Investments

9 Months Ended

Sep. 30, 2014

Investments, Debt and Equity Securities [Abstract]

Investments

3.  Investments

Net investment income is as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
(In millions)
Fixed maturity securities	$	453		$	461		$	1,356		$	1,372
Short term investments		1			2			3			5
Limited partnership investments		26			115			229			345
Equity securities		2			3			7			9
Income (loss) from trading portfolio (a)		(24	)		30			46			28
Other		7			7			25			19
Total investment income		465			618			1,666			1,778
Investment expenses		(14	)		(13	)		(41	)		(39)
Net investment income	$	451		$	605		$	1,625		$	1,739
(a)    Includes net unrealized gains (losses) related to changes in fair value on trading securities still held of $(19), $25, $46 and $(22) for the three and nine months ended September 30, 2014 and 2013.
Investment gains (losses) are as follows:
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
(In millions)
Fixed maturity securities	$	39		$	2		$	58		$	22
Equity securities		(3	)		(2	)		2			(17)
Derivative instruments					(1	)		1			(4)
Short term investments and other		1			3			4			6
Investment gains (a)	$	37		$	2		$	65		$	7

(a) Includes gross realized gains of $52, $50, $130 and $129 and gross realized losses of $16, $50, $70 and $124 on available-for-sale securities for the three and nine months ended September 30, 2014 and 2013.

The components of other-than-temporary impairment (“OTTI”) losses recognized in earnings by asset type are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	6	$	8	$	9	$	16
Asset-backed:
Residential mortgage-backed		2		2		4		5
Other asset-backed				1		1		2
Total asset-backed		2		3		5		7
Total fixed maturities available-for-sale		8		11		14		23
Equity securities available-for-sale:
Common stock		2		3		3		5
Preferred stock				2				22
Total equity securities available-for-sale		2		5		3		27
Net OTTI losses recognized in earnings	$	10	$	16	$	17	$	50

The amortized cost and fair values of securities are as follows:

September 30, 2014	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Unrealized OTTI Losses (Gains)
(In millions)
Fixed maturity securities:
Corporate and other bonds	$	17,480		$ 1,704	$	40		$19,144
States, municipalities and political subdivisions		11,217		1,295		53		12,459
Asset-backed:
Residential mortgage-backed		4,972		187		13		5,146	$	(54)
Commercial mortgage-backed		2,079		87		8		2,158		(2)
Other asset-backed		1,222		13		5		1,230
Total asset-backed		8,273		287		26		8,534		(56)
U.S. Treasury and obligations of government-sponsored enterprises		25		5				30
Foreign government		456		16		1		471
Redeemable preferred stock		39		3				42
Fixed maturities available- for-sale		37,490		3,310		120		40,680		(56)
Fixed maturities, trading		141				17		124
Total fixed maturities		37,631		3,310		137		40,804		(56)
Equity securities:
Common stock		35		11				46
Preferred stock		162		4		1		165
Equity securities available-for-sale		197		15		1		211		-
Equity securities, trading		568		87		112		543
Total equity securities		765		102		113		754		-
Total	$	38,396		$ 3,412	$	250		$41,558	$	(56)

December 31, 2013	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Unrealized   OTTI Losses   (Gains)
(In millions)
Fixed maturity securities:
Corporate and other bonds	$	19,352	$	1,645	$	135	$	20,862
States, municipalities and political subdivisions		11,281		548		272		11,557
Asset-backed:
Residential mortgage-backed		4,940		123		92		4,971	$	(37)
Commercial mortgage-backed		1,995		90		22		2,063		(3)
Other asset-backed		945		13		3		955
Total asset-backed		7,880		226		117		7,989		(40)
U.S. Treasury and obligations of government- sponsored enterprises		139		6		1		144
Foreign government		531		15		3		543
Redeemable preferred stock		92		10				102
Fixed maturities available-for-sale		39,275		2,450		528		41,197		(40)
Fixed maturities, trading		151				28		123
Total fixed maturities		39,426		2,450		556		41,320		(40)
Equity securities:
Common stock		36		9				45
Preferred stock		143		1		4		140
Equity securities available-for-sale		179		10		4		185		-
Equity securities, trading		702		119		135		686
Total equity securities		881		129		139		871		-
Total	$	40,307	$	2,579	$	695	$	42,191	$	(40)

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 noncontrolling interests and any required Shadow Adjustments. At September 30, 2014 and December 31, 2013, the net unrealized gains on investments included in AOCI were net of Shadow Adjustments of $873 million and $478 million. To the extent that unrealized gains on fixed income securities supporting certain products within CNA’s Life & Group Non-Core segment would result in a premium deficiency if realized, a related decrease in Deferred acquisition costs, and/or increase in Insurance reserves are recorded, net of tax and noncontrolling interests, as a reduction of net unrealized gains through Other comprehensive income (loss) (Shadow Adjustments).

The available-for-sale securities in a gross unrealized loss position are as follows:

	Less than 12 Months				12 Months or Longer				Total
September 30, 2014	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
(In millions)
Fixed maturity securities:
Corporate and other bonds	$	1,726	$	23	$	402	$	17	$	2,128	$	40
States, municipalities and political subdivisions		176		2		435		51		611		53
Asset-backed:
Residential mortgage-backed		208		3		254		10		462		13
Commercial mortgage-backed		506		4		112		4		618		8
Other asset-backed		507		4		13		1		520		5
Total asset-backed		1,221		11		379		15		1,600		26
U.S. Treasury and obligations of government- sponsored enterprises						5				5
Foreign government		35				8		1		43		1
Total fixed maturity securities		3,158		36		1,229		84		4,387		120
Preferred stock		32		1		1				33		1
Total	$	3,190	$	37	$	1,230	$	84	$	4,420	$	121

	Less than 12 Months						12 Months or Longer						Total
December 31, 2013	Estimated Fair Value			Gross Unrealized Losses			Estimated   Fair Value			Gross Unrealized Losses			Estimated   Fair Value			Gross   Unrealized   Losses
(In millions)
Fixed maturity securities:
Corporate and other bonds		$	3,592		$	129		$	72		$	6		$	3,664		$	135
States, municipalities and political subdivisions			3,251			197			129			75			3,380			272
Asset-backed:
Residential mortgage-backed			1,293			29			343			63			1,636			92
Commercial mortgage-backed			640			22									640			22
Other asset-backed			269			3									269			3
Total asset-backed			2,202			54			343			63			2,545			117
U.S. Treasury and obligations of government- sponsored enterprises			13			1									13			1
Foreign government			111			3									111			3
Total fixed maturity securities			9,169			384			544			144			9,713			528
Preferred stock			87			4									87			4
Total		$	9,256		$	388		$	544		$	144		$	9,800		$	532

Based on current facts and circumstances, the Company believes the unrealized losses presented in the table above are not indicative of the ultimate collectibility of the current amortized cost of the securities, but rather are primarily attributable to changes in interest rates and credit spreads, market illiquidity 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 at September 30, 2014.

The following table summarizes the activity for the three and nine months ended September 30, 2014 and 2013 related to the pretax credit loss component reflected in Retained earnings on fixed maturity securities still held at September 30, 2014 and 2013 for which a portion of an OTTI loss was recognized in Other comprehensive income (loss).

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
(In millions)
Beginning balance of credit losses on fixed maturity securities		$	66		$	89		$	74		$	95
Additional credit losses for securities for which an OTTI loss was previously recognized						1						2
Reductions for securities sold during the period			(2)			(7)			(7)			(14)
Reductions for securities the Company intends to sell or more likely than not will be required to sell									(3)
Ending balance of credit losses on fixed maturity securities		$	64		$	83		$	64		$	83

Contractual Maturity

The following table summarizes available-for-sale fixed maturity securities by contractual maturity at September 30, 2014 and December 31, 2013. Actual maturities may differ from contractual maturities because certain securities may be called or prepaid with or without call or prepayment penalties. Securities not due at a single date are allocated based on weighted average life.

	September 30, 2014				December 31, 2013
	Cost or   Amortized   Cost		Estimated    Fair    Value		Cost or    Amortized    Cost		Estimated       Fair       Value
(In millions)
Due in one year or less	$	2,329	$	2,368	$	2,420	$	2,455
Due after one year through five years		8,888		9,455		9,496		10,068
Due after five years through ten years		12,446		12,951		11,667		11,954
Due after ten years		13,827		15,906		15,692		16,720
Total	$	37,490	$	40,680	$	39,275	$	41,197

Investment Commitments

As of September 30, 2014, the Company had committed approximately $365 million to future capital calls from various third-party limited partnership investments in exchange for an ownership interest in the related partnerships.

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. As of September 30, 2014, the Company had commitments to purchase or fund additional amounts of $140 million and sell $103 million under the terms of such securities.