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CNA Financial Corporation substantially strengthened its business -financially, organizationally and operationally. During 1976, management aggressively pursued the development of its basic insurance businesses. This included efforts concentrated on the marketing, underwriting and service functions. The Company's relationships with its agents remain a high order of priority, and greater responsibility was delegated to CNA's regional and branch management. A primary objective has been the development of a comprehensive portfolio of modern insurance products, providing one-stop shop- ping for agents and customers alike. In 1976, CNA Insurance intro- duced a number of new or revised products including a business account package (BAP) which enables CNA to enter the small-to- medium-sized business marketplace-an area in which the Company previously had not been competitive. Other new products include a series of life insurance policies: Parallel, which is a unique concept utilizing decreasing premium; and Double IRA, an individual retirement account program. A number of additional new products will be introduced in 1977, including both participating and annual renewable term individual life insurance policies. CNA, in 1976, installed a sophisticated teleprocessing network which links CNA's four regional headquarters and 30 branches with the home office in Chicago. The network is the first stage of a program designed to establish the most modern computer service facility in the insurance industry. At General Finance Corporation, CNA's major non-insurance subsidiary, pre-tax operating earnings exceeded those reported in 1975 by approximately 63 %. The financial base of General Finance was strengthened during the year by a series of activities including its first public offering of long-term debt. The Company is a major consumer finance company operating more than 500 offices in 26 states. ~ During 1977, CNA's management will continue to address its primary goal of achieving greater profitability through selective ~ underwriting, improved product lines and aggressive marketing. 8 P

Year Ended December 31, 1975 Compared with Year Ended August 31,1974 As a result of a change in the Company's fiscal year from August 31 to December 31, effective December 31, 1974, 1975 was the first full year the Company reported its results of operations on a calendar year basis. There are therefore no comparable annual figures reported for the prior calendar year. The results of operations for the year ended December 31,1975 are compared with the results for the year ended August 31, 1974 (the last full fiscal year's operations). In the opinion of Manage- ment, the Company's operations for the two periods are comparable with the exception of inclusion of the results of operations of CNA for the year ended December 31, 1975. The results of operations of CNA as consolidated by the Company in its financial statements for the year ended December 31, 1975 reflect the application of purchase value accounting for the assets and liabilities of CNA pursuant to Opinion No. 16 of the Accounting Principles Board of the American Institute of Certified Public Accountants. Such purchase value adjustments result in differences between the results of operations of CNA as reported by it and as reflected in the Company's financial statements. A substantial portion of the realized investment gains reported by CNA for its year ended December 31, 1975 is not reflected in realized investment gains reported by the Company. and earnings related to the extraordinary items reported by CNA for the year ended December 31, 1975 are not reflected in the earnings of the Company for the year. The purchase value adjustments result in the inclusion of operating earnings relating to CNA in excess of the Company's equity in the results of operations as reported by CNA. Revenues of the Company reflected record levels for the year ended December 31, 1975 and operating earnings were the highest in the Company's history as a result of the acquisition of a con- trolling interest in CNA. While revenues resulting from tobacco sales, hotel operations and theatre operations increased when compared to the year ended August 31, 1974, the inclusion of revenues from insurance operations accounted primarily for the substantial increase in total revenues. Revenues of the residential development division declined in comparison with the year ended August 31, 1974. The increase in total expenses is largely attributable to the inclusion of the results of operations of CNA; however, operating costs also increased for the tobacco, hotel, theatre and residential develop- ment divisions. The increased expenses also reflect start-up costs relating to the Loews Monte Carlo Hotel and a provision for a loss in value of inventories of the Company's residential development operations. Due to economic conditions in the real estate industry, the Company substantially reduced the activities of its residential development division. Equity in earnings of associated companies reflects a reduction in earnings of Wheeling-Pittsburgh Steel Corporation and the effect of Management's determination to establish an allowance to reduce the difference between the carrying value of the investment in Wheeling and the related quoted market value. TIMN 446977 IS

Liabilities and Shareholders' Equity: Insurance reserves and claims (Note 1) : Claims and claims expense ................................. Life insurance policy reserves .............................. Unearned insurance premiums ............................. Deposits and advance premium funds ....................... Other ................................................. Total insurance reserves and claims .................... Short-term debt (Note 7) ................................... Accounts payable and accrued liabilities ....................... Accrued taxes: Federal and foreign income taxes (Note 12) .................. Excise and other taxes ................................... Long-term debt, less unamortized discount (Note 8) ............. Deferred credits and other liabilities .......................... Deferred income taxes (Note 12) ............................. Separate Account business (Note 1) ........................... Participating policyholders' equity ........................... Total liabilities ...................................... Minority interest .................................•..•••••• Commitments and Contingent Liabilities (Notes 12,13,16 and 19) Shareholders' equity (Notes 1 and 9) : Common stock, authorized 30,000,000 shares at $1 par value; issued shares stated at par value ......................... Additional paid-in capital ................................. Earnings retained in the business ........................... Unrealized appreciation .................................. Total .............................................. Less common stock held in treasury, at cost (1,873,000 shares) ... Shareholders' equity ................................. Total liabilities and shareholders' equity ................. December 31, 1976 1975 $1,492,866 1,138,846 492,678 261,326 118,587 3,504,303 174,913 158,124 $1,332,440 1,073,696 438,955 252,745 104,500 3,202,336 273,221 168,050 50,014 38,580 872,692 55,463 36,877 292,208 173,753 5,356,927 284,446 14,803 116,125 484,560 21,295 636,783 52,681 584,102 $6,225,475 24,021 31,440 866,098 18,019 34,173 ?2,162 162,012 5,051,532 254,681 14,791 116,226 408,738 5,931 545,686 52,681 493,005 $5,799,218 TIMN 446983 21

Summary of Operations (continued) Four Months Ended Years Ended December 31, December 31, Years Ended August 31, 1976 1975 1974 1974 1973 1972 (Amounts in thousands, except per share data) Earnings per share-primary: Earnings before realized investment gains (losses), equity in earnings of - associated companies, extraordinary items and accounting changes ...... Realized investment gains (Iosses)-net ............ Equity in earnings of associated companies-net Earnings before extraordinary items and accounting changes ................ Extraordinary items-net ... Cumulative effect of accounting changes-net . . Net earnings ............. Proforma net earnings assuming accounting changes applied retroactively ............ Earnings per share-assuming full dilution: Earnings before realized investment gains, equity in earnings of associated companies, extraordinary items and accounting changes ...... Realized investment gains- net .................... Equity in earnings of associated companies-net Earnings before extraordinary items and accounting changes ................ Extraordinary items-net ... Cumulative effect of accounting changes-net . . Net earnings .............. Proforma net earnings assuming accounting changes applied retroactively ............ Cash dividends per share ..... $5.12 1.31 .29 $4.64 .31 .19 $ .43 (.01) .66 $2.76 .74 $3.61 .84 $3.48 .93 .17 6.72 .33 5.14 1.08 3.50 4.45 4.58 .20 $7.05 $5.14 $1.08 $3.50 $4.45 $4.78 $6.72 $6.30 $3.92 $4.07 * $2.76 $3.01 $2.81 - .88 .23 ~ .60 .64 .20 .14 ~ .57 .11 5.00 4.44 * 3.33 3.61 3.56 .14 .22 $5.22 $4.44 ~ $3.33 $3.61 $3.70 $5.00 $5.31 $1.20 $1.20 $ .30 $1.22 $1.21 $1.03 *Anti-dilutive (a) Includes excise taxes of $191,410, $189,840, $64,051, $196,966, $197,054 and $194,752 paid on sales of manufactured products for the respective periods. (b) Net unrealized investment gains (losses) of $70,305, $72,188, $2,192, ($59,418), ($40,610) and $5,465 for the respective periods have not been included. TIMN 446979 17

Loews Corporation and Subsidiaries Consolidated Balance Sheet ~ December 31, (Amounts in thousands) 1976 1975 Assets: Investments (Notes I and 2) : Bonds and notes, quoted market values of $2,507,890 and $1,934,081 .............................. $2,455,605 $2,099,758 Common stocks, quoted market values of $168,268 and $129,115 ................................. 144,478 127,974 Preferred stocks, quoted market values of $145,349 and $145,303 ................................. 145,196 151,615 Mortgage loans and notes receivable, less allowance for discounts of $1,442 and $7,296 ........................ 645,307 665,778 Loans to life insurance policyholders ........................ 214,206 206,560 Real estate, less accumulated depreciation of $22,871 and $21,739 ................................. 182,902 191,672 Other invested assets .................................... 17,090 17,578 Total investments ................................... 3,804,784 3,460,935 Cash, including time deposits of $16,990 and $7,288 ............ 97,635 93,242 Receivables (Note 1) : Finance, less unearned discount, claim reserves and allowances for losses of $99,487 and $89,671 ............... 387,985 374,029 Insurance premiums in course of collection, less allowance for doubtful accounts of $4,300 and $4,302 ........ 275,220 253,216 Other, less allowance for doubtful accounts and cash discounts of $5,853 and $3,313 ....................... 208,137 190,431 Inventories (Notes I and 3) ................................. 383,188 404,576 Investments in associated companies (Notes 1 and 4) ............ 57,435 103,966 Property, plant and equipment-net (Notes I and 5) ............ 223,457 217,978 Cost in excess of net assets acquired (Notes 1 and 6) ............ 154,599 168,211 Trademarks .............................................. 99,523 100,033 Deferred policy acquisition costs of insurance subsidiaries (Note 1) ..................................... 200,187 174,752 Patents and licenses, less accumulated amortization of $7,203 and $6,125 .......................... 6,112 7,190 Separate Account business (Note 1) ........................... 292,208 222,162 Other assets .............................................. 35,005 28,497 TotaIassets .......................................... $6,225,475 $5,799,218 See Notes to Consolidated Financial Statements. TIMN 446982 20

1V1 anagement's Discussion and Analysis of Summary of Operations (Not covered by Auditors' Opinions) Year Ended December 31, 1976 Compared with Year Ended December 31, 1975 Revenues for the year ended December 31, 1976 reflect record levels for the second consecutive year and represent a 7.4% increase over the revenues reported for the year earlier period. Net earnings are the highest in the history of the Company and represent a 37.5% increase over the preceding year. This record achievement represents an 18.5 % return on shareholders' equity at the beginning of the year. The increase in revenues was achieved in all operating divisions of the Company except the theatre division, whose revenues declined as a result of a lack of successful box-office product. The principal revenue increases were (a) earned insurance premiums in the property/casualty lines of business, (b) manufactured products, as a result of tobacco price increases late in 1975 and 1976, (c) increased hotel revenues, as a result of increased occupancy and average rate, including an increase related to the opening of Loews Monte Carlo Hotel in late 1975, (d) increased net investment income due primarily to an increase in invested assets and (e) improved sales in the residential development division. Total expenses increased relative to increased revenues in the insurance, hotel and residential development divisions. Increased expenses resulted primarily from (a) increased underwriting losses in property/casualty lines of business, (b) increased tobacco product costs and (c) additional tobacco product advertising. These increases were partially offset by (a) decreased finance subsidiary expenses which reflected reductions in interest rates relating to the cost of borrowed money, (b) an adjustment in 1975 (with no corresponding adjustment in 1976) which reduced the carrying value of residential development inventories and (c) reduced theatre operating costs related to reduced theatre revenues. Purchase value adjustments, arising as noted in Management's discussion of the 1975 comparison, resulted in the inclusion of operating earnings and securities gains relating to CNA Financial Corporation (CNA) in excess of the Company's equity in those results as reported by CNA. The increase in net realized investment gains is attributable to the disposition of securities by CNA which had a cost basis for the Company which differed from that of CNA due to purchase value adjustments. The cost basis of such securities to CNA substantially exceeded the cost basis of such securities to the Company. These investment gains were offset in part by reduction of the carrying value of the Company's investment in Wheeling-Pittsburgh Steel Corporation to market value at December 31, 1976. Management determined to treat the Wheeling-Pittsburgh investment in the same manner as other holdings in its investment portfolio, based on a decision to no longer consider the Wheeling-Pittsburgh investment as a long-term holding. Accordingly, Management considered it prudent to adjust the carrying value of the investment to current market value. Equity in earnings of associated companies reflects the increase in earnings of Wheeling-Pittsburgh Steel Corporation for the year. Earnings attributable to the Company's investment in Wheeling- Pittsburgh will not be reflected in the earnings of the Company in the future. During 1976, CNA elected to adopt new methods of accounting for its reserve for credit losses in its finance subsidiary and of accounting for deferred tax credits. The Company's equity in the net cumulative effect of these accounting changes is reflected in the financial statements. 14 TIMN 446976

Loews Corporation and Subsidiaries Statement of Con5olidated ShaYeholders' Equity Earnings Additional Retained Common Paid-In in the (Amounts in thousands) Stock Capital Business Common Stock Unrealized Held in Appreciation Treasury Balance, December 31, 1974 ...... $14,791 $116,457 $357,818 $52,681 Net earnings ................ 66,422 Dividends paid, $1.20 per share . (15,502) Equity in certain transactions of associated and subsidiary companies ................ (231) Net unrealized appreciation for the year ............... $ 5,931 Balance, December 31, 1975 ...... 14,791 116,226 408,738 5,931 52,681 Net earnings ................ 91,327 Dividends paid, $1.20 per share . (15,505) Exercise of stock options (Note 9) 2 33 Exercise of warrants (Note 9) ... 10 336 Equity in certain transactions of associated and subsidiary companies ................ (470) Net unrealized appreciation for the year ............... 15,364 Balance, December 31, 1976 ...... $14,803 $116,125 $484,560 $21,295 $52,68 1 TIMN 446985 See Notes to Consolidated Financial Statements. 23

(c) Liabilities for future policy benefits and expenses have been computed by a net level premium method based upon the following actuarial assumptions: Expenses-The deferral of acquisition costs is described in (b) above. Renewal maintenance expenses for future years have been increased to reflect estimated effects of inflation. Provision has been made for expenses beyond the premium paying period. Withdrawals-Withdrawal rates are based on industry tables augmented by experience. Interest-Policy reserves are computed on the basis of interest rates which vary with date of issue and policy duration. CNA's investment experience is considered in the determination of assumptions. Mortality-Mortality rates assumed in the computation of policy reserves are based on a blend of company experience, industry experience prevailing at the time of issue and margins for adverse deviation. (d) Appropriate amounts have been allocated to participating business which approximates 21.8% of the companies' life insurance in force and 16.5 % of the total premium income for the year 1976. The amount of dividends to be paid to policyholders is determined annually by the respective companies' Boards of Directors. Earnings allocable to participating policyholders are determined by allocating 90% of the operating income or loss before participating policyholders' dividends, net of applicable income taxes, on the related business. In addition, 90% of the realized and unrealized gains or losses, net of applicable taxes on investments related to this business, are also allocated to the participating policyholders. Casualty Insurance Companies-revenue and expense recognition is as follows: Insurance reserves: (a) Unearned premiums are principally computed on a daily pro-rata basis. These calculations include provisions for refunds under retrospectively rated policies and deductions for reinsurance placed with insurers other than affiliated companies. (b) The claims liability is based on (i) aggregate case basis estimates for losses reported in relation to direct premiums written, adjusted in the aggregate for ultimate loss expectations and estimates of unreported losses based on past experience; and (ii) estimates received relating to assumed rein- surance and deductions for reinsurance placed with insurers other than affiliates. Insurance reserves are necessarily based on estimates and the ultimate liability may vary from such estimates; however, the reserves are believed to be adequate. (c) The liability for claim adjustment expenses covers estimated future expenses to be incurred in settlement of the claims provided for in the claims liability. Expenses-Deferred policy acquisition costs include commissions, premium taxes, agency expenses and all other underwriting costs. To the extent of demonstrable recoverability, deferred policy acquisition costs are charged against income ratably over the terms of the policies. TIMN 446990 28

Loews Corporation and Subsidiaries Summary of Operations The following summary of operations should be read in conjunction with the consolidated financial statements and notes included elsewhere. Effective December 31, 1974 the Company acquired, in a purchase transaction, a controlling interest in CNA. Accordingly, CNA's results of operations are included in the amounts shown for the years ended December 31, 1976 and 1975. The operations of CNA for other periods have not been included except for dividends earned prior to the acquisition date, which are not significant in relation to total revenues or net earnings of the respective periods. Four Months Ended Years Ended December 31, December 31, Years Ended August 31, 1976 1975 1974 1974 1973 1972 Revenues: Insurance premiums and net investment income ....... $1,877,750 Manufactured products (a) . . 751,969 Other........•.•..••••••• 271,735 To tal .............. 2,901,454 Expenses: Insurance benefits and underwriting expenses .... 1,811,056 Cost of manufactured products sold (a) ........ 527,010 Interest and amortization of debenture discount and expense-net ........... 80,830 Other .................... 353,463 Income taxes ............. 46,094 Minority interest .......... 16,655 Total .............. 2,835,108 Earnings before realized investment gains (losses), equity in earnings of associated companies, extraordinary items and accounting changes ........ 66,346 Realized investment gains (losses)-net (b) ........... 16,940 Equity in earnings of associated companies-net . . 3,779 Earnings before extraordinary items and accounting changes 87,065 Extraordinary items-sales of 48 theatres and of former associated company-net ... Cumulative effect of accounting changes-net .... 4,262 Net earnings ................ $ 91,327 Proforma net earnings assuming accounting changes applied retroactively ........ $ 87,065 Weighted average number of shares outstanding ......... 12,947 See Notes to Summary o f Operations 16 (Amounts in thousands) $1,755,652 $ 10,752 $ 30,319 $ 28,644 $ 25,942 700,397 225,470 641,134 624,203 604,469 245,787 41,438 119,973 112,018 173,106 2,701,836 277,660 791,426 764,865 803,517 1,660,319 510,594 174,582 481,335 443,541 426,672 91,876 22,000 57,207 50,526 44,964 322,766 74,089 203,017 192,213 252,207 40,002 1,520 14,154 27,359 28,855 16,315 (4) 37 29 78 2,641,872 272,187 755,750 713,668 752,776 59,964 5,473 35,676 51,197 50,741 3,970 (70) 26 11,885 13,522 2,488 8,575 9,582 35 2,429 66,422 13,978 45,284 63,117 66,692 2,929 $ 66,422 $ 13,978 $ 45,284 $ 63,117 $ 69,621 $ 81,381 12,919 12,919 12,920 14,190 14,567 T.IMN 446978

Loews Corporation and Subsidiaries Statement of Consolidated Changes in Financial Position (Amounts in thousands) Funds Provided: Net earnings ........................................... Items not currently requiring (providing) funds: Minority interest .......••.•••••.••.••.. ••••••'•••••••• Equity in undistributed net earnings related to associated companies ........•.•••••••••••••••••••••. Write-off of investments and other assets .................. Depreciation and amortization of investments .............. Other depreciation and amortization ...................... Deferred income taxes (benefits) ......................... Participating policyholders' interest in income .............. Other changes in: Insurance reserves and claims ......................... Deferred acquisition costs ............................. Receivables ......................................... Inventories ......................................... Accounts payable and accrued liabilities ................. Accrued taxes ....................................... Other items-net .................................... Funds provided from operations ...................... Unrealized appreciation-net .............................. Other changes in minority interest-net ..................... Increase in long-term debt, including current maturities ........ Reduction of cost in excess of net assets acquired attributable to income tax benefits ........................ Dispositions of property, plant and equipment ................ Disposition of investments in associated companies ............ Total .......................................... Funds Used: Increase (reduction) in investments .......................... Reduction in short-term debt-net .......................... Reduction of long-term debt, including current maturities ...... Dividends paid to shareholders ............................. Additions to property, plant and equipment .................. Other items-net . . . . . . . . . . . . . Increase (decrease) in cash ................................ Total .......................................... See Notes to Consolidated Financiai Statements. 24 Year Ended December 31, 1976 1975 $ 91,327 11,057 (2,877) 39,345 (8,404) 21,352 (17,296) 3,887 $ 66,422 36,444 (2,445) 12,243 (1,254) 16,476 17,563 15,136 301,967 (25,435) (53,666) 21,388 (9,926) 33,133 8,213 414,065 15,364 18,708 49,919 1,762 4,233 16,054 $520,105 $319,639 98,308 46,789 15,505 26,283 9,188 4,393 $520,105 162,263 (59,748) (28,481) (28,976) 27,743 7,084 8,363 248,833 5,931 (17,056) 53,058 15,786 3,938 $310,490 $ (60,267) 216,811 131,782 15,502 16,228 487 (10,053) $310,490 TIMN 446986