Business Segments

9 Months Ended

Sep. 30, 2020

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. The Company's operations outside of Property & Casualty Operations are managed and reported in two segments: Life & Group and Corporate & Other.

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, 2019. 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.

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 net investment gains or losses and any cumulative effects of changes in accounting guidance. 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 necessarily reflective of our primary operations.

Nine months ended September 30, 2020	Specialty			Commercial			International		Life & Group			Corporate & Other
(In millions)															Eliminations			Total
Operating revenues
Net earned premiums	$	2,124		$	2,470		$	699	$	380		$	—		$	(1	)	$	5,672
Net investment income	315			389			44		622			10			—			1,380
Non-insurance warranty revenue	926			—			—		—			—			—			926
Other revenues	1			18			—		—			3			(3		)	19
Total operating revenues	3,366			2,877			743		1,002			13			(4		)	7,997
Claims, benefits and expenses
Net incurred claims and benefits	1,346			1,897			480		983			(40		)	—			4,666
Policyholders’ dividends	2			15			—		—			—			—			17
Amortization of deferred acquisition costs	462			441			143		—			—			—			1,046
Non-insurance warranty expense	859			—			—		—			—			—			859
Other insurance related expenses	208			378			106		79			(1		)	(1		)	769
Other expenses	37			26			3		6			108			(3		)	177
Total claims, benefits and expenses	2,914			2,757			732		1,068			67			(4		)	7,534
Core income (loss) before income tax	452			120			11		(66		)	(54		)	—			463
Income tax (expense) benefit on core income (loss)	(98		)	(24		)	4		49			6			—			(63		)
Core income (loss)	$	354		$	96		$	15	$	(17	)	$	(48	)	$	—		400
Net investment gains (losses)																		(120		)
Income tax (expense) benefit on net investment gains (losses)																		23
Net investment gains (losses), after tax																		(97		)
Net income (loss)																		$	303

September 30, 2020
(In millions)
Reinsurance receivables	$	855	$	948	$	253	$	401	$	1,937	$	—	$	4,394
Insurance receivables	1,015		1,267		269		7		1		—		2,559
Deferred acquisition costs	324		285		88		—		—		—		697
Goodwill	117		—		29		—		—		—		146
Deferred non-insurance warranty acquisition expense	2,998		—		—		—		—		—		2,998
Insurance reserves
Claim and claim adjustment expenses	5,698		9,054		1,975		3,766		2,041		—		22,534
Unearned premiums	2,550		1,847		502		121		—		—		5,020
Future policy benefits	—		—		—		12,978		—		—		12,978
Deferred non-insurance warranty revenue	3,951		—		—		—		—		—		3,951

Nine months ended September 30, 2019	Specialty			Commercial			International			Life & Group			Corporate & Other
(In millions)																Eliminations			Total
Operating revenues
Net earned premiums	$	2,061		$	2,339		$	729		$	390		$	—		$	(2	)	$	5,517
Net investment income	410			480			47			616			20			—			1,573
Non-insurance warranty revenue	858			—			—			—			—			—			858
Other revenues	1			20			—			—			5			(4		)	22
Total operating revenues	3,330			2,839			776			1,006			25			(6		)	7,970
Claims, benefits and expenses
Net incurred claims and benefits	1,198			1,581			472			1,093			(40		)	—			4,304
Policyholders’ dividends	4			15			—			—			—			—			19
Amortization of deferred acquisition costs	454			391			180			—			—			—			1,025
Non-insurance warranty expense	801			—			—			—			—			—			801
Other insurance related expenses	217			372			94			87			(2		)	(2		)	766
Other expenses	37			27			14			5			108			(4		)	187
Total claims, benefits and expenses	2,711			2,386			760			1,185			66			(6		)	7,102
Core income (loss) before income tax	619			453			16			(179		)	(41		)	—			868
Income tax (expense) benefit on core income (loss)	(136		)	(97		)	(2		)	74			7			—			(154		)
Core income (loss)	$	483		$	356		$	14		$	(105	)	$	(34	)	$	—		714
Net investment gains (losses)																			20
Income tax (expense) benefit on net investment gains (losses)																			(7		)
Net investment gains (losses), after tax																			13
Net income (loss)																			$	727

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

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

Periods ended September 30	Three Months						Nine Months
(In millions)	2020			2019			2020			2019
Specialty
Management & Professional Liability	$	668		$	638		$	1,881		$	1,903
Surety	153			156			444			446
Warranty & Alternative Risks	356			332			1,041			981
Specialty revenues	1,177			1,126			3,366			3,330
Commercial
Middle Market	381			357			1,071			1,065
Construction (1)	298			265			823			754
Small Business	126			124			352			377
Other Commercial	223			213			631			643
Commercial revenues	1,028			959			2,877			2,839
International
Canada	73			70			214			204
Europe	96			91			282			270
Hardy	82			91			247			302
International revenues	251			252			743			776
Life & Group revenues	335			336			1,002			1,006
Corporate & Other revenues	3			7			13			25
Eliminations	(1		)	(2		)	(4		)	(6		)
Total operating revenues	2,793			2,678			7,997			7,970
Net investment gains (losses)	27			7			(120		)	20
Total revenues	$	2,820		$	2,685		$	7,877		$	7,990

(1)

Effective January 1, 2020, the Construction line of business is presented separately in the Commercial segment to better align with the Company's underwriting expertise and the manner in which the products are sold. Prior period information has been conformed to the new line of business presentation.