Benefit Plans

12 Months Ended

Dec. 31, 2011

Compensation and Retirement Disclosure [Abstract]

Benefit Plans

Note J. Benefit Plans

Pension and Postretirement Health Care and Life Insurance Benefit Plans

CNA sponsors noncontributory pension plans, primarily through the CNA Retirement Plan, typically covering full-time employees age 21 and over that have completed at least one year or 1,000 hours of service.

Effective January 1, 2000, the CNA Retirement Plan was closed to new participants. Existing participants at that time were given a choice to either continue to accrue benefits under the CNA Retirement Plan or to cease accruals at December 31, 1999. Employees who chose to continue to accrue benefits under the plan will receive a benefit based on their years of credited service and highest 60 months of compensation at termination. Compensation is defined as regular salary, eligible bonuses and overtime. Employees who elected to cease accruals at December 31, 1999 received the present value of their accrued benefit in an accrued pension account that is credited with interest based on the annual rate of interest on 30-year Treasury securities. These employees also receive certain enhanced employer contributions in the CNA Savings and Capital Accumulation Plan.

CNA's funding policy for defined benefit pension plans is to make contributions in accordance with applicable governmental regulatory requirements with consideration of the funded status of the plans.

CNA provides certain health care benefits to eligible retired employees, their covered dependents and their beneficiaries primarily through the CNA Health and Group Benefits Program. The funding for these plans is generally to pay covered expenses as they are incurred.

In November 2010, CNA announced a change in its postretirement benefits. The plan previously offered a maximum $10,000 non-contributory retiree life insurance benefit to participants who met certain eligibility requirements. The change eliminated this benefit for all active employees effective January 1, 2011, and for all retirees effective January 1, 2012. The change was treated as a negative plan amendment and the effect of this change was a reduction to the accumulated postretirement benefit obligation of $60 million at December 31, 2010.

The following table provides a reconciliation of benefit obligations and plan assets for the years ended December 31, 2011 and 2010.

Funded Status

	Pension Benefits						Postretirement Benefits
(In millions)	2011			2010			2011			2010
Benefit obligation at January 1	$	2,798		$	2,702		$	95		$	155
Changes in benefit obligation:
Service cost	13			16			1			1
Interest cost	146			149			3			7
Participants' contributions	—			—			6			6
Plan amendments	—			—			(12		)	(60		)
Actuarial (gain) loss	263			89			(18		)	(2		)
Benefits paid	(163		)	(157		)	(13		)	(13		)
Foreign currency translation and other	—			(1		)	—			1
Reduction of benefit obligations due to disposition of subsidiary	(54		)	—			(13		)	—
Benefit obligations at December 31	3,003			2,798			49			95
Fair value of plan assets at January 1	2,258			2,117			—			—
Change in plan assets:
Actual return on plan assets	82			234			—			—
Company contributions	89			65			7			7
Participants' contributions	—			—			6			6
Benefits paid	(163		)	(157		)	(13		)	(13		)
Foreign currency translation and other	—			(1		)	—			—
Reduction of plan assets due to disposition of subsidiary	(54		)	—			—			—
Fair value of plan assets at December 31	2,212			2,258			—			—
Funded status	$	(791	)	$	(540	)	$	(49	)	$	(95	)
Amounts recognized on the Consolidated Balance Sheets at December 31:
Other assets	$	1		$	7		$	—		$	—
Other liabilities	(792		)	(547		)	(49		)	(95		)
Net amount recognized	$	(791	)	$	(540	)	$	(49	)	$	(95	)
Amounts recognized in Accumulated other comprehensive income, not yet recognized in net periodic cost (benefit):
Prior service credit	$	—		$	—		$	(134	)	$	(141	)
Net actuarial loss	1,060			741			9			29
Net amount recognized	$	1,060		$	741		$	(125	)	$	(112	)

The accumulated benefit obligation for all defined benefit pension plans was $2,932 million and $2,715 million at December 31, 2011 and 2010.

The components of net periodic cost (benefit) are presented in the following table.

Net Periodic Cost (Benefit)

Years ended December 31
(In millions)	2011			2010			2009
Pension cost
Service cost	$	13		$	16		$	17
Interest cost on projected benefit obligation	146			149			153
Expected return on plan assets	(172		)	(162		)	(145		)
Amortization of net actuarial loss	25			24			25
Net periodic pension cost	$	12		$	27		$	50
Postretirement benefit
Service cost	$	1		$	1		$	1
Interest cost on projected benefit obligation	3			7			9
Amortization of prior service credit	(19		)	(16		)	(16		)
Amortization of net actuarial loss	—			1			1
Net periodic postretirement benefit	$	(15	)	$	(7	)	$	(5	)

The amounts recognized in Other comprehensive income are presented in the following table.

Years ended December 31
(In millions)	2011			2010			2009
Pension and postretirement benefits
Amounts arising during the period	$	(325	)	$	44		$	13
Reclassification adjustment relating to prior service credit	(19		)	(16		)	(16		)
Reclassification adjustment relating to actuarial loss	25			25			26
Total increase (decrease) in Other comprehensive income	$	(319	)	$	53		$	23

The table below presents the estimated amounts to be recognized from Accumulated other comprehensive income into net periodic cost (benefit) during 2012.

(In millions)	Pension Benefits		Postretirement Benefits
Amortization of prior service credit	$	—	$	(18	)
Amortization of net actuarial loss	39		1
Total estimated amounts to be recognized	$	39	$	(17	)

Actuarial assumptions used for the CNA Retirement Plan and CNA Health and Group Benefits Program to determine benefit obligations are set forth in the following table.

Actuarial Assumptions for Benefit Obligations

December 31	2011		2010
Pension benefits
Discount rate	4.600	%	5.375	%
Expected long term rate of return	8.000		8.000
Rate of compensation increases	4.125		5.030
Postretirement benefits
Discount rate	3.750	%	4.375	%

Actuarial assumptions used for the CNA Retirement Plan and CNA Health and Group Benefits Program to determine net cost or benefit are set forth in the following table.

Actuarial Assumptions for Net Cost or Benefit

Years ended December 31	2011		2010		2009
Pension benefits
Discount rate	5.375	%	5.700	%	6.300	%
Expected long term rate of return	8.000		8.000		8.000
Rate of compensation increases	5.030		5.030		5.830
Postretirement benefits
Discount rate	4.375	%	4.875 / 5.500%		6.300	%

In determining the expected long term rate of return on plan assets assumption for the CNA Retirement Plan, CNA considered the historical performance of the benefit plan investment portfolio as well as long term market return expectations based on the investment mix of the portfolio.

The CNA Health and Group Benefits Program has limited its share of the health care trend rate to a cost-of-living adjustment of 4% per year. For all participants, the employer subsidy on health care costs will not increase by more than 4% per year. As a result, the assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation for the CNA Health and Group Benefits Program was 4% per year in 2011, 2010 and 2009.

The health care cost trend rate assumption has a significant effect on the amount of the benefit obligation and periodic cost reported. An increase in the assumed health care cost trend rate of 1% in each year would have no significant impact on the Company's accumulated postretirement benefit obligation as of December 31, 2011 and would have no significant impact on the Company's aggregate net periodic postretirement benefit for 2011. A decrease in the assumed health care cost trend rate of 1% in each year would decrease the Company's accumulated postretirement benefit obligation as of December 31, 2011 by $3 million and would have no significant impact on the Company's aggregate net periodic postretirement benefit for 2011.

CNA employs a total return approach whereby a mix of equity and fixed maturity securities are used to maximize the long term return of plan assets for a prudent level of risk and to manage cash flows according to plan requirements. The intent of this strategy is to minimize plan expenses by outperforming plan liabilities over the long run. Risk tolerance is established after careful consideration of the plan liabilities, plan funded status and corporate financial conditions. The investment portfolio contains a diversified blend of fixed maturity, equity and short term securities. Alternative investments, including limited partnerships, are used to enhance risk adjusted long term returns while improving portfolio diversification. At December 31, 2011 the plan had committed approximately $27 million to future capital calls from various third-party limited partnership investments in exchange for an ownership interest in the related partnerships. Derivatives may be used to gain market exposure in an efficient and timely manner. Investment risk is measured and monitored on an ongoing basis through annual liability measurements, periodic asset/liability studies and quarterly investment portfolio reviews.

Pension plan assets measured at fair value on a recurring basis are summarized below.

December 31, 2011
(In millions)	Level 1		Level 2		Level 3		Total assets at fair value
Assets
Fixed maturity securities:
Corporate and other bonds	$	—	$	377	$	10	$	387
States, municipalities and political subdivisions	—		104		—		104
Asset-backed:
Residential mortgage-backed	—		198		—		198
Commercial mortgage-backed	—		68		—		68
Other asset-backed	—		10		—		10
Total asset-backed	—		276		—		276
Total fixed maturity securities	—		757		10		767
Equity securities	353		75		5		433
Short term investments	63		35		—		98
Limited partnerships:
Hedge funds	—		488		330		818
Private equity	—		—		65		65
Total limited partnerships	—		488		395		883
Other assets	—		21		—		21
Investment contracts with insurance company	—		—		10		10
Total assets	$	416	$	1,376	$	420	$	2,212

December 31, 2010
(In millions)	Level 1		Level 2		Level 3		Total assets at fair value
Assets
Fixed maturity securities:
Corporate and other bonds	$	—	$	305	$	10	$	315
States, municipalities and political subdivisions	—		92		—		92
Asset-backed:
Residential mortgage-backed	—		179		—		179
Commercial mortgage-backed	—		40		9		49
Other asset-backed	—		9		1		10
Total asset-backed	—		228		10		238
Total fixed maturity securities	—		625		20		645
Equity securities	421		77		6		504
Short term investments	106		7		—		113
Limited partnerships:
Hedge funds	—		518		394		912
Private equity	—		—		59		59
Total limited partnerships	—		518		453		971
Derivatives	1		—		—		1
Other assets	—		15		—		15
Investment contracts with insurance company	—		—		9		9
Total assets	$	528	$	1,242	$	488	$	2,258

The limited partnership investments are recorded at fair value, which represents the plan's share of net asset value of each partnership, as determined by the General Partner. Level 2 includes limited partnership investments which can be redeemed at net asset value in 90 days or less. Level 3 includes limited partnership investments with withdrawal provisions greater than 90 days, or for which withdrawals are not permitted until the termination of the partnership. Within hedge fund strategies, approximately 53% are equity related, 36% pursue a multi-strategy approach, 10% are focused on distressed investments and 1% are fixed income related at December 31, 2011.

The fair value of the guaranteed investment contracts is an estimate of the amount that would be received in an orderly sale to a market participant at the measurement date. The amount the plan would receive from the contract holder if the contracts were terminated is the primary input and is unobservable. The guaranteed investment contracts are therefore classified as Level 3 investments.

For a discussion of the fair value levels and the valuation methodologies used to measure fixed maturity securities, equities, derivatives and short term investments, see Note D.

The tables below present a reconciliation for all pension plan assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2011 and 2010.

Level 3 (In millions)	Balance at January 1, 2011		Actual return on assets still held at December 31, 2011			Actual return on assets sold during the year ended December 31, 2011		Purchases, sales, and settlements			Net transfers into (out of) Level 3		Balance at December 31, 2011
Fixed maturity securities:
Corporate and other bonds	$	10	$	—		$	—	$	—		$	—	$	10
Asset-backed:
Commercial mortgage-backed	9		—			—		(9		)	—		—
Other asset-backed	1		—			—		(1		)	—		—
Total asset-backed	10		—			—		(10		)	—		—
Total fixed maturity securities	20		—			—		(10		)	—		10
Equity securities	6		(1		)	—		—			—		5
Limited partnerships:
Hedge funds	394		5			5		(74		)	—		330
Private equity	59		9			—		(3		)	—		65
Total limited partnerships	453		14			5		(77		)	—		395
Investment contracts with insurance company	9		1			—		—			—		10
Total	$	488	$	14		$	5	$	(87	)	$	—	$	420

Level 3 (In millions)	Balance at January 1, 2010		Actual return on assets still held at December 31, 2010		Actual return on assets sold during the year ended December 31, 2010		Purchases, sales, and settlements			Net transfers into (out of) Level 3		Balance at December 31, 2010
Fixed maturity securities:
Corporate and other bonds	$	—	$	—	$	—	$	10		$	—	$	10
Asset-backed:
Residential mortgage-backed	52		—		6		(58		)	—		—
Commercial mortgage-backed	—		—		—		9			—		9
Other asset-backed	5		—		—		(4		)	—		1
Total asset-backed	57		—		6		(53		)	—		10
Total fixed maturity securities	57		—		6		(43		)	—		20
Equity securities	5		1		—		—			—		6
Limited partnerships:
Hedge funds	339		64		—		(9		)	—		394
Private equity	57		6		—		(4		)	—		59
Total limited partnerships	396		70		—		(13		)	—		453
Investment contracts with insurance company	9		—		—		—			—		9
Total	$	467	$	71	$	6	$	(56	)	$	—	$	488

The table below presents the estimated future minimum benefit payments to participants at December 31, 2011.

Estimated Future Minimum Benefit Payments to Participants

(In millions)	Pension Benefits		Postretirement Benefits
2012	$	176	$	6
2013	181		6
2014	184		5
2015	188		5
2016	191		5
2017-2021	1,002		18

In 2012, CNA expects to contribute $86 million to its pension plans and $6 million to its postretirement health care benefit plans.

Savings Plans

CNA sponsors savings plans, which are generally contributory plans that allow most employees to contribute a maximum of 20% of their eligible compensation, subject to certain limitations prescribed by the IRS. The Company contributes matching amounts to participants, amounting to 70% of the first 6% (35% of the first 6% in the first year of employment) of eligible compensation contributed by the employee. Employees vest in these contributions ratably over five years.

The CNA Savings and Capital Accumulation Plan allows employees to make contributions to an investment fund that is supported in part by an investment contract purchased from CAC. CAC will not accept any further deposits under this contract. The liability to the CNA Savings and Capital Accumulation Plan is included in Separate account liabilities and Policyholders' funds on the Consolidated Balance Sheets, and was $381 million and $363 million at December 31, 2011 and 2010.

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

Benefit expense for the Company's savings plans was $60 million, $61 million and $59 million for the years ended December 31, 2011, 2010 and 2009.

Stock-Based Compensation

The CNAF Incentive Compensation Plan (the Plan), as amended and restated on January 1, 2010, authorizes the grant of stock-based compensation to certain management personnel for up to 6 million shares of CNAF's common stock. The Plan currently provides for awards of stock options, stock appreciation rights (SARs), restricted shares, performance-based restricted share units (RSUs) and performance share units. The number of shares available for the granting of stock-based compensation under the Plan as of December 31, 2011 was approximately 2.4 million.

The Company recorded stock-based compensation expense related to the Plan of $6 million, $5 million and $3 million for the years ended December 31, 2011, 2010 and 2009. The related income tax benefit recognized was $2 million, $2 million and $1 million. The compensation cost related to nonvested awards not yet recognized was $10 million, and the weighted average period over which it is expected to be recognized is 1.83 years at December 31, 2011.

Equity based compensation that is not fully vested prior to termination is generally forfeited upon termination, except as otherwise provided by contractual obligations. In addition, any such compensation that vested prior to termination is generally canceled immediately, except in cases of retirement, death or disability, and as otherwise provided by contractual obligations.

Stock Options and SARs

The exercise price of all stock options and SARs granted is based on the market value of the Company's common stock as of the date of grant. Stock options and SARs generally vest ratably over a four-year service period following date of grant and have a maximum term of ten years.

The fair value of granted stock options and SARs was estimated at the grant date using the Black-Scholes option-pricing model. The Black-Scholes model incorporates a risk free rate of return and various assumptions regarding the underlying common stock and the expected life of the securities granted. Different interest rates and assumptions were used for each grant, as appropriate based on date of grant.

The following table presents the significant assumptions used to estimate the fair value of granted stock options and SARs for the years ended December 31, 2011, 2010 and 2009.

Years ended December 31	2011		2010		2009
Weighted average expected life of the securities granted (in years)	5.61		5.61		4.84
Estimate of the underlying common stock's volatility	39.88	%	39.58	%	39.95	%
Expected dividend yield	1.5	%	—	%	—	%
Risk free interest rate	2.2	%	2.6	%	2.0	%

The following table presents activity for stock options and SARs under the Plan in 2011.

	Number of Awards		Weighted-Average Exercise Price per Award		Aggregate Intrinsic Value			Weighted-Average Remaining Contractual Term (in years)
Outstanding at January 1, 2011	1,625,175		$	27.42
Awards granted	125,000		27.12
Awards exercised	(166,375	)	27.13
Awards forfeited, canceled or expired	(264,450	)	34.51
Outstanding at December 31, 2011	1,319,350		$	26.01	$	5	million	5.80
Outstanding, fully vested and expected to vest	1,260,045		$	26.14	$	5	million	5.69
Outstanding, exercisable	872,600		$	28.04	$	2	million	4.79

The following table presents weighted-average grant date fair value for awards granted, total intrinsic value for awards exercised and total fair value for awards vested for the years ended December 31, 2011, 2010 and 2009.

Years ended December 31	2011			2010			2009
Weighted-average grant date fair value	$	9.38		$	10.49		$	4.69
Total intrinsic value of awards exercised	$	481	thousand	$	350	thousand	$	—
Fair value of awards vested	$	2	million	$	2	million	$	4	million

Share Awards

The fair value of share awards is based on the market value of the Company's common stock as of the date of grant. Share awards currently granted under the Plan include restricted shares, performance-based RSUs, and performance share units. Generally, restricted shares vest ratably over a four-year service period following the date of grant. Performance-based RSUs generally become payable within a range of 0% to 100% of the number of shares initially granted based upon the attainment of specific annual performance goals and vest ratably over a four-year service period following the date of grant. Performance share units become payable within a range of 0% to 200% of the number of shares initially granted based upon the attainment of specific performance goals achieved over a three year period.

The following table presents activity for restricted shares, performance-based RSUs and performance share units under the Plan in 2011.

	Number of Awards		Weighted-Average Grant Date Fair Value
Balance at January 1, 2011	493,507		$	20.30
Awards granted	274,333		27.23
Awards vested	(114,130	)	17.95
Awards forfeited, canceled or expired	(6,880	)	26.24
Performance-based adjustment	(7,408	)	27.11
Balance at December 31, 2011	639,422		$	23.55