<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [ ]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CNA FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
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<PAGE> 2
CNA FINANCIAL CORPORATION
---------------
Notice of Annual Meeting -- May 6, 1998
To the Stockholders of
CNA FINANCIAL CORPORATION:
You are hereby notified that pursuant to the By-Laws of CNA Financial
Corporation, a Delaware corporation, the annual meeting of Stockholders will be
held at CNA Plaza (333 South Wabash Avenue), Room 207N, Chicago, Illinois, on
Wednesday, May 6, 1998, at 10:00 a.m., Chicago time, for the following purposes:
(1) To elect twelve Directors;
(2) To authorize an amendment to the Company's Certificate of Incorporation
to remove certain indemnification provisions as more fully described
herein.
(3) To ratify the appointment of Deloitte & Touche LLP as independent
auditors for the Company; and
(4) To transact such other business as may properly come before the
meeting.
Only Stockholders of record at the close of business on March 16, 1998, are
entitled to notice of, and to vote at, this meeting.
It is desired that as many Stockholders as practicable be represented at
the meeting. Consequently, whether or not you now expect to be present, you are
requested to sign and date the enclosed proxy and return it promptly to the
Company. You may revoke the proxy at any time before the authority granted
therein is exercised.
By order of the Board of Directors,
JONATHAN D. KANTOR
Senior Vice President, Secretary
and General Counsel
Chicago, Illinois
March 30, 1998
<PAGE> 3
CNA FINANCIAL CORPORATION
ADMINISTRATIVE OFFICES: CNA PLAZA, CHICAGO, ILLINOIS 60685
---------------
PROXY STATEMENT
ANNUAL MEETING -- MAY 6, 1998
The Board of Directors of CNA Financial Corporation ("CNA" or the
"Company") submits this statement in connection with the solicitation of proxies
from the Stockholders in the form enclosed.
The persons named in this statement as nominees for election as Directors
have been designated by the Board of Directors.
Any Stockholder giving a proxy has the power to revoke it at any time
before it is exercised. A subsequently dated proxy, duly received, will revoke
an earlier dated proxy. A Stockholder may also revoke his proxy and vote in
person at the Annual Meeting. Proxies will be voted in accordance with the
Stockholder's specifications and, if no specification is made, proxies will be
voted in accordance with the Board of Directors' recommendations. The
approximate date of mailing of this Proxy Statement is March 30, 1998.
On March 16, 1998, the Company had outstanding 61,798,262 shares of common
stock ("Common Stock"). The holders of Common Stock have one vote for each share
of stock held. Stockholders of record at the close of business on March 16, 1998
will be entitled to notice of, and to vote at, this meeting. The holders of a
majority of shares of Common Stock issued and outstanding and entitled to vote
when present in person or represented by proxy constitute a quorum at all
meetings of Stockholders.
In accordance with the Company's by-laws and applicable law, the election
of Directors will be determined by a plurality of the votes cast by the holders
of shares present in person or by proxy and entitled to vote. Consequently, the
twelve nominees who receive the greatest number of votes cast for election as
Directors will be elected as Directors of the Company. Shares present which are
properly withheld as to voting with respect to any one or more nominees, and
shares present with respect to which a broker indicates that it does not have
authority to vote ("broker non-votes"), will not be counted. The affirmative
vote of shares outstanding is required to approve the amendment to the Company's
Certificate of Incorporation. And,the affirmative vote of shares representing a
majority of the votes cast by the holders of shares present and entitled to vote
is required to approve the other matters to be voted on at the Annual Meeting.
Shares which are voted to abstain will be considered present at the meeting, but
since they are not affirmative votes for the matter they will have the same
effect as votes against the matter. Broker non-votes are not counted as present.
1
<PAGE> 4
PRINCIPAL SHAREHOLDERS
The following table contains certain information as to all entities which,
to the knowledge of the Company, were the beneficial owners of 5% or more of the
outstanding shares of Common Stock as of February 10, 1998 (unless otherwise
noted). Except as noted below, each such entity has sole voting and investment
power with respect to the shares set forth:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT BENEFICIALLY OWNED PERCENT OF CLASS
- ------------------------------------ ------------------------- ----------------
<S> <C> <C>
Loews Corporation ("Loews")........................... 52,115,660 84.3%
667 Madison Avenue
New York, New York 10021
The Equitable Companies Incorporated.................. 3,971,234 6.4%
("Equitable")(1)
787 Seventh Avenue
New York, New York 10019
</TABLE>
- ---------------
(1) This information is as of December 31, 1997 and is based on a report filed
with the Securities and Exchange Commission. According to the report the
shares were acquired for investment purposes and may be deemed to be
beneficially owned by certain subsidiaries of Equitable. Equitable states in
such report that it may be deemed to have sole voting power with respect to
2,099,950 shares and sole dispositive power with respect to 3,971,234
shares. The report states that it has been filed jointly on behalf of AXA,
and five French mutual insurance companies, as a group, as parent holding
companies.
Since Loews holds more than a majority of the outstanding Common Stock of
CNA, Loews has the power to approve matters submitted for consideration at the
Annual Meeting without regard to the votes of the other Stockholders. Loews
intends to vote FOR the election of management's nominees for the Board of
Directors', FOR the Amendment of the Certificate of Incorporation removing
certain indemnification provisions and FOR the ratification of the appointment
of Deloitte & Touche LLP as the Company's independent auditors. There are no
agreements between CNA and Loews with respect to the election of CNA Directors
or Officers or with respect to the other matters to come before the meeting.
2
<PAGE> 5
DIRECTOR AND OFFICER HOLDINGS
The following table sets forth certain information as to the shares of
Common Stock beneficially owned by each Director and nominee, and each Executive
Officer named in the Summary Compensation Table below, and by all Executive
Officers and Directors of the Company as a group as of January 31, 1998, based
on data furnished by them:
<TABLE>
<CAPTION>
SHARES OF THE SHARES OF SHARES OF CNA
COMPANY'S LOEWS CORPORATION SURETY CORPORATION
COMMON STOCK COMMON STOCK COMMON STOCK
NAME BENEFICIALLY OWNED BENEFICIALLY OWNED BENEFICIALLY OWNED
---- ------------------ ------------------ ------------------
<S> <C> <C> <C>
Antoinette Cook Bush....................... 200 0 0
Dennis H. Chookaszian...................... 1,000 4,000 0
Philip L. Engel............................ 400 0 0
Robert P. Gwinn............................ 307 0 0
Walter F. Mondale.......................... 300 0 0
Carolyn L. Murphy.......................... 1,159 0 0
Edward J. Noha............................. 450 1,500 0
Joseph Rosenberg........................... 2,000 0 0
Richard L. Thomas.......................... 1,700(a) 3,000 0
James S. Tisch............................. 0 80,000 0
Laurence A. Tisch.......................... 0 17,999,998 0
Preston R. Tisch........................... 0 17,999,998 0
Adrian Tocklin............................. 0 0 1,000
Marvin Zonis............................... 200 0 0
All Officers and Directors as a group (28
persons including those listed above).... 8,416 36,088,496 1,300
</TABLE>
- ---------------
Each holding represents less than 1% of the outstanding shares of Common
Stock. For information with respect to the stock holdings of Loews, see
"Principal Shareholders" above.
(a) Mr. Thomas' wife owns 1,100 shares of CNA Common Stock and 2,500
shares of Loews Common Stock in which he disclaims any beneficial
interest.
3
<PAGE> 6
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
The By-Laws provide that the number of Directors that shall constitute the
whole Board shall be twelve. The Directors shall be elected at the Annual
Meeting of Stockholders and each Director elected shall hold office until the
next annual meeting of Stockholders and until his successor is elected and
qualified. Directors need not be Stockholders. Unless authority to do so is
withheld, the persons named in the enclosed proxy intend to vote the shares
represented by the proxies given to them for the twelve nominees hereinafter
named. All Directors were elected at the last Annual Meeting of Stockholders.
Should any nominee or nominees become unavailable, the proxy holders will
vote for the nominee or nominees designated by the Board of Directors. The Board
of Directors has no reason to believe that any of the nominees will become
unavailable.
Set forth below is the name, principal occupation and business experience
during the past five years and certain other information for each nominee:
ANTOINETTE COOK BUSH, Partner, Skadden, Arps, Slate, Meagher & Flom,
Washington, D. C. since 1993. Ms. Bush was Senior Counsel of the United States
Senate Committee on Commerce, Science and Transportation-Majority Staff from
January 1991 to October 1993. She was Staff Counsel of the Committee from March
1987 to December 1990. She has been a Director since 1993. She is a member of
the Executive, Finance and Audit Committees and Chairperson of the Incentive
Compensation Committee. Age 41.
DENNIS H. CHOOKASZIAN, Chairman of the Board and Chief Executive Officer of
the CNA Insurance Companies since September 1992. From November 1990 to
September 1992, Mr. Chookaszian was President and Chief Operating Officer of the
CNA Insurance Companies. Prior thereto, he was Vice President and Controller of
the Company and its insurance subsidiaries since 1975. He serves on the boards
of Insurance Services Office, Inc., Loews and Mercury Finance Company. He serves
on the Executive and Finance Committees. Mr. Chookaszian has served as a
Director since 1990. Age 54.
PHILIP L. ENGEL, President of the CNA Insurance Companies since September
1992. From November 1990 until September 1992 he was Executive Vice President of
the CNA Insurance Companies. Prior thereto, Mr. Engel had been a Vice President
of the CNA Insurance Companies since 1977. He serves on the Executive and
Finance Committees. Mr. Engel has served as a Director since 1992. Age 57.
ROBERT P. GWINN, Retired Chairman of the Board and Chief Executive Officer
of Encyclopaedia Britannica. He is a director of Alberto Culver Company. He is a
member of the Incentive Compensation, Executive, Finance and Audit Committees.
Mr. Gwinn has served as a Director since 1967. Age 90.
WALTER F. MONDALE, Partner in the Minneapolis, Minnesota law firm of Dorsey
& Whitney since December 1996. Mr. Mondale was United States Ambassador to Japan
from September 1993 until December 1996. From September 1987 until his
appointment as Ambassador, Mr. Mondale was a partner at Dorsey & Whitney. Mr.
Mondale was Vice President of the United States from 1977 until 1981. He was the
Democratic nominee for President of the United States in 1984. He serves on the
boards of The BlackRock Income Trust Inc., The BlackRock Target Term Trust Inc.,
The BlackRock Advantage Term Trust Inc., The BlackRock Strategic Term Trust
Inc., The BlackRock 1998 Term Trust Inc., BBT Subsidiary Inc., The BlackRock
Municipal Target Term Trust Inc., The BlackRock North American Government Income
Trust Inc., The BlackRock Insured Municipal Term Trust Inc., The BlackRock
Investment Quality Term Trust Inc., The BlackRock 2001 Term Trust Inc., The
BlackRock Insured Municipal 2008 Term Trust Inc., The BlackRock California
Insured Municipal 2008 Term Trust Inc., The BlackRock New York Insured Municipal
2008 Term Trust Inc., The BlackRock Florida Insured Municipal 2008 Term Trust,
The BlackRock 1999 Term Trust Inc., BNN Subsidiary Inc., BBT Subsidiary Fund,
The BlackRock Investment Quality Municipal Trust
4
<PAGE> 7
Inc., The BlackRock Florida Investment Quality Municipal Trust, The BlackRock
California Investment Quality Municipal Trust, Inc., The BlackRock New York
Investment Quality Municipal Trust Inc., The BlackRock New Jersey Investment
Quality Municipal Trust Inc., The BlackRock Broad Investment Grade 2009 Term
Trust Inc., Dain Rauscher Corporation, St. Jude Medical Inc., United Healthcare
Corp., Northwest Airlines Corp., NWA Inc., and Northwest Airlines, Inc. He is a
member of the Executive, Finance and Audit Committees. He served as a Director
from 1985 until 1993 and was reelected Director in February 1997. Age 70.
EDWARD J. NOHA, Chairman of the Board of CNA since September 1992. Prior to
that time and since February 1975, Mr. Noha was Chairman of the Board and Chief
Executive Officer of the CNA Insurance Companies. Mr. Noha serves on the board
of Loews and Wheelabrator Technologies, Inc. He is a member of the Executive and
Finance Committees. Mr. Noha has served as a Director since 1975. Age 70.
JOSEPH ROSENBERG, Chief Investment Strategist of Loews since 1995. Prior to
that, he was Chief Investment Officer of Loews since August 1973. He serves on
the Executive and Finance Committees. He has been a Director since August 1995.
Age 65.
RICHARD L. THOMAS, Retired Chairman of the Board of First Chicago NBD
Corporation ("NBD"). He was Chairman of the Board of First Chicago Corporation
(the predecessor of NBD) from January 1992 through December 1995. He also serves
on the boards of NBD, Sara Lee Corporation, IMC Global, Inc., The PMI Group,
Inc., Scotsman Industries, Inc. and The Sabre Group Holdings, Inc. He serves on
the Executive, Finance and Incentive Compensation Committees and is Chairman of
the Audit Committee. Mr. Thomas has served as a Director since 1970. Age 67.
JAMES S. TISCH, President and Chief Operating Officer of Loews since
October 1994. Prior to that, he was Executive Vice President of Loews. He is a
Director of Loews, Vail Resorts, Inc. and Diamond Offshore Drilling, Inc. He is
Chairman of the Finance Committee and serves on the Executive Committee. Mr.
Tisch has served as a Director since 1985. Age 45.
LAURENCE A. TISCH, Co-Chairman of the Board and Co-Chief Executive Officer
of Loews. He is the Chief Executive Officer of CNA. He is a director of
Automatic Data Processing, Inc. and Bulova Corporation ("Bulova"). Prior to
1994, Mr. Tisch had been the Chairman of the Board and Co-Chief Executive
Officer of Loews. In addition, he served as Chairman of the Board, President and
Chief Executive Officer of CBS, Inc. until November 24, 1995. Mr. Tisch has
served as a Director since 1974 and is a member of the Executive and Finance
Committees. Age 75.
PRESTON R. TISCH, Co-Chairman of the Board and Co-Chief Executive Officer
of Loews. Prior to October 1994, he was President and Co-Chief Executive Officer
of Loews since March 1988. He was Postmaster General of the United States from
August 1986 to February 1988. Prior thereto he had served as President and Chief
Operating Officer of Loews since 1969 and a Director since 1960. He is a
director of Bulova, Hasbro, Inc., and Rite Aid Corporation. Mr. Tisch served as
a Director of CNA from 1974 to 1986 and was reelected a Director in May of 1988.
He is Chairman of the Executive Committee and serves on the Finance Committee.
Age 71.
MARVIN ZONIS, Professor of international political economy at the Graduate
School of Business of the University of Chicago since 1989. He has been a
Director since 1993. He is a member of the Incentive Compensation, Executive,
Finance and Audit Committees. Age 61.
COMMITTEES AND MEETINGS
The Company has an Audit, Incentive Compensation, Executive and Finance
Committee. The Company does not have a nominating committee.
5
<PAGE> 8
The Audit Committee is a standing committee and is charged with the
responsibility of administering corporate policy in matters of accounting and
control. The Audit Committee functions as the liaison with the Company's
independent auditors.
The Incentive Compensation Committee administers the Incentive Compensation
Plan for Certain Executive Officers (as hereinafter described).
The Board of Directors, Audit and Finance Committees met four times in
1997. The Incentive Compensation Committee met once. All of the current
Directors attended at least 75% of each of the Board of Directors meetings and
the committees of the Board on which each such director serves.
DIRECTOR COMPENSATION
CNA directors who are not employees of CNA or any of its subsidiaries
received an annual retainer in 1997 of $20,000. In addition, members of
committees received the following annual retainers: Finance $3,000; Executive
$3,000; Incentive Compensation $1,000; and Audit $1,500. Messrs. Chookaszian and
Engel, as employees of CNA, do not receive director retainer fees. Directors are
reimbursed for necessary and reasonable travel expenses incurred in attending
meetings.
Pursuant to a Continuing Service Agreement with CNA, expiring on September
20, 2002, Mr. Noha (or his estate in the event of his death) is paid a fee at
the rate of $1,570,000 per annum reduced by the retirement benefits payable to
Mr. Noha under his Employment Agreement and CNA's Retirement Plan and
Supplemental Retirement Plan. During the last fiscal year, services provided by
Mr. Noha under this Agreement consisted of providing the assistance and advice
as delineated in the Agreement and promoting and assisting the Company with
respect to its position in the Chicago business community. In this regard, Mr.
Noha served as a member of numerous organizations including Chairman of the
Chicago Manufacturing Center, Chairman of the Economic Development Commission of
the City of Chicago, Chairman of the NIST Manufacturing Extension Partnership
National Advisory Board and member of the Illinois Business Roundtable.
6
<PAGE> 9
COMPENSATION OF EXECUTIVE OFFICERS
The following table includes compensation paid by the Company and its
subsidiaries for services rendered in all capacities for the years indicated for
the Chief Executive Officer and the four most highly compensated Executive
Officers of the Company as of December 31, 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------
LONG-TERM
BONUS COMPENSATION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(B) (C) PAYOUTS(D) COMPENSATION(E)
--------------------------- ---- --------- ----- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Laurence A. Tisch(a)....................... 1997 -- -- -- $26,000(f)
Chief Executive Officer 1996 -- -- -- 26,000(f)
CNA Financial Corporation 1995 -- -- -- 26,000(f)
Dennis H. Chookaszian...................... 1997 $ 950,000 -- $1,650,000 129,288(g)
Chairman of the Board 1996 950,000 -- 1,450,000 51,362(h)
Chief Executive Officer 1995 1,593,027 -- -- 66,587
CNA Insurance Companies
Philip L. Engel............................ 1997 800,000 500,000 62,226(g)
President 1996 800,000 -- 400,000 40,131(h)
CNA Insurance Companies 1995 962,587 -- -- 40,429
Carolyn L. Murphy.......................... 1997 600,000 480,000 -- 25,200
Senior Vice President 1996 600,000 317,000 -- 25,200
CNA Insurance Companies 1995 562,307 206,000 -- 23,100
Adrian M. Tocklin.......................... 1997 550,000 417,000 23,100
Senior Vice President 1996 548,595 225,000 23,100
CNA Insurance Companies 1995 474,808 170,000 154,180(i) 10,741
</TABLE>
- ---------------
(a) Mr. Tisch does not receive a salary from the Company. CNA reimburses Loews
for Mr. Tisch's services, as well as other Loews officers and executives,
pursuant to the Services Agreement described below under "Certain
Transactions." The reimbursements for Mr. Tisch's services to CNA in 1997,
1996 and 1995 were $96,427, $128,365 and $82,418.
(b) Base salary includes compensation deferred under the CNA Savings Plan and
CNA Supplemental Savings Plan.
(c) Amounts disclosed are for bonus awards earned and accrued in the year
indicated under the company's annual incentive plans hereinafter described.
Bonus awards are typically paid in March of the following year.
(d) Represents payout under the Incentive Compensation Plan For Executive
Officers.
(e) Represents amounts contributed or accrued to the named officers for the CNA
Savings Plan and CNA Supplemental Savings Plan.
(f) Represents director fees paid to Mr. Tisch. He is not a participant in the
company's savings plans.
(g) Includes $27,356 and $11,260 of insurance premiums paid by the Company on
behalf of Mr. Chookaszian and Mr. Engel, respectively.
(h) Includes $10,422 and $6,009 of Long Term Disability Insurance Premium paid
by the Company on behalf of Mr. Chookaszian and Mr. Engel, respectively.
(i) The Continental Corporation Long-Term Incentive Program.
7
<PAGE> 10
EMPLOYMENT CONTRACTS
The Company is party to employment agreements (the "Agreements") with each
of Dennis H. Chookaszian and Philip L. Engel. The Agreements expire December 31,
1998 and are at an annual Base Salary of $950,000 for Mr. Chookaszian and
$800,000 for Mr. Engel. The Agreements provide that they will participate in an
Incentive Compensation Plan that will provide Mr. Chookaszian and Mr. Engel with
an opportunity to earn a bonus based on performance and attainment of specified
corporate goals. The Incentive Compensation Plan was approved by shareholders on
May 6, 1996.
Each of the Agreements requires the Company to provide long-term disability
coverage and permits the employee to participate in other benefit programs
offered by the Company to its employees. In the event of death or disability,
the employee is entitled to be paid the Base Salary to the end of the month in
which such death or disability occurs and a prorated amount based on assumed
attainment of the incentive compensation in effect at the time. Any incentive
compensation paid is included in the computation of pensionable earnings under
the Company's retirement plans. The employee may participate in the Qualified
and Supplemental Savings Plan established by the Company wherein the Company
pays a matching percentage of 70% of the first 6% of the employee's
contributions. This matching amount is also included in the computation of
pensionable earnings.
The Company may terminate each Agreement without cause at any time, in
which event the Company is required to continue to make payments to the employee
for a period of three years from the date of termination at a fixed rate based
on Base Salary and the incentive compensation in effect at the time of such
termination. Each Agreement contemplates negotiation of a renewal for an
additional three year period at the expiration of its term on December 31, 1998
and provides that if the parties have not reached an agreement before March 31,
1999 at a Base Salary and opportunity for incentive compensation of not less
than the amount of Base Salary and incentive compensation provided for the year
1998 at substantially the same terms as the expiring agreement, then the
employment shall be considered terminated by the Corporation and the employee
shall be entitled to termination pay for a period of three years based on the
combined Base Salary and the assumed incentive compensation for 1998. If a
renewal is not negotiated before December 31, 1998, the Executives shall become
employees-at-will for a three month period at an actual salary representing the
combined Base Salary and assumed incentive compensation for the year 1998.
RETIREMENT PLANS
CNA provides funded, tax qualified, non-contributory retirement plans for
all salaried employees, including executive officers (the "Retirement Plans")
and an unfunded, non-qualified, non-contributory benefits equalization plan (the
"Supplemental Retirement Plan") that provides for the accrual and payment of
benefits that are not available under tax qualified plans such as the Retirement
Plans. The following description of the Retirement Plans also gives effect to
benefits provided under the Supplemental Retirement Plan.
The Retirement Plans provide for retirement benefits based upon average
final compensation (i.e., based upon the highest average sixty consecutive
months compensation and years of credited service with CNA). Compensation under
the Retirement Plans consists of salary paid by the Company and its subsidiaries
included under "Salary," "Bonus" and "Long-Term Compensation Payouts" in the
Summary Compensation Table above. The following table shows estimated annual
benefits payable upon retirement under the Retirement Plans for various
compensation levels and years of credited service, based upon normal retirement
in 1997 and a straight life annuity form of benefit. In addition to a straight
life annuity, the Plans also allow the participant to elect payment to be made
in a Joint and Contingent (or Survivor) Annuitant form where the
8
<PAGE> 11
Contingent (or Survivor) Annuitant would receive payment at 50%, 66 2/3% or 100%
of the participant's benefit amount.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ESTIMATED ANNUAL PENSION FOR
AVERAGE REPRESENTATIVE YEARS OF CREDITED SERVICE
ANNUAL ------------------------------------------------------------------------------------
COMPENSATION 15 20 25 30 35
- ------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
$ 400,000............. $116,618 $ 155,491 $ 194,364 $ 206,570 $ 218,777
500,000............. 146,618 195,491 244,364 259,904 275,444
600,000............. 176,618 235,491 294,364 313,237 332,111
700,000............. 206,618 275,491 344,364 366,571 388,778
800,000............. 236,618 315,491 394,364 419,904 445,445
900,000............. 266,618 355,491 444,364 473,238 502,112
1,000,000............. 296,618 395,491 494,364 526,571 558,779
1,100,000............. 326,618 435,491 544,364 579,905 615,446
1,200,000............. 356,618 475,491 594,364 633,238 672,113
1,300,000............. 386,618 515,491 644,364 686,572 728,780
1,400,000............. 416,618 555,491 694,364 739,905 785,447
1,500,000............. 446,618 595,491 744,364 793,219 842,114
1,600,000............. 476,618 635,491 794,364 846,572 898,781
1,700,000............. 506,618 675,491 844,364 899,906 955,448
1,800,000............. 536,618 715,491 894,364 953,239 1,012,115
1,900,000............. 566,618 755,491 944,364 1,006,573 1,068,782
2,000,000............. 596,618 795,491 994,364 1,059,906 1,125,449
2,100,000............. 626,618 835,491 1,044,364 1,113,240 1,182,116
2,200,000............. 656,618 875,491 1,094,364 1,166,573 1,238,783
2,300,000............. 686,618 915,491 1,144,364 1,219,907 1,295,450
2,400,000............. 716,618 955,491 1,194,364 1,273,240 1,352,117
2,500,000............. 746,618 995,491 1,244,364 1,326,574 1,408,784
2,600,000............. 776,618 1,035,491 1,294,364 1,379,907 1,465,451
2,700,000............. 806,618 1,075,491 1,344,364 1,433,241 1,522,118
2,800,000............. 836,618 1,115,491 1,394,364 1,486,574 1,578,785
2,900,000............. 866,618 1,155,491 1,444,364 1,539,908 1,635,452
</TABLE>
The amounts in the table reflect deductions for estimated Social Security
payments.
Mr. Chookaszian, Mr. Engel, Ms. Murphy and Ms. Tocklin have 22, 32, 20 and
22 years of credited service, respectively.
9
<PAGE> 12
LONG-TERM INCENTIVE PLAN -- AWARDS IN 1997
The following table contains information with respect to awards made in
1997 under the Company's Incentive Compensation Plan to the Company's most
highly compensated executive officers:
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS --
NAME PERFORMANCE PERIOD(1) MAXIMUM(2)
---- --------------------- ---------------------------
<S> <C> <C>
Dennis H. Chookaszian........................... 1 year - 1997 1,650,000
1 year - 1998 1,850,000
Philip L. Engel................................. 1 year - 1997 500,000
1 year - 1998 600,000
</TABLE>
- ---------------
(1) Pursuant to the Incentive Compensation Plan, in 1996 the Incentive
Compensation Committee granted three single year awards (each, an "Award")
to Dennis Chookaszian and Philip Engel for each of the years 1996, 1997 and
1998 (each year being a "Performance Period"). Each Award represents a
designated percentage of the Company's consolidated after-tax net income,
exclusive of realized investment gains and losses ("Net Operating Income")
for one or more Performance Periods. There is no award of units or
securities under the Incentive Compensation Plan.
(2) The Awards granted to Dennis Chookaszian were as follows: (a) for the 1997
Performance Period: 1/2% of 1996 Net Operating Income plus 1/2% of 1997 Net
Operating Income; and (b) for the 1998 Performance Period: 1/3% of 1996 Net
Operating Income plus 1/3% of 1997 Net Operating Income plus 1/3% of 1998
Net Operating Income. The Awards granted to Philip Engel were as follows:
(a) for the 1997 Performance Period: 1/8% of 1996 Net Operating Income plus
1/8% of 1997 Net Operating Income; and (b) for the 1998 Performance Period
1/12% of 1996 Net Operating Income plus 1/12% of 1997 Net Operating Income
plus 1/12% of 1998 Net Operating Income. There is no threshold or minimum
level of Net Income or specific performance target with respect to any
Award. The Award for each Performance Period is subject to a maximum amount
which is set out in the foregoing table.
10
<PAGE> 13
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
CERTAIN EXECUTIVE OFFICERS
The Board of Directors believes that the future success of the Company and
its subsidiaries is dependent upon the quality of management, and that
compensation programs are important in attracting and retaining individuals of
superior ability and motivating their efforts on behalf of the Company and its
business interests.
Under Section 162(m) of the Internal Revenue Code and certain regulations
thereunder (together "the Code") the amount of compensation paid by a
publicly-held corporation to the five of its most highly compensated executive
officers during any year that may be deductible for federal income tax purposes
is limited to $1,000,000 per person per year except that compensation that is
"qualified performance-based compensation" will be deductible.
To the extent the Company's compensation policy can be implemented in a
manner that maximizes the deductibility of compensation paid by the Company, the
Board of Directors will seek to do so. Accordingly, in 1996, the Company adopted
the Incentive Compensation Plan for Certain Executive Officers (the "Plan"),
which is designed to qualify the amounts paid from time to time thereunder to
certain of the Corporation's Executive Officers as "qualified performance-based
compensation" under Section 162(m) of the Code (see "Long-Term Incentive Plan --
Awards in 1997," above).
GENERAL
The Company's compensation program is designed to recognize individual
performance and contribution to CNA. This pay-for-performance philosophy is used
to reward employees whose work meets or exceeds CNA's standards of quality and
value-added customer service. It is CNA's objective to have a compensation
policy that is internally equitable and externally competitive, rewards
executives for long term strategic management, supports a performance-oriented
environment that stresses attainment of corporate goals and individual
expectations, and attracts and retains key executives critical to the Company's
long term success.
The Chairman and Chief Executive Officer of the CNA Insurance Companies
establishes the compensation for the other executives (except the President of
the CNA Insurance Companies) following a systematic process to establish an
annual compensation plan for the Company's senior executives. He is assisted in
developing the plan by the Company's Human Resources staff. The Human Resources
staff is aided by an independent nationally recognized compensation consulting
organization. Information is obtained regarding the Company's competitor group
of companies. The competitor group of companies consisted of 20 companies in the
insurance industry and included five of the six companies in the Standard &
Poor's Multi-Line Insurance Index (see "Stock Price Performance Graph" below).
These companies represent the organizations with which CNA competes for talent.
This information, in conjunction with performance judgments as to past and
expected future contributions of the individual executive, is used to develop an
annual compensation plan. The Human Resources staff periodically reviews with
independent compensation consultants the overall competitiveness of the salary
plan. Because CNA uses this market pricing approach to determine appropriate
executive pay levels, CNA does not use formal salary ranges, with attendant
minimums, midpoints and maximums to determine pay levels or annual increase
amounts. In 1997, senior executives were provided total annual cash compensation
opportunities (base salary plus annual incentives) that approximated the 75th
percentile of total annual cash compensation opportunities for comparable
executives at the Company's competitors. Opportunities were set at these levels
in order to provide the Company's senior executives with a competitive level of
total compensation with their peers who, in general, receive total compensation
opportunities consisting of base salary and annual and long-term incentives.
11
<PAGE> 14
Senior executives' base salaries are reviewed annually by the Chairman and
Chief Executive Officer of the CNA Insurance Companies. In connection with this
review the Chairman is provided with the comparative salary data described
above. In 1997, senior executives base salaries increased in the aggregate over
1996 levels to reflect the comparative salary data referred to above relative to
CNA peer companies of similar size.
The Company has adopted an Annual Incentive Bonus Plan for all executive
officers other than certain executive officers who are eligible to participate
in the Incentive Compensation Plan for Certain Executive Officers. The awards
for the Annual Incentive Bonus Plan are determined by performance compared to
pre-set goals in three categories: Corporate Goals; Shared Goals; and Individual
Goals. Participants have a percentage established annually of their incentive
compensation based on the Corporate Goal and the remainder based on the other
two goals. Generally, the pre-set goals have been developed to be quantifiable
or definable to the extent possible. The percentage was based, among other
factors, on comparative salary data as described above. Final approval of bonus
payments are made by the Chief Executive Officer of the CNA Insurance Companies
with participation by the President and with respect to the Corporate Goal, the
Chief Financial Officer. The Company reserves the right to make discretionary
changes to the award amounts and reserves the right to eliminate these bonuses,
uniformly, due to adverse financial conditions. In determining the annual
incentive award for 1997, the Chairman and Chief Executive Officer and the
President of the CNA Insurance Companies evaluated Company and business unit
performance and individual performance against the pre-set goal categories.
Based upon financial performance, customer service levels, operating
efficiencies and business growth, the 1997 incentive bonuses ranged from 94% to
154% of the overall incentive target for the Company's senior executives.
As noted in the Summary Compensation Table, Laurence A. Tisch, the
Company's Chief Executive Officer, does not receive compensation from the
Company. Mr. Tisch is compensated by Loews, of which he is Chairman of the Board
and Co-Chief Executive Officer. CNA reimburses Loews for services of Mr. Tisch
and other officers and executives of Loews pursuant to the Services Agreement
described under "Certain Transactions," below.
<TABLE>
<S> <C> <C>
By the Board of Directors: Antoinette Cook Bush Joseph Rosenberg
Dennis H. Chookaszian Richard L. Thomas
Philip L. Engel James S. Tisch
Robert P. Gwinn Laurence A. Tisch
Walter F. Mondale Preston R. Tisch
Edward J. Noha Marvin Zonis
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. L. A. Tisch, D. H. Chookaszian, and P. L. Engel, each of whom are
Directors of the Company, also serve as officers of the Company or its
subsidiaries. In addition, Mr. Noha, a Director of the Company, formerly served
as an officer of the Company or its subsidiaries. Mr. L. A. Tisch, Director and
Chief Executive Officer of the Company, also serves as a Director and Co-Chief
Executive Officer of Loews. See "Certain Transactions," below, for information
with respect to transactions between the Company and its subsidiaries, and
certain individuals and entities with which they are affiliated.
CERTAIN TRANSACTIONS
Loews makes available to CNA the services of certain officers and
executives of Loews. In February 1975 CNA entered into a management services
agreement (the "Services Agreement") with Loews which provides that Loews will
make available to CNA these services, together with general corporate services,
including
12
<PAGE> 15
financial, administrative and management consulting services. Loews is
reimbursed on the basis of an allocation of a portion of the salaries and
related payroll taxes and benefits of the officers and executives performing the
services, in addition to travel and similar expenses incurred. The allocation
may be adjusted in the event of any substantial change in the services performed
and the Services Agreement may be terminated by CNA or Loews on the last day of
any month. The Services Agreement has been reviewed each year since 1975 by
CNA's Audit Committee. The last such review took place in February 1998 and the
Audit Committee recommended renewal of the Services Agreement for the ensuing
fiscal year, calling for a reimbursement allocation of approximately $210,000
per month, which recommendation was accepted by the Board of Directors. Under
the Services Agreement CNA reimbursed Loews $2,520,000 for services performed
during 1997, and $62,000 for travel and similar expenses incurred during that
period. During 1997 Loews paid premiums on insurance and administrative services
to the CNA Insurance Companies at standard rates aggregating approximately
$6,045,600.
The Loews ownership of the voting securities of CNA has exceeded 80% since
1980 requiring the inclusion of CNA and its eligible subsidiaries in the
consolidated federal income tax returns filed by Loews. Accordingly, following
approval by CNA's Audit Committee and Board of Directors, CNA and Loews entered
into a tax allocation agreement that provides that CNA will (i) 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 CNA and its subsidiaries in the Loews
consolidated federal income tax return, or (ii) pay to Loews an amount, if any,
equal to the federal income tax that would have been payable by CNA if CNA and
its subsidiaries had filed a separate consolidated 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 CNA and its eligible
subsidiaries, CNA may be required to repay tax recoveries previously received
from Loews. This agreement may be cancelled by CNA or Loews upon thirty days'
prior written notice. In 1997, the inclusion of CNA and its eligible
subsidiaries in the consolidated federal tax return of Loews resulted in
increased federal income tax liability for Loews. Accordingly, CNA has paid
approximately $210,000,000 in 1997 to Loews under the tax allocation agreement.
CNA has also reimbursed to Loews approximately $7,691,000 for expenses
(consisting primarily of salaries and benefits and other out-of-pocket costs)
incurred by Loews during 1997 in maintaining investment facilities and services
for CNA.
In December 1995, CNA Realty Corp. provided a $700,000 guaranty to James
Flood, an executive officer, to assist him with relocation costs. The guaranty
was fully secured, and subsequently assigned to CNA Financial Corp. in 1996. In
June 1996, CNA provided another executive officer, Michael McGavick, a $900,000
guaranty to assist him in relocation costs.
In 1997, certain subsidiaries of CNA paid approximately $329,168 in legal
fees to the law firm of Dorsey & Whitney. In addition, certain subsidiaries of
CNA paid the firm in connection with defense of policyholders pursuant to the
terms of insurance policies issued by certain CNA subsidiaries. In many such
situations, the policyholder, not CNA or its subsidiaries, chose Dorsey &
Whitney as the law firm to provide such legal services. Mr. Mondale is a partner
of this firm.
13
<PAGE> 16
STOCK PRICE PERFORMANCE GRAPH
The following graph compares the total return of the Company's common
stock, the Standard & Poor's 500 Composite Stock Index ("S&P 500") and the
Standard & Poor's Multi-Line Insurance Index for the five years ended December
31, 1997. The graph assumes that the value of the investment in the Company's
Common Stock and for each Index was $100 on December 31, 1992 and that dividends
were reinvested.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
92 93 94 95 96 97
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CNA FINANCIAL CORP 100 79.08 66.20 115.82 109.18 130.36
- --------------------------------------------------------------------------
S&P 500 INDEX 100 110.08 111.53 153.45 188.68 251.63
- --------------------------------------------------------------------------
MULTI-LINE INSURANCE 100 111.84 117.64 172.92 219.27 334.45
- --------------------------------------------------------------------------
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more that ten percent of a registered
class of the Company's equity securities, to file with the Commission initial
reports of ownership and reports of changes in ownership of common stock of the
Company. Officers, directors and greater than ten percent shareholders are
required by regulation to furnish the Company with copies of all Section 16(a)
forms they file. Based upon review of the information provided to the Company,
the Company believes that during the 1997 fiscal year all Section 16(a) filing
requirements were complied with except for two late Form 4 filings with respect
to the purchase of 300 shares of common stock acquired April 8, 1997 and 200
shares of common stock acquired November 14, 1997, both by Mr. Bernard
Hengesbaugh, an executive officer of the Company and the late Forms 4 and 5
filings with respect to the purchase of 200 shares of common stock acquired June
24, 1997 by Mr. Marvin Zonis, a director of the Company.
14
<PAGE> 17
PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION
REGARDING INDEMNIFICATION
(PROPOSAL NO. 2)
The Board of Directors has unanimously approved, subject to approval by the
stockholders at the annual meeting, the removal of Article Fourteenth,
Indemnification Provisions, of the Certificate of Incorporation. If adopted, the
Board of Directors intends to amend the Company's By-Laws initially to include
text identical to the provisions of Article Fourteenth of the Certificate of
Incorporation. The Board, within the limits imposed by the Delaware General
Corporation Law (the "DGCL"), may in the future restrict, expand or clarify the
application of the indemnification provisions. DGCL permits companies
incorporated under the laws of the State of Delaware, such as the Company, to
include in either their certificates of incorporation or their by-laws,
provisions that permit and, in some cases, may require, a company to indemnify
persons against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement by reason of the fact that the person is or was a
director, officer or employee of the company. Article Fourteenth of the
Company's Certificate of Incorporation includes such provisions.
Since the indemnification provisions were adopted by stockholders in 1967,
Delaware corporate law relating to indemnification of directors, officers or
employees has undergone numerous changes. Each amendment to the Company's
Certificate of Incorporation requires a solicitation of stockholders for their
approval. This process can be time consuming and costly to the Company. Because
the Company tries to minimize expenses relating to stockholder solicitation, the
Company has placed items requiring stockholder approval on the agenda for annual
meetings rather than calling a special meeting of stockholders. Relocation of
the Company's indemnification provisions from the Certificate of Incorporation
to the By-laws will permit the Board of Directors to monitor and amend these
provisions without the necessity for continually soliciting the vote of
stockholders.
The Board of Directors believes the proposed amendment is in the best
interest of the Company and its stockholders. In recent years, investigations,
claims, actions, suits or proceedings (including stockholder derivative actions)
("Proceedings") seeking to impose liability on, or involving as witnesses,
directors, officers and employees of publicly held corporations have become the
subject of much public discussion. These Proceedings are typically expensive
whatever their eventual outcome. Even in Proceedings in which a director ,
officer, employee or agent is not named as a defendant, substantial expenses or
attorneys' fees may be incurred if such individual is called as a witness, is
required to produce documents or becomes involved in the Proceedings in any
other way. As a result, an individual may conclude that potential exposure to
the costs and risks of Proceedings in which he or she may become involved
exceeds any benefit to him or her from serving as a director, officer or
employee of the Company. The relocation of the Company's indemnification
provisions would permit the Board of Directors to efficiently revise the
Company's indemnification provisions to reflect changes in the DGCL and court
decisions. The Board of Directors believes that the proposed amendment, if
adopted, would enhance the ability of the Company to attract and retain the best
qualified individuals to serve as directors, officers or employees.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR ADOPTION OF THE FOREGOING PROPOSAL AMENDING THE CERTIFICATE OF INCORPORATION
TO REMOVE ARTICLE FOURTEENTH.
15
<PAGE> 18
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL NO. 3)
Deloitte & Touche LLP was CNA's independent auditing firm for the fiscal
year 1997 and has been recommended by the Audit Committee to perform the audit
for the 1998 fiscal year. This recommendation was further approved by the Board
of Directors. The Board of Directors recommends that the appointment of Deloitte
& Touche LLP be ratified by the Stockholders. If the appointment of the firm of
Deloitte & Touche LLP is not approved or if that firm shall decline to act or
their employment is otherwise discontinued, the Board of Directors will appoint
other independent auditors. Representatives of Deloitte & Touche LLP will be
present at the Annual Meeting and will be extended the opportunity to make a
statement if they so desire and will respond to appropriate questions raised at
the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR PROPOSAL
NO. 3.
OTHER MATTERS
The Company does not know of any other business to come before the meeting.
However, if any other matters come before the meeting, the persons named in the
proxies will act on behalf of the Stockholders they represent according to their
best judgment.
The cost of this solicitation of proxies will be borne by the Company.
Solicitation will be made primarily through use of the mails, but regular
employees of the Company may solicit proxies personally, by telephone or
telegram. Such employees will receive no special compensation for such
solicitation. Brokers and nominees will be requested to obtain voting
instructions of beneficial owners of stock registered in their names and will be
reimbursed for their out-of-pocket expenses and reasonable clerical expenses.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Stockholder proposals for inclusion in proxy materials for the 1999 Annual
Meeting should be addressed to the Company's Senior Vice President, Secretary
and General Counsel, CNA Plaza, 43S, Chicago, Illinois 60685, and must be
received by November 27, 1998.
By order of the Board of Directors,
JONATHAN D. KANTOR
Senior Vice President, Secretary
and General Counsel
Chicago, Illinois
March 30, 1998
16
<PAGE> 19
PROXY
CNA FINANCIAL CORPORATION PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING, MAY 6, 1998, CHICAGO, ILLINOIS
The undersigned hereby appoints L.A. Tisch, J.S. Tisch, and D.H. Chookaszian, or
any of them, with full power of substitution, to represent and to vote the
Common Stock of the undersigned at the annual meeting of stockholders of CNA
Financial Corporation, to be held at CNA Plaza, (333 South Wabash Avenue),
Chicago, Illinois, on May 6, 1998, at 10:00 A.M., or at any adjournment thereof
as follows:
Election of Directors. Nominees:
Antoinette Cook Bush, Dennis H. Chookaszian,
Philip L. Engel, Robert P. Gwinn, Walter F. Mondale, Edward J. Noha,
Joseph Rosenberg, Richard L. Thomas, James S. Tisch,
Laurence A. Tisch, Preston R. Tisch, Marvin Zonis.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, SEE
REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE
WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXY COMMITTEE CANNOT VOTE
YOUR SHARE UNLESS YOU SIGN AND RETURN THIS CARD. [SEE REVERSE SIDE]
<PAGE> 20
[X] PLEASE MARK YOUR 4952
VOTES AS IN THIS
EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ELECTION OF
DIRECTORS AND FOR PROPOSALS 2 and 3.
<TABLE>
<CAPTION>
<S><C>
- -------------------------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR the Election of Directors and FOR proposals 2 and 3.
- -------------------------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of 2. Approval of
Directors [ ] [ ] Amendment to [ ] [ ] [ ]
(see reverse) Certificate
of Incorporation
3. Approval of
independent [ ] [ ] [ ]
accountants.
For, except vote withheld from the following nominee(s):
</TABLE>
- -------------------------------------------------------
SIGNATURE(S)__________________________ DATE__________ The signer hereby revokes
NOTE: Please sign exactly as name appears hereon. all proxies heretofore
Joint owners should each sign. When given by the signer to
signing as attorney, executor, vote at said meeting or
administrator, trustee or guardian, any adjournments thereof.
please give full title as such.
