Business Segments

9 Months Ended

Sep. 30, 2021

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.

Effective January 1, 2021, and in connection with the ceding of certain legacy reserves under a retroactive reinsurance agreement executed in February 2021, management changed the segment presentation of a legacy portfolio of excess workers’ compensation policies relating to business written in 2007 and prior. This business, which was previously reported as part of the Commercial business segment, is now reported as part of the Corporate & Other business segment. Further information on this retroactive reinsurance agreement is provided in Note E. In addition, a determination was made to change the segment presentation of certain legacy mass tort reserves. Similar to the aforementioned excess workers’ compensation legacy business, these legacy mass tort reserves were previously reported in the Commercial business segment and are now reported as part of the Corporate & Other business segment. These changes were made to better reflect the manner in which the Company is organized for purposes of making operating decisions and assessing performance. Prior period information has been conformed to the new segment presentation.

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, 2020. 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.

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

Three months ended September 30, 2021	Specialty		Commercial		International		Life & Group		Corporate & Other
(In millions)											Eliminations		Total
Operating revenues
Net earned premiums	$	773	$	893	$	271	$	123	$	—	$	(1)	$	2,059
Net investment income	116		141		14		240		2		—		513
Non-insurance warranty revenue	357		—		—		—		—		—		357
Other revenues	1		7		—		(1)		2		(1)		8
Total operating revenues	1,247		1,041		285		362		4		(2)		2,937
Claims, benefits and expenses
Net incurred claims and benefits	446		720		171		296		(6)		—		1,627
Policyholders’ dividends	—		5		—		—		—		—		5
Amortization of deferred acquisition costs	165		148		55		—		—		—		368
Non-insurance warranty expense	330		—		—		—		—		—		330
Other insurance related expenses	71		125		32		27		(1)		(1)		253
Other expenses	13		8		4		1		37		(1)		62
Total claims, benefits and expenses	1,025		1,006		262		324		30		(2)		2,645
Core income (loss) before income tax	222		35		23		38		(26)		—		292
Income tax (expense) benefit on core income (loss)	(49)		(8)		(6)		3		5		—		(55)
Core income (loss)	$	173	$	27	$	17	$	41	$	(21)	$	—	237
Net investment gains (losses)													22
Income tax (expense) benefit on net investment gains (losses)													(3)
Net investment gains (losses), after tax													19
Net income (loss)													$	256

Three months ended September 30, 2020	Specialty		Commercial		International		Life & Group		Corporate & Other
(In millions)											Eliminations		Total
Operating revenues
Net earned premiums	$	734	$	857	$	236	$	127	$	—	$	(1)	$	1,953
Net investment income	126		151		15		208		17		—		517
Non-insurance warranty revenue	317		—		—		—		—		—		317
Other revenues	—		5		—		—		1		—		6
Total operating revenues	1,177		1,013		251		335		18		(1)		2,793
Claims, benefits and expenses
Net incurred claims and benefits	433		671		150		363		(6)		—		1,611
Policyholders’ dividends	—		5		—		—		—		—		5
Amortization of deferred acquisition costs	158		150		52		—		—		—		360
Non-insurance warranty expense	293		—		—		—		—		—		293
Other insurance related expenses	66		128		31		28		(1)		(1)		251
Other expenses	14		7		(8)		3		34		—		50
Total claims, benefits and expenses	964		961		225		394		27		(1)		2,570
Core income (loss) before income tax	213		52		26		(59)		(9)		—		223
Income tax (expense) benefit on core income (loss)	(45)		(11)		1		24		1		—		(30)
Core income (loss)	$	168	$	41	$	27	$	(35)	$	(8)	$	—	193
Net investment gains (losses)													27
Income tax (expense) benefit on net investment gains (losses)													(7)
Net investment gains (losses), after tax													20
Net income (loss)													$	213

Nine months ended September 30, 2021	Specialty		Commercial		International		Life & Group		Corporate & Other
(In millions)											Eliminations		Total
Operating revenues
Net earned premiums	$	2,270	$	2,629	$	789	$	369	$	—	$	(1)	$	6,056
Net investment income	367		463		42		724		12		—		1,608
Non-insurance warranty revenue	1,054		—		—		—		—		—		1,054
Other revenues	1		17		1		(1)		5		(4)		19
Total operating revenues	3,692		3,109		832		1,092		17		(5)		8,737
Claims, benefits and expenses
Net incurred claims and benefits	1,312		1,947		485		899		23		—		4,666
Policyholders’ dividends	2		16		—		—		—		—		18
Amortization of deferred acquisition costs	478		449		157		—		—		—		1,084
Non-insurance warranty expense	973		—		—		—		—		—		973
Other insurance related expenses	212		376		106		77		9		(1)		779
Other expenses	36		28		(4)		5		119		(4)		180
Total claims, benefits and expenses	3,013		2,816		744		981		151		(5)		7,700
Core income (loss) before income tax	679		293		88		111		(134)		—		1,037
Income tax (expense) benefit on core income (loss)	(148)		(60)		(21)		9		24		—		(196)
Core income (loss)	$	531	$	233	$	67	$	120	$	(110)	$	—	841
Net investment gains (losses)													117
Income tax (expense) benefit on net investment gains (losses)													(22)
Net investment gains (losses), after tax													95
Net income (loss)													$	936

September 30, 2021
(In millions)
Reinsurance receivables	$	1,153	$	936	$	347	$	410	$	2,503	$	—	$	5,349
Insurance receivables	1,087		1,422		313		5		2		—		2,829
Deferred acquisition costs	354		275		92		—		—		—		721
Goodwill	117		—		31		—		—		—		148
Deferred non-insurance warranty acquisition expense	3,418		—		—		—		—		—		3,418
Insurance reserves
Claim and claim adjustment expenses	6,293		8,856		2,251		3,703		2,729		—		23,832
Unearned premiums	2,882		2,020		559		116		—		—		5,577
Future policy benefits	—		—		—		13,198		—		—		13,198
Deferred non-insurance warranty revenue	4,443		—		—		—		—		—		4,443

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		354		44		622		45		—		1,380
Non-insurance warranty revenue	926		—		—		—		—		—		926
Other revenues	1		18		—		—		3		(3)		19
Total operating revenues	3,366		2,842		743		1,002		48		(4)		7,997
Claims, benefits and expenses
Net incurred claims and benefits	1,346		1,840		480		983		17		—		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		379		106		79		(2)		(1)		769
Other expenses	37		25		3		6		109		(3)		177
Total claims, benefits and expenses	2,914		2,700		732		1,068		124		(4)		7,534
Core income (loss) before income tax	452		142		11		(66)		(76)		—		463
Income tax (expense) benefit on core income (loss)	(98)		(29)		4		49		11		—		(63)
Core income (loss)	$	354	$	113	$	15	$	(17)	$	(65)	$	—	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

December 31, 2020
(In millions)
Reinsurance receivables	$	886	$	848	$	302	$	390	$	2,052	$	—	$	4,478
Insurance receivables	1,052		1,254		328		4		2		—		2,640
Deferred acquisition costs	330		281		97		—		—		—		708
Goodwill	117		—		31		—		—		—		148
Deferred non-insurance warranty acquisition expense	3,068		—		—		—		—		—		3,068
Insurance reserves
Claim and claim adjustment expenses	5,748		8,250		2,091		3,743		2,874		—		22,706
Unearned premiums	2,635		1,824		546		114		—		—		5,119
Future policy benefits	—		—		—		13,318		—		—		13,318
Deferred non-insurance warranty revenue	4,023		—		—		—		—		—		4,023

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

Periods ended September 30	Three Months				Nine Months
(In millions)	2021		2020		2021		2020
Specialty
Management & Professional Liability	$	684	$	668	$	2,044	$	1,881
Surety	157		153		454		444
Warranty & Alternative Risks	406		356		1,194		1,041
Specialty revenues	1,247		1,177		3,692		3,366
Commercial
Middle Market	363		379		1,119		1,069
Construction	345		298		978		823
Small Business	144		126		413		352
Other Commercial	189		210		599		598
Commercial revenues	1,041		1,013		3,109		2,842
International
Canada	87		73		253		214
Europe	123		96		349		282
Hardy	75		82		230		247
International revenues	285		251		832		743
Life & Group revenues	362		335		1,092		1,002
Corporate & Other revenues	4		18		17		48
Eliminations	(2)		(1)		(5)		(4)
Total operating revenues	2,937		2,793		8,737		7,997
Net investment gains (losses)	22		27		117		(120)
Total revenues	$	2,959	$	2,820	$	8,854	$	7,877