Business Segments

12 Months Ended

Dec. 31, 2019

Segment Reporting [Abstract]

Business Segments

Business Segments

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 management and professional liability and other coverages through property and casualty products and services using a network of brokers, independent agencies and managing general underwriters. Commercial works with a network of brokers and independent agents to market a broad range of property and casualty insurance products and services to small, middle-market and large businesses. The International segment underwrites property and casualty coverages on a global basis through two insurance companies based in the United Kingdom (U.K.) and Luxembourg, a branch operation in Canada as well as through our Lloyd's syndicate.

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 long term care business that is 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, Goodwill and Deferred non-insurance warranty acquisition expense and revenue 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 Net investment gains or losses are allocated primarily based on each segment's net carried insurance reserves, as adjusted. All significant intersegment income and expense have been eliminated. Income taxes have been allocated on the basis of the taxable income of the segments.

Approximately 8.8%, 9.3% and 7.7% of the Company's direct written premiums were derived from outside the United States for the years ended December 31, 2019, 2018 and 2017.

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.

The performance of the Company's insurance operations is monitored by management through core income (loss), which is derived from certain income statement amounts. 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 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 investment gains or losses because net investment gains or losses are generally driven by economic factors that are not reflective of our primary operations.

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

Year ended December 31, 2019	Specialty			Commercial			International			Life & Group			Corporate & Other
(In millions)																Eliminations			Total
Net written premiums	$	2,848		$	3,315		$	971		$	523		$	1		$	(2	)	$	7,656
Operating revenues
Net earned premiums	$	2,773		$	3,162		$	974		$	520		$	1		$	(2	)	$	7,428
Net investment income	556			654			63			820			25			—			2,118
Non-insurance warranty revenue	1,161			—			—			—			—			—			1,161
Other revenues	1			29			—			—			6			(5		)	31
Total operating revenues	4,491			3,845			1,037			1,340			32			(7		)	10,738
Claims, benefits and expenses
Net incurred claims and benefits	1,595			2,130			624			1,416			18			—			5,783
Policyholders’ dividends	5			18			—			—			—			—			23
Amortization of deferred acquisition costs	610			537			236			—			—			—			1,383
Non-insurance warranty expense	1,082			—			—			—			—			—			1,082
Other insurance related expenses	292			505			130			115			(2		)	(2		)	1,038
Other expenses	48			32			8			8			144			(5		)	235
Total claims, benefits and expenses	3,632			3,222			998			1,539			160			(7		)	9,544
Core income (loss) before income tax	859			623			39			(199		)	(128		)	—			1,194
Income tax (expense) benefit on core income (loss)	(188		)	(134		)	(9		)	90			26			—			(215		)
Core income (loss)	$	671		$	489		$	30		$	(109	)	$	(102	)	$	—		979
Net investment gains (losses)																			29
Income tax (expense) benefit on net investment gains (losses)																			(8		)
Net investment gains (losses), after tax																			21
Net income																			$	1,000

December 31, 2019
(In millions)
Reinsurance receivables	$	575	$	855	$	247	$	385	$	2,142	$	—	$	4,204
Insurance receivables	971		1,210		284		16		—		—		2,481
Deferred acquisition costs	311		257		94		—		—		—		662
Goodwill	117		—		30		—		—		—		147
Deferred non-insurance warranty acquisition expense	2,840		—		—		—		—		—		2,840
Insurance reserves
Claim and claim adjustment expenses	5,238		8,656		1,876		3,716		2,234		—		21,720
Unearned premiums	2,337		1,626		495		125		—		—		4,583
Future policy benefits	—		—		—		12,311		—		—		12,311
Deferred non-insurance warranty revenue	3,779		—		—		—		—		—		3,779

Year ended December 31, 2018	Specialty			Commercial			International			Life & Group			Corporate & Other
(In millions)																Eliminations			Total
Net written premiums	$	2,744		$	3,060		$	1,018		$	524		$	—		$	(1	)	$	7,345
Operating revenues
Net earned premiums	$	2,732		$	3,050		$	1,001		$	530		$	—		$	(1	)	$	7,312
Net investment income	439			500			57			801			20			—			1,817
Non-insurance warranty revenue	1,007			—			—			—			—			—			1,007
Other revenues	2			28			1			2			19			(2		)	50
Total operating revenues	4,180			3,578			1,059			1,333			39			(3		)	10,186
Claims, benefits and expenses
Net incurred claims and benefits	1,526			2,053			699			1,218			51			—			5,547
Policyholders’ dividends	5			20			—			—			—			—			25
Amortization of deferred acquisition costs	599			505			231			—			—			—			1,335
Non-insurance warranty expense	923			—			—			—			—			—			923
Other insurance related expenses	279			505			135			122			(1		)	(1		)	1,039
Other expenses	46			43			14			7			193			(2		)	301
Total claims, benefits and expenses	3,378			3,126			1,079			1,347			243			(3		)	9,170
Core income (loss) before income tax	802			452			(20		)	(14		)	(204		)	—			1,016
Income tax (expense) benefit on core income (loss)	(173		)	(95		)	1			57			39			—			(171		)
Core income (loss)	$	629		$	357		$	(19	)	$	43		$	(165	)	$	—		845
Net investment gains (losses)																			(52		)
Income tax (expense) benefit on net investment gains (losses)																			14
Net investment gains (losses), after tax																			(38		)
Net deferred tax asset remeasurement																			6
Net income																			$	813

December 31, 2018
(In millions)
Reinsurance receivables	$	649	$	795	$	250	$	414	$	2,347		$	—	$	4,455
Insurance receivables	947		1,277		284		9		(152		)	—		2,365
Deferred acquisition costs	308		230		95		—		—			—		633
Goodwill	117		—		29		—		—			—		146
Deferred non-insurance warranty acquisition expense	2,513		—		—		—		—			—		2,513
Insurance reserves
Claim and claim adjustment expenses	5,465		8,743		1,750		3,601		2,425			—		21,984
Unearned premiums	2,132		1,454		475		122		—			—		4,183
Future policy benefits	—		—		—		10,597		—			—		10,597
Deferred non-insurance warranty revenue	3,402		—		—		—		—			—		3,402

Year ended December 31, 2017	Specialty			Commercial						Life & Group			Corporate & Other
(In millions)							International									Eliminations			Total
Net written premiums	$	2,731		$	2,922		$	881		$	536		$	—		$	(1	)	$	7,069
Operating revenues
Net earned premiums	$	2,712		$	2,881		$	857		$	539		$	—		$	(1	)	$	6,988
Net investment income	522			658			52			782			20			—			2,034
Non-insurance warranty revenue	390			—			—			—			—			—			390
Other revenues	1			32			—			2			2			—			37
Total operating revenues	3,625			3,571			909			1,323			22			(1		)	9,449
Claims, benefits and expenses
Net incurred claims and benefits	1,533			1,930			575			1,269			(19		)	—			5,288
Policyholders’ dividends	4			18			—			—			—			—			22
Amortization of deferred acquisition costs	590			481			162			—			—			—			1,233
Non-insurance warranty expense	299			—			—			—			—			—			299
Other insurance related expenses	279			530			162			129			(1		)	(1		)	1,098
Other expenses	43			57			(7		)	7			192			—			292
Total claims, benefits and expenses	2,748			3,016			892			1,405			172			(1		)	8,232
Core income (loss) before income tax	877			555			17			(82		)	(150		)	—			1,217
Income tax (expense) benefit on core income (loss)	(295		)	(186		)	(9		)	132			60			—			(298		)
Core income (loss)	$	582		$	369		$	8		$	50		$	(90	)	$	—		919
Net investment gains (losses)																			93
Income tax (expense) benefit on net investment gains (losses)																			(30		)
Net investment gains (losses), after tax																			63
Net deferred tax asset remeasurement																			(83		)
Net income																			$	899

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

Years ended December 31
(In millions)	2019			2018			2017
Specialty
Management & Professional Liability	$	2,572		$	2,440		$	2,533
Surety	596			571			541
Warranty & Alternative Risks (1)	1,323			1,169			551
Specialty revenues	4,491			4,180			3,625
Commercial
Middle Market	2,249			2,045			1,965
Small Business	469			472			480
Other Commercial Insurance	1,127			1,061			1,126
Commercial revenues	3,845			3,578			3,571
International
Canada	277			255			224
Europe	363			363			326
Hardy	397			441			359
International revenues	1,037			1,059			909
Life & Group revenues	1,340			1,333			1,323
Corporate & Other revenues	32			39			22
Eliminations	(7		)	(3		)	(1		)
Total operating revenues	10,738			10,186			9,449
Net investment gains (losses)	29			(52		)	93
Total revenues	$	10,767		$	10,134		$	9,542

(1)

As of January 1, 2018, the Company adopted ASU 2014-09 Revenue Recognition (Topic 606): Revenue from Contracts with Customers. See Note A to the Consolidated Financial Statements for additional information.