[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 [ ] | Emerging growth company [ ] |
Class | Outstanding at April 27, 2017 | |
Common Stock, Par value $2.50 | 270,980,108 |
Three months ended March 31 | |||||||
(In millions, except per share data) | 2017 | 2016 | |||||
Revenues | |||||||
Net earned premiums | $ | 1,645 | $ | 1,699 | |||
Net investment income | 545 | 435 | |||||
Net realized investment gains (losses): | |||||||
Other-than-temporary impairment losses | (2 | ) | (23 | ) | |||
Other net realized investment gains (losses) | 38 | (13 | ) | ||||
Net realized investment gains (losses) | 36 | (36 | ) | ||||
Other revenues | 104 | 97 | |||||
Total revenues | 2,330 | 2,195 | |||||
Claims, Benefits and Expenses | |||||||
Insurance claims and policyholders’ benefits | 1,293 | 1,408 | |||||
Amortization of deferred acquisition costs | 305 | 307 | |||||
Other operating expenses | 346 | 381 | |||||
Interest | 43 | 42 | |||||
Total claims, benefits and expenses | 1,987 | 2,138 | |||||
Income before income tax | 343 | 57 | |||||
Income tax (expense) benefit | (83 | ) | 9 | ||||
Net income | $ | 260 | $ | 66 | |||
Basic earnings per share | $ | 0.96 | $ | 0.25 | |||
Diluted earnings per share | $ | 0.96 | $ | 0.24 | |||
Dividends declared per share | $ | 2.25 | $ | 2.25 | |||
Weighted Average Outstanding Common Stock and Common Stock Equivalents | |||||||
Basic | 270.7 | 270.3 | |||||
Diluted | 271.7 | 270.9 |
Three months ended March 31 | |||||||
(In millions) | 2017 | 2016 | |||||
Comprehensive Income | |||||||
Net income | $ | 260 | $ | 66 | |||
Other Comprehensive Income, Net of Tax | |||||||
Changes in: | |||||||
Net unrealized gains on investments with other-than-temporary impairments | (4 | ) | 5 | ||||
Net unrealized gains on other investments | 67 | 234 | |||||
Net unrealized gains on investments | 63 | 239 | |||||
Foreign currency translation adjustment | 11 | 14 | |||||
Pension and postretirement benefits | 7 | 6 | |||||
Other comprehensive income, net of tax | 81 | 259 | |||||
Total comprehensive income | $ | 341 | $ | 325 |
(In millions, except share data) | March 31, 2017 (Unaudited) | December 31, 2016 | |||||
Assets | |||||||
Investments: | |||||||
Fixed maturity securities at fair value (amortized cost of $38,269 and $38,361) | $ | 40,980 | $ | 40,905 | |||
Equity securities at fair value (cost of $112 and $106) | 120 | 110 | |||||
Limited partnership investments | 2,389 | 2,371 | |||||
Other invested assets | 40 | 36 | |||||
Mortgage loans | 611 | 591 | |||||
Short term investments | 1,139 | 1,407 | |||||
Total investments | 45,279 | 45,420 | |||||
Cash | 299 | 271 | |||||
Reinsurance receivables (less allowance for uncollectible receivables of $38 and $37) | 4,395 | 4,416 | |||||
Insurance receivables (less allowance for uncollectible receivables of $47 and $46) | 2,144 | 2,209 | |||||
Accrued investment income | 431 | 405 | |||||
Deferred acquisition costs | 626 | 600 | |||||
Deferred income taxes | 267 | 379 | |||||
Property and equipment at cost (less accumulated depreciation of $255 and $254) | 324 | 310 | |||||
Goodwill | 146 | 145 | |||||
Other assets | 1,290 | 1,078 | |||||
Total assets | $ | 55,201 | $ | 55,233 | |||
Liabilities | |||||||
Insurance reserves: | |||||||
Claim and claim adjustment expenses | $ | 22,260 | $ | 22,343 | |||
Unearned premiums | 3,912 | 3,762 | |||||
Future policy benefits | 10,491 | 10,326 | |||||
Short term debt | 150 | — | |||||
Long term debt | 2,560 | 2,710 | |||||
Other liabilities (includes $41 and $50 due to Loews Corporation) | 4,135 | 4,123 | |||||
Total liabilities | 43,508 | 43,264 | |||||
Commitments and contingencies (Notes C and F) | |||||||
Stockholders' Equity | |||||||
Common stock ($2.50 par value; 500,000,000 shares authorized; 273,040,243 shares issued; 270,978,126 and 270,495,998 shares outstanding) | 683 | 683 | |||||
Additional paid-in capital | 2,161 | 2,173 | |||||
Retained earnings | 9,006 | 9,359 | |||||
Accumulated other comprehensive income | (92 | ) | (173 | ) | |||
Treasury stock (2,062,117 and 2,544,245 shares), at cost | (65 | ) | (73 | ) | |||
Total stockholders’ equity | 11,693 | 11,969 | |||||
Total liabilities and stockholders' equity | $ | 55,201 | $ | 55,233 |
Three months ended March 31 | |||||||
(In millions) | 2017 | 2016 | |||||
Cash Flows from Operating Activities | |||||||
Net income | $ | 260 | $ | 66 | |||
Adjustments to reconcile net income to net cash flows provided by operating activities: | |||||||
Deferred income tax expense | 72 | 55 | |||||
Trading portfolio activity | (6 | ) | (3 | ) | |||
Net realized investment (gains) losses | (36 | ) | 36 | ||||
Equity method investees | 38 | 262 | |||||
Net amortization of investments | (12 | ) | (4 | ) | |||
Depreciation and amortization | 21 | 21 | |||||
Changes in: | |||||||
Receivables, net | 89 | (317 | ) | ||||
Accrued investment income | (26 | ) | (22 | ) | |||
Deferred acquisition costs | (24 | ) | (23 | ) | |||
Insurance reserves | 135 | 511 | |||||
Other assets | (37 | ) | (89 | ) | |||
Other liabilities | (206 | ) | (168 | ) | |||
Other, net | 14 | 9 | |||||
Total adjustments | 22 | 268 | |||||
Net cash flows provided by operating activities | 282 | 334 | |||||
Cash Flows from Investing Activities | |||||||
Dispositions: | |||||||
Fixed maturity securities - sales | 1,359 | 1,722 | |||||
Fixed maturity securities - maturities, calls and redemptions | 823 | 490 | |||||
Equity securities | 16 | 4 | |||||
Limited partnerships | 57 | 89 | |||||
Mortgage loans | 3 | 22 | |||||
Purchases: | |||||||
Fixed maturity securities | (2,097 | ) | (2,238 | ) | |||
Equity securities | (7 | ) | — | ||||
Limited partnerships | (18 | ) | (169 | ) | |||
Mortgage loans | (23 | ) | (19 | ) | |||
Change in other investments | (1 | ) | — | ||||
Change in short term investments | 271 | 16 | |||||
Purchases of property and equipment | (30 | ) | (33 | ) | |||
Disposals of property and equipment | — | 107 | |||||
Other, net | 1 | — | |||||
Net cash flows provided (used) by investing activities | $ | 354 | $ | (9 | ) |
Three months ended March 31 | |||||||
(In millions) | 2017 | 2016 | |||||
Cash Flows from Financing Activities | |||||||
Dividends paid to common stockholders | $ | (609 | ) | $ | (609 | ) | |
Proceeds from the issuance of debt | — | 498 | |||||
Repayment of debt | — | (358 | ) | ||||
Other, net | — | — | |||||
Net cash flows used by financing activities | (609 | ) | (469 | ) | |||
Effect of foreign exchange rate changes on cash | 1 | (1 | ) | ||||
Net change in cash | 28 | (145 | ) | ||||
Cash, beginning of year | 271 | 387 | |||||
Cash, end of period | $ | 299 | $ | 242 |
Three months ended March 31 | |||||||
(In millions) | 2017 | 2016 | |||||
Common Stock | |||||||
Balance, beginning of period | $ | 683 | $ | 683 | |||
Balance, end of period | 683 | 683 | |||||
Additional Paid-in Capital | |||||||
Balance, beginning of period | 2,173 | 2,153 | |||||
Stock-based compensation | (12 | ) | (7 | ) | |||
Balance, end of period | 2,161 | 2,146 | |||||
Retained Earnings | |||||||
Balance, beginning of period | 9,359 | 9,313 | |||||
Dividends paid to common stockholders | (613 | ) | (609 | ) | |||
Net income | 260 | 66 | |||||
Balance, end of period | 9,006 | 8,770 | |||||
Accumulated Other Comprehensive Loss | |||||||
Balance, beginning of period | (173 | ) | (315 | ) | |||
Other comprehensive income | 81 | 259 | |||||
Balance, end of period | (92 | ) | (56 | ) | |||
Treasury Stock | |||||||
Balance, beginning of period | (73 | ) | (78 | ) | |||
Stock-based compensation | 8 | 5 | |||||
Balance, end of period | (65 | ) | (73 | ) | |||
Total stockholders' equity | $ | 11,693 | $ | 11,470 |
Three months ended March 31 | |||||||
(In millions) | 2017 | 2016 | |||||
Fixed maturity securities | $ | 455 | $ | 446 | |||
Equity securities | 1 | 3 | |||||
Limited partnership investments | 90 | (14 | ) | ||||
Mortgage loans | 7 | 9 | |||||
Short term investments | 3 | 3 | |||||
Trading portfolio | 2 | 2 | |||||
Other | 1 | — | |||||
Gross investment income | 559 | 449 | |||||
Investment expense | (14 | ) | (14 | ) | |||
Net investment income | $ | 545 | $ | 435 |
Three months ended March 31 | |||||||
(In millions) | 2017 | 2016 | |||||
Net realized investment gains (losses): | |||||||
Fixed maturity securities: | |||||||
Gross realized gains | $ | 49 | $ | 45 | |||
Gross realized losses | (17 | ) | (62 | ) | |||
Net realized investment gains (losses) on fixed maturity securities | 32 | (17 | ) | ||||
Equity securities: | |||||||
Gross realized gains | — | — | |||||
Gross realized losses | — | (5 | ) | ||||
Net realized investment gains (losses) on equity securities | — | (5 | ) | ||||
Derivatives | 1 | (7 | ) | ||||
Short term investments and other | 3 | (7 | ) | ||||
Net realized investment gains (losses) | $ | 36 | $ | (36 | ) |
Three months ended March 31 | |||||||
(In millions) | 2017 | 2016 | |||||
Fixed maturity securities available-for-sale: | |||||||
Corporate and other bonds | $ | 2 | $ | 16 | |||
Asset-backed: | |||||||
Residential mortgage-backed | — | — | |||||
Other asset-backed | — | 2 | |||||
Total asset-backed | — | 2 | |||||
Total fixed maturity securities available-for-sale | 2 | 18 | |||||
Equity securities available-for-sale -- Common stock | — | 5 | |||||
OTTI losses recognized in earnings | $ | 2 | $ | 23 |
March 31, 2017 | 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 | $ | 17,838 | $ | 1,428 | $ | 37 | $ | 19,229 | $ | (1 | ) | ||||||||
States, municipalities and political subdivisions | 12,261 | 1,219 | 31 | 13,449 | (12 | ) | |||||||||||||
Asset-backed: | |||||||||||||||||||
Residential mortgage-backed | 4,672 | 121 | 50 | 4,743 | (27 | ) | |||||||||||||
Commercial mortgage-backed | 1,902 | 52 | 19 | 1,935 | — | ||||||||||||||
Other asset-backed | 1,043 | 10 | 4 | 1,049 | — | ||||||||||||||
Total asset-backed | 7,617 | 183 | 73 | 7,727 | (27 | ) | |||||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 95 | 8 | — | 103 | — | ||||||||||||||
Foreign government | 419 | 14 | 1 | 432 | — | ||||||||||||||
Redeemable preferred stock | 19 | 1 | — | 20 | — | ||||||||||||||
Total fixed maturity securities available-for-sale | 38,249 | 2,853 | 142 | 40,960 | $ | (40 | ) | ||||||||||||
Total fixed maturity securities trading | 20 | 20 | |||||||||||||||||
Equity securities available-for-sale: | |||||||||||||||||||
Common stock | 20 | 5 | — | 25 | |||||||||||||||
Preferred stock | 92 | 5 | 2 | 95 | |||||||||||||||
Total equity securities available-for-sale | 112 | 10 | 2 | 120 | |||||||||||||||
Total | $ | 38,381 | $ | 2,863 | $ | 144 | $ | 41,100 |
December 31, 2016 | 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 | $ | 17,711 | $ | 1,323 | $ | 76 | $ | 18,958 | $ | (1 | ) | ||||||||
States, municipalities and political subdivisions | 12,060 | 1,213 | 33 | 13,240 | (16 | ) | |||||||||||||
Asset-backed: | |||||||||||||||||||
Residential mortgage-backed | 5,004 | 120 | 51 | 5,073 | (28 | ) | |||||||||||||
Commercial mortgage-backed | 2,016 | 48 | 24 | 2,040 | — | ||||||||||||||
Other asset-backed | 1,022 | 8 | 5 | 1,025 | — | ||||||||||||||
Total asset-backed | 8,042 | 176 | 80 | 8,138 | (28 | ) | |||||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 83 | 10 | — | 93 | — | ||||||||||||||
Foreign government | 435 | 13 | 3 | 445 | — | ||||||||||||||
Redeemable preferred stock | 18 | 1 | — | 19 | — | ||||||||||||||
Total fixed maturity securities available-for-sale | 38,349 | 2,736 | 192 | 40,893 | $ | (45 | ) | ||||||||||||
Total fixed maturity securities trading | 12 | 12 | |||||||||||||||||
Equity securities available-for-sale: | |||||||||||||||||||
Common stock | 13 | 6 | — | 19 | |||||||||||||||
Preferred stock | 93 | 2 | 4 | 91 | |||||||||||||||
Total equity securities available-for-sale | 106 | 8 | 4 | 110 | |||||||||||||||
Total | $ | 38,467 | $ | 2,744 | $ | 196 | $ | 41,015 |
Less than 12 Months | 12 Months or Longer | Total | |||||||||||||||||||||
March 31, 2017 | 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 | $ | 1,915 | $ | 29 | $ | 134 | $ | 8 | $ | 2,049 | $ | 37 | |||||||||||
States, municipalities and political subdivisions | 845 | 31 | 33 | — | 878 | 31 | |||||||||||||||||
Asset-backed: | |||||||||||||||||||||||
Residential mortgage-backed | 2,188 | 44 | 170 | 6 | 2,358 | 50 | |||||||||||||||||
Commercial mortgage-backed | 590 | 15 | 139 | 4 | 729 | 19 | |||||||||||||||||
Other asset-backed | 256 | 4 | 28 | — | 284 | 4 | |||||||||||||||||
Total asset-backed | 3,034 | 63 | 337 | 10 | 3,371 | 73 | |||||||||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 31 | — | — | — | 31 | — | |||||||||||||||||
Foreign government | 89 | 1 | — | — | 89 | 1 | |||||||||||||||||
Total fixed maturity securities available-for-sale | 5,914 | 124 | 504 | 18 | 6,418 | 142 | |||||||||||||||||
Equity securities available-for-sale: | |||||||||||||||||||||||
Common stock | 2 | — | — | — | 2 | — | |||||||||||||||||
Preferred stock | 15 | 2 | — | — | 15 | 2 | |||||||||||||||||
Total equity securities available-for-sale | 17 | 2 | — | — | 17 | 2 | |||||||||||||||||
Total | $ | 5,931 | $ | 126 | $ | 504 | $ | 18 | $ | 6,435 | $ | 144 |
Less than 12 Months | 12 Months or Longer | Total | |||||||||||||||||||||
December 31, 2016 | 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 | $ | 2,615 | $ | 61 | $ | 254 | $ | 15 | $ | 2,869 | $ | 76 | |||||||||||
States, municipalities and political subdivisions | 959 | 32 | 23 | 1 | 982 | 33 | |||||||||||||||||
Asset-backed: | |||||||||||||||||||||||
Residential mortgage-backed | 2,136 | 44 | 201 | 7 | 2,337 | 51 | |||||||||||||||||
Commercial mortgage-backed | 756 | 22 | 69 | 2 | 825 | 24 | |||||||||||||||||
Other asset-backed | 398 | 5 | 24 | — | 422 | 5 | |||||||||||||||||
Total asset-backed | 3,290 | 71 | 294 | 9 | 3,584 | 80 | |||||||||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 5 | — | — | — | 5 | — | |||||||||||||||||
Foreign government | 108 | 3 | — | — | 108 | 3 | |||||||||||||||||
Total fixed maturity securities available-for-sale | 6,977 | 167 | 571 | 25 | 7,548 | 192 | |||||||||||||||||
Equity securities available-for-sale -- Preferred stock | 12 | — | 13 | 4 | 25 | 4 | |||||||||||||||||
Total | $ | 6,989 | $ | 167 | $ | 584 | $ | 29 | $ | 7,573 | $ | 196 |
Three months ended March 31 | |||||||
(In millions) | 2017 | 2016 | |||||
Beginning balance of credit losses on fixed maturity securities | $ | 36 | $ | 53 | |||
Reductions for securities sold during the period | (4 | ) | (5 | ) | |||
Ending balance of credit losses on fixed maturity securities | $ | 32 | $ | 48 |
March 31, 2017 | December 31, 2016 | ||||||||||||||
(In millions) | Cost or Amortized Cost | Estimated Fair Value | Cost or Amortized Cost | Estimated Fair Value | |||||||||||
Due in one year or less | $ | 1,655 | $ | 1,701 | $ | 1,779 | $ | 1,828 | |||||||
Due after one year through five years | 7,539 | 7,918 | 7,566 | 7,955 | |||||||||||
Due after five years through ten years | 15,645 | 16,176 | 15,892 | 16,332 | |||||||||||
Due after ten years | 13,410 | 15,165 | 13,112 | 14,778 | |||||||||||
Total | $ | 38,249 | $ | 40,960 | $ | 38,349 | $ | 40,893 |
March 31, 2017 | Total Assets/Liabilities at Fair Value | ||||||||||||||
(In millions) | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets | |||||||||||||||
Fixed maturity securities: | |||||||||||||||
Corporate and other bonds | $ | — | $ | 19,125 | $ | 121 | $ | 19,246 | |||||||
States, municipalities and political subdivisions | — | 13,451 | 1 | 13,452 | |||||||||||
Asset-backed: | |||||||||||||||
Residential mortgage-backed | — | 4,617 | 126 | 4,743 | |||||||||||
Commercial mortgage-backed | — | 1,922 | 13 | 1,935 | |||||||||||
Other asset-backed | — | 932 | 117 | 1,049 | |||||||||||
Total asset-backed | — | 7,471 | 256 | 7,727 | |||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 103 | — | — | 103 | |||||||||||
Foreign government | — | 432 | — | 432 | |||||||||||
Redeemable preferred stock | 20 | — | — | 20 | |||||||||||
Total fixed maturity securities | 123 | 40,479 | 378 | 40,980 | |||||||||||
Equity securities | 101 | — | 19 | 120 | |||||||||||
Other invested assets | — | 5 | — | 5 | |||||||||||
Short term investments | 225 | 829 | — | 1,054 | |||||||||||
Life settlement contracts, included in Other assets | — | — | 46 | 46 | |||||||||||
Total assets | $ | 449 | $ | 41,313 | $ | 443 | $ | 42,205 | |||||||
Liabilities | |||||||||||||||
Other liabilities | $ | — | $ | (2 | ) | $ | — | $ | (2 | ) | |||||
Total liabilities | $ | — | $ | (2 | ) | $ | — | $ | (2 | ) |
December 31, 2016 | Total Assets/Liabilities at Fair Value | ||||||||||||||
(In millions) | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets | |||||||||||||||
Fixed maturity securities: | |||||||||||||||
Corporate and other bonds | $ | — | $ | 18,840 | $ | 130 | $ | 18,970 | |||||||
States, municipalities and political subdivisions | — | 13,239 | 1 | 13,240 | |||||||||||
Asset-backed: | |||||||||||||||
Residential mortgage-backed | — | 4,944 | 129 | 5,073 | |||||||||||
Commercial mortgage-backed | — | 2,027 | 13 | 2,040 | |||||||||||
Other asset-backed | — | 968 | 57 | 1,025 | |||||||||||
Total asset-backed | — | 7,939 | 199 | 8,138 | |||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 93 | — | — | 93 | |||||||||||
Foreign government | — | 445 | — | 445 | |||||||||||
Redeemable preferred stock | 19 | — | — | 19 | |||||||||||
Total fixed maturity securities | 112 | 40,463 | 330 | 40,905 | |||||||||||
Equity securities | 91 | — | 19 | 110 | |||||||||||
Other invested assets | — | 5 | — | 5 | |||||||||||
Short term investments | 475 | 853 | — | 1,328 | |||||||||||
Life settlement contracts, included in Other assets | — | — | 58 | 58 | |||||||||||
Total assets | $ | 678 | $ | 41,321 | $ | 407 | $ | 42,406 | |||||||
Liabilities | |||||||||||||||
Other liabilities | $ | — | $ | (3 | ) | $ | — | $ | (3 | ) | |||||
Total liabilities | $ | — | $ | (3 | ) | $ | — | $ | (3 | ) |
Level 3 (In millions) | Balance as of January 1, 2017 | 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 as of March 31, 2017 | Unrealized gains (losses) on Level 3 assets and liabilities held as of March 31, 2017 recognized in Net income (loss)* | |||||||||||||||||||||||||||||
Fixed maturity securities: | |||||||||||||||||||||||||||||||||||||||
Corporate and other bonds | $ | 130 | $ | — | $ | 1 | $ | 5 | $ | (1 | ) | $ | (14 | ) | $ | — | $ | — | $ | 121 | $ | — | |||||||||||||||||
States, municipalities and political subdivisions | 1 | — | — | — | — | — | — | — | 1 | — | |||||||||||||||||||||||||||||
Asset-backed: | |||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed | 129 | 1 | 2 | — | — | (6 | ) | — | — | 126 | — | ||||||||||||||||||||||||||||
Commercial mortgage-backed | 13 | — | — | — | — | — | — | — | 13 | — | |||||||||||||||||||||||||||||
Other asset-backed | 57 | (1 | ) | — | 38 | — | — | 28 | (5 | ) | 117 | — | |||||||||||||||||||||||||||
Total asset-backed | 199 | — | 2 | 38 | — | (6 | ) | 28 | (5 | ) | 256 | — | |||||||||||||||||||||||||||
Total fixed maturity securities | 330 | — | 3 | 43 | (1 | ) | (20 | ) | 28 | (5 | ) | 378 | — | ||||||||||||||||||||||||||
Equity securities | 19 | — | 1 | 1 | (2 | ) | — | — | — | 19 | — | ||||||||||||||||||||||||||||
Derivative financial instruments | — | 1 | — | — | (1 | ) | — | — | — | — | — | ||||||||||||||||||||||||||||
Life settlement contracts | 58 | 6 | — | — | (13 | ) | (5 | ) | — | — | 46 | — | |||||||||||||||||||||||||||
Total | $ | 407 | $ | 7 | $ | 4 | $ | 44 | $ | (17 | ) | $ | (25 | ) | $ | 28 | $ | (5 | ) | $ | 443 | $ | — |
Level 3 (In millions) | Balance as of January 1, 2016 | 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 as of March 31, 2016 | Unrealized gains (losses) on Level 3 assets and liabilities held as of March 31, 2016 recognized in Net income (loss)* | |||||||||||||||||||||||||||||
Fixed maturity securities: | |||||||||||||||||||||||||||||||||||||||
Corporate and other bonds | $ | 168 | $ | (1 | ) | $ | 4 | $ | 53 | $ | (16 | ) | $ | (3 | ) | $ | — | $ | (12 | ) | $ | 193 | $ | — | |||||||||||||||
States, municipalities and political subdivisions | 2 | — | — | — | — | — | — | — | 2 | — | |||||||||||||||||||||||||||||
Asset-backed: | |||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed | 134 | 1 | — | — | — | (5 | ) | — | (2 | ) | 128 | — | |||||||||||||||||||||||||||
Commercial mortgage-backed | 22 | — | — | 9 | — | — | — | (4 | ) | 27 | — | ||||||||||||||||||||||||||||
Other asset-backed | 53 | — | — | — | — | — | 2 | (5 | ) | 50 | — | ||||||||||||||||||||||||||||
Total asset-backed | 209 | 1 | — | 9 | — | (5 | ) | 2 | (11 | ) | 205 | — | |||||||||||||||||||||||||||
Total fixed maturity securities | 379 | — | 4 | 62 | (16 | ) | (8 | ) | 2 | (23 | ) | 400 | — | ||||||||||||||||||||||||||
Equity securities | 20 | — | (1 | ) | — | — | — | — | — | 19 | — | ||||||||||||||||||||||||||||
Life settlement contracts | 74 | 4 | — | — | — | (6 | ) | — | — | 72 | 1 | ||||||||||||||||||||||||||||
Total | $ | 473 | $ | 4 | $ | 3 | $ | 62 | $ | (16 | ) | $ | (14 | ) | $ | 2 | $ | (23 | ) | $ | 491 | $ | 1 |
Major Category of Assets and Liabilities | Condensed Consolidated Statements of Operations Line Items | |
Fixed maturity securities available-for-sale (1) | Net realized investment gains (losses) | |
Fixed maturity securities trading | Net investment income | |
Equity securities (1) | 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) | |
Life settlement contracts | Other revenues | |
Other liabilities - Derivative financial instruments | Net realized investment gains (losses) |
March 31, 2017 | Estimated Fair Value (In millions) | Valuation Technique(s) | Unobservable Input(s) | Range (Weighted Average) | |||||
Fixed maturity securities | $ | 122 | Discounted cash flow | Credit spread | 2% - 40% (4%) |
December 31, 2016 | Estimated Fair Value (In millions) | Valuation Technique(s) | Unobservable Input(s) | Range (Weighted Average) | |||||
Fixed maturity securities | $ | 106 | Discounted cash flow | Credit spread | 2% - 40% (4%) |
March 31, 2017 | Carrying Amount | Estimated Fair Value | |||||||||||||||||
(In millions) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||
Assets | |||||||||||||||||||
Mortgage loans | $ | 611 | $ | — | $ | — | $ | 616 | $ | 616 | |||||||||
Note receivable | 10 | — | — | 10 | 10 | ||||||||||||||
Liabilities | |||||||||||||||||||
Short term debt | $ | 150 | $ | — | $ | 156 | $ | — | $ | 156 | |||||||||
Long term debt | 2,560 | — | 2,811 | — | 2,811 |
December 31, 2016 | Carrying Amount | Estimated Fair Value | |||||||||||||||||
(In millions) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||
Assets | |||||||||||||||||||
Mortgage loans | $ | 591 | $ | — | $ | — | $ | 594 | $ | 594 | |||||||||
Liabilities | |||||||||||||||||||
Long term debt | $ | 2,710 | $ | — | $ | 2,952 | $ | — | $ | 2,952 |
For the three months ended March 31 | |||||||
(In millions) | 2017 | 2016 | |||||
Reserves, beginning of year: | |||||||
Gross | $ | 22,343 | $ | 22,663 | |||
Ceded | 4,094 | 4,087 | |||||
Net reserves, beginning of year | 18,249 | 18,576 | |||||
Net incurred claim and claim adjustment expenses: | |||||||
Provision for insured events of current year | 1,207 | 1,224 | |||||
Decrease in provision for insured events of prior years | (82 | ) | (45 | ) | |||
Amortization of discount | 48 | 48 | |||||
Total net incurred (1) | 1,173 | 1,227 | |||||
Net payments attributable to: | |||||||
Current year events | (68 | ) | (76 | ) | |||
Prior year events | (1,184 | ) | (1,147 | ) | |||
Total net payments | (1,252 | ) | (1,223 | ) | |||
Foreign currency translation adjustment and other | 14 | 39 | |||||
Net reserves, end of period | 18,184 | 18,619 | |||||
Ceded reserves, end of period | 4,076 | 4,399 | |||||
Gross reserves, end of period | $ | 22,260 | $ | 23,018 |
(1) | Total net incurred above does not agree to Insurance claims and policyholders' benefits as reflected on the Condensed Consolidated Statements of Operations due to amounts related to retroactive reinsurance deferred gain accounting, uncollectible reinsurance and loss deductible receivables, and benefit expenses related to future policy benefits, which are not reflected in the table above. |
Three months ended March 31, 2017 | |||||||||||||||||||
(In millions) | Specialty | Commercial | International | Corporate & Other Non-Core | Total | ||||||||||||||
Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development | $ | (31 | ) | $ | (24 | ) | $ | (2 | ) | $ | — | $ | (57 | ) | |||||
Pretax (favorable) unfavorable premium development | (5 | ) | 37 | (7 | ) | — | 25 | ||||||||||||
Total pretax (favorable) unfavorable net prior year development | $ | (36 | ) | $ | 13 | $ | (9 | ) | $ | — | $ | (32 | ) |
Three months ended March 31, 2016 | |||||||||||||||||||
(In millions) | Specialty | Commercial | International | Corporate & Other Non-Core | Total | ||||||||||||||
Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development | $ | (34 | ) | $ | (14 | ) | $ | (4 | ) | $ | — | $ | (52 | ) | |||||
Pretax (favorable) unfavorable premium development | (11 | ) | (2 | ) | (1 | ) | — | (14 | ) | ||||||||||
Total pretax (favorable) unfavorable net prior year development | $ | (45 | ) | $ | (16 | ) | $ | (5 | ) | $ | — | $ | (66 | ) |
Three months ended March 31 | |||||||
(In millions) | 2017 | 2016 | |||||
Pretax (favorable) unfavorable development: | |||||||
Medical Professional Liability | $ | 1 | $ | (7 | ) | ||
Other Professional Liability and Management Liability | (32 | ) | (9 | ) | |||
Surety | — | — | |||||
Warranty | — | 2 | |||||
Other | — | (20 | ) | ||||
Total pretax (favorable) unfavorable development | $ | (31 | ) | $ | (34 | ) |
Three months ended March 31 | |||||||
(In millions) | 2017 | 2016 | |||||
Pretax (favorable) unfavorable development: | |||||||
Commercial Auto | $ | (26 | ) | $ | (15 | ) | |
General Liability | — | (15 | ) | ||||
Workers' Compensation | — | 4 | |||||
Property and Other | 2 | 12 | |||||
Total pretax (favorable) unfavorable development | $ | (24 | ) | $ | (14 | ) |
Three months ended March 31 | |||||||
(In millions) | 2017 | 2016 | |||||
Pretax (favorable) unfavorable development: | |||||||
Medical Professional Liability | $ | — | $ | — | |||
Other Professional Liability | (1 | ) | (1 | ) | |||
Liability | — | — | |||||
Property & Marine | 1 | (4 | ) | ||||
Other | (2 | ) | 1 | ||||
Total pretax (favorable) unfavorable development | $ | (2 | ) | $ | (4 | ) |
Three months ended March 31 | |||||||
(In millions) | 2017 | 2016 | |||||
Net A&EP adverse development before consideration of LPT | $ | 60 | $ | 200 | |||
Retroactive reinsurance benefit recognized | (40 | ) | (73 | ) | |||
Pretax impact of A&EP reserve development and the LPT | $ | 20 | $ | 127 |
Three months ended March 31 | |||||||
(In millions) | 2017 | 2016 | |||||
Pension cost (benefit) | |||||||
Interest cost on projected benefit obligation | $ | 26 | $ | 28 | |||
Expected return on plan assets | (39 | ) | (40 | ) | |||
Amortization of net actuarial loss | 9 | 9 | |||||
Settlement loss | 2 | — | |||||
Net periodic pension cost (benefit) | $ | (2 | ) | $ | (3 | ) |
(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 as of January 1, 2017 | $ | 30 | $ | 642 | $ | (647 | ) | $ | (198 | ) | $ | (173 | ) | ||||||
Other comprehensive income (loss) before reclassifications | — | 85 | — | 11 | 96 | ||||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $(2), $(9), $4, $- and $(7) | 4 | 18 | (7 | ) | — | 15 | |||||||||||||
Other comprehensive income (loss) net of tax (expense) benefit of $1, $(38), $(4), $- and $(41) | (4 | ) | 67 | 7 | 11 | 81 | |||||||||||||
Balance as of March 31, 2017 | $ | 26 | $ | 709 | $ | (640 | ) | $ | (187 | ) | $ | (92 | ) |
(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 as of January 1, 2016 | $ | 27 | $ | 390 | $ | (648 | ) | $ | (84 | ) | $ | (315 | ) | ||||||
Other comprehensive income (loss) before reclassifications | 3 | 223 | — | 14 | 240 | ||||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $1, $7, $3, $- and $11 | (2 | ) | (11 | ) | (6 | ) | — | (19 | ) | ||||||||||
Other comprehensive income (loss) net of tax (expense) benefit of $(3), $(116), $(3), $- and $(122) | 5 | 234 | 6 | 14 | 259 | ||||||||||||||
Balance as of March 31, 2016 | $ | 32 | $ | 624 | $ | (642 | ) | $ | (70 | ) | $ | (56 | ) |
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 |
Three months ended March 31, 2017 | Specialty | Commercial | International | Life & Group Non-Core | Corporate & Other Non-Core | ||||||||||||||||||||||
(In millions) | Eliminations | Total | |||||||||||||||||||||||||
Operating revenues | |||||||||||||||||||||||||||
Net earned premiums | $ | 664 | $ | 651 | $ | 197 | $ | 133 | $ | — | $ | — | $ | 1,645 | |||||||||||||
Net investment income | 153 | 178 | 12 | 197 | 5 | — | 545 | ||||||||||||||||||||
Other revenues | 94 | 9 | — | 1 | — | — | 104 | ||||||||||||||||||||
Total operating revenues | 911 | 838 | 209 | 331 | 5 | — | 2,294 | ||||||||||||||||||||
Claims, Benefits and Expenses | |||||||||||||||||||||||||||
Net incurred claims and benefits | 386 | 437 | 115 | 330 | 21 | — | 1,289 | ||||||||||||||||||||
Policyholders’ dividends | 1 | 3 | — | — | — | — | 4 | ||||||||||||||||||||
Amortization of deferred acquisition costs | 143 | 116 | 46 | — | — | — | 305 | ||||||||||||||||||||
Other insurance related expenses | 69 | 126 | 27 | 32 | — | — | 254 | ||||||||||||||||||||
Other expenses | 81 | 14 | (6 | ) | 2 | 44 | — | 135 | |||||||||||||||||||
Total claims, benefits and expenses | 680 | 696 | 182 | 364 | 65 | — | 1,987 | ||||||||||||||||||||
Operating income (loss) before income tax | 231 | 142 | 27 | (33 | ) | (60 | ) | — | 307 | ||||||||||||||||||
Income tax (expense) benefit on operating income (loss) | (77 | ) | (48 | ) | (7 | ) | 37 | 23 | — | (72 | ) | ||||||||||||||||
Net operating income (loss) | 154 | 94 | 20 | 4 | (37 | ) | — | 235 | |||||||||||||||||||
Net realized investment gains (losses) | 7 | 11 | 6 | 10 | 2 | — | 36 | ||||||||||||||||||||
Income tax (expense) benefit on net realized investment gains (losses) | (3 | ) | (3 | ) | (1 | ) | (4 | ) | — | — | (11 | ) | |||||||||||||||
Net realized investment gains (losses), after tax | 4 | 8 | 5 | 6 | 2 | — | 25 | ||||||||||||||||||||
Net income (loss) | $ | 158 | $ | 102 | $ | 25 | $ | 10 | $ | (35 | ) | $ | — | $ | 260 |
March 31, 2017 | |||||||||||||||||||||||||||
(In millions) | |||||||||||||||||||||||||||
Reinsurance receivables | $ | 817 | $ | 616 | $ | 133 | $ | 448 | $ | 2,419 | $ | — | $ | 4,433 | |||||||||||||
Insurance receivables | 874 | 1,048 | 254 | 12 | 3 | — | 2,191 | ||||||||||||||||||||
Deferred acquisition costs | 314 | 225 | 87 | — | — | — | 626 | ||||||||||||||||||||
Goodwill | 117 | — | 29 | — | — | — | 146 | ||||||||||||||||||||
Insurance reserves | |||||||||||||||||||||||||||
Claim and claim adjustment expenses | 6,224 | 8,760 | 1,343 | 3,373 | 2,560 | — | 22,260 | ||||||||||||||||||||
Unearned premiums | 1,941 | 1,375 | 450 | 147 | — | (1 | ) | 3,912 | |||||||||||||||||||
Future policy benefits | — | — | — | 10,491 | — | — | 10,491 |
Three months ended March 31, 2016 | Specialty | Commercial | International | Life & Group Non-Core | Corporate & Other Non-Core | ||||||||||||||||||||||
(In millions) | Eliminations | Total | |||||||||||||||||||||||||
Operating revenues | |||||||||||||||||||||||||||
Net earned premiums | $ | 682 | $ | 688 | $ | 198 | $ | 131 | $ | — | $ | — | $ | 1,699 | |||||||||||||
Net investment income | 107 | 126 | 12 | 187 | 3 | — | 435 | ||||||||||||||||||||
Other revenues | 87 | 6 | 1 | — | 3 | — | 97 | ||||||||||||||||||||
Total operating revenues | 876 | 820 | 211 | 318 | 6 | — | 2,231 | ||||||||||||||||||||
Claims, Benefits and Expenses | |||||||||||||||||||||||||||
Net incurred claims and benefits | 390 | 442 | 121 | 323 | 128 | — | 1,404 | ||||||||||||||||||||
Policyholders’ dividends | 1 | 3 | — | — | — | — | 4 | ||||||||||||||||||||
Amortization of deferred acquisition costs | 144 | 116 | 47 | — | — | — | 307 | ||||||||||||||||||||
Other insurance related expenses | 75 | 141 | 28 | 33 | — | — | 277 | ||||||||||||||||||||
Other expenses | 75 | 5 | 9 | 3 | 54 | — | 146 | ||||||||||||||||||||
Total claims, benefits and expenses | 685 | 707 | 205 | 359 | 182 | — | 2,138 | ||||||||||||||||||||
Operating income (loss) before income tax | 191 | 113 | 6 | (41 | ) | (176 | ) | — | 93 | ||||||||||||||||||
Income tax (expense) benefit on operating income (loss) | (64 | ) | (39 | ) | — | 39 | 62 | — | (2 | ) | |||||||||||||||||
Net operating income (loss) | 127 | 74 | 6 | (2 | ) | (114 | ) | — | 91 | ||||||||||||||||||
Net realized investment gains (losses) | (11 | ) | (18 | ) | 4 | (3 | ) | (8 | ) | — | (36 | ) | |||||||||||||||
Income tax (expense) benefit on net realized investment gains (losses) | 4 | 6 | (1 | ) | — | 2 | — | 11 | |||||||||||||||||||
Net realized investment gains (losses), after tax | (7 | ) | (12 | ) | 3 | (3 | ) | (6 | ) | — | (25 | ) | |||||||||||||||
Net income (loss) | $ | 120 | $ | 62 | $ | 9 | $ | (5 | ) | $ | (120 | ) | $ | — | $ | 66 |
March 31, 2016 | |||||||||||||||||||||||||||
(In millions) | |||||||||||||||||||||||||||
Reinsurance receivables | $ | 765 | $ | 623 | $ | 139 | $ | 496 | $ | 2,707 | $ | — | $ | 4,730 | |||||||||||||
Insurance receivables | 884 | 1,025 | 276 | 14 | 2 | — | 2,201 | ||||||||||||||||||||
Deferred acquisition costs | 309 | 225 | 88 | — | — | — | 622 | ||||||||||||||||||||
Goodwill | 117 | — | 33 | — | — | — | 150 | ||||||||||||||||||||
Insurance reserves | |||||||||||||||||||||||||||
Claim and claim adjustment expenses | 6,325 | 9,095 | 1,395 | 3,311 | 2,892 | — | 23,018 | ||||||||||||||||||||
Unearned premiums | 1,861 | 1,347 | 464 | 136 | — | (1 | ) | 3,807 | |||||||||||||||||||
Future policy benefits | — | — | — | 10,500 | — | — | 10,500 |
Three months ended March 31 | |||||||
(In millions) | 2017 | 2016 | |||||
Specialty | |||||||
Management & Professional Liability | $ | 661 | $ | 618 | |||
Surety | 123 | 127 | |||||
Warranty & Alternative Risks | 134 | 120 | |||||
Specialty revenues | 918 | 865 | |||||
Commercial | |||||||
Middle Market | 458 | 401 | |||||
Small Business | 97 | 143 | |||||
Other Commercial Insurance | 294 | 258 | |||||
Commercial revenues | 849 | 802 | |||||
International | |||||||
Canada | 51 | 50 | |||||
CNA Europe | 73 | 78 | |||||
Hardy | 91 | 87 | |||||
International revenues | 215 | 215 | |||||
Life & Group Non-Core revenues | 341 | 315 | |||||
Corporate & Other Non-Core revenues | 7 | (2 | ) | ||||
Eliminations | — | — | |||||
Total revenues | $ | 2,330 | $ | 2,195 |
• | Insurance Reserves |
• | Reinsurance and Insurance Receivables |
• | Valuation of Investments and Impairment of Securities |
• | Long Term Care Policies |
• | Pension and Postretirement Benefit Obligations |
• | Income Taxes |
Three months ended March 31 | |||||||
(In millions) | 2017 | 2016 | |||||
Operating Revenues | |||||||
Net earned premiums | $ | 1,645 | $ | 1,699 | |||
Net investment income | 545 | 435 | |||||
Other revenues | 104 | 97 | |||||
Total operating revenues | 2,294 | 2,231 | |||||
Claims, Benefits and Expenses | |||||||
Net incurred claims and benefits | 1,289 | 1,404 | |||||
Policyholders' dividends | 4 | 4 | |||||
Amortization of deferred acquisition costs | 305 | 307 | |||||
Other insurance related expenses | 254 | 277 | |||||
Other expenses | 135 | 146 | |||||
Total claims, benefits and expenses | 1,987 | 2,138 | |||||
Operating income before income tax | 307 | 93 | |||||
Income tax expense on operating income | (72 | ) | (2 | ) | |||
Net operating income | 235 | 91 | |||||
Net realized investment gains (losses) | 36 | (36 | ) | ||||
Income tax (expense) benefit on net realized investment gains (losses) | (11 | ) | 11 | ||||
Net realized investment gains (losses), after tax | 25 | (25 | ) | ||||
Net income | $ | 260 | $ | 66 |
Three months ended March 31 | |||||||
(In millions, except ratios, rate and retention) | 2017 | 2016 | |||||
Net written premiums | $ | 679 | $ | 684 | |||
Net earned premiums | 664 | 682 | |||||
Net investment income | 153 | 107 | |||||
Net operating income | 154 | 127 | |||||
Net realized investment gains (losses), after tax | 4 | (7 | ) | ||||
Net income | 158 | 120 | |||||
Other performance metrics: | |||||||
Loss and loss adjustment expense ratio | 58.2 | % | 57.1 | % | |||
Expense ratio | 31.9 | 32.1 | |||||
Dividend ratio | 0.1 | 0.2 | |||||
Combined ratio | 90.2 | % | 89.4 | % | |||
Rate | 1 | % | 1 | % | |||
Retention | 88 | % | 88 | % | |||
New Business | $ | 57 | $ | 65 |
(In millions) | March 31, 2017 | December 31, 2016 | |||||
Gross case reserves | $ | 1,842 | $ | 1,871 | |||
Gross IBNR reserves | 4,382 | 4,278 | |||||
Total gross carried claim and claim adjustment expense reserves | $ | 6,224 | $ | 6,149 | |||
Net case reserves | $ | 1,681 | $ | 1,681 | |||
Net IBNR reserves | 3,731 | 3,723 | |||||
Total net carried claim and claim adjustment expense reserves | $ | 5,412 | $ | 5,404 |
Three months ended March 31 | |||||||
(In millions, except ratios, rate and retention) | 2017 | 2016 | |||||
Net written premiums | $ | 715 | $ | 748 | |||
Net earned premiums | 651 | 688 | |||||
Net investment income | 178 | 126 | |||||
Net operating income | 94 | 74 | |||||
Net realized investment gains (losses), after tax | 8 | (12 | ) | ||||
Net income | 102 | 62 | |||||
Other performance metrics: | |||||||
Loss and loss adjustment expense ratio | 67.0 | % | 64.2 | % | |||
Expense ratio | 37.4 | 37.3 | |||||
Dividend ratio | 0.5 | 0.4 | |||||
Combined ratio | 104.9 | % | 101.9 | % | |||
Rate | 0 | % | 0 | % | |||
Retention | 83 | % | 84 | % | |||
New Business | $ | 139 | $ | 137 |
(In millions) | March 31, 2017 | December 31, 2016 | |||||
Gross case reserves | $ | 4,613 | $ | 4,661 | |||
Gross IBNR reserves | 4,147 | 4,233 | |||||
Total gross carried claim and claim adjustment expense reserves | $ | 8,760 | $ | 8,894 | |||
Net case reserves | $ | 4,322 | $ | 4,353 | |||
Net IBNR reserves | 3,862 | 3,952 | |||||
Total net carried claim and claim adjustment expense reserves | $ | 8,184 | $ | 8,305 |
Three months ended March 31 | |||||||
(In millions, except ratios, rate and retention) | 2017 | 2016 | |||||
Net written premiums | $ | 238 | $ | 236 | |||
Net earned premiums | 197 | 198 | |||||
Net investment income | 12 | 12 | |||||
Net operating income | 20 | 6 | |||||
Net realized investment gains, after tax | 5 | 3 | |||||
Net income | 25 | 9 | |||||
Other performance metrics: | |||||||
Loss and loss adjustment expense ratio | 58.3 | % | 61.2 | % | |||
Expense ratio | 36.8 | 37.8 | |||||
Combined ratio | 95.1 | % | 99.0 | % | |||
Rate | 0 | % | 0 | % | |||
Retention | 76 | % | 81 | % | |||
New Business | $ | 65 | $ | 60 |
(In millions) | March 31, 2017 | December 31, 2016 | |||||
Gross case reserves | $ | 641 | $ | 632 | |||
Gross IBNR reserves | 702 | 696 | |||||
Total gross carried claim and claim adjustment expense reserves | $ | 1,343 | $ | 1,328 | |||
Net case reserves | $ | 559 | $ | 548 | |||
Net IBNR reserves | 666 | 653 | |||||
Total net carried claim and claim adjustment expense reserves | $ | 1,225 | $ | 1,201 |
Three months ended March 31 | |||||||
(In millions) | 2017 | 2016 | |||||
Net earned premiums | $ | 133 | $ | 131 | |||
Net investment income | 197 | 187 | |||||
Net operating income (loss) | 4 | (2 | ) | ||||
Net realized investment gains (losses), after tax | 6 | (3 | ) | ||||
Net income (loss) | 10 | (5 | ) |
Three months ended March 31 | |||||||
(In millions) | 2017 | 2016 | |||||
Net investment income | $ | 5 | $ | 3 | |||
Interest expense | 38 | 42 | |||||
Net operating loss | (37 | ) | (114 | ) | |||
Net realized investment gains (losses), after tax | 2 | (6 | ) | ||||
Net loss | (35 | ) | (120 | ) |
(In millions) | March 31, 2017 | December 31, 2016 | |||||
Gross case reserves | $ | 1,458 | $ | 1,524 | |||
Gross IBNR reserves | 1,102 | 1,090 | |||||
Total gross carried claim and claim adjustment expense reserves | $ | 2,560 | $ | 2,614 | |||
Net case reserves | $ | 95 | $ | 94 | |||
Net IBNR reserves | 132 | 136 | |||||
Total net carried claim and claim adjustment expense reserves | $ | 227 | $ | 230 |
Three months ended March 31 | |||||||
(In millions) | 2017 | 2016 | |||||
Fixed maturity securities: | |||||||
Taxable | $ | 347 | $ | 345 | |||
Tax-Exempt | 108 | 101 | |||||
Total fixed maturity securities | 455 | 446 | |||||
Limited partnership investments | 90 | (14 | ) | ||||
Other, net of investment expense | — | 3 | |||||
Net investment income | $ | 545 | $ | 435 | |||
Net investment income, after tax | $ | 389 | $ | 315 | |||
Effective income yield for the fixed maturity securities portfolio, pretax | 4.8 | % | 4.8 | % | |||
Effective income yield for the fixed maturity securities portfolio, after tax | 3.4 | % | 3.4 | % |
Three months ended March 31 | |||||||
(In millions) | 2017 | 2016 | |||||
Fixed maturity securities: | |||||||
Corporate and other bonds | $ | 29 | $ | (15 | ) | ||
States, municipalities and political subdivisions | 6 | 3 | |||||
Asset-backed | (4 | ) | (6 | ) | |||
U.S. Treasury and obligations of government-sponsored enterprises | 1 | 1 | |||||
Total fixed maturity securities | 32 | (17 | ) | ||||
Equity securities | — | (5 | ) | ||||
Derivative securities | 1 | (7 | ) | ||||
Short term investments and other | 3 | (7 | ) | ||||
Net realized investment gains (losses) | 36 | (36 | ) | ||||
Income tax (expense) benefit on net realized investment gains (losses) | (11 | ) | 11 | ||||
Net realized investment gains (losses), after tax | $ | 25 | $ | (25 | ) |
March 31, 2017 | December 31, 2016 | ||||||||||||||
(In millions) | Estimated Fair Value | Net Unrealized Gains (Losses) | Estimated Fair Value | Net Unrealized Gains (Losses) | |||||||||||
U.S. Government, Government agencies and Government-sponsored enterprises | $ | 3,995 | $ | 28 | $ | 4,212 | $ | 32 | |||||||
AAA | 1,832 | 117 | 1,881 | 110 | |||||||||||
AA | 9,016 | 761 | 8,911 | 750 | |||||||||||
A | 9,705 | 823 | 9,866 | 832 | |||||||||||
BBB | 13,166 | 815 | 12,802 | 664 | |||||||||||
Non-investment grade | 3,266 | 167 | 3,233 | 156 | |||||||||||
Total | $ | 40,980 | $ | 2,711 | $ | 40,905 | $ | 2,544 |
March 31, 2017 | |||||||
(In millions) | Estimated Fair Value | Gross Unrealized Losses | |||||
U.S. Government, Government agencies and Government-sponsored enterprises | $ | 2,154 | $ | 44 | |||
AAA | 284 | 8 | |||||
AA | 591 | 18 | |||||
A | 833 | 20 | |||||
BBB | 1,819 | 37 | |||||
Non-investment grade | 737 | 15 | |||||
Total | $ | 6,418 | $ | 142 |
March 31, 2017 | |||||||
(In millions) | Estimated Fair Value | Gross Unrealized Losses | |||||
Due in one year or less | $ | 90 | $ | 2 | |||
Due after one year through five years | 816 | 10 | |||||
Due after five years through ten years | 4,083 | 82 | |||||
Due after ten years | 1,429 | 48 | |||||
Total | $ | 6,418 | $ | 142 |
March 31, 2017 | December 31, 2016 | ||||||||||||
(In millions) | Estimated Fair Value | Effective Duration (In years) | Estimated Fair Value | Effective Duration (In years) | |||||||||
Investments supporting Life & Group Non-Core | $ | 15,957 | 8.8 | $ | 15,724 | 8.7 | |||||||
Other interest sensitive investments | 26,218 | 4.6 | 26,669 | 4.6 | |||||||||
Total | $ | 42,175 | 6.2 | $ | 42,393 | 6.1 |
(In millions) | March 31, 2017 | December 31, 2016 | |||||
Short term investments: | |||||||
Commercial paper | $ | 769 | $ | 733 | |||
U.S. Treasury securities | 175 | 433 | |||||
Money market funds | 52 | 44 | |||||
Other | 143 | 197 | |||||
Total short term investments | $ | 1,139 | $ | 1,407 |
• | the risks and uncertainties associated with our insurance 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 risks and uncertainties associated with potential acquisitions and divestitures, including the consummation of such transactions, the successful integration of acquired operations and the potential for subsequent impairment of goodwill or intangible assets. |
• | 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 underpriced 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; 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, legislative actions that increase claimant activity, 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 with respect to our ability to increase premium rates, and 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; 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 global weather patterns, greenhouse gases, sea, land and air temperatures, sea levels, rain, hail 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, the unpredictability of the nature, targets, severity or frequency of such events, and the effect of the absence or insufficiency of applicable terrorism legislation on coverages; and |
• | the occurrence of epidemics. |
• | in 2016, the United Kingdom (U.K.) held a referendum in which voters approved an exit from the European Union (E.U.), commonly referred to as "Brexit". As a result of the referendum, in 2017 the British government formally commenced the process to leave the E.U. and began negotiating the terms of treaties that will govern the U.K.'s future relationship with the E.U. Although the terms of any future treaties are unknown, changes in our international operating platform may be required to allow us to continue to write business in the E.U. after the completion of Brexit. As a result of these changes, the complexity and cost of regulatory compliance of our European business is likely to increase. |
CNA Financial Corporation | ||
Dated: May 1, 2017 | By | /s/ D. Craig Mense |
D. Craig Mense Executive Vice President and Chief Financial Officer |
Description of Exhibit | Exhibit Number |
Form of Award Letter to Executive Officers, along with Form of Award Terms, under the Long-Term Incentive Cash Plan | 10.1 |
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. | PSP Award. For purposes of these Award Terms, the "Participant" shall be the eligible person identified in the Award Letter included with these Award Terms (the "Award Letter"). For purposes of these Award Terms, the amounts of the target PSP Award and the maximum PSP Award are, respectively, the amounts specified in the Award Letter. The PSP Award has been granted under the CNA Financial Corporation Incentive Compensation Plan, as amended from time to time (the "Plan"), which is incorporated into and forms a part of these Award Terms. Certain words, terms and phrases used in these Award Terms are defined in the Plan (rather than in these Award Terms or the Award Letter), and, except where the context clearly implies or indicates the contrary and except as otherwise provided in these Award Terms, a word, term, or phrase used or defined in the Plan is used or defined identically in these Award Terms. Other words, terms or phrases used in these Award Terms are defined in Paragraph 12 or elsewhere in these Award Terms or the Award Letter. |
2. | Performance Period. The "Performance Period" shall have the meaning set forth in the Award Letter. |
3. | Vesting Period. The "Vesting Period" shall have the meaning set forth in the Award Letter. |
4. | Expiration. If the Participant's Date of Termination of Affiliation occurs, prior to payment following the completion of the Vesting Period, then the following shall apply: |
a) | Retirement. If the Participant's Date of Termination of Affiliation occurs before the last day of the Vesting Period by reason of the Participant's Retirement, the Participant shall be eligible for a payment with respect to the PSP Award in accordance with the terms of these Award Terms based on the Company’s actual performance for the period, but subject to a proration based on the number of months of participation for the portion of the Performance Period prior to the Participant's Date of Termination of Affiliation. Distribution under this paragraph shall be made as soon as practicable after the Participant’s Date of Termination of Affiliation. |
b) | Death or Disability. If the Participant's Date of Termination of Affiliation occurs before the last day of the Vesting Period by reason of the Participant's death or Permanent Disability, the Participant (or the Participant's estate) shall be eligible for a payment with respect to the PSP Award in accordance with the terms of these Award Terms based on the Company’s actual performance for the period, but subject to proration based on the number of months of participation for the portion of the Performance Period prior to the Participant's Date of Termination of Affiliation. Distribution under this paragraph shall be made as soon as practicable after the Participant’s Date of Termination of Affiliation. |
c) | Voluntary, Involuntary Termination and Termination for Cause. Except as provided above in this Paragraph 4, if the Participant's Date of Termination of Affiliation occurs at any time prior to the distribution of the PSP Award (as provided for in Paragraph 7 below) by reason of termination of employment by the Participant's employer for Cause, or by reason of the Participant's voluntary or involuntary termination, the Participant's PSP Award shall be entirely forfeited. |
5. | New Hires, Promotions and Demotions. Except as otherwise provided below, the Participant’s PSP Award will be based on the target percentage set forth in the Award Letter, as well as the Participant’s base salary at the commencement of the Performance Period, and shall not be affected by changes in base salary or status occurring during the Performance Period. |
a) | New Hires. If the Participant was hired on or prior to September 30 of the Performance Period, the Participant’s PSP Award will be prorated based on the appropriate number of complete months of participation. Any employee hired after September 30 of the Performance Period will not be eligible to participate until the following performance period. Nothing contained herein shall be construed to imply that any employee hired after the beginning of the Performance Period is entitled to any PSP Award unless such employee has received an Award Letter. |
b) | Promotions (First time participant or Current Officer) and Demotions. If the Participant is promoted to the Officer ranks for the first time during the Performance Period, the PSP award will be prorated based on the appropriate number of complete months of participation during the Performance Period. If a current Participant is either promoted or demoted during the Performance Period, the PSP award will not be affected. Any changes will be reflected in the subsequent grant assuming the Participant is still eligible to receive an award. |
c) | Limits on Adjustments for Restricted Executives. If following a promotion the Participant becomes a Restricted Executive (as defined in the Plan) in the year in which the PSP Award is paid, then the amount of the PSP Award determined under Section 5(b) shall not exceed the lesser of (i) the amount the Participant would have received based on the Participant’s target percentage prior to such promotion, but calculated as if the Participant’s new base salary had been in effect from the beginning of the Performance Period or (ii) $9,000,000. |
6. | Award Amount. The amount to be distributed with respect to the PSP Award shall be determined according to the schedule in the Award Letter, subject to review and approval of the Compensation Committee of the Company’s Board of Directors (the “Committee”). If the Adjusted Net Operating Income at the end of the Performance Period is at least the minimum level, but less than the target level, the amount distributable with respect to the PSP Award shall be interpolated between the minimum threshold amount and the target amount. If the Net Operating Income at the end of the Performance Period is greater than the target level, but less than the maximum level, the amount distributable with respect to the PSP Award shall be interpolated between the target amount and the maximum amount. As soon as practicable after the necessary financial data for the Performance Period is available to the Committee, the Committee shall make a determination of the extent of the achievement of the performance goals for that Performance Period, and shall make a determination of the amount, if any, of the distribution to be made for the PSP Award to the Participant for the Performance Period. Payment of the PSP Award shall be subject to the requirements of Paragraph 8 and, in addition, the Committee may, in its discretion, reduce the amount of the PSP Award or cancel the PSP Award entirely, whether or not the requirements of Paragraph 8 are met. |
7. | Settlement of Award. The amount that is distributable for the PSP Award shall be settled as soon as practicable as determined by the Company after the Committee makes the determination described in Paragraph 6 and expiration of the Vesting Period. An amount equal to 100% of the PSP Award shall be settled by the transfer to the Participant of a number of shares of common stock of the Company determined by dividing such percentage by the fair market value of a share of stock on the Grant Date, rounded to the next lower whole number. Unless otherwise determined by the Committee, tax withholding applicable to the stock portion of the payment shall be satisfied by reducing the number of shares delivered. The shares of stock transferred to the Participant shall be subject to such restrictions on transfer or other conditions as the Committee shall determine. |
8. | Minimum Performance Rating. Notwithstanding the foregoing, the PSP Award shall not be paid, and shall be forfeited, if at the time the PSP Award would otherwise be payable the Participant is not rated at least “Partially Meets” (or the equivalent) under the Company’s performance evaluation rating system. The Committee may provide for the payment of all or a portion of the PSP Award to a Participant who does not satisfy the minimum rating requirement if the Committee determines in its discretion that circumstances nonetheless warrant such a payment. |
9. | Restrictive Covenants. As a condition to the receipt of the Award made hereby, the Participant agrees to be bound by the terms and conditions hereof and of the Plan, including the following restrictive covenants: |
a) | Non-Solicitations of Employees. Participant agrees that during Participant’s employment with the Company, and for a period of 12 months following termination of Participant’s employment with the Company Participant will not: (i) employ or engage as a contractor or consultant for a position outside the Company, (ii) offer to employ or engage as a contractor or consultant for a position outside the Company, or (iii) solicit for employment or engagement as a contractor or consultant for a position outside the Company, any person who was employed by the Company at any time within 12 months before such employment, engagement, offer or solicitation. |
b) | Non-Solicitations of Business. Participant agrees that during Participant’s employment with the Company, and for a period of 12 months after the date of termination of Participant’s employment with the Company Participant will not solicit customers, agents or brokers, or direct others to solicit customers, agents or brokers, to move Company business away from the Company or to limit the amount of business the customers, agents or brokers do with the Company. This covenant is not intended to prohibit Participant from working in the insurance industry or from working for another commercial insurance company. However, Participant agrees that they cannot interfere with the Company’s relationships as described for the period of time referenced above. |
10. | Administration. The authority to manage and to control the operation and administration of these Award Terms shall be vested in the Committee and the Committee shall have all powers with respect to these Award Terms as it has with respect to the Plan. Any interpretations of these Award Terms by the Committee and any decisions made by it with respect to these Award Terms are final and binding on all persons. |
11. | Governing Documents. The Award Letter shall be subject to these Award Terms, and these Award Terms shall be subject to the provisions of the Plan. A copy of the Plan is included in the Company’s Proxy Statement, filed with the Securities and Exchange Commission on April 2, 2010, and a discussion of a First Amendment to the Plan is included in the Company’s Proxy Statement filed with the Securities and Exchange Commission on March 18, 2016, both of which are available at either www.sec.gov or www.cna.com, or are available from the Corporate Secretary of the Company. If discrepancies arise between the Award Letter and these Award Terms, these Award Terms will govern and if discrepancies arise between these Award Terms and the Plan, the terms of the Plan will govern; provided that if the discrepancy relates to the treatment of the PSP Award upon a Termination of Affiliation, or to any other provision of the Plan that, under the terms of the Plan, may be altered by the terms of an Award Agreement, these Award Terms shall govern. These Award Terms are subject to all interpretations, amendments, rules, and regulations promulgated by the Committee from time to time pursuant to the Plan. |
12. | Definitions. For purposes of these Award Terms, the following definitions shall apply: |
a) | Adjusted Net Operating Income. The “Adjusted Net Operating Income” of the Company is defined as net income to be reported to the shareholders in the Annual Report for [year]. In addition, the following items should be excluded: |
1. | Realized capital gain or losses, net of tax. |
2. | The after-tax impact of items of gain, loss, income or expense (including but not limited to changes in accounting principles) which in the judgment of the Compensation Committee were extraordinary or unusual in nature or infrequent in occurrence. |
3. | The after-tax impact of net investment income from limited partnership (LP) and common equity investments in excess of the [year] budgeted amount. To the extent that LP and common equity net investment income is below the budgeted amount, include LP and common equity net investment income up to the budgeted amount. |
4. | The after-tax impact of reserve strengthening and adverse dividend or premium development associated with asbestos and environmental pollution reserves for accident years prior to 2000, and any favorable or unfavorable income statement impact of applying retroactive reinsurance accounting to the losses ceded to the NICO loss portfolio transfer. |
5. | The after-tax impact of catastrophe losses of the Company or its subsidiaries in excess of the [year] budgeted amount. To the extent that catastrophe losses are below the budgeted amount, include catastrophe losses up to the budgeted amount |
6. | The after-tax impact of net reserve strengthening due to unlocking of assumptions relating to long term care or benefit settlement option liabilities or relating to a disposition, loss portfolio transfer or other transaction that fixes or limits the Company’s exposure to the run-off Life & Group businesses that the Committee deems to be in the best interest of shareholders. |
7. | Any income tax expense or benefit attributable to the impact of a change in the federal income tax rate on deferred income tax assets and liabilities. |
b) | Affiliate. The term "Affiliate" means any business or entity in which at any relevant time the Company directly or indirectly holds greater than a 10% equity (voting or non-voting) interest. |
c) | Cause. The term “Cause” as to a Participant means (i) a Participant’s engaging in any act or omission involving theft, malfeasance, gross negligence, fraud, dishonesty, moral turpitude, unlawful conduct, unethical conduct or breach of fiduciary duty; (ii) a Participant’s willful or reckless material misconduct in the performance of the Participant’s duties, engaging in any act that violates, in any material respect, any written policy or procedure of the Company or any Affiliate or engaging in any conduct that results in adverse publicity or harm to the business or reputation of the Company or any Affiliate; or (iii) a Participant’s habitual neglect of duties; provided, however, that for purposes of clauses (ii) and (iii), “Cause” shall not include any one or more of the following: bad judgment, negligence or any act or omission believed by the Participant in good faith to have been in, or not opposed to, the best interests of the Company (without intent of the Participant to gain, directly or indirectly, a profit to which the Participant was not legally entitled). A Participant who agrees to resign from his or her affiliation with the Company or an Affiliate in lieu of being terminated for Cause may be deemed to have been terminated for Cause for purposes of these Award Terms. |
d) | Date of Termination of Affiliation. The Participant's "Date of Termination of Affiliation" shall be the first day occurring on or after the Grant Date on which the Participant is not employed by the Company or any Affiliate, as determined by the Company, regardless of the reason for the termination of employment; provided that a termination of employment shall not be deemed to occur by reason of a transfer of the Participant between the Company and an Affiliate or between two Affiliates; and further provided that the Participant's employment shall not be considered terminated while the Participant is on a leave of absence from the Company or an Affiliate approved by the Participant's employer. If, as a result of a sale or other transaction, the Participant's employer ceases to be an Affiliate (and the Participant's employer is or becomes an entity that is separate from the Company), the occurrence of such transaction shall be treated as the Participant's Date of Termination of Affiliation, caused by the Participant being discharged by the employer. |
e) | Permanent Disability. The term "Permanent Disability" means a physical or mental condition of the Participant which, as determined by the Committee in its sole discretion based on all available medical information, would qualify the Participant for benefits under the Company’s long-term disability plan as in effect when the determination is made (ignoring the requirements |
f) | Retirement. Termination because of "Retirement" shall mean the Participant's Date of Termination of Affiliation after ceasing to provide services to the Company or any Affiliate for any reason other than death, Permanent Disability, Cause or unsatisfactory performance, at or after the Participant’s attainment of age 62 or, if earlier, the Participant's Date of Termination of Affiliation which is designated by the Committee as a "Retirement" for purposes of these Award Terms. |
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: | May 1, 2017 | By | /s/ Dino E. Robusto | |
Dino E. Robusto | ||||
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: | May 1, 2017 | By | /s/ D. Craig Mense | |
D. Craig Mense | ||||
Chief Financial Officer |
• | the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2017 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: | May 1, 2017 | By | /s/ Dino E. Robusto | |
Dino E. Robusto | ||||
Chief Executive Officer |
• | the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2017 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: | May 1, 2017 | By | /s/ D. Craig Mense | |
D. Craig Mense | ||||
Chief Financial Officer |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Apr. 27, 2017 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | CNA FINANCIAL CORP | |
Entity Central Index Key | 0000021175 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 270,980,108 |
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 260 | $ 66 |
Other Comprehensive Income, Net of Tax | ||
Net unrealized gains on investments with other-than-temporary impairments | (4) | 5 |
Net unrealized gains on other investments | 67 | 234 |
Net unrealized gains on investments | 63 | 239 |
Foreign currency translation adjustment | 11 | 14 |
Pension and postretirement benefits | 7 | 6 |
Other comprehensive income, net of tax | 81 | 259 |
Total comprehensive income | $ 341 | $ 325 |
Condensed Consolidated Balance Sheets - (Parenthetical) - USD ($) $ in Millions |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Amortized cost | $ 38,269 | $ 38,361 |
Cost | 112 | 106 |
Allowance for uncollectible reinsurance | 38 | 37 |
Allowance for uncollectible insurance receivables | 47 | 46 |
Accumulated depreciation | 255 | 254 |
Due to related parties | $ 41 | $ 50 |
Common stock, par value (dollars per share) | $ 2.50 | $ 2.50 |
Common stock, shares authorized (shares) | 500,000,000 | 500,000,000 |
Common stock, shares issued (shares) | 273,040,243 | 273,040,243 |
Common stock, shares outstanding (shares) | 270,978,126 | 270,495,998 |
Treasury stock, share (shares) | 2,062,117 | 2,544,245 |
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Millions |
Total |
Common Stock |
Additional Paid-in Capital |
Retained Earnings |
AOCI Attributable to Parent |
Treasury Stock |
---|---|---|---|---|---|---|
Balance, beginning of year at Dec. 31, 2015 | $ 683 | $ 2,153 | $ 9,313 | $ (315) | $ (78) | |
Stock-based compensation | (7) | 5 | ||||
Dividends paid to common stockholders | (609) | |||||
Net income | $ 66 | 66 | ||||
Other comprehensive income | 259 | 259 | ||||
Balance, end of period at Mar. 31, 2016 | 11,470 | 683 | 2,146 | 8,770 | (56) | (73) |
Balance, beginning of year at Dec. 31, 2016 | 11,969 | 683 | 2,173 | 9,359 | (173) | (73) |
Stock-based compensation | (12) | 8 | ||||
Dividends paid to common stockholders | (613) | |||||
Net income | 260 | 260 | ||||
Other comprehensive income | 81 | 81 | ||||
Balance, end of period at Mar. 31, 2017 | $ 11,693 | $ 683 | $ 2,161 | $ 9,006 | $ (92) | $ (65) |
General |
3 Months Ended |
---|---|
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
General | General Basis of Presentation The Condensed Consolidated Financial Statements include the accounts of CNA Financial Corporation (CNAF) and its subsidiaries. Collectively, CNAF and its subsidiaries are referred to as CNA or the Company. Loews Corporation (Loews) owned approximately 90% of the outstanding common stock of CNAF as of March 31, 2017. The accompanying Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Intercompany amounts have been eliminated. Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, including certain financial statement notes, is not required for interim reporting purposes and has been condensed or omitted. These statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in CNAF's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2016, including the summary of significant accounting policies in Note A. The preparation of Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. The interim financial data as of March 31, 2017 and for the three months ended March 31, 2017 and 2016 is unaudited. However, in the opinion of management, the interim data includes all adjustments, including normal recurring adjustments, necessary for a fair statement of the Company's results for the interim periods. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Recently Adopted Accounting Standards Updates (ASU) In March 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The updated accounting guidance simplifies the accounting for share-based payment award transactions, including income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. As of January 1, 2017, the Company adopted the updated accounting guidance and began recognizing excess tax benefits or deficiencies on vesting or settlement of awards as an income tax benefit or expense within net income, instead of additional paid-in capital as required under previous guidance. The related cash flows are now classified within operating activities. As a result of this change, excess tax benefits are no longer included in assumed proceeds under the treasury stock method of calculating earnings per share. The impact of the accounting change resulted in a decrease of $3 million to income tax expense for the three months ended March 31, 2017. Accounting Standards Pending Adoption In May 2014, the FASB issued ASU No. 2014-09, Revenue Recognition (Topic 606): Revenue from Contracts with Customers. The standard excludes from its scope the accounting for insurance contracts, financial instruments, and certain other agreements that are governed under other GAAP guidance. The updated guidance requires an entity to recognize revenue as performance obligations are met, in an amount that reflects the consideration the entity is entitled to receive for the transfer of the promised goods or services. The standard is effective for interim and annual reporting periods beginning after December 15, 2017 and may be applied retrospectively or through a cumulative effect adjustment to retained earnings at the date of adoption. As insurance contracts are out of scope, the Company anticipates the primary change will be to revenue recognition for certain of our warranty products and services. The Company has not made a decision on the method of adoption and is currently evaluating the effect the updated guidance will have on the Company’s financial statements, but we do not currently believe ASU 2014-09 will have a material effect on the Company's results of operations or financial position. In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The updated accounting guidance requires changes to the reporting model for financial instruments. The guidance is effective for interim and annual periods beginning after December 15, 2017. The Company is currently evaluating the effect the guidance will have on the Company's financial statements, and expects the primary change for the Company to be the requirement for equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842): Accounting for Leases. The updated accounting guidance requires lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by all leases, including those historically accounted for as operating leases. The guidance is effective for interim and annual periods beginning after December 15, 2018. The Company is currently evaluating the effect the updated guidance will have on the Company's financial statements. It is expected that assets and liabilities will increase based on the present value of remaining lease payments for leases in place at the adoption date; however, this is not expected to be material to the Company's results of operations or financial position. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The updated accounting guidance requires changes to the recognition of credit losses on financial instruments not accounted for at fair value through net income. The guidance is effective for interim and annual periods beginning after December 15, 2019. The Company is currently evaluating the effect the guidance will have on the Company's financial statements, but expects the primary changes to be the use of the expected credit loss model for its mortgage loan portfolio and reinsurance receivables and the presentation of credit losses within the available-for-sale fixed maturities portfolio through an allowance method rather than as a direct write-down. The expected credit loss model will require a financial asset to be presented at the net amount expected to be collected. The allowance method for available-for-sale debt securities will allow the Company to record reversals of credit losses if the estimate of credit losses declines. In March 2017, the FASB issued ASU No. 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The updated accounting guidance requires changes to the presentation of the components of net periodic benefit cost on the income statement by requiring service cost to be presented with other employee compensation costs and other components of net periodic pension cost to be presented outside of any subtotal of operating income. The ASU also stipulates that only the service cost component of net benefit cost is eligible for capitalization. The guidance is effective for interim and annual periods beginning after December 15, 2017. The Company is currently evaluating the effect the guidance will have on the Company's financial statements. |
Earnings Per Share |
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Mar. 31, 2015 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share Earnings per share is based on the weighted average number of outstanding common shares. Basic earnings (loss) per share excludes the effect of dilutive securities and is computed by dividing Net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For the three months ended March 31, 2017 and 2016, approximately 974 thousand and 542 thousand potential shares attributable to exercises or conversions into common stock under stock-based employee compensation plans were included in the calculation of diluted earnings per share. For those same periods, approximately 148 thousand and 180 thousand potential shares attributable to exercises or conversions into common stock under stock-based employee compensation plans were not included in the calculation of diluted earnings per share, because the effect would have been antidilutive. |
Investments |
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | Investments The significant components of Net investment income are presented in the following table.
Net realized investment gains (losses) are presented in the following table.
Net realized investment losses for the three months ended March 31, 2016 include $8 million related to the first quarter 2016 redemption of the Company's $350 million senior notes due August 2016. The components of Other-than-temporary impairment (OTTI) losses recognized in earnings by asset type are presented in the following table.
The following tables present a summary of fixed maturity and equity securities.
The net unrealized gains on investments included in the tables above are recorded as a component of Accumulated other comprehensive income (AOCI). When presented in AOCI, these amounts are net of tax and any required Shadow Adjustments. To the extent that unrealized gains on fixed income securities supporting certain products within the Life & Group Non-Core segment would result in a premium deficiency if realized, a related increase in Insurance reserves is recorded, net of tax, as a reduction of net unrealized gains through Other comprehensive income (loss) (Shadow Adjustments). As of March 31, 2017 and December 31, 2016, the net unrealized gains on investments included in AOCI were correspondingly reduced by Shadow Adjustments of $1,060 million and $1,014 million. The following tables present the estimated fair value and gross unrealized losses of fixed maturity and equity securities in a gross unrealized loss position by the length of time in which the securities have continuously been in that position.
Based on current facts and circumstances, the Company believes the unrealized losses presented in the March 31, 2017 securities in a gross unrealized loss position table above are not indicative of the ultimate collectibility of the current amortized cost of the securities, but rather are attributable to changes in interest rates, credit spreads and other factors. The Company has no current intent to sell securities with unrealized losses, nor is it more likely than not that it will be required to sell prior to recovery of amortized cost; accordingly, the Company has determined that there are no additional OTTI losses to be recorded as of March 31, 2017. The following table presents the activity related to the pretax credit loss component reflected in Retained earnings on fixed maturity securities still held as of March 31, 2017 and 2016 for which a portion of an OTTI loss was recognized in Other comprehensive income (loss).
Contractual Maturity The following table presents available-for-sale fixed maturity securities by contractual maturity.
Actual maturities may differ from contractual maturities because certain securities may be called or prepaid. Securities not due at a single date are allocated based on weighted average life. Derivative Financial Instruments The Company holds an embedded derivative on a funds withheld liability with a notional value of $172 million and $174 million as of March 31, 2017 and December 31, 2016 and a fair value of $2 million and $3 million as of March 31, 2017 and December 31, 2016. The embedded derivative on funds withheld liability is accounted for separately and reported with the funds withheld liability in Other liabilities on the Condensed Consolidated Balance Sheets. Investment Commitments As of March 31, 2017, the Company had committed approximately $394 million to future capital calls from various third-party limited partnership investments in exchange for an ownership interest in the related partnerships. As of March 31, 2017, the Company had mortgage loan commitments of $46 million representing signed loan applications received and accepted. The Company invests in various privately placed debt securities, including bank loans, as part of its overall investment strategy and has committed to additional future purchases, sales and funding. Purchases and sales of privately placed debt securities are recorded once funded. As of March 31, 2017, the Company had commitments to purchase or fund additional amounts of $217 million and sell $196 million under the terms of such securities. |
Fair Value |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value | Fair Value Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy is used in selecting inputs, with the highest priority given to Level 1, as these are the most transparent or reliable. Level 1 - Quoted prices for identical instruments in active markets. Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets. Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are not observable. Prices may fall within Level 1, 2 or 3 depending upon the methodology and inputs used to estimate fair value for each specific security. In general, the Company seeks to price securities using third-party pricing services. Securities not priced by pricing services are submitted to independent brokers for valuation and, if those are not available, internally developed pricing models are used to value assets using a methodology and inputs the Company believes market participants would use to value the assets. Prices obtained from third-party pricing services or brokers are not adjusted by the Company. The Company performs control procedures over information obtained from pricing services and brokers to ensure prices received represent a reasonable estimate of fair value and to confirm representations regarding whether inputs are observable or unobservable. Procedures may include i) the review of pricing service methodologies or broker pricing qualifications, ii) back-testing, where past fair value estimates are compared to actual transactions executed in the market on similar dates, iii) exception reporting, where period-over-period changes in price are reviewed and challenged with the pricing service or broker based on exception criteria, iv) deep dives, where the Company performs an independent analysis of the inputs and assumptions used to price individual securities and v) pricing validation, where prices received are compared to prices independently estimated by the Company. Assets and Liabilities Measured at Fair Value Assets and liabilities measured at fair value on a recurring basis are presented in the following tables.
The tables below present a reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).
*Net realized and unrealized gains and losses from Level 3 securities and derivatives are reported in Net income (loss) as follows:
(1) Unrealized gains and losses are reported within AOCI. Securities may be transferred in or out of levels within the fair value hierarchy based on the availability of observable market information and quoted prices used to determine the fair value of the security. The availability of observable market information and quoted prices varies based on market conditions and trading volume. During the three months ended March 31, 2017 and 2016 there were no transfers between Level 1 and Level 2. The Company's policy is to recognize transfers between levels at the beginning of quarterly reporting periods. Valuation Methodologies and Inputs The following section describes the valuation methodologies and relevant inputs used to measure different financial instruments at fair value, including an indication of the level in the fair value hierarchy in which the instruments are generally classified. Fixed Maturity Securities Level 1 securities include highly liquid and exchange traded bonds and redeemable preferred stock, valued using quoted market prices. Level 2 securities include most other fixed maturity securities as the significant inputs are observable in the marketplace. All classes of Level 2 fixed maturity securities are valued using a methodology based on information generated by market transactions involving identical or comparable assets, a discounted cash flow methodology, or a combination of both when necessary. Common inputs for all classes of fixed maturity securities include prices from recently executed transactions of similar securities, marketplace quotes, benchmark yields, spreads off benchmark yields, interest rates and U.S. Treasury or swap curves. Specifically for asset-backed securities, key inputs include prepayment and default projections based on past performance of the underlying collateral and current market data. Fixed maturity securities are primarily assigned to Level 3 in cases where broker/dealer quotes are significant inputs to the valuation, and there is a lack of transparency as to whether these quotes are based on information that is observable in the marketplace. Level 3 securities also include private placement debt securities whose fair value is determined using internal models with inputs that are not market observable. Equity Securities Level 1 equity securities include publicly traded securities valued using quoted market prices. Level 2 securities are primarily non-redeemable preferred stocks and common stocks valued using pricing for similar securities, recently executed transactions and other pricing models utilizing market observable inputs. Level 3 securities are primarily priced using broker/dealer quotes and internal models with inputs that are not market observable. Other Invested Assets The fair value of Federal Home Loan Bank of Chicago (FHLBC) stock is equal to par because it can only be redeemed by the FHLBC at par or sold to another member of the FHLBC at par and is classified as Level 2. As of March 31, 2017 and December 31, 2016, there were approximately $35 million and $31 million respectively of overseas deposits within other invested assets, which can be redeemed at net asset value in 90 days or less. Overseas deposits are excluded from the fair value hierarchy, because their fair value is recorded using the net asset value per share (or equivalent) practical expedient. Short Term Investments Securities that are actively traded or have quoted prices are classified as Level 1. These securities include money market funds and treasury bills. Level 2 primarily includes commercial paper, for which all inputs are market observable. Fixed maturity securities purchased within one year of maturity are classified consistent with fixed maturity securities discussed above. Short term investments as presented in the tables above differ from the amounts presented on the Condensed Consolidated Balance Sheets because certain short term investments, such as time deposits, are not measured at fair value. Life Settlement Contracts The Company accounts for its investment in life settlement contracts using the fair value method. Historically, the fair value of life settlement contracts was determined as the present value of the anticipated death benefits less anticipated premium payments based on contract terms that are distinct for each insured, as well as the Company's own assumptions for mortality, premium expense and the rate of return that a buyer would require on the contracts. The entire portfolio of life settlement contracts, which is included within the Life and Group Non-Core segment, was determined to be held for sale as of December 31, 2016 as the Company reached an agreement on terms to sell the portfolio. As such, the Company adjusted the fair value to the estimated sales proceeds less cost to sell. The definitive Purchase and Sale Agreement (PSA) related to the portfolio was executed on March 7, 2017 (sale date). In connection therewith, the life settlement contracts and related sale proceeds were placed in escrow until the buyer is recognized as the owner and beneficiary of each individual life settlement contract by the life insurance company that issued the policy. A number of contracts have been released from escrow as of March 31, 2017. The Company derecognized these contracts and recorded the consideration, including a note receivable, which is payable over three years and is carried at amortized cost less any valuation allowance. The note receivable is included within Other assets on the Condensed Consolidated Balance Sheets and interest income is accreted to the principal balance of the note receivable. The remaining contracts still in escrow have not been derecognized and were measured at the fair value per the PSA. The fair value of the Company's investments in life settlement contracts were $46 million and $58 million as of March 31, 2017 and December 31, 2016, and are included in Other assets on the Condensed Consolidated Balance Sheets. Despite the sale, the contracts have been classified as Level 3 as there is not an active market for life settlement contracts. The cash receipts and payments related to the life settlement contracts prior to the sale date are included in Cash Flows from operating activities on the Condensed Consolidated Statements of Cash Flows. Cash receipts related to the sale of the life settlement contracts, as well as principal payments on the note receivable, are included in Cash Flows from investing activities. Derivative Financial Investments Level 2 securities primarily include the embedded derivative on the funds withheld liability. The embedded derivative on funds withheld liability is valued using the change in fair value of the assets supporting the funds withheld liability, which are fixed maturity securities valued with observable inputs. Significant Unobservable Inputs The following tables present quantitative information about the significant unobservable inputs utilized by the Company in the fair value measurements of Level 3 assets. Valuations for assets and liabilities not presented in the tables below are primarily based on broker/dealer quotes for which there is a lack of transparency as to inputs used to develop the valuations. The quantitative detail of these unobservable inputs is neither provided nor reasonably available to the Company. The valuation of life settlement contracts was based on the terms of the sale of the contracts to a third party, therefore, the contracts are not included in the table below.
For fixed maturity securities, an increase to the credit spread assumptions would result in a lower fair value measurement. Financial Assets and Liabilities Not Measured at Fair Value The carrying amount and estimated fair value of the Company's financial assets and liabilities which are not measured at fair value on the Condensed Consolidated Balance Sheets are presented in the following tables.
The following methods and assumptions were used to estimate the fair value of these financial assets and liabilities. The fair values of mortgage loans were based on the present value of the expected future cash flows discounted at the current interest rate for origination of similar quality loans, adjusted for specific loan risk. The fair value of the note receivable was based on the present value of the expected future cash flows discounted at the current interest rate for origination of similar notes, adjusted for specific credit risk. The Company's senior notes and debentures were valued based on observable market prices. The fair value for other debt was estimated using discounted cash flows based on current incremental borrowing rates for similar borrowing arrangements. The carrying amounts reported on the Condensed Consolidated Balance Sheets for Cash, Short term investments not carried at fair value, Accrued investment income and certain Other assets and Other liabilities approximate fair value due to the short term nature of these items. These assets and liabilities are not listed in the tables above. |
Claim and Claim Adjustment Expense Reserves |
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Liability for Claims and Claims Adjustment Expense [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Claim and Claim Adjustment Expense Reserves | Claim and Claim Adjustment Expense Reserves The Company's property and casualty insurance claim and claim adjustment expense reserves represent the estimated amounts necessary to resolve all outstanding claims, including incurred but not reported (IBNR) claims as of the reporting date. The Company's reserve projections are based primarily on detailed analysis of the facts in each case, the Company's experience with similar cases and various historical development patterns. Consideration is given to such historical patterns as claim reserving trends and settlement practices, loss payments, pending levels of unpaid claims and product mix, as well as court decisions, economic conditions, including inflation, and public attitudes. All of these factors can affect the estimation of claim and claim adjustment expense reserves. Establishing claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves for catastrophic events that have occurred, is an estimation process. Many factors can ultimately affect the final settlement of a claim and, therefore, the necessary reserve. Changes in the law, results of litigation, medical costs, the cost of repair materials and labor rates can all affect ultimate claim costs. In addition, time can be a critical part of reserving determinations since the longer the span between the incidence of a loss and the payment or settlement of the claim, the more variable the ultimate settlement amount can be. Accordingly, short-tail claims, such as property damage claims, tend to be more reasonably estimable than long-tail claims, such as workers' compensation, general liability and professional liability claims. Adjustments to prior year reserve estimates, if necessary, are reflected in the results of operations in the period that the need for such adjustments is determined. There can be no assurance that the Company's ultimate cost for insurance losses will not exceed current estimates. Catastrophes are an inherent risk of the property and casualty insurance business and have contributed to material period-to-period fluctuations in the Company's results of operations and/or equity. The Company reported catastrophe losses, net of reinsurance, of $34 million and $36 million for three months ended March 31, 2017 and 2016. Catastrophe losses in the first quarter of 2017 related primarily to U.S. weather-related events. Liability for Unpaid Claim and Claim Adjustment Expenses Rollforward The following table presents a reconciliation between beginning and ending claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves of the Life & Group Non-Core segment.
Net Prior Year Development Changes in estimates of claim and allocated claim adjustment expense reserves and premium accruals, net of reinsurance, for prior years are defined as net prior year development. These changes can be favorable or unfavorable. The following tables and discussion present the net prior year development recorded for Specialty, Commercial, International and Corporate & Other Non-Core segments.
Premium development can occur in the property and casualty business when there is a change in exposure on auditable policies or when premium accruals differ from processed premium. Audits on policies usually occur in a period after the expiration date of the policy. See further information on the premium development in the Commercial segment for the three months ended March 31, 2017 within Note F. Specialty The following table presents further detail of the net prior year claim and allocated claim adjustment expense reserve development (development) recorded for the Specialty segment.
2017 Favorable development in other professional liability and management liability was primarily due to favorable settlements on closed claims and lower than expected frequency of large losses related to professional liability in accident years 2011 through 2016. 2016 Favorable development for medical professional liability was due to lower than expected severity in accident years 2011 and prior. This was partially offset by unfavorable development in accident years 2012 and 2013 related to higher than expected large loss emergence and higher than expected severity in accident years 2014 and 2015. Favorable development in other professional liability and management liability was primarily related to favorable settlements on claims in accident years 2011 through 2013. This was partially offset by unfavorable development related to a specific financial institutions claim in accident year 2014 and continued deterioration on claims in accident year 2009 related to the credit crisis. Favorable development for other coverages was primarily due to better than expected claim frequency in property coverages provided to Specialty customers in accident year 2015. Commercial The following table presents further detail of the development recorded for the Commercial segment.
2017 Favorable development for commercial auto was primarily due to lower than expected severity in accident years 2013 through 2015. 2016 Favorable development for commercial auto was primarily due to favorable settlements on claims in accident years 2011 through 2014. Favorable development for general liability was primarily due to favorable settlements on claims in accident years 2013 and 2014. Unfavorable development for property and other was primarily due to higher than expected severity from a 2015 catastrophe event. International The following table presents further detail of the development recorded for the International segment.
Reserves In 2010, Continental Casualty Company (CCC) together with several of the Company’s insurance subsidiaries completed a transaction with National Indemnity Company (NICO), a subsidiary of Berkshire Hathaway Inc., under which substantially all of the Company’s legacy A&EP liabilities were ceded to NICO through a Loss Portfolio Transfer (LPT). At the effective date of the transaction, the Company ceded approximately $1.6 billion of net A&EP claim and allocated claim adjustment expense reserves to NICO under a retroactive reinsurance agreement with an aggregate limit of $4 billion. The $1.6 billion of claim and allocated claim adjustment expense reserves ceded to NICO was net of $1.2 billion of ceded claim and allocated claim adjustment expense reserves under existing third-party reinsurance contracts. The NICO LPT aggregate reinsurance limit also covers credit risk on the existing third-party reinsurance related to these liabilities. The Company paid NICO a reinsurance premium of $2 billion and transferred to NICO billed third-party reinsurance receivables related to A&EP claims with a net book value of $215 million, resulting in total consideration of $2.2 billion. Subsequent to the effective date of the LPT, the Company recognized adverse prior year development on its A&EP reserves which resulted in additional amounts ceded under the LPT. As a result, the cumulative amounts ceded under the LPT exceeded the $2.2 billion consideration paid, resulting in the NICO LPT moving into a gain position, requiring retroactive reinsurance accounting. Under retroactive reinsurance accounting, this gain is deferred and only recognized in earnings in proportion to actual paid recoveries under the LPT. Over the life of the contract, there is no economic impact as long as any additional losses incurred are within the limit of the LPT. In a period in which the Company recognizes a change in the estimate of A&EP reserves that increases the amounts ceded under the LPT, the proportion of actual paid recoveries to total ceded losses is impacted and the change in the deferred gain is recognized in earnings as if the revised estimate of ceded losses was available at the effective date of the LPT. The effect of the deferred retroactive reinsurance benefit is recorded in Insurance claims and policyholders' benefits in the Condensed Consolidated Statement of Operations. The following table presents the impact of the Loss Portfolio Transfer on the Condensed Consolidated Statements of Operations.
Based upon the Company's annual A&EP reserve review, net unfavorable prior year development of $60 million and $200 million was recognized before consideration of cessions to the LPT for the three months ended March 31, 2017 and 2016. The 2017 unfavorable development was driven by modestly higher anticipated payouts on claims from known sources of asbestos exposure. The 2016 unfavorable development was driven by an increase in anticipated future expenses associated with determination of coverage, higher anticipated payouts associated with a limited number of historical accounts having significant asbestos exposures and higher than expected severity on pollution claims. While this unfavorable development was ceded to NICO under the LPT, the Company’s Net income in both periods was negatively affected due to the application of retroactive reinsurance accounting. As of March 31, 2017 and December 31, 2016, the cumulative amounts ceded under the LPT were $2.9 billion and $2.8 billion. The unrecognized deferred retroactive reinsurance benefit was $354 million and $334 million as of March 31, 2017 and December 31, 2016. NICO established a collateral trust account as security for its obligations to the Company. The fair value of the collateral trust account was $2.7 billion and $2.8 billion as of March 31, 2017 and December 31, 2016. In addition, Berkshire Hathaway Inc. guaranteed the payment obligations of NICO up to the aggregate reinsurance limit as well as certain of NICO’s performance obligations under the trust agreement. NICO is responsible for claims handling and billing and collection from third-party reinsurers related to the Company’s A&EP claims. |
Legal Proceedings and Guarantees |
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Mar. 31, 2017 | |
Legal Proceedings, Commitments and Contingencies, and Guarantees [Abstract] | |
Legal Proceedings and Guarantees | Legal Proceedings and Guarantees CNA 401(k) Plus Plan Litigation In September 2016, a class action lawsuit was filed against CCC, Continental Assurance Company (CAC), CNAF, the Investment Committee of the CNA 401(k) Plus Plan, The Northern Trust Company and John Does 1-10 (collectively Defendants) over the CNA 401(k) Plus Plan. The complaint alleges that Defendants breached fiduciary duties to the CNA 401(k) Plus Plan and caused prohibited transactions in violation of the Employee Retirement Income Security Act of 1974 when the CNA 401(k) Plus Plan's Fixed Income Fund’s annuity contract with CAC was canceled. The plaintiff alleges he and a proposed class of the CNA 401(k) Plus Plan participants who had invested in the Fixed Income Fund suffered lower returns in their CNA 401(k) Plus Plan investments as a consequence of these alleged violations and seeks relief on behalf of the putative class. This litigation is in its preliminary stages, and as of yet no class has been certified. CCC and the other defendants are contesting the case and management currently is unable to predict the final outcome or the impact on the Company’s financial condition, results of operations, or cash flows. As of March 31, 2017, the likelihood of loss is reasonably possible, but the amount of loss, if any, cannot be estimated at this stage of the litigation. Small Business Premium Rate Adjustment The Company identified rating errors related to its multi-peril package product within its Small Business unit in the fourth quarter of 2016 and recorded a charge which reduced Earned premium by $16 million in anticipation of voluntarily issuing premium refunds related to affected policies written from December 1, 2015. The Company notified state regulators and provided them with details regarding these anticipated voluntary premium refunds and other corrective actions related to the multi-peril package product. At that time, the Company also alerted regulators that it was reviewing other business lines to determine whether similar issues exist. In the first quarter of 2017, the Company concluded its review and determined that there were also rating errors related to Small Business workers' compensation policies. Accordingly, the Company recorded a charge which reduced Earned premium by $42 million in anticipation of voluntarily issuing premium refunds related to affected policies written from March 1, 2014. The Company is currently in dialogue with state regulators regarding this matter. The estimated refund liability for the multi-peril product and workers' compensations policies as of March 31, 2017 was $36 million and $50 million, respectively. In the first quarter of 2017, the Company also recorded a $5 million liability for interest due to policyholders on the aggregate refund amounts. Any fines or penalties related to the foregoing are reasonably possible, but are not expected to be material to the Company's Condensed Consolidated Financial Statements. The amount of the refund and corresponding liability will continue to increase until required changes to the automated rating processes are fully implemented. The changes are expected to be implemented by the end of May for the multi-peril product and by the end of September for workers' compensation policies. Accordingly, subsequent to the periods discussed in the preceding paragraphs, written and earned premium for the subject product and policy lines are reported net of any impact from the premium rate adjustments. Other Litigation The Company is a party to other routine litigation incidental to its business, which, based on the facts and circumstances currently known, is not material to the Condensed Consolidated Financial Statements. Guarantees As of March 31, 2017 and December 31, 2016, the Company had recorded liabilities of approximately $5 million related to guarantee and indemnification agreements. Management believes that it is not likely that any future indemnity claims will be significantly greater than the amounts recorded. In the course of selling business entities and assets to third parties, the Company agreed to guarantee the performance of certain obligations of previously owned subsidiaries and to indemnify purchasers for losses arising out of breaches of representations and warranties with respect to the business entities or assets sold, including, in certain cases, losses arising from undisclosed liabilities or certain named litigation. Such guarantee and indemnification agreements in effect for sales of business entities, assets and third-party loans may include provisions that survive indefinitely. As of March 31, 2017, the aggregate amount related to quantifiable guarantees was $434 million and the aggregate amount related to quantifiable indemnification agreements was $254 million. In certain cases, should the Company be required to make payments under any such guarantee, it would have the right to seek reimbursement from an affiliate of a previously owned subsidiary. 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 March 31, 2017, 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. Certain provisions of the indemnification agreements survive indefinitely, while others survive until the applicable statutes of limitation expire, or until the agreed-upon contract terms expire. The Company also provided guarantees, if the primary obligor fails to perform, to holders of structured settlement annuities provided by a previously owned subsidiary. As of March 31, 2017, the potential amount of future payments the Company could be required to pay under these guarantees was approximately $1.8 billion, which will be paid over the lifetime of the annuitants. The Company does not believe any payment is likely under these guarantees, as the Company is the beneficiary of a trust that must be maintained at a level that approximates the discounted reserves for these annuities. |
Benefit Plans |
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Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Benefit Plans | Benefit Plans The components of net periodic cost (benefit) are presented in the following table.
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Accumulated Other Comprehensive Income (Loss) by Component |
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Accumulated Other Comprehensive Income (Loss) by Component | Accumulated Other Comprehensive Income (Loss) by Component The tables below display the changes in Accumulated other comprehensive income (loss) by component.
Amounts reclassified from Accumulated other comprehensive income (loss) shown above are reported in Net income (loss) as follows:
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Business Segments |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Segments | Business Segments The Company's core property and casualty commercial insurance operations are managed and reported in three business segments: Specialty, Commercial and International. The Company's non-core operations are managed and reported 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 to the Consolidated Financial Statements within CNAF's Annual Report on Form 10-K for the year ended December 31, 2016. 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 (loss), 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 i) net realized investment gains (losses) ii) income or loss from discontinued operations and iii) any cumulative effects of changes in accounting guidance. The calculation of net operating income excludes net realized investment gains (losses) because net realized investment gains (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.
The following table presents revenue by line of business for each reportable segment. Revenues are comprised of operating revenues and net realized investment gains and losses.
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General (Policies) |
3 Months Ended |
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Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Consolidation | The accompanying Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Intercompany amounts have been eliminated. Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, including certain financial statement notes, is not required for interim reporting purposes and has been condensed or omitted. These statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in CNAF's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2016, including the summary of significant accounting policies in Note A. |
Use of Estimates | The preparation of Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. |
Recently Adopted Accounting Standards Updates and Accounting Standards Pending Adoption | Recently Adopted Accounting Standards Updates (ASU) In March 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The updated accounting guidance simplifies the accounting for share-based payment award transactions, including income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. As of January 1, 2017, the Company adopted the updated accounting guidance and began recognizing excess tax benefits or deficiencies on vesting or settlement of awards as an income tax benefit or expense within net income, instead of additional paid-in capital as required under previous guidance. The related cash flows are now classified within operating activities. As a result of this change, excess tax benefits are no longer included in assumed proceeds under the treasury stock method of calculating earnings per share. The impact of the accounting change resulted in a decrease of $3 million to income tax expense for the three months ended March 31, 2017. Accounting Standards Pending Adoption In May 2014, the FASB issued ASU No. 2014-09, Revenue Recognition (Topic 606): Revenue from Contracts with Customers. The standard excludes from its scope the accounting for insurance contracts, financial instruments, and certain other agreements that are governed under other GAAP guidance. The updated guidance requires an entity to recognize revenue as performance obligations are met, in an amount that reflects the consideration the entity is entitled to receive for the transfer of the promised goods or services. The standard is effective for interim and annual reporting periods beginning after December 15, 2017 and may be applied retrospectively or through a cumulative effect adjustment to retained earnings at the date of adoption. As insurance contracts are out of scope, the Company anticipates the primary change will be to revenue recognition for certain of our warranty products and services. The Company has not made a decision on the method of adoption and is currently evaluating the effect the updated guidance will have on the Company’s financial statements, but we do not currently believe ASU 2014-09 will have a material effect on the Company's results of operations or financial position. In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The updated accounting guidance requires changes to the reporting model for financial instruments. The guidance is effective for interim and annual periods beginning after December 15, 2017. The Company is currently evaluating the effect the guidance will have on the Company's financial statements, and expects the primary change for the Company to be the requirement for equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842): Accounting for Leases. The updated accounting guidance requires lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by all leases, including those historically accounted for as operating leases. The guidance is effective for interim and annual periods beginning after December 15, 2018. The Company is currently evaluating the effect the updated guidance will have on the Company's financial statements. It is expected that assets and liabilities will increase based on the present value of remaining lease payments for leases in place at the adoption date; however, this is not expected to be material to the Company's results of operations or financial position. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The updated accounting guidance requires changes to the recognition of credit losses on financial instruments not accounted for at fair value through net income. The guidance is effective for interim and annual periods beginning after December 15, 2019. The Company is currently evaluating the effect the guidance will have on the Company's financial statements, but expects the primary changes to be the use of the expected credit loss model for its mortgage loan portfolio and reinsurance receivables and the presentation of credit losses within the available-for-sale fixed maturities portfolio through an allowance method rather than as a direct write-down. The expected credit loss model will require a financial asset to be presented at the net amount expected to be collected. The allowance method for available-for-sale debt securities will allow the Company to record reversals of credit losses if the estimate of credit losses declines. In March 2017, the FASB issued ASU No. 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The updated accounting guidance requires changes to the presentation of the components of net periodic benefit cost on the income statement by requiring service cost to be presented with other employee compensation costs and other components of net periodic pension cost to be presented outside of any subtotal of operating income. The ASU also stipulates that only the service cost component of net benefit cost is eligible for capitalization. The guidance is effective for interim and annual periods beginning after December 15, 2017. The Company is currently evaluating the effect the guidance will have on the Company's financial statements. |
Investments (Tables) |
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | The significant components of Net investment income are presented in the following table.
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Net realized investment gains (losses) | Net realized investment gains (losses) are presented in the following table.
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Components of net other than temporary impairment losses recognized in earnings by asset type | The components of Other-than-temporary impairment (OTTI) losses recognized in earnings by asset type are presented in the following table.
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Summary of fixed maturity and equity securities | The following tables present a summary of fixed maturity and equity securities.
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Securities in a gross unrealized loss position | The following tables present the estimated fair value and gross unrealized losses of fixed maturity and equity securities in a gross unrealized loss position by the length of time in which the securities have continuously been in that position.
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Activity related to the pretax fixed maturity credit loss component reflected within retained earnings for securities still held for which a portion of an OTTI loss was recognized in OCI | The following table presents the activity related to the pretax credit loss component reflected in Retained earnings on fixed maturity securities still held as of March 31, 2017 and 2016 for which a portion of an OTTI loss was recognized in Other comprehensive income (loss).
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Contractual maturity | The following table presents available-for-sale fixed maturity securities by contractual maturity.
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Fair Value (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets and liabilities measured at fair value on a recurring basis | Assets and liabilities measured at fair value on a recurring basis are presented in the following tables.
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Table of reconciliation for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs | The tables below present a reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).
*Net realized and unrealized gains and losses from Level 3 securities and derivatives are reported in Net income (loss) as follows:
(1) Unrealized gains and losses are reported within AOCI. |
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Qualitative information about assets and liabilities | *Net realized and unrealized gains and losses from Level 3 securities and derivatives are reported in Net income (loss) as follows:
(1) Unrealized gains and losses are reported within AOCI. |
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Quantitative information about significant unobservable inputs in the fair value measurement of level 3 assets | The following tables present quantitative information about the significant unobservable inputs utilized by the Company in the fair value measurements of Level 3 assets. Valuations for assets and liabilities not presented in the tables below are primarily based on broker/dealer quotes for which there is a lack of transparency as to inputs used to develop the valuations. The quantitative detail of these unobservable inputs is neither provided nor reasonably available to the Company. The valuation of life settlement contracts was based on the terms of the sale of the contracts to a third party, therefore, the contracts are not included in the table below.
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Carrying amount and estimated fair value of financial instrument assets and liabilities not measured at fair value | The carrying amount and estimated fair value of the Company's financial assets and liabilities which are not measured at fair value on the Condensed Consolidated Balance Sheets are presented in the following tables.
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Claim and Claim Adjustment Expense Reserves (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liability for Claims and Claims Adjustment Expense [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of liability for unpaid claims and claims adjustment expense | The following table presents a reconciliation between beginning and ending claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves of the Life & Group Non-Core segment.
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Net prior year development | The following tables and discussion present the net prior year development recorded for Specialty, Commercial, International and Corporate & Other Non-Core segments.
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Specialty | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liability for Claims and Claims Adjustment Expense [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net prior year claim and allocated claim adjustment expense reserve development | The following table presents further detail of the net prior year claim and allocated claim adjustment expense reserve development (development) recorded for the Specialty segment.
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Commercial | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liability for Claims and Claims Adjustment Expense [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net prior year claim and allocated claim adjustment expense reserve development | The following table presents further detail of the development recorded for the Commercial segment.
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International | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liability for Claims and Claims Adjustment Expense [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net prior year claim and allocated claim adjustment expense reserve development | The following table presents further detail of the development recorded for the International segment.
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CNAF Consolidated | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liability for Claims and Claims Adjustment Expense [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impact of loss portfolio transfer on the consolidated statement of operations | The following table presents the impact of the Loss Portfolio Transfer on the Condensed Consolidated Statements of Operations.
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Benefit Plans (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of net periodic cost (benefit) | The components of net periodic cost (benefit) are presented in the following table.
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Accumulated Other Comprehensive Income (Loss) by Component (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated other comprehensive income (loss) by component | The tables below display the changes in Accumulated other comprehensive income (loss) by component.
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Reclassification out of accumulated other comprehensive income | Amounts reclassified from Accumulated other comprehensive income (loss) shown above are reported in Net income (loss) as follows:
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Business Segments (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Significant components of the Company's continuing operations and selected balance sheet items | The Company's results of operations and selected balance sheet items by segment are presented in the following tables.
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Revenues by line of business | The following table presents revenue by line of business for each reportable segment. Revenues are comprised of operating revenues and net realized investment gains and losses.
|
General - Narrative (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2017
USD ($)
| |
Noncontrolling Interest [Line Items] | |
Employee service share-based compensation, tax benefit realized from exercise of stock options | $ 3 |
CNAF Consolidated | Loews | |
Noncontrolling Interest [Line Items] | |
Ownership percentage of outstanding common stock of CNAF | 90.00% |
Earnings Per Share - Narrative (Details) - shares shares in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Earnings Per Share [Abstract] | ||
Incremental common shares attributable to dilutive effect of share-based payment arrangements | 974 | 542 |
Antidilutive securities excluded from computation of earnings per share, amount | 148 | 180 |
Investments - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2017 |
Dec. 31, 2016 |
|
Investments [Abstract] | |||
Net realized investment losses | $ 8 | ||
Redemption senior notes | $ 350 | ||
Reduction of net unrealized gains on investments included in AOCI due to shadow adjustments | $ 1,060 | $ 1,014 | |
Embedded derivative notional value | 172 | 174 | |
Embedded derivative fair value | 2 | $ 3 | |
Future capital call commitments for limited partnership investments | 394 | ||
Mortgage loan commitments | 46 | ||
Commitments to purchase or fund privately placed debt securities | 217 | ||
Commitments to sell various privately placed debt securities | $ 196 |
Investments - Net investment income (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Net Investment Income [Line Items] | ||
Gross investment income | $ 559 | $ 449 |
Investment expense | (14) | (14) |
Net investment income | 545 | 435 |
Fixed maturity securities | ||
Net Investment Income [Line Items] | ||
Gross investment income | 455 | 446 |
Equity securities | ||
Net Investment Income [Line Items] | ||
Gross investment income | 1 | 3 |
Limited partnership investments | ||
Net Investment Income [Line Items] | ||
Gross investment income | 90 | (14) |
Mortgage loans | ||
Net Investment Income [Line Items] | ||
Gross investment income | 7 | 9 |
Short term investments | ||
Net Investment Income [Line Items] | ||
Gross investment income | 3 | 3 |
Trading portfolio | ||
Net Investment Income [Line Items] | ||
Gross investment income | 2 | 2 |
Other | ||
Net Investment Income [Line Items] | ||
Gross investment income | $ 1 | $ 0 |
Investments - Net realized investment gains (losses) (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Schedule of Available-for-sale Securities [Line Items] | ||
Net realized investment gains (losses) on fixed maturity securities | $ 36 | $ (36) |
Fixed maturity securities | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Gross realized gains | 49 | 45 |
Gross realized losses | (17) | (62) |
Net realized investment gains (losses) on fixed maturity securities | 32 | (17) |
Equity securities | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Gross realized gains | 0 | 0 |
Gross realized losses | 0 | (5) |
Net realized investment gains (losses) on fixed maturity securities | 0 | (5) |
Derivatives | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Net realized investment gains (losses) on fixed maturity securities | 1 | (7) |
Short term investments and other | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Net realized investment gains (losses) on fixed maturity securities | $ 3 | $ (7) |
Investments - Activity related to the pretax fixed maturity credit loss component reflected within retained earnings for securities still held for which a portion of an OTTI loss was recognized in OCI (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Roll Forward] | ||
Beginning balance of credit losses on fixed maturity securities | $ 36 | $ 53 |
Reductions for securities sold during the period | (4) | (5) |
Ending balance of credit losses on fixed maturity securities | $ 32 | $ 48 |
Investments - Contractual maturity (Details) - USD ($) $ in Millions |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Available-for-sale Securities, Debt Maturities, Single Maturity Date, Amortized Cost Basis [Abstract] | ||
Due in one year or less, cost or amortized cost | $ 1,655 | $ 1,779 |
Due after one year through five years, cost or amortized cost | 7,539 | 7,566 |
Due after five years through ten years, cost or amortized cost | 15,645 | 15,892 |
Due after ten years, cost or amortized cost | 13,410 | 13,112 |
Total Amortized Cost Basis | 38,249 | 38,349 |
Available-for-sale Securities, Debt Maturities, Single Maturity Date [Abstract] | ||
Due in one year or less, estimated fair value | 1,701 | 1,828 |
Due after one year through five years, estimated fair value | 7,918 | 7,955 |
Due after five years through ten years, estimated fair value | 16,176 | 16,332 |
Due after ten years, estimated fair value | 15,165 | 14,778 |
Total Estimated Fair Value | $ 40,960 | $ 40,893 |
Fair Value - Narrative (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Dec. 31, 2016 |
|
Fair Value Disclosures [Abstract] | |||
Fair value, assets, level 2 to level 1, transfers | $ 0 | $ 0 | |
Fair value, assets, level 1 to level 2, transfers | 0 | $ 0 | |
Other invested assets overseas deposit | 35,000,000 | $ 31,000,000 | |
Life settlement contracts, fair value | $ 46,000,000 | $ 58,000,000 |
Fair Value - Quantitative information about significant unobservable inputs in the fair value measurement of level 3 assets (Details) - Fixed maturity securities - Income Approach Valuation Technique - USD ($) $ in Millions |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||
Estimated Fair Value (In millions) | $ 122 | $ 106 |
Minimum | ||
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||
Credit spread | 2.00% | 2.00% |
Maximum | ||
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||
Credit spread | 40.00% | 40.00% |
Weighted Average | ||
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||
Credit spread | 4.00% | 4.00% |
Fair Value - Carrying amount and estimated fair value of financial instrument assets and liabilities which are not measured at fair value (Details) - USD ($) $ in Millions |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Assets | ||
Mortgage loans | $ 611 | $ 591 |
Liabilities | ||
Short term debt | 150 | 0 |
Long term debt | 2,560 | 2,710 |
Carrying Amount | ||
Assets | ||
Mortgage loans | 611 | 591 |
Note receivable | 10 | |
Liabilities | ||
Short term debt | 150 | |
Long term debt | 2,560 | 2,710 |
Estimated Fair Value | ||
Assets | ||
Mortgage loans | 616 | 594 |
Note receivable | 10 | |
Liabilities | ||
Short term debt | 156 | |
Long term debt | 2,811 | 2,952 |
Level 1 | Estimated Fair Value | ||
Assets | ||
Mortgage loans | 0 | 0 |
Note receivable | 0 | |
Liabilities | ||
Short term debt | 0 | |
Long term debt | 0 | 0 |
Level 2 | Estimated Fair Value | ||
Assets | ||
Mortgage loans | 0 | 0 |
Note receivable | 0 | |
Liabilities | ||
Short term debt | 156 | |
Long term debt | 2,811 | 2,952 |
Level 3 | Estimated Fair Value | ||
Assets | ||
Mortgage loans | 616 | 594 |
Note receivable | 10 | |
Liabilities | ||
Short term debt | 0 | |
Long term debt | $ 0 | $ 0 |
Claim and Claim Adjustment Expense Reserves - Reconciliation of claim and claim adjustment expense reserves (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward] | ||
Gross, beginning of year | $ 22,343 | $ 22,663 |
Ceded, beginning of year | 4,094 | 4,087 |
Net reserves, beginning of year | 18,249 | 18,576 |
Net incurred claim and claim adjustment expenses: | ||
Provision for insured events of current year | 1,207 | 1,224 |
Decrease in provision for insured events of prior years | (82) | (45) |
Amortization of discount | 48 | 48 |
Total net incurred | 1,173 | 1,227 |
Net payments attributable to: | ||
Current year events | (68) | (76) |
Prior year events | (1,184) | (1,147) |
Total net payments | (1,252) | (1,223) |
Foreign currency translation adjustment and other | 14 | 39 |
Net reserves, end of period | 18,184 | 18,619 |
Ceded reserves, end of year | 4,076 | 4,399 |
Gross reserves, end of year | $ 22,260 | $ 23,018 |
Claim and Claim Adjustment Expense Reserves - Net prior year claim and allocated claim adjustment expense reserve development for Specialty segment (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Liability for Claims and Claims Adjustment Expense [Line Items] | ||
Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development | $ (57) | $ (52) |
Specialty | ||
Liability for Claims and Claims Adjustment Expense [Line Items] | ||
Medical Professional Liability | 1 | (7) |
Other Professional Liability and Management Liability | (32) | (9) |
Surety | 0 | 0 |
Warranty | 0 | 2 |
Other | 0 | (20) |
Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development | $ (31) | $ (34) |
Claim and Claim Adjustment Expense Reserves - Net prior year claim and allocated claim adjustment expense reserve development for Commercial segment (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Liability for Claims and Claims Adjustment Expense [Line Items] | ||
Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development | $ (57) | $ (52) |
Commercial | ||
Liability for Claims and Claims Adjustment Expense [Line Items] | ||
Commercial Auto | (26) | (15) |
General Liability | 0 | (15) |
Workers' Compensation | 0 | 4 |
Property and Other | 2 | 12 |
Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development | $ (24) | $ (14) |
Claim and Claim Adjustment Expense Reserves - Net prior year claim and allocated claim adjustment expense reserve development for International segment (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Liability for Claims and Claims Adjustment Expense [Line Items] | ||
Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development | $ (57) | $ (52) |
International | ||
Liability for Claims and Claims Adjustment Expense [Line Items] | ||
Medical Professional Liability | 0 | 0 |
Medical Professional Liability | (1) | (1) |
Other Professional Liability | 0 | 0 |
Liability | 1 | (4) |
Other | (2) | 1 |
Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development | $ (2) | $ (4) |
Claim and Claim Adjustment Expense Reserves - Impact of Loss Portfolio Transfer on the Consolidated Statement of Operations (Details) - Loss Portfolio Transfer - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Liability for Claims and Claims Adjustment Expense [Line Items] | ||
Net A&EP adverse development before consideration of LPT | $ 60 | $ 200 |
Retroactive reinsurance benefit recognized | (40) | (73) |
Pretax impact of A&EP reserve development and the LPT | $ 20 | $ 127 |
Benefit Plans - Components of net periodic cost (benefit) (Details) - Pension Plans, Defined Benefit - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Defined Benefit Plan Disclosure [Line Items] | ||
Interest cost on projected benefit obligation | $ 26 | $ 28 |
Expected return on plan assets | (39) | (40) |
Amortization of net actuarial loss | 9 | 9 |
Settlement loss | 2 | 0 |
Net periodic pension cost (benefit) | $ (2) | $ (3) |
Business Segments - Narrative (Details) |
3 Months Ended |
---|---|
Mar. 31, 2017
segments
| |
Core Segments - Specialty, Commercial and International | |
Segment Reporting Information [Line Items] | |
Number of operating segments | 3 |
Non-Core Segments - Life & Group Non-Core and Corporate and Other Non-Core | |
Segment Reporting Information [Line Items] | |
Number of operating segments | 2 |
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