[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware (State or other jurisdiction of incorporation or organization) | 36-6169860 (I.R.S. Employer Identification No.) |
333 S. Wabash Chicago, Illinois (Address of principal executive offices) | 60604 (Zip Code) |
Large accelerated filer [x] | Accelerated filer [ ] | Non-accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company [ ] |
Class | Outstanding at October 25, 2013 | |
Common Stock, Par value $2.50 | 269,702,799 |
Item Number | PART I. Financial Information | Page Number |
1. | ||
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2013 and 2012 | ||
2. | ||
3. | ||
4. | ||
PART II. Other Information | ||
1. | ||
4. | ||
6. |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions, except per share data) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Revenues | |||||||||||||||
Net earned premiums | $ | 1,825 | $ | 1,781 | $ | 5,389 | $ | 5,098 | |||||||
Net investment income | 597 | 601 | 1,808 | 1,719 | |||||||||||
Net realized investment gains (losses): | |||||||||||||||
Other-than-temporary impairment losses | (15 | ) | (62 | ) | (49 | ) | (89 | ) | |||||||
Portion of other-than-temporary impairments recognized in Other comprehensive income (loss) | (2 | ) | (2 | ) | (2 | ) | (25 | ) | |||||||
Net other-than-temporary impairment losses recognized in earnings | (17 | ) | (64 | ) | (51 | ) | (114 | ) | |||||||
Other net realized investment gains | 21 | 72 | 69 | 180 | |||||||||||
Net realized investment gains | 4 | 8 | 18 | 66 | |||||||||||
Other revenues | 78 | 76 | 285 | 230 | |||||||||||
Total revenues | 2,504 | 2,466 | 7,500 | 7,113 | |||||||||||
Claims, Benefits and Expenses | |||||||||||||||
Insurance claims and policyholders’ benefits | 1,414 | 1,435 | 4,364 | 4,164 | |||||||||||
Amortization of deferred acquisition costs | 341 | 333 | 1,004 | 937 | |||||||||||
Other operating expenses | 332 | 341 | 993 | 976 | |||||||||||
Interest | 42 | 43 | 125 | 128 | |||||||||||
Total claims, benefits and expenses | 2,129 | 2,152 | 6,486 | 6,205 | |||||||||||
Income before income tax | 375 | 314 | 1,014 | 908 | |||||||||||
Income tax expense | (103 | ) | (93 | ) | (298 | ) | (271 | ) | |||||||
Net income | $ | 272 | $ | 221 | $ | 716 | $ | 637 | |||||||
Basic earnings per share | $ | 1.01 | $ | 0.82 | $ | 2.66 | $ | 2.37 | |||||||
Diluted earnings per share | $ | 1.01 | $ | 0.82 | $ | 2.65 | $ | 2.36 | |||||||
Dividends per share | $ | 0.20 | $ | 0.15 | $ | 0.60 | $ | 0.45 | |||||||
Weighted Average Outstanding Common Stock and Common Stock Equivalents | |||||||||||||||
Basic | 269.7 | 269.4 | 269.6 | 269.4 | |||||||||||
Diluted | 270.2 | 269.8 | 270.1 | 269.8 |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Other Comprehensive Income (Loss), Net of Tax | |||||||||||||||
Changes in: | |||||||||||||||
Net unrealized gains (losses) on investments with other-than-temporary impairments | $ | (3 | ) | $ | 36 | $ | 3 | $ | 73 | ||||||
Net unrealized gains (losses) on other investments | (70 | ) | 191 | (717 | ) | 528 | |||||||||
Net unrealized gains (losses) on investments | (73 | ) | 227 | (714 | ) | 601 | |||||||||
Foreign currency translation adjustment | 56 | 33 | (18 | ) | 37 | ||||||||||
Pension and postretirement benefits | 4 | 3 | 14 | 12 | |||||||||||
Other comprehensive income (loss), net of tax | (13 | ) | 263 | (718 | ) | 650 | |||||||||
Net income | 272 | 221 | 716 | 637 | |||||||||||
Total comprehensive income (loss) | $ | 259 | $ | 484 | $ | (2 | ) | $ | 1,287 |
September 30, 2013 | December 31, 2012 | ||||||
(In millions, except share data) | |||||||
Assets | |||||||
Investments: | |||||||
Fixed maturity securities at fair value (amortized cost of $39,129 and $38,170) | $ | 41,274 | $ | 42,633 | |||
Equity securities at fair value (cost of $189 and $228) | 199 | 249 | |||||
Limited partnership investments | 2,790 | 2,462 | |||||
Other invested assets | 55 | 59 | |||||
Mortgage loans | 440 | 401 | |||||
Short term investments | 1,475 | 1,832 | |||||
Total investments | 46,233 | 47,636 | |||||
Cash | 185 | 156 | |||||
Reinsurance receivables (less allowance for uncollectible receivables of $72 and $73) | 5,731 | 6,158 | |||||
Insurance receivables (less allowance for uncollectible receivables of $90 and $101) | 1,993 | 1,882 | |||||
Accrued investment income | 482 | 434 | |||||
Deferred acquisition costs | 642 | 598 | |||||
Deferred income taxes | 331 | 93 | |||||
Property and equipment at cost (less accumulated depreciation of $358 and $404) | 334 | 326 | |||||
Goodwill | 154 | 154 | |||||
Other assets (includes $0 and $4 due from Loews Corporation) | 889 | 773 | |||||
Separate account business | 213 | 312 | |||||
Total assets | $ | 57,187 | $ | 58,522 | |||
Liabilities | |||||||
Insurance reserves: | |||||||
Claim and claim adjustment expenses | $ | 23,962 | $ | 24,763 | |||
Unearned premiums | 3,820 | 3,610 | |||||
Future policy benefits | 10,681 | 11,475 | |||||
Policyholders’ funds | 127 | 157 | |||||
Short term debt | — | 13 | |||||
Long term debt | 2,559 | 2,557 | |||||
Other liabilities (includes $129 and $0 due to Loews Corporation) | 3,672 | 3,321 | |||||
Separate account business | 213 | 312 | |||||
Total liabilities | 45,034 | 46,208 | |||||
Commitments and contingencies (Notes C, G and J) | |||||||
Stockholders' Equity | |||||||
Common stock ($2.50 par value; 500,000,000 shares authorized; 273,040,243 shares issued; 269,701,999 and 269,399,390 shares outstanding) | 683 | 683 | |||||
Additional paid-in capital | 2,142 | 2,146 | |||||
Retained earnings | 9,328 | 8,774 | |||||
Accumulated other comprehensive income | 113 | 831 | |||||
Treasury stock (3,338,244 and 3,640,853 shares), at cost | (91 | ) | (99 | ) | |||
Notes receivable for the issuance of common stock | (22 | ) | (21 | ) | |||
Total stockholders’ equity | 12,153 | 12,314 | |||||
Total liabilities and stockholders' equity | $ | 57,187 | $ | 58,522 |
Nine months ended September 30 | |||||||
(In millions) | 2013 | 2012 | |||||
Cash Flows from Operating Activities | |||||||
Net income | $ | 716 | $ | 637 | |||
Adjustments to reconcile net income to net cash flows provided by operating activities: | |||||||
Loss on disposal of property and equipment | — | 1 | |||||
Deferred income tax expense | 141 | 95 | |||||
Trading portfolio activity | 2 | (13 | ) | ||||
Net realized investment gains | (18 | ) | (66 | ) | |||
Equity method investees | (230 | ) | (68 | ) | |||
Amortization of investments | (20 | ) | (43 | ) | |||
Depreciation and amortization | 80 | 83 | |||||
Changes in: | |||||||
Receivables, net | 316 | 348 | |||||
Accrued investment income | (48 | ) | (46 | ) | |||
Deferred acquisition costs | (23 | ) | (27 | ) | |||
Insurance reserves | (166 | ) | (53 | ) | |||
Other assets | (62 | ) | 90 | ||||
Other liabilities | 233 | 47 | |||||
Other, net | — | 8 | |||||
Total adjustments | 205 | 356 | |||||
Net cash flows provided by operating activities | $ | 921 | $ | 993 | |||
Cash Flows from Investing Activities | |||||||
Dispositions: | |||||||
Fixed maturity securities - sales | $ | 4,830 | $ | 4,761 | |||
Fixed maturity securities - maturities, calls and redemptions | 2,496 | 2,655 | |||||
Equity securities | 82 | 72 | |||||
Limited partnerships | 91 | 153 | |||||
Mortgage loans | 20 | 6 | |||||
Purchases: | |||||||
Fixed maturity securities | (8,205 | ) | (7,369 | ) | |||
Equity securities | (61 | ) | (30 | ) | |||
Limited partnerships | (163 | ) | (119 | ) | |||
Mortgage loans | (59 | ) | (129 | ) | |||
Change in other investments | (19 | ) | 1 | ||||
Change in short term investments | 357 | (505 | ) | ||||
Purchase of Hardy | — | (197 | ) | ||||
Purchases of property and equipment | (67 | ) | (60 | ) | |||
Other, net | 9 | 14 | |||||
Net cash flows used by investing activities | $ | (689 | ) | $ | (747 | ) |
Nine months ended September 30 | |||||||
(In millions) | 2013 | 2012 | |||||
Cash Flows from Financing Activities | |||||||
Dividends paid to common stockholders | $ | (162 | ) | $ | (122 | ) | |
Repayment of debt | (13 | ) | (70 | ) | |||
Stock options exercised | 1 | 1 | |||||
Other, net | (26 | ) | (4 | ) | |||
Net cash flows used by financing activities | $ | (200 | ) | $ | (195 | ) | |
Effect of foreign exchange rate changes on cash | $ | (3 | ) | $ | 3 | ||
Net change in cash | $ | 29 | $ | 54 | |||
Cash, beginning of year | 156 | 75 | |||||
Cash, end of period | $ | 185 | $ | 129 |
Nine months ended September 30 | |||||||
(In millions) | 2013 | 2012 | |||||
Common Stock | |||||||
Balance, beginning of period | $ | 683 | $ | 683 | |||
Balance, end of period | 683 | 683 | |||||
Additional Paid-in Capital | |||||||
Balance, beginning of period | 2,146 | 2,141 | |||||
Stock-based compensation | (4 | ) | 3 | ||||
Balance, end of period | 2,142 | 2,144 | |||||
Retained Earnings | |||||||
Balance, beginning of period | 8,774 | 8,308 | |||||
Dividends paid to common stockholders | (162 | ) | (122 | ) | |||
Net income | 716 | 637 | |||||
Balance, end of period | 9,328 | 8,823 | |||||
Accumulated Other Comprehensive Income | |||||||
Balance, beginning of period | 831 | 480 | |||||
Other comprehensive income (loss) | (718 | ) | 650 | ||||
Balance, end of period | 113 | 1,130 | |||||
Treasury Stock | |||||||
Balance, beginning of period | (99 | ) | (102 | ) | |||
Stock-based compensation | 8 | 3 | |||||
Balance, end of period | (91 | ) | (99 | ) | |||
Notes Receivable for the Issuance of Common Stock | |||||||
Balance, beginning of period | (21 | ) | (22 | ) | |||
(Increase) decrease in notes receivable for the issuance of common stock | (1 | ) | 1 | ||||
Balance, end of period | (22 | ) | (21 | ) | |||
Total Stockholders' Equity | $ | 12,153 | $ | 12,660 |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Fixed maturity securities | $ | 504 | $ | 507 | $ | 1,501 | $ | 1,528 | |||||||
Short term investments | 1 | 2 | 3 | 5 | |||||||||||
Limited partnership investments | 93 | 89 | 303 | 184 | |||||||||||
Equity securities | 3 | 4 | 9 | 10 | |||||||||||
Mortgage loans | 6 | 5 | 17 | 13 | |||||||||||
Trading portfolio (a) | 3 | 7 | 13 | 18 | |||||||||||
Other | 1 | — | 2 | 3 | |||||||||||
Gross investment income | 611 | 614 | 1,848 | 1,761 | |||||||||||
Investment expense | (14 | ) | (13 | ) | (40 | ) | (42 | ) | |||||||
Net investment income | $ | 597 | $ | 601 | $ | 1,808 | $ | 1,719 |
(a) | There were no net unrealized gains (losses) related to changes in fair value of trading securities still held included in net investment income for the three or nine months ended September 30, 2013 or 2012. |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Net realized investment gains (losses): | |||||||||||||||
Fixed maturity securities: | |||||||||||||||
Gross realized gains | $ | 51 | $ | 75 | $ | 132 | $ | 193 | |||||||
Gross realized losses | (44 | ) | (49 | ) | (98 | ) | (120 | ) | |||||||
Net realized investment gains (losses) on fixed maturity securities | 7 | 26 | 34 | 73 | |||||||||||
Equity securities: | |||||||||||||||
Gross realized gains | 3 | 5 | 10 | 10 | |||||||||||
Gross realized losses | (5 | ) | (20 | ) | (27 | ) | (24 | ) | |||||||
Net realized investment gains (losses) on equity securities | (2 | ) | (15 | ) | (17 | ) | (14 | ) | |||||||
Derivatives | (1 | ) | (1 | ) | (4 | ) | (1 | ) | |||||||
Short term investments and other | — | (2 | ) | 5 | 8 | ||||||||||
Net realized investment gains (losses) | $ | 4 | $ | 8 | $ | 18 | $ | 66 |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Fixed maturity securities available-for-sale: | |||||||||||||||
Corporate and other bonds | $ | 9 | $ | 7 | $ | 17 | $ | 23 | |||||||
States, municipalities and political subdivisions | — | 17 | — | 17 | |||||||||||
Asset-backed: | |||||||||||||||
Residential mortgage-backed | 2 | 20 | 5 | 49 | |||||||||||
Other asset-backed | 1 | — | 2 | — | |||||||||||
Total asset-backed | 3 | 20 | 7 | 49 | |||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | — | — | — | 1 | |||||||||||
Total fixed maturity securities available-for-sale | 12 | 44 | 24 | 90 | |||||||||||
Equity securities available-for-sale: | |||||||||||||||
Common stock | 3 | 1 | 5 | 5 | |||||||||||
Preferred stock | 2 | 19 | 22 | 19 | |||||||||||
Total equity securities available-for-sale | 5 | 20 | 27 | 24 | |||||||||||
Net OTTI losses recognized in earnings | $ | 17 | $ | 64 | $ | 51 | $ | 114 |
September 30, 2013 | Cost or Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Unrealized OTTI Losses (Gains) | ||||||||||||||
(In millions) | |||||||||||||||||||
Fixed maturity securities available-for-sale: | |||||||||||||||||||
Corporate and other bonds | $ | 19,616 | $ | 1,695 | $ | 151 | $ | 21,160 | $ | — | |||||||||
States, municipalities and political subdivisions | 11,000 | 672 | 233 | 11,439 | — | ||||||||||||||
Asset-backed: | |||||||||||||||||||
Residential mortgage-backed | 4,779 | 141 | 101 | 4,819 | (33 | ) | |||||||||||||
Commercial mortgage-backed | 1,942 | 99 | 24 | 2,017 | (3 | ) | |||||||||||||
Other asset-backed | 942 | 16 | 2 | 956 | — | ||||||||||||||
Total asset-backed | 7,663 | 256 | 127 | 7,792 | (36 | ) | |||||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 166 | 8 | 1 | 173 | — | ||||||||||||||
Foreign government | 547 | 17 | 3 | 561 | — | ||||||||||||||
Redeemable preferred stock | 94 | 12 | — | 106 | — | ||||||||||||||
Total fixed maturity securities available-for-sale | 39,086 | 2,660 | 515 | 41,231 | $ | (36 | ) | ||||||||||||
Total fixed maturity securities trading | 43 | — | — | 43 | |||||||||||||||
Equity securities available-for-sale: | |||||||||||||||||||
Common stock | 41 | 12 | — | 53 | |||||||||||||||
Preferred stock | 148 | 1 | 3 | 146 | |||||||||||||||
Total equity securities available-for-sale | 189 | 13 | 3 | 199 | |||||||||||||||
Total | $ | 39,318 | $ | 2,673 | $ | 518 | $ | 41,473 |
December 31, 2012 | Cost or Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Unrealized OTTI Losses (Gains) | ||||||||||||||
(In millions) | |||||||||||||||||||
Fixed maturity securities available-for-sale: | |||||||||||||||||||
Corporate and other bonds | $ | 19,530 | $ | 2,698 | $ | 21 | $ | 22,207 | $ | — | |||||||||
States, municipalities and political subdivisions | 9,372 | 1,455 | 44 | 10,783 | — | ||||||||||||||
Asset-backed: | |||||||||||||||||||
Residential mortgage-backed | 5,745 | 246 | 71 | 5,920 | (28 | ) | |||||||||||||
Commercial mortgage-backed | 1,692 | 147 | 17 | 1,822 | (3 | ) | |||||||||||||
Other asset-backed | 929 | 23 | — | 952 | — | ||||||||||||||
Total asset-backed | 8,366 | 416 | 88 | 8,694 | (31 | ) | |||||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 172 | 11 | 1 | 182 | — | ||||||||||||||
Foreign government | 588 | 25 | — | 613 | — | ||||||||||||||
Redeemable preferred stock | 113 | 13 | 1 | 125 | — | ||||||||||||||
Total fixed maturity securities available-for-sale | 38,141 | 4,618 | 155 | 42,604 | $ | (31 | ) | ||||||||||||
Total fixed maturity securities trading | 29 | — | — | 29 | |||||||||||||||
Equity securities available-for-sale: | |||||||||||||||||||
Common stock | 38 | 14 | — | 52 | |||||||||||||||
Preferred stock | 190 | 7 | — | 197 | |||||||||||||||
Total equity securities available-for-sale | 228 | 21 | — | 249 | |||||||||||||||
Total | $ | 38,398 | $ | 4,639 | $ | 155 | $ | 42,882 |
Less than 12 Months | 12 Months or Longer | Total | |||||||||||||||||||||
September 30, 2013 | Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | |||||||||||||||||
(In millions) | |||||||||||||||||||||||
Fixed maturity securities available-for-sale: | |||||||||||||||||||||||
Corporate and other bonds | $ | 3,521 | $ | 146 | $ | 45 | $ | 5 | $ | 3,566 | $ | 151 | |||||||||||
States, municipalities and political subdivisions | 2,413 | 179 | 122 | 54 | 2,535 | 233 | |||||||||||||||||
Asset-backed: | |||||||||||||||||||||||
Residential mortgage-backed | 1,289 | 40 | 287 | 61 | 1,576 | 101 | |||||||||||||||||
Commercial mortgage-backed | 449 | 20 | 79 | 4 | 528 | 24 | |||||||||||||||||
Other asset-backed | 207 | 2 | — | — | 207 | 2 | |||||||||||||||||
Total asset-backed | 1,945 | 62 | 366 | 65 | 2,311 | 127 | |||||||||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 21 | 1 | — | — | 21 | 1 | |||||||||||||||||
Foreign government | 76 | 3 | — | — | 76 | 3 | |||||||||||||||||
Total fixed maturity securities available-for-sale | 7,976 | 391 | 533 | 124 | 8,509 | 515 | |||||||||||||||||
Equity securities available-for-sale: | |||||||||||||||||||||||
Preferred stock | 86 | 3 | — | — | 86 | 3 | |||||||||||||||||
Total | $ | 8,062 | $ | 394 | $ | 533 | $ | 124 | $ | 8,595 | $ | 518 |
Less than 12 Months | 12 Months or Longer | Total | |||||||||||||||||||||
December 31, 2012 | Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | |||||||||||||||||
(In millions) | |||||||||||||||||||||||
Fixed maturity securities available-for-sale: | |||||||||||||||||||||||
Corporate and other bonds | $ | 846 | $ | 13 | $ | 108 | $ | 8 | $ | 954 | $ | 21 | |||||||||||
States, municipalities and political subdivisions | 254 | 5 | 165 | 39 | 419 | 44 | |||||||||||||||||
Asset-backed: | |||||||||||||||||||||||
Residential mortgage-backed | 583 | 5 | 452 | 66 | 1,035 | 71 | |||||||||||||||||
Commercial mortgage-backed | 85 | 2 | 141 | 15 | 226 | 17 | |||||||||||||||||
Total asset-backed | 668 | 7 | 593 | 81 | 1,261 | 88 | |||||||||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 23 | 1 | — | — | 23 | 1 | |||||||||||||||||
Redeemable preferred stock | 28 | 1 | — | — | 28 | 1 | |||||||||||||||||
Total | $ | 1,819 | $ | 27 | $ | 866 | $ | 128 | $ | 2,685 | $ | 155 |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Beginning balance of credit losses on fixed maturity securities | $ | 89 | $ | 99 | $ | 95 | $ | 92 | |||||||
Additional credit losses for securities for which an OTTI loss was previously recognized | 1 | 2 | 2 | 23 | |||||||||||
Credit losses for securities for which an OTTI loss was not previously recognized | — | — | — | 2 | |||||||||||
Reductions for securities sold during the period | (7 | ) | (3 | ) | (14 | ) | (11 | ) | |||||||
Reductions for securities the Company intends to sell or more likely than not will be required to sell | — | — | — | (8 | ) | ||||||||||
Ending balance of credit losses on fixed maturity securities | $ | 83 | $ | 98 | $ | 83 | $ | 98 |
September 30, 2013 | December 31, 2012 | ||||||||||||||
(In millions) | Cost or Amortized Cost | Estimated Fair Value | Cost or Amortized Cost | Estimated Fair Value | |||||||||||
Due in one year or less | $ | 2,475 | $ | 2,516 | $ | 1,648 | $ | 1,665 | |||||||
Due after one year through five years | 10,687 | 11,304 | 13,603 | 14,442 | |||||||||||
Due after five years through ten years | 10,586 | 10,901 | 8,726 | 9,555 | |||||||||||
Due after ten years | 15,338 | 16,510 | 14,164 | 16,942 | |||||||||||
Total | $ | 39,086 | $ | 41,231 | $ | 38,141 | $ | 42,604 |
September 30, 2013 | Contractual/ Notional Amount | Estimated Fair Value | |||||||||
(In millions) | Asset | (Liability) | |||||||||
Without hedge designation | |||||||||||
Credit default swaps - purchased protection | $ | 20 | $ | — | $ | — | |||||
Currency forwards | 27 | — | (1 | ) | |||||||
Equity warrants | 5 | — | — | ||||||||
Total without hedge designation | 52 | — | (1 | ) | |||||||
Trading activities | |||||||||||
Futures sold, not yet purchased | 17 | — | — | ||||||||
Total | $ | 69 | $ | — | $ | (1 | ) |
December 31, 2012 | Contractual/ Notional Amount | Estimated Fair Value | |||||||||
(In millions) | Asset | (Liability) | |||||||||
Without hedge designation | |||||||||||
Credit default swaps - purchased protection | $ | 20 | $ | — | $ | (1 | ) | ||||
Currency forwards | 59 | — | (2 | ) | |||||||
Equity warrants | 5 | — | — | ||||||||
Total | $ | 84 | $ | — | $ | (3 | ) |
September 30, 2013 | Total Assets/(Liabilities) at Fair Value | ||||||||||||||
(In millions) | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets | |||||||||||||||
Fixed maturity securities: | |||||||||||||||
Corporate and other bonds | $ | 27 | $ | 20,945 | $ | 211 | $ | 21,183 | |||||||
States, municipalities and political subdivisions | — | 11,364 | 95 | 11,459 | |||||||||||
Asset-backed: | |||||||||||||||
Residential mortgage-backed | — | 4,449 | 370 | 4,819 | |||||||||||
Commercial mortgage-backed | — | 1,860 | 157 | 2,017 | |||||||||||
Other asset-backed | — | 523 | 433 | 956 | |||||||||||
Total asset-backed | — | 6,832 | 960 | 7,792 | |||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 144 | 29 | — | 173 | |||||||||||
Foreign government | 81 | 480 | — | 561 | |||||||||||
Redeemable preferred stock | 48 | 58 | — | 106 | |||||||||||
Total fixed maturity securities | 300 | 39,708 | 1,266 | 41,274 | |||||||||||
Equity securities | 135 | 51 | 13 | 199 | |||||||||||
Other invested assets | — | 55 | — | 55 | |||||||||||
Short term investments | 992 | 430 | — | 1,422 | |||||||||||
Life settlement contracts, included in Other assets | — | — | 90 | 90 | |||||||||||
Separate account business | 12 | 199 | 2 | 213 | |||||||||||
Total assets | $ | 1,439 | $ | 40,443 | $ | 1,371 | $ | 43,253 | |||||||
Liabilities | |||||||||||||||
Derivative financial instruments, included in Other liabilities | $ | — | $ | (1 | ) | $ | — | $ | (1 | ) | |||||
Total liabilities | $ | — | $ | (1 | ) | $ | — | $ | (1 | ) |
December 31, 2012 | Total Assets/(Liabilities) at Fair Value | ||||||||||||||
(In millions) | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets | |||||||||||||||
Fixed maturity securities: | |||||||||||||||
Corporate and other bonds | $ | 6 | $ | 22,011 | $ | 219 | $ | 22,236 | |||||||
States, municipalities and political subdivisions | — | 10,687 | 96 | 10,783 | |||||||||||
Asset-backed: | |||||||||||||||
Residential mortgage-backed | — | 5,507 | 413 | 5,920 | |||||||||||
Commercial mortgage-backed | — | 1,693 | 129 | 1,822 | |||||||||||
Other asset-backed | — | 584 | 368 | 952 | |||||||||||
Total asset-backed | — | 7,784 | 910 | 8,694 | |||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 158 | 24 | — | 182 | |||||||||||
Foreign government | 140 | 473 | — | 613 | |||||||||||
Redeemable preferred stock | 40 | 59 | 26 | 125 | |||||||||||
Total fixed maturity securities | 344 | 41,038 | 1,251 | 42,633 | |||||||||||
Equity securities | 117 | 98 | 34 | 249 | |||||||||||
Other invested assets | — | 58 | 1 | 59 | |||||||||||
Short term investments | 987 | 799 | 6 | 1,792 | |||||||||||
Life settlement contracts, included in Other assets | — | — | 100 | 100 | |||||||||||
Separate account business | 4 | 306 | 2 | 312 | |||||||||||
Total assets | $ | 1,452 | $ | 42,299 | $ | 1,394 | $ | 45,145 | |||||||
Liabilities | |||||||||||||||
Derivative financial instruments, included in Other liabilities | $ | — | $ | (2 | ) | $ | (1 | ) | $ | (3 | ) | ||||
Total liabilities | $ | — | $ | (2 | ) | $ | (1 | ) | $ | (3 | ) |
Level 3 (In millions) | Balance at July 1, 2013 | Net realized investment gains (losses) and net change in unrealized appreciation (depreciation) included in net income (loss)* | Net change in unrealized appreciation (depreciation) included in other comprehensive income (loss) | Purchases | Sales | Settlements | Transfers into Level 3 | Transfers out of Level 3 | Balance at September 30, 2013 | Unrealized gains (losses) on Level 3 assets and liabilities held at September 30, 2013 recognized in net income (loss)* | |||||||||||||||||||||||||||||
Fixed maturity securities: | |||||||||||||||||||||||||||||||||||||||
Corporate and other bonds | $ | 202 | $ | 1 | $ | — | $ | 6 | $ | (6 | ) | $ | (8 | ) | $ | 17 | $ | (1 | ) | $ | 211 | $ | — | ||||||||||||||||
States, municipalities and political subdivisions | 140 | — | (3 | ) | — | — | (15 | ) | — | (27 | ) | 95 | — | ||||||||||||||||||||||||||
Asset-backed: | |||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed | 428 | — | (20 | ) | 5 | — | (21 | ) | — | (22 | ) | 370 | (1 | ) | |||||||||||||||||||||||||
Commercial mortgage-backed | 165 | (1 | ) | (2 | ) | 10 | — | (1 | ) | — | (14 | ) | 157 | — | |||||||||||||||||||||||||
Other asset-backed | 387 | — | 1 | 56 | — | (6 | ) | — | (5 | ) | 433 | (1 | ) | ||||||||||||||||||||||||||
Total asset-backed | 980 | (1 | ) | (21 | ) | 71 | — | (28 | ) | — | (41 | ) | 960 | (2 | ) | ||||||||||||||||||||||||
Redeemable preferred stock | 25 | (1 | ) | 1 | — | — | (25 | ) | — | — | — | — | |||||||||||||||||||||||||||
Total fixed maturity securities | 1,347 | (1 | ) | (23 | ) | 77 | (6 | ) | (76 | ) | 17 | (69 | ) | 1,266 | (2 | ) | |||||||||||||||||||||||
Equity securities | 13 | (2 | ) | 2 | — | — | — | — | — | 13 | (2 | ) | |||||||||||||||||||||||||||
Life settlement contracts | 91 | 3 | — | — | — | (4 | ) | — | — | 90 | — | ||||||||||||||||||||||||||||
Separate account business | 2 | — | — | — | — | — | — | — | 2 | — | |||||||||||||||||||||||||||||
Total | $ | 1,453 | $ | — | $ | (21 | ) | $ | 77 | $ | (6 | ) | $ | (80 | ) | $ | 17 | $ | (69 | ) | $ | 1,371 | $ | (4 | ) |
Level 3 (In millions) | Balance at July 1, 2012 | Net realized investment gains (losses) and net change in unrealized appreciation (depreciation) included in net income (loss)* | Net change in unrealized appreciation (depreciation) included in other comprehensive income (loss) | Purchases | Sales | Settlements | Transfers into Level 3 | Transfers out of Level 3 | Balance at September 30, 2012 | Unrealized gains (losses) on Level 3 assets and liabilities held at September 30, 2012 recognized in net income (loss)* | |||||||||||||||||||||||||||||
Fixed maturity securities: | |||||||||||||||||||||||||||||||||||||||
Corporate and other bonds | $ | 488 | $ | 1 | $ | (4 | ) | $ | 50 | $ | (5 | ) | $ | (11 | ) | $ | — | $ | (260 | ) | $ | 259 | $ | (1 | ) | ||||||||||||||
States, municipalities and political subdivisions | 89 | — | — | — | — | — | — | — | 89 | — | |||||||||||||||||||||||||||||
Asset-backed: | |||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed | 443 | (17 | ) | 20 | 21 | — | (8 | ) | — | (22 | ) | 437 | (18 | ) | |||||||||||||||||||||||||
Commercial mortgage-backed | 166 | 4 | 6 | 12 | — | (17 | ) | 11 | (65 | ) | 117 | — | |||||||||||||||||||||||||||
Other asset-backed | 434 | 2 | 5 | 143 | (117 | ) | (34 | ) | — | (62 | ) | 371 | — | ||||||||||||||||||||||||||
Total asset-backed | 1,043 | (11 | ) | 31 | 176 | (117 | ) | (59 | ) | 11 | (149 | ) | 925 | (18 | ) | ||||||||||||||||||||||||
Redeemable preferred stock | 27 | — | (1 | ) | — | — | — | — | — | 26 | — | ||||||||||||||||||||||||||||
Total fixed maturity securities | 1,647 | (10 | ) | 26 | 226 | (122 | ) | (70 | ) | 11 | (409 | ) | 1,299 | (19 | ) | ||||||||||||||||||||||||
Equity securities | 93 | (19 | ) | (10 | ) | — | — | — | — | (14 | ) | 50 | (19 | ) | |||||||||||||||||||||||||
Other invested assets, including derivatives, net | 10 | — | — | — | — | — | — | — | 10 | — | |||||||||||||||||||||||||||||
Short term investments | 4 | — | — | 7 | (4 | ) | — | 1 | — | 8 | — | ||||||||||||||||||||||||||||
Life settlement contracts | 116 | 7 | — | — | — | (10 | ) | — | — | 113 | — | ||||||||||||||||||||||||||||
Separate account business | 3 | — | — | — | — | — | — | — | 3 | — | |||||||||||||||||||||||||||||
Total | $ | 1,873 | $ | (22 | ) | $ | 16 | $ | 233 | $ | (126 | ) | $ | (80 | ) | $ | 12 | $ | (423 | ) | $ | 1,483 | $ | (38 | ) |
Level 3 (In millions) | Balance at January 1, 2013 | Net realized investment gains (losses) and net change in unrealized appreciation (depreciation) included in net income (loss)* | Net change in unrealized appreciation (depreciation) included in other comprehensive income (loss) | Purchases | Sales | Settlements | Transfers into Level 3 | Transfers out of Level 3 | Balance at September 30, 2013 | Unrealized gains (losses) on Level 3 assets and liabilities held at September 30, 2013 recognized in net income (loss)* | |||||||||||||||||||||||||||||
Fixed maturity securities: | |||||||||||||||||||||||||||||||||||||||
Corporate and other bonds | $ | 219 | $ | 2 | $ | (1 | ) | $ | 129 | $ | (96 | ) | $ | (34 | ) | $ | 43 | $ | (51 | ) | $ | 211 | $ | (2 | ) | ||||||||||||||
States, municipalities and political subdivisions | 96 | (3 | ) | 1 | 122 | (79 | ) | (20 | ) | 5 | (27 | ) | 95 | — | |||||||||||||||||||||||||
Asset-backed: | |||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed | 413 | 2 | (21 | ) | 116 | (10 | ) | (53 | ) | 4 | (81 | ) | 370 | (3 | ) | ||||||||||||||||||||||||
Commercial mortgage-backed | 129 | — | 7 | 88 | — | (10 | ) | 21 | (78 | ) | 157 | — | |||||||||||||||||||||||||||
Other asset-backed | 368 | 3 | (1 | ) | 230 | (132 | ) | (30 | ) | — | (5 | ) | 433 | (2 | ) | ||||||||||||||||||||||||
Total asset-backed | 910 | 5 | (15 | ) | 434 | (142 | ) | (93 | ) | 25 | (164 | ) | 960 | (5 | ) | ||||||||||||||||||||||||
Redeemable preferred stock | 26 | (1 | ) | — | — | — | (25 | ) | — | — | — | — | |||||||||||||||||||||||||||
Total fixed maturity securities | 1,251 | 3 | (15 | ) | 685 | (317 | ) | (172 | ) | 73 | (242 | ) | 1,266 | (7 | ) | ||||||||||||||||||||||||
Equity securities | 34 | (22 | ) | 2 | — | — | — | — | (1 | ) | 13 | (22 | ) | ||||||||||||||||||||||||||
Other invested assets, including derivatives, net | — | — | — | — | (1 | ) | 1 | — | — | — | — | ||||||||||||||||||||||||||||
Short term investments | 6 | — | — | — | (6 | ) | — | — | — | — | — | ||||||||||||||||||||||||||||
Life settlement contracts | 100 | 14 | — | — | — | (24 | ) | — | — | 90 | (1 | ) | |||||||||||||||||||||||||||
Separate account business | 2 | — | — | — | — | — | — | — | 2 | — | |||||||||||||||||||||||||||||
Total | $ | 1,393 | $ | (5 | ) | $ | (13 | ) | $ | 685 | $ | (324 | ) | $ | (195 | ) | $ | 73 | $ | (243 | ) | $ | 1,371 | $ | (30 | ) |
Level 3 (In millions) | Balance at January 1, 2012 | Net realized investment gains (losses) and net change in unrealized appreciation (depreciation) included in net income (loss)* | Net change in unrealized appreciation (depreciation) included in other comprehensive income (loss) | Purchases | Sales | Settlements | Transfers into Level 3 | Transfers out of Level 3 | Balance at September 30, 2012 | Unrealized gains (losses) on Level 3 assets and liabilities held at September 30, 2012 recognized in net income (loss)* | |||||||||||||||||||||||||||||
Fixed maturity securities: | |||||||||||||||||||||||||||||||||||||||
Corporate and other bonds | $ | 482 | $ | 7 | $ | 2 | $ | 197 | $ | (118 | ) | $ | (43 | ) | $ | 42 | $ | (310 | ) | $ | 259 | $ | (1 | ) | |||||||||||||||
States, municipalities and political subdivisions | 171 | — | 3 | — | — | (85 | ) | — | — | 89 | — | ||||||||||||||||||||||||||||
Asset-backed: | |||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed | 452 | (15 | ) | (2 | ) | 81 | — | (24 | ) | — | (55 | ) | 437 | (18 | ) | ||||||||||||||||||||||||
Commercial mortgage-backed | 59 | 6 | 14 | 141 | (12 | ) | (21 | ) | 11 | (81 | ) | 117 | — | ||||||||||||||||||||||||||
Other asset-backed | 343 | 8 | 8 | 501 | (293 | ) | (93 | ) | — | (103 | ) | 371 | — | ||||||||||||||||||||||||||
Total asset-backed | 854 | (1 | ) | 20 | 723 | (305 | ) | (138 | ) | 11 | (239 | ) | 925 | (18 | ) | ||||||||||||||||||||||||
Redeemable preferred stock | — | — | (1 | ) | 53 | (26 | ) | — | — | — | 26 | — | |||||||||||||||||||||||||||
Total fixed maturity securities | 1,507 | 6 | 24 | 973 | (449 | ) | (266 | ) | 53 | (549 | ) | 1,299 | (19 | ) | |||||||||||||||||||||||||
Equity securities | 67 | (19 | ) | 6 | 26 | (16 | ) | — | — | (14 | ) | 50 | (21 | ) | |||||||||||||||||||||||||
Other invested assets, including derivatives, net | 10 | — | — | — | — | — | — | — | 10 | — | |||||||||||||||||||||||||||||
Short term investments | 27 | — | — | 23 | (4 | ) | (39 | ) | 1 | — | 8 | — | |||||||||||||||||||||||||||
Life settlement contracts | 117 | 30 | — | — | — | (34 | ) | — | — | 113 | 3 | ||||||||||||||||||||||||||||
Separate account business | 23 | — | — | — | (20 | ) | — | — | — | 3 | — | ||||||||||||||||||||||||||||
Total | $ | 1,751 | $ | 17 | $ | 30 | $ | 1,022 | $ | (489 | ) | $ | (339 | ) | $ | 54 | $ | (563 | ) | $ | 1,483 | $ | (37 | ) |
Major Category of Assets and Liabilities | Condensed Consolidated Statements of Operations Line Items | |
Fixed maturity securities available-for-sale | Net realized investment gains (losses) | |
Fixed maturity securities trading | Net investment income | |
Equity securities | Net realized investment gains (losses) | |
Other invested assets - Derivative financial instruments held in a trading portfolio | Net investment income | |
Other invested assets - Derivative financial instruments not held in a trading portfolio | Net realized investment gains (losses) | |
Other invested assets - Overseas deposits | Net investment income | |
Life settlement contracts | Other revenues |
Assets (In millions) | Fair Value at September 30, 2013 | Valuation Technique(s) | Unobservable Input(s) | Range (Weighted Average) | |||||
Fixed maturity securities | $ | 179 | Discounted cash flow | Expected call date | 2.1 - 5.3 years (3.8 years) | ||||
Credit spread | 1.92% - 26.24% (3.80%) | ||||||||
Equity securities | $ | 13 | Market approach | Private offering price | $289.80 - $4,273.77 per share ($1,337.14 per share) | ||||
Life settlement contracts | $ | 90 | Discounted cash flow | Discount rate risk premium | 9% | ||||
Mortality assumption | 69% - 883% (208.8%) |
Assets (In millions) | Fair Value at December 31, 2012 | Valuation Technique(s) | Unobservable Input(s) | Range (Weighted Average) | |||||
Fixed maturity securities | $ | 121 | Discounted cash flow | Expected call date | 3.3 - 5.3 years (4.3 years) | ||||
Credit spread adjustment | 0.02% - 0.48% (0.17%) | ||||||||
$ | 72 | Market approach | Private offering price | $42.39 - $102.32 ($100.11) | |||||
Equity securities | $ | 34 | Market approach | Private offering price | $4.54 - $3,842.00 per share ($571.17 per share) | ||||
Life settlement contracts | $ | 100 | Discounted cash flow | Discount rate risk premium | 9% | ||||
Mortality assumption | 69% - 883% (208.9%) |
September 30, 2013 | Carrying Amount | Estimated Fair Value | |||||||||||||||||
(In millions) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||
Financial assets | |||||||||||||||||||
Notes receivable for the issuance of common stock | $ | 22 | $ | — | $ | — | $ | 22 | $ | 22 | |||||||||
Mortgage loans | 440 | — | — | 452 | 452 | ||||||||||||||
Financial liabilities | |||||||||||||||||||
Premium deposits and annuity contracts | $ | 68 | $ | — | $ | — | $ | 69 | $ | 69 | |||||||||
Long term debt | 2,559 | — | 2,928 | — | 2,928 |
December 31, 2012 | Carrying Amount | Estimated Fair Value | |||||||||||||||||
(In millions) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||
Financial assets | |||||||||||||||||||
Notes receivable for the issuance of common stock | $ | 21 | $ | — | $ | — | $ | 21 | $ | 21 | |||||||||
Mortgage loans | 401 | — | — | 418 | 418 | ||||||||||||||
Financial liabilities | |||||||||||||||||||
Premium deposits and annuity contracts | $ | 100 | $ | — | $ | — | $ | 104 | $ | 104 | |||||||||
Short term debt | 13 | — | 13 | — | 13 | ||||||||||||||
Long term debt | 2,557 | — | 3,016 | — | 3,016 |
Three months ended September 30, 2013 | |||||||||||||||||||
(In millions) | CNA Specialty | CNA Commercial | Hardy | Corporate & Other Non-Core | Total | ||||||||||||||
Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development | $ | (74 | ) | $ | (3 | ) | $ | (6 | ) | $ | 2 | $ | (81 | ) | |||||
Pretax (favorable) unfavorable premium development | (3 | ) | 7 | 1 | — | 5 | |||||||||||||
Total pretax (favorable) unfavorable net prior year development | $ | (77 | ) | $ | 4 | $ | (5 | ) | $ | 2 | $ | (76 | ) |
Three months ended September 30, 2012 | |||||||||||||||||||
(In millions) | CNA Specialty | CNA Commercial | Hardy | Corporate & Other Non-Core | Total | ||||||||||||||
Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development | $ | (39 | ) | $ | 2 | $ | (6 | ) | $ | 3 | $ | (40 | ) | ||||||
Pretax (favorable) unfavorable premium development | (1 | ) | (5 | ) | — | (1 | ) | (7 | ) | ||||||||||
Total pretax (favorable) unfavorable net prior year development | $ | (40 | ) | $ | (3 | ) | $ | (6 | ) | $ | 2 | $ | (47 | ) |
Nine months ended September 30, 2013 | |||||||||||||||||||
(In millions) | CNA Specialty | CNA Commercial | Hardy | Corporate & Other Non-Core | Total | ||||||||||||||
Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development | $ | (130 | ) | $ | 13 | $ | 5 | $ | — | $ | (112 | ) | |||||||
Pretax (favorable) unfavorable premium development | (16 | ) | (8 | ) | 7 | 1 | (16 | ) | |||||||||||
Total pretax (favorable) unfavorable net prior year development | $ | (146 | ) | $ | 5 | $ | 12 | $ | 1 | $ | (128 | ) |
Nine months ended September 30, 2012 | |||||||||||||||||||
(In millions) | CNA Specialty | CNA Commercial | Hardy | Corporate & Other Non-Core | Total | ||||||||||||||
Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development | $ | (80 | ) | $ | (25 | ) | $ | (6 | ) | $ | 1 | $ | (110 | ) | |||||
Pretax (favorable) unfavorable premium development | (15 | ) | (41 | ) | — | 1 | (55 | ) | |||||||||||
Total pretax (favorable) unfavorable net prior year development | $ | (95 | ) | $ | (66 | ) | $ | (6 | ) | $ | 2 | $ | (165 | ) |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development: | |||||||||||||||
Medical Professional Liability | $ | 9 | $ | 9 | $ | (11 | ) | $ | (6 | ) | |||||
Other Professional Liability | (4 | ) | 1 | (28 | ) | (1 | ) | ||||||||
Surety | (76 | ) | (60 | ) | (74 | ) | (59 | ) | |||||||
Warranty | — | — | — | (1 | ) | ||||||||||
Other | (3 | ) | 11 | (17 | ) | (13 | ) | ||||||||
Total pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development | $ | (74 | ) | $ | (39 | ) | $ | (130 | ) | $ | (80 | ) |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development: | |||||||||||||||
Commercial Auto | $ | 4 | $ | 9 | $ | 1 | $ | 11 | |||||||
General Liability | (18 | ) | (21 | ) | (24 | ) | (26 | ) | |||||||
Workers’ Compensation | 26 | 24 | 96 | 13 | |||||||||||
Property and Other | (15 | ) | (10 | ) | (60 | ) | (23 | ) | |||||||
Total pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development | $ | (3 | ) | $ | 2 | $ | 13 | $ | (25 | ) |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development: | |||||||||||||||
Marine and Aviation | $ | — | $ | 1 | $ | 3 | $ | 1 | |||||||
Non-Marine Property | 1 | (5 | ) | 8 | (5 | ) | |||||||||
Property Treaty | (5 | ) | — | (3 | ) | — | |||||||||
Specialty | (2 | ) | (2 | ) | (3 | ) | (2 | ) | |||||||
Total pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development | $ | (6 | ) | $ | (6 | ) | $ | 5 | $ | (6 | ) |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Pension cost (benefit) | |||||||||||||||
Service cost | $ | 3 | $ | 3 | $ | 9 | $ | 9 | |||||||
Interest cost on projected benefit obligation | 30 | 34 | 90 | 101 | |||||||||||
Expected return on plan assets | (45 | ) | (43 | ) | (135 | ) | (128 | ) | |||||||
Amortization of net actuarial (gain) loss | 10 | 10 | 34 | 29 | |||||||||||
Settlement loss | 3 | — | 3 | — | |||||||||||
Net periodic pension cost (benefit) | $ | 1 | $ | 4 | $ | 1 | $ | 11 | |||||||
Postretirement cost (benefit) | |||||||||||||||
Interest cost on projected benefit obligation | $ | — | $ | 1 | $ | 1 | $ | 2 | |||||||
Amortization of prior service credit | (4 | ) | (4 | ) | (13 | ) | (13 | ) | |||||||
Amortization of net actuarial (gain) loss | 1 | — | 1 | — | |||||||||||
Net periodic postretirement cost (benefit) | $ | (3 | ) | $ | (3 | ) | $ | (11 | ) | $ | (11 | ) |
September 30, 2013 | December 31, 2012 | ||||||||||||||
(In millions) | Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | |||||||||||
Finite-lived intangible assets: | |||||||||||||||
Value of business acquired | $ | 62 | $ | 62 | $ | 62 | $ | 43 | |||||||
Trade name | 8 | 1 | 8 | — | |||||||||||
Distribution channel | 13 | 1 | 13 | — | |||||||||||
Total finite-lived intangible assets | 83 | 64 | 83 | 43 | |||||||||||
Indefinite-lived intangible assets | 73 | 73 | |||||||||||||
Total other intangible assets | $ | 156 | $ | 64 | $ | 156 | $ | 43 |
Three months ended September 30, 2013 | CNA Specialty | CNA Commercial | Hardy | Life & Group Non-Core | Corporate & Other Non-Core | ||||||||||||||||||||||
(In millions) | Eliminations | Total | |||||||||||||||||||||||||
Operating revenues | |||||||||||||||||||||||||||
Net earned premiums | $ | 768 | $ | 832 | $ | 86 | $ | 140 | $ | — | $ | (1 | ) | $ | 1,825 | ||||||||||||
Net investment income | 159 | 219 | 1 | 209 | 9 | — | 597 | ||||||||||||||||||||
Other revenues | 67 | 10 | 1 | (3 | ) | 3 | — | 78 | |||||||||||||||||||
Total operating revenues | 994 | 1,061 | 88 | 346 | 12 | (1 | ) | 2,500 | |||||||||||||||||||
Claims, Benefits and Expenses | |||||||||||||||||||||||||||
Net incurred claims and benefits | 427 | 565 | 35 | 377 | 4 | — | 1,408 | ||||||||||||||||||||
Policyholders’ dividends | 3 | 1 | — | 2 | — | — | 6 | ||||||||||||||||||||
Amortization of deferred acquisition costs | 161 | 148 | 25 | 7 | — | — | 341 | ||||||||||||||||||||
Other insurance related expenses | 64 | 141 | 14 | 34 | 1 | (1 | ) | 253 | |||||||||||||||||||
Other expenses | 58 | 7 | 2 | 5 | 49 | — | 121 | ||||||||||||||||||||
Total claims, benefits and expenses | 713 | 862 | 76 | 425 | 54 | (1 | ) | 2,129 | |||||||||||||||||||
Operating income (loss) before income tax | 281 | 199 | 12 | (79 | ) | (42 | ) | — | 371 | ||||||||||||||||||
Income tax (expense) benefit on operating income (loss) | (94 | ) | (68 | ) | — | 44 | 16 | — | (102 | ) | |||||||||||||||||
Net operating income (loss) | 187 | 131 | 12 | (35 | ) | (26 | ) | — | 269 | ||||||||||||||||||
Net realized investment gains (losses), pre-tax | 2 | 1 | — | — | 1 | — | 4 | ||||||||||||||||||||
Income tax (expense) benefit on net realized investment gains (losses) | (1 | ) | — | 1 | — | (1 | ) | — | (1 | ) | |||||||||||||||||
Net realized investment gains (losses) | 1 | 1 | 1 | — | — | — | 3 | ||||||||||||||||||||
Net income (loss) | $ | 188 | $ | 132 | $ | 13 | $ | (35 | ) | $ | (26 | ) | $ | — | $ | 272 |
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) 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) | 136 | 125 | 3 | (22 | ) | (26 | ) | — | 216 | ||||||||||||||||||
Net realized investment gains (losses), pre-tax | 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) | — | 7 | (1 | ) | (2 | ) | 1 | — | 5 | ||||||||||||||||||
Net income (loss) | $ | 136 | $ | 132 | $ | 2 | $ | (24 | ) | $ | (25 | ) | $ | — | $ | 221 |
Nine months ended September 30, 2013 | CNA Specialty | CNA Commercial | Hardy | Life & Group Non-Core | Corporate & Other Non-Core | ||||||||||||||||||||||
(In millions) | Eliminations | Total | |||||||||||||||||||||||||
Operating revenues | |||||||||||||||||||||||||||
Net earned premiums | $ | 2,237 | $ | 2,509 | $ | 226 | $ | 419 | $ | — | $ | (2 | ) | $ | 5,389 | ||||||||||||
Net investment income | 480 | 680 | 3 | 620 | 25 | — | 1,808 | ||||||||||||||||||||
Other revenues | 190 | 85 | 1 | 2 | 8 | (1 | ) | 285 | |||||||||||||||||||
Total operating revenues | 2,907 | 3,274 | 230 | 1,041 | 33 | (3 | ) | 7,482 | |||||||||||||||||||
Claims, Benefits and Expenses | |||||||||||||||||||||||||||
Net incurred claims and benefits | 1,344 | 1,809 | 107 | 1,082 | 6 | — | 4,348 | ||||||||||||||||||||
Policyholders’ dividends | 5 | 5 | — | 6 | — | — | 16 | ||||||||||||||||||||
Amortization of deferred acquisition costs | 467 | 450 | 66 | 21 | — | — | 1,004 | ||||||||||||||||||||
Other insurance related expenses | 200 | 426 | 43 | 100 | 1 | (2 | ) | 768 | |||||||||||||||||||
Other expenses | 172 | 18 | 15 | 12 | 134 | (1 | ) | 350 | |||||||||||||||||||
Total claims, benefits and expenses | 2,188 | 2,708 | 231 | 1,221 | 141 | (3 | ) | 6,486 | |||||||||||||||||||
Operating income (loss) before income tax | 719 | 566 | (1 | ) | (180 | ) | (108 | ) | — | 996 | |||||||||||||||||
Income tax (expense) benefit on operating income (loss) | (244 | ) | (198 | ) | 3 | 109 | 38 | — | (292 | ) | |||||||||||||||||
Net operating income (loss) | 475 | 368 | 2 | (71 | ) | (70 | ) | — | 704 | ||||||||||||||||||
Net realized investment gains (losses), pre-tax | (1 | ) | (7 | ) | 2 | 14 | 10 | — | 18 | ||||||||||||||||||
Income tax (expense) benefit on net realized investment gains (losses) | — | 3 | — | (5 | ) | (4 | ) | — | (6 | ) | |||||||||||||||||
Net realized investment gains (losses) | (1 | ) | (4 | ) | 2 | 9 | 6 | — | 12 | ||||||||||||||||||
Net income (loss) | $ | 474 | $ | 364 | $ | 4 | $ | (62 | ) | $ | (64 | ) | $ | — | $ | 716 |
September 30, 2013 | |||||||||||||||||||||||||||
(In millions) | |||||||||||||||||||||||||||
Reinsurance receivables | $ | 613 | $ | 1,107 | $ | 227 | $ | 1,229 | $ | 2,627 | $ | — | $ | 5,803 | |||||||||||||
Insurance receivables | $ | 746 | $ | 1,112 | $ | 211 | $ | 10 | $ | 4 | $ | — | $ | 2,083 | |||||||||||||
Deferred acquisition costs | $ | 320 | $ | 270 | $ | 52 | $ | — | $ | — | $ | — | $ | 642 | |||||||||||||
Goodwill | $ | 117 | $ | — | $ | 37 | $ | — | $ | — | $ | — | $ | 154 | |||||||||||||
Insurance reserves | |||||||||||||||||||||||||||
Claim and claim adjustment expenses | $ | 6,846 | $ | 10,763 | $ | 432 | $ | 3,050 | $ | 2,871 | $ | — | $ | 23,962 | |||||||||||||
Unearned premiums | 1,811 | 1,604 | 274 | 132 | — | (1 | ) | 3,820 | |||||||||||||||||||
Future policy benefits | — | — | — | 10,681 | — | — | 10,681 | ||||||||||||||||||||
Policyholders’ funds | 10 | 15 | — | 102 | — | — | 127 |
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) 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) | 374 | 321 | 3 | (38 | ) | (66 | ) | — | 594 | ||||||||||||||||||
Net realized investment gains (losses), pre-tax | 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) | 12 | 22 | (1 | ) | 9 | 1 | — | 43 | |||||||||||||||||||
Net income (loss) | $ | 386 | $ | 343 | $ | 2 | $ | (29 | ) | $ | (65 | ) | $ | — | $ | 637 |
December 31, 2012 | |||||||||||||||||||||||||||
(In millions) | |||||||||||||||||||||||||||
Reinsurance receivables | $ | 665 | $ | 1,155 | $ | 294 | $ | 1,273 | $ | 2,844 | $ | — | $ | 6,231 | |||||||||||||
Insurance receivables | $ | 673 | $ | 1,116 | $ | 181 | $ | 9 | $ | 4 | $ | — | $ | 1,983 | |||||||||||||
Deferred acquisition costs | $ | 300 | $ | 269 | $ | 29 | $ | — | $ | — | $ | — | $ | 598 | |||||||||||||
Goodwill | $ | 117 | $ | — | $ | 37 | $ | — | $ | — | $ | — | $ | 154 | |||||||||||||
Insurance reserves | |||||||||||||||||||||||||||
Claim and claim adjustment expenses | $ | 6,748 | $ | 11,326 | $ | 521 | $ | 3,006 | $ | 3,162 | $ | — | $ | 24,763 | |||||||||||||
Unearned premiums | 1,685 | 1,569 | 222 | 134 | — | — | 3,610 | ||||||||||||||||||||
Future policy benefits | — | — | — | 11,475 | — | — | 11,475 | ||||||||||||||||||||
Policyholders’ funds | 8 | 15 | — | 134 | — | — | 157 |
(a) | Included from date of acquisition. |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
CNA Specialty | |||||||||||||||
International | $ | 59 | $ | 53 | $ | 177 | $ | 163 | |||||||
Professional & Management Liability | 720 | 700 | 2,107 | 2,039 | |||||||||||
Surety | 126 | 124 | 365 | 364 | |||||||||||
Warranty & Alternative Risks | 91 | 80 | 257 | 232 | |||||||||||
CNA Specialty revenues | 996 | 957 | 2,906 | 2,798 | |||||||||||
CNA Commercial | |||||||||||||||
Commercial Insurance | 776 | 826 | 2,429 | 2,396 | |||||||||||
International | 93 | 93 | 276 | 274 | |||||||||||
Small Business | 193 | 172 | 562 | 493 | |||||||||||
CNA Commercial revenues | 1,062 | 1,091 | 3,267 | 3,163 | |||||||||||
Hardy revenues | 88 | 65 | 232 | 65 | |||||||||||
Life & Group Non-Core | |||||||||||||||
Health | 290 | 274 | 875 | 852 | |||||||||||
Life & Annuity | 58 | 64 | 177 | 181 | |||||||||||
Other | (2 | ) | 2 | 3 | 17 | ||||||||||
Life & Group Non-Core revenues | 346 | 340 | 1,055 | 1,050 | |||||||||||
Corporate & Other Non-Core revenues | 13 | 14 | 43 | 39 | |||||||||||
Eliminations | (1 | ) | (1 | ) | (3 | ) | (2 | ) | |||||||
Total revenues | $ | 2,504 | $ | 2,466 | $ | 7,500 | $ | 7,113 |
(In millions) | Net unrealized gains (losses) on investments with OTTI losses | Net unrealized gains (losses) on other investments | Pension and postretirement benefits | Cumulative foreign currency translation adjustment | Total | ||||||||||||||
Balance at June 30, 2013 | $ | 26 | $ | 724 | $ | (711 | ) | $ | 87 | $ | 126 | ||||||||
Other comprehensive income (loss) before reclassifications | (4 | ) | (68 | ) | — | 56 | (16 | ) | |||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) after tax (expense) benefit of $0, $(2), $3, $0, and $1 | (1 | ) | 2 | (4 | ) | — | (3 | ) | |||||||||||
Other comprehensive income (loss) after tax (expense) benefit of $1, $38, $(3), $0, and $36 | (3 | ) | (70 | ) | 4 | 56 | (13 | ) | |||||||||||
Balance at September 30, 2013 | $ | 23 | $ | 654 | $ | (707 | ) | $ | 143 | $ | 113 |
(In millions) | Net unrealized gains (losses) on investments with OTTI losses | Net unrealized gains (losses) on other investments | Pension and postretirement benefits | Cumulative foreign currency translation adjustment | Total | ||||||||||||||
Balance at January 1, 2013 | $ | 20 | $ | 1,371 | $ | (721 | ) | $ | 161 | $ | 831 | ||||||||
Other comprehensive income (loss) before reclassifications | 2 | (706 | ) | — | (18 | ) | (722 | ) | |||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) after tax (expense) benefit of $0, $(5), $8, $0, and $3 | (1 | ) | 11 | (14 | ) | — | (4 | ) | |||||||||||
Other comprehensive income (loss) after tax (expense) benefit of $(2), $387, $(8), $0, and $377 | 3 | (717 | ) | 14 | (18 | ) | (718 | ) | |||||||||||
Balance at September 30, 2013 | $ | 23 | $ | 654 | $ | (707 | ) | $ | 143 | $ | 113 |
Component of AOCI | Condensed Consolidated Statements of Operations Line Item Affected by Reclassifications | |
Net unrealized gains (losses) on investments with OTTI losses | Net realized investment gains (losses) | |
Net unrealized gains (losses) on other investments | Net realized investment gains (losses) | |
Pension and postretirement benefits | Other operating expenses |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Operating Revenues | |||||||||||||||
Net earned premiums | $ | 1,825 | $ | 1,781 | $ | 5,389 | $ | 5,098 | |||||||
Net investment income | 597 | 601 | 1,808 | 1,719 | |||||||||||
Other revenues | 78 | 76 | 285 | 230 | |||||||||||
Total operating revenues | 2,500 | 2,458 | 7,482 | 7,047 | |||||||||||
Claims, Benefits and Expenses | |||||||||||||||
Net incurred claims and benefits | 1,408 | 1,430 | 4,348 | 4,150 | |||||||||||
Policyholders' dividends | 6 | 5 | 16 | 14 | |||||||||||
Amortization of deferred acquisition costs | 341 | 333 | 1,004 | 937 | |||||||||||
Other insurance related expenses | 253 | 268 | 768 | 766 | |||||||||||
Other expenses | 121 | 116 | 350 | 338 | |||||||||||
Total claims, benefits and expenses | 2,129 | 2,152 | 6,486 | 6,205 | |||||||||||
Operating income before income tax | 371 | 306 | 996 | 842 | |||||||||||
Income tax expense on operating income | (102 | ) | (90 | ) | (292 | ) | (248 | ) | |||||||
Net operating income | 269 | 216 | 704 | 594 | |||||||||||
Net realized investment gains, pre-tax | 4 | 8 | 18 | 66 | |||||||||||
Income tax expense on net realized investment gains | (1 | ) | (3 | ) | (6 | ) | (23 | ) | |||||||
Net realized investment gains | 3 | 5 | 12 | 43 | |||||||||||
Net income | $ | 272 | $ | 221 | $ | 716 | $ | 637 |
• | Insurance Reserves |
• | Reinsurance and Insurance Receivables |
• | Valuation of Investments and Impairment of Securities |
• | Long Term Care Products and Payout Annuity Contracts |
• | Pension and Postretirement Benefit Obligations |
• | Income Taxes |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions, except ratios) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Net written premiums | $ | 778 | $ | 723 | $ | 2,337 | $ | 2,206 | |||||||
Net earned premiums | 768 | 738 | 2,237 | 2,163 | |||||||||||
Net investment income | 159 | 159 | 480 | 446 | |||||||||||
Net operating income | 187 | 136 | 475 | 374 | |||||||||||
Net realized investment gains (losses) | 1 | — | (1 | ) | 12 | ||||||||||
Net income | 188 | 136 | 474 | 386 | |||||||||||
Ratios | |||||||||||||||
Loss and loss adjustment expense | 55.6 | % | 62.5 | % | 60.1 | % | 63.6 | % | |||||||
Expense | 29.4 | 31.0 | 29.8 | 31.5 | |||||||||||
Dividend | 0.3 | 0.2 | 0.2 | — | |||||||||||
Combined | 85.3 | % | 93.7 | % | 90.1 | % | 95.1 | % |
September 30, 2013 | December 31, 2012 | ||||||
(In millions) | |||||||
Gross Case Reserves | $ | 2,296 | $ | 2,292 | |||
Gross IBNR Reserves | 4,550 | 4,456 | |||||
Total Gross Carried Claim and Claim Adjustment Expense Reserves | $ | 6,846 | $ | 6,748 | |||
Net Case Reserves | $ | 2,023 | $ | 2,008 | |||
Net IBNR Reserves | 4,225 | 4,104 | |||||
Total Net Carried Claim and Claim Adjustment Expense Reserves | $ | 6,248 | $ | 6,112 |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions, except ratios) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Net written premiums | $ | 760 | $ | 811 | $ | 2,504 | $ | 2,543 | |||||||
Net earned premiums | 832 | 840 | 2,509 | 2,452 | |||||||||||
Net investment income | 219 | 230 | 680 | 646 | |||||||||||
Net operating income | 131 | 125 | 368 | 321 | |||||||||||
Net realized investment gains (losses) | 1 | 7 | (4 | ) | 22 | ||||||||||
Net income | 132 | 132 | 364 | 343 | |||||||||||
Ratios | |||||||||||||||
Loss and loss adjustment expense | 67.9 | % | 70.5 | % | 72.1 | % | 71.3 | % | |||||||
Expense | 34.8 | 35.2 | 34.9 | 35.2 | |||||||||||
Dividend | 0.3 | 0.3 | 0.2 | 0.3 | |||||||||||
Combined | 103.0 | % | 106.0 | % | 107.2 | % | 106.8 | % |
(In millions) | September 30, 2013 | December 31, 2012 | |||||
Gross Case Reserves | $ | 6,003 | $ | 6,146 | |||
Gross IBNR Reserves | 4,760 | 5,180 | |||||
Total Gross Carried Claim and Claim Adjustment Expense Reserves | $ | 10,763 | $ | 11,326 | |||
Net Case Reserves | $ | 5,500 | $ | 5,611 | |||
Net IBNR Reserves | 4,207 | 4,600 | |||||
Total Net Carried Claim and Claim Adjustment Expense Reserves | $ | 9,707 | $ | 10,211 |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions, except ratios) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Net written premiums | $ | 81 | $ | 56 | $ | 274 | $ | 56 | |||||||
Net earned premiums | 86 | 64 | 226 | 64 | |||||||||||
Net investment income | 1 | 2 | 3 | 2 | |||||||||||
Net operating income | 12 | 3 | 2 | 3 | |||||||||||
Net realized investment gains (losses) | 1 | (1 | ) | 2 | (1 | ) | |||||||||
Net income | 13 | 2 | 4 | 2 | |||||||||||
Ratios | |||||||||||||||
Loss and loss adjustment expense | 40.5 | % | 33.3 | % | 47.3 | % | 33.3 | % | |||||||
Expense | 44.6 | 52.5 | 48.1 | 52.5 | |||||||||||
Dividend | — | — | — | — | |||||||||||
Combined | 85.1 | % | 85.8 | % | 95.4 | % | 85.8 | % |
(In millions) | September 30, 2013 | December 31, 2012 | |||||
Gross Case Reserves | $ | 285 | $ | 333 | |||
Gross IBNR Reserves | 147 | 188 | |||||
Total Gross Carried Claim and Claim Adjustment Expense Reserves | $ | 432 | $ | 521 | |||
Net Case Reserves | $ | 159 | $ | 192 | |||
Net IBNR Reserves | 89 | 82 | |||||
Total Net Carried Claim and Claim Adjustment Expense Reserves | $ | 248 | $ | 274 |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Net earned premiums | $ | 140 | $ | 141 | $ | 419 | $ | 421 | |||||||
Net investment income | 209 | 201 | 620 | 600 | |||||||||||
Net operating loss | (35 | ) | (22 | ) | (71 | ) | (38 | ) | |||||||
Net realized investment gains (losses) | — | (2 | ) | 9 | 9 | ||||||||||
Net loss | (35 | ) | (24 | ) | (62 | ) | (29 | ) |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Net investment income | $ | 9 | $ | 9 | $ | 25 | $ | 25 | |||||||
Net operating loss | (26 | ) | (26 | ) | (70 | ) | (66 | ) | |||||||
Net realized investment gains | — | 1 | 6 | 1 | |||||||||||
Net loss | (26 | ) | (25 | ) | (64 | ) | (65 | ) |
(In millions) | September 30, 2013 | December 31, 2012 | |||||
Gross Case Reserves | $ | 1,134 | $ | 1,207 | |||
Gross IBNR Reserves | 1,737 | 1,955 | |||||
Total Gross Carried Claim and Claim Adjustment Expense Reserves | $ | 2,871 | $ | 3,162 | |||
Net Case Reserves | $ | 287 | $ | 292 | |||
Net IBNR Reserves | 194 | 220 | |||||
Total Net Carried Claim and Claim Adjustment Expense Reserves | $ | 481 | $ | 512 |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Fixed maturity securities | $ | 504 | $ | 507 | $ | 1,501 | $ | 1,528 | |||||||
Short term investments | 1 | 2 | 3 | 5 | |||||||||||
Limited partnership investments | 93 | 89 | 303 | 184 | |||||||||||
Equity securities | 3 | 4 | 9 | 10 | |||||||||||
Mortgage loans | 6 | 5 | 17 | 13 | |||||||||||
Trading portfolio | 3 | 7 | 13 | 18 | |||||||||||
Other | 1 | — | 2 | 3 | |||||||||||
Gross investment income | 611 | 614 | 1,848 | 1,761 | |||||||||||
Investment expense | (14 | ) | (13 | ) | (40 | ) | (42 | ) | |||||||
Net investment income | $ | 597 | $ | 601 | $ | 1,808 | $ | 1,719 |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||
Fixed maturity securities: | |||||||||||||||
Corporate and other bonds | $ | 2 | $ | 48 | $ | 48 | $ | 91 | |||||||
States, municipalities and political subdivisions | 8 | (16 | ) | 6 | 11 | ||||||||||
Asset-backed | (6 | ) | (7 | ) | (24 | ) | (36 | ) | |||||||
U.S. Treasury and obligations of government-sponsored enterprises | — | 1 | — | 3 | |||||||||||
Foreign government | 4 | — | 5 | 4 | |||||||||||
Redeemable preferred stock | (1 | ) | — | (1 | ) | — | |||||||||
Total fixed maturity securities | 7 | 26 | 34 | 73 | |||||||||||
Equity securities | (2 | ) | (15 | ) | (17 | ) | (14 | ) | |||||||
Derivative securities | (1 | ) | (1 | ) | (4 | ) | (1 | ) | |||||||
Short term investments and other | — | (2 | ) | 5 | 8 | ||||||||||
Net realized investment gains (losses), pre-tax | 4 | 8 | 18 | 66 | |||||||||||
Income tax (expense) benefit on net realized investment gains (losses) | (1 | ) | (3 | ) | (6 | ) | (23 | ) | |||||||
Net realized investment gains (losses) | $ | 3 | $ | 5 | $ | 12 | $ | 43 |
(In millions) | September 30, 2013 | % | December 31, 2012 | % | |||||||||
U.S. Government, Government agencies and Government-sponsored enterprises | $ | 3,506 | 9 | % | $ | 4,540 | 11 | % | |||||
AAA rated | 2,915 | 7 | 3,224 | 8 | |||||||||
AA and A rated | 20,212 | 49 | 19,305 | 45 | |||||||||
BBB rated | 11,253 | 27 | 11,997 | 28 | |||||||||
Non-investment grade | 3,388 | 8 | 3,567 | 8 | |||||||||
Total | $ | 41,274 | 100 | % | $ | 42,633 | 100 | % |
(In millions) | September 30, 2013 | % | December 31, 2012 | % | |||||||||
BB | $ | 1,379 | 41 | % | $ | 1,529 | 43 | % | |||||
B | 1,070 | 31 | 1,075 | 30 | |||||||||
CCC - C | 665 | 20 | 724 | 20 | |||||||||
D | 274 | 8 | 239 | 7 | |||||||||
Total | $ | 3,388 | 100 | % | $ | 3,567 | 100 | % |
September 30, 2013 | Estimated Fair Value | % | Gross Unrealized Losses | % | |||||||||
(In millions) | |||||||||||||
U.S. Government, Government agencies and Government-sponsored enterprises | $ | 1,117 | 13 | % | $ | 82 | 16 | % | |||||
AAA | 612 | 7 | 26 | 5 | |||||||||
AA | 1,700 | 20 | 164 | 32 | |||||||||
A | 1,755 | 21 | 85 | 16 | |||||||||
BBB | 2,460 | 29 | 123 | 24 | |||||||||
Non-investment grade | 865 | 10 | 35 | 7 | |||||||||
Total | $ | 8,509 | 100 | % | $ | 515 | 100 | % |
September 30, 2013 | Estimated Fair Value | % | Gross Unrealized Losses | % | |||||||||
Due in one year or less | $ | 237 | 3 | % | $ | 7 | 1 | % | |||||
Due after one year through five years | 1,214 | 14 | 34 | 7 | |||||||||
Due after five years through ten years | 3,811 | 45 | 198 | 38 | |||||||||
Due after ten years | 3,247 | 38 | 276 | 54 | |||||||||
Total | $ | 8,509 | 100 | % | $ | 515 | 100 | % |
September 30, 2013 | December 31, 2012 | ||||||||||||
(In millions) | Fair Value | Effective Duration (In years) | Fair Value | Effective Duration (In years) | |||||||||
Investments supporting Life & Group Non-Core | $ | 14,840 | 11.4 | $ | 15,590 | 11.3 | |||||||
Other interest sensitive investments | 27,803 | 4.4 | 28,855 | 3.9 | |||||||||
Total | $ | 42,643 | 6.8 | $ | 44,445 | 6.5 |
(In millions) | September 30, 2013 | December 31, 2012 | |||||
Short term investments: | |||||||
Commercial paper | $ | 392 | $ | 751 | |||
U.S. Treasury securities | 837 | 617 | |||||
Money market funds | 111 | 301 | |||||
Other | 135 | 163 | |||||
Total short term investments | $ | 1,475 | $ | 1,832 |
• | the risks and uncertainties associated with our loss reserves, as outlined in the Critical Accounting Estimates and the Reserves - Estimates and Uncertainties sections of our Annual Report on Form 10-K, including the sufficiency of the reserves and the possibility for future increases, which would be reflected in the results of operations in the period that the need for such adjustment is determined; |
• | the risk that the other parties to the transaction in which, subject to certain limitations, we ceded our legacy A&EP liabilities will not fully perform their obligations to CNA, the uncertainty in estimating loss reserves for A&EP liabilities and the possible continued exposure of CNA to liabilities for A&EP claims that are not covered under the terms of the transaction; |
• | the performance of reinsurance companies under reinsurance contracts with us; and |
• | the consummation of contemplated transactions and the successful integration of acquired operations. |
• | the impact of competitive products, policies and pricing and the competitive environment in which we operate, including changes in our book of business; |
• | product and policy availability and demand and market responses, including the level of ability to obtain rate increases and decline or non-renew under priced accounts, to achieve premium targets and profitability and to realize growth and retention estimates; |
• | general economic and business conditions, including recessionary conditions that may decrease the size and number of our insurance customers and create additional losses to our lines of business, especially those that provide management and professional liability insurance, as well as surety bonds, to businesses engaged in real estate, financial services and professional services, and inflationary pressures on medical care costs, construction costs and other economic sectors that increase the severity of claims; |
• | conditions in the capital and credit markets, including continuing uncertainty and instability in these markets, as well as the overall economy, and their impact on the returns, types, liquidity and valuation of our investments; |
• | conditions in the capital and credit markets that may limit our ability to raise significant amounts of capital on favorable terms, as well as restrictions on the ability or willingness of Loews to provide additional capital support to us; and |
• | the possibility of changes in our ratings by ratings agencies, including the inability to access certain markets or distribution channels and the required collateralization of future payment obligations as a result of such changes, and changes in rating agency policies and practices. |
• | regulatory initiatives and compliance with governmental regulations, judicial interpretations within the regulatory framework, including interpretation of policy provisions, decisions regarding coverage and theories of liability, trends in litigation and the outcome of any litigation involving us, and rulings and changes in tax laws and regulations; |
• | regulatory limitations, impositions and restrictions upon us, including the effects of assessments and other surcharges for guaranty funds and second-injury funds, other mandatory pooling arrangements and future assessments levied on insurance companies as well as the new federal financial regulatory reform of the insurance industry established by the Dodd-Frank Wall Street Reform and Consumer Protection Act; |
• | increased operating costs and underwriting losses arising from the Patient Protection and Affordable Care Act and the related amendments in the Health Care and Education Reconciliation Act, as well as health care reform proposals at the state level; and |
• | regulatory limitations and restrictions, including limitations upon our ability to receive dividends from our insurance subsidiaries, imposed by regulatory authorities, including regulatory capital adequacy standards. |
• | weather and other natural physical events, including the severity and frequency of storms, hail, snowfall and other winter conditions, natural disasters such as hurricanes and earthquakes, as well as climate change, including effects on weather patterns, greenhouse gases, sea, land and air temperatures, sea levels, rain and snow; |
• | regulatory requirements imposed by coastal state regulators in the wake of hurricanes or other natural disasters, including limitations on the ability to exit markets or to non-renew, cancel or change terms and conditions in policies, as well as mandatory assessments to fund any shortfalls arising from the inability of quasi-governmental insurers to pay claims; |
• | man-made disasters, including the possible occurrence of terrorist attacks and the effect of the absence or insufficiency of applicable terrorism legislation on coverages; |
• | the unpredictability of the nature, targets, severity or frequency of potential terrorist events, as well as the uncertainty as to our ability to contain our terrorism exposure effectively; and |
• | the occurrence of epidemics. |
CNA Financial Corporation | ||
Dated: October 29, 2013 | By | /s/ D. Craig Mense |
D. Craig Mense Executive Vice President and Chief Financial Officer |
Description of Exhibit | Exhibit Number |
Certification of Chief Executive Officer | 31.1 |
Certification of Chief Financial Officer | 31.2 |
Written Statement of the Chief Executive Officer of CNA Financial Corporation Pursuant to 18 U.S.C. Section 1350 (As adopted by Section 906 of the Sarbanes-Oxley Act of 2002) | 32.1 |
Written Statement of the Chief Financial Officer of CNA Financial Corporation Pursuant to 18 U.S.C. Section 1350 (As adopted by Section 906 of the Sarbanes-Oxley Act of 2002) | 32.2 |
XBRL Instance Document | 101.INS |
XBRL Taxonomy Extension Schema | 101.SCH |
XBRL Taxonomy Extension Calculation Linkbase | 101.CAL |
XBRL Taxonomy Extension Definition Linkbase | 101.DEF |
XBRL Taxonomy Label Linkbase | 101.LAB |
XBRL Taxonomy Extension Presentation Linkbase | 101.PRE |
1. | I have reviewed this quarterly report on Form 10-Q of CNA Financial Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: | October 29, 2013 | By | /s/ Thomas F. Motamed | |
Thomas F. Motamed | ||||
Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of CNA Financial Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: | October 29, 2013 | By | /s/ D. Craig Mense | |
D. Craig Mense | ||||
Chief Financial Officer |
• | the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2013 filed on the date hereof with the Securities and Exchange Commission (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
• | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: | October 29, 2013 | By | /s/ Thomas F. Motamed | |
Thomas F. Motamed | ||||
Chief Executive Officer |
• | the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2013 filed on the date hereof with the Securities and Exchange Commission (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
• | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: | October 29, 2013 | By | /s/ D. Craig Mense | |
D. Craig Mense | ||||
Chief Financial Officer |
Commitments, Contingencies, and Guarantees
|
9 Months Ended |
---|---|
Sep. 30, 2013
|
|
Commitments and Contingencies Disclosure [Abstract] | |
Commitments, Contingencies, and Guarantees | Note J. Commitments, Contingencies, and Guarantees Commitments and Contingencies The Company holds an investment in a real estate joint venture. In the normal course of business, the Company, on a joint and several basis with other unrelated insurance company shareholders, has committed to continue funding the operating deficits of this joint venture. Additionally, the Company and the other unrelated shareholders, on a joint and several basis, have guaranteed an operating lease for an office building, which expires in 2016. The guarantee of the operating lease is a parallel guarantee to the commitment to fund operating deficits; consequently, the separate guarantee to the lessor is not expected to be triggered as long as the joint venture continues to be funded by its shareholders which provide liquidity to make its annual lease payments. In the event that the other parties to the joint venture are unable to meet their commitments in funding the operations of this joint venture, the Company would be required to assume the obligation for the entire office building operating lease. The Company does not believe it is likely that it will be required to do so. However, the maximum potential future lease payments and other related costs at September 30, 2013 that the Company could be required to pay under this guarantee, in excess of amounts already recorded, were approximately $90 million. If the Company were required to assume the entire lease obligation, the Company would have the right to pursue reimbursement from the other shareholders and the right to all sublease revenues. Guarantees In the course of selling business entities and assets to third parties, the Company has agreed to indemnify purchasers for losses arising out of breaches of representation and warranties with respect to the business entities or assets being sold, including, in certain cases, losses arising from undisclosed liabilities or certain named litigation. Such indemnification provisions generally survive for periods ranging from nine months following the applicable closing date to the expiration of the relevant statutes of limitation. As of September 30, 2013, the aggregate amount of quantifiable indemnification agreements in effect for sales of business entities, assets and third party loans was $723 million. In addition, the Company has agreed to provide indemnification to third party purchasers for certain losses associated with sold business entities or assets that are not limited by a contractual monetary amount. As of September 30, 2013, the Company had outstanding unlimited indemnifications in connection with the sales of certain of its business entities or assets that included tax liabilities arising prior to a purchaser's ownership of an entity or asset, defects in title at the time of sale, employee claims arising prior to closing and in some cases losses arising from certain litigation and undisclosed liabilities. These indemnification agreements survive until the applicable statutes of limitation expire or until the agreed upon contract terms expire. As of September 30, 2013 and December 31, 2012, the Company had recorded liabilities of approximately $7 million related to indemnification agreements and management believes that it is not likely that any future indemnity claims will be significantly greater than the amounts recorded. |
Commitments, Contingencies, and Guarantees (Narrative) (Detail) (USD $)
In Millions, unless otherwise specified |
Sep. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Commitments and Contingencies Disclosure [Abstract] | ||
Maximum potential future lease payments and other related costs under guarantee on a real estate joint venture | $ 90 | |
Aggregate amount of quantifiable indemnification agreements in effect for sales of business entities, assets and third party loans | 723 | |
Recorded liabilities related to indemnification agreements | $ 7 | $ 7 |
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