Business Segments

9 Months Ended

Sep. 30, 2012

Segment Reporting [Abstract]

Business Segments

Note K. Business Segments

The Company's core property and casualty commercial insurance operations are reported in three business segments: CNA Specialty, CNA Commercial and Hardy. The Company acquired Hardy on July 2, 2012. Further information on Hardy is set forth in Note B. The Company's non-core operations are managed in two segments: Life & Group Non-Core and Corporate & Other Non-Core.

The accounting policies of the segments are the same as those described in Note A of the Consolidated Financial Statements within CNAF's Annual Report on Form 10-K for the year ended December 31, 2011, other than the accounting for deferred acquisition costs, as further discussed in Note A herein. The Company manages most of its assets on a legal entity basis, while segment operations are conducted across legal entities. As such, only insurance and reinsurance receivables, insurance reserves and deferred acquisition costs are readily identifiable by individual segment. Distinct investment portfolios are not maintained for each individual segment; accordingly, allocation of assets to each segment is not performed. Therefore, net investment income and realized investment gains or losses are allocated primarily based on each segment's net carried insurance reserves, as adjusted. All significant intersegment income and expense has been eliminated. Income taxes have been allocated on the basis of the taxable income of the segments.

In the following tables, certain financial measures are presented to provide information used by management to monitor the Company's operating performance. Management utilizes these financial measures to monitor the Company's insurance operations and investment portfolio. Net operating income, which is derived from certain income statement amounts, is used by management to monitor performance of the Company's insurance operations. The Company's investment portfolio is monitored by management through analysis of various factors including unrealized gains and losses on securities, portfolio duration and exposure to market and credit risk. Based on such analyses, the Company may recognize an OTTI loss on an investment security in accordance with its policy, or sell a security, which may produce realized gains and losses.

Net operating income (loss) is calculated by excluding from net income (loss) attributable to CNA the after-tax effects of 1) net realized investment gains or losses, 2) income or loss from discontinued operations and 3) any cumulative effects of changes in accounting guidance. The calculation of net operating income excludes net realized investment gains or losses because net realized investment gains or losses are largely discretionary, except for some losses related to OTTI, and are generally driven by economic factors that are not necessarily consistent with key drivers of underwriting performance, and are therefore not considered an indication of trends in insurance operations.

The significant components of the Company's continuing operations and selected balance sheet items are presented in the following tables.

Three months ended
September 30, 2012	CNA Specialty			CNA Commercial			Hardy			Life & Group Non-Core			Corporate & Other Non-Core
(In millions)																Eliminations			Total
Operating revenues
Net earned premiums	$	738		$	840		$	64		$	141		$	(2	)	$	—		$	1,781
Net investment income	159			230			2			201			9			—			601
Other revenues	58			11			—			1			7			(1		)	76
Total operating revenues	955			1,081			66			343			14			(1		)	2,458
Claims, Benefits and Expenses
Net incurred claims and benefits	460			591			21			350			8			—			1,430
Policyholders’ dividends	1			3			—			1			—			—			5
Amortization of deferred acquisition costs	156			151			20			6			—			—			333
Other insurance related expenses	73			146			13			35			1			—			268
Other expenses	53			7			7			8			42			(1		)	116
Total claims, benefits and expenses	743			898			61			400			51			(1		)	2,152
Operating income (loss) from continuing operations before income tax	212			183			5			(57		)	(37		)	—			306
Income tax (expense) benefit on operating income (loss)	(76		)	(58		)	(2		)	35			11			—			(90		)
Net operating income (loss) from continuing operations attributable to CNA	136			125			3			(22		)	(26		)	—			216
Net realized investment gains (losses), net of participating policyholders’ interests	2			10			(1		)	(3		)	—			—			8
Income tax (expense) benefit on net realized investment gains (losses)	(2		)	(3		)	—			1			1			—			(3		)
Net realized investment gains (losses) attributable to CNA	—			7			(1		)	(2		)	1			—			5
Net income (loss) from continuing operations attributable to CNA	$	136		$	132		$	2		$	(24	)	$	(25	)	$	—		$	221

Three months ended
September 30, 2011	CNA Specialty			CNA Commercial			Life & Group Non-Core			Corporate & Other Non-Core						Total
(In millions)													Eliminations
Operating revenues
Net earned premiums	$	741		$	848		$	142		$	2		$	(1	)	$	1,732
Net investment income	85			115			190			4			—			394
Other revenues	56			14			6			—			—			76
Total operating revenues	882			977			338			6			(1		)	2,202
Claims, Benefits and Expenses
Net incurred claims and benefits	485			583			332			(1		)	—			1,399
Policyholders’ dividends	(4		)	3			2			—			—			1
Amortization of deferred acquisition costs	147			145			5			—			—			297
Other insurance related expenses	75			141			36			1			(1		)	252
Other expenses	48			10			2			42			—			102
Total claims, benefits and expenses	751			882			377			42			(1		)	2,051
Operating income (loss) from continuing operations before income tax	131			95			(39		)	(36		)	—			151
Income tax (expense) benefit on operating income (loss)	(48		)	(46		)	25			11			—			(58		)
Net operating (income) loss, after-tax, attributable to noncontrolling interests	—			(2		)	—			—			—			(2		)
Net operating income (loss) from continuing operations attributable to CNA	83			47			(14		)	(25		)	—			91
Net realized investment gains (losses), net of participating policyholders’ interests	(8		)	(15		)	(4		)	—			—			(27		)
Income tax (expense) benefit on net realized investment gains (losses)	3			5			1			1			—			10
Net realized investment (gains) losses, after-tax, attributable to noncontrolling interests	—			1			—			—			—			1
Net realized investment gains (losses) attributable to CNA	(5		)	(9		)	(3		)	1			—			(16		)
Net income (loss) from continuing operations attributable to CNA	$	78		$	38		$	(17	)	$	(24	)	$	—		$	75

Nine months ended
September 30, 2012	CNA Specialty			CNA Commercial			Hardy (a)			Life & Group Non-Core			Corporate & Other Non-Core
(In millions)																Eliminations			Total
Operating revenues
Net earned premiums	$	2,163		$	2,452		$	64		$	421		$	(1	)	$	(1	)	$	5,098
Net investment income	446			646			2			600			25			—			1,719
Other revenues	171			31			—			15			14			(1		)	230
Total operating revenues	2,780			3,129			66			1,036			38			(2		)	7,047
Claims, Benefits and Expenses
Net incurred claims and benefits	1,376			1,749			21			1,009			(5		)	—			4,150
Policyholders’ dividends	—			9			—			5			—			—			14
Amortization of deferred acquisition costs	458			437			20			22			—			—			937
Other insurance related expenses	222			425			13			106			1			(1		)	766
Other expenses	153			24			7			18			137			(1		)	338
Total claims, benefits and expenses	2,209			2,644			61			1,160			133			(2		)	6,205
Operating income (loss) from continuing operations before income tax	571			485			5			(124		)	(95		)	—			842
Income tax (expense) benefit on operating income (loss)	(197		)	(164		)	(2		)	86			29			—			(248		)
Net operating income (loss) from continuing operations attributable to CNA	374			321			3			(38		)	(66		)	—			594
Net realized investment gains (losses), net of participating policyholders’ interests	18			34			(1		)	14			1			—			66
Income tax (expense) benefit on net realized investment gains (losses)	(6		)	(12		)	—			(5		)	—			—			(23		)
Net realized investment gains (losses) attributable to CNA	12			22			(1		)	9			1			—			43
Net income (loss) from continuing operations attributable to CNA	$	386		$	343		$	2		$	(29	)	$	(65	)	$	—		$	637

September 30, 2012
(In millions)
Reinsurance receivables	$	750	$	1,131	$	238	$	1,297	$	2,498	$	—		$	5,914
Insurance receivables	$	676	$	1,108	$	206	$	10	$	4	$	—		$	2,004
Deferred acquisition costs	$	306	$	278	$	19	$	—	$	—	$	—		$	603
Insurance reserves
Claim and claim adjustment expenses	$	6,853	$	11,226	$	466	$	2,956	$	2,830	$	—		$	24,331
Unearned premiums	1,698		1,604		243		137		—		(1		)	3,681
Future policy benefits	—		—		—		10,974		—		—			10,974
Policyholders’ funds	13		13		—		139		—		—			165

_______________________________

(a) Included from date of acquisition.

Nine months ended
September 30, 2011	CNA Specialty			CNA Commercial			Life & Group Non-Core			Corporate & Other Non-Core						Total
(In millions)													Eliminations
Operating revenues
Net earned premiums	$	2,098		$	2,418		$	427		$	1		$	(2	)	$	4,942
Net investment income	371			569			567			24			—			1,531
Other revenues	164			40			6			4			—			214
Total operating revenues	2,633			3,027			1,000			29			(2		)	6,687
Claims, Benefits and Expenses
Net incurred claims and benefits	1,333			1,807			985			—			—			4,125
Policyholders’ dividends	(4		)	5			5			—			—			6
Amortization of deferred acquisition costs	428			435			17			—			—			880
Other insurance related expenses	216			400			108			4			(2		)	726
Other expenses	140			37			14			129			—			320
Total claims, benefits and expenses	2,113			2,684			1,129			133			(2		)	6,057
Operating income (loss) from continuing operations before income tax	520			343			(129		)	(104		)	—			630
Income tax (expense) benefit on operating income (loss)	(182		)	(127		)	78			34			—			(197		)
Net operating (income) loss, after-tax, attributable to noncontrolling interests	(12		)	(3		)	—			—			—			(15		)
Net operating income (loss) from continuing operations attributable to CNA	326			213			(51		)	(70		)	—			418
Net realized investment gains (losses), net of participating policyholders’ interests	7			13			(7		)	(12		)	—			1
Income tax (expense) benefit on net realized investment gains (losses)	(2		)	(4		)	2			5			—			1
Net realized investment (gains) losses, after-tax, attributable to noncontrolling interests	—			—			—			—			—			—
Net realized investment gains (losses) attributable to CNA	5			9			(5		)	(7		)	—			2
Net income (loss) from continuing operations attributable to CNA	$	331		$	222		$	(56	)	$	(77	)	$	—		$	420

December 31, 2011
(In millions)
Reinsurance receivables	$	852	$	1,188	$	1,375	$	2,677	$	—	$	6,092
Insurance receivables	$	670	$	1,047	$	8	$	1	$	—	$	1,726
Deferred acquisition costs	$	300	$	252	$	—	$	—	$	—	$	552
Insurance reserves
Claim and claim adjustment expenses	$	6,840	$	11,509	$	2,825	$	3,129	$	—	$	24,303
Unearned premiums	1,629		1,480		141		—		—		3,250
Future policy benefits	—		—		9,810		—		—		9,810
Policyholders’ funds	15		10		166		—		—		191

The following table provides revenue by line of business for each reportable segment. Revenues are comprised of operating revenues and net realized investment gains and losses, net of participating policyholders’ interests.

Revenues by Line of Business

Periods ended September 30	Three Months						Nine Months
(In millions)	2012			2011			2012			2011
CNA Specialty
International	$	53		$	54		$	163		$	159
Professional & Management Liability	700			623			2,039			1,909
Surety	124			123			364			353
Warranty & Alternative Risks	80			74			232			219
CNA Specialty revenues	957			874			2,798			2,640
CNA Commercial
CNA Select Risk	70			65			208			203
Commercial Insurance	756			622			2,188			2,015
International	93			133			274			390
Small Business	172			142			493			432
CNA Commercial revenues	1,091			962			3,163			3,040
Hardy revenues	65						65
Life & Group Non-Core
Health	274			274			852			818
Life & Annuity	64			55			181			170
Other	2			5			17			5
Life & Group Non-Core revenues	340			334			1,050			993
Corporate & Other Non-Core revenues	14			6			39			17
Eliminations	(1		)	(1		)	(2		)	(2		)
Total revenues	$	2,466		$	2,175		$	7,113		$	6,688