Business Segments

9 Months Ended

Sep. 30, 2013

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'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, 2012. The Company manages most of its assets on a legal entity basis, while segment operations are generally conducted across legal entities. As such, only insurance and reinsurance receivables, insurance reserves, deferred acquisition costs and goodwill are readily identifiable for all individual segments. Distinct investment portfolios are not maintained for every individual segment; accordingly, allocation of assets to each segment is not performed. Therefore, a significant portion of 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) the after-tax effects of 1) net realized investment gains or losses and 2) 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 Company's results of operations and selected balance sheet items by segment are presented in the following tables.

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.

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.

Revenues by Line of Business

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