Business Segments

12 Months Ended

Dec. 31, 2017

The Company's property and casualty commercial insurance operations are managed and reported in three business segments: Specialty, Commercial and International. These three segments are collectively referred to as Property & Casualty Operations. Specialty provides a broad array of professional, financial and specialty property and casualty products and services through a network of independent agents, brokers and managing general underwriters. Commercial includes property and casualty coverages sold to small businesses and middle market entities and organizations primarily through an independent agency distribution system. Commercial also includes commercial insurance and risk management products sold to large corporations primarily through insurance brokers. International provides management and professional liability coverages as well as a broad range of other property and casualty insurance products and services abroad through a network of brokers, independent agencies and managing general underwriters, as well as the Lloyd’s of London marketplace.

The Company's operations outside of Property & Casualty Operations are managed and reported in two segments: Life & Group and Corporate & Other. Life & Group primarily includes the results of the individual and group long term care businesses that are in run-off. Corporate & Other primarily includes certain corporate expenses, including interest on corporate debt, and the results of certain property and casualty business in run-off, including CNA Re and A&EP.

The accounting policies of the segments are the same as those described in Note A to the Consolidated Financial Statements. 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 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. Significant intersegment income and expense has been eliminated. Income taxes have been allocated on the basis of the taxable income of the segments.

Approximately 7.7%, 7.9% and 8.0% of the Company's direct written premiums were derived from outside the United States for the years ended December 31, 2017, 2016 and 2015.

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.

What was previously referred to as net operating income (loss) in our public disclosures is now referred to as core income (loss). With this terminology change, "Non-Core" was removed from the titles of the Life & Group and Corporate & Other segments to avoid confusion. The fourth quarter 2017 net deferred tax asset remeasurement was excluded from core income (loss) for the year ended December 31, 2017. Otherwise, there were no changes to the calculation of these measures. Core 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.

Core 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, iii) any cumulative effects of changes in accounting guidance and iv) deferred tax asset and liability remeasurement as a result of an enacted U.S. Federal tax rate change. The calculation of core income (loss) excludes net realized investment gains or losses because net realized investment gains or losses 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.



Year ended December 31, 2017	Specialty			Commercial			International			Life & Group			Corporate & Other
(In millions)	Specialty			Commercial			International			Life & Group			Corporate & Other			Eliminations			Total
Net written premiums	$	2,771		$	2,882		$	881		$	536		$	—		$	(1	)	$	7,069
Operating revenues
Net earned premiums	$	2,753		$	2,840		$	857		$	539		$	—		$	(1	)	$	6,988
Net investment income	538			642			52			782			20			—			2,034
Other revenues	392			31			—			2			2			—			427
Total operating revenues	3,683			3,513			909			1,323			22			(1		)	9,449
Claims, Benefits and Expenses
Net incurred claims and benefits	1,535			1,928			575			1,269			(19		)	—			5,288
Policyholders’ dividends	4			18			—			—			—			—			22
Amortization of deferred acquisition costs	596			475			162			—			—			—			1,233
Other insurance related expenses	286			523			162			129			(1		)	(1		)	1,098
Other expenses	342			57			(7		)	7			192			—			591
Total claims, benefits and expenses	2,763			3,001			892			1,405			172			(1		)	8,232
Core income (loss) before income tax	920			512			17			(82		)	(150		)	—			1,217
Income tax (expense) benefit on core income (loss)	(310		)	(171		)	(9		)	132			60			—			(298		)
Core income (loss)	$	610		$	341		$	8		$	50		$	(90	)	$	—		919
Net realized investment gains (losses)																			93
Income tax (expense) benefit on net realized investment gains (losses)																			(30		)
Net realized investment gains (losses), after tax																			63
Net deferred tax asset remeasurement																			(83		)
Net income																			$	899



December 31, 2017
(In millions)
Reinsurance receivables	$	678	$	647	$	212	$	438	$	2,315	$	—	$	4,290
Insurance receivables	984		1,088		254		8		2		—		2,336
Deferred acquisition costs	319		222		93		—		—		—		634
Goodwill	117		—		31		—		—		—		148
Insurance reserves
Claim and claim adjustment expenses	5,848		8,585		1,636		3,499		2,436		—		22,004
Unearned premiums	2,035		1,394		472		128		—		—		4,029
Future policy benefits	—		—		—		11,179		—		—		11,179



Year ended December 31, 2016	Specialty			Commercial			International			Life & Group			Corporate & Other
(In millions)	Specialty			Commercial			International			Life & Group			Corporate & Other			Eliminations			Total
Net written premiums	$	2,780		$	2,841		$	821		$	547		$	—		$	(1	)	$	6,988
Operating revenues
Net earned premiums	$	2,779		$	2,804		$	806		$	536		$	—		$	(1	)	$	6,924
Net investment income	516			638			51			767			16			—			1,988
Other revenues	362			32			—			(2		)	12			—			404
Total operating revenues	3,657			3,474			857			1,301			28			(1		)	9,316
Claims, Benefits and Expenses
Net incurred claims and benefits	1,467			1,927			492			1,286			98			—			5,270
Policyholders’ dividends	4			9			—			—			—			—			13
Amortization of deferred acquisition costs	591			470			174			—			—			—			1,235
Other insurance related expenses	301			560			133			132			(3		)	(1		)	1,122
Other expenses	312			36			24			8			209			—			589
Total claims, benefits and expenses	2,675			3,002			823			1,426			304			(1		)	8,229
Core income (loss) before income tax	982			472			34			(125		)	(276		)	—			1,087
Income tax (expense) benefit on core income (loss)	(332		)	(161		)	(13		)	145			98			—			(263		)
Core income (loss)	$	650		$	311		$	21		$	20		$	(178	)	$	—		824
Net realized investment gains (losses)																			50
Income tax (expense) benefit on net realized investment gains (losses)																			(15		)
Net realized investment gains (losses), after tax																			35
Net income																			$	859



December 31, 2016
(In millions)
Reinsurance receivables	$	760	$	621	$	131	$	462	$	2,479	$	—	$	4,453
Insurance receivables	982		1,021		233		17		2		—		2,255
Deferred acquisition costs	310		214		76		—		—		—		600
Goodwill	117		—		28		—		—		—		145
Insurance reserves
Claim and claim adjustment expenses	6,149		8,894		1,328		3,358		2,614		—		22,343
Unearned premiums	1,911		1,323		396		132		—		—		3,762
Future policy benefits	—		—		—		10,326		—		—		10,326



Year ended December 31, 2015	Specialty			Commercial						Life & Group			Corporate & Other
(In millions)	Specialty			Commercial			International			Life & Group			Corporate & Other			Eliminations			Total
Net written premiums	$	2,781		$	2,818		$	822		$	542		$	1		$	(2	)	$	6,962
Operating revenues
Net earned premiums	$	2,782		$	2,788		$	804		$	548		$	1		$	(2	)	$	6,921
Net investment income	474			593			52			704			17			—			1,840
Other revenues	356			37			(1		)	7			11			(3		)	407
Total operating revenues	3,612			3,418			855			1,259			29			(5		)	9,168
Claims, Benefits and Expenses
Net incurred claims and benefits	1,597			1,814			479			1,421			61			—			5,372
Policyholders’ dividends	4			8			—			—			—			—			12
Amortization of deferred acquisition costs	589			469			168			314			—			—			1,540
Other insurance related expenses	278			538			138			142			(1		)	(2		)	1,093
Other expenses	301			28			12			11			186			(3		)	535
Total claims, benefits and expenses	2,769			2,857			797			1,888			246			(5		)	8,552
Core income (loss) before income tax	843			561			58			(629		)	(217		)	—			616
Income tax (expense) benefit on core income (loss)	(283		)	(192		)	(21		)	315			80			—			(101		)
Core income (loss)	$	560		$	369		$	37		$	(314	)	$	(137	)	$	—		515
Net realized investment gains (losses)																			(67		)
Income tax (expense) benefit on net realized investment gains (losses)																			31
Net realized investment gains (losses), after tax																			(36		)
Net income																			$	479

The following table presents operating revenue by line of business for each reportable segment.



Years ended December 31
(In millions)	2017			2016			2015
Specialty
Management & Professional Liability	$	2,591		$	2,617		$	2,647
Surety	541			529			504
Warranty & Alternative Risks	551			511			461
Specialty revenues	3,683			3,657			3,612
Commercial
Middle Market	1,907			1,768			1,641
Small Business	480			582			621
Other Commercial Insurance	1,126			1,124			1,156
Commercial revenues	3,513			3,474			3,418
International
Canada	224			203			213
CNA Europe	326			314			311
Hardy	359			340			331
International revenues	909			857			855
Life & Group revenues	1,323			1,301			1,259
Corporate & Other revenues	22			28			29
Eliminations	(1		)	(1		)	(5		)
Total operating revenues	9,449			9,316			9,168
Net realized investment gains (losses) ⁽¹⁾	93			50			(67		)
Total revenues	$	9,542		$	9,366		$	9,101


(1)	2017 Net realized investment gains (losses) includes a $42 million loss on the early redemption of the Company's $350 million senior notes due November 2019.