SEC Info - Cna Financial Corp - 10-K - For 12/31/00

SEC Info

Home

My Interests

Help

Please Sign In

Database maintenance is being performed. If something doesn’t work, please try again shortly.

Cna Financial Corp · 10-K · For 12/31/00 · EX-13.1

Filed On 3/16/01 5:21pm ET · SEC File 1-05823 · Accession Number 891554-1-501431

  As Of               Filer                 Filing     As/For/On Docs:Pgs              Issuer               Agent

 3/16/01  Cna Financial Corp                10-K       12/31/00    6:199                                    Document Tech Inc/FA

Annual Report · Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                         27    143K 
 2: EX-10.10    First Amendment to Sale and Purchase Agreement        60    242K 
 3: EX-12.1     Computation of Ratios                                  1      6K 
 4: EX-13.1     Annual Report                                        108±   475K 
 5: EX-21.1     Primary Subsidiaries of Cnaf                           2      7K 
 6: EX-23.1     Independent Auditors' Consent                          1      6K

EX-13.1 · Annual Report

EX-13.1 1st "Page" of 65 TOC Top Previous Next Bottom Just 1st
 Sponsored Ads...







CNA CHARTING THE COURSE                                                         
--------------------------------------------------------------------------------

When CNA set out to turn the company's performance around two years ago, we     
began evaluating each aspect of our business with a fresh perspective. We were  
determined to target those areas where our expertise added the most value for   
our clients and, ultimately, our shareholders.                                  

This intensive look at our business is engaging literally thousands of
employees. As a result, we've changed a great deal at CNA during the past two   
years - simplifying our business, clarifying our goals and applying renewed     
discipline and accountability to our performance.                               

    CNA is charting the course to a future of profitable growth by focusing on
what we do best, and it's a journey that will continue to drive the creation of 
shareholder value. This Annual Report details our substantial progress to date  
and the strategies that will take us where we want to go.                       

--------------------------------------------------------------------------------

CNA - WHO WE ARE CNA Financial Corporation is a holding company for             
property-casualty and life insurance companies and other related businesses. The
CNA insurance group of companies is one of the largest writers of commercial    
property-casualty insurance in the United States - using underwriting to help   
businesses manage their risks.                                                  

     CNA is the country's second largest commercial insurance writer, the eighth
largest property-casualty company and the 36th largest life insurance company.  

CNA's insurance products include standard commercial lines, specialty 
lines, surety, reinsurance, marine and other property and casualty coverages;   
life and accident insurance; group long term care, disability and life          
insurance; and pension products and annuities. CNA services include risk        
management, information services, underwriting, loss control and claims         
administration. Its products and services are marketed through agents, brokers  
and managing general agents.                                                    

"CNA" is a registered service mark, trade name and domain name of CNA 
Financial Corporation authorized for use by its subsidiaries.                   

CNA's major subsidiaries include The Continental Insurance Company,   
incorporated in 1853, Continental Casualty Company, incorporated in 1897, and   
Continental Assurance Company, incorporated in 1911. The company operates in all
50 states, as well as major international markets around the world.             

     CNA's financial strength is reflected in revenues of $15.6 billion in 2000,
and at year-end 2000, assets of $62.1 billion and stockholders' equity of       
$9.6 billion. CNA Financial Corporation stock is traded primarily on the New    
York Stock Exchange, and is approximately 87 percent owned by Loews Corporation.

--------------------------------------------------------------------------------

Table of Contents                                                               

2  Letter to Shareholders                                                       

6  Enhancing Underwriting Expertise                                             

8  Continuing Our Commitment                                                    
to Life and Group                                                         

10 Improving Service and Efficiency                                             

12 Maintaining a Disciplined                                                    
Financial Approach                                                        

14 Building Worldwide Capabilities                                              

16 Developing People and Partners                                               

18 Building a Strong Reputation                                                 

20 Financial Highlights (1991-2000)                                             

21 Management's Discussion and Analysis                                         

41 Consolidated Financial Statements                                            

74 Directors and Officers                                                       

IBC   Company Information                                                       

--------------------------------------------------------------------------------

EX-13.1 2nd "Page" of 65 TOC 1st Previous Next Bottom Just 2nd

                                                            FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

As of and for the Years Ended December 31                                                                                    
(In millions, except per share data and ratios)            2000           1999           1998            1997           1996 
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                                             
Results of Operations                                                                                                        

Revenues                                               $ 15,614       $ 16,403       $ 17,162        $ 17,199       $ 16,988 
-----------------------------------------------------------------------------------------------------------------------------

Net operating income (loss)                            $    354       $   (145)      $   (152)       $    488       $    578 

Net realized investment gains                               860            192            434             478            387 

Cumulative effect of a change                                                                                                
   in accounting principle, net of tax                       --           (177)            --              --             -- 
-----------------------------------------------------------------------------------------------------------------------------
     Net income (loss)                                 $  1,214       $   (130)      $    282        $    966       $    965 
=============================================================================================================================
Earnings per share                                                                                                           

Net operating income (loss)                            $   1.92       $  (0.85)      $  (0.86)       $   2.59       $   3.08 

Net realized investment gains, net of tax                                                                                    
   and minority interest                                   4.69           1.04           2.35            2.58           2.09 

Cumulative effect of a change in accounting                                                                                  
   principle, net of tax and minority interest               --          (0.96)            --              --             -- 
-----------------------------------------------------------------------------------------------------------------------------
     Net income (loss)                                 $   6.61       $  (0.77)      $   1.49        $   5.17       $   5.17 
=============================================================================================================================

Financial condition                                                                                                          

Invested assets                                        $ 35,122       $ 35,560       $ 37,177        $ 36,203       $ 35,412 

Total assets                                             62,068         61,219         62,432          61,675         60,455 

Reserves                                                 39,054         39,271         40,509          39,829         39,981 

Debt                                                      2,729          2,881          3,160           2,897          2,765 

Stockholders' equity                                      9,647          8,938          9,157           8,309          7,060 

Book value per common share                            $  52.64       $  47.66       $  47.89        $  44.01       $  37.27 

Return on average stockholders' equity                     13.1%         -1.4%           3.2%           12.6%          14.0% 

Statutory surplus                                                                                                            

Property-casualty companies*                           $  8,387       $  8,679       $  7,593        $  7,123       $  6,349 

Life insurance companies                                  1,274          1,222          1,109           1,224          1,163 
=============================================================================================================================

* Surplus includes equity of property-casualty companies' ownership in life     
insurance subsidiaries.                                                         

1 

EX-13.1 3rd "Page" of 65 TOC 1st Previous Next Bottom Just 3rd

LETTER TO SHAREHOLDERS                                                          
--------------------------------------------------------------------------------

Bernard L. Hengesbaugh   Chairman and Chief Executive Officer                   

Dear Shareholder:                                                               

 I am pleased to report continued progress during 2000 in our efforts to
improve CNA's operating performance and to enhance shareholder value.           

 As this year's results indicate, we have a lot of additional work to do
before we attain the full measure of shareholder value that is within our reach.
But we are on the right path. We are beginning to achieve operating improvements
through simplification, focus and improved discipline.                          

  Simplifying and clarifying our business today is also helping us chart a
course for a profitable and productive future for CNA. That course is being     
developed around strategies focused on what we do best for our customers.       

2 

EX-13.1 4th "Page" of 65 TOC 1st Previous Next Bottom Just 4th

CONTINUED IMPROVEMENT                                                           

During the past two years, CNA exited non-core businesses, sharpened our focus  
on the risks of business customers and strengthened the fundamentals of our     
operations. We are beginning to see the results of these efforts with the       
continued improvement in our earnings.                                          

    Our net income for 2000 was $1.2 billion, an increase of $1.3 billion over
the net loss of $130 million in 1999. While this significant increase in net    
income is attributable largely to realized gains on our superb Global Crossing  
and Canary Wharf investments, operating performance also improved.              

  Net operating income of $354 million in 2000, improved $500 million over
1999's loss of $145 million. This came on operating revenues of $14.3 billion in
2000, compared with operating revenues of $16.1 billion in 1999. This is an     
indicator of improved margins in our business.                                  

    Our performance during 2000 increased CNA's book value per share to $52.64
at the end of the year, a 10 percent increase compared with $47.66 at year-end  
1999.                                                                           

TWO KEY ELEMENTS                                                                

The two priorities that have driven the CNA turnaround since inception -        
underwriting discipline and cost-effective operations - continued in 2000.      

     First, our underwriting actions were favorably influenced by three factors:

1. An underwriting, pricing, loss control and claims team more attuned to       
underwriting excellence than even one year ago.                                 

2. Continued strong partnerships with agents and brokers who are willing to work
with us to solve problems.                                                      

3. A generally supportive marketplace. (Reinsurance was a notable exception to  
this through most of the year.)                                                 

  As happened in 1999, the re-underwriting and pricing actions resulted in
renewal retention rates lower than historical levels with only modest new       
business writings, and consequent reductions in premium volume. On the business 
renewed, we achieved increases in the 14 to 20 percent range, thereby improving 
future profit potential both from the rate increases and the improved quality of
the business retained.                                                          

     Second, we are maintaining our commitment to drive unnecessary costs out of
the business. In spite of our decreased premium volume, our expense reduction   
efforts are starting to show in the expense ratio and in real dollars of        
underwriting and acquisition expenses.                                          

     Having said that, this management team is not satisfied with these results.
We have more to do to complete this fundamental improvement process. But we are 
establishing the momentum for profitable growth and increased shareholder value 
over the long term.                                                             

MILESTONES                                                                      

During 2000, we reached some significant milestones on our path to improved     
operating performance.                                                          

o Six of our seven business segments reported improved net operating results for
2000.                                                                           

o We launched our eBusiness initiative, supported by a long term commitment to  
invest more than $150 million over the next several years in support of this    
strategy.                                                                       

3 

EX-13.1 5th "Page" of 65 TOC 1st Previous Next Bottom Just 5th

o We began to see improved service levels through our new, centralized          
processing facility in Maitland, Florida.                                       

o We sold our life reinsurance business to MARC, the U.S. life subsidiary of    
Munich Re. This allowed us to focus better on our core strategies.              

o We affirmed our ongoing commitment to our Individual Life, Long Term Care and 
Retirement Services businesses after a comprehensive analysis.                  

CHARTING THE COURSE                                                             

Looking forward, the people of CNA have responded enthusiastically to solving   
the challenges we face - not just within our own company, but also new and      
emerging challenges that face our industry and our clients in this new century. 

During 2000, I was privileged to meet with more than 15,000 of our    
employees to discuss our direction. I am more convinced than ever that our      
success is assured by our talented people who work on the front lines with our  
customers every day.                                                            

 As you will see from our Statement of Direction on the facing page, our
commitment is simple and straightforward. Our future is centered on providing   
significant value to our customers through great underwriting. This commitment  
will be the core of our strategies and everything we do.                        

   To sharpen and simplify our focus, we're creating three new organizations
as announced on January 29, 2001: Worldwide Field Operations, unifying CNA's    
domestic and international branches, led by Gary Owcar; Global Specialty        
Underwriting and Claims, extending our underwriting expertise worldwide, headed 
by Peter Wilson; and Technology Solutions, combining eBusiness Operations,      
information technology and business processing systems for the property-casualty
organization, led by Robert James. In addition, we have combined CNA Life and   
Group Operations under the leadership of Robert Patin, who joined us earlier    
this year as chief executive officer of this unit, having served eight years as 
chairman and CEO of Washington National Corporation.                            

Through these changes, we are improving our ability to communicate and
collaborate within our organization on behalf of our clients, and we are        
removing the "internal walls" so that we have the opportunity to provide        
solutions to our clients' needs.                                                

 Three of these four new organizations draw very capable people promoted
from within CNA - a very healthy sign. But we have also continued our success in
attracting talented and experienced insurance and technology people from outside
CNA. These people recognize the opportunity that now exists to be part of the   
re-emergence of CNA as a winner in coming years.                                

IN THE FUTURE                                                                   

When you combine the momentum of our financial improvement and our newly focused
direction, I believe you can see why we are optimistic about the future of CNA. 

     We have outstanding franchise value, including a broad base of thousands of
customers . . . we have excellent partnerships with outstanding agents and      
brokers . . . we maintain a strong balance sheet . . . and we have the resources
to make targeted investments that will enhance our ability to serve our         
customers.                                                                      

4 

EX-13.1 6th "Page" of 65 TOC 1st Previous Next Bottom Just 6th

                                                      CNA STATEMENT OF DIRECTION
--------------------------------------------------------------------------------

Businesses face changing risks worldwide that demand great underwriting. The    
people of CNA are dedicated to being the experts in understanding these risks   
and in building well-reasoned products and services that serve the best interest
of our customers. By doing so, CNA will be very profitable.                     

Great underwriting requires expertiese across many disciplines and about many   
different businesses. The people of CNA are committed to investing continuously 
in research about the businesses wer serve, training to advance our skills, and 
the technology to get the job done well.                                        

Only the highest caliber of people can deliver great underwriting. The people of
CNA are dedicated to building a disciplined and diverse organization that       
expects and regards superior results deivered with integrity and mutual respect.

We have made the tough decisions to improve our performance, we are   
demonstrating the strength of our business model and we are providing a solid   
platform for profitable growth and enhanced shareholder value.                  

BOARD CHANGES                                                                   

Finally, I want to salute two directors who will be retiring from our board in  
May: Robert Gwinn and Walter Mondale. Bob Gwinn, former Chairman and CEO of     
Encyclopaedia Brittanica, served for over 40 years on our board with great      
dedication and distinction. Walter Mondale, who served on our board for 12      
years, has been a steady source of insight and sound advice. We will miss them  
both.                                                                           

Early this year, we announced that Walter Harris, president and CEO of
Tanenbaum-Harber Company, had become the newest member of our Board of          
Directors. He brings more than two decades of insurance industry leadership, and
we are pleased to have Walter's experience and perspective on our Board.        

In summary, it has been a year of significant effort and progress in  
improving the fundamentals at CNA. We clearly have more work to do. But we are a
stronger organization today than even a year ago, and we are more confident of  
delivering enhanced value for you in the years ahead.                           

Thank you for your continued support.                                 

Sincerely,                                                                      

Bernard L. Hengesbaugh                                                          

Chairman and Chief Executive Officer                                            

CNA insurance companies                                                         

March 10, 2001                                                                  

5 

EX-13.1 7th "Page" of 65 TOC 1st Previous Next Bottom Just 7th

                                            MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------------------------------------------

INTRODUCTION                                                                    

The following discussion highlights significant factors influencing the         
consolidated results of operations and financial condition of CNA Financial     
Corporation (CNAF) and its subsidiaries (collectively CNA or the Company). Loews
Corporation (Loews) owns approximately 87% of the outstanding common stock of   
CNAF. This discussion should be read in conjunction with the Consolidated       
Financial Statements and the related Notes, appearing on pages 41 through 72,   
and the five-year summary of selected financial highlights appearing on page 1. 

 The discussion also includes an overview of each of the Company's seven
operating segments, the products offered, the customers served, the distribution
channels used and an analysis of operating results. The provisions for          
restructuring and other related charges, recorded in prior years, are discussed 
on a consolidated basis on page 32. Because distinct investment portfolios are  
not maintained for each insurance segment, the discussion of investment results,
including investment income and realized investment gains, is also on a         
consolidated basis and begins on page 32.                                       

CONSOLIDATED OPERATIONS                                                         

Business Overview                                                               

CNA is one of the largest insurance organizations in the United States. Based on
1999 net written premiums, CNA is the eighth largest property-casualty company  
and the 36th largest life insurance company.                                    

 CNA conducts its operations through the seven operating segments listed
below. In addition to the seven operating segments, certain other activities are
reported in a Corporate and Other segment.                                      

Agency Market Operations                                              
Specialty Operations                                                  
CNA Re                                                                
Global Operations                                                     
Risk Management                                                       
Group Operations                                                      
Life Operations                                                       

These operating segments reflect the way in which CNA distributes its 
products to the marketplace and the way in which it manages operations and makes
business decisions. A more detailed description of each segment is included     
later in this discussion.                                                       

Operating Results                                                               

The following chart summarizes the consolidated results of operations for each  
of the last three years.                                                        

Consolidated Operations                                                         

                                                                [Download Table]

Years ended December 31                                                         
(In millions, except per share data)                2000       1999        1998 
--------------------------------------------------------------------------------
                                                                                
Revenues:                                                                       
 Net earned premiums                            $ 11,474   $ 13,282    $ 13,536 
 Net investment income                             2,080      2,101       2,146 
 Other revenues                                      739        705         799 
--------------------------------------------------------------------------------
 Total revenues                                   14,293     16,088      16,481 
Claims, benefits and expenses                     13,804     16,331      16,567 
Restructuring and other                                                         
 related charges                                      --         83         246 
--------------------------------------------------------------------------------
Operating income (loss) before                                                  
 income tax and minority interest                    489       (326)       (332)
Income tax (expense) benefit                        (107)       211         200 
Minority interest                                    (28)       (30)        (20)
--------------------------------------------------------------------------------
Net operating income (loss)                          354       (145)       (152)
Net realized investment gains,                                                  
 net of tax and minority interest                    860        192         434 
Cumulative effect of a change in                                                
 accounting principle, net of tax                                               
 and minority interest                                --       (177)         -- 
--------------------------------------------------------------------------------
Net income (loss)                               $  1,214   $   (130)   $    282 
================================================================================
Basic and diluted earnings (loss) per share:                                    
  Net operating income (loss)                   $   1.92   $  (0.85)   $  (0.86)
  Net realized investment gains,                                                
   net of tax and minority interest                 4.69       1.04        2.35 
  Cumulative effect of a change                                                 
   in accounting principle, net                                                 
   of tax and minority interest                       --      (0.96)         -- 
--------------------------------------------------------------------------------
Basic and diluted earnings (loss)                                               
 per share available to                                                         
 common stockholders                            $   6.61   $  (0.77)   $   1.49 
================================================================================
Weighted average outstanding                                                    
 common stock and common                                                        
 stock equivalents                                 183.6      184.2      184.9  
================================================================================

21

EX-13.1 8th "Page" of 65 TOC 1st Previous Next Bottom Just 8th

The following table summarizes net income excluding after-tax realized
investment gains/losses (net operating income) by segment.                      

Net Operating Income by Segment                                                 

                                                                [Download Table]

Years ended December 31                                                         
(In millions)                                    2000         1999         1998 
--------------------------------------------------------------------------------
                                                                                
Agency Market Operations                        $ 110        $(201)       $ (54)
Specialty Operations                              131           49           58 
CNA Re                                             57          (13)          68 
Global Operations                                  42           64           18 
Risk Management                                    29           19          (88)
Group Operations                                   36           (6)         (48)
Life Operations                                   169          145          105 
Corporate and Other                              (220)        (202)        (211)
--------------------------------------------------------------------------------
Net operating income (loss)                     $ 354        $(145)       $(152)
================================================================================

2000 Compared with 1999                                                         

Net earned premiums decreased $1,808 million, or 14%, to $11,474 million in 2000
as compared with 1999. This decline was attributable to $1,354 million related  
to the CNA Personal Insurance business (Personal Insurance) transaction (see    
Note O to the Consolidated Financial Statements for discussion of the Personal  
Insurance transaction), as well as continued efforts to re-underwrite business  
and obtain adequate rates for exposure underwritten.                            

Net operating income was $354 million, or $1.92 per share, in 2000 as 
compared with a net operating loss of $145 million, or $0.85 per share, in 1999.
Net operating income increased $499 million in 2000, primarily as a result of   
the improvement of $451 million for the property-casualty segments, $42 million 
for Group Operations and $24 million for Life Operations, partially offset by a 
decline for Corporate and Other of $18 million. The improvement in the          
property-casualty net operating income was principally attributable to improved 
underwriting results of $554 million, partially offset by decreased investment  
income and increased expenses, including increased interest expense related to  
the cost of reinsurance. The improvement in 2000 results was primarily due to   
significant rate increases across the entire book of business, favorable        
catastrophe experience, reduced prior year reserve strengthening and the        
non-recurrence of $54 million in restructuring and related charges incurred in  
1999. After-tax catastrophe losses for 2000 improved by $189 million, including 
$62 million related to Personal Insurance. See Note O to the Consolidated       
Financial Statements for a discussion of the Personal Insurance transaction. In 
addition, net operating income in both 2000 and 1999 benefited from a change in 
estimate for certain insurance-related assessments resulting from regulatory    
changes in the basis on which certain of these assessments are calculated. The  
after-tax impact of these releases was $60 million in 2000 and $51 million in   
1999.                                                                           

 Net income for 2000 was $1,214 million, or $6.61 per share, as compared
with a net loss for 1999 of $130 million, or $0.77 per share. Net realized gains
increased $668 million in 2000 primarily attributable to sales of equity        
securities. Included in the net loss for 1999 was a charge of $177 million, net 
of tax, or $0.96 per share, for the cumulative effect of a change in accounting 
principle for insurance-related assessments.                                    

1999 Compared with 1998                                                         

The Company had a net operating loss for 1999 of $145 million, or $0.85 per     
share, compared with a net operating loss of $152 million, or $0.86 per share,  
for 1998. The net operating loss for 1999 includes $363 million in loss and     
allocated loss adjustment expense reserve strengthening for prior periods.      
After-tax catastrophe losses were approximately $35 million higher in 1999 as   
compared with 1998. The 1999 net operating loss also included $54 million in    
after-tax restructuring and other related charges, as compared with $160 million
in after-tax restructuring and other related charges in 1998. The 1999 net      
operating loss also reflects an after-tax benefit of $51 million resulting from 
regulatory changes in the basis on which certain insurance-related assessments  
are calculated.                                                                 

Discussions of the results of operations from the Company's segments  
follow.                                                                         

AGENCY MARKET OPERATIONS                                                        

Business Overview                                                               

Agency Market Operations builds on the Company's long and successful            
relationship with the independent agency distribution system to market a broad  
range of property-casualty insurance products and services to small and middle  
market businesses. Business products include workers' compensation, commercial  
packages, general liability, umbrella and commercial auto, as well as a variety 
of creative risk management services. In addition, Agency Market Operations     
includes a professional employer organization, CNA UniSource, which provides    
various employer-related services. Personal Insurance included personal auto and
homeowners coverage and also offered personal umbrella, separate scheduled      
property, boat-owners and other recreational vehicle insurance. These operations
were transferred to The Allstate Corporation (Allstate) effective               
October 1, 1999. See Note O to the Consolidated Financial Statements for        
discussion of the Personal Insurance transaction.                               

Agency Market Operations is comprised of the following four groups:   
Commercial Insurance, CNA E&S, CNA UniSource and Personal Insurance.            

22

EX-13.1 9th "Page" of 65 TOC 1st Previous Next Bottom Just 9th

Commercial Insurance (CI) provides standard property-casualty insurance products
such as workers' compensation, general and product liability, property,         
commercial auto and umbrella coverage to a wide range of businesses. The        
majority of CI customers are small and middle-market businesses, with less than 
$1 million in annual insurance premiums. Most insurance programs are provided on
a guaranteed cost basis, although customized loss sensitive programs are also   
available for larger middle-market customers. CI is a market leader in applying 
industry segmentation techniques to design products and services tailored to the
needs of its targeted customer groups.                                          

  CI's operating model focuses on underwriting performance, exposure based
pricing, relationships with selective distribution sources and aligning         
resources closer to CI's customers. The model includes more than 35 branches    
that provide underwriting, loss and sales for all of CI's lines of business. In 
addition, these branches provide claim services for the workers' compensation   
business. Also, there are eight claim service centers which provide customers   
and claimants, for all non-workers' compensation lines of business, with        
efficient and quality service and focus on the total claims outcome through     
specialized claim handling and timely claims reporting. The branches and service
centers are all located in the United States. Further, a centralized processing 
center in Maitland, Florida, handles all policy processing and accounting, and  
also acts as a call center for all branches to optimize customer service.       

CNA E&S (E&S) provides specialized insurance and other financial products for   
selected commercial risks on both an individual customer or program basis. Risks
insured by E&S are generally viewed as higher risk and less predictable in      
exposure than those covered by standard insurance markets. By combining superior
insurance and financial expertise with an in-depth understanding of each        
customer's unique and changing risks, E&S develops innovative business solutions
that are valued by the customer and producer. E&S's products are distributed    
throughout the United States through specialist producers, program agents, and  
CI's agents and brokers. E&S has specialized underwriting and claims resources  
in Chicago, New York City, Denver and Columbus.                                 

CNA UniSource is a business solutions provider offering outsourcing services    
and products that relieve businesses of many administrative tasks, allowing them
more time to focus on their core business. CNA UniSource provides human         
resources (HR) information technology, payroll processing and professional      
employer organization services. CNA UniSource is also engaged in delivering     
Internet-based HR and payroll administrative services and implementing HR       
information outsourcing for large-scale businesses. CNA UniSource's results are 
included in other revenues and expenses in the segment results.                 

Personal Insurance:  On October 1, 1999, certain CNA subsidiaries completed a   
transaction with Allstate to transfer substantially all of CNA's personal lines 
insurance business. See Note O to the Consolidated Financial Statements for     
discussion of the Personal Insurance transaction.                               

Operating Results                                                               

                                                                [Download Table]

Years ended December 31                                                         
(In millions)                                 2000          1999          1998  
--------------------------------------------------------------------------------
                                                                                
Net written premiums                       $ 3,230       $ 3,667       $ 5,496  

================================================================================
Net earned premiums                        $ 3,331       $ 4,799       $ 5,247  
Claims, benefits and expenses                3,772         5,791         6,050  
Restructuring and other                                                         
 related charges                                --            60            96  
--------------------------------------------------------------------------------
Underwriting loss                             (441)       (1,052)         (899) 
Net investment income                          604           686           744  
Other revenues                                 151            80            48  
Other expenses                                 185            77            52  
--------------------------------------------------------------------------------
Pre-tax operating income (loss)                129          (363)         (159) 
Income tax (expense) benefit                   (19)          162           105  
--------------------------------------------------------------------------------
Net operating income (loss)                $   110       $  (201)      $   (54) 
================================================================================
Ratios                                                                          
Loss and loss adjustment expense              80.9%         90.4%         83.1% 
Expense                                       29.8          31.0          32.6  
Dividend                                       2.5           0.5           1.4  
--------------------------------------------------------------------------------
Combined                                     113.2%        121.9%        117.1% 
================================================================================

2000 Compared with 1999                                                         

Agency Market Operations' net written and earned premiums were impacted by the  
transfer of Personal Insurance to Allstate. The 1999 net written premiums       
through October 1, 1999 (the transfer date) were largely offset by the impact of
the ceded unearned premium relating to Personal Insurance. As a result, 1999 net
written and earned premiums included $379 million and $1,354 million related to 
Personal Insurance.                                                             

   Excluding the impact of Personal Insurance, Agency Market Operations' net
written premiums decreased $58 million, or 2%, to $3,230 million in 2000 as     
compared with 1999. Net earned premiums for Agency Market Operations, excluding 
Personal Insurance, decreased $114 million, or 3%, to $3,331 million in 2000 as 
compared with 1999. These declines were due to the continued effort to          
re-underwrite business and obtain adequate rates for exposure underwritten,     
partially offset by a change in the structure of reinsurance which reduced ceded
premiums.                                                                       

    The combined ratio improved 8.7 points to 113.2% for 2000 as compared with
1999 and underwriting results improved $611 million. The loss ratio improvement 
of 9.5 points is comprised of underwriting actions including the increased use  
of reinsurance, the continued efforts to achieve adequate rates for exposure    
underwritten, the                                                               

23

EX-13.1 10th "Page" of 65 TOC 1st Previous Next Bottom Just 10th

non-renewal of unprofitable business and lower catastrophe losses than in 1999. 
Also, the 1999 loss ratio included adverse loss development related to          
automobile, workers' compensation and packaged general liability exposures. The 
expense ratio improved 1.2 points principally as a result of decreased          
underwriting expenses and the absence of restructuring-related charges,         
partially offset by a decrease in ceding commissions received relating to a     
change in the structure of reinsurance. The dividend ratio increase of          
2.0 points is attributable to favorable development in dividend reserves in 1999
not present in 2000.                                                            

    Net operating income increased $311 million based on improved underwriting
results, partially offset by lower investment income and an increase in interest
expense related to the cost of reinsurance. Net operating income in both 2000   
and 1999 benefited from a change in estimate for certain insurance-related      
assessments due to changes in the basis on which certain of these assessments   
are calculated. The after-tax impact of this change was $30 million in 2000 and 
$25 million in 1999.                                                            

CI achieved an average rate increase of approximately 15% in 2000. The
improvement in the reported loss ratio for the 2000 accident year is the first  
for CI since 1993 and this improvement is expected to accelerate as the benefits
of rate increases and underwriting actions are fully realized. CI's effective   
retention rate is in the low 70 percent range.                                  

1999 Compared with 1998                                                         

Agency Market Operations' net written and net earned premiums were impacted by  
the transfer of Personal Insurance to Allstate. Net written and earned premiums 
from Personal Insurance decreased by $1,310 million and $268 million in 1999.   

   Excluding the impact of Personal Insurance, Agency Market Operations' net
written and earned premiums decreased $519 million and $180 million in 1999 as  
compared with 1998. These decreases reflect the impact of the increased use of  
reinsurance and efforts to achieve adequate pricing and the shedding of         
unprofitable business.                                                          

    The combined ratio for 1999 increased 4.8 points due to an increase in the
loss ratio of 7.3 points, partially offset by decreases in the expense and      
dividend ratios of 1.6 points and 0.9 points. The increase in the loss ratio is 
due principally to increased adverse loss reserve development in 1999, partially
offset by the beneficial effects of reinsurance agreements executed in 1999. The
1999 adverse loss reserve development included development related to           
automobile, workers' compensation and packaged general liability exposures. The 
decrease in the expense ratio is attributable to lower restructuring and other  
related charges in 1999 as compared with 1998. Additionally, Agency Market      
Operations' 1999 expense ratio benefited 0.9 points from regulatory changes in  
the basis on which certain insurance-related assessments are calculated.        
Underwriting losses for 1999 were $1,052 million as compared with $899 million  
in 1998 due to deterioration in the combined ratio partially offset by          
reductions in volume. Agency Market Operations had a net operating loss of      
$201 million for 1999 as compared with a $54 million loss in 1998. The larger   
loss was due primarily to the deterioration in underwriting results as described
above.                                                                          

SPECIALTY OPERATIONS                                                            

Business Overview                                                               

Specialty Operations provides a broad array of professional, financial and      
specialty property-casualty products and services through a network of brokers, 
managing general agencies and independent agencies. Specialty Operations        
provides creative solutions for managing the risks of its clients, including    
architects, engineers, lawyers, healthcare professionals, financial             
intermediaries and corporate directors and officers.                            

  Specialty Operations is composed of three principal groups: CNA Pro, CNA
HealthPro and CNA Guaranty and Credit.                                          

CNA Pro is one of the largest providers of non-medical professional liability   
insurance and risk management services in the United States. CNA Pro's products 
include errors and omissions, directors and officers, employment practices      
liability coverages and a broad range of fidelity products. Products are        
distributed on a national basis through a variety of channels including brokers,
agents and managing general underwriters. CNA Pro's customers include architects
and engineers, lawyers, accountants and real estate agents and brokers, along   
with a broad range of large and small corporate clients and not-for-profit      
organizations.                                                                  

CNA HealthPro offers a comprehensive set of specialized insurance products and  
clinical risk management consulting services designed to assist healthcare      
providers in managing the quality-of-care risks associated with the delivery of 
healthcare. Key customer segments include individual, small group and large     
corporate purchasers of malpractice insurance. Caronia Corporation, an operating
company of CNA HealthPro, provides third-party claims administration for medical
professional liability insureds.                                                

CNA Guaranty and Credit provides credit insurance on short-term trade           
receivables for domestic and international clients, reinsurance to insurers who 
provide financial guarantees to issuers of asset-backed securities, money market
funds and investment grade corporate debt securities and credit enhancement     
products that focus on asset backed transactions. These products are distributed
through brokers, captive agents, financial institutions and directly to         
customers. In addition, CNA Guaranty and Credit includes R.V.I. Guaranty Co.    
Ltd. (RVI), a 50% owned, but not controlled, affiliate. RVI is the largest      
monoline residual value insurer in the world, offering coverages to protect the 
insured against a decrease in the market value of a properly maintained asset at
the termination of a lease.                                                     

24

EX-13.1 11th "Page" of 65 TOC 1st Previous Next Bottom Just 11th

Other Operations consist principally of Hedge Financial Products (Hedge), which 
focused on securitization of insurance risk and the embedding of financial      
protections within traditional insurance programs, and agricultural and         
entertainment insurance businesses. During 1999 and 1998, the Company decided to
exit Hedge and the agriculture and entertainment insurance businesses.          

Operating Results                                                               

                                                                [Download Table]

Years ended December 31                                                         
(In millions)                                 2000          1999          1998  
--------------------------------------------------------------------------------
                                                                                
Net written premiums                       $   805       $   948       $ 1,023  
================================================================================
Net earned premiums                        $   799       $ 1,001       $ 1,092  
Claims, benefits and expenses                  819         1,166         1,251  
Restructuring and other                                                         
 related charges                                --            --             5  
--------------------------------------------------------------------------------
Underwriting loss                              (20)         (165)         (164) 
Net investment income                          216           235           245  
Other revenues                                  26            19            27  
Other expenses                                  35            30            44  
--------------------------------------------------------------------------------
Pre-tax operating income                       187            59            64  
Income tax expense                             (56)          (10)           (6) 
--------------------------------------------------------------------------------
Net operating income                       $   131       $    49       $    58  
================================================================================

Ratios                                                                          
Loss and loss adjustment expense              75.4%         90.6%         87.0% 
Expense                                       27.0          25.9          28.1  
--------------------------------------------------------------------------------
Combined                                     102.4%        116.5%        115.1% 
================================================================================

2000 Compared with 1999                                                         

Net written premiums for Specialty Operations for 2000 declined $143 million, or
15%, to $805 million as compared with 1999. Net earned premiums declined        
$202 million, or 20%, to $799 million as compared with 1999. These premium      
declines relate principally to 1) active decisions to renew only those accounts 
which meet current underwriting guidelines supporting the ongoing commitment to 
underwriting discipline, 2) a $46 million decline related to Hedge and the      
agriculture and entertainment lines of business, 3) an increase in the          
retrospective return premium relating to favorable loss experience in the       
retrospectively rated architects' and engineers' business and 4) a $30 million  
decline due to the increased use of reinsurance for the medical professional    
liability lines of CNA HealthPro.                                               

     The combined ratio improved 14.1 points to 102.4% for 2000 as compared with
1999 and underwriting results improved $145 million. These improvements are the 
result of the ongoing commitment to underwriting discipline reflected by a      
15.2 point decline in the loss ratio, partially offset by a 1.1 point increase  
in the expense ratio. The 2000 loss ratio was impacted by favorable loss        
experience in the retrospectively rated architects' and engineers' business and 
the increased use of reinsurance for the medical professional liability lines,  
partially offset by large loss experience in the guaranty and credit business.  
The 1999 loss ratio was unfavorably impacted by adverse loss experience mainly  
in the medical malpractice lines of business. Acquisition and underwriting      
expenses have decreased year-over-year, but the expense ratio has increased due 
to the reduced net earned premium base. Net operating income has increased $82  
million in 2000 as compared with 1999, principally from the improvement in the  
underwriting results, partially offset by lower net investment income.          

     Specialty Operations achieved on average, premium-weighted retention levels
in the high 70 percent range across its entire book of business in 2000. CNA    
HealthPro achieved an average rate increase of 18% in 2000, including an average
rate increase of 17% in the institutions and physicians products. For CNA Pro,  
rate increases and other underwriting actions have been initiated for the       
directors' and officers' product in late 2000.                                  

1999 Compared with 1998                                                         

Net written premiums for Specialty Operations for 1999 declined $75 million, or 
7%, to $948 million as compared with 1998. Net earned premiums for 1999 declined
$91 million, or 8%, to $1,001 million as compared with 1998, due primarily to   
declines in CNA HealthPro and businesses exited. Net earned premiums for CNA    
HealthPro declined $40 million, due mainly to new ceded reinsurance agreements  
covering 1999 risks and the efforts to achieve adequate price increases and     
eliminate unprofitable business. Hedge, agriculture and entertainment net earned
premiums decreased a combined $46 million from 1998 due to the exit from these  
lines of business.                                                              

The combined ratio for 1999 increased 1.4 points due principally to a 
3.6 point increase in the loss ratio as a result of adverse claim experience in 
the medical malpractice and non-medical professional liability lines of         
business. The impact of adverse claim experience in these lines of business was 
to increase the 1999 loss ratio for Specialty Operations by 6.6 points over its 
1998 level. The 1999 loss ratio was favorably impacted by 4.1 points due to the 
exit from the agricultural insurance line of business. The expense ratio        
declined 2.2 points in 1999 due principally to businesses exited. The           
underwriting loss for 1999 was $165 million, essentially unchanged from 1998,   
due to the offsetting impacts of a higher loss ratio and a lower expense ratio. 
Net operating income for 1999 declined principally because of lower net         
investment income.                                                              

CNA RE                                                                          

Business Overview                                                               

CNA Re operates globally as a reinsurer in the broker market, offering both     
treaty and facultative products. CNA Re's operations include the business of CNA
Reinsurance Company Limited (CNA Re U.K.), a United Kingdom reinsurance company,
and United States operations based in Chicago. While CNA Re's primary product is
traditional treaty reinsurance, it also offers facultative and financial        
reinsurance. CNA Re also participates in Lloyd's of London through CNA Corporate
Capital Ltd., which provides capital to Lloyd's Syndicate 1229.                 

25

EX-13.1 12th "Page" of 65 TOC 1st Previous Next Bottom Just 12th

 CNA Re U.K. writes in both the London market and other European markets
through its headquarters in London and offices in Amsterdam, Milan, Singapore   
and Zurich. As one of the largest reinsurers in this market, CNA Re U.K. has    
ratings of A (Strong) from Standard & Poor's (S&P), A (Excellent) from A.M. Best
and A3 (Good) from Moody's. CNA Re U.K. writes United States and international  
treaty and professional liability business, including medical malpractice,      
errors and omissions and directors' and officers' coverages.                    

The United States operations of CNA Re provide products to the North  
American markets. Treaty products include working layer property, working layer 
casualty, property catastrophe, workers' compensation, products liability,      
general liability, professional liability, specialty and excess and surplus     
lines. In addition, financial reinsurance products are offered as well as       
property and casualty facultative reinsurance.                                  

     In 2000, CNA Re instituted a new global operating structure by creating six
specialized underwriting centers of excellence and three centers of functional  
excellence that span geographic boundaries. This structure allows the           
organization to better utilize the specialized expertise of its people worldwide
and take advantage of market opportunities.                                     

Operating Results                                                               

                                                                [Download Table]

Years ended December 31                                                         
(In millions)                                 2000          1999          1998  
--------------------------------------------------------------------------------
                                                                                
Net written premiums                       $   951       $ 1,275       $   908  
================================================================================
Net earned premiums                        $ 1,089       $ 1,176       $   944  
Claims, benefits and expenses                1,186         1,369         1,005  
Restructuring and other                                                         
 related charges                                --            --             1  
--------------------------------------------------------------------------------
Underwriting loss                              (97)         (193)          (62) 
Net investment income                          195           161           163  
Other revenues                                   5            (1)            5  
Other expenses                                  14            (5)           11  
--------------------------------------------------------------------------------
Pre-tax operating income (loss)                 89           (28)           95  
Income tax (expense) benefit                   (32)           15           (27) 
--------------------------------------------------------------------------------
Net operating income (loss)                $    57       $   (13)      $    68  
================================================================================
Ratios                                                                          
Loss and loss adjustment expense              81.6%         84.9%         74.9% 
Expense                                       27.3          31.5          31.7  
--------------------------------------------------------------------------------
Combined                                     108.9%        116.4%        106.6% 
================================================================================


2000 Compared with 1999                                                         

Net written premiums for CNA Re for 2000 decreased $324 million, or 25%, to     
$951 million as compared with 1999. Net earned premiums decreased $87 million,  
or 7%, to $1,089 million as compared with 1999. These declines reflect decisions
not to renew contracts that management believed did not meet its underwriting   
profitability targets, partially offset by modest rate increases.               

   The combined ratio improved 7.5 points to 108.9% in 2000 as compared with
1999 and underwriting results improved $96 million. The improvement in the      
underwriting results is attributable to improvements in both the loss and       
expense ratios. The loss ratio improvement is attributable mainly to favorable  
2000 catastrophe experience as compared with 1999 catastrophe results that were 
negatively impacted by a series of European windstorms, Hurricane Floyd and     
other international catastrophes. The improvement in the expense ratio was      
related to decreased contingent commissions in 2000. Net operating income       
increased $70 million in 2000 as compared with 1999 due to the improvement in   
the underwriting results and an increase in investment income.                  

     A significant portion of CNA Re's treaty business renewals are effective on
January 1. Reinsurance renewals for the January 1, 2001 cycle were the latest   
experienced in the past several years. The delay was driven by a significant    
difference between the improvement in the terms, conditions and rates required  
by reinsurers and what clients considered acceptable. The retrocessional and    
catastrophe markets exhibited the greatest amount of tightening. Casualty lines,
however, continued to be a challenge. CNA Re has been able to achieve targeted  
rate increases but at a lower retention level than expected.                    

1999 Compared with 1998                                                         

Net written premiums for CNA Re increased $367 million, or 40%, to              
$1,275 million as compared with 1998. Net earned premiums increased             
$232 million, or 25%, to $1,176 million as compared with 1998. This growth      
occurred in both foreign and domestic markets in the professional and standard  
lines of business. Growth was experienced via expansion of treaty relationships 
with existing clients, the continued development of new product lines and growth
in global facultative operations.                                               

     CNA Re's 1999 combined ratio increased by 9.8 points as compared with 1998,
primarily as a result of a 10.0 point increase in the loss ratio. The           
underwriting results for 1999 were dramatically impacted by the series of       
European windstorms, Hurricane Floyd and other international catastrophes, which
contributed to an aggregate 9.4 point increase in the 1999 loss ratio relative  
to 1998. Net operating income in 1999 was adversely affected by $122 million in 
after-tax catastrophe losses, compared with $50 million in after-tax catastrophe
losses in 1998.                                                                 

GLOBAL OPERATIONS                                                               

Business Overview                                                               

Global Operations provides products and services to United States-based         
customers expanding overseas and foreign customers. The major product lines     
include marine, commercial and contract surety, warranty and specialty products,
as well as commercial property and casualty coverages.                          

 Global Operations is composed of five principal groups: Marine, Surety,
Warranty, CNA Global and First Insurance Company of Hawaii (FICOH).             

Marine completed the acquisition of Maritime Insurance Co., Ltd. (Maritime      
Ltd.), based in the United Kingdom, and its Canadian subsidiary, Eastern Marine 
Underwriters (EMU) on July 1, 1998,                                             

26

EX-13.1 13th "Page" of 65 TOC 1st Previous Next Bottom Just 13th

strengthening CNA's position as a global marine insurer. In 1999, CNA launched  
the marketing brand, CNA Maritime, which unites three industry leaders, MOAC,   
Maritime Ltd. and EMU, to serve global ocean marine needs. MOAC, a leading      
provider of ocean marine insurance in the United States, offers hull, cargo,    
primary and excess marine liability, marine claims and recovery products and    
services. Business is sold through national brokers, regional marine specialty  
brokers and independent agencies, which work closely with MOAC's nine branch    
offices located throughout the United States. Maritime Ltd. is a leading marine 
cargo and related marine insurance specialist with markets extending across     
Europe and throughout the world. As foreign subsidiaries, Maritime Ltd. and EMU 
are included in the results of, and are managed by, CNA Global. Growth is       
expected to result from leveraging the relationships with CNA's domestic        
producers, implementing e-commerce and providing customers with services and    
products throughout the world.                                                  

 On September 22, 2000, CNA Maritime launched the first phase of OMMnism
(Ocean Marine Manager network interface), an automated cargo insurance system   
accessible over the Internet. This first phase of OMMnism allows potential      
customers to receive real-time quotes, issue certificates, pay by credit card,  
and access an array of other convenient policy services, such as on-line reports
and first notice of loss services. The core of CNA Maritime's global cargo      
strategy will occur through interactive products such as OMMnism.               

Surety consists primarily of CNA Surety Corporation (CNA Surety), which is      
traded on the New York Stock Exchange (SUR) and is the largest publicly traded  
provider of surety bonds, with approximately 8% of that market. Among its United
States competitors, CNA Surety has one of the most extensive distribution       
systems and one of the most diverse surety product lines, offering small, medium
and large contract and commercial surety bonds. CNA Surety provides surety and  
fidelity bonds in all 50 states through a combined network of approximately     
37,000 independent agencies. Growth is expected to come from CNA Surety's broad 
product and distribution resources and international expansion. CNA owns        
approximately 64% of CNA Surety.                                                

Warranty is one of the largest warranty underwriters in the United States,      
providing extended service contracts, warranties and related insurance products 
that protect the consumer or business from the financial burden associated with 
the breakdown, under-performance or maintenance of a product. Warranty's key    
market segments consist of vehicle, retail, home, commercial and original       
equipment manufacturers. Each market segment distributes its product via a sales
force employed or contracted through a program administrator.                   

 CNA National Warranty Corporation (CNA Warranty) sells vehicle warranty
services in the United States and Canada. In July 1998, Warranty expanded into  
the home warranty segment with the acquisition of a 90% interest in Home        
Security of America, Inc., one of the largest home warranty administrators in   
the United States. Also, in January 1998, the Company acquired a joint venture  
interest in Specialty Underwriters, a provider of innovative equipment          
maintenance management services to companies worldwide. These entities are      
service administrators whose products are backed by insurance coverages provided
by CNA's insurance affiliates.                                                  

CNA Global is responsible for coordinating and managing the direct business of  
the foreign property-casualty operations of CNA. This business identifies and   
capitalizes on strategic indigenous opportunities outside the United States by  
continuing to build its own capabilities and by initiating acquisitions,        
strategic alliances and start-up operations that allow for expansion into       
targeted markets. In addition, CNA Global provides United States-based customers
expanding their operations overseas with a single source for their commercial   
insurance needs. To this end, CNA Global has placed underwriters within         
commercial insurance branches.                                                  

   CNA Global currently oversees operations in Europe, Latin America, Canada
and Asia. CNA Insurance Company (Europe) Limited (CIE) is based in London, with 
offices in France, Germany, the Netherlands and Denmark. In Europe, CNA Global's
operations include the results of U.K.-based Maritime Ltd. and CIE. On          
July 1, 2001, a planned merger of CIE into Maritime Ltd. is expected to be      
completed. Through its network of offices, CNA Global built on the successes of 
several CNA specialty products (including travel and accident, warranty and     
financial lines insurance) and introduced those products across Europe in 2000. 
During 2000, the Company had a majority and controlling interest in Omega A.R.T.
(Omega), a workers' compensation company domiciled in Argentina. Omega ranks as 
the fifth largest workers' compensation company in Argentina based on premium   
volume.                                                                         

    The short- to mid-term growth opportunities for CNA Global are in the more
mature foreign insurance markets, such as Europe and Canada, and in specialty   
insurance products. In the longer term, emphasis will be on the emerging        
insurance markets in Latin America and Asia.                                    

First Insurance Company of Hawaii is the oldest and largest domestic            
property-casualty insurer in Hawaii and offers commercial and personal lines    
solely in that state. Distributed through 30 independent agencies, the business 
mix has historically been approximately 70% commercial and 30% personal lines.  
On November 1, 1999, Tokio Marine & Fire Insurance Co. Ltd. (Tokio) and CNA     
executed an agreement to increase Tokio's ownership share from 40% to 50%,      
resulting in equal ownership by CNA and Tokio. Concurrently, Tokio merged their 
Hawaii-based operations into FICOH. As CNA retains control over FICOH, its      
operations are consolidated with CNA's operations. CNA viewed this transaction  
as a positive step in the ongoing strategic relationship between CNA and Tokio. 

   CNA's partnership with Tokio is expected to generate growth opportunities
and facilitate international expansion. Additionally, CNA foresees growth       
opportunities through collaborative partnerships between FICOH and other CNA    
businesses.                                                                     

27

EX-13.1 14th "Page" of 65 TOC 1st Previous Next Bottom Just 14th

Operating Results                                                               

                                                                [Download Table]

Years ended December 31                                                         
(In millions)                                 2000          1999          1998  
--------------------------------------------------------------------------------
                                                                                
Net written premiums                       $ 1,160       $ 1,080       $   985  
================================================================================
Net earned premiums                        $ 1,089       $ 1,010       $   941  
Claims, benefits and expenses                1,128         1,037           991  
Restructuring and other                                                         
 related charges                                --            --             1  
--------------------------------------------------------------------------------
Underwriting loss                              (39)          (27)          (51) 
Net investment income                          136           132           110  
Other revenues                                 116           120            82  
Other expenses                                 123           100            80  
--------------------------------------------------------------------------------
Pre-tax operating income                        90           125            61  
Minority interest                              (24)          (28)          (25) 
Income tax expense                             (24)          (33)          (18) 
--------------------------------------------------------------------------------
Net operating income                       $    42       $    64       $    18  
================================================================================
Ratios                                                                          
Loss and loss adjustment expense              60.3%         56.9%         62.2% 
Expense                                       43.1          45.5          42.8  
Dividend                                       0.1           0.3           0.4  
--------------------------------------------------------------------------------
Combined                                     103.5%        102.7%        105.4% 
================================================================================

2000 Compared with 1999                                                         

Net written premiums for Global Operations in 2000 increased $80 million, or 7%,
to $1,160 million as compared with 1999. Net earned premiums increased          
$79 million, or 8%, to $1,089 million as compared with 1999. These increases    
were driven by growth in the commercial casualty and property lines in the      
European operations, as well as growth in the commercial warranty and surety    
lines.                                                                          

    The combined ratio increased 0.8 points to 103.5% in 2000 as compared with
1999 and underwriting results declined $12 million. The decline in underwriting 
results is mainly attributable to adverse current and prior year loss experience
in the vehicle warranty insurance line of business. Net operating income        
decreased $22 million in 2000 as compared with 1999 due to the decline in       
underwriting results and an increase in other expenses related to the           
non-insurance operations in the warranty business.                              

Global operations achieved pricing increases in 2000 that averaged    
approximately 3% across the businesses in this segment. Retention rates were in 
the mid 70 percent range. Retention rates do not apply to the Surety and        
Warranty businesses.                                                            

1999 Compared with 1998                                                         

Net written premiums in 1999 increased $95 million, or 10%, as compared with    
1998. Net earned premiums increased $69 million, or 7%, to $1,010 million as    
compared with 1998. CNA Global contributed $56 million of the increase, the     
majority of which was attributable to a full year's premiums from Maritime Ltd. 
Surety contributed increased net earned premium of $29 million, due to generally
favorable domestic economic conditions for public construction and expansion    
internationally. Warranty net earned premiums increased $24 million over 1998,  
due mainly to increased sales of new automobile warranties. Partially offsetting
this growth was a decrease in net earned premiums in MOAC of $49 million due to 
competitive marine market conditions.                                           

  Underwriting results improved $24 million from 1998 due to a decrease in
the combined ratio of 2.7 points. This was due primarily to improved loss ratios
in MOAC, Surety and CNA Global partially offset by an increase in the loss ratio
in Warranty. The improvement in the MOAC and CNA Global loss ratios was due to a
change in the mix of business that reduced exposure to catastrophes and large   
property losses. The decrease in Surety's loss ratio was due to favorable loss  
experience in 1999 compared with 1998. The increase in the loss ratio in        
Warranty was due to unfavorable loss experience in its automotive business. Net 
operating income for 1999 increased $46 million as compared with 1998 primarily 
from the improved underwriting results and increased investment income.         

RISK MANAGEMENT                                                                 

Business Overview                                                               

Risk Management serves the property-casualty needs of large domestic commercial 
businesses, offering customized strategies to address the management of business
risks. Also, Risk Management, primarily through RSKCoSM, provides total risk    
management services relating to claims, loss control, cost management and       
information services to the commercial insurance marketplace.                   

Risk Management includes two groups: Risk Transfer and RSKCoSM.       

Risk Transfer writes casualty and property lines of insurance. The casualty     
business focuses on workers' compensation, commercial auto liability and general
liability through traditional and innovative advanced financial risk products.  
Excess products provide umbrella, excess workers' compensation and high excess  
coverages. Casualty offerings target Fortune 1000 businesses.                   

Over the last three years, domestic and global property insurance     
capabilities have been increased, providing primary, quota share and excess of  
loss property facilities. Capabilities include providing property, inland       
marine, global and boiler and machinery coverages to large accounts and Fortune 
100 businesses.                                                                 

RSKCoSM was formed in 1998 and provides total risk management services          
(integrated and single component) related to claims, loss control, cost         
management and information services to the commercial insurance marketplace.    

RSKCo'sSM capabilities include:                                       

Claim Services provides services that allow customers to select from a
single source the desired level of service ranging from an integrated claims    
package to any component service.                                               

    Loss Control provides pre-loss prevention services that include industrial
hygiene, laboratory, ergonomics, field consulting and training, property,       
environmental and transportation loss control. Driver training is provided      
through Smith System Driver Improvement Institute, Inc., a wholly owned         
subsidiary.                                                                     

28

EX-13.1 15th "Page" of 65 TOC 1st Previous Next Bottom Just 15th

Cost Management provides post-loss cost control services through case 
management, medical bill review, preferred provider organizations and other     
unique partnerships to reduce lost work days through rapid response, quality    
care and effective coordination.                                                

 Information Services provides services including data access, reporting
tools, information and benchmarking analysis, consulting and custom reporting   
services.                                                                       

Operating Results                                                               

                                                                [Download Table]

Years ended December 31                                                         
(In millions)                                 2000          1999          1998  
--------------------------------------------------------------------------------
                                                                                
Net written premiums                       $   633       $   839       $   889  
================================================================================
Net earned premiums                        $   637       $   801       $   823  
Claims, benefits and expenses                  760           936         1,018  
--------------------------------------------------------------------------------
Underwriting loss                             (123)         (135)         (195) 
Net investment income                          163           154           144  
Other revenues                                 318           316           230  
Other expenses                                 324           307           227  
Non-insurance restructuring and                                                 
 other related charges                          --            10            88  
--------------------------------------------------------------------------------
Pre-tax operating income (loss)                 34            18          (136) 
Income tax (expense) benefit                    (5)            1            48  
--------------------------------------------------------------------------------
Net operating income (loss)                $    29       $    19       $   (88) 
================================================================================
Ratios                                                                          
Loss and loss adjustment expense              95.8%         94.3%         89.1% 
Expense                                       23.5          22.6          30.7  
Dividend                                        --            --           3.9  
--------------------------------------------------------------------------------
Combined                                     119.3%        116.9%        123.7% 
================================================================================

2000 Compared with 1999                                                         

Net written premiums for Risk Management in 2000 decreased $206 million, or 25%,
to $633 million as compared with 1999. Net earned premiums decreased            
$164 million, or 20%, to $637 million as compared with 1999. These declines     
resulted from a continued focus on re-underwriting the book of business, as well
as the increased utilization of reinsurance.                                    

Despite the combined ratio increase of 2.4 points to 119.3% in 2000 as
compared with 1999, underwriting results improved by $12 million. Increases in  
both the loss and expense ratios led to the unfavorable change in the combined  
ratio. The loss ratio increase of 1.5 points is principally the result of       
adverse property and casualty experience for both the current and prior accident
years. Acquisition and underwriting expenses have decreased year-over-year, but 
the expense ratio has increased due to a reduced net earned premiums base in the
current year. Net operating income improved $10 million primarily as a result of
improved underwriting results, improved net operating income for RSKCoSM,       
increased investment income and restructuring-related charges incurred in 1999  
that did not recur in 2000. These improvements were partially offset by an      
increase in interest expense related to the cost of reinsurance. Net operating  
income in both 2000 and 1999 benefited from a change in estimate for certain    
insurance-related assessments due to regulatory changes in the basis on which   
certain of these assessments are calculated. The after-tax impact of this change
was $30 million in 2000 and $26 million in 1999.                                

   Risk Management has been involved in numerous underwriting initiatives to
improve results. Risk Management achieved double-digit price increases in 2000  
on average across its book of business while maintaining premium-weighted       
retention in the low 80 percent range. Risk Management's underwriting           
initiatives continue to focus on risk selection, increased attachment points and
strengthened underwriting terms and conditions through increasing deductibles   
and limiting the scope of coverages. Risk Management has also launched a quality
initiative designed to increase net operating income through the review and     
improvement of all activities that create, market and support products and      
services.                                                                       

1999 Compared with 1998                                                         

Net written premiums for 1999 declined $50 million, or 6%, to $839 million as   
compared with 1998. Net earned premiums for 1999 declined $22 million, or 3%, to
$801 million as compared with 1998. This decrease resulted from Risk            
Management's decision to take advantage of a favorable reinsurance market and   
cede a larger portion of its direct premiums, the redesign of existing risk     
management programs and decreased business as a result of pricing actions taken 
in a difficult market.                                                          

  Risk Management's underwriting loss decreased $60 million in 1999 as the
combined ratio for 1999 decreased 6.8 points due to decreases in the expense and
dividend ratios of 8.1 points and 3.9 points, partially offset by an increase in
the loss ratio of 5.2 points. The increase in the loss ratio was principally the
result of adverse loss development related primarily to asbestos exposures,     
offset in part by the beneficial effects of reinsurance agreements executed in  
1999. Risk Management's expense ratio benefited 4.9 points from regulatory      
changes in the basis on which certain insurance-related assessments are         
calculated and a decrease in restructuring-related charges of $78 million. The  
decrease in the dividend ratio is due to favorable development in dividend      
reserves. Despite reserve strengthening, overall results increased to a net     
operating income of $19 million from a net operating loss of $88 million in     
1998. Positively influencing results were underwriting expense savings,         
reinsurance programs, the impact of favorable regulatory changes in the basis on
which certain insurance-related assessments are calculated and reduced          
restructuring-related charges compared with those recorded in 1998.             

29

EX-13.1 16th "Page" of 65 TOC 1st Previous Next Bottom Just 16th

GROUP OPERATIONS                                                                

Business Overview                                                               

Group Operations provides a broad array of group life and health insurance      
products and services to employers, affinity groups and other entities that     
purchase insurance as a group. Group Operations also provides health insurance  
to federal employees, retirees and their families (Federal Markets); managed    
care and self-funded medical excess insurance; medical provider network         
management and administration services; and reinsurance for life and health     
insurers.                                                                       

   Group Operations includes four principal groups: Group Benefits (formerly
Special Benefits), Provider Markets, Life Reinsurance and Federal Markets.      

Group Benefits provides group term life insurance, short- and long-term         
disability, statutory disability, long term care and accident products. Products
are marketed through a nationwide operation of 31 sales offices, third party    
administrators, managing general agents and insurance consultants.              

Provider Markets is composed of two major businesses. CNA Health Partners       
provides comprehensive managed care services to employers offering self-funded  
medical plans. Services offered include network development and management,     
medical management, medical claims administration, consulting services and      
management services. Group reinsurance assumes reinsurance on health, life and  
other related products written on a group basis, as well as excess risk         
coverages related to healthcare.                                                

Life Reinsurance reinsures individual life and health products marketed by      
unaffiliated life insurance companies throughout North America. Sales are       
generated through an internal sales force. On December 31, 2000, CNA sold its   
Life Reinsurance business. See Note O to the Consolidated Financial Statements  
for discussion of the Life Reinsurance transaction.                             

Federal Markets is the second largest provider of health insurance benefits to  
federal employees, insuring approximately one million members under the Mail    
Handlers Benefit Plan (MHBP) offered through the Federal Employees Health       
Benefit Plan (FEHBP), and also underwrites conversion policies and supplemental 
coverages for members. Federal Markets is responsible for all claim management  
activities under the plan, such as large case management, hospital and provider 
bill negotiations, fraud detection activities and vendor contracts.             

Operating Results                                                               

                                                                [Download Table]

Years ended December 31                                                         
(In millions)                                  2000          1999          1998 
--------------------------------------------------------------------------------
                                                                                
Net earned premiums                         $ 3,675       $ 3,571       $ 3,733 
Net investment income                           142           130           133 
Other revenues                                   49            40            24 
--------------------------------------------------------------------------------
Total operating revenues                      3,866         3,741         3,890 
Benefits                                      3,068         3,053         3,171 
Expenses                                        748           699           763 
Restructuring and other                                                         
 related charges                                 --             5            39 
--------------------------------------------------------------------------------
Pre-tax operating income (loss)                  50           (16)          (83)
Income tax (expense) benefit                    (14)           10            35 
--------------------------------------------------------------------------------
Net operating income (loss)                 $    36       $    (6)      $   (48)
================================================================================

2000 Compared with 1999                                                         

Net earned premiums for Group Operations in 2000 increased $104 million, or 3%, 
to $3,675 million as compared with 1999. This increase was principally a result 
of a $41 million increase in Group Benefits, primarily related to the group life
line of business; a $35 million increase in Life Reinsurance; an $18 million    
increase in Provider Markets, primarily related to the group reinsurance line of
business and a $10 million increase in Federal Markets. The increases in Group  
Benefits and Life Reinsurance relate to new business production.                

   Net operating income increased $42 million in 2000 as compared with 1999.
This increase relates to a $24 million improvement in Federal Markets due to the
1999 exit of unprofitable medical lines, a $34 million improvement in Provider  
Markets and a $4 million improvement in Life Reinsurance. These improvements    
were partially offset by an $18 million decline in Group Benefits due to        
favorable 1999 loss experience in the group life line of business. The          
improvement associated with Provider Markets relates to adverse experience and  
loss development for the personal accident business recorded in 1999, which     
exceeded $7 million of exit costs incurred from the Management Services         
Organization (MSO) business and $13 million of adverse development on the       
medical stop loss business in 2000. The decision to shut down the MSO business  
was based on lack of demand as providers are backing away from risk contracting.

The strategy to focus on Group Benefits, Federal Markets and the group
reinsurance lines of business positions Group Operations for the expectation of 
modest improvement in net operating income in 2001.                             

1999 Compared with 1998                                                         

Net earned premiums declined in 1999 by $162 million, or 4%, to $3,571 million  
as compared with 1998. Federal Markets' net earned premiums declined            
$274 million, almost entirely due to the exit of selected medical markets in    
late 1998. This decline was partially offset by growth in Life Reinsurance and  
Group Benefits of $60 million and $53 million.                                  

30

EX-13.1 17th "Page" of 65 TOC 1st Previous Next Bottom Just 17th

Net operating results in 1999 improved by $42 million as compared with
1998. Key components of the improvement include better underwriting results in  
Group Benefits' life and disability product lines, the exit of the employer     
health and affinity lines of business and lower restructuring and other related 
charges, partially offset by adverse losses and reserve development in the      
personal accident business.                                                     

LIFE OPERATIONS                                                                 

Business Overview                                                               

Life Operations provides financial protection to individuals through a full     
product line of term life insurance, universal life insurance, long term care   
insurance, annuities and other products. Life Operations also provides          
retirement services products to institutions in the form of various investment  
products and administration services. Life Operations has several distribution  
relationships and partnerships including managing general agencies, other       
independent agencies working with CNA life sales offices, a network of brokers  
and dealers and various other independent insurance consultants.                

Life Operations is composed of four principal groups: Individual Life,
Retirement Services, Long Term Care and Other Operations.                       

Individual Life primarily offers level premium term life insurance, universal   
life insurance and related products. New sales of term life have consistently   
placed CNA among the top five producers in the market in each of the past three 
years.                                                                          

Retirement Services markets annuities and investment products and services to   
both retail and institutional customers. In the institutional market, CNA has   
benefited from strong sales and earnings of its Index 500 product, which is a   
guaranteed investment contract that is indexed to the performance of the        
Standard and Poor's 500(R) (S&P 500(R)) Index.                                  

Long Term Care products provide reimbursement for covered nursing home and home 
health care expenses incurred due to physical or mental disability. New sales of
Long Term Care have placed CNA among the top producers in the individual        
marketplace in each of the past three years.                                    

Other Operations businesses include developing operations in certain            
international markets and life settlements.                                     

Operating Results                                                               

                                                                [Download Table]

Years ended December 31                                                         
(In millions)                                  2000          1999          1998 
--------------------------------------------------------------------------------
                                                                                
Sales volume*:                                                                  
 Individual life                            $   929       $   873       $   761 
 Retirement services                          1,723         2,270         1,553 
 Long term care                                 398           343           299 
 Other operations                               141           183           141 
--------------------------------------------------------------------------------
Total                                       $ 3,191       $ 3,669       $ 2,754 
================================================================================
Net earned premiums                         $   876       $   936       $   823 
Net investment income                           601           556           525 
Other revenues                                  192           123           115 
--------------------------------------------------------------------------------
Total operating revenues                      1,669         1,615         1,463 
Benefits                                      1,104         1,122           998 
Expenses                                        311           277           295 
Restructuring and other                                                         
 related charges                                 --            --             7 
--------------------------------------------------------------------------------
Pre-tax operating income                        254           216           163 
Income tax expense                              (85)          (71)          (58)
--------------------------------------------------------------------------------
Net operating income                        $   169       $   145       $   105 
================================================================================

* Sales volume is a cash-based measure that includes premium and annuity        
considerations, investment deposits and other sales activities that are not     
reported as premiums under accounting principles generally accepted in the      
United States of America (GAAP).                                                

2000 Compared with 1999                                                         

Sales volume for Life Operations declined $478 million, or 13%, to              
$3,191 million in 2000 as compared with 1999. Sales volume decreased because of 
a reduction in Retirement Services' products sold to institutions. These        
products tend to be "large case" institutional markets' sales, which can be     
sporadic, opportunistic and sensitive to independent agency ratings. Despite the
overall decline, Life Operations' competitively priced product portfolio enabled
most of its businesses to experience growth in 2000. Individual Life and Long   
Term Care products had an increasing base of direct premiums, and variable      
investment contracts experienced growth of $270 million to reach an annual sales
level of $380 million in 2000. Net earned premiums declined $60 million, or 6%, 
to $876 million in 2000 as compared with 1999. This decline was mainly          
attributable to sales declines in structured settlements and single premium     
group annuities due to a competitive pricing environment. These declines were   
partially offset by a growing in-force block of Long Term Care and annuity      
products.                                                                       

   Net operating income increased $24 million in 2000 as compared with 1999.
The increase was principally attributable to increased earnings in the Index 500
product, the continued growth of Individual Life insurance in-force and         
favorable investment results in Individual Life and the Retirement Services     
businesses.                                                                     

  Life Operations expects that its continued product innovation and strong
commitment to growth will generate increased sales, particularly of variable    
products and Long Term Care business.                                           

1999 Compared with 1998                                                         

Sales volume increased $915 million, or 33%, to $3,669 million in 1999 as       
compared with 1998. The 1999 increase represents increased sales of $717 million
in Retirement Services and a                                                    

31

EX-13.1 18th "Page" of 65 TOC 1st Previous Next Bottom Just 18th

growing base of premiums for Individual Life and Long Term Care. The significant
growth in Retirement Services was largely attributable to strong sales in       
institutional investment products and variable annuities. Net earned premiums   
increased $113 million, or 14%, to $936 million in 1999 as compared with 1998.  
This increase was attributable mainly to increases in Long Term Care of $61     
million and Retirement Services of $39 million.                                 

 Net operating income increased to $145 million in 1999 as compared with
$105 million in 1998. The 1999 improvement in net operating income was due      
primarily to favorable investment performance in the portfolio supporting       
Retirement Services' Index 500 product, improved mortality experience in the    
individual life market and expense reductions across virtually all of the other 
principal groups.                                                               

CORPORATE AND OTHER                                                             

The Corporate and Other segment results consist of interest expense on corporate
borrowings, certain run-off insurance operations, asbestos claims related to    
Fibreboard Corporation (Fibreboard), financial guarantee insurance contracts and
certain non-insurance operations, including eBusiness initiatives.              

     Net operating loss increased to $220 million for 2000 as compared with 1999
primarily as a result of expenses in 2000 for CNA's eBusiness initiatives.      

   The net operating loss for 1999 was $202 million, or $9 million less than
1998. The improvement was primarily attributable to decreased interest expense  
and decreased losses of $20 million from AMS Services, Inc. (AMS), an           
information technology and agency software development subsidiary which was sold
in the fourth quarter of 1999, partially offset by increased losses from run-off
insurance operations. See Note O to the Consolidated Financial Statements for   
discussion of the AMS transaction.                                              

RESTRUCTURING AND OTHER RELATED CHARGES                                         

On August 5, 1998, CNA announced estimates of the financial implications of its 
initiatives to achieve world-class performance. "World-class performance," as   
defined by the Company, refers to the Company's intention to position each of   
its strategic business units (SBU) as a market leader by sharpening its focus on
customers and employing new technology to work smarter and faster. In the third 
quarter of 1998, the Company finalized and approved a plan to restructure its   
operations. The restructuring plan focused on a gross workforce reduction of    
approximately 4,500 employees resulting in a net reduction of approximately     
2,400 employees, the consolidation of certain processing centers, the closing of
various facilities and the exiting of certain businesses. The details of the    
restructuring and other related charges recognized in 1998 and 1999 are         
discussed in Note N to the Consolidated Financial Statements.                   

As of December 31, 2000, the remaining accrued restructuring and other
related charges consist of $7 million of lease termination costs, all of which  
are expected to be paid during 2001.                                            

INVESTMENTS                                                                     

The components of net investment income for the years ended December 31, 2000,  
1999 and 1998 are presented in the following table.                             

Net Investment Income                                                           

                                                                [Download Table]

Years ended December 31                                                         
(In millions)                                     2000        1999        1998  
--------------------------------------------------------------------------------
                                                                                
Fixed maturity securities:                                                      
  Bonds:                                                                        
  Taxable                                       $ 1,549     $ 1,509     $ 1,490 
  Tax-exempt                                        216         267         340 
 Redeemable preferred stocks                          1          --           2 
Equity securities                                    52          36          33 
Mortgage loans and real estate                        4           4           5 
Policy loans                                         12          11          11 
Short-term investments                              201         188         241 
Securities lending transactions, net                 22          26          10 
Other invested assets                                71         101          67 
--------------------------------------------------------------------------------
Gross investment income                           2,128       2,142       2,199 
Investment expenses                                 (48)        (41)        (53)
--------------------------------------------------------------------------------
Net investment income                           $ 2,080     $ 2,101     $ 2,146 
================================================================================

    Lower net investment income results for 2000 as compared with 1999 was due
to lower levels of invested assets caused by asset transfers in the fourth      
quarter of 1999 in connection with the Personal Insurance transaction with      
Allstate and the $1.1 billion payment from escrow to Fibreboard to settle       
certain asbestos-related claims. The impact of a lower invested asset base on   
net investment income was partially offset by the increase in yield on the bond 
portfolio. Lower net investment income in 1999 compared with 1998 was due to the
lower invested asset base, as discussed above, and due to a decline in yield on 
the bond portfolio. The bond segment of the investment portfolio yielded 6.7% in
2000, 6.1% in 1999 and 6.4% in 1998.                                            

The components of net realized investment gains for the years ended   
December 31, 2000, 1999 and 1998 are presented in the following table.          

Net Realized Investment Gains                                                   

                                                                [Download Table]

Years ended December 31                                                         
(In millions)                                    2000         1999         1998 
--------------------------------------------------------------------------------
                                                                                
Realized investment gains (losses):                                             
  Fixed maturity securities:                                                    
   U.S. Government bonds                      $    96      $  (177)     $   265 
   Corporate and other                                                          
    taxable securities                           (171)         (78)          67 
   Tax-exempt bonds                                13          (44)          90 
   Asset-backed bonds                             (65)         (13)          39 
   Other                                           (3)           1            6 
--------------------------------------------------------------------------------
  Total fixed maturity securities                (130)        (311)         467 
  Equity securities                             1,116          366           38 
  Other invested assets                           339          253          190 
--------------------------------------------------------------------------------
Total realized investment gains                 1,325          308          695 
Allocated to participating                                                      
 policyholders                                     (4)           7          (14)
Income tax expense                               (461)        (123)        (247)
--------------------------------------------------------------------------------
Net realized investment gains                 $   860      $   192      $   434 
================================================================================

32

EX-13.1 19th "Page" of 65 TOC 1st Previous Next Bottom Just 19th

  Net realized investment gains increased $668 million in 2000 as compared
with 1999. This increase is principally related to realized gains from the sale 
of Global Crossing Ltd. (Global Crossing) common stock and Canary Wharf Group   
plc (Canary Wharf) common stock. The increase in net realized gains for 2000 as 
compared with 1999 was $171 million for Global Crossing and $209 million for    
Canary Wharf. Additionally, a favorable change in market conditions contributed 
to the results for the bond sector.                                             

  Net realized investment gains decreased $242 million in 1999 as compared
with 1998. This decrease was principally related to interest rates and other    
market conditions impacting the results from bond sales. This decrease was      
partially offset by increased net realized gains for the sale of Global Crossing
and Canary Wharf. The increase in net realized gains for 1999 as compared with  
1998 was $103 million for Global Crossing and $79 million for Canary Wharf.     

     A primary objective in the management of the fixed maturity portfolio is to
maximize total return relative to underlying liabilities and respective         
liquidity needs. In achieving this goal, assets may be sold to take advantage of
market conditions or other investment opportunities or credit and tax           
considerations. This activity will produce realized gains and losses depending  
on market conditions including interest rates.                                  

     Substantially all invested assets are publicly traded securities classified
as available-for-sale in the accompanying Consolidated Financial Statements.    
Accordingly, changes in fair value for these securities are reported in other   
comprehensive income.                                                           

The following table details the carrying value of CNA's general and   
separate account investment portfolios as of the end of each of the last two    
years.                                                                          

General and Separate Account Investments                                        

                                                                [Download Table]

December 31                                                                     
(In millions)                               2000         %       1999         % 
--------------------------------------------------------------------------------
                                                                                
General Account Investments                                                     
Fixed maturity securities:                                                      
 Bonds:                                                                         
  Taxable                                $23,249        66%   $22,722        64%
  Tax-exempt                               3,349        10      4,396        12 
 Redeemable preferred stocks                  54        --        130        -- 
Equity securities:                                                              
 Common stocks                             2,216         6      3,344         9 
 Non-redeemable preferred stocks             196         1        266         1 
Mortgage loans and real estate                26        --         47        -- 
Policy loans                                 193         1        192         1 
Other invested assets                      1,116         3      1,108         3 
Short-term investments                     4,723        13      3,355        10 
--------------------------------------------------------------------------------
Total general account investments        $35,122       100%   $35,560       100%
================================================================================

Separate Account Investments                                                    
Fixed maturity securities:                                                      
 Taxable bonds                           $ 2,703        65%   $ 3,260        72%
Equity securities:                                                              
 Common stocks                               212         5        240         5 
 Non-redeemable preferred stocks               3        --         21         1 
Other invested assets                        849        21        493        11 
Short-term investments                       380         9        489        11 
--------------------------------------------------------------------------------
Total separate account investments       $ 4,147       100%   $ 4,503       100%
================================================================================

  The Company's general and separate account investment portfolios consist
primarily of publicly traded government bonds, asset-backed securities,         
mortgage-backed securities, municipal bonds and corporate bonds.                

Approximately 57% and 63% of separate account investments at          
December 31, 2000 and 1999, are used to fund guaranteed investment contracts for
which Continental Assurance Company (CAC) and Valley Forge Life Insurance       
Company (VFL) guarantee principal and a specified return to the contract holders
(guaranteed investment contracts). The duration of fixed maturity securities    
included in the guaranteed investment contract portfolio is matched             
approximately with the corresponding payout pattern of the liabilities of the   
guaranteed investment contracts.                                                

     The Company's investment policies for both the general and separate account
portfolios emphasize high credit quality and diversification by industry, issuer
and issue. Assets supporting interest rate sensitive liabilities are segmented  
within the general account to facilitate asset/liability duration management.   

     The general account portfolio consists primarily of high-quality (rated BBB
or higher) bonds, 93% and 94% of which were rated as investment-grade at        
December 31, 2000 and 1999. The following table summarizes the ratings of CNA's 
general account bond portfolio at carrying value.                               

General Account Bond Ratings                                                    

                                                                [Download Table]

December 31                                                                     
(In millions)                               2000         %       1999         % 
--------------------------------------------------------------------------------
                                                                                
U.S. Government and                                                             
 affiliated agency securities            $ 8,689        32%   $ 8,781        32%
Other AAA rated                            7,120        27      9,692        36 
AA and A rated                             5,954        22      4,465        16 
BBB rated                                  3,066        12      2,598        10 
Below investment-grade                     1,769         7      1,582         6 
--------------------------------------------------------------------------------
Total                                    $26,598       100%   $27,118       100%
================================================================================

The following table summarizes the bond ratings of the investments    
supporting those separate account products, which guarantee principal and a     
specified rate of interest.                                                     

Guaranteed Separate Account Bond Ratings                                        

                                                                [Download Table]

December 31                                                                      
(In millions)                               2000         %       1999         %  
-------------------------------------------------------------------------------- 
                                                                                 
U.S. Government and                                                              
 affiliated agency securities             $  224        10%    $   59         2% 
Other AAA rated                            1,248        55      1,795        62  

AA and A rated                               374        16        548        19  
BBB rated                                    397        17        375        13  
Below investment-grade                        49         2        107         4  
-------------------------------------------------------------------------------- 
Total                                     $2,292       100%    $2,884       100% 
================================================================================ 

33

EX-13.1 20th "Page" of 65 TOC 1st Previous Next Bottom Just 20th

 At December 31, 2000 and 1999, approximately 98% and 95% of the general
account portfolio and 99% and 97% of the guaranteed investment contract         
portfolio bonds are United States Government Agency securities or were rated by 
S&P's or Moody's Investors Service. The remaining bonds are rated by other      
rating agencies, outside brokers or Company management.                         

Below investment-grade bonds, as presented in the tables above, are   
high-yield securities rated below BBB by bond rating agencies as well as other  
unrated securities that, in the opinion of management, are below                
investment-grade. High-yield securities generally involve a greater degree of   
risk than investment-grade securities. However, expected returns should         
compensate for the added risk. This risk is also considered in the interest rate
assumptions for the underlying insurance products. CNA's concentration in       
high-yield bonds was approximately 7% and 6% of the general account portfolio   
and 2% and 4% of the guaranteed investment contract portion of CNA's separate   
account bond portfolio as of December 31, 2000 and 1999.                        

Included in CNA's general account fixed maturity securities at        
December 31, 2000 are $7,623 million of asset-backed securities, at fair value, 
consisting of approximately 46% in United States government agency issued       
pass-through certificates, 34% in collateralized mortgage obligations (CMOs),   
16% in corporate asset-backed obligations and 4% in corporate mortgage-backed   
pass-through certificates. The majority of CMOs held are actively traded in     
liquid markets and are priced by broker-dealers.                                

     Short-term investments at December 31, 2000 and 1999 consisted primarily of
commercial paper and money market funds. The components of the general account  
short-term investments portfolio are presented in the following table.          

Short-term Investments                                                          

                                                                [Download Table]

December 31                                                                     
(In millions)                                               2000            1999
--------------------------------------------------------------------------------
                                                                                
Commercial paper                                          $3,291          $1,988
U.S. Treasury securities                                     383              41
Money market funds                                           620             904
Other                                                        429             422
--------------------------------------------------------------------------------
Total short-term investments                              $4,723          $3,355
================================================================================

     CNA invests in certain derivative financial instruments primarily to reduce
its exposure to market risk (principally interest rate, equity price and foreign
currency risk). CNA considers the derivatives in its general account to be held 
for purposes other than trading. Derivative securities are recorded at fair     
value at the reporting date.                                                    

     Certain derivatives in separate accounts are held for trading purposes. The
Company uses derivatives to mitigate market risk by purchasing S&P 500(R) index 
futures contracts in a notional amount equal to the contract liability relating 
to Life Operations' Index 500 guaranteed investment contract product.           

    The Company's largest equity holding in a single issuer is Global Crossing
common stock. See Note B to the Consolidated Financial Statements for a         
discussion of the Company's ownership in Global Crossing.                       

   The Company's second largest equity holding is Canary Wharf. During 2000,
the Company experienced a net decrease in unrealized gains of $334 million on   
its position in Canary Wharf, which was valued at $291 million on               
December 31, 2000. The majority of this decline was due to the sale of          
60.1 million shares, resulting in a pretax realized gain of $444 million.       

MARKET RISK                                                                     

Market risk is a broad term related to changes in the fair value of a financial 
instrument. Discussions herein regarding market risk focus on only one element  
of market risk - price risk. Price risk relates to changes in the level of      
prices due to changes in interest rates, equity prices, foreign exchange rates  
or other factors that relate to market volatility of the rate, index or price   
underlying the financial instrument. The Company's primary market risk exposures
are due to changes in interest rates, although the Company has certain exposures
to changes in equity prices and foreign currency exchange rates. The fair value 
of the financial instruments are adversely affected when interest rates rise,   
equity markets decline and the dollar strengthens against foreign currency.     

   Active management of market risk is integral to the Company's operations.
The Company may use the following tools to manage its exposure to market risk   
within defined tolerance ranges: 1) change the character of future investments  
purchased or sold, 2) use derivatives to offset the market behavior of existing 
assets and liabilities or assets expected to be purchased and liabilities to be 
incurred or 3) rebalance its existing asset and liability portfolios.           

For purposes of this disclosure, market risk sensitive instruments are
divided into two categories: 1) instruments entered into for trading purposes   
and 2) instruments entered into for purposes other than trading. The Company's  
general account market risk sensitive instruments presented are classified as   
held for purposes other than trading.                                           

Sensitivity Analysis                                                            

CNA monitors its sensitivity to interest rate risk by evaluating the change in  
the value of financial assets and liabilities due to fluctuations in interest   
rates. The evaluation is performed by applying an instantaneous change in       
interest rates of varying magnitudes on a static balance sheet to determine the 
effect such a change in rates would have on the Company's market value at risk  
and the resulting effect on stockholders' equity. The analysis presents the     
sensitivity of the market value of the Company's financial instruments to       
selected changes in market rates and prices. The range of change chosen reflects
the Company's view of changes which are reasonably possible over a one-year     
period. The selection of the range of values chosen to represent changes in     
interest rates should not be construed as the Company's prediction of future    
market events, but rather an illustration of the impact of such events.         

   The sensitivity analysis estimates the decline in the market value of the
Company's interest sensitive assets and liabilities that were held on           
December 31, 2000 and December 31, 1999 due to instantaneous parallel increases 
in the period end yield curve of 100 and 150 basis points.                      

34

EX-13.1 21st "Page" of 65 TOC 1st Previous Next Bottom Just 21st

    The sensitivity analysis also assumes an instantaneous 10% and 20% decline
in the foreign currency exchange rates versus the United States dollar from     
their levels at December 31, 2000 and December 31, 1999, with all other         
variables held constant.                                                        

Equity price risk was measured assuming an instantaneous 10% and 25%  
decline in the S&P 500(R) Index (Index) from its level at December 31, 2000 and 
December 31, 1999, with all other variables held constant. The Company's equity 
holdings were assumed to be highly and positively correlated with the Index. At 
December 31, 2000, a 10% and 25% decrease in the Index would result in a        
$457 million and $1,042 million decrease compared to $564 million and           
$1,420 million decrease at December 31, 1999, in the market value of the        
Company's equity investments. Of these amounts, under the 10% and 25% scenarios,
$167 million and $418 million at December 31, 2000 and $148 million and         
$381 million at December 31, 1999 pertained to decreases in the market value of 
the separate account investments. These decreases would substantially be offset 
by decreases in related separate account liabilities to customers. Similarly,   
increases in the market value of the separate account equity investments would  
also be offset by increases in the same related separate account liabilities by 
the same approximate amounts.                                                   

   The following tables present the estimated effects on the market value of
the Company's financial instruments at December 31, 2000 and 1999, due to an    
increase in interest rates of 100 basis points, a decline of 10% in foreign     
currency exchange rates and a 10% decline in the Index.                         

                                                        [Enlarge/Download Table]

Market Risk Scenario 1                                                           Increase (Decrease)                 

December 31, 2000                                                 Market      Interest       Currency         Equity 
(In millions)                                                      Value     Rate Risk           Risk           Risk 
---------------------------------------------------------------------------------------------------------------------
                                                                                                                     
Held for Other Than Trading Purposes                                                                                 
General account:                                                                                                     
 Fixed maturity securities                                       $26,652       $(1,428)       $  (213)       $   (22)
 Equity securities                                                 2,412            --            (44)          (223)
 Short-term investments                                            4,723            (4)           (18)            -- 
 Other invested assets                                             1,333            43             --            (45)
 Interest rate caps                                                    1             1             --             -- 
 Interest rate swaps                                                  --            --             --             -- 
 Equity indexed futures                                               --            --             --             -- 
 Other derivative securities                                           1             1             (4)            -- 

  Total general account                                           35,122        (1,387)          (279)          (290)
-------------------------------------------------------------------------------------------------------------------- 

Separate accounts:                                                                                                   
 Fixed maturity securities                                         2,293          (118)            (7)            -- 
 Equity securities                                                   212            --             (1)           (21)
 Short-term investments                                              150            --             --             -- 
  Other invested assets                                              444            --             --            (44)
 Other derivative securities                                          --            --             --             -- 

  Total separate accounts                                          3,099          (118)            (8)           (65)

Total all securities held for other than trading purposes         38,221        (1,505)          (287)          (355)
-------------------------------------------------------------------------------------------------------------------- 

Held for Trading Purposes                                                                                            
Separate accounts:                                                                                                   
 Fixed maturity securities                                           410           (19)            (4)            (1)
 Equity securities                                                     3            --             --             -- 
 Short-term investments                                              230            --             --             -- 
 Other invested assets                                               404            --             --             (3)
 Equity indexed futures                                               --             2             --            (98)
 Other derivative securities                                           1            (6)            --             -- 

Total all securities held for trading purposes                     1,048           (23)            (4)          (102)
-------------------------------------------------------------------------------------------------------------------- 
Total all securities                                             $39,269       $(1,528)       $  (291)       $  (457)
==================================================================================================================== 
Debt (carrying value)                                            $ 2,729       $  (114)       $    --        $    -- 
==================================================================================================================== 

35

EX-13.1 22nd "Page" of 65 TOC 1st Previous Next Bottom Just 22nd

                                                        [Enlarge/Download Table]

MarketRisk Scenario 1                                                             Increase (Decrease)                   
                                                                                  -------------------                   
December 31, 1999                                                Market        Interest        Currency          Equity 
(In millions)                                                     Value       Rate Risk            Risk            Risk 
------------------------------------------------------------------------------------------------------------------------
                                                                                                                        
Held for Other Than Trading Purposes                                                                                    
General account:                                                                                                        
 Fixed maturity securities                                     $ 27,248        $ (1,268)       $   (149)       $    (14)
 Equity securities                                                3,610              --             (84)           (361)
 Short-term investments                                           3,355              (2)            (26)             -- 
 Other invested assets                                            1,331              42              --             (44)
 Interest rate caps                                                   4               5              --              -- 
 Interest rate swaps                                                 --              --              --              -- 
 Equity indexed futures                                              --              19              --              -- 
 Other derivative securities                                         12              (8)             59               3 

  Total general account                                          35,560          (1,212)           (200)           (416)
----------------------------------------------------------------------------------------------------------------------- 

Separate accounts:                                                                                                      
 Fixed maturity securities                                        2,927            (115)            (16)             (2)
 Equity securities                                                  242              --              --             (24)
 Short-term investments                                              59              --              --              -- 
 Other invested assets                                              175              --              --             (17)
 Other derivative securities                                         (1)             (7)             --              -- 

  Total separate accounts                                         3,402            (122)            (16)            (43)

Total all securities held for other than trading purposes        38,962          (1,334)           (216)           (459)
----------------------------------------------------------------------------------------------------------------------- 

Held for Trading Purposes                                                                                               
Separate accounts:                                                                                                      
 Fixed maturity securities                                          333             (12)             (1)             -- 
 Equity securities                                                   19              --              --              (2)
 Short-term investments                                             430              --              (2)             -- 
 Other invested assets                                              319              --              --               2 
 Equity indexed futures                                              --               2              --            (105)
 Other derivative securities                                         --              (1)             --              -- 

Total all securities held for trading purposes                    1,101             (11)             (3)           (105)
----------------------------------------------------------------------------------------------------------------------- 
Total all securities                                           $ 40,063        $ (1,345)       $   (219)       $   (564)
======================================================================================================================= 
Debt (carrying value)                                          $  2,881        $   (132)       $     --        $     -- 
======================================================================================================================= 

36

EX-13.1 23rd "Page" of 65 TOC 1st Previous Next Bottom Just 23rd

   The following tables present the estimated effects on the market value of
the Company's financial instruments at December 31, 2000 and 1999, due to an    
increase in interest rates of 150 basis points, a 20% decline in foreign        
currency exchange rates and a 25% decline in the S&P 500(R).                    

                                                        [Enlarge/Download Table]

MarketRisk Scenario 2                                                       Increase (Decrease)                  
                                                                            -------------------                  
December 31, 2000                                             Market      Interest       Currency         Equity 
(In millions)                                                  Value     Rate Risk           Risk           Risk 
---------------------------------------------------------------------------------------------------------------- 
                                                                                                                 
Held for Other Than Trading Purposes                                                                             
General account:                                                                                                 
 Fixed maturity securities                                   $26,652       $(2,180)       $  (427)       $   (56)
 Equity securities                                             2,412            --            (88)          (456)
 Short-term investments                                        4,723            (6)           (36)            -- 
 Other invested assets                                         1,333            65             --           (112)
 Interest rate caps                                                1             2             --             -- 
 Interest rate swaps                                              --            (1)            --             -- 
 Equity indexed futures                                           --            --             --             -- 
 Other derivative securities                                       1             1             (7)            -- 

  Total general account                                       35,122        (2,119)          (558)          (624)
---------------------------------------------------------------------------------------------------------------- 

Separate accounts:                                                                                               
 Fixed maturity securities                                     2,293          (171)           (15)            -- 
 Equity securities                                               212            --             (1)           (53)
 Short-term investments                                          150            --             --             -- 
  Other invested assets                                          444            --             --           (111)
 Other derivative securities                                      --            --             --             -- 
  Total separate accounts                                      3,099          (171)           (16)          (164)

Total all securities held for other than trading purposes     38,221        (2,290)          (574)          (788)
---------------------------------------------------------------------------------------------------------------- 

Held for Trading Purposes                                                                                        
Separate accounts:                                                                                               
 Fixed maturity securities                                       410           (28)            (7)            (1)
 Equity securities                                                 3            --             --             (1)
 Short-term investments                                          230            --             --             -- 
 Other invested assets                                           404            --             --             (7)
 Equity indexed futures                                           --             3             --           (245)
 Other derivative securities                                       1            (9)            --             -- 

Total all securities held for trading purposes                 1,048           (34)            (7)          (254)
---------------------------------------------------------------------------------------------------------------- 
Total all securities                                         $39,269       $(2,324)       $  (581)       $(1,042)
=================================================================================================================
Debt (carrying value)                                        $ 2,729       $  (166)       $    --        $    -- 
=================================================================================================================

37

EX-13.1 24th "Page" of 65 TOC 1st Previous Next Bottom Just 24th

                                                        [Enlarge/Download Table]

MarketRisk Scenario 2                                                            Increase (Decrease)                    
                                                                                 -------------------                    
December 31, 1999                                                Market        Interest        Currency          Equity 
(In millions)                                                     Value       Rate Risk            Risk            Risk 
----------------------------------------------------------------------------------------------------------------------- 
                                                                                                                        
Held for Other Than Trading Purposes                                                                                    
General account:                                                                                                        
 Fixed maturity securities                                     $ 27,248        $ (1,878)       $   (298)       $    (35)
 Equity securities                                                3,610              --            (168)           (902)
 Short-term investments                                           3,355              (3)            (51)             -- 
 Other invested assets                                            1,331              63              --            (111)
 Interest rate caps                                                   4              11              --              -- 
 Interest rate swaps                                                 --              --              --              -- 
 Equity indexed futures                                              --              29              --              -- 
 Other derivative securities                                         12             (13)            118               9 

  Total general account                                          35,560          (1,791)           (399)         (1,039)
----------------------------------------------------------------------------------------------------------------------- 

Separate accounts:                                                                                                      
 Fixed maturity securities                                        2,927            (170)            (32)             (4)
 Equity securities                                                  242              --              --             (60)
 Short-term investments                                              59              --              (1)             -- 
 Other invested assets                                              175              --              --             (44)
 Other derivative securities                                         (1)            (11)             --               _ 

  Total separate accounts                                         3,402            (181)            (33)           (108)
----------------------------------------------------------------------------------------------------------------------- 
Total all securities held for other than trading purposes        38,962          (1,972)           (432)         (1,147)

Held for TradingPurposes                                                                                                
Separate accounts:                                                                                                      
 Fixed maturity securities                                          333             (18)             (1)             (1)
 Equity securities                                                   19              --              --              (5)
 Short-term investments                                             430              --              (4)             -- 
 Other invested assets                                              319              --              --              (6)
 Equity indexed futures                                              --               3              --            (261)
 Other derivative securities                                         --              (2)             --              -- 

Total all securities held for trading purposes                    1,101             (17)             (5)           (273)
----------------------------------------------------------------------------------------------------------------------- 
Total all securities                                           $ 40,063        $ (1,989)       $   (437)       $ (1,420)
======================================================================================================================= 
Debt (carrying value)                                          $  2,881        $   (193)       $     --        $     -- 
======================================================================================================================= 

LIQUIDITY AND CAPITAL RESOURCES                                                 

The principal operating cash flow sources of CNA's property-casualty and life   
insurance subsidiaries are premiums and investment income. The primary operating
cash flow uses are payments for claims, policy benefits and operating expenses. 

For the year ended December 31, 2000, net cash used for operating     
activities was $1,373 million as compared with net cash used of $2,934 million  
and $806 million in 1999 and 1998. The improvement in 2000 relates primarily to 
significant outflows in 1999 of 1) $1.1 billion in cash to Allstate in          
connection with the transaction involving the Company's Personal Insurance      
business and 2) $1.1 billion of claim payments from escrow pursuant to the      
Fibreboard settlement. See Note O to the Consolidated Financial Statements for  
discussion of the Personal Insurance transaction. Excluding these significant,  
non-recurring transactions from 1999, the Company's 2000 cash outflow from      
operations declined by approximately $600 million to an outflow of approximately
$1.4 billion. The operating cash flows forgone in 2000 due to the transfer of   
Personal Insurance in 1999 was approximately $250 million. The remainder of the 
decline related primarily to increased payments of claims and decreased receipts
of premiums.                                                                    

For the year ended December 31, 1999, net cash used for operating     
activities increased significantly, due to the non-recurring transactions       
described above. Excluding these transactions, cash from operations improved in 
1999 over 1998, primarily due to lower levels of paid operating expenses.       

For the year ended December 31, 2000, net cash inflows from investment
activities were $1,870 million as compared with $3,428 million and $300 million 
for the same period in 1999 and 1998. Cash flows from investing activities were 
particularly high in 1999 due to sales of investments to fund the outflows      
related to the Personal Insurance transaction and Fibreboard claim payments.    

For the year ended December 31, 2000, net cash used for financing     
activities was $487 million as compared with $558 million in 1999. In 1998, cash
provided by financing activities amounted to $340 million. During 2000 and 1999,
cash flows for financing activities included the repurchase of preferred and    
common equity instruments, the retirement or repurchase of senior debt          
securities and mortgages, the repayment of bank loans and the payment of        
dividends. During 1998, cash provided by financing activities included issuance 
of preferred stock and increased cash flows from borrowings.                    

38

EX-13.1 25th "Page" of 65 TOC 1st Previous Next Bottom Just 25th

    On February 15, 2000, S&P lowered the Company's senior debt rating from A-
to BBB and lowered the Company's preferred stock rating from BBB to BB+. As a   
result of these actions, the facility fee payable on the aggregate amount of    
CNA's $795 million revolving credit facility (Facility) was increased to 12.5   
basis points per annum from 9.0 basis points per annum and the interest rate was
increased to London Interbank Offered Rate (LIBOR) plus 27.5 basis points from  
LIBOR plus 16.0 basis points. Subsequently, the Company repurchased and retired 
all of its outstanding balance in its $150 million of money market preferred    
stock in the first four months of 2000.                                         

  The Company has selected a financial institution to lead the syndication
process for the new CNAF credit facility to replace the current CNAF revolving  
credit facility that terminates in May 2001.                                    

   During 2000, CNA purchased a portion of its debt notes when opportunities
arose. CNA may purchase additional securities in the future. These repurchases  
included approximately $24 million of The Continental Corporation (Continental) 
senior notes and approximately $14 million of CNAF senior notes. On             
August 2, 1999, the Company repaid its $157 million, 11% Secured Mortgage Notes,
due June 30, 2013.                                                              

    On April 19, 1999, CNA filed a Registration Statement on Form S-3 with the
Securities and Exchange Commission (SEC), which became effective, relating to   
$600 million in senior and subordinated debt, junior debt, common stock,        
preferred stock and warrants. No securities have been issued under this         
registration.                                                                   

    On April 15, 1999, the Company retired $100 million of Continental's 8.25%
senior notes.                                                                   

     On December 23, 1998, CNA sold $200 million of preferred stock to Loews. On
June 30, 1999, CNA redeemed this preferred stock at par plus accrued dividends. 

In 1998, CNA issued $1 billion of senior notes under a $1 billion     
Registration Statement on Form S-3 filed with the SEC on August 18, 1997. This  
shelf registration incorporated $250 million of securities remaining available  
for issuance from a prior shelf registration. Since filing this shelf           
registration, CNA has issued in four separate offerings senior notes with an    
aggregate principal amount of $1 billion. Proceeds from these debt issues were  
used to repay or refinance existing debt, provide funds for acquisitions, and   
increase the capital of CCC.                                                    

 The Company is separated into three intercompany reinsurance pools: the
Continental Casualty Company Pool (CCC Pool), The Continental Insurance Company 
Pool (CIC Pool) and the Continental Assurance Company Pool (CAC Pool). The CCC  
Pool, CIC Pool and CAC Pool are composed of nine, fifteen and two legal         
insurance entities, respectively, domiciled in a total of 13 states and doing   
business in 50 states and Canada (the Pool Companies). To the extent a Pool     
Company's currently due claim liabilities may exceed its readily available      
liquid assets, the Company may be called upon to contribute capital to that     
company. Furthermore, such capital would likely be obtained in the form of a    
dividend from another Pool Company, possibly in a different pool, which may or  
may not require the approval of insurance regulators in the jurisdiction of the 
dividend-paying company. In addition, by agreement with the New Hampshire       
Insurance Department as well as certain other state insurance departments,      
dividend paying capacity for the CIC Pool is restricted to internal and external
debt service requirements through September 2003 up to a maximum of $85 million 
annually, without the prior approval of the New Hampshire Insurance Department. 
As of December 31, 2000, approximately $881 million of dividend payments would  
not be subject to insurance department pre-approval. Accordingly, management    
must continuously monitor the capital allocation among the pools and the        
liquidity and capital resources of the individual Pool Companies. See Note K to 
the Consolidated Financial Statements for discussion of statutory accounting    
practices.                                                                      

In March of 1998, the National Association of Insurance Commissioners 
(NAIC) adopted the Codification of Statutory Accounting Principles              
(Codification). Codification, which is intended to standardize regulatory       
accounting and reporting to state insurance departments, is effective           
January 1, 2001. However, statutory accounting principles will continue to be   
established by individual state laws and permitted practices. The states in     
which CNAF's insurance subsidiaries conduct business will require adoption of   
Codification (with certain modifications) for the preparation of statutory      
financial statements effective January 1, 2001. The Company estimates that the  
adoption of Codification, as modified, will increase statutory capital and      
surplus as of January 1, 2001 by approximately $77 million, which primarily     
relates to deferred tax assets, partially offset by insurance related           
assessments and pension liabilities.                                            

  The table below presents ratings issued by A.M. Best, Fitch, Moody's and
S&P for the CCC Pool, the CIC Pool and the CAC Pool. Also rated were CNAF's     
senior debt, commercial paper and Continental senior debt.                      

                                                        [Enlarge/Download Table]

                          Insurance Ratings                    Debt Ratings          
                ---------------------------------            ----------------        
                CCC Pool    CAC Pool     CIC Pool            CNAF Continental        

                                                   Financial   Commercial      Senior
                                                    Strength  Senior Debt       Paper
-------------------------------------------------------------------------------------
 Debt                                                                                
                                                                                     
A.M. Best             A           A           A-          --           --          --
Fitch               AA-          AA           --          A-           --          --
Moody's              A2          A2*          A3        Baa1           P2        Baa2
S&P                   A         AA-           A-         BBB           A2        BBB-

* CAC and VFL are rated separately by Moody's and both have an A2 rating.       

39

EX-13.1 26th "Page" of 65 TOC 1st Previous Next Bottom Just 26th

ACCOUNTING PRONOUNCEMENTS                                                       

In the first quarter of 2000, the Company adopted the American Institute of     
Certified Public Accountants' Statement of Position No. 98-7, Deposit           
Accounting: Accounting for Insurance and Reinsurance Contracts That Do Not      
Transfer Insurance Risk (SOP 98-7). Adoption of SOP 98-7 did not have a         
significant impact on the results of operations or the equity of the Company.   

     In December 1999, the SEC issued Staff Accounting Bulletin No. 101, Revenue
Recognition in Financial Statements (SAB 101). SAB 101 summarizes the SEC       
Staff's view in applying GAAP to revenue recognition in financial statements.   
This bulletin, through its subsequent revised releases SAB No. 101A and No.     
101B, is effective for registrants no later than the fourth fiscal quarter of   
fiscal years beginning after December 15, 1999. Adoption of this bulletin, which
occurred on October 1, 2000, did not have a significant impact on the results of
operations or the equity of the Company.                                        

   In 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard No. 133, Accounting for Derivative Instruments 
and Hedging Activities (SFAS 133). SFAS 133 was subsequently amended by         
Statement of Financial Accounting Standard No. 137, Accounting for Derivative   
Instruments and Hedging Activities-Deferral of the Effective Date of FASB       
Statement No. 133, which delayed the effective date of SFAS 133 by one year, and
Statement of Financial Accounting Standards No. 138, Accounting for Certain     
Derivative Instruments and Certain Hedging Activities (SFAS 138). SFAS 138      
addresses a limited number of issues causing implementation difficulties for    
entities applying SFAS 133. SFAS 133, as amended and interpreted, establishes   
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities. 
SFAS 133 requires that an entity recognize all derivative instruments as either 
assets or liabilities in the balance sheet and measure those instruments at fair
value. If certain conditions are met, a derivative may be specifically          
designated as a hedge of the exposures to changes in the fair value, cash flows 
or foreign currencies. The accounting for changes in the fair value of a        
derivative depends on the intended use of the derivative and the resulting      
designation.                                                                    

  The Company is required to adopt SFAS 133 effective January 1, 2001. The
transition adjustments resulting from adoption must be reported in net income or
other comprehensive income, as appropriate, as the cumulative effect of a change
in accounting principle. The Company estimates that the initial adoption of SFAS
133 will not have a significant impact on the equity of the Company; however,   
adoption will result in an estimated after-tax decrease to 2001 earnings of     
$62 million. Of this estimated transition amount, approximately $58 million     
relates to investments and investment related derivatives (primarily related to 
the Company's hedged position in Global Crossing common stock, see Note C to the
Consolidated Financial Statements). Because the Company already carries its     
investment related derivatives at fair value through other comprehensive income,
there is an equal and offsetting favorable adjustment of $58 million to         
stockholders' equity (accumulated other comprehensive income). The remainder of 
the estimated transition adjustment is attributable to collateralized debt      
obligation products that are derivatives under SFAS 133.                        

   These estimates are based on the Company's interpretation of SFAS 133 and
related implementation guidance. Changes in implementation guidance or the      
interpretation thereof could result in changes in the transition adjustment     
estimate.                                                                       

FORWARD-LOOKING STATEMENTS                                                      

The statements contained in this management discussion and analysis that are not
historical facts are forward-looking statements. When included in the           
management's discussion and analysis, the words "believes," "expects,"          
"intends," "anticipates," "estimates" and analogous expressions are intended to 
identify forward-looking statements. Such statements inherently are subject to a
variety of risks and uncertainties that could cause actual results to differ    
materially from those projected. Such risks and uncertainties include, among    
others, the impact of competitive products, policies and pricing; product and   
policy demand and market responses; development of claims and claim trends and  
the effect on loss reserves; the performance of reinsurance companies under     
reinsurance contracts with the Company; general economic and business           
conditions; changes in financial markets (interest rate, credit, currency,      
commodities and stocks); changes in foreign, political, social and economic     
conditions; regulatory initiatives and compliance with governmental regulations;
judicial decisions and rulings; the effect on the Company of changes in rating  
agency policies and practices; the results of financing efforts; changes in the 
Company's composition of operating segments; the actual closing of contemplated 
transactions; and agreements and various other matters and risks (many of which 
are beyond the Company's control) detailed in the Company's SEC filings. These  
forward-looking statements speak only as of the filing date of this document.   
The Company expressly disclaims any obligation or undertaking to release        
publicly any updates or revisions to any forward-looking statement contained    
herein to reflect any change in the Company's expectations with regard thereto  
or any change in events, conditions or circumstances on which any statement is  
based.                                                                          

40

EX-13.1 27th "Page" of 65 TOC 1st Previous Next Bottom Just 27th

                                           CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

Years ended December 31                                                                                                    
(In millions, except per share data)                                                    2000           1999           1998 
---------------------------------------------------------------------------------------------------------------------------
                                                                                                                           
Revenues                                                                                                                   

Net earned premiums                                                                 $ 11,474       $ 13,282       $ 13,536 

Net investment income                                                                  2,080          2,101          2,146 

Realized investment gains, net of participating                                                                            
  policyholders' and minority interests                                                1,321            315            681 

Other revenues                                                                           739            705            799 

Total revenues                                                                        15,614         16,403         17,162 
---------------------------------------------------------------------------------------------------------------------------

Claims, Benefits and Expenses                                                                                              

Insurance claims and policyholders' benefits                                           9,831         11,890         11,701 

Amortization of deferred acquisition costs                                             1,880          2,143          2,180 

Other operating expenses                                                               1,887          2,096          2,467 

Restructuring and other related charges                                                   --             83            246 

Interest                                                                                 206            202            219 

Total claims, benefits and expenses                                                   13,804         16,414         16,813 
---------------------------------------------------------------------------------------------------------------------------

Income (loss) before income tax and cumulative effect                                                                      
  of a change in accounting principle                                                  1,810            (11)           349 

Income tax (expense) benefit                                                            (568)            88            (47)

Minority interest                                                                        (28)           (30)           (20)
---------------------------------------------------------------------------------------------------------------------------

Income before cumulative effect of a change in accounting principle                    1,214             47            282 

Cumulative effect of a change in accounting principle, net of tax of $95                  --           (177)            -- 
---------------------------------------------------------------------------------------------------------------------------
Net income (loss)                                                                   $  1,214       $   (130)      $    282 
===========================================================================================================================

Basic and Diluted Earnings (Loss) per Share                                                                                

Income before cumulative effect of a change in accounting principle                 $   6.61       $   0.19       $   1.49 
Cumulative effect of a change in accounting principle, net of tax                         --          (0.96)            -- 
---------------------------------------------------------------------------------------------------------------------------
Basic and diluted earnings (loss) per share available to common stockholders        $   6.61       $  (0.77)      $   1.49 
===========================================================================================================================
Weighted average outstanding common stock and common stock equivalents                 183.6          184.2          184.9 
===========================================================================================================================

The accompanying Notes are an integral part of these Consolidated Financial     
Statements.                                                                     

41

EX-13.1 28th "Page" of 65 TOC 1st Previous Next Bottom Just 28th

                                                     CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

December 31                                                                                                              
(In millions)                                                                                       2000            1999 
------------------------------------------------------------------------------------------------------------------------ 
                                                                                                                         
Assets                                                                                                                   

Investments:                                                                                                             

  Fixed maturity securities available-for-sale (amortized cost of $26,579 and $27,948)          $ 26,652        $ 27,248 

  Equity securities available-for-sale (cost of $1,175 and $1,150)                                 2,412           3,610 

  Mortgage loans and real estate (less accumulated depreciation of $1 and $1)                         26              47 

  Policy loans                                                                                       193             192 

  Other invested assets                                                                            1,116           1,108 

  Short-term investments                                                                           4,723           3,355 
------------------------------------------------------------------------------------------------------------------------ 

Total investments                                                                                 35,122          35,560 

Cash and cash equivalents                                                                            163             153 

Receivables:                                                                                                             

  Reinsurance                                                                                      9,397           7,403 

  Insurance                                                                                        5,026           5,115 

  Less allowance for doubtful accounts                                                              (321)           (310)

Accrued investment income                                                                            404             387 

Receivables for securities sold                                                                      424             284 

Deferred acquisition costs                                                                         2,418           2,436 

Prepaid reinsurance premiums                                                                       1,445           1,456 

Federal income taxes recoverable (includes $25 and $241 due from Loews)                               15             269 

Deferred income taxes                                                                                503             852 

Property and equipment at cost (less accumulated depreciation of $802 and $701)                      716             746 

Intangibles                                                                                          317             328 

Other assets                                                                                       2,152           1,937 

Separate account business                                                                          4,287           4,603 
------------------------------------------------------------------------------------------------------------------------ 

Total assets                                                                                    $ 62,068        $ 61,219 
======================================================================================================================== 

42

EX-13.1 29th "Page" of 65 TOC 1st Previous Next Bottom Just 29th

                                                        [Enlarge/Download Table]

                                                                                2000                  1999 
-----------------------------------------------------------------------------------------------------------
                                                                                                           
Liabilities and Stockholders' Equity                                                                       

Liabilities:                                                                                               

  Insurance reserves:                                                                                      

    Claim and claim adjustment expense                                      $ 26,962              $ 27,356 

    Unearned premiums                                                          4,821                 5,103 

    Future policy benefits                                                     6,669                 6,102 

    Policyholders' funds                                                         602                   710 

  Collateral on loaned securities and derivatives                              1,308                 1,300 

  Payables for securities purchased                                              593                   135 

  Participating policyholders' equity                                            131                   121 

  Debt                                                                         2,729                 2,881 

  Other liabilities                                                            4,102                 3,775 

  Separate account business                                                    4,287                 4,603 

Total liabilities                                                             52,204                52,086 
---------------------------------------------------------------------------------------------------------- 

Commitments and contingencies (Notes A, E and F)                                                           

Minority interest                                                                217                   195 

Stockholders' equity:                                                                                      

  Common stock                                                                   464                   464 

  Preferred stock                                                                 --                   150 

  Additional paid-in capital                                                     126                   126 

  Retained earnings                                                            8,327                 7,114 

  Accumulated other comprehensive income                                         873                 1,188 

  Treasury stock, at cost                                                        (71)                  (41)
---------------------------------------------------------------------------------------------------------- 

                                                                               9,719                 9,001 

  Notes receivable for the issuance of common stock (Note I)                     (72)                  (63)
---------------------------------------------------------------------------------------------------------- 

Total stockholders' equity                                                     9,647                 8,938 
---------------------------------------------------------------------------------------------------------- 

Total liabilities and stockholders' equity                                  $ 62,068              $ 61,219 
========================================================================================================== 

The accompanying Notes are an integral part of these Consolidated Financial     
Statements.                                                                     

43

EX-13.1 30th "Page" of 65 TOC 1st Previous Next Bottom Just 30th

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

Years ended December 31                                                                                           
(In millions)                                                                 2000           1999           1998  
----------------------------------------------------------------------------------------------------------------- 
                                                                                                                  
Cash Flows from Operating Activities                                                                              

Net income (loss)                                                         $  1,214       $   (130)      $    282  

Adjustments to reconcile net income (loss)                                                                        
  to net cash flows used by operating activities:                                                                 

    Cumulative effect of change in accounting principle, net of tax             --            177             --  

    Minority interest                                                           28             30             20  

    Deferred income tax provision                                              493            138             47  

    Realized investment gains                                               (1,321)          (315)          (681) 

    Amortization of intangibles                                                 21             23             93  

    Amortization of bond discount                                             (309)          (243)          (208) 

    Depreciation                                                               155            185            166  

    Changes in:                                                                                                   

      Receivables, net                                                      (1,664)            (9)          (404) 

      Deferred acquisition costs                                              (132)          (221)          (280) 

      Accrued investment income                                                (17)             6             (3) 

      Federal income taxes recoverable                                         254            (17)          (233) 

      Prepaid reinsurance premiums                                              11           (152)          (435) 

      Insurance reserves                                                      (128)        (1,193)           586  

      Transfer of business via reinsurance                                     (41)        (1,149)            --  

      Other                                                                     63            (64)           244  
----------------------------------------------------------------------------------------------------------------- 

Total adjustments                                                           (2,587)        (2,804)        (1,088) 
----------------------------------------------------------------------------------------------------------------  

Net cash flows used by operating activities                                 (1,373)        (2,934)          (806) 
----------------------------------------------------------------------------------------------------------------- 

Cash Flows from Investing Activities                                                                              

Purchases of fixed maturity securities                                     (40,975)       (45,515)       (39,039) 

Proceeds from fixed maturity securities:                                                                          

  Sales                                                                     38,502         43,587         35,480  

  Maturities, calls and redemptions                                          4,222          2,996          3,564  

Purchases of equity securities                                              (1,858)        (1,575)        (1,071) 

Proceeds from sales of equity securities                                     2,935          1,803            848  

Change in short-term investments                                            (1,124)           907            823  

Change in collateral on loaned securities and derivatives                        9          1,170            (23) 

Change in other investments                                                    313            238            (81) 

Purchases of property and equipment, net                                      (152)          (250)          (261) 

Acquisitions, net of cash acquired                                              (2)           (19)          (120) 

Other, net                                                                      --             86            180  
----------------------------------------------------------------------------------------------------------------- 

Net cash flows from investing activities                                  $  1,870       $  3,428       $    300  
==================================================================================================================

44

EX-13.1 31st "Page" of 65 TOC 1st Previous Next Bottom Just 31st

                                                        [Enlarge/Download Table]

                                                                           2000          1999          1998 
----------------------------------------------------------------------------------------------------------- 
                                                                                                            
Cash Flows from Financing Activities                                                                        

Dividends paid to preferred stockholders                                  $  (1)        $ (13)        $  (7)

Purchase of treasury stock                                                  (35)           --          (102)

Receipts from investment contracts credited to                                                              
   policyholder account balances                                              5             7             6 

Return of policyholder account balances on investment contracts            (138)          (78)          (20)

Principal payments on debt                                                 (164)         (450)         (730)

Proceeds from issuance of debt                                               --           177           993 

(Redemption) issuance of preferred stock                                   (150)         (200)          200 

Other, net                                                                   (4)           (1)           -- 
----------------------------------------------------------------------------------------------------------- 

Net cash flows (used by) from financing activities                         (487)         (558)          340 
----------------------------------------------------------------------------------------------------------- 

Net change in cash and cash equivalents                                      10           (64)         (166)

Cash and cash equivalents, beginning of year                                153           217           383 
----------------------------------------------------------------------------------------------------------- 

Cash and cash equivalents, end of year                                    $ 163         $ 153         $ 217 
=========================================================================================================== 

Supplemental Disclosures of Cash Flow Information                                                           

Cash paid (received):                                                                                       

   Interest expense                                                       $ 205         $ 201         $ 210 

   Federal income taxes                                                    (154)         (279)          143 

Non-cash transactions:                                                                                      

   Notes receivable for the issuance of stock                                 4            19            44 

   Exchange of Canary Wharf Limited Partnership interest into common stock   --           539            -- 

The accompanying Notes are an integral part of these Consolidated Financial     
Statements.                                                                     

45

EX-13.1 32nd "Page" of 65 TOC 1st Previous Next Bottom Just 32nd

                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                                       Accumulated                 Notes            
                                                                                             Other            Receivable            
                                                                                        Comprehen-               for the      Total 
                                                                   Additional                 sive              Issuance     Stock- 
                                                 Common  Preferred    Paid-in  Retained     Income   Treasury  of Common   holders' 
                                                  Stock      Stock    Capital  Earnings      (Loss)     Stock      Stock     Equity 
----------------------------------------------------------------------------------------------------------------------------------- 
(In millions)                                                                                                                       
                                                                                                                                    
Balance, January 1, 1998                        $   464    $   150    $   126   $ 6,983    $   589    $    (3)   $    --    $ 8,309 

Comprehensive income:                                                                                                               
    Net income                                       --         --         --       282         --         --         --        282 

  Other comprehensive income                         --         --         --        --        475         --         --        475 
                                                                                                                              ----- 

Total comprehensive income                                                                                                      757 

Issuance of preferred stock                          --        200         --        --         --         --         --        200 

Purchase of treasury stock                           --         --         --        --         --       (102)        --       (102)

Increase in notes from issuance                                                                                                     
  of common stock                                    --         --         --        --         --         44        (44)        -- 

Preferred dividends                                  --         --         --        (7)        --         --         --         (7)

Balance, December 31, 1998                          464        350        126     7,258      1,064        (61)       (44)     9,157 

Comprehensive loss:                                                                                                                 

  Net loss                                           --         --         --      (130)        --         --         --       (130)

  Other comprehensive income                         --         --         --        --        124         --         --        124 
                                                                                                                              ----- 

Total comprehensive loss                             (6)                                                                            

Redemption of preferred stock                        --       (200)        --        --         --         --         --       (200)

Increase in notes from issuance                                                                                                     
  of common stock                                    --         --         --        (1)        --         20        (19)        -- 

Preferred dividends                                  --         --         --       (13)        --         --         --        (13)

Balance, December 31, 1999                          464        150        126     7,114      1,188        (41)       (63)     8,938 

Comprehensive income:                                                                                                               

  Net income                                         --         --         --     1,214         --         --         --      1,214 

  Other comprehensive loss                           --         --         --        --       (315)        --         --       (315)
                                                                                                                              ----- 

Total comprehensive income                                                                                                      899 

Redemption of preferred stock                        --       (150)        --        --         --         --         --       (150)

Purchase of treasury stock                           --         --         --        --         --        (35)        --        (35)

Increase in notes from issuance                                                                                                     
  of common stock                                    --         --         --        --         --          5         (9)        (4)

Preferred dividends                                  --         --         --        (1)        --         --         --         (1)

Balance, December 31, 2000                      $   464    $    --    $   126   $ 8,327    $   873    $   (71)   $   (72)   $ 9,647 
====================================================================================================================================

The accompanying Notes are an integral part of these Consolidated Financial     
Statements.                                                                     

46

EX-13.1 33rd "Page" of 65 TOC 1st Previous Next Bottom Just 33rd

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE A.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                             

Basis of Presentation                                                           

The Consolidated Financial Statements include CNA Financial Corporation (CNAF)  
and its controlled subsidiaries, which include property-casualty insurance      
companies (principally Continental Casualty Company (CCC) and The Continental   
Insurance Company (CIC)) and life insurance companies (principally Continental  
Assurance Company (CAC) and Valley Forge Life Insurance Company (VFL)),         
collectively CNA or the Company. Loews Corporation (Loews) owns approximately   
87% of the outstanding common stock of the Company.                             

  The accompanying Consolidated Financial Statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America (GAAP). All significant intercompany amounts have been eliminated.      
Certain amounts applicable to prior years have been reclassified to conform to  
the current year presentation.                                                  

 The preparation of consolidated financial statements in conformity with
GAAP requires management to make estimates and assumptions that affect the      
reported amounts of assets and liabilities and the disclosure of contingent     
assets and liabilities at the date of the consolidated financial statements and 
the reported amounts of revenues and expenses during the reporting period.      
Actual results could differ from those estimates.                               

Business                                                                        

CNA serves a wide variety of customers, including small, medium and large       
businesses; associations; professionals; and groups and individuals with a broad
range of insurance and risk management products and services.                   

    Insurance products include property and casualty coverages; life, accident
and health insurance; and retirement products and annuities. CNA services       
include risk management, information services, healthcare management, claims    
administration and employee leasing/payroll processing. CNA's products and      
services are marketed through agents, brokers, managing general agents and      
direct sales.                                                                   

Insurance                                                                       

Earned premiums: Insurance premiums on property-casualty and accident and health
insurance contracts are earned ratably over the duration of the policies after  
provision for estimated adjustments on retrospectively rated policies and       
deductions for ceded insurance. The reserve for unearned premiums on these      
contracts represents the portion of premiums written relating to the unexpired  
terms of coverage. Revenues on interest sensitive contracts are comprised of    
contract charges and fees, which are recognized over the coverage period.       
Premiums for other life insurance products and annuities are recognized as      
revenue when due, after deductions for ceded insurance premiums.                

Claim and claim adjustment expense reserves: Claim and claim adjustment expense 
reserves, except reserves for structured settlements, workers' compensation     
lifetime claims and accident and health disability claims, are not discounted   
and are based on 1) case basis estimates for losses reported on direct business,
adjusted in the aggregate for ultimate loss expectations, 2) estimates of       
unreported losses, 3) estimates of losses on assumed reinsurance, 4) estimates  
of future expenses to be incurred in settlement of claims and 5) estimates of   
claim recoveries, exclusive of reinsurance recoveries, which are reported as an 
asset. Management considers current conditions and trends as well as past       
Company and industry experience in establishing these estimates. The effects of 
inflation, which can be significant, are implicitly considered in the reserving 
process and are part of the recorded reserve balance.                           

Claim and claim adjustment expense reserves represent management's    
estimates of ultimate liabilities based on currently available facts and case   
law. The ultimate liability may vary significantly from such estimates. CNA     
regularly reviews its reserves, and any adjustments to the previously           
established reserves are recognized in operating income in the period that the  
need for such adjustments becomes apparent.                                     

   Structured settlements have been negotiated for certain property-casualty
insurance claims. Structured settlements are agreements to provide fixed        
periodic payments to claimants. Certain structured settlements are funded by    
annuities purchased from CAC for which the related annuity obligations are      
reported in future policy benefits reserves. Obligations for structured         
settlements not funded by annuities are included in claim and claim adjustment  
expense reserves and carried at present values determined using interest rates  
ranging from 6.0% to 7.5%. At December 31, 2000 and 1999, the discounted        
reserves for unfunded structured settlements were $884 million and $883 million,
net of discount of $1,473 million and $1,483 million.                           

Workers' compensation lifetime claim reserves and accident and health 
disability claim reserves are calculated using mortality and morbidity          
assumptions based on Company and industry experience, and are discounted at     
interest rates allowed by insurance regulators that range from 3.5% to 6.5%. At 
December 31, 2000 and 1999, such discounted reserves totaled $2,205 million and 
$2,174 million, net of discount of $940 million and $893 million.               

47

EX-13.1 34th "Page" of 65 TOC 1st Previous Next Bottom Just 34th

Future policy benefits reserves: Reserves for traditional life insurance        
products (whole and term life products) and long-term care products are computed
using the net level premium method, which incorporates actuarial assumptions as 
to interest rates, mortality, morbidity, withdrawals and expenses. Actuarial    
assumptions generally vary by plan, age at issue and policy duration, and       
include a margin for adverse deviation. Interest rates range from 3% to 9%, and 
mortality, morbidity and withdrawal assumptions are based on Company and        
industry experience prevailing at the time of issue. Expense assumptions include
the estimated effects of inflation and expenses to be incurred beyond the       
premium paying period. Reserves for interest sensitive contracts are equal to   
the account balances that accrue to the benefit of the policyholders. Interest  
crediting rates ranged from 4.30% to 6.85% for the three years ended            
December 31, 2000.                                                              

Insurance-related assessments: CNA's participation in involuntary risk pools is 
mandatory and is generally a function of its proportionate share of the         
voluntary market, by line of insurance, in each state in which it does business.
In the first quarter of 1999, CNA adopted Statement of Position No. 97-3,       
Accounting by Insurance and Other Enterprises for Insurance-Related Assessments 
(SOP 97-3). SOP 97-3 requires that insurance companies recognize liabilities for
insurance-related assessments when an assessment is probable, when it can be    
reasonably estimated and when the event obligating the entity to pay an imposed 
or probable assessment has occurred on or before the date of the financial      
statements. Adoption of SOP 97-3 resulted in an after-tax charge of $177 million
as a cumulative effect of a change in accounting principle in 1999. The pro     
forma effect of adoption on reported results for prior periods was not          
significant. Insurance-related assessment liabilities are not discounted or     
recorded net of premium taxes. These liabilities are included as part of other  
liabilities in the consolidated balance sheets.                                 

Reinsurance: Amounts recoverable from reinsurers are estimated in a manner      
consistent with claim and claim adjustment expense reserves or future policy    
benefits reserves and reported as a recoverable in the consolidated balance     
sheets. Reinsurance contracts that do not meet the criteria for risk transfer   
are recorded in accordance with Statement of Position No. 98-7, Deposit         
Accounting: Accounting for Insurance and Reinsurance Contracts That Do Not      
Transfer Insurance Risk. The related deposit assets are recorded as reinsurance 
receivables in the consolidated balance sheets.                                 

Deferred acquisition costs: Costs that vary with and are related primarily to   
the acquisition of property-casualty insurance business are deferred and        
amortized ratably over the period the related premiums are earned. Such costs   
include commissions, premium taxes and certain underwriting and policy issuance 
costs. Anticipated investment income is considered in the determination of the  
recoverability of deferred acquisition costs.                                   

    Life insurance business acquisition costs are deferred and amortized based
on assumptions consistent with those used for computing future policy benefits  
reserves. Deferred acquisition costs on traditional life business are amortized 
over the assumed premium paying periods. The amortization of deferred           
acquisition costs for universal life and annuity contracts are matched to the   
recognition of gross profits on these contracts. To the extent that unrealized  
gains or losses on available-for-sale securities would result in an adjustment  
of deferred policy acquisition costs had they actually been realized, an        
adjustment is recorded to deferred acquisition costs and to unrealized          
investment gains or losses.                                                     

Investments                                                                     

Valuation of investments: CNA classifies its fixed maturity securities (bonds   
and redeemable preferred stocks) and its equity securities as                   
available-for-sale, and as such, they are carried at fair value. The amortized  
cost of fixed maturity securities is adjusted for amortization of premiums and  
accretion of discounts to maturity, and amortization and accretion are included 
in investment income. Changes in fair value are reported as a component of other
comprehensive income. Investments are written down to estimated fair values and 
losses are recognized in income when a decline in value is determined to be     
other than temporary.                                                           

Mortgage loans are carried at unpaid principal balances, including    
unamortized premium or discount. Real estate is carried at depreciated cost.    
Policy loans are carried at unpaid balances. Short-term investments are carried 
at amortized cost, which approximates fair value.                               

Other invested assets include investments in joint ventures, limited  
partnerships and certain derivative securities. Investments in joint ventures   
and limited partnerships are carried at CNA's equity in the investees' net      
assets.                                                                         

Investments in derivative securities are carried at fair value at the 
reporting date, and changes in fair value are recognized in realized investment 
gains and losses. Derivatives used to hedge the fair value of assets or         
liabilities are classified with the related hedged item in the consolidated     
balance sheets. For interest rate swaps associated with certain corporate       
borrowings, amounts due or payable under these swaps are recorded as an         
adjustment to interest expense and changes in the fair value of the swaps are   
not recognized in the Company's consolidated financial statements.              

Investment gains and losses: All securities transactions are recorded on the    
trade date. Realized investment gains and losses are determined on the basis of 
the cost or amortized cost of the specific securities sold.                     

Equity in affiliates: CNA uses the equity method of accounting for investments  
in companies in which its ownership interest of the voting shares of an investee
company enables CNA to influence the operating or financial decisions of the    
investee company but without a controlling financial interest. Equity in net    
income of these affiliates is reported in other revenues.                       

48

EX-13.1 35th "Page" of 65 TOC 1st Previous Next Bottom Just 35th

Securities lending activities: CNA lends securities to unrelated parties,       
primarily major brokerage firms. Borrowers of these securities must deposit     
collateral with CNA equal to 100% of the fair value of the securities if the    
collateral is cash or 102% of the fair value of the securities if the collateral
is securities. Cash deposits from these transactions are invested in short-term 
investments, primarily commercial paper, and a liability is recognized for the  
obligation to return the collateral. The fair value of collateral held and      
included in short-term investments was $885 million and $1,300 million at       
December 31, 2000 and 1999. CNA continues to receive the interest on loaned debt
securities as beneficial owner and, accordingly, loaned debt securities are     
included in fixed maturity securities.                                          

Cash Equivalents                                                                

Cash equivalents are short-term, highly liquid investments that are both readily
convertible into known amounts of cash and so near to maturity that they present
insignificant risk of changes in value due to changing interest rates.          

Separate Account Business                                                       

CAC and VFL write investment and annuity contracts. The supporting assets and   
liabilities of certain of these contracts are legally segregated and reported as
assets and liabilities of separate account business. CAC and VFL guarantee      
principal and a specified return to the contractholders on approximately 57% and
63% of the separate account business at December 31, 2000 and 1999.             
Substantially all assets of the separate account business are carried at fair   
value. Separate account liabilities are carried at contract values.             

Income Taxes                                                                    

The Company accounts for income taxes under the liability method. Under the     
liability method, deferred income taxes are recognized for temporary differences
between the financial statement and tax return bases of assets and liabilities. 

Property and Equipment                                                          

Property and equipment are carried at cost less accumulated depreciation.       
Depreciation is based on the estimated useful lives of the various classes of   
property and equipment and is determined principally on the straight-line       
method.                                                                         

Intangibles                                                                     

Intangibles include goodwill, representing the excess of purchase price over    
fair value of the net assets of acquired entities, and other intangible assets. 
Goodwill is generally amortized on a straight-line basis over the period of     
expected benefit, generally ranging from 15 to 30 years. Other intangible assets
are amortized on a straight-line basis over their estimated economic lives.     
Amortization expense on goodwill and other intangibles amounted to $21 million, 
$23 million and $32 million for the years ended December 31, 2000, 1999 and     
1998. Intangible assets are periodically reviewed to determine whether          
impairment in value has occurred.                                               

Earnings Per Share                                                              

Earnings per share applicable to common stock are based on weighted average     
outstanding shares, retroactively adjusted for all stock splits. The computation
of earnings per share was as follows.                                           

Earnings Per Share                                                              

                                                                [Download Table]

Years ended December 31                                                         
(In millions, except per share amounts)          2000         1999         1998 
--------------------------------------------------------------------------------
                                                                                
Net income (loss)                             $ 1,214      $  (130)     $   282 
Less preferred dividends                           (1)         (13)          (7)
--------------------------------------------------------------------------------
Net income (loss) applicable to                                                 
 common stock                                 $ 1,213      $  (143)     $   275 
================================================================================
Weighted average outstanding                                                    
 common stock and common                                                        
 stock equivalents                              183.6        184.2        184.9 
Basic and diluted earnings (loss)                                               
 per share available to common                                                  
 stockholders                                 $  6.61      $ (0.77)     $  1.49 
================================================================================

Accounting Pronouncements                                                       

In the first quarter of 2000, the Company adopted the American Institute of     
Certified Public Accountants' Statement of Position No. 98-7, Deposit           
Accounting: Accounting for Insurance and Reinsurance Contracts That Do Not      
Transfer Insurance Risk (SOP 98-7). Adoption of SOP 98-7 did not have a         
significant impact on the results of operations or the equity of the Company.   

     In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB   
101). SAB 101 summarizes the SEC Staff's view in applying GAAP to revenue       
recognition in financial statements. This bulletin, through its subsequent      
revised releases SAB No. 101A and No. 101B, was effective for registrants no    
later than the fourth fiscal quarter of fiscal years beginning after            
December 15, 1999. Adoption of this bulletin, which occurred on October 1, 2000,
did not have a significant impact on the results of operations or the equity of 
the Company.                                                                    

   In 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard No. 133, Accounting for Derivative Instruments 
and Hedging Activities (SFAS 133). SFAS 133 was subsequently amended by         
Statement of Financial Accounting Standard No. 137, Accounting for Derivative   
Instruments and Hedging Activities - Deferral of the Effective Date of FASB     
Statement No. 133, which delayed the effective date of SFAS 133 by one year,    
and Statement of Financial Accounting Standards No. 138, Accounting for Certain 
Derivative Instruments and Certain Hedging                                      

49

EX-13.1 36th "Page" of 65 TOC 1st Previous Next Bottom Just 36th

Activities (SFAS 138). SFAS 138 addresses a limited number of issues causing    
implementation difficulties for entities applying SFAS 133. SFAS 133, as amended
and interpreted, establishes accounting and reportings standards for derivative 
instruments, including certain derivative instruments embedded in other         
contracts, and for hedging activities. SFAS 133 requires that an entity         
recognize all derivative instruments as either assets or liabilities in the     
balance sheet and measure those instruments at fair value. If certain conditions
are met, a derivative may be specifically designated as a hedge of the exposures
to changes in the fair value, cash flows or foreign currencies. The accounting  
for changes in the fair value of a derivative depends on the intended use of the
derivative and the resulting designation.                                       

  The Company is required to adopt SFAS 133 effective January 1, 2001. The
transition adjustments resulting from adoption must be reported in net income or
other comprehensive income, as appropriate, as the cumulative effect of a       
change in accounting principle. The Company estimates that the initial adoption 
of SFAS 133 will not have a significant impact on the equity of the Company;    
however, adoption will result in an estimated after-tax decrease to 2001        
earnings of $62 million. Of this estimated transition amount, approximately     
$58 million relates to investments and investment-related derivatives (related  
primarily to the Company's hedged position in GlobalCrossing Ltd. (Global       
Crossing) common stock, see Note C). Because the Company already carries its    
investment-related derivatives at fair value through other comprehensive income,
there is an equal and offsetting favorable adjustment of $58 million to         
stockholders' equity (accumulated other comprehensive income). The remainder of 
the estimated transition adjustment is attributable to collateralized debt      
obligation products that are derivatives under SFAS 133.                        

   These estimates are based on the Company's interpretation of SFAS 133 and
related implementation guidance. Changes in implementation guidance or the      
interpretation thereof could result in changes in the transition adjustment     
estimate.                                                                       

NOTE B.  INVESTMENTS                                                            

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

Net Investment Income                                                           

                                                                [Download Table]

Years ended December 31                                                         
(In millions)                                  2000          1999          1998 
--------------------------------------------------------------------------------
                                                                                
Fixed maturity securities                   $ 1,766       $ 1,776       $ 1,832 
Short-term investments                          201           188           241 
Other                                           161           178           126 
--------------------------------------------------------------------------------
Gross investment income                       2,128         2,142         2,199 
Investment expenses                             (48)          (41)          (53)
--------------------------------------------------------------------------------
Net investment income                       $ 2,080       $ 2,101       $ 2,146 
================================================================================

Net realized investment gains (losses) and net change in unrealized   
appreciation (depreciation) in investments were as follows.                     

Net Investment Appreciation                                                     

                                                                [Download Table]

Years ended December 31                                                         
(In millions)                                    2000         1999        1998  
--------------------------------------------------------------------------------
                                                                                
Net realized investment gains (losses):                                         
  Fixed maturity securities:                                                    
   Gross realized gains                         $   434     $   269     $   621 
   Gross realized losses                           (564)       (580)       (154)
  Net realized (losses) gains                                                   
   on fixed maturity securities                    (130)       (311)        467 
--------------------------------------------------------------------------------
  Equity securities:                                                            
   Gross realized gains                           1,337         481         119 
   Gross realized losses                           (221)       (115)        (81)
  Net realized gains                                                            
   on equity securities                           1,116         366          38 
--------------------------------------------------------------------------------
  Other realized investment gains                   339         253         190 
--------------------------------------------------------------------------------
Net realized investment gains                                                   
 before allocation to participating                                             
 policyholders and minority interest              1,325         308         695 
Allocation to participating                                                     
 policyholders and minority interest                 (4)          7         (14)
Income tax expense                                 (461)       (123)       (247)
Net realized investment gains                       860         192         434 
--------------------------------------------------------------------------------
Net change in unrealized                                                        
 appreciation (depreciation)                                                    
 in investments:                                                                
  Fixed maturity securities                         773      (1,262)         34 
  Equity securities                              (1,223)      1,545         796 
  Other                                             (52)         18        (112)
--------------------------------------------------------------------------------
Total net change in unrealized                                                  
 (depreciation) appreciation                                                    
 in general account investments                    (502)        301         718 
Net change in unrealized                                                        
 appreciation (depreciation) on                                                 
 separate accounts and other                         66         (59)          5 
Allocation to participating                                                     
 policyholders and minority interest                (12)         24          (6)
Deferred income tax                                                             
 benefit (expense)                                  161        (100)       (249)
Net change in unrealized                                                        
 (depreciation) appreciation                                                    
 in investments                                    (287)        166         468 
--------------------------------------------------------------------------------
Net realized gains and change                                                   
 in unrealized appreciation                                                     
 in investments                                 $   573     $   358     $   902 
================================================================================


50

EX-13.1 37th "Page" of 65 TOC 1st Previous Next Bottom Just 37th

     Other realized investment gains for the years ended December 31, 2000, 1999
and 1998 include gains and losses related to the sale of certain operations or  
affiliates. See Note O.                                                         

 The unrealized gain on the Company's position in Global Crossing common
stock, including the fair market value of the related hedge discussed in Note C,
was $902 million and $1,764 million as of December 31, 2000 and 1999. Changes in
the Company's investment in Global Crossing, on a pre-tax basis, were as        
follows.                                                                        

EX-13.1 38th "Page" of 65 TOC 1st Previous Next Bottom Just 38th

Change in Net Realized Gains and Unrealized Appreciation (Depreciation) for     
Global Crossing                                                                 

                                                        [Enlarge/Download Table]

Years ended December 31                                                                                                      
(In millions)                                                                                   2000         1999        1998
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                                             
(Decrease) increase in unrealized gain on common stock                                       $(1,525)     $   924     $   828
Increase in unrealized gain on options collar                                                    663           --          --
=============================================================================================================================
Net (decrease) increase in unrealized gain on position in Global Crossing common stock       $  (862)     $   924     $   828
Realized gains on sales of Global Crossing common stock                                      $   485      $   222     $    63
=============================================================================================================================

 The following tables provide a summary of investments in fixed maturity
securities and equity securities available-for-sale.                            

Summary of Fixed Maturity and Equity Securities                                 

                                                        [Enlarge/Download Table]

                                                                                   Cost or         Gross         Gross              
                                                                                 Amortized    Unrealized    Unrealized          Fair
(In millions)                                                                         Cost         Gains        Losses         Value
-----------------------------------------------------------------------------------------------------------------------------       
                                                                                                                                    
December 31, 2000                                                                                                                   

U.S. Treasury securities and obligations of government agencies                    $ 5,103       $   198       $     3       $ 5,298
Asset-backed securities                                                              7,549           100            26         7,623
States, municipalities and political subdivisions - tax-exempt                       3,279            79             9         3,349
Corporate securities                                                                 7,237           149           342         7,044
Other debt securities                                                                3,357            63           136         3,284
Redeemable preferred stocks                                                             54            --            --            54
------------------------------------------------------------------------------------------------------------------------------------
Total fixed maturity securities                                                     26,579           589           516        26,652
Equity securities                                                                    1,175         1,400           163         2,412
====================================================================================================================================
Total                                                                              $27,754       $ 1,989       $   679       $29,064
====================================================================================================================================

December 31, 1999                                                                                                                   

U.S. Treasury securities and obligations of government agencies                    $ 8,431       $    14       $   127       $ 8,318
Asset-backed securities                                                              7,253            14           228         7,039
States, municipalities and political subdivisions - tax-exempt                       4,514            16           134         4,396
Corporate securities                                                                 5,502            34           303         5,233
Other debt securities                                                                2,185            36            89         2,132
Redeemable preferred stocks                                                             63            72             5           130
------------------------------------------------------------------------------------------------------------------------------------
Total fixed maturity securities                                                     27,948           186           886        27,248
Equity securities                                                                    1,150         2,635           175         3,610
------------------------------------------------------------------------------------------------------------------------------------
Total                                                                              $29,098       $ 2,821       $ 1,061       $30,858
====================================================================================================================================

51

EX-13.1 39th "Page" of 65 TOC 1st Previous Next Bottom Just 39th

 The following table summarizes fixed maturity securities by contractual
maturity at December 31, 2000.                                                  

Contractual Maturity                                                            

                                                                [Download Table]

                                                         Amortized          Fair
(In millions)                                                 Cost         Value
--------------------------------------------------------------------------------
                                                                                
Due in one year or less                                    $ 1,217       $ 1,210
Due after one year through five years                        5,047         5,014
Due after five years through ten years                       6,965         6,861
Due after ten years                                          5,801         5,944
Asset-backed securities                                      7,549         7,623
--------------------------------------------------------------------------------
Total                                                      $26,579       $26,652
================================================================================

Actual maturities may differ from contractual maturities because some 
securities may be called or prepaid with or without call or prepayment          
penalties.                                                                      

   The carrying value of investments (other than equity securities) that did
not produce income during 2000 was $35 million. At December 31, 2000, no        
investments, other than investments in U.S. government agency securities,       
exceeded 10% of stockholders' equity.                                           

Restricted Investments                                                          

The Company may from time to time invest in securities that have a limited      
market or the sale of which may be restricted in whole or in part. As of        
December 31, 2000, the Company owned 19.3 million shares of Global Crossing     
common stock valued at $277 million, representing approximately 2.2% of Global  
Crossing's outstanding common stock. Because the Company's holdings of Global   
Crossing were not acquired in a public offering, the shares may not be sold to  
the public unless the sale is registered or exempt from the registration        
requirements of the Securities Act of 1933 (the Act) including sales pursuant to
Rule 144. The Company has the right to require Global Crossing to register,     
under the Act, all of the Company's current holdings. See Note C for discussion 
of the Company's hedge of this investment.                                      

   Cash and securities with carrying values of $1.9 billion and $1.8 billion
were deposited by the Company's insurance subsidiaries under requirements of    
regulatory authorities as of December 31, 2000 and 1999.                        

Note C.  FINANCIAL INSTRUMENTS                                                  

In the normal course of business, CNA invests in various financial assets,      
incurs various financial liabilities and enters into agreements involving       
derivative securities, including off-balance sheet financial instruments.       

  Fair values are disclosed for all financial instruments, for which it is
practicable to estimate fair value, whether or not such values are recognized in
the consolidated balance sheets. Management attempts to obtain quoted market    
prices for the purposes of these disclosures. Where quoted market prices are not
available, fair values are estimated using present value or other valuation     
techniques. These techniques are significantly affected by management's         
assumptions, including discount rates and estimates of future cash flows.       
Potential taxes and other transaction costs have not been considered in         
estimating fair values. The estimates presented herein are not necessarily      
indicative of the amounts that CNA would realize in a current market exchange.  

    Non-financial instruments such as real estate, deferred acquisition costs,
property and equipment, deferred income taxes and intangibles and certain       
financial instruments such as insurance reserves and leases are excluded from   
the fair value disclosures. Therefore, the fair value amounts cannot be         
aggregated to determine the underlying economic value of the Company.           

   The carrying amounts reported in the consolidated balance sheets for cash
and cash equivalents, short-term investments, accrued investment income,        
receivables for securities sold, federal income taxes recoverable, collateral on
loaned securities and derivatives, payables for securities purchased and certain
other assets and other liabilities approximate fair value because of the        
short-term nature of these items. These assets and liabilities are not listed in
the following tables.                                                           

  The following methods and assumptions were used by CNA in estimating the
fair value for financial assets and liabilities.                                

The fair values of fixed maturity and equity securities were based on 
quoted market prices, where available. For securities not actively traded, fair 
values were estimated using values obtained from independent pricing services or
quoted market prices of comparable instruments.                                 

  The fair values for mortgage loans and policy loans were estimated using
discounted cash flows utilizing interest rates currently offered for similar    
loans to borrowers of comparable credit quality. Loans with similar             
characteristics were aggregated for purposes of these calculations.             

    Premium deposits and annuity contracts were valued based on cash surrender
values and the outstanding fund balances.                                       

   Valuation techniques to determine fair value of other invested assets and
other separate account business assets consisted of discounting cash flows,     
obtaining quoted market prices of the investments and comparing the investments 
to similar instruments or to the underlying assets of the investments.          

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

The fair values of financial guarantee contracts were estimated using 
discounted cash flows utilizing interest rates currently offered for similar    
contracts.                                                                      

   The fair values of guaranteed investment contracts and deferred annuities
of the separate account business were estimated using discounted cash flow      
calculations based on interest rates currently offered for similar contracts    
with similar maturities. The fair values of the liabilities for variable        
separate account business were based on the quoted market values of the         
underlying assets of each variable separate account. The fair values of other   
separate account liabilities approximate their carrying value because of their  
short-term nature.                                                              

52

EX-13.1 40th "Page" of 65 TOC 1st Previous Next Bottom Just 40th

    The carrying amount and estimated fair value of CNA's financial instrument
assets and liabilities are listed in the following table. Derivative financial  
instruments are shown in a separate table.                                      

Financial Assets and Liabilities                                                

                                                        [Enlarge/Download Table]

                                                                            2000                            1999
                                                        ------------------------        ------------------------
December 31                                             Carrying       Estimated        Carrying       Estimated
(In millions)                                             Amount      Fair Value          Amount      Fair Value
----------------------------------------------------------------------------------------------------------------
                                                                                                                
Financial assets                                                                                                
Investments:                                                                                                    
 Fixed maturity securities                               $26,652         $26,652         $27,248         $27,248
 Equity securities                                         2,412           2,412           3,610           3,610
 Mortgage loans                                               22              23              44              42
 Policy loans                                                193             180             192             179
 Other invested assets                                     1,116           1,116           1,108           1,108
Separate account business:                                                                                      
 Fixed maturity securities                                 2,703           2,703           3,260           3,260
 Equity securities                                           215             215             261             261
 Other                                                       849             849             493             493
Notes receivable for the issuance of common stock             72              58              63              56

Financial liabilities                                                                                           
Premium deposits and annuity contracts                   $ 1,486         $ 1,419         $ 1,293         $ 1,240
Debt                                                       2,729           2,595           2,881           2,775
Financial guarantee contracts                                150             128             124             112
Separate account business:                                                                                      
 Guaranteed investment contracts                             882             880           1,516           1,518
 Variable separate accounts                                1,387           1,387           1,505           1,505
 Deferred annuities                                          114             115             117             125
 Other                                                       623             623             571             571

Derivative Financial Instruments                                                

CNA invests in derivative financial instruments in the normal course of business
primarily to reduce its exposure to market risk (principally interest rate risk,
equity stock price risk and foreign currency risk). Financial instruments used  
for such purposes include interest rate swaps, interest rate caps, put and call 
options, commitments to purchase securities, futures and forwards. Other than   
derivatives held in certain separate accounts, the Company generally does not   
hold or issue these instruments for trading purposes. CNA also uses derivatives 
to mitigate the risk associated with its indexed group annuity contracts (a     
separate account product) by purchasing Standard & Poor's 500(R) (S&P 500(R))   
index futures contracts in a notional amount equal to the contract holder       
liability, which is calculated using the S&P 500(R) rate of return.             

   Futures are contracts to buy or sell a standard quantity and quality of a
commodity, financial instrument or index at a specified future date and price.  

    Forwards are contracts between two parties to purchase and sell a specific
quantity of a commodity, government security, foreign currency or other         
financial instrument at a price specified at contract inception, with delivery  
and settlement at a specified future date.                                      

    Commitments to purchase government and municipal securities are agreements
to purchase securities in the future at a predetermined price.                  

    Options are contracts that grant the purchaser, for a premium payment, the
right, but not the obligation, to either purchase or sell a financial instrument
at a specified price within a specified period of time. The option purchaser    
pays a premium to the option seller (writer) for the right to exercise the      
option. The option seller is obligated to buy (put) or sell (call) the item     
underlying the contract at a set price, if the option purchaser chooses to      
exercise.                                                                       

 An interest rate cap consists of a guarantee given by the issuer to the
purchaser in exchange for the payment of a premium. This guarantee states that  
if interest rates rise above a specified rate the issuer will pay to the        
purchaser the difference between the then current market rate and the specified 
rate on the notional principal amount.                                          

     The gross notional principal or contractual amounts of derivative financial
instruments in the general account at December 31, 2000 and 1999 were           
$2,872 million and $2,062 million. The gross notional principal or contractual  
amounts of derivative financial instruments in the separate accounts were       
$1,411 million and $1,627 million at December 31, 2000 and 1999. The contractual
or notional amounts are used to calculate the exchange of contractual payments  
under the agreements and are not representative of the potential for gain or    
loss on these instruments.                                                      

53

EX-13.1 41st "Page" of 65 TOC 1st Previous Next Bottom Just 41st

     Interest rates, equity prices and foreign currency exchange rates generally
affect the fair values associated with derivative financial instruments. The    
credit exposure associated with non-performance by the counterparties to these  
instruments is generally limited to the gross fair value of the asset related to
the instruments recognized in the consolidated balance sheets. The Company      
continuously monitors the creditworthiness of its counterparties. The Company   
generally does not require collateral from its derivative investment            
counterparties.                                                                 

  The fair values of derivatives generally represent the estimated amounts
that CNA would expect to receive or pay upon termination of the contracts at the
reporting date. Dealer quotes are available for substantially all of CNA's      
derivatives. For derivative instruments not actively traded, fair values are    
estimated using values obtained from independent pricing services, costs to     
settle or quoted market prices of comparable instruments.                       

    A summary of the aggregate contractual or notional amounts, estimated fair
values and gains (losses) related to derivative financial instruments is as     
follows.                                                                        

Derivative Financial Instruments                                                

                                                        [Enlarge/Download Table]


                                                                                                            Fair Value              
                                                                            Contractual         ------------------------------------
                                                                               Notional                                   Recognized
(In millions)                                                                    Amount         Asset    (Liability)  Gains (Losses)
----------------------------------------------------------------------------------------------------------------------------------- 
                                                                                                                                    
As of and for the year ended December 31, 2000                                                                                      
General account                                                                                                                     
Total return swaps                                                               $    5        $   --        $   --          $   12 
Interest rate caps                                                                  500             1            --              (3)
Commitments to purchase government and municipal securities                          --            --            --               5 
Futures sold, not yet purchased                                                      80            --            --              (7)
Forwards                                                                             13            --            --              54 
Options purchased                                                                    18             1            --              (9)
Options written                                                                      --            --            --               8 
Options purchased - GlobalCrossing                                                1,000           664            --              -- 
Options written - GlobalCrossing                                                  1,256            --             1              -- 
----------------------------------------------------------------------------------------------------------------------------------- 
Total                                                                            $2,872        $  666        $    1          $   60 
=================================================================================================================================== 

Separate accounts                                                                                                                   
Futures purchased                                                                $  996        $   --        $  (13)         $ (172)
Futures sold, not yet purchased                                                      76            --            --              (4)
Commitments to purchase government and municipal securities                         111             1            --               4 
Options purchased                                                                   110            --            --              (2)
Options written                                                                     118            --            (1)              4 
----------------------------------------------------------------------------------------------------------------------------------- 
Total                                                                            $1,411        $    1        $  (14)         $ (170)
----------------------------------------------------------------------------------------------------------------------------------- 

As of and for the year ended December 31, 1999                                                                                      
General account                                                                                                                     
Interest rate swaps on corporate borrowings                                      $  650        $   --        $   --          $   -- 
Total return swaps                                                                    7            --            --              11 
Interest rate caps                                                                  500             4            --               4 
Commitments to purchase government and municipal securities                         127            --            (1)             (1)
Futures sold, not yet purchased                                                     153            --            --               9 
Forwards                                                                            591             9            --              21 
Options purchased                                                                    25             4            --              (5)
Options written                                                                       9            --            --              -- 
----------------------------------------------------------------------------------------------------------------------------------- 
Total                                                                            $2,062        $   17        $   (1)         $   39 
=================================================================================================================================== 

Separate accounts                                                                                                                   
Futures purchased                                                                $1,113        $   --        $   --          $  131 
Futures sold, not yet purchased                                                      79            --            --               2 
Commitments to purchase government and municipal securities                         228            --            (2)             (4)
Options purchased                                                                   108             1            --              (1)
Options written                                                                      99            --            --               4 
----------------------------------------------------------------------------------------------------------------------------------- 
Total                                                                            $1,627        $    1        $   (2)         $  132 
=================================================================================================================================== 

54

EX-13.1 42nd "Page" of 65 TOC 1st Previous Next Bottom Just 42nd

During the first quarter of 2000, at which time the Company owned     
36.1 million shares of Global Crossing common stock, the Company entered into   
option agreements intended to hedge the market risk associated with             
approximately 19.3 million shares of Global Crossing common stock. These option 
agreements were structured as a collar in which the Company purchased put       
options and sold call options on Global Crossing common stock. As of            
December 31, 2000, the average exercise prices were $51.70 and $64.93 on the put
and call options, subject to adjustments on the call options under certain      
limited circumstances. The options expire in the first half of 2002 and are only
exercisable on their expiration dates. The Company has designated the collar as 
a hedge of its investment in Global Crossing common stock. Accordingly, the fair
value of the collar is presented in equity securities available-for-sale in the 
accompanying consolidated balance sheets, consistent with the hedged item.      
Additionally, at December 31, 2000, CNA holds collateral, included in short-term
investments, with a fair value of $462 million. See Note B for discussion of    
changes in the fair value of the collar.                                        

   The Company had entered into interest rate swap agreements to convert the
variable rate of its borrowings under a revolving credit facility and its       
commercial paper program to a fixed rate. The Company was party to interest rate
swap agreements with several banks with an aggregate notional principal amount  
of $650 million at December 31, 1999. Those agreements, which terminated        
December 14, 2000, effectively fixed the Company's interest cost on $650 million
of variable rate debt for 1998, 1999 and most of 2000. See Note H for discussion
of these agreements.                                                            

NOTE D.  INCOME TAXES                                                           

CNA and its eligible subsidiaries (CNA Tax Group) are included in the           
consolidated federal income tax return of Loews and its eligible subsidiaries.  
Loews and CNA have agreed that for each taxable year, CNA will 1) be paid by    
Loews the amount, if any, by which the Loews consolidated federal income tax    
liability is reduced by virtue of the inclusion of the CNA Tax Group in the     
Loews consolidated federal income tax return or 2) pay to Loews an amount, if   
any, equal to the federal income tax that would have been payable by the CNA Tax
Group filing a separate consolidated tax return. In the event that Loews should 
have a net operating loss in the future computed on the basis of filing a       
separate consolidated tax return without the CNA Tax Group, CNA may be required 
to repay tax recoveries previously received from Loews. Either party may cancel 
this agreement upon 30 days' written notice.                                    

  For 2000, the inclusion of the CNA Tax Group in the consolidated federal
income tax return of Loews increased the Loews federal income tax liability.    
Accordingly, CNA has paid or will pay Loews approximately $64 million for 2000. 
In 1999 and 1998, the inclusion of the CNA Tax Group in the consolidated federal
income tax return of Loews resulted in a decreased federal income tax liability 
for Loews. Accordingly, Loews has paid CNA approximately $288 million for 1999  
and $83 million for 1998.                                                       

A reconciliation between CNA's federal income tax expense (benefit) at
statutory rates and the recorded income tax expense (benefit), after giving     
effect to minority interest, but before giving effect to the cumulative effect  
of a 1999 change in accounting principle for SOP 97-3, is as follows.           

Tax Rate Reconciliation                                                         

                                                                [Download Table]

Years ended December 31                                                         
(In millions)                                      2000        1999        1998 
--------------------------------------------------------------------------------
                                                                                
Income tax expense (benefit) at                                                 
 statutory rates                                  $ 624       $ (14)      $ 115 
Tax benefit from tax exempt income                  (71)        (84)       (103)
Other expense, including state                                                  
 income taxes                                        15          10          35 
--------------------------------------------------------------------------------
Effective income tax expense                                                    
 (benefit)                                        $ 568       $ (88)      $  47 
================================================================================

The composition of CNA's total income tax expense (benefit) allocated 
between operating income and realized investment gains and losses, excluding the
cumulative effect of the 1999 change in accounting principle, is as follows.    

Components of Tax Provision                                                     

                                                                [Download Table]

Years ended December 31                                                         
(In millions)                                       2000       1999        1998 
--------------------------------------------------------------------------------
                                                                                
Income tax expense (benefit) on                                                 
 operating income                                  $ 107      $(211)      $(200)
Income tax expense on realized                                                  
 investment gains                                    461        123         247 
--------------------------------------------------------------------------------
Total income tax expense (benefit)                 $ 568      $ (88)      $  47 
================================================================================

    The current and deferred components of CNA's income tax expense (benefit),
excluding taxes on the cumulative effect of the 1999 change in accounting       
principle, are as follows.                                                      

Current and Deferred Taxes                                                      

                                                                [Download Table]

Years ended December 31                                                         
(In millions)                                         2000       1999       1998
--------------------------------------------------------------------------------
                                                                                
Current tax expense (benefit)                        $  75      $(226)     $  --
Deferred tax expense                                   493        138         47
--------------------------------------------------------------------------------
Total income tax expense (benefit)                   $ 568      $ (88)     $  47
================================================================================

55

EX-13.1 43rd "Page" of 65 TOC 1st Previous Next Bottom Just 43rd

  The deferred tax effects of the significant components of CNA's deferred
tax assets and liabilities are set forth in the table below.                    

Components of Net Deferred Tax Assets                                           

                                                                [Download Table]

December 31                                                                     
(In millions)                                                2000          1999 
--------------------------------------------------------------------------------
                                                                                
Deferred tax assets (liabilities)                                               
Insurance reserves:                                                             
 Property-casualty claim reserves                         $   864       $ 1,081 
 Unearned premium reserves                                    294           335 
 Life reserves                                                187           213 
 Other insurance reserves                                      21            26 
Deferred acquisition costs                                   (763)         (778)
Net unrealized gains                                         (470)         (627)
Postretirement benefits other than pensions                   134           149 
Net operating losses                                           --           137 
Foreign affiliate(s) related                                  110            44 
Receivables                                                    82            80 
Accrued assessments and guarantees                             43            72 
Investment valuation differences                               10            65 
Other, net                                                     (9)           55 
--------------------------------------------------------------------------------
Net deferred tax asset                                    $   503       $   852 
================================================================================

     At December 31, 2000, gross deferred tax assets and liabilities amounted to
approximately $1.9 billion and $1.4 billion. In comparison, gross deferred tax  
assets and liabilities amounted to approximately $2.4 billion and $1.5 billion  
at December 31, 1999. CNA's management believes it is more likely than not that 
the deferred tax assets will be realized through future earnings and available  
tax planning strategies.                                                        

NOTE E.  CLAIM AND CLAIM ADJUSTMENT EXPENSE RESERVES                            

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

Establishing loss reserves is an estimation process. Many factors can 
ultimately affect the final settlement of a claim and, therefore, the reserve   
that is needed. Changes in the law, results of litigation, medical costs, the   
cost of repair materials and labor rates can all affect ultimate claim costs. In
addition, time can be a critical part of reserving determinations since the     
longer the span between the incidence of a loss and the payment or settlement of
the claim, the more variable the ultimate settlement amount can be. Accordingly,
short-tail claims, such as property damage claims, tend to be more reasonably   
estimable than long-tail claims, such as general liability and professional     
liability claims.                                                               

The table below provides a reconciliation between beginning and ending
claim and claim adjustment expense reserves.                                    

Reconciliation of Claim and Claim Adjustment Expense Reserves                   

                                                                [Download Table]

As of and for the years                                                         
ended December 31                                                               
(In millions)                                         2000       1999       1998

                                                                                
Reserves, beginning of year:                                                    
 Gross                                            $ 26,631   $ 28,317   $ 28,533
 Ceded                                               6,273      5,424      5,326
Net reserves, beginning of year                     20,358     22,893     23,207
--------------------------------------------------------------------------------
Net reserves transferred                                                        
 under retroactive reinsurance                                                  
 agreements                                             --     (1,024)        --
Net reserves of acquired insurance                                              
 companies at date of acquisition                       --         --        122
Total net adjustments                                   --     (1,024)       122
--------------------------------------------------------------------------------
Net incurred claim and claim adjustment expenses:                               
  Provision for insured events                                                  
   of current year                                   6,331      7,287      7,903
  Increase in provision for                                                     
   insured events of prior years                       427      1,027        263
  Amortization of discount                             158        139        143
Total net incurred                                   6,916      8,453      8,309
--------------------------------------------------------------------------------
Net payments attributable to:                                                   
 Current year events                                 1,888      2,744      2,791
 Prior year events                                   6,916      7,460      5,954
 Reinsurance recoverable                                                        
  against net reserves transferred                                              
  under retroactive reinsurance                                                 
  agreements (See Note O)                             (370)      (240)        --
--------------------------------------------------------------------------------
Total net payments                                   8,434      9,964      8,745
--------------------------------------------------------------------------------
Net reserves, end of year                           18,840     20,358     22,893
Ceded reserves, end of year                          7,568      6,273      5,424
--------------------------------------------------------------------------------
Gross reserves, end of year*                      $ 26,408   $ 26,631   $ 28,317
================================================================================

* Excludes life claim and claim adjustment expense reserves of $554 million and 
$725 million at December 31, 2000 and 1999, included in the consolidated balance
sheets.                                                                         

The increase (decrease) in provision for insured events of prior years
(reserve development) is composed of the following components.                  

Reserve Development                                                             

                                                                [Download Table]

Years ended December 31                                                         
(In millions)                                   2000         1999          1998 
--------------------------------------------------------------------------------
                                                                                
Environmental pollution and                                                     
 other mass tort                             $    17      $   (84)      $   227 
Asbestos                                          65          560           243 
Other                                            345          551          (207)
--------------------------------------------------------------------------------
Total                                        $   427      $ 1,027       $   263 
-===============================================================================

56

EX-13.1 44th "Page" of 65 TOC 1st Previous Next Bottom Just 44th

Environmental Pollution and Other                                               
Mass Tort and Asbestos Reserves                                                 

CNA's property-casualty insurance companies have potential exposures related to 
environmental pollution and other mass tort and asbestos claims.                

  Environmental pollution cleanup is the subject of both federal and state
regulation. By some estimates, there are thousands of potential waste sites     
subject to cleanup. The insurance industry is involved in extensive litigation  
regarding coverage issues. Judicial interpretations in many cases have expanded 
the scope of coverage and liability beyond the original intent of the policies. 

    The Comprehensive Environmental Response Compensation and Liability Act of
1980 (Superfund) and comparable state statutes (mini-Superfunds) govern the     
cleanup and restoration of toxic waste sites and formalize the concept of legal 
liability for cleanup and restoration by "Potentially Responsible Parties"      
(PRPs). Superfund and the mini-Superfunds establish mechanisms to pay for       
cleanup                                                                         

EX-13.1 45th "Page" of 65 TOC 1st Previous Next Bottom Just 45th

of waste sites if PRPs fail to do so, and to assign liability to PRPs. The      
extent of liability to be allocated to a PRP is dependent on a variety of       
factors. Further, the number of waste sites subject to cleanup is unknown. To   
date, approximately 1,500 cleanup sites have been identified by the             
Environmental Protection Agency (EPA) on its National Priorities List (NPL). The
addition of new cleanup sites to the NPL has slowed in recent years. State      
authorities have designated many cleanup sites as well.                         

Many policyholders have made claims against various CNA insurance     
subsidiaries for defense costs and indemnification in connection with           
environmental pollution matters. These claims relate to accident years 1989 and 
prior, which coincides with CNA's adoption of the Simplified Commercial General 
Liability coverage form, which includes an absolute pollution exclusion. CNA and
the insurance industry are disputing coverage for many such claims. Key coverage
issues include whether cleanup costs are considered damages under the policies, 
trigger of coverage, allocation of liability among triggered policies,          
applicability of pollution exclusions and owned property exclusions, the        
potential for joint and several liability and the definition of an occurrence.  
To date, courts have been inconsistent in their rulings on these issues.        

A number of proposals to reform Superfund have been made by various   
parties. However, no reforms were enacted by Congress during 2000, and it is    
unclear what positions the Congress or the administration will take and what    
legislation, if any, will result in the future. If there is legislation, and in 
some circumstances even if there is no legislation, the federal role in         
environmental cleanup may be significantly reduced in favor of state action.    
Substantial changes in the federal statute or the activity of the EPA may cause 
states to reconsider their environmental cleanup statutes and regulations. There
can be no meaningful prediction of the pattern of regulation that would result. 

Due to the inherent uncertainties described above, including the      
inconsistency of court decisions, the number of waste sites subject to cleanup, 
and the standards for cleanup and liability, the ultimate liability of CNA for  
environmental pollution claims may vary substantially from the amount currently 
recorded.                                                                       

    The following table provides data related to CNA's environmental pollution
and other mass tort and asbestos claim and claim adjustment expense reserves.   

Environmental Pollution and Other Mass Tort and Asbestos Reserves               

                                                                [Download Table]

                                             2000                          1999 
--------------------------------------------------------------------------------
                       Environmental                Environmental               
December 31            Pollution and                Pollution and               
(In millions)         Other Mass Tort    Asbestos   Other Mass Tort    Asbestos 
--------------------------------------------------------------------------------
                                                                                
Gross reserves                 $ 493        $ 848            $ 618        $ 946 
Ceded reserves                  (146)        (245)            (155)        (262)
--------------------------------------------------------------------------------
Net reserves                   $ 347        $ 603            $ 463        $ 684 
================================================================================

As of December 31, 2000, 1999 and 1998 CNA carried $347 million,      
$463 million and $787 million of claim and claim expense reserves, net of       
reinsurance recoverables, for reported and unreported environmental pollution   
and other mass tort claims. In 2000, CNA recorded $17 million of adverse        
development compared with $84 million of favorable development in 1999 and      
$227 million of adverse development in 1998. These changes were based upon the  
Company's continuous review of these types of exposures, as well as its internal
studies and annual analysis of environmental pollution and other mass tort      
claims. The analysis of activity in calendar year 2000 indicated a slight       
deterioration in pollution claims. The analysis completed in 1999 indicated     
favorable results in the number of new claims being reported in the other mass  
tort area. The 1998 analysis indicated deterioration in claim experience related
mainly to pollution claims.                                                     

CNA's property-casualty insurance subsidiaries also have exposure to  
asbestos claims. Estimation of asbestos claim and claim adjustment expense      
reserves involves many of the same limitations discussed above for environmental
pollution claims, such as inconsistency of court decisions, specific policy     
provisions, allocation of liability among insurers, missing policies and proof  
of coverage. As of December 31, 2000, 1999 and 1998, CNA carried approximately  
$603 million, $684 million and $1,456 million of claim and claim adjustment     
expense reserves, net of reinsurance recoverables, for reported                 

57

EX-13.1 46th "Page" of 65 TOC 1st Previous Next Bottom Just 46th

and unreported asbestos-related claims. In 2000, CNA recorded $65 million of    
adverse development compared with $560 million of adverse development in 1999   
and $243 million of adverse development in 1998. The reserve strengthening in   
2000 for asbestos-related claims was a result of management's continuous review 
of development with respect to these exposures, as well as a review of the      
results of the Company's annual analysis of these claims, which was completed in
conjunction with the study of environmental pollution and other mass tort       
claims. This analysis indicated continued deterioration in claim counts and     
asbestos-related claims similar to the results noted in both 1999 and 1998. The 
factors that have led to the deterioration in claim counts include intensive    
advertising campaigns by lawyers for asbestos claimants and the addition of new 
defendants, such as distributors of asbestos-containing products.               

The results of operations in future years may continue to be adversely
affected by environmental pollution and other mass tort and asbestos claim and  
claim adjustment expenses. Management will continue to monitor these liabilities
and make further adjustments as warranted.                                      

Other Reserves                                                                  

Unfavorable claim and claim adjustment expense reserve development for other    
lines in 2000 was due to unfavorable loss experience in standard commercial     
lines, assumed reinsurance and accident and health lines. These unfavorable     
changes were partially offset by favorable development in non-medical           
professional liability and other casualty lines. The unfavorable development in 
standard commercial lines can be attributed to adverse claim experience for     
recent accident years in the commercial auto liability, commercial multi-peril  
and workers' compensation lines of business. The unfavorable development in the 
assumed reinsurance and accident and health lines also resulted from adverse    
claims experience.                                                              

Unfavorable claim and claim adjustment expense reserve development for
other lines in 1999 of $551 million was due to unfavorable loss development of  
approximately $540 million for standard commercial lines, approximately         
$60 million for medical malpractice and approximately $70 million for accident  
and health. These unfavorable changes were partially offset by favorable        
development of approximately $120 million in non-medical professional liability 
and assumed reinsurance on older accident years. The unfavorable development in 
standard commercial lines was due to commercial automobile liability and        
workers' compensation losses being higher than expected in recent accident      
years. In addition, the number of claims reported for commercial multiple-peril 
liability claims from older accident years did not decrease as much as expected.
The unfavorable development for medical malpractice was also due to losses being
higher than expected for recent accident years. The accident and health         
unfavorable development was due to higher than expected claim reporting on      
assumed personal accident coverage in recent accident years.                    

Other lines' favorable claim and claim adjustment expense reserve     
development for 1998 of $207 million was due to favorable loss development of   
approximately $100 million in the commercial lines business and approximately   
$105 million of favorable loss development in the personal lines business. The  
favorable development in the commercial lines of business was primarily         
attributable to improved frequency and severity in the commercial auto lines for
older accident years, as well as some continued improvement in workers'         
compensation for older years. The favorable development in the personal auto    
lines of business was attributable to improved trends, particularly in personal 
auto liability.                                                                 

CNA's insurance subsidiaries also have exposure to construction defect
losses, principally in its general liability and commercial multiple-peril      
lines. This exposure relates to claims involving property damage alleging loss  
of use, damage, destruction or deterioration of land, buildings and other       
structures involving new construction or major rehabilitation of real property. 
Many of these claims involve multiple defects and multiple defendants. The      
majority of losses have been concentrated in a limited number of states,        
including California. The Company has taken several underwriting actions to     
mitigate this exposure in the future. Estimation of construction defect losses  
is subject to a high level of uncertainty due to the long period of time between
the accident date and the reporting of the claim, emerging case law, changing   
regulatory rules and the allocation of damages to the multiple defendants. Due  
to the inherent uncertainties noted above, the ultimate liability for           
construction defect claims may vary substantially from the amount currently     
recorded.                                                                       

Financial Guarantee Reserves                                                    

CNA's property-casualty operations write financial guarantee insurance          
contracts, which guarantee corporate credit and asset-backed securities.        
Premiums are received throughout the exposure period and are recognized as      
revenue in proportion to the underlying risk insured. In addition, through      
August 1, 1989, CNA's property-casualty operations wrote financial guarantee    
insurance in the form of surety bonds and also insured equity policies. These   
bonds represented primarily industrial development bond guarantees and, in the  
case of insured equity policies, typically extended in initial terms from 10 to 
13 years. For these guarantees and policies CNA received an advance premium,    
which is recognized over the exposure period and in proportion to the underlying
risk insured.                                                                   

     At December 31, 2000 and 1999, gross exposure on financial guarantee surety
bonds and insured equity policies was $249 million and $352 million. The degree 
of risk to CNA related to this exposure is substantially reduced through        
reinsurance, diversification of exposures and collateral requirements. In       
addition, security interests in improved real estate are also commonly obtained 
on financial guarantee risks. Approximately 39% and 37% of the risks were ceded 
to reinsurers at December 31, 2000 and 1999. Total exposure, net of reinsurance,
amounted to $151 million and $222 million at December 31, 2000 and 1999. At     
December 31, 2000 and 1999, collateral consisting of letters of credit, cash    
reserves and debt service reserves amounted to $7 million and $43 million.      

Gross unearned premium reserves for financial guarantee contracts were
$23 million and $11 million at December 31, 2000 and 1999. Gross claim and claim
adjustment expense reserves totaled $127 million and $113 million at            
December 31, 2000 and 1999.                                                     

58

EX-13.1 47th "Page" of 65 TOC 1st Previous Next Bottom Just 47th

NOTE F.  LEGAL PROCEEDINGS AND CONTINGENT LIABILITIES                           

Tobacco Litigation                                                              

Four insurance subsidiaries of CNAF are defendants in a lawsuit arising out of  
policies allegedly issued to Liggett Group, Inc. (Liggett). The lawsuit was     
filed by Liggett and its current parent, Brooke Group Holding Inc., in the      
Delaware Superior Court, New Castle County, on January 26, 2000. The lawsuit,   
which involves numerous insurers, concerns coverage issues relating to a number 
of tobacco-related claims (currently over 1,100 pending) asserted against       
Liggett over the past 20 years. However, Liggett only began submitting claims   
for coverage under the policies in January 2000. CNA believes its coverage      
defenses are strong. Based on facts and circumstances currently known,          
management believes that the ultimate outcome of the pending litigation should  
not materially affect the financial condition or results of operations of CNA.  

IGI Contingency                                                                 

In 1997, CNA Reinsurance Company Limited (CNA Re Ltd.) entered into an          
arrangement with IOA Global, Ltd. (IOA), an independent managing general agent  
based in Philadelphia, Pennsylvania, to develop and manage a book of accident   
and health coverages. Pursuant to this arrangement, IGI Underwriting Agencies,  
Ltd. (IGI), a personal accident reinsurance managing general underwriter, was   
appointed to underwrite and market the book under the supervision of IOA.       
Between April 1, 1997 and December 1, 1999, IGI underwrote a number of          
reinsurance                                                                     

EX-13.1 48th "Page" of 65 TOC 1st Previous Next Bottom Just 48th

arrangements with respect to personal accident insurance worldwide (the IGI     
Program). Under various arrangements, CNA Re Ltd. both assumed risks as a       
reinsurer and also ceded a substantial portion of those risks to other          
companies, including other CNA insurance subsidiaries and ultimately to a group 
of reinsurers participating in a reinsurance pool known as the Associated       
Accident and Health Reinsurance Underwriters (AAHRU) Facility. CNA's Group      
Operations business unit participated as a pool member in the AAHRU Facility in 
varying percentages between 1997 and 1999.                                      

CNA has undertaken a review of the IGI Program and, among other things, has 
determined that a small portion of the premiums assumed under the IGI Program   
related to United States workers' compensation "carve-out" business. CNA is     
aware that a number of reinsurers with workers' compensation carve-out insurance
exposure have disavowed their obligations under various legal theories. If one  
or more such companies are successful in avoiding or reducing their liabilities,
then it is likely that CNA's liability will also be reduced. Moreover, based on 
information known at this time, CNA reasonably believes it has strong grounds   
for avoiding a substantial portion of its United States workers' compensation   
carve-out exposure through legal action.                                        

 As noted, CNA arranged substantial reinsurance protection to manage its
exposures under the IGI Program. CNA believes it has valid and enforceable      
reinsurance contracts with the AAHRU Facility and other reinsurers with respect 
to the IGI Program, including the United States workers' compensation carve-out 
business. It is likely that certain reinsurers will dispute their liabilities to
CNA; however, the Company is unable to predict the extent of such potential     
disputes at this time. Legal actions could result, and the resolution of any    
such actions could take years.                                                  

Based on the Company's review of the entire IGI Program, CNA has      
established reserves for its estimated exposure under the program and an        
estimate for recoverables from retrocessionaires.                               

  The Company is pursuing a number of loss mitigation strategies. Although
the results of these various actions to date support the recorded reserves, the 
estimate of ultimate losses is subject to considerable uncertainty. As a result 
of these uncertainties, the results of operations in future years may be        
adversely affected by potentially significant reserve additions. Management does
not believe that any such future reserve additions will be material to the      
equity of the Company.                                                          

Other Litigation                                                                

CNAF and its subsidiaries are also parties to other litigation arising in the   
ordinary course of business. The outcome of such other litigation will not, in  
the opinion of management, materially affect the financial position or results  
of operations of CNA.                                                           

NOTE G.  REINSURANCE                                                            

CNA assumes and cedes reinsurance with other insurers and reinsurers and members
of various reinsurance pools and associations. CNA utilizes reinsurance         
arrangements to limit its maximum loss, provide greater diversification of risk,
minimize exposures on larger risks and to exit certain lines of business.       
Reinsurance coverages are tailored to the specific risk characteristics of each 
product line and CNA's retained amount varies by type of coverage. Generally,   
property risks are reinsured on an excess of loss, per risk basis. Liability    
coverages are generally reinsured on a quota share basis in excess of CNA's     
retained risk. CNA's life reinsurance includes coinsurance, yearly renewable    
term and facultative programs.                                                  

 The ceding of insurance does not discharge the primary liability of the
Company. Therefore, a credit exposure exists with respect to property, liability
and life reinsurance ceded to the extent that any reinsurer is unable to meet   
the obligations assumed under reinsurance agreements. CNA holds substantial     
collateral in the form of funds and bank letters of credit. Such collateral was 
approximately $1,566 million and $1,306 million at December 31, 2000 and 1999.  
CNA places reinsurance with carriers only after review of the nature of the     
contract and a thorough assessment of the reinsurers' credit quality and claims 
settlement practices.                                                           

CNA's largest recoverables from a single reinsurer, including prepaid 
reinsurance premiums, were approximately $1,176 million, $776 million and       
$402 million at December 31, 2000, from The Allstate Corporation (Allstate),    
American Reinsurance Company and National Indemnity Insurance Company.          

Insurance claims and policyholders' benefits are net of reinsurance   
recoveries of $4,863 million, $3,224 million and $994 million for 2000, 1999 and
1998.                                                                           

59

EX-13.1 49th "Page" of 65 TOC 1st Previous Next Bottom Just 49th

Life premiums are primarily from long duration contracts and          
property-casualty premiums and accident and health premiums are primarily from  
short duration contracts.                                                       

    The effects of reinsurance on earned premiums and written premiums for the
years ended December 31, 2000, 1999 and 1998 are shown in the following table.  

Components of Earned Premiums                                                   

                                                        [Enlarge/Download Table]

(In millions)                                    Direct       Assumed         Ceded           Net  Assumed/Net %
--------------------------------------------------------------------------------------------------------------- 
                                                                                                                
2000 Earned Premiums                                                                                            
Property-casualty                               $ 8,389       $ 1,955       $ 3,421       $ 6,923          28.2%
Accident and health                               3,644           484           487         3,641          13.3 
Life                                              1,227           220           537           910          24.2 
--------------------------------------------------------------------------------------------------------------- 
Total earned premiums                           $13,260       $ 2,659       $ 4,445       $11,474          23.2%
=============================================================================================================== 

1999 Earned Premiums                                                                                            
Property-casualty                               $ 9,158       $ 1,816       $ 2,199       $ 8,775          20.7%
Accident and health                               3,730           198           397         3,531           5.6 
Life                                              1,174           222           420           976          22.7 
--------------------------------------------------------------------------------------------------------------- 
Total earned premiums                           $14,062       $ 2,236       $ 3,016       $13,282          16.8%
=============================================================================================================== 

1998 Earned Premiums                                                                                            
Property-casualty                               $ 8,327       $ 1,549       $   897       $ 8,979          17.3%
Accident and health                               3,745           176           256         3,665           4.8 
Life                                              1,014           159           281           892          17.8 
--------------------------------------------------------------------------------------------------------------- 
Total earned premiums                           $13,086       $ 1,884       $ 1,434       $13,536          13.9%
=============================================================================================================== 

Components of Written Premiums                                                  

                                                        [Enlarge/Download Table]

(In millions)                                    Direct       Assumed         Ceded           Net  Assumed/Net %
--------------------------------------------------------------------------------------------------------------- 
                                                                                                                
2000 Written Premiums                                                                                           
Property-casualty                               $ 8,412       $ 1,787       $ 3,444       $ 6,755          26.5%
Accident and health                               3,598           468           489         3,577          13.1 
Life                                              1,229           220           537           912          24.1 
--------------------------------------------------------------------------------------------------------------- 
Total written premiums                          $13,239       $ 2,475       $ 4,470       $11,244          22.0%
=============================================================================================================== 

1999 Written Premiums                                                                                           
Property-casualty                               $ 9,114       $ 1,948       $ 3,262       $ 7,800          25.0%
Accident and health                               3,731           194           403         3,522           5.5 
Life                                              1,158           196           461           893          21.9 
--------------------------------------------------------------------------------------------------------------- 
Total written premiums                          $14,003       $ 2,338       $ 4,126       $12,215          19.1%
=============================================================================================================== 

1998 Written Premiums                                                                                           
Property-casualty                               $ 8,765       $ 1,429       $   969       $ 9,225          15.5%
Accident and health                               3,717           178           254         3,641           4.9 
Life                                                986           159           283           862          18.4 
--------------------------------------------------------------------------------------------------------------- 
Total written premiums                          $13,468       $ 1,766       $ 1,506       $13,728          12.9%
=============================================================================================================== 

60

EX-13.1 50th "Page" of 65 TOC 1st Previous Next Bottom Just 50th

    The impact of reinsurance on life insurance in-force at December 31, 2000,
1999 and 1998 is shown in the following table.                                  

Components of Life Insurance In-Force                                           

                                                                [Download Table]

(In millions)         Direct        Assumed          Ceded            Net 
--------------------------------------------------------------------------
                                                                          
2000                $391,847       $142,934       $363,893       $170,888 
1999                 339,255        130,735        184,376        285,614 
1998                 297,488         96,906        128,896        265,498 

NOTE H.  DEBT                                                                   

Debt consists of the following.                                                 

Debt                                                                            

                                                                [Download Table]

December 31                                                                     
(In millions)                                                  2000         1999
--------------------------------------------------------------------------------
                                                                                
Variable rate debt:                                                             
 Commercial paper                                            $  627       $  675
 Credit facility - CNA                                           --           77
 Credit facility - CNA Surety                                   100          100
Senior notes:                                                                   
 7.250%, due March 1, 2003                                      133          143
 6.250%, due November 15, 2003                                  249          249
 6.500%, due April 15, 2005                                     491          497
 6.750%, due November 15, 2006                                  249          248
 6.450%, due January 15, 2008                                   149          149
 6.600%, due December 15, 2008                                  199          199
 8.375%, due August 15, 2012                                     68           81
 6.950%, due January 15, 2018                                   148          148
Debenture, 7.250%, due November 15, 2023                        240          247
Capital leases, 8.000%-19.980%, due                                             
 through December 31, 2011                                       40           42
Other debt, 1.000%-8.500%, due through 2019                      36           26
--------------------------------------------------------------------------------
Total debt                                                   $2,729       $2,881
================================================================================

CNA has a $750 million revolving credit facility (the Facility) that  
expires in May 2001. The amount available under the Facility is reduced by CNA's
outstanding commercial paper borrowings. As of December 31, 2000, there was     
$123 million of unused borrowing capacity under the Facility. The interest rate 
on the Facility was equal to the London Interbank Offered Rate (LIBOR), plus    
27.5 basis points. Additionally, there is an annual facility fee of 12.5 basis  
points on the entire Facility. There were no borrowings under the Facility at   
December 31, 2000. The average interest rate on the borrowings under the        
Facility, excluding facility fees, for the year ended December 31, 1999 was     
6.66%.                                                                          

     The weighted average interest rate on commercial paper was 7.24%, 6.50% and
5.89% at December 31, 2000, 1999 and 1998. At December 31, 2000, the commercial 
paper program had a weighted average maturity of 22 days.                       

    As discussed in Note C, to offset the variable rate characteristics of the
Facility and the interest rate risk associated with periodically reissuing      
commercial paper, CNA was party to interest rate swap agreements with several   
banks. The last of these agreements expired on December 14, 2000. These         
agreements required CNA to pay interest at a fixed rate in exchange for the     
receipt of the three-month LIBOR. The effect of the interest rate swap          
agreements was to decrease interest expense by approximately $2 million for the 
year ended December 31, 2000 and increase interest expense by approximately     
$4 million and $2 million for the years ended December 31, 1999 and 1998.       

  The combined weighted average cost of Facility borrowings and commercial
paper borrowings, including Facility fees and interest rate swaps, was 7.36%,   
6.47% and 6.36% at December 31, 2000, 1999 and 1998.                            

   On February 15, 2000, Standard & Poor's lowered the Company's senior debt
rating from A- to BBB and lowered the Company's preferred stock rating from BBB 
to BB+. As a result of these actions the facility fee payable on the aggregate  
amount of the Facility was increased to 12.5 basis points per annum and the     
interest rate on the Facility was increased to LIBOR plus 27.5 basis points from
their previous levels of 9 basis points and LIBOR plus 16 basis points.         

During 2000, the Company repaid bank loans drawn under the CNA credit 
facility and repurchased approximately $38 million of its senior notes.         

On August 2, 1999, the Company repaid its $157 million, 11% Secured   
Mortgage Notes, due June 30, 2013. The gain realized on the transaction was not 
significant.                                                                    

 On April 15, 1999, the Company retired $100 million of its 8.25% senior
notes.                                                                          

     CNA Surety Corporation (CNA Surety), a 64% owned subsidiary of the Company,
has entered into a $130 million revolving credit facility that expires in       
September 2002. The interest rate on facility borrowings is based on LIBOR plus 
20 basis points. Additionally, there is an annual facility fee of 10 basis      
points on the entire facility. The average interest rate on the borrowings under
this facility, including facility fees, for the years ended December 31, 2000   
and 1999 was 6.73% and 5.57%.                                                   

     Commercial paper is reflected as due in 2001 in the following table because
the commercial paper program is fully supported by the Facility, which expires  
in 2001.                                                                        

The combined aggregate maturities for debt at December 31, 2000 are   
presented in the following table.                                               

Maturity of Debt                                                                

                                                                [Download Table]

(In millions)                              
                                           
2001                                $  639 
2002                                   105 
2003                                   387 
2004                                     4 
2005                                   496 
Thereafter                           1,112 
Less original issue discount           (14)
-------------------------------------------
Total                               $2,729 
===========================================

61

EX-13.1 51st "Page" of 65 TOC 1st Previous Next Bottom Just 51st

NOTE I.  BENEFIT PLANS                                                          

Pension and Postretirement Healthcare and                                       
Life Insurance Benefit Plans                                                    

CNAF and certain subsidiaries sponsor noncontributory pension plans typically   
covering full-time employees age 21 or over who have completed at least one year
of service. While the terms of the plans vary, benefits are generally based on  
years of credited service and the employee's highest 60 consecutive months of   
compensation.                                                                   

     CNA's funding policy is to make contributions in accordance with applicable
governmental regulatory requirements. The assets of the plans are invested      
primarily in U.S. government securities with the balance in mortgage-backed     
securities, equity investments and short-term investments.                      

 CNA provides certain healthcare and life insurance benefits to eligible
retired employees, their covered dependents and their beneficiaries. The funding
for these plans is generally to pay covered expenses as they are incurred.      

    In 2000, employees of CCC who were employed at December 31, 1999, and were
still employed at April 24, 2000, were required to make a choice regarding their
continued participation in the defined benefit pension plan. These employees    
were given two choices: 1) to continue earning additional benefits in the       
defined benefit pension plan or 2) to convert the present value of their accrued
benefit in the pension plan to an "accrued pension account" (APA) that would be 
credited with interest at the 30-year Treasury rate and to receive enhanced     
employer contributions to the Savings and Capital Accumulation Plan (S-CAP) (see
Savings Plan discussion below). Approximately 60% of eligible employees elected 
the latter choice, resulting in a curtailment charge of approximately $13       
million, before income taxes. Additionally, this change in benefit plan         
participation resulted in a reduction of the pension benefit obligation of $37  
million at December 31, 2000.                                                   

     In 1999, the Company recorded pre-tax curtailment and other related charges
of approximately $8 million related to the transfer of personal lines insurance 
business to Allstate as discussed in Note O. This transaction resulted in a     
reduction of the pension and postretirement benefit obligations of $44 million  
and $2 million at December 31, 1999.                                            

    A 1999 amendment to the postretirement plan that affected early retirement
eligibility and the level of employer subsidy resulted in a net reduction in the
postretirement benefit obligation of approximately $40 million at               
December 31, 1999.                                                              

    Additionally, in 1999, the Company amended its benefit plans for its total
risk management services subsidiary, RSKCoSM. The amendment resulted in a       
reduction in the pension and postretirement benefit obligations of approximately
$10 million and $8 million at December 31, 1999.                                

The Company recorded pre-tax curtailment charges of approximately     
$19 million in 1998 related to its restructuring activities as discussed in Note
N. These curtailments resulted in a reduction of the pension and postretirement 
benefit obligations of $88 million and $34 million at December 31, 1998.        

The following table provides a reconciliation of benefit obligations. 

Benefit Obligations and Accrued Benefit Costs                                   

                                                                [Download Table]


                                                                 Postretirement 
                                           Pension Benefits         Benefits    
                                           ----------------      ---------------
(In millions)                               2000       1999    2000        1999 
--------------------------------------------------------------------------------
                                                                                
Benefit obligation at January 1           $ 1,815   $ 1,900   $   268   $   321 
Change in benefit obligation:                                                   
 Service cost                                  31        64         7        11 
 Interest cost                                131       129        22        22 
 Participants' contributions                   --        --         4         4 
 Plan amendments                               (1)      (10)       (1)      (48)
 Actuarial gain (loss)                         62      (130)       41        (5)
 Curtailment                                  (37)      (44)       --        (2)
 Special termination benefits                  --         3        --        -- 
 Acquisition                                   --         2        --        -- 
 Benefits paid                               (119)      (99)      (28)      (35)
--------------------------------------------------------------------------------
Benefit obligation at December 31           1,882     1,815       313       268 
--------------------------------------------------------------------------------
Fair value of plan assets at January 1      1,452     1,424        --        -- 
Change in plan assets:                                                          
 Actual return on plan assets                 213       (17)       --        -- 
 Acquisition                                   --         2        --        -- 
 Company contributions                        138       142        24        31 
 Participants' contributions                   --        --         4         4 
 Benefits paid                               (119)      (99)      (28)      (35)
--------------------------------------------------------------------------------
Fair value of plan assets at December 31    1,684     1,452        --        -- 
--------------------------------------------------------------------------------
 Funded status                               (198)     (363)     (313)     (268)
 Unrecognized net actuarial loss              105       173        80        41 
 Unrecognized prior service cost (benefit)     20        39      (116)     (132)
--------------------------------------------------------------------------------
Accrued benefit cost                      $   (73)  $  (151)  $  (349)  $  (359)
================================================================================

62

EX-13.1 52nd "Page" of 65 TOC 1st Previous Next Bottom Just 52nd

     The components of net periodic benefit costs are presented in the following
table.                                                                          

Net Periodic Benefit Costs                                                      

                                                                [Download Table]

Years ended December 31                                                         
(In millions)                                      2000        1999        1998 
--------------------------------------------------------------------------------
                                                                                
Pension benefits                                                                
Service cost                                      $  31       $  64       $  58 
Interest cost on projected                                                      
 benefit obligation                                 131         129         126 
Expected return on plan assets                     (120)       (100)        (97)
Prior service cost amortization                       3           6          10 
Actuarial loss                                        1           8           4 
Transition amount amortization                       --          --          (2)
Curtailment loss                                     13           8          17 
--------------------------------------------------------------------------------
Net periodic benefit cost                         $  59       $ 115       $ 116 
================================================================================

Postretirement benefits                                                         
Service cost                                      $   7       $  11       $  11 
Interest cost on projected                                                      
 benefit obligation                                  22          22          28 
Prior service cost amortization                     (16)        (13)         (4)
Actuarial loss                                        2           3           1 
Curtailment loss                                     --          --           2 
--------------------------------------------------------------------------------
Net periodic benefit cost                         $  15       $  23       $  38 
================================================================================

Actuarial assumptions are set forth in the following table.           

Actuarial Assumptions                                                           

                                                                [Download Table]

December 31                               2000        1999         1998  
-------------------------------------------------------------------------
                                                                         
Pension benefits                                                         
Discount rate                             7.50%       7.75%       6.75%  
Expected return on plan assets            7.75%       8.00%       7.00%  
Rate of compensation increases            5.83%       5.70%       5.70%  

Postretirement benefits                                                  
Discount rate                             7.50%       7.75%       6.75%  

  The assumed healthcare cost trend rate used in measuring the accumulated
postretirement benefit obligation was 4% per year in 2000. The healthcare cost  
trend rate assumption has a significant effect on the amount of the benefit     
obligation and periodic cost reported. An increase in the assumed healthcare    
cost trend rate of 1% in each year would increase the accumulated postretirement
benefit obligation as of December 31, 2000, by $12 million and the aggregate net
periodic postretirement benefit cost for 2000 by $1 million. A decrease in the  
assumed healthcare cost trend rate of 1% in each year would decrease the        
accumulated postretirement benefit obligation as of December 31, 2000, by       
$11 million and the aggregate net periodic postretirement benefit cost for 2000,
by $1 million.                                                                  

Savings Plans                                                                   

CNAF sponsors savings plans, which are generally contributory plans that allow  
most employees to contribute a maximum of 13% of their eligible compensation,   
subject to certain limitations prescribed by the Internal Revenue Service. The  
Company contributes matching amounts to participants, amounting to 70% of the   
first 6% of eligible compensation contributed by the employee. Employees vest in
these contributions ratably over five years. Employees of RSKCoSM participating 
in the CNAF sponsored plan are able to contribute a maximum of 16% of their     
eligible compensation, subject to certain limitations prescribed by the         
Internal Revenue Service. RSKCoSM contributes matching amounts to participants, 
amounting to 50% of the first 6% of eligible compensation contributed by the    
employee.                                                                       

   As noted above, during 2000, CCC employees were required to make a choice
regarding their continued participation in CCC's defined benefit pension plan.  
Employees who elected to forego earning additional benefits in the defined      
benefit pension plan and all employees hired by CCC on or after January 1, 2000,
receive a Company contribution of 3% or 5% of their eligible compensation,      
depending on their age. In addition, these employees are eligible to receive    
additional discretionary contributions of up to 2% of eligible compensation and 
an additional Company match of up to 80% of the first 6% of eligible            
compensation contributed by the employee. These contributions are made at the   
discretion of management and are contributed to participant accounts in the     
first quarter of the year following management's determination of the           
discretionary amounts. Employees fully vest in these contributions after five   
years of service.                                                               

Contributions by the Company to the savings plans were $39 million,   
$29 million and $25 million in 2000, 1999 and 1998. Additionally, in 2000, CNA  
has accrued $12 million in discretionary contributions. This accrued            
discretionary contribution will be paid during 2001.                            

Stock Options                                                                   

The Board of Directors approved the CNA Long-Term Incentive Plan (the LTI Plan) 
during 1999 and subsequently merged it with the CNA Financial Corporation       
Incentive Compensation Plan in February 2000. The LTI Plan authorizes the grant 
of options to certain management personnel for up to 2.0 million shares of the  
Company's common stock. All options granted have 10-year terms and vest ratably 
over the four-year period following the date of grant. The number of shares     
available for the granting of options under the LTI Plan as of                  
December 31, 2000, was approximately 1.4 million.                               

63

EX-13.1 53rd "Page" of 65 TOC 1st Previous Next Bottom Just 53rd

  The following table presents activity under the LTI Plan during 2000 and
1999.                                                                           

Option Plan Activity                                                            

                                                                [Download Table]


                                               2000                   1999 
---------------------------------------------------------------------------
                                           Weighted               Weighted 
                                            Average                Average 
                                             Option                 Option 
                                 Number       Price     Number       Price 
                              of Shares   Per Share  of Shares   Per Share 
-------------------------------------------------------------------------- 
                                                                           
Balance at January 1            291,300    $  35.21         --    $     -- 
 Options granted                318,300       32.15    294,900       35.21 
 Options exercised               (3,300)      35.09         --          -- 
 Options forfeited              (53,025)      34.02     (3,600)      35.09 
-------------------------------------------------------------------------- 
Balance at                                                                 
 December 31                    553,275    $  33.56    291,300    $  35.21 
========================================================================== 
Options exercisable                                                        
 at December 31                  63,575    $  35.23         --    $     -- 
========================================================================== 
Weighted average fair                                                      
 value per share of                                                        
 options granted                           $  12.10               $  11.82 
========================================================================== 

    The weighted average remaining contractual life of options outstanding was
nine years, and the range of exercise prices on those options was $32.03 to     
$36.53.                                                                         

     The fair value of granted options was estimated at the grant date using the
Black-Scholes option-pricing model. The weighted average fair value of options  
granted during 2000 and 1999 was $3.9 million and $3.5 million. The following   
weighted average assumptions were used for the year ended December 31, 2000 and 
1999: risk free interest rate of 6.2%; expected dividend yield of 0.0%; and     
expected option life of five years. The weighted average assumption for the     
expected stock price volatility was 29.2% and 22.9% for the years ended         
December 31, 2000 and 1999.                                                     

CNA Surety has reserved shares of its common stock for issuance to    
directors, officers and employees of CNA Surety through incentive stock options,
non-qualified stock options and stock appreciation rights under a separate plan 
(CNA Surety Plan). The CNA Surety Plan and the Replacement Plan have an         
aggregate number of 1.3 million shares available for which options may be       
granted. At December 31, 2000, approximately 1.5 million options were           
outstanding under these two plans.                                              

 The Company follows the financial disclosure provisions of Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation 
(SFAS 123), with respect to its stock-based incentive plans. The Company applies
Accounting Principal Board Opinion No. 25, Accounting for Stock Issued to       
Employees (APB 25), and related interpretations, in accounting for its plan, as 
permitted by SFAS 123. Accordingly, no compensation cost has been recognized for
any of the aforementioned plans, as the exercise price of the granted options   
equaled the market price of the under lying stock at the grant date. However,   
had the Company applied the fair value provision of SFAS 123, the Company's net 
income, including the pro forma effect of the options issued under the CNA      
Surety Plan and the LTI Plan, for the year ended December 31, 2000, would have  
been $1,213 million, or net income per share of $6.60. For the year ended       
December 31, 1999, the net loss would have been a loss of $131 million, or a net
loss per share of $0.78.                                                        

NOTE J.  LEASES                                                                 

CNA occupies office facilities under lease agreements that expire at various    
dates through 2014. CNA's home office is partially situated on grounds under    
leases expiring in 2058. In addition, data processing, office and transportation
equipment is leased under agreements that expire at various dates through 2005. 
Most leases contain renewal options that provide for rent increases based on    
prevailing market conditions.                                                   

    CNA has vacated certain owned and leased facilities in connection with its
restructuring and other related activities (see Note N). These facilities have  
been leased or subleased under lease agreements that expire at various dates    
through 2014. Lease expense for the years ended December 31, 2000, 1999 and 1998
was $83 million, $81 million and $134 million.                                  

     The table below presents the future minimum lease payments to be made under
non-cancelable operating leases along with lease and sublease future minimum    
receipts to be received on owned and leased properties at December 31, 2000.    

Future Minimum Lease Payments and Receipts                                      

                                                                [Download Table]

                            Future             Future 
                           Minimum            Minimum 
                             Lease              Lease 
(In millions)             Payments           Receipts 
----------------------------------------------------- 
                                                      
2001                          $118               $ 49 
2002                           105                 49 
2003                            89                 50 
2004                            69                 46 
2005                            58                 44 
Thereafter                     192                253 
------------------------------------------------------
Total                         $631               $491 
------------------------------------------------------

NOTE K.  STOCKHOLDERS' EQUITY AND STATUTORY FINANCIAL INFORMATION               

Capital stock (in whole numbers) is composed of the following.                  

Summary of Capital Stock                                                        

                                                                [Download Table]

December 31                                       2000              1999 
-------------------------------------------------------------------------
                                                                         
Preferred stock, without                                                 
 par value, non-voting                                                   
Authorized                                  12,500,000        12,500,000 
Money market cumulative                                                  
 preferred stock, without par                                            
 value, non-voting                                                       
Issued and outstanding:                                                  
 Series E (stated value                                                  
  $100,000 per share)                               --               750 
 Series F (stated value                                                  
  $100,000 per share)                               --               750 
Common stock, par value $2.50                                            
Authorized                                 500,000,000       500,000,000 
Issued                                     185,525,907       185,525,907 
Outstanding                                183,263,873       184,406,931 
Treasury stock                               2,262,034         1,118,976 

During 2000, the Company redeemed all outstanding shares of its money 
market preferred stock, which amounted to $150 million, at its stated value of  
$100,000 per share plus accrued dividends.                                      

  In 1999, the Company increased the number of authorized shares of common
stock from 200,000,000 to 500,000,000.                                          

    In 1998, CNA's Board of Directors approved the Share Repurchase Program to
purchase, in the open market or through privately negotiated transactions, its  
outstanding common stock, as Company management deems appropriate. During 2000, 
CNA purchased 1,272,700 shares of its common stock for approximately            
$35 million. No shares were purchased during 1999.                              

 During 2000, 1999 and 1998, CNA sold 126,342 shares, 507,362 shares and
1,229,583 shares of common stock that were held in treasury to certain senior   
officers of CNA, at the average of the highest and lowest sale prices on the New
York Stock Exchange composite transactions, for the dates of the sales. Each of 
these purchases by senior officers was financed by collateralized loans from CNA
which, at origination, amounted to $4 million, $19 million and $44 million for  
the years ended December 31, 2000, 1999 and 1998. The loans are 10-year notes,  
which bear interest at the applicable federal rate for the month in which they  
originated, compounding semi-annually and due at maturity. The interest rates   
range from 5.23% to 6.14% as of December 31, 2000.                              

On December 23, 1998, CNA issued 2,000 shares of Series G cumulative, 
exchangeable preferred stock to Loews for $200 million. On June 30, 1999, CNA   
repurchased the Series G preferred stock from Loews.                            

Statutory Accounting Practices (Unaudited)                                      

CNA's insurance subsidiaries are domiciled in various jurisdictions. These      
subsidiaries prepare statutory financial statements in accordance with          
accounting practices prescribed or permitted by the respective jurisdictions'   
insurance regulators. Prescribed statutory accounting practices are set forth in
a variety of publications of the National Association of Insurance Commissioners
(NAIC) as well as state laws, regulations and general administrative rules. The 
Company's insurance subsidiaries follow one significant permitted accounting    
practice related to discounting of certain non-tabular workers' compensation    
claims. The impact of this permitted practice was to increase statutory surplus 
by approximately $71 million, $95 million and $118 million at December 31, 2000,
1999 and 1998. This practice was followed by an acquired company, and CNA       
received permission to eliminate the effect of the permitted practice over a    
10-year period.                                                                 

CNAF's ability to pay dividends and other credit obligations is       
significantly dependent on receipt of dividends from its subsidiaries. The      
payment of dividends to CNAF by its insurance subsidiaries without prior        
approval of the insurance department of each subsidiary's domiciliary           
jurisdiction is limited by formula. Dividends in excess of these amounts are    
subject to pre-approval by the respective state insurance departments. In       
addition, by agreement with the New Hampshire Insurance Department, as well as  
certain other state insurance departments, dividend paying capacity for the     
Continental Insurance Company Pool is restricted to internal and external debt  
service requirements through September 2003 up to a maximum of $85 million      
annually, without the prior approval of the New Hampshire Insurance Department. 
As of December 31, 2000, approximately $881 million of dividend payments would  
not be subject to insurance department pre-approval.                            

     Combined statutory capital and surplus and net income (loss), determined in
accordance with accounting practices prescribed or permitted by the regulations 
and statutes of various insurance regulators for the property-casualty and the  
life insurance subsidiaries, were as follows.                                   

Statutory Information                                                           

                                                        [Enlarge/Download Table]

                       Statutory Capital and Surplus     Statutory Net Income (Loss) 
                       -------------------------------  ---------------------------- 
                                         December 31         Years Ended December 31 
                       ------------------------------   ---------------------------- 
(In millions)                         2000      1999       2000      1999       1998 
------------------------------------------------------------------------------------ 
                                                                                     
Property-casualty companies*       $ 8,387   $ 8,679    $ 1,118     $ 361      $ 161 
Life insurance companies             1,274     1,222        (47)       77        (57)

* Surplus includes equity of property-casualty companies' ownership in life     
insurance subsidiaries.                                                         

65

EX-13.1 54th "Page" of 65 TOC 1st Previous Next Bottom Just 54th

  In March 1998, the NAIC adopted the Codification of Statutory Accounting
Principles (Codification). Codification, which is intended to standardize       
regulatory accounting and reporting to state insurance departments, is effective
January 1, 2001. However, statutory accounting principles will continue to be   
established by individual state laws and permitted practices. The states in     
which CNAF's insurance subsidiaries conduct business will require adoption of   
Codification (with certain modifications) for the preparation of statutory      
financial statements effective January 1, 2001. The Company estimates that the  
adoption of Codification, as modified, will increase statutory capital and      
surplus as of January 1, 2001 by approximately $77 million, which primarily     
relates to deferred tax assets offset by insurance related-assessments and      
pension liabilities.                                                            

NOTE L.  COMPREHENSIVE INCOME                                                   

Comprehensive income is composed of all changes to stockholders' equity, except 
those changes resulting from transactions with stockholders in their capacity as
stockholders. The components of comprehensive income are shown below.           

Comprehensive Income                                                            

                                                        [Enlarge/Download Table]

Years ended December 31                                                                                                 
(In millions)                                                                          2000          1999          1998 
----------------------------------------------------------------------------------------------------------------------- 
                                                                                                                        
Net income (loss)                                                                   $ 1,214       $  (130)      $   282 
Other comprehensive income:                                                                                             
 Change in unrealized gains/losses on general account investments:                                                      
  Holding gains arising during the period                                               422           714           925 
  Less: unrealized gains at beginning of period included in realized                                                    
   gains during the period                                                             (924)         (413)         (207)
----------------------------------------------------------------------------------------------------------------------- 
 Net change in unrealized gains/losses on general account investments                  (502)          301           718 
 Net change in unrealized gains/losses on separate accounts and other                    66           (59)            5 
 Foreign currency translation adjustment                                                (28)          (42)            7 
 Allocation to participating policyholders and minority interest                        (12)           24            (6)
----------------------------------------------------------------------------------------------------------------------- 
 Other comprehensive (loss) income, before tax                                         (476)          224           724 
 Deferred income tax benefit (expense) related to other comprehensive income            161          (100)         (249)
Other comprehensive (loss) income, net of tax                                          (315)          124           475 
----------------------------------------------------------------------------------------------------------------------- 
Total comprehensive income (loss)                                                   $   899       $    (6)      $   757 
======================================================================================================================= 

In the preceding table, deferred income tax expense related to other  
comprehensive income is attributable to each of the components of other         
comprehensive income in equal proportion except for the foreign currency        
translation adjustment, for which there are no deferred taxes.                  

   See Note B for a discussion of changes in the fair value of the Company's
holdings of Global Crossing common stock.                                       

The following table displays the components of accumulated other      
comprehensive income included in the consolidated balance sheets.               

EX-13.1 55th "Page" of 65 TOC 1st Previous Next Bottom Just 55th

Accumulated Other Comprehensive Income                                          

                                                                [Download Table]

December 31                                                           
(In millions)                                      2000          1999 
----------------------------------------------------------------------
                                                                      
Cumulative foreign currency                                           
 translation adjustment                          $    3        $   31 
Net unrealized gains on investments                 870         1,157 
--------------------------------------------------------------------- 
Accumulated other comprehensive income           $  873        $1,188 
===================================================================== 

NOTE M.  BUSINESS SEGMENTS                                                      

CNA conducts its operations through seven operating segments: Agency Market     
Operations, Specialty Operations, CNA Re, Global Operations, Risk Management,   
Group Operations and Life Operations. In addition to these seven operating      
segments, certain other activities are reported in a Corporate and Other        
segment. These segments reflect the way CNA distributes its products to the     
marketplace, manages operations and makes business decisions.                   

Agency Market Operations provides a broad range of property-casualty  
insurance products and services to small and middle market businesses. Specialty
Operations provides a broad array of professional, financial and specialty      
property-casualty products and services. CNA Re offers primarily traditional    
property-casualty treaty reinsurance and also offers facultative and financial  
reinsurance. Global Operations provides commercial and contract marine, surety, 
warranty and specialty products and services to United States-based customers   
expanding overseas and foreign customers.                                       

  Risk Management serves the casualty and property needs of large domestic
commercial businesses, offering customized strategies to address the management 
of business risks. Group Operations offers a broad array of group life and      
health insurance products and services to employers, affinity groups, federal   
employees and other entities that purchase insurance as a group. Life Operations
provides financial protection to individuals through a full product line of term
life insurance, universal life insurance, long-term care insurance and annuities
and provides retirement service products to institutions in the form of various 
investment products and administrative services.                                

66

EX-13.1 56th "Page" of 65 TOC 1st Previous Next Bottom Just 56th

Corporate and Other segment results consist of interest expense on    
corporate borrowings, eBusiness expenses, certain run-off insurance operations, 
asbestos claims related to Fibreboard Corporation, financial guarantee insurance
contracts and certain non-insurance operations.                                 

    The accounting policies of the segments are the same as those described in
the summary of significant accounting polices. The Company manages its assets on
a legal entity basis, while segment operations are conducted across legal       
entities, as such assets are not readily identifiable by individual segment. In 
addition, distinct investment portfolios are not maintained for each segment,   
and accordingly, allocation of assets to each segment is not performed.         
Therefore, investment income and realized investment gains/losses are allocated 
based on each segment's net carried insurance reserves, as adjusted.            

    All significant intersegment income and expense have been eliminated. Risk
Management's other revenues and expenses for 2000 and 1999 include revenues for 
services provided by RSKCoSM to other units within the Risk Management segment  
that are eliminated at the consolidated level. Such intrasegment revenues and   
expenses eliminated at the consolidated level were $159 million and $176 million
for the years ended December 31, 2000 and 1999.                                 

    Income taxes have been allocated on the basis of the taxable income of the
segments.                                                                       

Approximately 8.2%, 7.6% and 5.0% of CNA's gross written premiums were
derived from outside the United States for the years ended December 31, 2000,   
1999 and 1998. The increases in foreign premiums were indicative of CNA's       
continued expansion overseas, which management attributes to its development of 
a greater awareness and working knowledge of international business to seize the
opportunities of international economic growth. Gross written premiums from the 
United Kingdom were approximately 5.3%, 5.8% and 3.5% of CNA's premiums for the 
years ended December 31, 2000, 1999 and 1998. Gross written premiums from any   
individual foreign country, other than the United Kingdom, were not significant.

Group Operations' revenues include $2.1 billion, $2.1 billion and     
$2.0 billion in 2000, 1999 and 1998 under contracts covering U.S. government    
employees and their dependents.                                                 

Segment Results                                                                 

                                                        [Enlarge/Download Table]

                                              Agency                                            Risk                          
Years ended December 31                       Market   Specialty                  Global     Manage-       Group        Life  
(In millions)                             Operations  Operations      CNA Re  Operations        ment  Operations  Operations  
------------------------------------------------------------------------------------------------------------------------------
                                                                                                                              
2000                                                                                                                          

Net earned premiums                         $  3,331    $    799    $  1,089    $  1,089    $    637    $  3,675    $    876  
Claims, benefits and expenses                  3,772         819       1,186       1,128         760       3,770       1,316  
------------------------------------------------------------------------------------------------------------------------------
Underwriting loss                               (441)        (20)        (97)        (39)       (123)        (95)       (440) 
Net investment income                            604         216         195         136         163         142         601  
Other revenues                                   151          26           5         116         318          49         192  
Other expenses                                   185          35          14         123         324          46          99  
------------------------------------------------------------------------------------------------------------------------------
Pre-tax operating income (loss)                  129         187          89          90          34          50         254  
Income tax (expense) benefit                     (19)        (56)        (32)        (24)         (5)        (14)        (85) 
Minority interest                                 --          --          --         (24)         --          --          --  
------------------------------------------------------------------------------------------------------------------------------
Net operating income (loss) excluding                                                                                         
 realized investment gains                       110         131          57          42          29          36         169  
Realized investment gains, net of tax,                                                                                        
 participating policyholders' and                                                                                             
 minority interests                              388         141          80          78          96          55          22  
------------------------------------------------------------------------------------------------------------------------------
Net income (loss)                           $    498    $    272    $    137    $    120    $    125    $     91    $    191  
==============================================================================================================================



Years ended December 31                    Corporate      Elimi-                                                              
(In millions)                              and Other     nations      Total                                                   
----------------------------------------------------------------------------                                                  
                                                                                                                              
2000                                                                                                                          

Net earned premiums                         $     24    $    (46)   $ 11,474                                                  
Claims, benefits and expenses                    164         (46)     12,869                                                  
----------------------------------------------------------------------------                                                  
Underwriting loss                               (140)         --      (1,395)                                                 
Net investment income                             23          --       2,080                                                  
Other revenues                                    55        (173)        739                                                  
Other expenses                                   282        (173)        935                                                  
----------------------------------------------------------------------------                                                  
Pre-tax operating income (loss)                 (344)         --         489                                                  
Income tax (expense) benefit                     128          --        (107)                                                 
Minority interest                                 (4)         --         (28)                                                 
----------------------------------------------------------------------------                                                  
Net operating income (loss) excluding                                                                                         
 realized investment gains                      (220)         --         354                                                  
Realized investment gains, net of tax,                                                                                        
 participating policyholders' and                                                                                             
 minority interests                               --          --         860                                                  
----------------------------------------------------------------------------                                                  
Net income (loss)                           $   (220)   $     --    $  1,214                                                  
============================================================================                                                  

                                       67                                                                                     

EX-13.1 57th "Page" of 65 TOC 1st Previous Next Bottom Just 57th

Segment Results (continued)                                                                                                   

                                              Agency                                            Risk                          
Years ended December 31                       Market   Specialty                  Global     Manage-       Group        Life  
(In millions)                             Operations  Operations      CNA Re  Operations        ment  Operations  Operations  
------------------------------------------------------------------------------------------------------------------------------
                                                                                                                              
1999                                                                                                                          

Net earned premiums                         $  4,799    $  1,001    $  1,176    $  1,010    $    801    $  3,571    $    936  
Claims, benefits and expenses                  5,791       1,166       1,369       1,037         936       3,706       1,323  
Restructuring and other related charges           60          --          --          --          --           5          --  
------------------------------------------------------------------------------------------------------------------------------
Underwriting loss                             (1,052)       (165)       (193)        (27)       (135)       (140)       (387) 
Net investment income                            686         235         161         132         154         130         556  
Other revenues                                    80          19          (1)        120         316          40         123  
Other expenses                                    77          30          (5)        100         307          46          76  
Non-insurance restructuring and                                                                                               
 related charges                                  --          --          --          --          10          --          --  
------------------------------------------------------------------------------------------------------------------------------
Pre-tax operating (loss) income                 (363)         59         (28)        125          18         (16)        216  
Income tax benefit (expense)                     162         (10)         15         (33)          1          10         (71) 
Minority interest                                 --          --          --         (28)         --          --          --  
------------------------------------------------------------------------------------------------------------------------------
Net operating (loss) income excluding                                                                                         
 realized investment gains (losses)             (201)         49         (13)         64          19          (6)        145  
Realized investment gains (losses),                                                                                           
 net of tax, participating policyholders'                                                                                     
 and minority interests                           75          38          21          15          19           4         (31) 
Cumulative effect of a change in                                                                                              
 accounting principle, net of tax                (93)         (3)         --          (3)        (74)         (2)         (2) 
------------------------------------------------------------------------------------------------------------------------------
Net (loss) income                           $   (219)   $     84    $      8    $     76    $    (36)   $     (4)   $    112  
==============================================================================================================================



Years ended December 31                    Corporate      Elimi-                                                              
(In millions)                              and Other     nations      Total                                                   
----------------------------------------------------------------------------                                                  
                                                                                                                              
1999                                                                                                                          

Net earned premiums                         $     35    $    (47)   $ 13,282                                                  
Claims, benefits and expenses                    214         (47)     15,495                                                  
Restructuring and other related charges           --          --          65                                                  
----------------------------------------------------------------------------                                                  
Underwriting loss                               (179)         --      (2,278)                                                 
Net investment income                             47          --       2,101                                                  
Other revenues                                   204        (196)        705                                                  
Other expenses                                   401        (196)        836                                                  
Non-insurance restructuring and                                                                                               
 related charges                                   8          --          18                                                  
----------------------------------------------------------------------------                                                  
Pre-tax operating (loss) income                 (337)         --        (326)                                                 
Income tax benefit (expense)                     137          --         211                                                  
Minority interest                                 (2)         --         (30)                                                 
----------------------------------------------------------------------------                                                  
Net operating (loss) income excluding                                                                                         
 realized investment gains (losses)             (202)         --        (145)                                                 
Realized investment gains (losses),                                                                                           
 net of tax, participating policyholders'                                                                                     
 and minority interests                           51          --         192                                                  
Cumulative effect of a change in                                                                                              
 accounting principle, net of tax                 --          --        (177)                                                 
----------------------------------------------------------------------------                                                  
Net (loss) income                           $   (151)   $     --    $   (130)                                                 
============================================================================                                                  


                                              Agency                                            Risk                          
Years ended December 31                       Market   Specialty                  Global     Manage-       Group        Life  
(In millions)                             Operations  Operations       NA Re  Operations        ment  Operations  Operations  
----------------------------------------------------------------------------------------------------------------------------- 
                                                                                                                              
1998                                                                                                                          

Net earned premiums                         $  5,247    $  1,092    $    944    $    941    $    823    $  3,733    $    823  
Claims, benefits and expenses                  6,050       1,251       1,005         991       1,018       3,903       1,210  
Restructuring and other related charges           96           5           1           1          --          39           3  
----------------------------------------------------------------------------------------------------------------------------- 
Underwriting loss                               (899)       (164)        (62)        (51)       (195)       (209)       (390) 
Net investment income                            744         245         163         110         144         133         525  
Other revenues                                    48          27           5          82         230          24         115  
Other expenses                                    52          44          11          80         227          31          83  
Non-insurance restructuring and                                                                                               
 related charges                                  --          --          --          --          88          --           4  
----------------------------------------------------------------------------------------------------------------------------- 
Pre-tax operating (loss) income                 (159)         64          95          61        (136)        (83)        163  
Income tax benefit (expense)                     105          (6)        (27)        (18)         48          35         (58) 
Minority interest                                 --          --          --         (25)         --          --          --  
----------------------------------------------------------------------------------------------------------------------------- 
Net operating (loss) income excluding                                                                                         
 realized investment gains                       (54)         58          68          18         (88)        (48)        105  
Realized investment gains, net of tax,                                                                                        
 participating policyholders' and                                                                                             
 minority interests                              171          57          27          17          31          29          82  
----------------------------------------------------------------------------------------------------------------------------- 
Net income (loss)                           $    117    $    115    $     95    $     35    $    (57)   $    (19)   $    187  
============================================================================================================================= 



Years ended December 31                    Corporate      Elimi-                                                              
(In millions)                              and Other     nations      Total                                                   
----------------------------------------------------------------------------                                                  
                                                                                                                              
1998                                                                                                                          

Net earned premiums                         $    (26)   $    (41)   $ 13,536                                                  
Claims, benefits and expenses                    162         (41)     15,549                                                  
Restructuring and other related charges           --          --         145                                                  
----------------------------------------------------------------------------                                                  
Underwriting loss                               (188)         --      (2,158)                                                 
Net investment income                             82          --       2,146                                                  
Other revenues                                   284         (16)        799                                                  
Other expenses                                   506         (16)      1,018                                                  
Non-insurance restructuring and                                                                                               
 related charges                                   9          --         101                                                  
----------------------------------------------------------------------------                                                  
Pre-tax operating (loss) income                 (337)         --        (332)                                                 
Income tax benefit (expense)                     121          --         200                                                  
Minority interest                                  5          --         (20)                                                 
----------------------------------------------------------------------------                                                  
Net operating (loss) income excluding                                                                                         
 realized investment gains                      (211)         --        (152)                                                 
Realized investment gains, net of tax,                                                                                        
 participating policyholders' and                                                                                             
 minority interests                               20          --         434                                                  
----------------------------------------------------------------------------                                                  
Net income (loss)                           $   (191)   $     --    $    282                                                  
============================================================================                                                  

68

EX-13.1 58th "Page" of 65 TOC 1st Previous Next Bottom Just 58th

NOTE N.  RESTRUCTURING AND OTHER RELATED CHARGES                                

The Company finalized and approved a restructuring plan (the Plan) in           
August 1998. In connection with the Plan, the Company incurred various expenses 
that were recorded in the third and fourth quarters of 1998 and throughout 1999.
These restructuring and other related charges related primarily to the following
activities: planned reductions in the workforce; the consolidation of certain   
processing centers; the exiting of certain businesses and office facilities; the
termination of lease obligations; and the write-off of certain assets related to
these activities. The Plan contemplated a gross reduction in workforce of 4,500 
employees, resulting in a planned net reduction of approximately 2,400          
employees. As of December 31, 1999, the Company had completed essentially all   
aspects of the Plan.                                                            

   The Company accrued $220 million of these restructuring and other related
charges in the third quarter of 1998 (the Initial Accrual). Other charges, such 
as parallel processing costs, relocation costs and retention bonuses, did not   
qualify for accrual under GAAP and have been charged to expense as incurred     
(Period Costs). The Company incurred Period Costs of $83 million and $26 million
during 1999 and the fourth quarter of 1998.                                     

The Company incurred restructuring and other related charges of       
$246 million in 1998 that were composed of the Initial Accrual and fourth       
quarter Period Costs, and which included the following: 1) costs and benefits   
related to planned employee terminations of $98 million, of which $53 million   
related to severance and outplacement costs, $24 million related to other       
employee transition related costs and $21 million related to benefit plan       
curtailment costs; 2) writedown of certain assets to their fair value of        
$74 million, of which $59 million related to a writedown of an intangible asset,
and $15 million of abandoned leasehold improvements and other related fixed     
assets associated with leases that were terminated as part of the restructuring 
plan; 3) lease termination costs of $42 million; and 4) losses incurred on the  
exiting of certain businesses of $32 million.                                   

    The 1998 restructuring and other related charges incurred by Agency Market
Operations were approximately $96 million. These charges included employee      
severance and outplacement costs of $43 million related to the planned net      
reduction in the workforce of approximately 1,200 employees. Lease termination  
costs of approximately $29 million were incurred in connection with the         
consolidation of four regional offices into two zone offices and a reduction of 
the number of claim processing offices from 24 to eight. The Agency Market      
Operations charges also included benefit plan curtailment costs of $12 million, 
parallel-processing charges of $7 million and $5 million of fixed asset         
writedowns. Through December 31, 1998, approximately 364 Agency Market          
Operations employees, the majority of whom were loss adjusters and office       
support staff, had been released.                                               

The 1999 Period Costs incurred by Agency Market Operations were       
approximately $60 million. These charges included employee-related expenses     
(outplacement, retention bonuses and relocation costs) of $23 million, parallel 
processing costs of $16 million and consulting expenses of $10 million. Other   
charges, including technology and facility charges, were approximately          
$15 million. Additionally, Agency Market Operations reduced its estimate for    
lease termination cost by $4 million during 1999. During 1999, approximately    
1,000 Agency Market Operations employees, the majority of whom were office      
support staff, were released.                                                   

The 1998 restructuring and other related charges incurred by Risk     
Management were approximately $88 million. These charges included lease         
termination costs of approximately $8 million associated with the consolidation 
of claim offices in 36 market territories. In addition, employee severance and  
outplacement costs relating to the planned net reduction in workforce of        
approximately 200 employees were approximately $10 million, and the writedown of
fixed and intangible assets was approximately $64 million. Parallel processing  
and other charges were approximately $6 million. Through December 31, 1998,     
approximately 152 Risk Management employees had been released, the majority of  
whom were claim adjusters and office support staff.                             

    The charges related to fixed and intangible assets were due primarily to a
writedown of an intangible asset (goodwill) related to Alexsis, Inc., a wholly  
owned subsidiary acquired by the Company in 1995 that provided claims           
administration services for unrelated parties. As part of the Company's periodic
reviews of asset recoverability and as a result of several adverse events, the  
Company concluded, based on an undiscounted cash flow analysis completed in the 
third quarter of 1998, that an impairment existed. Based on a discounted cash   
flow analysis, a $59 million write-off was necessary. The adverse events        
contributing to this conclusion included operating losses from the business, the
loss of several significant customers whose business volume with this operation 
constituted a large portion of the revenue base and substantial changes in the  
overall market demand for the services offered by this operation, which, in     
turn, had negative effects on the prospects for achieving the profitability     
levels necessary to recover the intangible asset.                               

69

EX-13.1 59th "Page" of 65 TOC 1st Previous Next Bottom Just 59th

The 1999 Period Costs incurred by Risk Management were approximately  
$10 million. These charges included employee-related expenses of $3 million and 
parallel processing charges of $3 million. Other charges, including consulting  
and facility charges, were approximately $7 million. Additionally, Risk         
Management reduced its estimate for lease termination costs by $2 million and   
its estimate of employee severance costs by $1 million during 1999. During 1999,
approximately 136 Risk Management employees were released, the majority of whom 
were claims adjusters and office support staff.                                 

The 1998 restructuring and other related charges incurred by Group    
Operations were approximately $39 million. These charges included approximately 
$29 million of costs related to the Company's decision to exit the Employer     
Health and Affinity lines of business. These costs represent the Company's      
estimate of losses in connection with fulfilling the remaining obligations under
contracts. Earned premiums for these lines of business were approximately       
$400 million in 1998. The 1998 charges also included employee severance and     
outplacement costs of approximately $7 million related to the planned net       
reduction in workforce of approximately 400 employees. Charges for lease        
termination costs and fixed asset writedowns were $3 million. Through           
December 31, 1998, approximately 56 Group Operations employees had been         
released. The majority of the released employees were claims and sales support  
staff.                                                                          

The 1999 Period Costs incurred by Group Operations were approximately 
$5 million. These charges include $7 million of employee severance and related  
charges. Additionally, Group Operations reduced its estimate for business exit  
costs by $2 million during 1999. During 1999, approximately 300 Group Operations
employees were released, the majority of whom were claims adjusters and sales   
support staff.                                                                  

For the other segments of the Company, restructuring and other related
charges were approximately $23 million in 1998. Charges related primarily to the
closing of leased facilities were $3 million, and employee severance and        
outplacement costs related to planned net reductions of 600 employees in the    
current workforce and benefit costs associated with those reductions were       
$13 million. In addition, there were charges of $4 million related to the       
writedown of certain assets and $3 million related to the exiting of certain    
businesses. Through December 31, 1998, approximately 270 employees of these     
other segments, most of whom were underwriters and office support staff, had    
been released.                                                                  

For the other segments of the Company, Period Costs were approximately
$8 million for 1999. These charges were primarily for employee                  
termination-related costs. Through December 31, 1999, approximately 600         
employees of these other segments, most of whom were underwriters and office    
support staff, had been released.                                               

   No restructuring-related charges related to the Plan were incurred during
2000; however, payments were made during 2000 related to amounts accrued under  
the Plan as of December 31, 1999. The following table sets forth the major      
categories of the restructuring accrual and changes therein during 1998, 1999   
and 2000.                                                                       

Accrued Restructuring and Other Related Costs                                   

                                                        [Enlarge/Download Table]

                                               Employee                                                             
                                            Termination                         Lease                               
                                            and Related      Writedown    Termination      Business                 
(In millions)                             Benefit Costs      of Assets          Costs      Exit Costs         Total 
------------------------------------------------------------------------------------------------------------------- 
                                                                                                                    
Initial accrual                                   $  72          $  74          $  42          $  32          $ 220 
 Payments charged against liability                 (14)            --             --             --            (14)
 Costs that did not require cash                    (21)           (74)            --             --            (95)
------------------------------------------------------------------------------------------------------------------- 
Accrued costs at December 31, 1998                   37             --             42             32            111 
 Payments charged against liability                 (32)            --             (9)           (15)           (56)
 Change in estimated costs                           (1)            --             (6)            (2)            (9)
------------------------------------------------------------------------------------------------------------------- 
Accrued costs at December 31, 1999                    4             --             27             15             46 
 Payments charged against liability                  (4)            --            (20)           (15)           (39)
------------------------------------------------------------------------------------------------------------------- 
Accrued costs at December 31, 2000                $  --          $  --          $   7          $  --          $   7 
=================================================================================================================== 

70

EX-13.1 60th "Page" of 65 TOC 1st Previous Next Bottom Just 60th

NOTE O.  SIGNIFICANT ACQUISITIONS AND DISPOSITIONS                              

Individual Life Reinsurance Transaction                                         

Effective December 31, 2000, CNA completed a transaction with Munich American   
Reassurance Company (MARC), whereby MARC acquired CNA's individual life         
reinsurance business (CNA Life Re) via an indemnity reinsurance agreement. CNA  
will continue to accept and retrocede business on existing CNA Life Re contracts
until such time that CNA and MARC are able to execute novations of each of CNA  
Life Re's assumed and retroceded reinsurance contracts.                         

  MARC assumed approximately $294 million of liabilities (primarily future
policy benefits and claim reserves) and approximately $209 million in assets    
(primarily uncollected premiums and deferred policy acquisition costs). The net 
gain from the reinsurance transaction, which is subject to certain post-closing 
adjustments, has been recorded as deferred revenue and will be recognized in    
income over the next 12 to 18 months as CNA Life Re's assumed contracts are     
novated to MARC.                                                                

   The CNA Life Re business contributed net earned premiums of $229 million,
$194 million and $134 million, and pre-tax operating income of $33 million,     
$28 million and $12 million for the years ended December 31, 2000, 1999 and     
1998.                                                                           

Personal Insurance Transaction                                                  

On October 1, 1999, certain subsidiaries of CNA completed a transaction with    
Allstate, whereby CNA's personal lines insurance business and related employees 
were transferred to Allstate. Approximately $1.1 billion of cash and            
$1.1 billion of additional assets (primarily premium receivables and deferred   
policy acquisition costs) were transferred to Allstate, and Allstate assumed    
$2.2 billion of claim and claim adjustment expense reserves and unearned premium
reserves. Additionally, CNA received $140 million in cash which consisted of 1) 
$120 million in ceding commission for the reinsurance of the CNA personal       
insurance business by Allstate and 2) $20 million for an option exercisable     
during 2002 to purchase 100% of the common stock of five CNA insurance          
subsidiaries at a price equal to GAAP carrying value as of the exercise date.   
Also, CNA invested $75 million in a 10-year equity-linked note issued by        
Allstate.                                                                       

    CNA will continue to write new and renewal personal insurance policies and
to reinsure this business with Allstate companies until such time as Allstate   
exercises its option to buy the five CNA subsidiaries. Prior to 2002, the       
Company will concentrate the direct writing of personal lines insurance business
into the five optioned companies, such that most, if not all, business related  
to this transaction will be written by those companies by the date Allstate has 
the opportunity to exercise its option. CNA continues to have primary liability 
on policies reinsured by Allstate.                                              

     CNA will continue to have an ongoing interest in the profitability of CNA's
personal lines insurance business and the related successor business through an 
agreement licensing the "CNA Personal Insurance" trademark and a portion of     
CNA's Agency Market Operations distribution system to Allstate for use in       
Allstate's personal insurance agency business for a period of five years from   
the transaction date. Under this agreement, CNA will receive a royalty fee based
on the business volume of personal insurance policies sold through the CNA      
agents for a period of six years. In addition, the $75 million equity-linked    
note will be redeemed on September 30, 2009 (subject to earlier redemption on   
stated contingencies) for an amount equal to the face amount plus or minus an   
amount not exceeding $10 million, depending on the underwriting profitability of
the CNA Personal Insurance business.                                            

CNA also shares in any reserve development related to claim and claim 
adjustment expense reserves transferred to Allstate at the transaction date.    
Under the reserve development sharing agreement, 80% of any favorable or adverse
reserve development up to $40 million and 90% of any favorable or adverse       
reserve development in excess of $40 million inures to CNA. CNA's obligation    
with respect to unallocated loss adjustment expense reserves was settled at the 
transaction date and is therefore not subject to the reserve sharing            
arrangement.                                                                    

The retroactive portion of the reinsurance transaction, consisting    
primarily of the cession of claim and claim adjustment expense reserves         
approximating $1.0 billion, was not recognized as reinsurance because the       
criteria for risk transfer were not met for this portion of the transaction. The
related consideration paid was recorded as a deposit and is included in         
reinsurance receivables in the consolidated balance sheets. The prospective     
portion of the transaction, which as of the transaction date consisted primarily
of the cession of $1.1 billion of unearned premium reserves, has been recorded  
as reinsurance. The related consideration paid was recorded as prepaid          
reinsurance premiums. Premiums ceded after the transaction date will follow this
same treatment. The $20 million received from Allstate for the option to        
purchase the five CNA subsidiaries was deferred and will not be recognized until
Allstate exercises its option or the option expires.                            

   CNA recognized an after-tax realized loss of approximately $39 million in
1999 related to the transaction, consisting primarily of the accrual of lease   
obligations and the write-down of assets that related specifically to the       
Personal Insurance lines of business. The $120 million ceding commission related
to the prospective portion of the transaction has been recognized in proportion 
to the recognition of the unearned premium reserves to which it relates. Ceding 
commission earned was $69 million and $51 million in 2000 and 1999. Royalty fees
earned in 2000 and 1999 were approximately $27 million and $7 million.          

71

EX-13.1 61st "Page" of 65 TOC 1st Previous Next Bottom Just 61st

     The Personal Insurance lines transferred to Allstate contributed net earned
premiums of $1,354 million and $1,622 million and pre-tax operating income of   
$89 million and $97 million for the years ended December 31, 1999 and 1998.     

Sale of AMS Services, Inc.                                                      

On November 30, 1999, CNA sold the majority of its interest in AMS Services,    
Inc. (AMS), a software development company serving the insurance agency market. 
Prior to the sale, CNA owned 89% of AMS and consolidated AMS in its financial   
statements. As a result of the sale, CNA owns 9% of AMS and therefore AMS is no 
longer consolidated. CNA recognized an after-tax gain of $21 million on the     
sale. Total assets of AMS as of the sale date were approximately $135 million.  
CNA's share of the AMS operating results were $206 million and $264 million of  
operating revenue and $8 million and $28 million of operating losses for the 11 
months ended November 30, 1999 and the year ended December 31, 1998.            

NOTE P.  QUARTERLY FINANCIAL DATA (UNAUDITED)                                   

The following tables set forth unaudited quarterly financial data for the years 
ended December 31, 2000 and 1999.                                               

Quarterly Financial Data (Unaudited)                                            

                                                        [Enlarge/Download Table]

(In millions, except per share data)                               First         Second         Third         Fourth           Year 
----------------------------------------------------------------------------------------------------------------------------------- 
                                                                                                                                    
2000 Quarters                                                                                                                       
Revenues                                                        $  3,509       $  3,855      $  4,337       $  3,913       $ 15,614 
=================================================================================================================================== 
Net operating income excluding realized                                                                                             
 investment gains                                               $     84       $     88      $     90       $     92       $    354 
Net realized investment gains                                         57            242           460            101            860 
----------------------------------------------------------------------------------------------------------------------------------- 
Net income                                                      $    141       $    330      $    550       $    193       $  1,214 
Basic and diluted earnings per share                            $   0.76       $   1.80      $   3.00       $   1.06       $   6.61 
=================================================================================================================================== 

1999 Quarters                                                                                                                       
Revenues                                                        $  4,347       $  4,347      $  4,001       $  3,708       $ 16,403 
=================================================================================================================================== 
Net operating income (loss) excluding realized                                                                                      
 investment gains (losses)                                      $     28       $     45      $     82       $   (300)      $   (145)
Net realized investment gains (losses)                               144            109           (53)            (8)           192 
----------------------------------------------------------------------------------------------------------------------------------- 
Net income (loss) before cumulative effect                                                                                          
 of a change in accounting principle                                 172            154            29           (308)            47 
Cumulative effect of a change in accounting                                                                                         
 principle, net of tax                                              (177)            --            --             --           (177)
----------------------------------------------------------------------------------------------------------------------------------- 
Net (loss) income                                               $     (5)      $    154      $     29       $   (308)      $   (130)
=================================================================================================================================== 
Basic and diluted (loss) earnings per share                     $  (0.05)      $   0.82      $   0.15       $  (1.68)      $  (0.77)

NOTE Q.  RELATED PARTY TRANSACTIONS                                             

CNA reimburses Loews, or pays directly, for management fees, travel and related 
expenses and expenses of investment facilities and services provided to CNA.    
These amounts were approximately $14 million, $13 million and $13 million in    
2000, 1999 and 1998.                                                            

    CNA and its eligible subsidiaries are included in the consolidated federal
income tax return of Loews and its eligible subsidiaries. See Note D for a      
detailed description of the income tax agreement and tax payments made between  
the Company and Loews.                                                          

    CNA writes, at standard rates, a limited amount of insurance for Loews and
its affiliates. The total premiums from Loews and its affiliates were $5 million
for both 2000 and 1999 and $6 million in 1998.                                  

     CNA assumes the risk for a limited amount of insurance from R.V.I. Guaranty
Company, Inc. (RVI), an affiliate. CNA assumed approximately $12 million and    
$5 million in written premiums from RVI during 2000 and 1999.                   

CNA sponsors a stock ownership plan whereby the Company finances the  
purchase of Company stock by certain executive officers. See Note K for a       
detailed discussion of this plan.                                               

72

EX-13.1 62nd "Page" of 65 TOC 1st Previous Next Bottom Just 62nd

                                                    INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------

The Board of Directors and Stockholders                                         
of CNA Financial Corporation                                                    

We have audited the consolidated balance sheets of CNA Financial Corporation (an
affiliate of Loews Corporation) and subsidiaries as of December 31, 2000 and    
1999, and the related consolidated statements of operations, stockholders'      
equity, and cash flows for each of the three years in the period ended          
December 31, 2000. These financial statements are the responsibility of the     
Company's management. Our responsibility is to express an opinion on these      
financial statements based on our audits.                                       

 We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan  
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a 
test basis, evidence supporting the amounts and disclosures in the financial    
statements. An audit also includes assessing the accounting principles used and 
significant estimates made by management, as well as evaluating the overall     
financial statement presentation. We believe that our audits provide a          
reasonable basis for our opinion.                                               

   In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of CNA Financial Corporation and  
subsidiaries as of December 31, 2000 and 1999, and the results of their         
operations and their cash flows for each of the three years in the period ended 
December 31, 2000 in conformity with accounting principles generally accepted in
the United States of America.                                                   

As discussed in Note A to the consolidated financial statements, the  
Company changed its method of accounting for liabilities for insurance-related  
assessments in 1999.                                                            

DELOITTE & TOUCHE LLP                                                           
Chicago, Illinois                                                               
February 14, 2001                                                               

73

EX-13.1 63rd "Page" of 65 TOC 1st Previous Next Bottom Just 63rd

DIRECTORS AND OFFICERS                                                          
--------------------------------------------------------------------------------

DIRECTORS                                                                       

Antoinette Cook Bush  o + @ #                                                   
Executive Vice President                                                        
Northpoint Technology Ltd.                                                      

Dennis H. Chookaszian  + @                                                      
Board of Directors                                                              
mPower Advisors, LLC                                                            

Ronald L. Gallatin  o + @ #                                                     
Independent Consultant                                                          

Robert P. Gwinn(1)  o + @ #                                                     
Retired Chairman                                                                
and Chief Executive Officer                                                     
Encyclopaedia Britannica                                                        

Walter L. Harris  o + @                                                         
President and Chief Executive Officer                                           
Tanenbaum-Harber Co., Inc.                                                      

Bernard L. Hengesbaugh  + @                                                     
Chairman and Chief Executive Officer                                            
CNA insurance companies                                                         

Walter F. Mondale(1)  o + @                                                     
Partner                                                                         
Dorsey & Whitney LLP                                                            

Edward J. Noha   + @                                                            
Chairman of the Board                                                           
CNA Financial Corporation                                                       

Joseph Rosenberg   + @                                                          
Senior Investment Strategist                                                    
Loews Corporation                                                               

James S. Tisch   + @                                                            
President and Chief Executive Officer                                           
Loews Corporation                                                               

Laurence A. Tisch   + @                                                         
Chief Executive Officer                                                         
CNA Financial Corporation                                                       
Co-Chairman of the Board                                                        
Loews Corporation                                                               

Preston R. Tisch   + @                                                          
Co-Chairman of the Board                                                        
Loews Corporation                                                               

Marvin Zonis  o + @ #                                                           
Professor of International                                                      
Political Economy                                                               
University of Chicago                                                           
Graduate School of Business                                                     

Committees of the Board:                                                        

o     Audit                                                                     
+     Executive                                                                 
@     Finance                                                                   
#     Incentive Compensation                                                    

Red symbol indicates committee chairperson                                      

OFFICERS                                                                        

Laurence A. Tisch                                                               
Chief Executive Officer                                                         
CNA Financial Corporation                                                       

Bernard L. Hengesbaugh                                                          
Chairman and Chief Executive Officer                                            
CNA insurance companies                                                         

Robert V. Deutsch                                                               
Senior Vice President                                                           
and Chief Financial Officer                                                     
CNA Financial Corporation                                                       

(1) Retirement to be effective May 2001.                                        
(2) Retired effective February 28, 2001.                                        

Jonathan D. Kantor                                                              
Senior Vice President,                                                          
General Counsel and Secretary                                                   
CNA Financial Corporation                                                       

Thomas F. Taylor(2)                                                             
Executive Vice President                                                        
CNA insurance companies                                                         

74

EX-13.1 64th "Page" of 65 TOC 1st Previous Next Bottom Just 64th

                                                             COMPANY INFORMATION
--------------------------------------------------------------------------------

COMPANY HEADQUARTERS                                                            

CNA Financial Corporation                                                       
CNA Plaza                                                                       
333 South Wabash Avenue                                                         
Chicago, IL 60685                                                               
312-822-5000                                                                    
www.cna.com                                                                     

STOCKHOLDER INFORMATION                                                         

CNA's common stock is listed on the New York Stock Exchange, the Chicago Stock  
Exchange and the Pacific Exchange, and is traded on the Philadelphia Stock      
Exchange. Its trading symbol is CNA.                                            

SHARES OUTSTANDING                                                              

As of March 8, 2001, CNA had 183,264,248 shares of common stock outstanding.    
Approximately 87 percent of CNA's outstanding common stock is owned by Loews    
Corporation. CNA had 2,540 stockholders of record at March 8, 2001.             

COMMON STOCK INFORMATION                                                        

The table below shows the high and low closing sales prices for CNA's common    
stock based on the New York Stock Exchange Composite Transactions. No dividends 
have been paid on CNA's common stock in order to develop and maintain a strong  
surplus position necessary to support business growth in an increasingly        
competitive environment for CNA's insurance subsidiaries. CNA's ability to pay  
dividends is influenced, in part, by dividend restrictions of its principal     
operating insurance subsidiaries as described in Note K to the Consolidated     
Financial Statements.                                                           

ANNUAL MEETING                                                                  

The Annual Meeting of Stockholders will be held at 10:00 a.m. Central time on   
Wednesday, May 2, 2001 in Room 207N, CNA Plaza, 333 South Wabash Avenue,        
Chicago, Illinois.                                                              

     Shareholders unable to attend are requested to exercise their right to vote
by proxy. Proxy materials will be mailed to shareholders prior to the meeting.  

FORM 10-K                                                                       

A copy of CNA Financial Corporation's annual report on Form 10-K, which is filed
with the Securities and Exchange Commission, will be furnished to shareholders  
without charge upon written request to:                                         
Jonathan D. Kantor                                                              
Senior Vice President,                                                          
General Counsel and Secretary                                                   
CNA Financial Corporation                                                       
CNA Plaza, 43 South                                                             
Chicago, IL 60685                                                               

INDEPENDENT AUDITORS                                                            

Deloitte & Touche LLP                                                           
180 North Stetson Avenue                                                        
Chicago, IL 60601                                                               

INVESTOR RELATIONS                                                              

Donald P. Lofe, Jr.                                                             
Group Vice President, Corporate Finance                                         
CNA Financial Corporation                                                       
CNA Plaza, 22 South                                                             
Chicago, IL 60685                                                               
312-822-3993                                                                    

EX-13.1 Last "Page" of 65 TOC 1st Previous Next Bottom Just 65th

TRANSFER AGENT AND REGISTRAR                                                    

First Chicago Trust Company of New York                                         
c/o EquiServe                                                                   
P.O. Box 2500                                                                   
Jersey City, NJ 07303-2500                                                      

Telephone                                                                       

Inside the United States                                                        
1-800-446-2617                                                                  

Outside the United States                                                       
1-201-324-0498                                                                  

TDD/TTY for hearing impaired                                                    
1-201-222-4955                                                                  

(Operators are available Monday - Friday, 8:30 a.m. to 7:00 p.m. Eastern time.  
An interactive automated system is available around the clock every day.)       

Internet                                                                        

www.equiserve.com                                                               

Certificate transfers by mail                                                   

EquiServe                                                                       
P.O. Box 2589                                                                   
Jersey City, NJ 07303-2506                                                      

Certificate transfers by private courier                                        

EquiServe                                                                       
Transfer Department                                                             
525 Washington Boulevard                                                        
Jersey City, NJ 07310                                                           

Certificate transfers by messenger                                              

EquiServe                                                                       
c/o Securities Transfer                                                         
and Reporting Service, Inc.                                                     
100 William Street, Galleria                                                    
New York, NY 10038                                                              

COMMON STOCK INFORMATION                                                        

2000                              

Quarter       High      Low                                                     

Fourth     40 1/16  32 1/16                                                     

Third     41 15/16   34 3/8                                                     

Second    36 15/16   27 1/8                                                     

First       39 1/8  24 9/16                                                     

1999                              

Quarter       High       Low                                                    

Fourth      42 1/8  33 15/16                                                    

Third       41 1/4   34 5/16                                                    

Second     45 5/16   35 1/16                                                    

First           41        33

EX-13.1	1st "Page" of 65	TOC	Top	Previous	Next	Bottom	Just 1st

EX-13.1	2nd "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 2nd

EX-13.1	3rd "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 3rd

EX-13.1	4th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 4th

EX-13.1	5th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 5th

EX-13.1	6th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 6th

EX-13.1	7th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 7th

EX-13.1	8th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 8th

EX-13.1	9th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 9th

EX-13.1	10th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 10th

EX-13.1	11th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 11th

EX-13.1	12th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 12th

EX-13.1	13th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 13th

EX-13.1	14th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 14th

EX-13.1	15th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 15th

EX-13.1	16th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 16th

EX-13.1	17th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 17th

EX-13.1	18th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 18th

EX-13.1	19th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 19th

EX-13.1	20th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 20th

EX-13.1	21st "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 21st

EX-13.1	22nd "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 22nd

EX-13.1	23rd "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 23rd

EX-13.1	24th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 24th

EX-13.1	25th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 25th

EX-13.1	26th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 26th

EX-13.1	27th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 27th

EX-13.1	28th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 28th

EX-13.1	29th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 29th

EX-13.1	30th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 30th

EX-13.1	31st "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 31st

EX-13.1	32nd "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 32nd

EX-13.1	33rd "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 33rd

EX-13.1	34th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 34th

EX-13.1	35th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 35th

EX-13.1	36th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 36th

EX-13.1	37th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 37th

EX-13.1	38th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 38th

EX-13.1	39th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 39th

EX-13.1	40th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 40th

EX-13.1	41st "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 41st

EX-13.1	42nd "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 42nd

EX-13.1	43rd "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 43rd

EX-13.1	44th "Page" of 65	TOC	1st	Previous	Next	Bottom	Just 44th

Dates Referenced Herein and Documents Incorporated By Reference

		Referenced-On Page
This 10-K Filing	Date	First	Last	Other Filings

	4/1/97	47
	8/18/97	25		S-3
	1/1/98	32
	7/1/98	12
	8/5/98	18
	12/23/98	25	53
	12/31/98	18	61	10-K
	4/15/99	25	50
	4/19/99	25
	6/30/99	25	53	13F-HR, 10-Q
	8/2/99	25	50
	10/1/99	8	60
	11/1/99	13
	11/30/99	61
	12/1/99	47
	12/15/99	26	35
	12/31/99	18	62	13F-HR/A, 10-K/A, 13F-HR, 10-K
	1/1/00	52
	1/26/00	47
	2/15/00	25	50	SC 13G/A
	4/24/00	51
	9/22/00	13
	10/1/00	26	35
	12/14/00	42	50
For The Period Ended	12/31/00	16	62	13F-HR/A, 13F-HR
	1/1/01	12	54
	1/29/01	5
	2/14/01	62		SC 13G
	2/28/01	63
	3/8/01	64
	3/10/01	6
Filed On / Filed As Of	3/16/01
	5/2/01	64		DEF 14A
	7/1/01	13
	9/30/09	60
	6/30/13	25	50

Top				List All Filings

Filing Submission - Alternative Formats (Word / Rich Text, HTML, Plain Text, SGML, XML, et al.)

			in		Show		and
Help...	Wildcards: ? (any letter), * (many). *Logic:* for Docs: & (and), \| (or); for Text: \| (anywhere), "(&)" (near).

Cna Financial Corp · 10-K · For 12/31/00 · EX-13.1

Filed On 3/16/01 5:21pm ET · SEC File 1-05823 · Accession Number 891554-1-501431

Annual Report · Form 10-KFiling Table of Contents

EX-13.1 · Annual Report

Dates Referenced Herein and Documents Incorporated By Reference

Annual Report · Form 10-K
Filing Table of Contents