Business Segments

6 Months Ended

Jun. 30, 2014

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, 2013. 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, 2) income or loss from discontinued operations and 3) any cumulative effects of changes in accounting guidance. The calculation of net operating income excludes net realized investment gains or losses because net realized investment gains or losses are largely discretionary, except for some losses related to OTTI, and are generally driven by economic factors that are not necessarily consistent with key drivers of underwriting performance, and are therefore not considered an indication of trends in insurance operations.

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

Three months ended June 30, 2014	CNA Specialty			CNA Commercial			Hardy			Life & Group Non-Core			Corporate & Other Non-Core
(In millions)																Eliminations			Total
Operating revenues
Net earned premiums	$	763		$	817		$	92		$	139		$	—		$	—		$	1,811
Net investment income	161			208			1			173			7			—			550
Other revenues	74			9			(1		)	8			5			(2		)	93
Total operating revenues	998			1,034			92			320			12			(2		)	2,454
Claims, Benefits and Expenses
Net incurred claims and benefits	426			654			52			304			1			—			1,437
Policyholders’ dividends	1			3			—			—			—			—			4
Amortization of deferred acquisition costs	158			144			26			7			—			—			335
Other insurance related expenses	74			138			16			31			—			—			259
Other expenses	65			8			4			(3		)	(31		)	(2		)	41
Total claims, benefits and expenses	724			947			98			339			(30		)	(2		)	2,076
Operating income (loss) before income tax	274			87			(6		)	(19		)	42			—			378
Income tax (expense) benefit on operating income (loss)	(92		)	(28		)	1			28			(15		)	—			(106		)
Net operating income (loss)	182			59			(5		)	9			27			—			272
Net realized investment gains (losses), pretax	(5		)	(7		)	(1		)	(4		)	3			—			(14		)
Income tax (expense) benefit on net realized investment gains (losses)	2			1			—			1			(1		)	—			3
Net realized investment gains (losses)	(3		)	(6		)	(1		)	(3		)	2			—			(11		)
Net income (loss) from continuing operations	$	179		$	53		$	(6	)	$	6		$	29		$	—		$	261

Three months ended June 30, 2013	CNA Specialty			CNA Commercial			Hardy			Life & Group Non-Core			Corporate & Other Non-Core
(In millions)																Eliminations			Total
Operating revenues
Net earned premiums	$	746		$	840		$	76		$	138		$	—		$	—		$	1,800
Net investment income	151			211			1			163			8			—			534
Other revenues	63			65			(1		)	2			2			(1		)	130
Total operating revenues	960			1,116			76			303			10			(1		)	2,464
Claims, Benefits and Expenses
Net incurred claims and benefits	452			644			41			347			(2		)	—			1,482
Policyholders’ dividends	1			2			—			—			—			—			3
Amortization of deferred acquisition costs	156			153			20			6			—			—			335
Other insurance related expenses	65			142			13			32			—			—			252
Other expenses	60			2			6			2			39			(1		)	108
Total claims, benefits and expenses	734			943			80			387			37			(1		)	2,180
Operating income (loss) before income tax	226			173			(4		)	(84		)	(27		)	—			284
Income tax (expense) benefit on operating income (loss)	(78		)	(61		)	2			43			9			—			(85		)
Net operating income (loss)	148			112			(2		)	(41		)	(18		)	—			199
Net realized investment gains (losses), pretax	(6		)	(12		)	1			—			3			—			(14		)
Income tax (expense) benefit on net realized investment gains (losses)	2			4			(1		)	1			(1		)	—			5
Net realized investment gains (losses)	(4		)	(8		)	—			1			2			—			(9		)
Net income (loss) from continuing operations	$	144		$	104		$	(2	)	$	(40	)	$	(16	)	$	—		$	190

Six months ended June 30, 2014	CNA Specialty			CNA Commercial			Hardy			Life & Group Non-Core			Corporate & Other Non-Core
(In millions)																Eliminations			Total
Operating revenues
Net earned premiums	$	1,511		$	1,639		$	190		$	278		$	—		$	(1	)	$	3,617
Net investment income	312			406			2			344			12			—			1,076
Other revenues	142			18			—			13			7			(2		)	178
Total operating revenues	1,965			2,063			192			635			19			(3		)	4,871
Claims, Benefits and Expenses
Net incurred claims and benefits	906			1,276			90			610			(2		)	—			2,880
Policyholders’ dividends	2			5			—			—			—			—			7
Amortization of deferred acquisition costs	311			284			54			15			—			—			664
Other insurance related expenses	146			277			36			63			—			(1		)	521
Other expenses	126			19			8			(2		)	20			(2		)	169
Total claims, benefits and expenses	1,491			1,861			188			686			18			(3		)	4,241
Operating income (loss) before income tax	474			202			4			(51		)	1			—			630
Income tax (expense) benefit on operating income (loss)	(158		)	(65		)	(2		)	58			(1		)	—			(168		)
Net operating income	316			137			2			7			—			—			462
Net realized investment gains (losses), pretax	7			5			(1		)	12			9			—			32
Income tax (expense) benefit on net realized investment gains (losses)	(2		)	(3		)	—			(5		)	(3		)	—			(13		)
Net realized investment gains (losses)	5			2			(1		)	7			6			—			19
Net income from continuing operations	$	321		$	139		$	1		$	14		$	6		$	—		$	481

June 30, 2014
(In millions)
Reinsurance receivables	$	666	$	1,032	$	146	$	367	$	2,904	$	—		$	5,115
Insurance receivables	$	853	$	1,137	$	214	$	7	$	4	$	—		$	2,215
Deferred acquisition costs	$	323	$	267	$	60	$	—	$	—	$	—		$	650
Goodwill	$	117	$	—	$	39	$	—	$	—	$	—		$	156
Insurance reserves
Claim and claim adjustment expenses	$	6,939	$	10,537	$	386	$	3,092	$	3,042	$	—		$	23,996
Unearned premiums	1,857		1,576		283		136		—		(1		)	3,851
Future policy benefits	—		—		—		8,696		—		—			8,696
Policyholders’ funds	9		18		—		—		—		—			27

Six months ended June 30, 2013	CNA Specialty			CNA Commercial			Hardy			Life & Group Non-Core			Corporate & Other Non-Core
(In millions)																Eliminations			Total
Operating revenues
Net earned premiums	$	1,469		$	1,677		$	140		$	279		$	—		$	(1	)	$	3,564
Net investment income	321			461			2			325			16			—			1,125
Other revenues	123			75			—			5			5			(1		)	207
Total operating revenues	1,913			2,213			142			609			21			(2		)	4,896
Claims, Benefits and Expenses
Net incurred claims and benefits	917			1,244			72			640			2			—			2,875
Policyholders’ dividends	2			4			—			—			—			—			6
Amortization of deferred acquisition costs	306			302			41			14			—			—			663
Other insurance related expenses	136			285			29			64			—			(1		)	513
Other expenses	114			11			13			7			85			(1		)	229
Total claims, benefits and expenses	1,475			1,846			155			725			87			(2		)	4,286
Operating income (loss) before income tax	438			367			(13		)	(116		)	(66		)	—			610
Income tax (expense) benefit on operating income (loss)	(150		)	(130		)	3			69			22			—			(186		)
Net operating income (loss)	288			237			(10		)	(47		)	(44		)	—			424
Net realized investment gains (losses), pretax	(3		)	(8		)	2			9			9			—			9
Income tax (expense) benefit on net realized investment gains (losses)	1			3			(1		)	(2		)	(3		)	—			(2		)
Net realized investment gains (losses)	(2		)	(5		)	1			7			6			—			7
Net income (loss) from continuing operations	$	286		$	232		$	(9	)	$	(40	)	$	(38	)	$	—		$	431

December 31, 2013
(In millions)
Reinsurance receivables	$	546	$	1,075	$	197	$	1,203	$	3,067	$	—	$	6,088
Insurance receivables	$	775	$	1,099	$	176	$	11	$	2	$	—	$	2,063
Deferred acquisition costs	$	318	$	257	$	49	$	—	$	—	$	—	$	624
Goodwill	$	117	$	—	$	38	$	—	$	—	$	—	$	155
Insurance reserves
Claim and claim adjustment expenses	$	6,689	$	10,649	$	386	$	3,058	$	3,307	$	—	$	24,089
Unearned premiums	1,805		1,536		249		128		—		—		3,718
Future policy benefits	—		—		—		10,471		—		—		10,471
Policyholders’ funds	9		15		—		92		—		—		116

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 June 30	Three Months						Six Months
(In millions)	2014			2013			2014			2013
CNA Specialty
International	$	62		$	59		$	126		$	118
Management & Professional Liability	710			687			1,414			1,387
Surety	125			123			247			239
Warranty & Alternative Risks	96			85			185			166
CNA Specialty revenues	993			954			1,972			1,910
CNA Commercial
Commercial Insurance	755			827			1,517			1,653
International	91			90			186			183
Small Business	181			187			365			369
CNA Commercial revenues	1,027			1,104			2,068			2,205
Hardy revenues	91			77			191			144
Life & Group Non-Core revenues	316			303			647			618
Corporate & Other Non-Core revenues	15			13			28			30
Eliminations	(2		)	(1		)	(3		)	(2		)
Total revenues	$	2,440		$	2,450		$	4,903		$	4,905