Good day everyone. Welcome to the CNA Financial Corporation’s fourth quarter and full year 2009 earnings conference call. Today’s call is being recorded. At this time I would like to turn the conference over to Nancy Bufalino.

Welcome to the CNA’s fourth quarter earnings call. Our press release was issued earlier this morning so hopefully everyone has had an opportunity to review it along with the financial supplement which can be found on the CNA website. With us this morning are Tom Motamed, our Chairman and CEO and Craig Mense, our CFO. Tom and Craig will provide some prepared remarks before opening it up for questions. Before we get started, I would like to advise everyone that during this call there may be forward-looking statements made and references to non-GAAP financial measures. Please see the sections of the earnings release headed Financial Measures and Forward-Looking Statements for further detail. In addition, the forward-looking statements speak only as of today, February 8, 2010. CNA expressly disclaims any obligation to update or revise any forward-looking statements made during this call. This call is being recorded and webcast. During the next week the call may be accessed again on CNA’s website at www.cna.com. With that, I will turn the call over to CNA’s Chairman and CEO, Tom Motamed.

Thanks Nancy. Good morning everyone and thank you for joining us today. We are pleased to report that our fourth quarter full year results improved significantly in 2009. Fourth quarter net operating income was $197 million or $0.63 per common share in 2009 as compared to $21 million net operating loss or $0.15 per common share in 2008. Net income in the fourth quarter was $246 million or $0.81 per common share compared with a net loss of $336 million or $1.31 per common share in 2008. Key drivers of these improved results were investment income, favorable prior year development, and net realized investment results. For the year, net operating income was $982 million or $3.20 per common share as compared to $533 million or $1.91 per common share in 2008. Net income was $419 million or $1.10 per common share compared with a net loss of $299 million or $1.18 per share in 2008. In addition to the drivers I just mentioned, our full year results benefited from lower catastrophe losses. Turning to our core property casualty operations, the 2009 combined ratio was 96.9 which included 6.5 points of favorable development compared to 4.4 points in 2008. Catastrophes added 1.4 points to the 2009 combined ratio and 5.7 points in the 2008 ratio. Before development and catastrophes, the 2009 combined ratio was 102 as compared to 96.7 in the prior year. The 2009 accident year loss ratio before catastrophes increased approximately 2 points to 69.1% driven by large loss activity and property lines early in 2009 and higher frequency and severity in certain areas of our workers compensation business. Property and casualty operations net written premiums decreased 6% in 2009 to $6.1 billion. The decrease reflects the impact of the economy on our exposure base as well as our…

Thanks, Tom and good morning everyone. As has been the pattern from past calls, I would like to review our financial results both for the fourth quarter and full year with particular attention to our performance against the financial priorities that we established at the beginning of 2009. We reported operating earnings of $197 million for the quarter and $982 million for the year. These earnings represent operating ROEs of 7% and 9% for the same respective periods. While these results are below our longer term targets and the performance of some of our leading peers, they are still at respectable levels and mark our sixth straight year of operating profits. Our balance sheet and capital position remain very strong and shows consistent improvement this quarter. We continue to maintain a very conservative capital structure and to exhibit a strong cash flow and liquidity profile. The dramatic recovery of our investment portfolio was a major highlight of the year. Earnings and the sustained recovery of our investment portfolio continue to drive capital growth this quarter. Book value per share has now increased 72% from year end 2008 to $35.91 per share. With respect to our capital position, we ended the year with GAAP common shareholders’ equity of $9.7 billion up 72% from $5.6 billion at the end of 2008. Our debt to total capital ratio is now 17.8% as compared to 23% at the beginning of 2009. Our earnings coverage ratio is a healthy 6 times the interest on our public debt and preferred stock dividends. Our regulatory capital shows similar improvement. [Inaudible] surplus increased 19% from $7.8 billion to $9.3 billion over the course of 2009. Importantly, we have also generated significant dividend capacity in our primary insurance subsidiary. In addition, the holding company has approximately $400 million in…

Thanks, Craig. Before we open it up for questions, I would like to close with some summary observations. Last May we announced a three part strategy to drive top and bottom line growth. First, developing and deepening our expertise to serve our chosen industry segments while also maintaining an appetite for a broad range of good risks. Second, manage our mix of business to improve profitability, third, extend our geographic reach and improve our capabilities at the point of sale. We have put our strategy into action on many fronts. We have developed and implemented 11 industry segment strategies aimed at delivering differentiated products and services. We upgraded leadership talent in commercial and small business and we upgraded field operations leadership at the home office zone and branch levels. These leaders are fully aligned with our strategy and have a track record of delivering results. We put a structure in place to support our strategy of enterprise segmentation and cross selling within specialty and commercial. This structure includes new underwriting and business development positions to extend our underwriting outreach and drive sales across CNA. To better align our field structure with our agency plant, we opened a new branch office in Chicago. This year we are planning to open offices in Washington DC, Los Angeles, Birmingham, Alabama, and West Chester County, New York. We provided front line underwriters with improved pricing metrics and made the branches fully responsible for profit and loss in their territories. We have launched a range of initiatives to manage the mix by shifting towards focus industries and commercial exiting poorly performing accounts and segments and launching growth initiatives in Specialty. We are strengthening producer relationships by improving our organizational sales capability. I am pleased with the progress we have made so far. However, looking ahead,…

(Operator Instructions) Your first question comes from Jay Cohen – Bank of America Merrill Lynch. Jay Cohen – Bank of America Merrill Lynch: A couple of questions. First is, the expense ratio picked up and you mentioned some of the issues behind that but some of it sounds I guess somewhat, not permanent, but it’s not just all obviously one time in nature. I’m wondering if you have a target for next year. Obviously you’re taking a closer look at expenses. Do you think you can get it back down to where it was in 2008 given the environment?

I think number one, we’re cognizant that it kicked up. As we said, if you look at the quarter, the decrease in net earned premium was equivalent to about 0.7 of a point. Employee related expenses 1.7 points and the increase in industry assessments, 1.3 points. Overall for the year, the headcount was off 2%. As I mentioned in the areas that we focus on relative to our expense focus in the staff areas, the one area we looked at, head count was down 7%. So we are looking at head count but we’re looking at it in a controlled way based on what expertise we need to execute the strategy but we will continue to work on pushing it down. But obviously premium has a lot to do with it. If we can stabilize our premium, get growth up to flat, that’s going to help quite a bit. Then I think the employee related expenses we should be able to manage that over time. We did invest in quite a few number of new jobs in the field in 2009, particularly in the Specialty area and excess surplus lines which we both see as areas we want to grow. They are profitable, so part of it is shifting headcount around and looking for greater efficiency and effectiveness. We have not picked a target. That was your question. Rather we’re going to manage the pieces and eventually get it to a lower number over time. Jay Cohen – Bank of America Merrill Lynch: Part of the question was you had suggested that these cost savings that you’re focusing on for I guess more of the support areas, you were going to “reinvest” in the business which I guess would suggest maybe you don’t see a drop in the expense ratio.

Good question but the fact is we’ve already invested in the business by putting these jobs on the ground, creating different jobs such as business development, more senior underwriting jobs in the field. That’s already in place. So we have kind of spent the money first and now we’re taking some of the costs out. Jay Cohen – Bank of America Merrill Lynch: The E&S business, I seem to recall this was in what had been called Standard Commercial has moved to Specialty, now you’re moving it back to CNA Commercial. It sounds like a Specialty type business. I’m wondering what’s the reason you’re putting it back in the commercial business.

We look at it as a line of business issue so if they’re selling general liability policies, or they’re selling property policies, that aligns with commercial, not Specialty. The definition of Specialty around the industry bounces around quite a bit. But we are really taking kind of a line of business approach as to how we put businesses within Commercial or Specialty. Jay Cohen – Bank of America Merrill Lynch: If it’s possible, if you could get us some prior quarters restated so our models don’t get too screwed up.

Those should all be out there, we filed an 8-K and looking down at Nancy, January 21 we restated 7 and 9 and all of the quarters of 9. Jay Cohen – Bank of America Merrill Lynch: The debt offering, it didn’t look like you had any additional debt coming due until August 11 and I was wondering what the rationale was for issuing debt here.

We used the proceeds to repay a portion of the preferred so the reason we did it was capital efficiency so we eliminated 10% non-tax deductible preferred and in its place put a [7 and 735] tax deductible debt. Jay Cohen – Bank of America Merrill Lynch: How much of the preferred is left at this point?

$1 billion is left.

Your next question comes from Robert Glasspiegel - Langen McAlenney.

Assessments you said was 1.3 points, do you have a dollar amount and was that sort of incremental or absolute?

That was incremental increases. I don’t have an exact dollar amount for you but it crossed a bunch of different second injury funds, New York, Department of Labor, and a few other states.

So that’s overall expense ratio on PC if I want to do the calculations?

What you have to think is the expense ratio is up about 3 points from the prior year and what we’ve given you is where that 3 points is allocated. It doesn’t come up exactly, there’s some miscellaneous in there.

Do you think that’s going to be an incremental pressure perspectively at this rate or do you just try to get ahead of the curve?

I would say number one, we don’t believe that it’s going to tick up. We’ve got our finger on all the components including the controllable expenses so we did a much tighter job when we did our planning for 2010 on where our expenses are and what they actually are, so I don’t expect that getting worse. Our hope is over time it will get better. I don’t think we’re going to see the real benefits until 2011 as we work through the sufficiency and effectiveness piece of the expense strategy.

You didn’t do your Investor Day. I was wondering is Jon Kantor on the line to be able to talk about asbestos and environmental or if you could just give us a couple paragraphs in what wiggled this quarter? I’d appreciate that.

Jon’s here.

As Craig says, there are no secular changes in asbestos or pollution and you may want to take a look and the [AM Best] report that came out in the beginning of December which confirms that. Just around the edges, more Defendants are deciding to try cases in the asbestos arena. Site activity is up in some key jurisdictions like New York and California. So that would be the key takeaway in asbestos for this quarter. Solution is just a matter of, you have remediation costs developing over quite a bit of time in some of the larger sites and you do tend to get an increase in remediation costs over time at some of these dig sites and [inaudible] pay losses in the pollution area have remained stubbornly high, higher than expected, but they are coming down and that is very much our experience as well.

So just concluding, would it be fair to say minor wiggle in what’s been sort of a secular improving segment or am I oversimplifying?

What I’m saying is that there are many trends but the overall trend is downward over time in terms of pay losses and incurred losses for the industry. It’s a bumpy ride and there will be lumpy years and lumpy quarters along the way.

Where are you on these investment portfolios being where you want them to be from a d risk basis? You talked about what you’ve done but where’s the end zone timing?

Richard Scott is here as well and I can ask him to comment after I comment. Repositioning portfolios is never really done as you’re thinking about reaction to the market. But I think what you ought to expect from us going forward is likely continued reduction in the non-agency structure runoff and obviously we’d like to, as our confidence in the market improves, put more of the cash to work. I think that’s generally what you should expect to see from us.

I want to comment on a couple of things. One, if you think about what has happened in the market over the last several years, two of the major asset classes that have been historically been AAA asset classes, namely municipal bonds and non-agency structured securities, are fundamentally AAA asset classes, so we for a variety of reasons have been reducing both of those asset classes and would expect to continue to do so. Not so much because of rating but because of just uncertainties on the structured side as to the amount of cash flow that’s going to come off. No matter where they’re rated and no matter where you own them, that is an area that is yet to crystallize in terms of ultimate result and I think that so long as the structured market is more or less closed to new issuance it will continue to struggle a little bit in the market. We’re also in a tax position where we don’t get the full current benefit of tax exempt interest income but you should expect to see our tax exempt municipal portfolio continue to shrink. To some degree that will be offset by increases in the holdings of taxable municipals, particularly [BABS] but from a perspective of de-risking per se, I think most of what I would view as circumstances where we were in the position of wanting to reduce the volatility, most of that is already done.

Your next question comes from Matthew Carletti - Macquarie Research Equities.

I just want to ask a question on capital. Capital has rebounded very nicely, both [stat] and GAAP from a year ago. You’ve paid down a little of the preferred but I was hoping you could comment on your appetite or willingness to pay that down further and what, given the terms of it, what [Lowe’s] appetite might be to allow you to pay it down.

I want to repeat and reference you back to what we said last quarter that we certainly would like to pay it down as soon as it’s practical but neither anybody here nor anybody at Lowe’s is anxious about getting it done, so we’re trying to bounce our longer term objective and get an upgrade from the rating agencies. What I said last quarter is the natural move to stable which has now happened with the [AA Invest] announcement this morning so we’re going to balance that objective of getting the upgrade, positioning the upgrade with the paybacks, so I think you should expect us to be cautious in terms of our movement and likely will move incrementally like we did last quarter and as our confidence in the earnings and then the investment market improves, you can expect us to act over time.

Your next question comes from Adam Star - Gulfside Asset Management.

Can you just give a little more color on the adverse development in the fourth quarter and the commercial lines and whether there’s any indication as to whether that future in the writing will reflect different assumptions?

Could you repeat it? You’re not coming across very clearly.

Could you just discuss the adverse reserve development in the commercial lines during the fourth quarter and whether that has any implication for future results in those lines?

The reserve development in commercial lines was positive, was favorable for the quarter and for the year, over $100 million pretax this quarter. So the unfavorable development was in our asbestos and pollution and Mass Tort reserves.

Will there be future reserving patterns reflecting that or do you think you’ve got it pretty much behind you?

It’s in the current accident year so the deterioration is already in the number. The other thing is we had workers comp deteriorated in the quarter.

The press release indicates that it’s in the commercial but I guess in the press release you’re including the yields [inaudible] within that, accident year in the press release.

There is favorable prior year development in general in commercial. There was some deterioration in prior year comp in commercial but it was more than offset by the favorable stuff and there was some strength in the current accident year in commercial and workers comp. In a separate discussion you’ll see in the press release related to the corporate segment which is where the asbestos, pollution, and Mass Tort is centered.

That was largely workers comp or was it new business or new accounts or was it just old business where patterns had changed?

The workers comp piece, both the prior year adverse development which was more than offset by favorable development in property lines and the current accident year increased, was related to one area of our workers comp book and it’s a smaller segment but noticeable. We think we’ve dealt with it and got it behind us.

Your next question comes from Daniel Johnson – Citadel Investment Group. Daniel Johnson – Citadel Investment Group: Would you guys maybe provide a little more color around the support function changes that you maybe a) have already completed b) you plan to complete, maybe trying to scope out sizing in terms of potential savings so we get a sense of the magnitude of the reinvestment dollars that are going back into the business, and are we pretty much assuming that’s a one for one initiative in terms of reinvesting the savings?

Complicated question, complicated answer. What I would say is that what we are focused on is most of the staff functions within the organization so this would be non-production related so think of that as the deal that is production related that staff positions would be for the most part focused in the home office as well as various processing areas around the company so that’s what we’re focusing on. We’re kind of going one area at a time. We have not I’ll say finalized a number as to potential total spend but we think it’s pretty significant but we’re clearly doing this from the standpoint of making us more efficient and more effective. This is not an attempt or I should say a Draconian attempt to just say we’re going to cut out 5% or 10%. It’s really going area by area and doing a pretty deep dive as to work flow, process, function, so we’re encouraged. As we said, one area that we’ve looked at already, the headcount, is off about 7% in that area. We expect over time that will be less but we’re not prepared to put anything out there that says this is exactly what the cuts are going to be, by when, etc. It will show up as we move forward and as I said earlier, a lot of this will not show up until 2011. Daniel Johnson – Citadel Investment Group: In terms of the savings or in terms of the impact of the reinvestments.

The savings. Daniel Johnson – Citadel Investment Group: The reinvestments, maybe just, I know you said you’re opening up some new branches, anything else you’d want to highlight?

As we said earlier, we already have put more people on the ground and in the field. Whether those are Specialty underwriters, excess surplus lines, underwriters, business development, marketing people, and also commercial underwriters at a pretty high level of expertise. So we have already done that, that’s kind of baked in, and over time we expect that we’ll become more effective, more efficient, and we’ll get some other costs out of the place, so we’ve kind of done the investment first and now we’re going to start harvesting some costs. Daniel Johnson – Citadel Investment Group: So then there has been some spend up front so that we may see some benefit but as I said, not exactly.

What we’re trying to do is number one, we want to get the loss ratio down and we want to grow in those segments where we think there are profitable margins and we have kind of put that piece in demotion. We’re pretty pleased with that. The next thing is identifying cost savings, whether that’s redundancy, inefficiencies, etc. and most of that will come out of what we would call the staff areas, many of which are support areas.

Your next question comes from Jay Cohen – Bank of America Merrill Lynch. Jay Cohen – Bank of America Merrill Lynch: On the investment side, I guess you suggested you have still a fair amount of short term and cash in the portfolio and I guess you suggested that you were looking to redeploy it when the market looks better and I’m wondering when do you think that’s going to be? Are you looking to do this relatively soon or over the course of the next two years?

We’re not looking to do it relatively soon. We’re going to do it just as Richard said as our outlook in the market and depending on the direction of interest rates and our general confidence in stability in the market improved. It’s not something you should look first to do. We’re not anxious to do it immediately, expect to do it over time.

One way I would phrase it to you is from a target duration including cash on the general account, we are not that far off from where we want to be, so I would characterize our long term intent there is more to do with where we want to be positioned on the curve then necessarily much of anything else. It’s more of a duration targeting than an amount of cash targeting exercise. Jay Cohen – Bank of America Merrill Lynch: The next question is on the favorable reserve development which looks like both in the Specialty business and in the Commercial business jumped up quite a bit from the pace we had been seeing and I’m wondering was there any change in the methodology at all or was it simply the claims trend looked a little bit better than you’d been seeing?

I think first of all in the fourth quarter we looked at much of our global affiliate book and surety and so therefore we looked at Europe, we looked at Canada, we looked at the surety business, and clearly these were areas that had significant favorable development so just a question of what we looked at. On the property side we were able to relive some reserves related to Hurricanes Gustav and Ike so this was kind of a convergence of a lot of things just happening in the fourth quarter. Jay Cohen – Bank of America Merrill Lynch: In general on the reserves, have you made any changes in the reserving methodology in general? Tom since you’ve gotten there, given that [chub] had sort of a defined way of looking at reserves, have you changed the way CNA approaches reserves at all?

I would say no but we are doing I think a much better job getting reserves up on a case basis which is very helpful. As you know, most of the reserves in a given year start with [IB&R] and as the claims people put up case reserves, the two kind of balance. Ultimately it all goes into case but clearly I think we’re doing a much better job on the claims side getting the reserves up in a timely fashion and a more accurate fashion so I wouldn’t say it’s a new process, I would say it’s better execution at the claim level and we are also investing resources in our actuarial area which we believe will also have a benefit too.

Your next question comes from Matthew Carletti - Macquarie Research Equities.

I just want to ask a question relating to insider trading activity. Can you just generally remind me when [inaudible] has been able to buy or not buy, when the block out periods are generally around the quarter for CNA and when you might be able to be in the market?

Jon, do you want to answer that?

Our rule of thumb is 30 days. That can be extended if everything is quiet and there’s no material variation at the time but the general rule of thumb is 30 days.

So you’re saying go quiet 30 days before the end of the quarter?

No, I’m saying the window is 30 days from earnings.

From the earnings release. Okay.

There are no other questions holding. I’ll turn things back over to our speakers for any additional or closing comments today.

Thank you very much. See you next quarter.

With that ladies and gentlemen, we’ll conclude today’s call. Again, thank you for joining us and once more, have a good day.