be made to the Compensation Committee as to those executives. Proposed incentive compensation awards to the Chief Executive Officer himself are developed by the Company’s Senior Human Resources officer in consultation with the majority Stockholder of the Company’s Common Stock, and then recommended to the Compensation Committee. Since each NEO who reports to the Chief Executive Officer is assessed separately by him and the Compensation Committee as to each element of compensation, there is no direct relationship among those elements from one NEO to another. The relationship among the various elements of compensation for each NEO individually is driven by the goal of providing the executive with an overall package of base and incentive compensation that fairly recompenses him for both Company and individual performance, in the judgment of the Compensation Committee in consultation with management. Accordingly, there is an annual assessment of all compensation elements collectively for each NEO, to assure that in the aggregate they represent a fair and balanced package in light of individual achievements and overall Company results.

In the case of the Chief Executive Officer, overall Company operating and financial performance are primary considerations in determining the incentive compensation recommendations to be made to the Compensation Committee. Among the performance factors considered in this regard for the 2009 performance year were: reported net operating income of $987 million in a softening insurance market; and combined ratios

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for core property & casualty operations of 96.9%. In addition, under Mr. Motamed’s leadership, the Company launched a three-part strategy for future growth which included: developing and deepening the Company’s expertise to serve selected industry segments; managing our mix of business to improve profitability; and extending our geographic reach and improving capabilities at the point of sale.

For Mr. Mense, among the performance factors considered for the 2009 performance year were: an overall improvement in the Company’s capital levels; effective management of key relationships with rating agencies and regulators, efficient capital management and maintenance of balance sheet strength, including a successful $350 million debt issuance and redemption of $250 million of the 2008 Senior Preferred Stock; continued reduction in reinsurance recoverables; effective overall leadership of the Company’s enterprise risk management initiatives; and implementation of a number of significant required accounting changes.

For Mr. Kantor, among the performance factors considered for the 2009 performance year were: successful claims and litigation management; leadership in the Company’s overall enhancements to its claims handling processes, with a favorable impact on the Company’s reserve position in relation to those risks; and effective conduct of government relations initiatives.

For Mr. Pontarelli, among the performance factors considered for the 2009 performance year were: successfully recruiting new senior leadership; significantly improving cash flow results in the Worldwide Operations area; achieving an effective transition of leadership in the Information Technology area; and enhancing the Company’s use of technology in communications through its external website, www.cna.com, as well as digital advertising.

For Mr. Wilson, the performance factors considered for the 2009 performance year primarily involve his pivotal role in leading CNA Specialty, one of our two business segments, including: improving the combined ratio for 2009, as compared with 2008; securing successful policy retention levels; effectively managing underwriting risk; expanding new product development capability; and improving the management of portfolio mix.

The annual incentive opportunity for each NEO is also based, among other factors, on comparative market compensation data as described below. Final approval of annual incentive cash compensation payments is made by the Compensation Committee, which retains authority to make discretionary reductions in the award amounts, including changes through the exercise of negative discretion as to individual awards. Pursuant to Mr. Motamed’s employment agreement, the Compensation Committee may exercise negative discretion to decrease or eliminate any portion of his earned annual incentive cash compensation payment that exceeds his annual target bonus opportunity of $2.5 million. The Compensation Committee also reserves the right to eliminate these awards to the NEOs, uniformly, due to adverse financial conditions, except where otherwise specified in employment agreements. In determining the annual incentive cash compensation awards for 2009, the Compensation Committee evaluated Company performance and individual performance against the pre-set financial goals and other performance measures where appropriate, as described above. However, while these factors were generally considered as part of the Compensation Committee’s overall analysis of the payout amounts, none of the factors was formally weighted or reduced to a specific percentage or dollar amount figures. The primary driver of the annual incentive bonus amount to be paid to each NEO individually is based upon the assessment by Company senior management and the Compensation Committee of that NEO’s success in his or her responsibilities during the performance period in question. For 2009, the chief factors considered in the assessment for each NEO are recited above. As noted above, in terms of overall performance, the Company was adversely affected in 2009, in the insurance marketplace and otherwise, by the extraordinary deterioration in economic conditions. These overarching circumstances negatively affect how much cash will be considered available for annual incentive bonuses to NEOs generally. Based upon this process of evaluation, the Compensation Committee applied negative discretion ranging from 25% to 41% and the 2009 annual incentive bonus payouts for the NEOs ranged from 75% to 59% of the respective maximum annual incentive opportunities.

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Long-Term Incentive Cash Plan

Under the current Incentive Compensation Plan, potential long-term incentive (“LTI”) cash awards for NEOs, among other employees, are based upon the Company’s NOI, determined pursuant to a definition approved by the Compensation Committee, over three-year cycles, with NOI goals set by the Compensation Committee for each calendar year within the three-year cycle. The three-year period covered by these awards encourages the Company’s executives, including its NEOs, to think in terms of multi-year performance spans, rather than exclusively a succession of separate single-year measures.

The Company is proposing changes to the Incentive Compensation Plan to incorporate book value as an added performance measure (please see Proposal No. 2). The goal of including this measure is to more closely align our long-term incentive compensation opportunities with individual and Company performance in order to better attract and retain the talent necessary to support a high performance culture, drive profitable growth and maximize Stockholder value. Awards under the amended and restated Incentive Compensation Plan will be based on a three-year adjusted book value growth measure. Although net operating income will continue to be the performance measure for the annual incentive bonus plan, the Company, the Compensation Committee and the overall Board believe that a multi-year book value-based measurement for awards granted under the amended Incentive Compensation Plan will better reflect longer-term CNA growth and more closely correlate individual long-term performance incentives with lasting shareholder value creation.

The determination of NOI for purposes of establishing 2009 LTI cash awards was the same as the NOI determination for purposes of annual incentive cash compensation opportunities, as described above. Performance for LTI cash payments is determined at the end of each calendar year and payouts are accrued until the end of each three-year cycle. Accordingly, 2009 performance year results applied for the 2007-2009, 2008-2010 and 2009-2011 cycles under the Incentive Compensation Plan were reviewed and approved by the Compensation Committee. In addition, awards for the 2007-2009 performance cycle payable in March 2010, based on the 2009, 2008 and 2007 performance years, were approved by the Compensation Committee at the January 2010 meeting. As distinct from their annual incentive cash compensation award opportunities, the LTI cash payments for the NEOs in 2009 were determined pursuant to NOI goal levels and target percentages that are the same for all NEOs, as well as other employees, although the amounts awardable at each target percentage achievement were different for each executive. The calculated percentage achievement amounts may be reduced depending upon the Company’s assessment of quantifiable and non-quantifiable factors applied to the Company’s overall performance (which are considered informally and not reduced to a specific weighting, valuation, or dollar value process). In 2009, the calculated percentage achievement amount and the amounts actually awarded were the same. The ranges of LTI cash award opportunities for the NEOs for 2009 as determined by the Compensation Committee are reflected below in the Grants of Plan Based Awards Table. Generally actual payouts of the LTI cash awards for NEOs may range from 0% to 200% of target, based upon the Company’s overall business results and performance and prospects of the Company as a whole, both from an operational and a financial perspective, as determined by the Compensation Committee in its sole discretion.

For the LTI cash award opportunity, the difficulty for each NEO in reaching the highest level of LTI cash opportunity for any given year is a product of both the large number of cumulative factors affecting actual NOI production for that year, as well as the accuracy of the pre-set NOI goal in reflecting what can reasonably be regarded as achievable NOI production for the period given all circumstances affecting such production. Consideration of a span of three production years for each such award opportunity is a stabilizing factor.

Stock-Based Awards. Another element of our compensation policy for NEOs is stock-based awards under the Incentive Compensation Plan. Unlike base salary and incentive cash compensation awards, which are earned and paid based on the annual or multi-year performance of the individual and the Company, stock-based awards generally vest

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in four equal installments over a period of four years, and each installment vests only if the NEO is employed on each vesting date. As a result, these awards recognize performance over a longer term, encourage executives to continue their employment with the Company or its subsidiaries and directly link the value of the awards to appreciation in the price of the Company’s Common Stock. All of these elements further serve to align the executive’s interests with those of the Company’s Stockholders.

Contractual commitments to NEOs for stock-based awards generally take the form of a minimum number of shares to be awarded annually, subject to the terms of the Incentive Compensation Plan, share availability and the approval of the Compensation Committee. Stock-based awards to NEOs are made at an exercise or strike price equal to the fair market value as defined in the Incentive Compensation Plan, based upon the average of the high and low sales prices of the Company’s Common Stock on the date of grant. We believe this practice is fair and reasonable to the individual executive and to the Company and its Stockholders, since, in addition to being consistent with the Incentive Compensation Plan, it is a commonly used method of determining the exercise or strike price of equity-based awards to corporate executives and is unconnected with the impact of any subsequent events.

In 2006 the Company recommended to the Compensation Committee that regularly scheduled stock-based awards to NEOs and other Company officers, except as otherwise provided by contract, normally be granted in the form of stock appreciation rights paid in stock (“SARs”), as described below. The objective of this practice is to reduce the level of dilution of Company ownership by current Stockholders created as a result of equity awards to officers, and to help maintain consolidation for tax reporting purposes with our corporate majority owner. With a SARs grant, the only Common Stock granted and potentially sold are shares representing the difference in the stock’s fair market value between the date the grant was made and the exercise date.

Stock-based awards to NEOs may be made in the form of restricted stock grants, stock options, SARs paid in stock, restricted stock units (performance and/or time-based) (“RSUs”) in each case subject to the terms and provisions of the Incentive Compensation Plan. Grants of stock options or SARs paid in stock generally survive for a period of ten years. Each of the SARs granted entitles the grantee to receive, at the time of exercise, an amount equal to the difference between the fair market value of a single share of the Company’s Common Stock on the date of exercise and the exercise price, which may not be less than the fair market value of a single share of the Company’s Common Stock on the date the grant was made, paid not in cash but in shares of the Company’s Common Stock. SARs generally vest in four equal annual installments on the first four anniversaries of the grant date, so long as the grantee is employed by the Company or one of its subsidiaries on each such date.

In 2009, NEOs received SARs awards as outlined in the 2009 Grants of Plan-Based Awards Table. The SARs granted reflect the assessment of management as to each NEO’s contribution to the attainment of corporate goals, his level of success in meeting individual performance expectations and competitive levels of total compensation. In addition, Mr. Motamed received a sign-on grant of 130,464 RSUs, each representing the right to receive one share of the Company’s Common Stock. Mr. Motamed also received an award of performance-based RSUs with a target value of $2.5 million (or 208,160 target shares), based upon the volume weighted average price during the ten (10) trading days immediately preceding the date of grant, with the maximum number of shares payable equal to 208,160 shares. At the January 2010 Compensation Committee meeting, the Compensation Committee determined, based on the scale below which was approved by the Compensation Committee at its February 4, 2009 meeting, that the achievement for this award was equal to 80% (or 166,528 shares)

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Retirement Plans. CNA provides funded, tax-qualified retirement plans for salaried employees, including executive officers (the “Qualified Plans”) and unfunded, non-qualified equalization plans for certain highly compensated employees (the “Non-Qualified Plans”) which provide for accruals and contributions not available under the Qualified Plans. The Qualified Plans and the Non-Qualified Plans both include defined contribution plans and defined benefit plans. The Qualified and Non-Qualified defined contribution plans are the CNA Savings and Capital Accumulation Plan (the “S-CAP”) and the CNA Supplemental Executive Savings and Capital Accumulation Plan (the “SES-CAP”), respectively. The Qualified and Non-Qualified defined benefit plans are the CNA Retirement Plan (the “Retirement Plan”) and the CNA Supplemental Executive Retirement Plan (the “SERP”), respectively.

In 2000, the Retirement Plan was amended and employees who were employed at December 31, 1999 and were still employed on April 24, 2000 were required to make a choice regarding their future accruals in this plan. Employees were given two choices: (1) to continue earning additional benefits under the formula described below; or (2) to convert the present value of their accrued benefit as of December 31, 1999 to an accrued pension account, which amount was credited with interest at a rate based on 30 year treasury securities.

Other Benefits. We provide limited types of perquisites and other personal benefits to our NEOs which we believe are reasonable, consistent with our overall compensation program to enable the Company to attract and retain superior employees for key positions and comparable with perquisite packages offered by our competitors to their senior executives. Pursuant to Company policy and the terms of their respective employment agreements described in the “Narrative Supplement to the 2009 Summary Compensation Table and the 2009 Grants of Plan-Based Awards Table” section. NEOs are generally entitled to participate in the various benefit plans, programs or arrangements established and maintained by the Company from time to time and applicable to its senior executives, including medical benefits, dental benefits, life insurance, long-term disability insurance, qualified and supplemental defined contribution and defined benefit plans, and to receive all fringe benefits made available to senior executives of the Company, including reimbursement for club memberships, annual physical examinations, preparation of personal income tax returns and paid parking. Each NEO’s entitlement to such benefits is subject to the terms and conditions of the Company’s policies with regard to them, as adjusted by the Company from time to time in its discretion. NEOs are not eligible for paid time off under the Company’s paid time off policy for other employees, any vacation or other work leave time for those NEOs being in each case subject to the approval of the Chairman of the Board and Chief Executive Officer (other than himself). Severance and other benefits available to NEOs upon termination of employment are determined in accordance with the terms of their respective employment contracts, which are summarized in the “Narrative Supplement to the 2009 Summary Compensation Table and the 2009 Grants of Plan-Based Awards Table” section.

IRC Section 162(m). Under Section 162(m) of the Internal Revenue Code (“IRC”), unless classified as “qualified performance-based compensation,” the amount of compensation deductible for federal income tax purposes which is paid by a publicly-held corporation to its CEO and certain other highly compensated officers during any year is limited to a maximum of $1 million per person, except that compensation which is considered to be “qualified performance-based compensation” is not subject to this limitation. To the extent the Company’s compensation policy can be implemented in a manner that maximizes the deductibility of compensation paid by the Company, the Board of Directors seeks to do so, subject to the contractual obligations to executives in particular cases.

Comparative Market Data. The Compensation Committee reviews and approves the compensation for the NEOs. The Chairman of the Board and Chief Executive Officer reviews and approves recommendations made to the Compensation Committee regarding all compensation for the NEOs (other than himself). Recommendations regarding the Chief Executive Officer’s compensation are developed by the Company’s Senior Human Resources officer in consultation with the majority Stockholder of the Company’s Common Stock. The Compensation Committee and the Chief Executive Officer are assisted in developing and evaluating the overall competitiveness of the compensation program by the Company’s Human Resources staff, which uses market data provided by the following executive compensation consulting firms: Mercer—Property & Casualty Insurance Compensation Survey; Hewitt—Total Compensation Measurement Survey; Towers Perrin—Financial Services Executive Survey—insurance industry and financial industry data; Perlin IT Executive Survey; and Clear Solutions

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Actuarial Survey. Comparative compensation information regarding the Company’s peer group of companies is evaluated each year. The competitor group consisted of the companies identified below, all of which are within the insurance industry. In 2009, the Company added two new companies to this group in order to have a larger and thus more balanced base line for the Company’s compensation program.

These companies, as well as other companies within the insurance, financial services and certain other industries, represent the organizations against which CNA competes for key executives. This comparative compensation information, in conjunction with performance assessments as to past and expected future contributions of the individual, is used to develop annual compensation levels. It is the Company’s goal to set total compensation opportunities for the NEOs at levels generally comparable with those available to similarly placed executives at the Company’s competitor group; however, the Company does not benchmark executive compensation in the sense of setting mandatory levels or percentiles of peer compensation within which compensation for any particular NEO must fall. Rather, the Company uses information from the surveys and peer companies cited above to assure that its recommendations to the Compensation Committee concerning overall compensation for each NEO are comparable to the full compensation packages given to executives in the same or similar positions in such peer companies and in companies from related industries. Thus, in any particular case, one or more components of a given NEO’s entire compensation structure might not be directly aligned with the same component in compensation packages offered at peer companies, but overall compensation for that NEO would nevertheless be within the parameters reflected in peer and survey data as full compensation for the same or similar positions. This process promotes the Company’s goal of offering its NEOs compensation structures that, taken as a whole, make it possible to retain the most talented and productive executive officers.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

We have reviewed and discussed the Compensation Discussion and Analysis set forth above with the management of the Company, and, based on such review and discussion, have approved inclusion of the Compensation Discussion and Analysis in this Proxy Statement and in the Company’s Annual Report on Form 10-K.

By the Compensation Committee:

Paul J. Liska, Jose O. Montemayor, Don M. Randel and Marvin Zonis (Chairman)

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COMPENSATION OF EXECUTIVE OFFICERS

The following 2009 Summary Compensation Table summarizes compensation paid by the Company and its subsidiaries for services rendered in all capacities for our Chief Executive Officer, Chief Financial Officer and other NEOs as of December 31, 2009:

2009 SUMMARY COMPENSATION TABLE

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2009 ALL OTHER COMPENSATION TABLE

The following 2009 All Other Compensation Table describes each component of the All Other Compensation column in the Summary Compensation Table for the year ended December 31, 2009.

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2009 GRANTS OF PLAN-BASED AWARDS TABLE

The following 2009 Grants of Plan-Based Awards Table provides additional information on stock options/SARs awards and non-equity incentive plan awards granted to each of the NEOs during the year ended December 31, 2009.

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Narrative Supplement to the 2009 Summary Compensation Table and the 2009 Grants of Plan-Based Awards Table

From and after the time individuals become NEOs, the terms of their employment and the form of their employment agreements are approved by the Compensation Committee, except the Chairman and Chief Executive Officer, whose terms of employment and form of employment agreement are approved by the Board of Directors.

Mr. Motamed

Pursuant to an employment agreement, dated May 22, 2008, and as amended October 24, 2008 and March 3, 2010, Mr. Thomas F. Motamed currently serves as Chairman of the Board and Chief Executive Officer of our Company and as Chairman of the Board, President and Chief Executive Officer of the CNA insurance companies. The term of the employment agreement began January 1, 2009 and expires December 31, 2013. His annual base compensation is $1,000,000, subject to potential increases by our Board of Directors or Compensation Committee beginning in 2010. In addition, Mr. Motamed is entitled to earn annual incentive cash awards under the Incentive Compensation Plan with a annual target bonus opportunity of $2.5 million and a maximum annual bonus opportunity of $4 million, as well as certain long-term incentive cash awards, calculated pursuant to net operating income goals and overall Company business performance, as determined by the Compensation Committee and subject to its approval and adjustment. Under the employment agreement, Mr. Motamed received a sign-on grant of 130,464 RSUs, each representing the right to receive one share of our Common Stock, and is entitled to an annual grant of 80,000 SARs paid in stock. In addition, he is entitled to an annual target grant of performance-based RSUs with a value of $2.5 million, based upon the volume weighted average price during the ten (10) trading days immediately preceding the date of grant, which target was increased to $3.5 million solely for 2010 pursuant to the March 3, 2010 amendment to his agreement, subject to Compensation Committee approval.

If Mr. Motamed’s employment is terminated by the Company without “cause” or he resigns for “good reason” (each as defined in the agreement), he will receive, at a minimum, unpaid base salary through the termination date, the balance of any unpaid annual incentive cash awards and long-term incentive cash awards for the performance period in which termination occurs, prorated to date of termination; full vesting of all outstanding SARs, with SARs remaining exercisable for the lesser of three (3) years following termination or the balance of the maximum term; full vesting of any outstanding RSUs whose vesting is based solely on continued employment; full vesting of performance-based RSUs granted in the calendar year of termination or in the previous year, subject solely to satisfying performance criteria of such RSUs; and forty-two (42) months of Company subsidized participation in the medical, dental, vision, life and disability plans in which he was enrolled prior to termination. In the event Mr. Motamed timely executes, delivers and does not revoke a release in the time, manner and form described in the agreement, he shall be entitled to receive severance payments in the amount of $312,500 per month commencing with month of termination through the remaining term of his employment agreement; provided however, severance payments shall be made for a period of no less than six (6) months following termination and any severance payments will be made in substantially equal installments, not less frequently than monthly. Mr. Motamed is also entitled to the following special termination payments: (i) a payment of $15,000 annually commencing January 2014 and ending on January 2033; and (ii) a lump sum payment equal to $1.5 million to be paid within thirty (30) days following termination. The foregoing severance payments are subject to deferral pursuant to the provisions of IRC Section 409A and the Treasury Regulations related to it.

If Mr. Motamed’s employment is terminated in connection with a change of control, as such term is defined in his employment agreement, he will receive: any unpaid base salary through the termination date, the balance of any unpaid annual incentive cash awards and long-term incentive cash awards for the performance period in which termination occurs, prorated to the date of termination; full vesting of all outstanding SARs, with SARs remaining exercisable for the lesser of ninety (90) days following termination or the balance of the maximum

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term; full vesting of any outstanding RSUs where vesting is based solely on continued employment; and full vesting of any earned but unvested performance-based RSUs. In addition, Mr. Motamed is entitled to reimbursement, on an after-tax basis, for any excise tax due as a result of any payment under his employment agreement being treated as an “excess parachute payment” under Section 280G of the Internal Revenue Code.

Mr. Mense

In accordance with an employment agreement, dated August 1, 2007, and as amended July 1, 2008, Mr. D. Craig Mense serves as Executive Vice President and Chief Financial Officer of the Company. The term of the agreement expires December 31, 2010 and current annual base compensation is $800,000, subject to discretionary adjustments by the Compensation Committee. In addition, Mr. Mense is entitled to earn annual incentive cash awards under the Incentive Compensation Plan with a maximum annual bonus opportunity equal to 200% of his base salary, as well as certain long-term incentive awards, calculated pursuant to net operating income goals and overall Company business performance as determined by the Compensation Committee and subject to its approval and adjustment. Pursuant to the employment agreement, Mr. Mense is also entitled to a minimum annual grant of 30,000 SARs of the Company’s Common Stock, subject to share availability under the Incentive Compensation Plan and Compensation Committee approval. Under the employment agreement, Mr. Mense is further entitled to the remaining $400,000 of a $800,000 retention bonus payable on June 30, 2010 so long as Mr. Mense’s employment is not terminated by the Company for “cause” (as defined in the agreement) or Mr. Mense does not voluntarily resign from the Company prior to June 30, 2010 (the first $400,000 was paid on June 30, 2009).

If Mr. Mense’s employment is terminated by the Company without “cause” or he resigns for “good reason” (each as defined in the agreement), he will receive prorated salary and benefits through the event, and severance payments over 24 months in a total amount equal to $3.6 million, payable over two years in equal monthly installments following termination, but subject to deferral pursuant to the provisions of Section 409A of the Internal Revenue Code and the Treasury Regulations related to it. In addition, severance includes up to 12 months of Company subsidized participation in health benefit plans in which he was enrolled in prior to termination.

Mr. Kantor

Pursuant to an employment agreement, dated April 1, 2008, Mr. Jonathan D. Kantor serves as Executive Vice President, General Counsel & Secretary of the Company, with duties and responsibilities as designated by the Chairman of the Board and Chief Executive Officer. The term of the agreement expires June 30, 2011 and current annual base compensation is $800,000, subject to annual increases at the discretion of the Chairman of the Board and Chief Executive Officer and/or the Compensation Committee. In addition, Mr. Kantor is entitled to earn annual incentive cash awards under the Incentive Compensation Plan with a maximum annual bonus opportunity equal to 200% of his base salary, as well as certain long-term incentive awards, calculated pursuant to net operating income goals and overall Company business performance, as determined by the Compensation Committee and subject to its approval and adjustment. Pursuant to the terms of the employment agreement, Mr. Kantor is also entitled to a minimum annual grant of 30,000 SARs of the Company’s Common Stock, subject to share availability under the Incentive Compensation Plan and Compensation Committee approval. Under the employment agreement Mr. Kantor is further entitled to the remaining $400,000 of a $800,000 retention bonus, payable on June 30, 2010, so long as Mr. Kantor’s employment is not terminated by the Company for “cause” (as defined in the agreement) or Mr. Kantor does not voluntarily resign from the Company prior to June 30, 2010 (the first $400,000 was paid on June 30, 2009).

If Mr. Kantor’s employment is terminated by the Company without “cause” or he resigns for “good reason” (each as defined in the agreement), he will receive prorated salary and benefits through the event, and severance payments over 24 months in a total amount equal to $3.6 million, payable over two years in equal monthly installments following termination, but subject to deferral pursuant to the provisions of Section 409A of the Internal Revenue Code and the Treasury Regulations related to it. In addition, severance includes up to 18 months of Company subsidized participation in health benefit plans in which he was enrolled in prior to termination.

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Mr. Pontarelli

Mr. Thomas Pontarelli serves as Executive Vice President and Chief Administration Officer of the CNA insurance companies. Mr. Pontarelli’s current base compensation is $675,000, subject to discretionary adjustments by the Compensation Committee. Mr. Pontarelli is eligible to earn annual incentive cash awards under the Incentive Compensation Plan with a target annual bonus opportunity equal to 100% of his base salary, as well as SARs and certain long-term incentive awards, calculated pursuant to net operating income goals and overall Company business performance as determined by the Compensation Committee and subject to its approval and adjustment.

Pursuant to a series of letter agreements, dated June 18, 2007, August 8, 2008 and December 9, 2009, Mr. Pontarelli is entitled to the remaining $300,000 of a $600,000 retention bonus, payable on June 30, 2010, so long as Mr. Pontarelli’s employment is not terminated by the Company for “cause” (as defined in the agreement) or Mr. Pontarelli does not voluntarily resign from the Company prior to June 30, 2010 (the first $300,000 installment of this retention bonus was paid on June 30, 2009).

Pursuant to the letter agreements, if Mr. Pontarelli’s employment is terminated by the Company involuntarily for any reason except “cause” (as defined in the agreements), he will receive prorated salary and benefits through the event. Payments, if any, under incentive plans, including annual and long-term incentive plans, will be determined by the terms of the respective plans. Mr. Pontarelli will receive a severance payment comprised of one year of his annual base compensation, plus his annual bonus at target, each in effect at the time of termination, but subject to deferral pursuant to the provisions of Section 409A of the Internal Revenue Code and the Treasury Regulations related to it. In addition, severance includes up to 12 months of Company subsidized participation in health benefit plans in which he was enrolled in prior to termination.

Mr. Wilson

Pursuant to an employment agreement, dated August 24, 2006, and as amended September 19, 2008, Mr. Peter W. Wilson serves as President and Chief Operating Officer, CNA Specialty, of the CNA insurance companies. The term of the agreement expires December 31, 2011 and current annual base compensation is $700,000, subject to discretionary adjustments by the Compensation Committee. Mr. Wilson is entitled to earn annual incentive cash awards under the Incentive Compensation Plan with a target annual bonus opportunity equal to 100% of his base salary, as well as certain long-term incentive awards, calculated pursuant to net operating income goals and overall Company business performance as determined by the Compensation Committee and subject to its approval and adjustment. Additionally, he is entitled to an annual stock option grant of 20,000 shares of common stock of the Company. In January 2010, pursuant to his agreement, Mr. Wilson received a special signing bonus of $500,000 that was deposited into his account under the CNA Supplemental Executive Savings and Capital Accumulation Plan. Mr. Wilson is also entitled to the remaining $350,000 of a $700,000 retention bonus, payable on June 30, 2010, so long as Mr. Wilson’s employment is not terminated by the Company for “cause” (as defined in the agreement) or Mr. Wilson does not voluntarily resign from the Company prior to June 30, 2010 (the first $350,000 installment of this retention bonus was paid on June 30, 2009).

If Mr. Wilson’s employment is terminated by the Company without “cause” or he resigns for “good reason” (each as defined in the agreement), he will receive prorated salary, current year’s annual bonus, if any, based upon performance results and benefits through the event, and, within 30 days following termination, a lump sum severance payment comprised of two times his base compensation and two times his bonus at target in effect at the time of termination, but subject to deferral pursuant to the provisions of Section 409A of the Internal Revenue Code and the Treasury Regulations related to it. In addition, severance includes up to 24 months of Company subsidized participation in health benefit plans in which he was enrolled in prior to termination.

In the event any of the foregoing employment agreements, except in the case of Mr. Pontarelli, in effect is not renewed or is terminated prior to the respective expiration dates, each executive may be entitled to certain

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payments, the continuation of certain benefits, and the vesting of certain stock options, SARs or RSUs, all as determined in accordance with the applicable provisions of the respective agreements. Following the expiration or earlier termination of the agreements, each of the foregoing executives, except for Mr. Pontarelli, remains subject to certain confidentiality, non-competition, non-solicitation, non-interference and claims assistance covenants. Mr. Pontarelli does not have a non-renewal provision in his letter agreements and as such, would not be entitled to any additional payments, benefits or vesting of equity, nor is he subject to any covenants post-termination.

2009 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END TABLE

The following 2009 Outstanding Equity Awards at Fiscal Year End Table summarizes equity awards made to the NEOs which were outstanding as of the year ended December 31, 2009.

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